Fair Value

3 Months Ended

Mar. 31, 2013

Fair Value [Abstract]

Fair Value

(7) Fair Value:

Assets and liabilities recorded at fair value in the consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair value. The following tables summarize fair value measurements by level for assets measured at fair value on a recurring basis:

As of March 31, 2013:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	75,562	$	75,562	$	-	$	-
Residential mortgage-backed securities		23,190		-		23,190		-
Commercial mortgage-backed securities		12,444		-		12,444		-
State and municipal obligations		179,854		-		179,854		-
Corporate securities		117,835		-		107,362		10,473
Options embedded in convertible securities		1,882		-		1,882		-
Foreign government obligations		21,854		-		21,854		-
Total fixed maturities		432,621		75,562		346,586		10,473
Equity securities		115,377		115,377		-		-
Short term		3,740		3,740		-		-
Cash equivalents		80,032		-		80,032		-
	$	631,770	$	194,679	$	426,618	$	10,473

As of December 31, 2012:
Description	Total		Level 1		Level 2		Level 3
U.S. government obligations	$	70,742	$	70,742	$	-	$	-
Residential mortgage-backed securities		25,040		-		25,040		-
Commercial mortgage-backed securities		11,828		-		11,828		-
State and municipal obligations		194,865		-		194,865		-
Corporate securities		118,945		-		107,263		11,682
Options embedded in convertible securities		1,651		-		1,651		-
Foreign government obligations		22,598		-		22,598		-
Total fixed maturities		445,669		70,742		363,245		11,682
Equity securities		107,582		107,582		-		-
Short term		4,201		4,201		-		-
Cash equivalents		64,450		-		64,450		-
	$	621,902	$	182,525	$	427,695	$	11,682

Level inputs, as defined by FASB Fair Value Measurements, are as follows:

Level Input:	Input Definition:
Level 1	Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data at the measurement date.
Level 3	Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date.

The following methods, assumptions and inputs were used to determine the fair value of each class of the following assets recorded at fair value in the consolidated balance sheets:

Cash equivalents:  Cash equivalents primarily consist of highly rated money market funds purchased at par value with specified yield rates. Due to underlying assets of these funds, we designate all cash equivalents as Level 2.

Fixed maturities: Fair values of fixed maturities are based on quoted market prices, where available. These fair values are obtained primarily from third party pricing services, which generally use Level 1 or Level 2 inputs for the determination of fair value to facilitate fair value measurements and disclosures. U.S. government obligations represent Level 1 securities, while Level 2 securities primarily include corporate securities, states and municipal obligations, foreign government obligations, and mortgage-backed securities. For securities not actively traded, the third party pricing services may use quoted market prices of comparable instruments or discounted cash flow analyses, incorporating inputs that are currently observable in the markets for similar securities. Inputs that are often used in the valuation methodologies include, but are not limited to, broker quotes, benchmark yields, credit spreads, default rates and prepayment speeds.

Equity securities: Fair values of equity securities are designated as Level 1 and are based on quoted market prices.

The Level 3 assets consist of an investment portfolio of insurance-linked securities.  The insurance-linked securities are valued using the average of estimated market quotes from multiple insurance-linked securities brokers.  The broker quotes include Level 3 inputs which are significant to the valuation of the insurance-linked securities and vary by 0-3% from each other. There was no Level 3 sales, no transfers into Level 3 and no transfers out of Level 3 during 2013 or 2012.  A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows for the three months ended March 31, 2013 and for the year ended December 31, 2012:

	2013			2012
Beginning of period balance	$	11,682		$	17,050
Net realized and unrealized gain included in
earnings or changes in net assets		403			1,653
Purchases		258			400
Settlements		(1,870	)		(7,421	)
End of period balance	$	10,473		$	11,682

There were no transfers of assets between Level 1 and Level 2 during the three months ended March 31, 2013 and 2012.  Transfers between levels, if any, are recorded as of the beginning of the reporting period.

In addition to the preceding disclosures on assets recorded at fair value in the consolidated balance sheets, FASB guidance also requires the disclosure of fair values for certain other financial instruments for which it is practicable to estimate fair value, whether or not such values are recognized in the consolidated balance sheets.

Non-financial instruments such as real estate, property and equipment, other assets, deferred income taxes and intangible assets, and certain financial instruments such as reserves for losses and loss expenses are excluded from the fair value disclosures.  Therefore, the fair value amounts cannot be aggregated to determine the Company's underlying economic value.

The carrying amounts reported in the consolidated balance sheets for cash, accounts receivables, reinsurance recoverable, notes receivable, accounts payable and accrued expenses, income taxes receivable or payable and unearned premiums approximate fair value because of the short term nature of these items.  These assets and liabilities are not included in the table below.

The following methods, assumptions and inputs were used to estimate the fair value of each class of financial instrument:

Limited partnerships: The Company accounts for investments in limited partnerships using the equity method of accounting, which requires an investor in a limited partnership to carry the investment at its proportionate share of the limited partnership's equity.   The underlying assets of the Company's investments in limited partnerships are carried at fair value, and, therefore, the Company's carrying value of limited partnerships approximates fair value.  As these investments are not actively traded and the corresponding inputs are based on data provided by the investees, they are classified as Level 3.

Short-term borrowings: The fair value of our short-term borrowings is based on quoted market prices for the same or similar debt, or, if no quoted market prices are available, on the current market interest rates available to us for debt of similar terms and remaining maturities.

A summary of the carrying value and fair value by level of financial instruments not recorded at fair value on the Company's consolidated balance sheets at March 31, 2013 and December 31, 2012 are as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
March 31, 2013
Assets:   Limited partnerships	$	62,668	$	-	$	-	$	62,668	$	62,668
Liabilities:   Short-term borrowings		10,000		-		10,000		-		10,000
December 31, 2012
Assets:   Limited partnerships		59,954		-		-		59,954		59,954
Liabilities:   Short-term borrowings		10,000		-		10,000		-		10,000