Note 5 - Fair Value of Financial Instruments - Level 1 (Notes)

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Fair Value of Financial Instruments The following tables include a list of assets that are measured at fair value by hierarchy level as of December 31, 2020 and 2019.

(In thousands)	Level I		Level II		Level III		Total
Assets at fair value as of December 31, 2020
Investments:
Fixed-maturities available for sale:
U.S. government and agency securities	$	140,034	$	29,189	$	—	$	169,223
State and municipal obligations	—		165,271		—		165,271
Corporate bonds and notes	—		3,047,189		—		3,047,189
RMBS	—		833,939		—		833,939
CMBS	—		681,265		—		681,265
CLO	—		568,558		—		568,558
Other ABS	—		252,457		—		252,457
Foreign government and agency securities	—		5,438		—		5,438
Total fixed-maturities available for sale	140,034		5,583,306		—		5,723,340
Trading securities:
State and municipal obligations	—		120,449		—		120,449
Corporate bonds and notes	—		123,142		—		123,142
RMBS	—		13,000		—		13,000
CMBS	—		34,294		—		34,294
Total trading securities	—		290,885		—		290,885
Equity securities	142,761		8,479		—		151,240
Short-term investments:
State and municipal obligations	—		21,819		—		21,819
Money market instruments	268,900		—		—		268,900
Corporate bonds and notes	—		30,495		—		30,495
Other ABS	—		219		—		219
Other investments (1)	—		296,571		—		296,571
Total short-term investments	268,900		349,104		—		618,004
Other invested assets (2)	—		—		3,000		3,000
Total investments at fair value (2)	551,695		6,231,774		3,000		6,786,469
Other:
Embedded derivatives (3)	—		—		5,513		5,513
Loaned securities: (4)
U.S. government and agency securities	4,876		—		—		4,876
Corporate bonds and notes	—		31,324		—		31,324
Equity securities	21,299		—		—		21,299
Total assets at fair value (2)	$	577,870	$	6,263,098	$	8,513	$	6,849,481

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

(2)Does not include other invested assets of $2.0 million that are primarily invested in limited partnership investments valued using the net asset value as a practical expedient.

(3)Embedded derivatives related to our Excess-of-Loss Program are classified as other assets in our consolidated balance sheets. See Note 8 for more information about our reinsurance programs.

(4)Securities loaned to third-party borrowers under securities lending agreements are classified as other assets in our consolidated balance sheets. See Note 6 for more information.

(In thousands)	Level I		Level II		Level III		Total
Assets at fair value as of December 31, 2019
Investments:
Fixed-maturities available for sale:
U.S. government and agency securities	$	143,884	$	35,700	$	—	$	179,584
State and municipal obligations	—		119,994		—		119,994
Corporate bonds and notes	—		2,237,611		—		2,237,611
RMBS	—		779,354		—		779,354
CMBS	—		588,420		—		588,420
CLO	—		462,561		—		462,561
Other ABS	—		316,163		—		316,163
Foreign government and agency securities	—		5,224		—		5,224
Total fixed-maturities available for sale	143,884		4,545,027		—		4,688,911
Trading securities:
State and municipal obligations	—		118,949		—		118,949
Corporate bonds and notes	—		147,232		—		147,232
RMBS	—		16,180		—		16,180
CMBS	—		34,789		—		34,789
Total trading securities	—		317,150		—		317,150
Equity securities	124,009		6,212		—		130,221
Short-term investments:
U.S. government and agency securities	127,152		—		—		127,152
State and municipal obligations	—		21,475		—		21,475
Money market instruments	202,461		—		—		202,461
Corporate bonds and notes	—		20,298		—		20,298
Other investments (1)	—		147,007		—		147,007
Total short-term investments	329,613		188,780		—		518,393
Other invested assets (2)	—		—		1,500		1,500
Total investments at fair value (2)	597,506		5,057,169		1,500		5,656,175
Other:
Embedded derivatives (3)	—		—		383		383
Loaned securities: (4)
U.S. government and agency securities	35,309		—		—		35,309
Corporate bonds and notes	—		3,669		—		3,669
Equity securities	27,464		—		—		27,464
Total assets at fair value (2)	$	660,279	$	5,060,838	$	1,883	$	5,723,000

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

(2)Does not include other invested assets of $2.6 million that are primarily invested in limited partnership investments valued using the net asset value as a practical expedient.

