Fair Value (Tables)

9 Months Ended

Sep. 30, 2016

Schedule of fair value measurements on a recurring basis by asset class and level of input

The following tables present our fair value measurements on a recurring basis by asset class and level of input:



	At September 30, 2016
	Fair value measurements using:
(in thousands)	Total		Quoted prices in active markets for identical assets Level 1		Observable inputs Level 2		Unobservable inputs Level 3
Available-for-sale securities:
U.S. government & agencies	$	2,048	$	0	$	2,048	$	0
States & political subdivisions	246,259		0		246,259		0
Corporate debt securities	320,268		0		310,079		10,189
Residential mortgage-backed securities	17,145		0		17,145		0
Commercial mortgage-backed securities	40,985		0		40,985		0
Collateralized debt obligations	66,647		0		61,526		5,121
Other debt securities	2,003		0		2,003		0
Total fixed maturities	695,355		0		680,045		15,310
Common stock	9,020		9,020		0		0
Total available-for-sale securities	704,375		9,020		680,045		15,310
Other investments ⁽¹⁾	3,964		—		—		—
Total	$	708,339	$	9,020	$	680,045	$	15,310



	At December 31, 2015
	Fair value measurements using:
(in thousands)	Total		Quoted prices in active markets for identical assets Level 1		Observable inputs Level 2		Unobservable inputs Level 3
Available-for-sale securities:
States & political subdivisions	$	231,847	$	0	$	231,847	$	0
Corporate debt securities	250,333		0		250,264		69
Residential mortgage-backed securities	13,513		0		13,513		0
Commercial mortgage-backed securities	37,571		0		37,571		0
Collateralized debt obligations	51,745		0		43,168		8,577
Other debt securities	2,200		0		2,200		0
Total fixed maturities	587,209		0		578,563		8,646
Common stock	12,732		12,732		0		0
Total available-for-sale securities	599,941		12,732		578,563		8,646
Other investments ⁽¹⁾	4,526		—		—		—
Total	$	604,467	$	12,732	$	578,563	$	8,646

(1) Other investments measured at fair value represent real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option using the net asset value practical expedient. These amounts are not required to be categorized in the fair value hierarchy. The investments can never be redeemed with the funds. Instead, distributions are received when liquidation of the underlying assets of the funds occur. It is estimated that the underlying assets will generally be liquidated between 5 and 10 years from the inception of the funds. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner. Fair value is based on our proportionate share of the NAV based on the most recent partners' capital statements received from the general partners, which is generally one quarter prior to our balance sheet date. These values are then analyzed to determine if the NAV represents fair value at our balance sheet date, with adjustment being made where appropriate. We consider observable market data and perform a review validating the appropriateness of the NAV at each balance sheet date. It is likely that all of the investments will be redeemed at a future date for an amount different than the NAV of our ownership interest in partners' capital as of September 30, 2016 and December 31, 2015. During the nine months ended September 30, 2016, no contributions were made and distributions totaling $0.7 million were received from these investments. During the year ended December 31, 2015, no contributions were made and distributions totaling $3.5 million were received from these investments. The amount of unfunded commitments related to the investments was $0.3 million as of September 30, 2016, and $0.6 million as of December 31, 2015.

Schedule of roll forward of Level 3 fair value measurements on a recurring basis

Level 3 Assets – Year-to-Date Change:




(in thousands)	Beginning balance at December 31, 2015		Included in earnings ⁽¹⁾		Included in other comprehensive income			Purchases		Sales			Transfers in and (out) of Level 3			Ending balance at September 30, 2016
Available-for-sale securities:
Corporate debt securities	$	69	$	67	$	119		$	11,887	$	(924	)	$	(1,029	)	$	10,189
Commercial mortgage-backed securities	0		0		3			1,000		0			(1,003		)	0
Collateralized debt obligations	8,577		4		(5		)	7,722		(54		)	(11,123		)	5,121
Total fixed maturities	8,646		71		117			20,609		(978		)	(13,155		)	15,310
Total available-for-sale securities	8,646		71		117			20,609		(978		)	(13,155		)	15,310
Total Level 3 assets	$	8,646	$	71	$	117		$	20,609	$	(978	)	$	(13,155	)	$	15,310


(1)	These amounts are reported in the Statement of Operations as net investment income and net realized investment gains (losses) for the nine months ended September 30, 2016 on Level 3 securities.

