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Fair Value

3 Months Ended

Mar. 31, 2024

Financial instruments carried at fair value

Our available-for-sale and equity securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.

Valuation techniques used to derive the fair value of our available-for-sale and equity securities are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources. Unobservable inputs reflect our own assumptions regarding fair market value for these securities. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

•Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•Level 3 – Unobservable inputs for the asset or liability.

Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service. Our Level 1 securities are valued using an exchange traded price provided by the pricing service. Pricing service valuations for Level 2 securities include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data. Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.

Although virtually all of our prices are obtained from third party sources, we also perform internal pricing reviews, including evaluating the methodology and inputs used to ensure that we determine the proper classification level of the financial instrument and reviewing securities with price changes that vary significantly from current market conditions or independent price sources. Price variances are investigated and corroborated by market data and transaction volumes. We have reviewed the pricing methodologies of our pricing service as well as other observable inputs and believe that the prices adequately consider market activity in determining fair value.

In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes. In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.

When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables. When available, we obtain multiple quotes for the same security. The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information. As of March 31, 2024, nearly all of our available-for-sale and equity securities were priced using a third party pricing service.

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


	March 31, 2024
(in thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities:




Corporate debt securities	$	595,295	$	0	$	591,387	$	3,908
Collateralized debt obligations	113,088		0		113,088		0
Commercial mortgage-backed securities	110,880		0		96,303		14,577
Residential mortgage-backed securities	132,787		0		132,787		0
Other debt securities	16,556		0		16,556		0
U.S. Treasury	1,039		0		1,039		0
Total available-for-sale securities	969,645		0		951,160		18,485
Equity securities:
Financial services sector	70,834		500		65,390		4,944
Utilities sector	5,876		0		5,876		0
Energy sector	3,698		0		3,698		0
Consumer sector	4,425		0		2,925		1,500
Technology sector	1,500		0		0		1,500
Industrial sector	221		0		197		24
Communications sector	24		24		0		0
Total equity securities	86,578		524		78,086		7,968
Total	$	1,056,223	$	524	$	1,029,246	$	26,453


	December 31, 2023
(in thousands)	Total		Level 1		Level 2		Level 3
Available-for-sale securities:




Corporate debt securities	$	588,688	$	0	$	584,182	$	4,506
Collateralized debt obligations	112,468		0		112,468		0
Commercial mortgage-backed securities	102,720		0		91,726		10,994
Residential mortgage-backed securities	140,055		0		138,521		1,534
Other debt securities	17,310		0		17,310		0

Total available-for-sale securities	961,241		0		944,207		17,034
Equity securities:
Financial services sector	69,900		816		63,750		5,334
Utilities sector	5,810		0		5,810		0
Energy sector	3,901		0		3,901		0
Consumer sector	3,915		0		2,415		1,500
Technology sector	500		0		0		500
Industrial sector	180		0		180		0
Communications sector	47		47		0		0
Total equity securities	84,253		863		76,056		7,334
Total	$	1,045,494	$	863	$	1,020,263	$	24,368

We review the fair value hierarchy classifications each reporting period. Transfers between hierarchy levels may occur due to changes in available market observable inputs.

Level 3 Assets – 2024 Year-to-Date Change:


(in thousands)	Beginning balance at December 31, 2023		Included in earnings(1)		Included in other comprehensive income (loss)		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at March 31, 2024
Available-for-sale securities:
Corporate debt securities	$	4,506	$	3	$	41	$	343	$	(302)	$	1,622	$	(2,305)	$	3,908

Commercial mortgage-backed securities	10,994		(254)		94		1,595		0		6,005		(3,857)		14,577
Residential mortgage- backed securities	1,534		(5)		(24)		0		(40)		0		(1,465)		0

Total available-for-sale securities	17,034		(256)		111		1,938		(342)		7,627		(7,627)		18,485
Equity securities	7,334		86		—		1,000		0		24		(476)		7,968
Total Level 3 securities	$	24,368	$	(170)	$	111	$	2,938	$	(342)	$	7,651	$	(8,103)	$	26,453

Level 3 Assets – 2023 Year-to-Date Change:


(in thousands)	Beginning balance at December 31, 2022		Included in earnings(1)		Included in other comprehensive income (loss)		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at March 31, 2023
Available-for-sale securities:
Corporate debt securities	$	3,686	$	(28)	$	85	$	753	$	(645)	$	1,498	$	(846)	$	4,503

Commercial mortgage-backed securities	10,910		(191)		217		589		0		137		(5,247)		6,415
Residential mortgage-backed securities	4,184		(5)		96		0		(87)		33		(4,188)		33

Total available-for-sale securities	18,780		(224)		398		1,342		(732)		1,668		(10,281)		10,951
Equity securities	3,779		(38)		—		958		0		0		0		4,699
Total Level 3 securities	$	22,559	$	(262)	$	398	$	2,300	$	(732)	$	1,668	$	(10,281)	$	15,650

(1)These amounts are reported as net investment income and net realized and unrealized investment gains (losses) for 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.

Financial instruments not carried at fair value

The following table presents the carrying values and fair values of financial instruments categorized as Level 3 in the fair value hierarchy that are recorded at carrying value as of:


	March 31, 2024				December 31, 2023
(in thousands)	Carrying value		Fair value		Carrying value		Fair value
Agent loans, net	$	67,448	$	63,281	$	67,787	$	66,445
Other loans receivable, net (1)	10,713		10,713		10,713		10,713


Held-to-maturity securities, net (2)	4,833		4,833		—		—

(1) The current and long-term portions of other loans receivable are included in the line items "Prepaid expenses and other current assets" and "Other assets, net", respectively, in the Statements of Financial Position.

(2) Held-to-maturity securities are included in the line item "Other assets, net" in the Statement of Financial Position.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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