Fair Value (Tables)

9 Months Ended

Sep. 30, 2017

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, 2017
	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. treasury	$	11,834	$	0	$	11,834	$	0
States & political subdivisions	261,966		0		261,966		0
Foreign government securities	507		0		507		0
Corporate debt securities	346,372		0		338,457		7,915
Residential mortgage-backed securities	25,719		0		25,719		0
Commercial mortgage-backed securities	34,331		0		34,331		0
Collateralized debt obligations	62,381		0		62,381		0
Other debt securities	6,156		0		6,156		0
Total fixed maturities	749,266		0		741,351		7,915
Total available-for-sale securities	749,266		0		741,351		7,915
Other investments ⁽¹⁾	4,338		—		—		—
Total	$	753,604	$	0	$	741,351	$	7,915



	At December 31, 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. treasury	$	5,031	$	0	$	5,031	$	0
Government sponsored entities	2,026		0		2,026		0
States & political subdivisions	253,132		0		253,132		0
Corporate debt securities	322,948		0		313,596		9,352
Residential mortgage-backed securities	16,102		0		16,102		0
Commercial mortgage-backed securities	36,849		0		36,849		0
Collateralized debt obligations	69,253		0		69,253		0
Other debt securities	2,000		0		2,000		0
Total fixed maturities	707,341		0		697,989		9,352
Common stock	5,950		5,950		0		0
Total available-for-sale securities	713,291		5,950		697,989		9,352
Other investments ⁽¹⁾	4,412		—		—		—
Total	$	717,703	$	5,950	$	697,989	$	9,352

(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, 2017 and December 31, 2016. During the nine months ended September 30, 2017, no contributions were made and distributions totaling $0.3 million were received from these investments. During the year ended December 31, 2016, no contributions were made and distributions totaling $0.9 million were received from these investments. There were no unfunded commitments related to the investments as of September 30, 2017, and $0.3 million as of December 31, 2016.

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

Level 3 Assets – Quarterly Change:



(in thousands)	Beginning balance at June 30, 2017		Included in earnings⁽¹⁾		Included in other comprehensive income			Purchases		Sales			Transfers into Level 3⁽²⁾		Transfers out of Level 3⁽²⁾			Ending balance at September 30, 2017
Available-for-sale securities:
Corporate debt securities	$	9,295	$	24	$	(60	)	$	539	$	(1,240	)	$	2,633	$	(3,276	)	$	7,915
Total fixed maturities	9,295		24		(60		)	539		(1,240		)	2,633		(3,276		)	7,915
Total available-for-sale securities	9,295		24		(60		)	539		(1,240		)	2,633		(3,276		)	7,915
Total Level 3 assets	$	9,295	$	24	$	(60	)	$	539	$	(1,240	)	$	2,633	$	(3,276	)	$	7,915

Level 3 Assets – Year-to-Date Change:



(in thousands)	Beginning balance at December 31, 2016		Included in earnings⁽¹⁾		Included in other comprehensive income			Purchases		Sales			Transfers into Level 3⁽²⁾		Transfers out of Level 3⁽²⁾			Ending balance at September 30, 2017
Available-for-sale securities:
Corporate debt securities	$	9,352	$	3	$	(108	)	$	4,520	$	(4,372	)	$	8,444	$	(9,924	)	$	7,915
Total fixed maturities	9,352		3		(108		)	4,520		(4,372		)	8,444		(9,924		)	7,915
Total available-for-sale securities	9,352		3		(108		)	4,520		(4,372		)	8,444		(9,924		)	7,915
Total Level 3 assets	$	9,352	$	3	$	(108	)	$	4,520	$	(4,372	)	$	8,444	$	(9,924	)	$	7,915

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 into Level 3⁽²⁾		Transfers out of Level 3⁽²⁾			Ending balance at September 30, 2016
Available-for-sale securities:
Corporate debt securities	$	8,851	$	22	$	38	$	3,217	$	(318	)	$	2,514	$	(4,135	)	$	10,189
Commercial mortgage-backed securities	1,003		0		0		0		0			0		(1,003		)	0
Collateralized debt obligations	1,200		0		7		3,000		0			2,114		(1,200		)	5,121
Total fixed maturities	11,054		22		45		6,217		(318		)	4,628		(6,338		)	15,310
Total available-for-sale securities	11,054		22		45		6,217		(318		)	4,628		(6,338		)	15,310
Total Level 3 assets	$	11,054	$	22	$	45	$	6,217	$	(318	)	$	4,628	$	(6,338	)	$	15,310

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 into Level 3⁽²⁾		Transfers out of Level 3⁽²⁾			Ending balance at September 30, 2016
Available-for-sale securities:
Corporate debt securities	$	69	$	67	$	119		$	11,887	$	(924	)	$	5,470	$	(6,499	)	$	10,189
Commercial mortgage-backed securities	0		0		3			1,000		0			0		(1,003		)	0
Collateralized debt obligations	8,577		4		(5		)	7,722		(54		)	2,114		(13,237		)	5,121
Total fixed maturities	8,646		71		117			20,609		(978		)	7,584		(20,739		)	15,310
Total available-for-sale securities	8,646		71		117			20,609		(978		)	7,584		(20,739		)	15,310
Total Level 3 assets	$	8,646	$	71	$	117		$	20,609	$	(978	)	$	7,584	$	(20,739	)	$	15,310


(1)	These amounts are reported in the Statements of Operations as net investment income and net realized investment gains (losses) for the each of the periods presented above.


(2)	Transfers into and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.

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, 2017
	Total		Level 1		Level 2		Level 3
Fixed maturities:
Priced via pricing services	$	749,266	$	0	$	741,351	$	7,915
Total fixed maturities	749,266		0		741,351		7,915
Other investments:
Priced via unobservable inputs ⁽¹⁾	4,338		—		—		—
Total other investments	4,338		—		—		—
Total	$	753,604	$	0	$	741,351	$	7,915

(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 NAV information provided by the general partner.