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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2011
Fair Value Disclosures [Abstract] |
Fair Value Measurements | NOTE 7. Fair Value Measurements The following table presents the carrying amounts and estimated fair values of our financial instruments as of September 30, 2011 and December 31, 2010:
|  | September 30, 2011 |  | December 31, 2010
|  | Carrying |  | Fair |  | Carrying |  | Fair
($ in thousands) |  | Amount |  | Value |  | Amount |  | Value
Financial Assets |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |
HTM | $ | 852,843 |  | 901,385 |  | 1,214,324 |  | 1,256,294
AFS |  | 2,772,348 |  | 2,772,348 |  | 2,342,742 |  | 2,342,742
Equity securities, AFS |  | 139,203 |  | 139,203 |  | 69,636 |  | 69,636
Short-term investments |  | 162,812 |  | 162,812 |  | 161,155 |  | 161,155
Receivable for proceeds related to sale of Selective |  |  |  |  |  |  |  |
HR Solutions ("Selective HR") |  | 3,375 |  | 3,375 |  | 5,002 |  | 5,002
Financial Liabilities |  |  |  |  |  |  |  |
Notes payable: |  |  |  |  |  |  |  |
7.25% Senior Notes |  | 49,907 |  | 58,589 |  | 49,904 |  | 55,190
6.70% Senior Notes |  | 99,446 |  | 110,604 |  | 99,429 |  | 90,097
7.50% Junior Notes |  | 100,000 |  | 98,664 |  | 100,000 |  | 99,840
2.90% borrowings from FHLBI |  | 13,000 |  | 13,780 |  | 13,000 |  | 13,389
Total notes payable | $ | 262,353 |  | 281,637 |  | 262,333 |  | 258,516
There have been no significant changes to the techniques used to value our financial instruments during Nine Months 2011. For a discussion regarding these techniques, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." in our 2010 Annual Report. For discussion of the sale of Selective HR, refer to Note 15. "Discontinued Operations" of this Form 10-Q. The following tables provide quantitative disclosures of our financial assets that were measured at fair value at September 30, 2011 and December 31, 2010:
September 30, 2011 |  |  | Fair Value Measurements Using
|  |  |  | Quoted Prices in |  |  |  |
|  | Assets |  | Active Markets for |  | Significant Other |  | Significant
|  | Measured at |  | Identical Assets/ |  | Observable |  | Unobservable
|  | Fair Value |  | Liabilities |  | Inputs |  | Inputs
($ in thousands) |  | at 9/30/11 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Description |  |  |  |  |  |  |  |
Measured on a recurring basis: |  |  |  |  |  |  |  |
U.S. government and government agencies1 | $ | 380,031 |  | 122,701 |  | 257,330 |  | -
Foreign government |  | 32,912 |  | - |  | 32,912 |  | -
Obligations of states and political subdivisions |  | 561,515 |  | - |  | 561,515 |  | -
Corporate securities |  | 1,125,559 |  | - |  | 1,125,559 |  | -
ABS |  | 78,694 |  | - |  | 78,694 |  | -
CMBS |  | 112,891 |  | - |  | 112,561 |  | 330
RMBS |  | 480,746 |  | - |  | 480,746 |  | -
Total AFS fixed maturity securities |  | 2,772,348 |  | 122,701 |  | 2,649,317 |  | 330
Equity securities |  | 139,203 |  | 139,203 |  | - |  | -
Short-term investments |  | 162,812 |  | 162,812 |  | - |  | -
Receivable for proceeds related to sale of Selective HR |  | 3,375 |  | - |  | - |  | 3,375
Total financial assets measured on a recurring basis | $ | 3,077,738 |  | 424,716 |  | 2,649,317 |  | 3,705
December 31, 2010 |  |  | Fair Value Measurements Using
|  |  |  | Quoted Prices in |  |  |  |
|  | Assets |  | Active Markets for |  | Significant Other |  | Significant
|  | Measured at |  | Identical Assets/ |  | Observable |  | Unobservable
|  | Fair Value |  | Liabilities |  | Inputs |  | Inputs
($ in thousands) |  | at 12/31/10 |  | (Level 1) |  | (Level 2) |  | (Level 3)
Description |  |  |  |  |  |  |  |
Measured on a recurring basis: |  |  |  |  |  |  |  |
U.S. government and government agencies1 | $ | 320,529 |  | 105,317 |  | 215,212 |  | -
