Fair Value

9 Months Ended

Sep. 30, 2020

Fair Value [Abstract]

Fair Value

(8)  Fair Value:

Assets and liabilities recorded at fair value in the condensed 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 September 30, 2020:

Description	Total		Level 1		Level 2		Level 3
Fixed income securities:
Agency collateralized mortgage obligations	$	10,106	$	–	$	10,106	$	–
Agency mortgage-backed securities		98,651		–		98,651		–
Asset-backed securities		102,193		–		102,193		–
Bank loans		8,580		–		8,580		–
Certificates of deposit		520		520		–		–
Collateralized mortgage obligations		6,034		–		6,034		–
Corporate securities		318,874		–		318,874		–
Options embedded in convertible securities		5,242		–		5,242		–
Mortgage-backed securities		43,233		–		43,233		–
Municipal obligations		43,920		–		43,920		–
Non-U.S. government obligations		29,718		–		29,718		–
U.S. government obligations		184,866		–		184,866		–
Total fixed income securities		851,937		520		851,417		–
Equity securities:
Consumer		11,220		11,220		–		–
Energy		1,059		1,059		–		–
Financial		22,357		22,357		–		–
Industrial		4,072		4,072		–		–
Technology		2,481		2,481		–		–
Funds (e.g., mutual funds, closed end funds, ETFs)		–		–		–		–
Other		7,228		7,228		–		–
Total equity securities		48,417		48,417		–		–
Short-term investments		1,000		1,000		–		–
Cash equivalents		78,401		–		78,401		–
Total	$	979,755	$	49,937	$	929,818	$	–

As of December 31, 2019:

Description	Total		Level 1		Level 2		Level 3
Fixed income securities:
Agency collateralized mortgage obligations	$	12,093	$	–	$	12,093	$	–
Agency mortgage-backed securities		56,280		–		56,280		–
Asset-backed securities		106,397		–		106,397		–
Bank loans		14,568		–		14,568		–
Certificates of deposit		2,835		2,835		–		–
Collateralized mortgage obligations		5,616		–		5,616		–
Corporate securities		276,087		–		276,087		–
Options embedded in convertible securities		5,294		–		5,294		–
Mortgage-backed securities		47,463		–		47,463		–
Municipal obligations		36,286		–		36,286		–
Non-U.S. government obligations		24,179		–		24,179		–
U.S. government obligations		208,440		–		208,440		–
Total fixed income securities		795,538		2,835		792,703		–
Equity securities:
Consumer		16,707		16,707		–		–
Energy		3,074		3,074		–		–
Financial		31,577		31,577		–		–
Industrial		4,927		4,927		–		–
Technology		2,817		2,817		–		–
Funds (e.g., mutual funds, closed end funds, ETFs)		9,460		9,460		–		–
Other		8,250		8,250		–		–
Total equity securities		76,812		76,812		–		–
Short-term investments		1,000		1,000		–		–
Cash equivalents		59,780		–		59,780		–
Total	$	933,130	$	80,647	$	852,483	$	–

Level inputs, as defined by the FASB guidance, 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 Company did not have any Level 3 assets at September 30, 2020 or December 31, 2019.  Level 3 assets, when present, are valued using various unobservable inputs, including extrapolated data, proprietary models and indicative quotes. 

Quoted market prices are obtained whenever possible.  Where quoted market prices are not available, fair values are estimated using broker/dealer quotes for specific securities.  These techniques are significantly affected by the Company's assumptions, including discount rates and estimates of future cash flows.  Potential taxes and other transaction costs have not been considered in estimating fair values.

Transfers between levels, if any, are recorded as of the beginning of the reporting period.  There were no significant transfers of assets between Level 1 and Level 2 during the nine months ended September 30, 2020.

In addition to the preceding disclosures on assets recorded at fair value in the condensed 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 condensed 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 policy reserve liabilities are excluded from the fair value disclosures.  Therefore, the fair value amounts cannot be aggregated to determine the underlying economic value of the Company.  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 primarily at fair value; 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.

Commercial mortgage loans:  Commercial mortgage loans are carried primarily at amortized cost along with a valuation allowance for losses when necessary. These investments represent interests in commercial mortgage loans originated and serviced by a third party of which the Company shares, on a pro-rata basis, in all related cash flows of the underlying mortgage loans.  The fair value of the Company’s investment in these commercial mortgage loans is based on expected future cash flows discounted at the current interest rate for origination of similar quality loans, adjusted for specific loan risk.  These investments are classified as Level 3.

Short-term borrowings: The fair value of the Company's 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 the Company 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 condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 is as follows:

	Carrying		Fair Value
	Value		Level 1		Level 2		Level 3		Total
September 30, 2020
Assets:
Limited partnerships	$	7,455	$	–	$	–	$	7,455	$	7,455
Commercial mortgage loans		11,087		–		–		11,707		11,707
Liabilities:
Short-term borrowings		20,000		–		20,000		–		20,000
December 31, 2019
Assets:
Limited partnerships	$	23,292	$	–	$	–	$	23,292	$	23,292
Commercial mortgage loans		11,782		–		–		12,068		12,068
Liabilities:
Short-term borrowings		20,000		–		20,000		–		20,000