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Note 4 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2019

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 2018 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 2018 Form 10-K.

The following is a list of assets that are measured at fair value by hierarchy level as of March 31, 2019:



(In thousands)	Level I		Level II		Total
Assets at Fair Value
Investment Portfolio:
U.S. government and agency securities	$	178,908	$	33,610	$	212,518
State and municipal obligations	—		233,827		233,827
Money market instruments	174,541		—		174,541
Corporate bonds and notes	—		2,485,463		2,485,463
RMBS	—		368,495		368,495
CMBS	—		549,986		549,986
Other ABS	—		675,477		675,477
Equity securities	136,107		4,998		141,105
Other investments (1)	—		653,905		653,905
Total Investments at Fair Value (2)	489,556		5,005,761		5,495,317		(3)
Total Assets at Fair Value (4)	$	489,556	$	5,005,761	$	5,495,317	(3)

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


(2)	Does not include certain other invested assets of $3.1 million that are primarily invested in limited partnership investments valued using the net asset value as a practical expedient. Includes cash collateral held under securities lending agreements of $6.2 million that is reinvested in money market instruments.


(3)	Includes $22.6 million of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our condensed consolidated balance sheets. See Note 5 for more information.


(4)	Does not include the fair value of an immaterial embedded derivative, which we have accounted for separately as a freestanding derivative and classified in other assets in our condensed consolidated balance sheet. See Note 7 for more information.

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



(In thousands)	Level I		Level II		Total
Assets at Fair Value
Investment Portfolio:
U.S. government and agency securities	$	199,302	$	28,412	$	227,714
State and municipal obligations	—		324,742		324,742
Money market instruments	95,132		—		95,132
Corporate bonds and notes	—		2,564,068		2,564,068
RMBS	—		353,224		353,224
CMBS	—		591,393		591,393
Other ABS	—		705,468		705,468
Equity securities	136,662		3,958		140,620
Other investments (1)	—		175,113		175,113
Total Investments at Fair Value (2)	431,096		4,746,378		5,177,474		(3)
Total Assets at Fair Value (4)	$	431,096	$	4,746,378	$	5,177,474	(3)

______________________


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


(2)	Does not include certain other invested assets of $3.4 million that are primarily invested in limited partnership investments valued using the net asset value as a practical expedient. Includes cash collateral held under securities lending agreements of $11.7 million that is reinvested in money market instruments.


(3)	Includes $27.9 million of securities loaned to third-party Borrowers under securities lending agreements, classified as other assets in our condensed consolidated balance sheets. See Note 5 for more information.


(4)	Does not include the fair value of an immaterial embedded derivative, which we have accounted for separately as a freestanding derivative and classified in other assets in our condensed consolidated balance sheet. See Note 7 for more information.

At March 31, 2019 and December 31, 2018, there were no material Level III assets measured at fair value and no Level III liabilities. There were no investment transfers to or from Level III for the three months ended March 31, 2019 or the year ended December 31, 2018. Activity related to Level III assets and liabilities (including realized and unrealized gains and losses, purchases, sales, issuances, settlements and transfers) was immaterial for the three months ended March 31, 2019 and the year ended December 31, 2018.

Other Fair Value Disclosure

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



	March 31, 2019				December 31, 2018
(In thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Liabilities:
Senior notes	$	1,031,197	$	1,051,418	$	1,030,348	$	1,007,687
FHLB advances	108,532		109,097		82,532		82,899

The fair value of our senior notes is estimated based on the quoted market prices for the same or similar instruments. The fair value of our FHLB advances is estimated based on expected cash flows for similar borrowings. These liabilities are categorized in Level II of the fair value hierarchy.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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