4.FAIR VALUE

The Companys fixed maturity and equity securities are primarily managed by third party investment asset managers.The investment asset managers obtain prices from nationally recognized pricing services.These services seek to utilize market data and observations in their evaluation process.They use pricing applications that vary by asset class and incorporate available market information and when fixed maturity securities do not trade on a daily basis the services will apply available information through processes such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing.In addition, they use model processes, such as the Option Adjusted Spread model to develop prepayment and interest rate scenarios for securities that have prepayment features.

In limited instances where prices are not provided by pricing services or in rare instances when a manager may not agree with the pricing service, price quotes on a non-binding basis are obtained from investment brokers.The investment asset managers do not make any changes to prices received from either the pricing services or the investment brokers.In addition, the investment asset managers have procedures in place to review the reasonableness of the prices from the service providers and may request verification of the prices.In addition, the Company continually performs analytical reviews of price changes and tests the prices on a random basis to an independent pricing source.No material variances were noted during these price validation procedures.In limited situations, where financial markets are inactive or illiquid, the Company may use its own assumptions about future cash flows and risk-adjusted discount rates to determine fair value.The Company made no such adjustments at September 30, 2014 and December 31, 2013.

The Company internally manages a small public equity portfolio which had a fair value at September 30, 2014 and December 31, 2013, of $90,124 thousand and $88,338 thousand, respectively, and all prices were obtained from publically published sources.

Equity securities in U.S. denominated currency are categorized as Level 1, Quoted Prices in Active Markets for Identical Assets, since the securities are actively traded on an exchange and prices are based on quoted prices from the exchange.Equity securities traded on foreign exchanges are categorized as Level 2 due to potential foreign exchange adjustments to fair or market value.

Fixed maturity securities are generally categorized as Level 2, Significant Other Observable Inputs, since a particular security may not have traded but the pricing services are able to use valuation models with observable market inputs such as interest rate yield curves and prices for similar fixed maturity securities in terms of issuer, maturity and seniority. Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk) are categorized as Level 3, Significant Unobservable Inputs.These securities include broker priced securities.

As of September 30, 2014 and December 31, 2013, all Level 3 fixed maturity securities, were priced using single non-binding broker quotes since prices for these securities were not provided by normal pricing service companies.The single broker quotes are provided by market makers or broker-dealers who are recognized as market participants in the markets in which they are providing the quotes.The prices received from brokers are reviewed for reasonableness by the third party asset managers and the Company.

Other invested assets, at fair value, are categorized as Level 1, Quoted Prices in Active Markets for Identical Assets, since the securities are shares of the Companys parent, which are actively traded on an exchange and the price is based on a quoted price.

The following table presents the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the period indicated:


			Fair Value Measurement Using:
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	September 30, 2014		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	519,771	$	-	$	519,771	$	-
Obligations of U.S. States and political subdivisions		834,723		-		834,723		-
Corporate securities		2,030,599		-		2,029,283		1,316
Asset-backed securities		92,317		-		72,041		20,276
Mortgage-backed securities
Commercial		43,684		-		43,684		-
Agency residential		626,542		-		626,542		-
Non-agency residential		358		-		358		-
Foreign government securities		567,131		-		567,131		-
Foreign corporate securities		1,102,991		-		1,099,427		3,564
Total fixed maturities, market value		5,818,116		-		5,792,960		25,156

Fixed maturities, fair value		18,426		-		18,426		-
Equity securities, market value		16		16		-		-
Equity securities, fair value		1,195,257		1,086,016		109,241		-
Other invested assets, fair value		1,574,733		1,574,733		-		-

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 2014.

