Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2018

Fair value measurements for items measured at fair value

Assets carried at fair value included those listed, by hierarchy level, in the following tables as of December 31, 2018 and 2017:



Assets carried at fair value by hierarchy level as of December 31, 2018
Table	6.1a
(In thousands)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	167,176	$	42,264	$	124,912	$	—
Obligations of U.S. states and political subdivisions		1,720,100		—		1,720,087		13
Corporate debt securities		2,400,762		—		2,400,762		—
ABS		112,033		—		112,033		—
RMBS		178,961		—		178,961		—
CMBS		267,660		—		267,660		—
CLOs		305,295		—		305,295		—
Total fixed income securities		5,151,987		42,264		5,109,710		13
Equity securities		3,932		3,932		—		—
Other ⁽¹⁾		96,403		96,403		—		—
Real estate acquired ⁽²⁾		14,535		—		—		14,535
Total		$	5,266,857	$	142,599	$	5,109,710	$	14,548



Assets carried at fair value by hierarchy level as of December 31, 2017
Table	6.1b
(In thousands)		Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
U.S. Treasury securities and obligations of U.S. government corporations and agencies		$	178,846	$	81,598	$	97,248	$	—
Obligations of U.S. states and political subdivisions		2,152,524		—		2,152,253		271
Corporate debt securities		2,066,838		—		2,066,838		—
ABS		4,923		—		4,923		—
RMBS		181,849		—		181,849		—
CMBS		297,312		—		297,312		—
CLOs		101,023		—		101,023		—
Total fixed income securities		4,983,315		81,598		4,901,446		271
Equity securities ⁽³⁾		7,246		2,978		—		4,268
Real estate acquired ⁽²⁾		12,713		—		—		12,713
Total		$	5,003,274	$	84,576	$	4,901,446	$	17,252


⁽¹⁾	Consists of money market funds included in "Cash and Cash Equivalents" and "Restricted Cash and Cash Equivalents" on the consolidated balance sheet.


⁽²⁾	Real estate acquired through claim settlement, which is held for sale, is reported in "Other assets" on the consolidated balance sheets.


⁽³⁾	Equity securities in Level 3 are carried at cost, which approximates fair value. See "Reconciliation of Level 3 assets" below for information regarding a change in presentation of amounts previously included in Level 3 Equity securities.

Reconciliation of beginning and ending balance for assets and liabilities measured at fair value with significant unobservable inputs (level 3)

For assets and liabilities measured at fair value using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances for the years ended December 31, 2018, 2017, and 2016 is shown in tables 6.2a, 6.2b and 6.2c below. As described in Note 3 - "Significant Accounting Policies," under updated guidance regarding the "Recognition and Measurement of Financial Assets and Financial Liabilities" which became effective on January 1, 2018, our investment in FHLB stock is no longer presented with equity securities. Prior to the updated guidance, the FHLB stock was included in our Level 3 equity securities. As shown in table 6.2a below, for the year ended December 31, 2018, we have transferred the FHLB stock out of Level 3 assets, and it is carried at cost, which approximates fair value, on our consolidated balance sheet in "Other invested assets" as of December 31, 2018. There were no transfers into or out of Level 3 for the years ending December 31, 2017 and 2016. There were no losses included in earnings for the years ended December 31, 2018, 2017, and 2016 attributable to the change in unrealized losses on assets still held at the end of each applicable year.



Fair value roll-forward for financial instruments classified as Level 3 for the year ended December 31, 2018
Table	6.2a
(In thousands)		Debt Securities			Equity Securities			Total Investments			Real Estate Acquired
Balance at December 31, 2017		$	271		$	4,268		$	4,539		$	12,713
Transfers out of Level 3		—			(3,100		)	(3,100		)	—
Total realized/unrealized gains (losses):
Included in earnings and reported as net realized investment gains		—			3,663			3,663			—
Included in earnings and reported as losses incurred, net		—			—			—			(1,995		)
Purchases		—			—			—			33,912
Sales		(258		)	(4,831		)	(5,089		)	(30,095		)
Balance at December 31, 2018		$	13		$	—		$	13		$	14,535



Fair value roll-forward for financial instruments classified as Level 3 for the year ended December 31, 2017
Table	6.2b
(In thousands)		Debt Securities			Equity Securities		Total Investments			Real Estate Acquired
Balance at December 31, 2016		$	691		$	4,268	$	4,959		$	11,748
Total realized/unrealized gains (losses):
Included in earnings and reported as losses incurred, net		—			—		—			(1,315		)
Purchases		—			—		—			34,749
Sales		(420		)	—		(420		)	(32,469		)
Balance at December 31, 2017		$	271		$	4,268	$	4,539		$	12,713



Fair value roll-forward for financial instruments classified as Level 3 for the year ended December 31, 2016
Table	6.2c
(In thousands)		Debt Securities			Equity Securities			Total Investments			Real Estate Acquired
Balance at December 31, 2015		$	1,228		$	2,855		$	4,083		$	12,149
Total realized/unrealized gains (losses):
Included in earnings and reported as net realized investment gains		—			3,579			3,579			—
Included in earnings and reported as losses incurred, net		—			—			—			(1,142		)
Purchases		—			4,258			4,258			36,859
Sales		(537		)	(6,424		)	(6,961		)	(36,118		)
Balance at December 31, 2016		$	691		$	4,268		$	4,959		$	11,748

Schedule of carrying value and fair value of financial liabilities measured on a recurring basis

Table 6.3 compares the carrying value and fair value of our financial liabilities disclosed, but not carried, at fair value as of December 31, 2018 and 2017. The fair values of our 5.75% Notes and 9% Debentures were based on observable market prices. The fair value of the FHLB Advance was estimated using cash flows discounted at current incremental borrowing rates for similar borrowing arrangements, and in all cases they are categorized as Level 2. See Note 7 - "Debt" for a description of the financial liabilities in table 6.3.



Financial liabilities not carried at fair value
Table	6.3
		December 31, 2018				December 31, 2017
(In thousands)		Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
FHLB Advance		$	155,000	$	150,551	$	155,000	$	152,124
5.75% Notes		419,713		425,791		418,560		465,473
9% Debentures		256,872		338,069		256,872		353,507
Total financial liabilities		$	831,585	$	914,411	$	830,432	$	971,104