Fair Value (Tables)

9 Months Ended

Sep. 30, 2018

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, 2018
	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	$	36,425	$	0	$	36,425	$	0
States & political subdivisions	256,865		0		256,865		0
Corporate debt securities	277,669		0		269,399		8,270
Residential mortgage-backed securities	2,494		0		2,494		0
Commercial mortgage-backed securities	46,860		0		46,860		0
Collateralized debt obligations	65,294		0		65,294		0
Other debt securities	18,588		0		17,683		905
Total available-for-sale securities	704,195		0		695,020		9,175
Equity securities:
Nonredeemable preferred stock - financial services sector	12,511		1,981		10,530		0
Total equity securities	12,511		1,981		10,530		0
Other limited partnership investments ⁽¹⁾	3,317		—		—		—
Total	$	720,023	$	1,981	$	705,550	$	9,175



	At December 31, 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	$	11,734	$	0	$	11,734	$	0
States & political subdivisions	259,264		0		259,264		0
Foreign government securities	503		0		503		0
Corporate debt securities	346,523		0		338,644		7,879
Residential mortgage-backed securities	25,571		0		25,571		0
Commercial mortgage-backed securities	32,804		0		32,804		0
Collateralized debt obligations	58,034		0		55,834		2,200
Other debt securities	11,528		0		11,528		0
Total fixed maturities	745,961		0		735,882		10,079
Nonredeemable preferred stock - financial services sector	11,659		2,015		9,644		0
Nonredeemable preferred stock - utilities sector	1,093		0		1,093		0
Total available-for-sale securities	758,713		2,015		746,619		10,079
Other limited partnership investments ⁽¹⁾	4,816		—		—		—
Total	$	763,529	$	2,015	$	746,619	$	10,079

(1) Other limited partnership 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, 2018 and December 31, 2017. During the nine months ended September 30, 2018, no contributions were made and distributions totaling $1.2 million were received from these investments. During the year ended December 31, 2017, no contributions were made and distributions totaling $0.5 million were received from these investments. There were no unfunded commitments related to the investments as of September 30, 2018 and December 31, 2017.

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

Level 3 Assets – 2018 Quarterly Change:



(in thousands)	Beginning balance at June 30, 2018		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, 2018
Available-for-sale securities:
Corporate debt securities	$	11,120	$	3	$	71	$	1,539	$	(1,416	)	$	2,735	$	(5,782	)	$	8,270
Other debt securities	0		0		0		905		0			0		0			905
Total Level 3 available-for-sale securities	$	11,120	$	3	$	71	$	2,444	$	(1,416	)	$	2,735	$	(5,782	)	$	9,175

Level 3 Assets – 2018 Year-to-Date Change:



(in thousands)	Beginning balance at December 31, 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, 2018
Available-for-sale securities:
Corporate debt securities	$	7,879	$	4	$	23	$	4,586	$	(2,381	)	$	10,517	$	(12,358	)	$	8,270
Collateralized debt obligations	2,200		0		7		0		0			0		(2,207		)	0
Other debt securities	0		0		0		905		0			0		0			905
Total Level 3 available-for-sale securities	$	10,079	$	4	$	30	$	5,491	$	(2,381	)	$	10,517	$	(14,565	)	$	9,175

Level 3 Assets – 2017 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 Level 3 available-for-sale securities	$	9,295	$	24	$	(60	)	$	539	$	(1,240	)	$	2,633	$	(3,276	)	$	7,915

Level 3 Assets – 2017 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 Level 3 available-for-sale securities	$	9,352	$	3	$	(108	)	$	4,520	$	(4,372	)	$	8,444	$	(9,924	)	$	7,915


(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:



	At September 30, 2018
(in thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities priced via pricing services	$	704,195	$	0	$	695,020	$	9,175
Equity securities priced via pricing services	12,511		1,981		10,530		0
Other limited partnership investments priced via unobservable inputs ⁽¹⁾	3,317		—		—		—
Total	$	720,023	$	1,981	$	705,550	$	9,175

(1)

Other limited partnership investments measured at fair value represent real estate funds included on the Statements of Financial Position as limited partnership investments that are reported under the fair value option using the NAV 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.