(3)Embedded derivatives related to our Excess-of-Loss Program are classified as other assets in our consolidated balance sheets. See Note 8 for more information about our reinsurance programs.

(4)Securities loaned to third-party borrowers under securities lending agreements are classified as other assets in our consolidated balance sheets. See Note 6 for more information.

There were no transfers to or from Level III for the years ended December 31, 2020 and 2019. 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 years ended December 31, 2020 and 2019.

Valuation Methodologies for Assets Measured at Fair Value

The following are descriptions of our valuation methodologies for financial assets measured at fair value.

We are responsible for the determination of the value of all investments carried at fair value and the supporting methodologies and assumptions. To assist us in this responsibility, we utilize independent third-party valuation service providers to gather, analyze and interpret market information and estimate fair values based upon relevant methodologies and assumptions for various asset classes and individual securities. We perform monthly quantitative and qualitative analyses on the prices received from third parties to determine whether the prices are reasonable estimates of fair value. Our analysis includes: (i) a review of the methodology used by third-party pricing services; (ii) a comparison of pricing services’ valuations to other independent sources; (iii) a review of month-to-month price fluctuations; and (iv) a comparison of actual purchase and sale transactions with valuations received from third parties. These processes are designed to ensure that our investment values are accurately recorded, that the data inputs and valuation techniques utilized are appropriate and consistently applied and that the assumptions are reasonable and consistent with the objective of determining fair value.

U.S. Government and Agency Securities. The fair value of U.S. government and agency securities is estimated using observed market transactions, including broker-dealer quotes and actual trade activity as a basis for valuation. U.S. government and agency securities are categorized in either Level I or Level II of the fair value hierarchy.

State and Municipal Obligations. The fair value of state and municipal obligations is estimated using recent transaction activity, including market observations. Valuation models are used, which incorporate bond structure, yield curve, credit spreads and other factors. These securities are generally categorized in Level II of the fair value hierarchy or in Level III when market-based transaction activity is unavailable.

Money Market Instruments. The fair value of money market instruments is based on daily prices, which are published and available to all potential investors and market participants. As such, these securities are categorized in Level I of the fair value hierarchy.

Corporate Bonds and Notes. The fair value of corporate bonds and notes is estimated using recent transaction activity, including market observations. Spread models are used that incorporate issuer and structure characteristics, such as credit risk and early redemption features, where applicable. These securities are generally categorized in Level II of the fair value hierarchy or in Level III when market-based transaction activity is unavailable.

RMBS, CMBS, CLO and Other ABS. The fair value of these instruments is estimated based on prices of comparable securities and spreads and observable prepayment speeds. These securities are generally categorized in Level II of the fair value hierarchy or in Level III when market-based transaction activity is unavailable. The fair value of any Level III securities is generally estimated by discounting estimated future cash flows.

Foreign Government and Agency Securities. The fair value of foreign government and agency securities is estimated using observed market yields used to create a maturity curve and observed credit spreads from market makers and broker-dealers. These securities are categorized in Level II of the fair value hierarchy.

Equity Securities. The fair value of these securities is generally estimated using observable market data in active markets or bid prices from market makers and broker-dealers. Generally, these securities are categorized in Level I or II of the fair value hierarchy, as observable market data are readily available. From time to time, certain equity securities may be categorized in Level III of the fair value hierarchy due to a lack of market-based transaction data or the use of model-based valuations.

Other Investments. These securities primarily consist of commercial paper and short-term certificates of deposit, which are categorized in Level II of the fair value hierarchy. The fair value of these investments is estimated using market data for comparable instruments of similar maturity and average yield.

Other Invested Assets. These other invested assets represent a promissory note receivable. The estimated fair value approximates its cost due to the short-term nature of the note.

Embedded Derivatives. The estimated fair value related to our embedded derivatives generally reflects the present value impact of the variation in investment income on the assets held by the reinsurance trusts and the contractual reference rate used to calculate the reinsurance premiums we will pay.

Other Fair Value Disclosure

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

	December 31, 2020				December 31, 2019
(In thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Liabilities:
Senior notes	$	1,405,674	$	1,563,503	$	887,110	$	949,500
FHLB advances	176,483		179,578		134,875		135,997

The fair value of our senior notes is estimated based on the quoted market prices. 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. See Note 12 for further information about these borrowings.