Foreign government |  | 18,966 |  | - |  | 18,966 |  | -
Obligations of states and political subdivisions |  | 533,897 |  | - |  | 533,897 |  | -
Corporate securities |  | 993,725 |  | - |  | 993,725 |  | -
ABS |  | 48,733 |  | - |  | 48,733 |  | -
CMBS |  | 104,475 |  | - |  | 104,290 |  | 185
RMBS |  | 322,417 |  | - |  | 322,417 |  | -
Total AFS fixed maturity securities |  | 2,342,742 |  | 105,317 |  | 2,237,240 |  | 185
Equity securities |  | 69,636 |  | 69,636 |  | - |  | -
Short-term investments |  | 161,155 |  | 161,155 |  | - |  | -
Receivable for proceeds related to sale of Selective HR |  | 5,002 |  | - |  | - |  | 5,002
Total financial assets measured on a recurring basis | $ | 2,578,535 |  | 336,108 |  | 2,237,240 |  | 5,187
1 U.S. government includes corporate securities fully guaranteed by the FDIC. The following tables provide a summary of the changes in fair value of securities using Level 3 inputs. The transfers of the CMBS, AFS securities in 2010 between levels in the fair value hierarchy were driven primarily by the availability and nature of the broker quotes used at the valuation dates:
Nine Months 2011 ($ in thousands) |  | CMBS, AFS | Receivable for Proceeds Related to Sale of Selective HR | Total
Fair value, December 31, 2010 | $ | 185 | 5,002 | 5,187
Total net gains (losses) for the period included in: |  |  |  |
OCI1 |  | 425 | - | 425
Net income2, 3 |  | (269) | (708) | (977)
Purchases |  | - | - | -
Sales |  | - | - | -
Issuances |  | - | - | -
Settlements |  | (11) | (919) | (930)
Net transfers in and/or out of Level 3 |  | - | - | -
Fair value, September 30, 2011 | $ | 330 | 3,375 | 3,705
2010 ($ in thousands) |  | ABS, AFS | CMBS, AFS | Receivable for Proceeds Related to Sale of Selective HR | Total
Fair Value, December 31, 2009 | $ | - | - | 12,300 | 12,300
Total net (losses) gains for the period included in: |  |  |  |  |
OCI1 |  | (22) | 1,862 | - | 1,840
Net income2, 3 |  | - | 41 | (5,460) | (5,419)
Purchases, sales, issuances, and settlements (net) |  | 2,737 | (148) | (1,838) | 751
Net transfers in and/or out of Level 3 |  | (2,715) | (1,570) | - | (4,285)
Fair value, December 31, 2010 | $ | - | 185 | 5,002 | 5,187
1 | Amounts are reported in "Other net unrealized gains on investment securities, net of deferred income tax" on the Consolidated Statements of Stockholders' Equity.
2 | Amounts are reported in "Net realized investment gains (losses)" for realized gains and losses and "Net investment income earned" for amortization for the CMBS securities on the Consolidated Statements of Income.
3 | Amounts are reported in either "Loss on disposal of discontinued operations, net of tax" or "Other income" for the receivable related to sale of Selective HR on the Consolidated Statements of Income. Amounts in "Loss on disposal of discontinued operations, net of tax" relate to charges to reduce the fair value of our receivable and amounts in "Other income" reflect interest accretion on the receivable.
## Due to worksite life generation that has not met our expectations, in Third Quarter 2011 we reduced the value of our receivable for the expected proceeds from the sale of Selective HR by $1.0 million. This charge is reflected in "Loss on disposal of discontinued operations, net of tax" on the Consolidated Statement of Income. We are scheduled to receive the proceeds from the sale of Selective HR over a 10-year period and the fair value of this receivable was determined using a discounted cash flow analysis (Level 3 pricing). Partially offsetting this charge was $0.3 million of interest accretion on the receivable, which is reflected in "Other income" on the Consolidated Statement of Income.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6925170&loc=d3e19296-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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