The following table presents the fair value measurement levels for all assets, which the Company has recorded at fair value (fair and market value) as of the period indicated:


			Fair Value Measurement Using:
			Quoted Prices
			in Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
			Assets		Inputs		Inputs
(Dollars in thousands)	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
Assets:
Fixed maturities, market value
U.S. Treasury securities and obligations of
U.S. government agencies and corporations	$	71,685	$	-	$	71,685	$	-
Obligations of U.S. States and political subdivisions		1,002,528		-		1,002,528		-
Corporate securities		1,702,415		-		1,702,415		-
Asset-backed securities		39,609		-		36,076		3,533
Mortgage-backed securities
Commercial		38,666		-		38,666		-
Agency residential		697,399		-		697,399		-
Non-agency residential		939		-		935		4
Foreign government securities		674,827		-		674,827		-
Foreign corporate securities		973,853		-		973,372		481
Total fixed maturities, market value		5,201,921		-		5,197,903		4,018

Fixed maturities, fair value		19,388		-		19,388		-
Equity securities, market value		13		13		-		-
Equity securities, fair value		1,298,940		1,179,139		119,801		-
Other invested assets, fair value		1,515,052		1,515,052		-		-

The following tables present the activity under Level 3, fair value measurements using significant unobservable inputs by asset type, for the periods indicated:


	Three Months Ended September 30, 2014														Nine Months Ended September 30, 2014
	Corporate		Asset-backed			Foreign			Non-agency						Corporate		Asset-backed			Foreign			Non-agency
(Dollars in thousands)	Securities		Securities			Corporate			RMBS			Total			Securities		Securities			Corporate			RMBS			Total
Beginning balance	$	-	$	2,528		$	-		$	4		$	2,532		$	-	$	3,533		$	481		$	4		$	4,018
Total gains or (losses) (realized/unrealized)
Included in earnings		-		1,235			-			2			1,237			-		1,291			18			3			1,312
Included in other comprehensive income (loss)		42		(284	)		(50	)		(3	)		(295	)		42		(191	)		(70	)		(3	)		(222	)
Purchases, issuances and settlements		1,274		17,898			3,614			(3	)		22,783			1,274		16,744			3,135			(4	)		21,149
Transfers in and/or (out) of Level 3		-		(1,101	)		-			-			(1,101	)		-		(1,101	)		-			-			(1,101	)
Ending balance	$	1,316	$	20,276		$	3,564		$	-		$	25,156		$	1,316	$	20,276		$	3,564		$	-		$	25,156

The amount of total gains or losses for the period included
in earnings (or changes in net assets) attributable to the
change in unrealized gains or losses relating to assets
still held at the reporting date	$	-	$	-		$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	-

(Some amounts may not reconcile due to rounding.)


	Three Months Ended September 30, 2013														Nine Months Ended September 30, 2013
	Asset-backed			Foreign			Non-agency			Agency					Asset-backed			Foreign			Non-agency			Agency
(Dollars in thousands)	Securities			Corporate			RMBS			RMBS		Total			Securities			Corporate			RMBS			RMBS			Total
Beginning balance	$	4,832		$	7,225		$	323		$	-	$	12,380		$	4,849		$	11,421		$	5		$	29,398		$	45,673
Total gains or (losses) (realized/unrealized)
Included in earnings		58			(4	)		1			-		55			74			(655	)		3			-			(578	)
Included in other comprehensive income (loss)		(186	)		51			-			-		(135	)		(515	)		(371	)		(25	)		-			(911	)
Purchases, issuances and settlements		(377	)		(1,751	)		(1	)		-		(2,129	)		(397	)		1,086			(72	)		-			617
Transfers in and/or (out) of Level 3		-			(5,039	)		(319	)		-		(5,358	)		316			(10,999	)		93			(29,398	)		(39,988	)
Ending balance	$	4,327		$	482		$	4		$	-	$	4,813		$	4,327		$	482		$	4		$	-		$	4,813

The amount of total gains or losses for the period included
in earnings (or changes in net assets) attributable to the
change in unrealized gains or losses relating to assets
still held at the reporting date	$	-		$	-		$	-		$	-	$	-		$	-		$	-		$	-		$	-		$	-

(Some amounts may not reconcile due to rounding.)

The transfers from level 3, fair value measurements using significant unobservable inputs, of $1,101 thousand and $39,988 thousand of investments for the nine months ended September 30, 2014 and September 30, 2013, respectively, primarily relate to securities that were priced using single non-binding broker quotes as of December 31, 2013 and December 31, 2012, respectively.The securities were subsequently priced using a recognized pricing service as of September 30, 2014 and 2013 and were classified as level 2 as of that date.