Fair Value of Financial Instruments

Available for sale securities, trading securities, equity securities and certain other assets are recorded at fair value. All changes in the fair value of trading securities, equity securities and certain other assets are included in our condensed consolidated statements of operations. All changes in the fair value of available for sale securities are recorded in accumulated other comprehensive income. As a result of our implementation of the update to the standard for the accounting of financial instruments, we elected to measure certain other investments using the net asset value as a practical expedient. See Note 1 “—Significant Accounting Policies—Recent Accounting Pronouncements—Accounting Standards Adopted During 2018” for additional information. There were no other changes to our fair value methodologies during the three months ended March 31, 2018.

In accordance with GAAP, we established a three-level valuation hierarchy for disclosure of fair value measurements based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level I measurements) and the lowest priority to unobservable inputs (Level III measurements). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the measurement in its entirety. The three levels of the fair value hierarchy are defined below:


Level I	— Unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


Level II	— Prices or valuations based on observable inputs other than quoted prices in active markets for identical assets and liabilities; and


Level III	— Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. Level III inputs are used to measure fair value only to the extent that observable inputs are not available.

The level of market activity used to determine the fair value hierarchy is based on the availability of observable inputs market participants would use to price an asset or a liability, including market value price observations. We provide a qualitative description of the valuation techniques and inputs used for recurring and non-recurring fair value measurements in our audited financial statements and notes thereto included in our 2017 Form 10-K. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our 2017 Form 10-K.

The following is a list of assets that are measured at fair value by hierarchy level as of March 31, 2018:



(In thousands)	Level I		Level II		Total
Assets at Fair Value
Investment Portfolio:
U.S. government and agency securities	$	154,347	$	7,890	$	162,237
State and municipal obligations	—		372,465		372,465
Money market instruments	144,207		—		144,207
Corporate bonds and notes	—		2,298,885		2,298,885
RMBS	—		254,124		254,124
CMBS	—		520,468		520,468
Other ABS	—		736,518		736,518
Foreign government and agency securities	—		36,576		36,576
Equity securities	136,159		1,882		138,041
Other investments (1)	—		45,774		45,774
Total Investments at Fair Value (2)	434,713		4,274,582		4,709,295		(3)
Total Assets at Fair Value	$	434,713	$	4,274,582	$	4,709,295	(3)

______________________


(1)	Comprising short-term certificates of deposit and commercial paper.


(2)	Does not include certain other invested assets ($3.3 million), primarily invested in limited partnership investments valued using the net asset value as a practical expedient. Includes cash collateral held under securities lending agreements ($39.1 million) reinvested in money market instruments.


(3)	Includes $44.4 million of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets. See Note 5 for more information.

The following is a list of assets that are measured at fair value by hierarchy level as of December 31, 2017:



(In thousands)	Level I		Level II		Total
Assets at Fair Value
Investment Portfolio:
U.S. government and agency securities	$	124,969	$	8,023	$	132,992
State and municipal obligations	—		386,111		386,111
Money market instruments	213,357		—		213,357
Corporate bonds and notes	—		2,304,017		2,304,017
RMBS	—		216,749		216,749
CMBS	—		503,955		503,955
Other ABS	—		676,158		676,158
Foreign government and agency securities	—		36,448		36,448
Equity securities	175,205		860		176,065
Other investments (1)	—		25,720		25,720
Total Investments at Fair Value (2)	513,531		4,158,041		4,671,572		(3)
Total Assets at Fair Value	$	513,531	$	4,158,041	$	4,671,572	(3)

______________________


(1)	Comprising short-term certificates of deposit and commercial paper.


(2)	Does not include certain other invested assets ($0.3 million), primarily invested in limited partnerships, accounted for as cost-method investments and not measured at fair value. Includes cash collateral held under securities lending agreements ($19.4 million) reinvested in money market instruments.


(3)	Includes $28.0 million of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our consolidated balance sheets. See Note 5 for more information.

There were no Level III assets measured at fair value at March 31, 2018 or December 31, 2017, and no Level III liabilities. There were no investment transfers between Level I, Level II or Level III for the three months ended March 31, 2018 and 2017.

Other Fair Value Disclosure

The carrying value and estimated fair value of other selected assets and liabilities not carried at fair value in our condensed consolidated balance sheets were as follows as of the dates indicated:



	March 31, 2018				December 31, 2017
(In thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Other invested assets (1)	$	—	$	—	$	334	$	3,226
Liabilities:
Senior notes	1,027,875		1,056,437		1,027,074		1,093,934

______________________


(1)	As a result of implementing the update to the standard for the accounting of financial instruments effective January 1, 2018, other invested assets are no longer carried at amortized cost.