XML 37 R15.htm IDEA: XBRL DOCUMENT v2.3.0.15
Fair Value Measurements
9 Months Ended
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.