Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2012

The Carrying Amounts and Estimated Fair Values of Financial Instruments


		March 31, 2012		December 31, 2011
		Carrying	Fair	Carrying	Fair
($ in thousands)		Amount	Value	Amount	Value
Financial Assets
Fixed maturity securities:
HTM	$	667,192	711,731	712,348	758,043
AFS		3,034,511	3,034,511	2,897,373	2,897,373
Equity securities, AFS		152,986	152,986	157,355	157,355
Short-term investments		174,472	174,472	217,044	217,044
Receivable for proceeds related to sale of Selective
HR Solutions ("Selective HR")		2,989	2,989	3,212	3,212
Financial Liabilities
Notes payable:
7.25% Senior Notes		49,909	59,814	49,908	51,111
6.70% Senior Notes		99,457	113,261	99,452	113,195
7.50% Junior Notes		100,000	100,520	100,000	100,360
2.90% borrowings from FHLBI		13,000	13,725	13,000	13,759
1.25% borrowings from FHLBI		45,000	44,688	45,000	44,629
Total notes payable	$	307,366	332,008	307,360	323,054

Quantitative Disclosures of Our Financial Assets That Were Measured At Fair Value


March 31, 2012			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 3/31/12	(Level 1)¹	(Level 2)¹	(Level 3)
Description
Measured on a recurring basis:
U.S. government and government agencies²	$	335,180	130,189	183,768	21,223
Foreign government		37,817	-	37,817	-
Obligations of states and political subdivisions		669,073	-	669,073	-
Corporate securities		1,294,945	-	1,292,433	2,512
ABS		94,742	-	94,742	-
CMBS		112,048	-	111,667	381
RMBS		490,706	-	490,706	-
Total AFS fixed maturity securities		3,034,511	130,189	2,880,206	24,116
Equity securities		152,986	152,986	-	-
Short-term investments		174,472	174,472	-	-
Receivable for proceeds related to sale of Selective HR		2,989	-	-	2,989
Total assets	$	3,364,958	457,647	2,880,206	27,105


December 31, 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 12/31/11	(Level 1)	(Level 2)	(Level 3)
Description
Measured on a recurring basis:
U.S. government and government agencies²	$	353,796	126,475	205,580	21,741
Foreign government		34,173	-	34,173	-
Obligations of states and political subdivisions		622,659	-	622,659	-
Corporate securities		1,213,310	-	1,210,707	2,603
ABS		78,949	-	78,949	-
CMBS		112,598	-	112,244	354
RMBS		481,888	-	481,888	-
Total AFS fixed maturity securities		2,897,373	126,475	2,746,200	24,698
Equity securities		157,355	157,355	-	-
Short-term investments		217,044	217,044	-	-
Receivable for proceeds related to sale of Selective HR		3,212	-	-	3,212
Total assets	$	3,274,984	500,874	2,746,200	27,910

¹There were no transfers of securities between Level 1 and Level 2 in First Quarter 2012.

² U.S. government includes corporate securities fully guaranteed by the FDIC.

Summary of the Changes in Fair Value of Securities Using Level 3 Inputs

($ in thousands)		Government	Corporate	CMBS	Receivable for Proceeds Related to Sale of Selective HR	Total

Fair value, December 31, 2011	$	21,741	2,603	354	3,212	27,910
Total net (losses) gains for the period included in:
OCI¹		105	99	27	-	231
Net income^2,3		(46)	-	-	64	18
Purchases		-	-	-	-	-
Sales		-	-	-	-	-
Issuances		-	-	-	-	-
Settlements		(577)	(190)	-	(287)	(1,054)
Transfers into Level 3		-	-	-	-	-
Transfers out of Level 3		-	-	-	-	-
Fair value, March 31, 2012	$	21,223	2,512	381	2,989	27,105

¹Amounts are reported in "Unrealized holding gains (losses) arising during period" on the Consolidated Statements of Comprehensive Income.

²Amounts are reported in "Net realized gains (losses)" for realized gains and losses and "Net investment income earned" for amortization of securities on the Consolidated Statements of Income.

³Amounts are reported in "Other income" for the receivable related to the sale of Selective HR on the Consolidated Statements of Income and are related to interest accretion on the receivable.

2011 ($ in thousands)		Government	Corporate	CMBS	Receivable for Proceeds Related to Sale of Selective HR	Total

Fair value, December 31, 2010	$	-	-	185	5,002	5,187
Total net (losses) gains for the period included in:
OCI¹		-	-	507	-	507
Net income^2,3		-	-	(322)	(638)	(960)
Purchases		-	-	-	-	-
Sales		-	-	-	-	-
Issuances		-	-	-	-	-
Settlements		-	-	(16)	(1,152)	(1,168)
Transfers into Level 3		21,741	2,603	-	-	24,344
Transfers out of Level 3		-	-	-	-	-
Fair value, December 31, 2011	$	21,741	2,603	354	3,212	27,910

¹Amounts are reported in "Other net unrealized gains on investment securities, net of deferred income tax" on the Consolidated Statements of Stockholders' Equity in our 2011 Annual Report.

²Amounts are reported in "Net realized gains (losses)" for realized gains and losses and "Net investment income earned" for amortization for the CMBS securities on the Consolidated Statements of Income in our 2011 Annual Report.

³Amounts are reported in either "Loss on disposal of discontinued operations, net of tax" or "Other income" for the receivable related to the sale of Selective HR on the Consolidated Statements of Income. Amounts in "Loss on disposal of discontinued operations, net of tax" related to charges to reduce the fair value of our receivable, and amounts in "Other income" related to interest accretion on the receivable in our 2011 Annual Report.

Quantitative Information of Our Financial Assets and Liabilities That Were Disclosed at Fair Value


March 31, 2012			Fair Value Measurements Using
		Assets/	Quoted Prices in
		Liabilities	Active Markets for	Significant Other	Significant
		Disclosed at	Identical Assets/	Observable	Unobservable
		Fair Value	Liabilities	Inputs	Inputs
($ in thousands)		at 3/31/12	(Level 1)	(Level 2)	(Level 3)
Financial Assets
HTM:
Foreign government	$	5,455	-	5,455	-
Obligations of states and political subdivisions		612,293	-	612,293	-
Corporate securities		69,063	-	63,280	5,783
ABS		7,863	-	6,188	1,675
CMBS		17,057	-	14,366	2,691
Total HTM fixed maturity securities	$	711,731	-	701,582	10,149

Financial Liabilities
Notes payable:
7.25% Senior Notes	$	59,814	59,814	-	-
6.70% Senior Notes		113,261	113,261	-	-
7.50% Junior Notes		100,520	100,520	-	-
2.90% borrowings from FHLBI		13,725	-	13,725	-
1.25% borrowings from FHLBI		44,688	-	44,688	-
Total notes payable	$	332,008	273,595	58,413	-

- Definition

Tabular disclosure of assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring and/or nonrecurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).

+ References+ Details

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

+ References

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+ Details

-

185

5,002

5,187