Level 3 Assets – Quarterly Change:





(in thousands)	Beginning balance at June 30, 2016		Included in earnings ⁽¹⁾		Included in other comprehensive income		Purchases		Sales			Transfers in and (out) of Level 3			Ending balance at September 30, 2016
Available-for-sale securities:
Corporate debt securities	$	8,851	$	22	$	38	$	3,217	$	(318	)	$	(1,621	)	$	10,189
Commercial mortgage-backed securities	1,003		0		0		0		0			(1,003		)	0
Collateralized debt obligations	1,200		0		7		3,000		0			914			5,121
Total fixed maturities	11,054		22		45		6,217		(318		)	(1,710		)	15,310
Total available-for-sale securities	11,054		22		45		6,217		(318		)	(1,710		)	15,310
Total Level 3 assets	$	11,054	$	22	$	45	$	6,217	$	(318	)	$	(1,710	)	$	15,310


(1)	These amounts are reported in the Statement of Operations as net investment income and net realized investment gains (losses) for the three months ended September 30, 2016 on Level 3 securities.

Level 3 Assets – Quarterly Change:





(in thousands)	Beginning balance at June 30, 2015		Included in earnings ⁽¹⁾			Included in other comprehensive income			Purchases		Sales		Transfers in and (out) of Level 3		Ending balance at September 30, 2015
Available-for-sale securities:
Corporate debt securities	$	0	$	(1	)	$	(58	)	$	0	$	0	$	124	$	65
Collateralized debt obligations	660		1			(3		)	4,546		0		0		5,204
Total fixed maturities	660		0			(61		)	4,546		0		124		5,269
Total available-for-sale securities	660		0			(61		)	4,546		0		124		5,269
Total Level 3 assets	$	660	$	0		$	(61	)	$	4,546	$	0	$	124	$	5,269


(1)	These amounts are reported in the Statement of Operations as net investment income for the three months ended September 30, 2015 on Level 3 securities.

Level 3 Assets – Year-to-Date Change:




(in thousands)	Beginning balance at December 31, 2014		Included in earnings ⁽¹⁾			Included in other comprehensive income			Purchases		Sales		Transfers in and (out) of Level 3		Ending balance at September 30, 2015
Available-for-sale securities:
Corporate debt securities	$	0	$	(1	)	$	(58	)	$	110	$	0	$	14	$	65
Collateralized debt obligations	0		1			(3		)	5,206		0		0		5,204
Total fixed maturities	0		0			(61		)	5,316		0		14		5,269
Total available-for-sale securities	0		0			(61		)	5,316		0		14		5,269
Total Level 3 assets	$	0	$	0		$	(61	)	$	5,316	$	0	$	14	$	5,269


(1)	These amounts are reported in the Statement of Operations as net investment income for the nine months ended September 30, 2015 on Level 3 securities.

Schedule of fair value measurements on a recurring basis by pricing source

The following table presents our fair value measurements on a recurring basis by pricing source:



(in thousands)	At September 30, 2016
	Total		Level 1		Level 2		Level 3
Fixed maturities:
Priced via pricing services	$	689,205	$	0	$	679,955	$	9,250
Priced via market comparables/broker quotes	6,150		0		90		6,060
Total fixed maturities	695,355		0		680,045		15,310
Common stock:
Priced via pricing services	9,020		9,020		0		0
Total common stock	9,020		9,020		0		0
Other investments:
Priced via unobservable inputs ⁽¹⁾	3,964		—		—		—
Total other investments	3,964		—		—		—
Total	$	708,339	$	9,020	$	680,045	$	15,310

(1)

Other investments measured at fair value represent real estate funds included on the balance sheet as limited partnership investments that are reported under the fair value option using the net asset value practical expedient. These amounts are not required to be categorized in the fair value hierarchy. The fair value of these investments is based on the net asset value (NAV) information provided by the general partner.