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Fair Value Measurements | 12 Months Ended
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Dec. 31, 2012
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements The following table presents the carrying amounts and estimated fair values of our financial instruments as of December 31, 2012 and 2011:
|  | December 31, 2012 |  | December 31, 2011
($ in thousands) |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
Financial Assets |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |  |
HTM |  | $ | 554,069 |  |  | 594,661 |  |  | 712,348 |  |  | 758,043 |
AFS |  | 3,296,013 |  |  | 3,296,013 |  |  | 2,897,373 |  |  | 2,897,373 |
Equity securities, AFS |  | 151,382 |  |  | 151,382 |  |  | 157,355 |  |  | 157,355 |
Short-term investments |  | 214,479 |  |  | 214,479 |  |  | 217,044 |  |  | 217,044 |
Receivable for proceeds related to sale of Selective HR ("Selective HR") |  | 2,705 |  |  | 2,705 |  |  | 3,212 |  |  | 3,212 |
Financial Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Notes payable: |  |  |  |  |  |  |  |  |  |  |  |
2.90% borrowings from FHLBI |  | 13,000 |  |  | 13,595 |  |  | 13,000 |  |  | 13,759 |
1.25% borrowings from FHLBI |  | 45,000 |  |  | 45,590 |  |  | 45,000 |  |  | 44,629 |
7.50% Junior Notes |  | 100,000 |  |  | 101,480 |  |  | 100,000 |  |  | 100,360 |
6.70% Senior Notes |  | 99,475 |  |  | 107,707 |  |  | 99,452 |  |  | 113,195 |
7.25% Senior Notes |  | 49,912 |  |  | 52,689 |  |  | 49,908 |  |  | 51,111 |
Total notes payable |  | $ | 307,387 |  |  | 321,061 |  |  | 307,360 |  |  | 323,054 |
For discussion regarding the fair value techniques of our financial instruments, refer to Note 2. "Summary of Significant Accounting Policies" in this Form 10-K. The following tables provide quantitative disclosures of our financial assets that were measured at fair value at December 31, 2012 and 2011:
December 31, 2012 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets Measured at Fair Value 12/31/12 |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)1 |  | Significant Other Observable Inputs (Level 2)1 |  | Significant Unobservable Inputs (Level 3)
Description |  |  |  |  |  |  |  |  |  |  |  |
Measured on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies |  | $ | 259,092 |  |  | 115,861 |  |  | 123,442 |  |  | 19,789 |
Foreign government |  | 30,229 |  |  | — |  |  | 30,229 |  |  | — |
Obligations of states and political subdivisions |  | 818,024 |  |  | — |  |  | 818,024 |  |  | — |
Corporate securities |  | 1,450,247 |  |  | — |  |  | 1,447,301 |  |  | 2,946 |
ABS |  | 128,640 |  |  | — |  |  | 122,572 |  |  | 6,068 |
CMBS |  | 137,119 |  |  | — |  |  | 129,957 |  |  | 7,162 |
RMBS |  | 472,662 |  |  | — |  |  | 472,662 |  |  | — |
Total AFS fixed maturity securities |  | 3,296,013 |  |  | 115,861 |  |  | 3,144,187 |  |  | 35,965 |
Equity securities |  | 151,382 |  |  | 147,775 |  |  | — |  |  | 3,607 |
Short-term investments |  | 214,479 |  |  | 214,479 |  |  | — |  |  | — |
Receivable for proceeds related to sale of Selective HR |  | 2,705 |  |  | — |  |  | — |  |  | 2,705 |
Total assets |  | $ | 3,664,579 |  |  | 478,115 |  |  | 3,144,187 |  |  | 42,277 |
December 31, 2011 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets Measured at Fair Value 12/31/11 |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)1 |  | Significant Other Observable Inputs (Level 2)1 |  | Significant Unobservable Inputs (Level 3)
Description |  |  |  |  |  |  |  |  |  |  |  |
Measured on a recurring basis: |  |  |  |  |  |  |  |  |  |  |  |
U.S. government and government agencies 2 |  | $ | 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 |
1 There were no transfers of securities between Level 1 and Level 2. 2 U.S. government includes corporate securities fully guaranteed by the FDIC. The following table provides a summary of the changes in the fair value of securities measured using Level 3 inputs and related quantitative information for the year ended December 31, 2012:
2012 |  |  |  |  |  |  |  |  |  |  |  |  |  |
($ in thousands) |  | Government |  | Corporate |  | ABS |  | CMBS |  | Equity |  | 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: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
OCI 1 |  | (22 | ) |  | 185 |  |  | 68 |  |  | 858 |  |  | — |  |  | — |  |  | 1,089 |
Net income 2,3 |  | (193 | ) |  | — |  |  | — |  |  | (51 | ) |  | — |  |  | 244 |  |  | — |
Purchases |  | — |  |  | — |  |  | 7,300 |  |  | 5,611 |  |  | — |  |  | — |  |  | 12,911 |
Sales |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Issuances |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements |  | (1,737 | ) |  | (630 | ) |  | — |  |  | (624 | ) |  | — |  |  | (751 | ) |  | (3,742 | )
Transfers into Level 3 |  | — |  |  | 788 |  |  | — |  |  | 8,247 |  |  | 3,607 |  |  | — |  |  | 12,642 |
Transfers out of Level 3 |  | — |  |  | — |  |  | (1,300 | ) |  | (7,233 | ) |  | — |  |  | — |  |  | (8,533 | )
Fair value, December 31, 2012 |  | $ | 19,789 |  |  | 2,946 |  |  | 6,068 |  |  | 7,162 |  |  | 3,607 |  |  | 2,705 |  |  | 42,277 |
1 Amounts are reported in “Unrealized holding gains arising during period” on the Consolidated Statements of Comprehensive Income. 2 Amounts 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. 3 Amounts 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. As discussed in Note 2. "Summary of Significant Accounting Policies," in this Form 10-K, the fair value of our Level 3 fixed maturity securities are typically obtained through non-binding broker quotes, which we review for reasonableness. In 2012, fixed maturity securities with an aggregate fair value of $36.0 million were measured using Level 3 inputs. This amount includes securities with a fair value of $9.0 million that were transferred into Level 3 during the year. These transfers were primarily related to securities that had been previously priced using Level 2 inputs, but due to the availability and nature of the pricing used at the valuation dates, are priced using Level 3 inputs at December 31, 2012. In addition, a portion of these transfers relate to securities that had previously been classified as HTM, and therefore not measured at fair value, for which available pricing at December 31, 2012 used Level 3 inputs. In addition, securities with a fair value of $8.5 million were transfered out of level 3 due to the current availability of level 2 pricing at December 31, 2012 that was not available previously. Equity securities with a fair value of $3.6 million were transferred into Level 3 during 2012, driven primarily by the nature of the quotes used at the valuation date. We review the fair values received on these non-publicly traded equity securities for reasonableness. The remaining measurement using Level 3 inputs relates to the receivable from the sale of Selective HR. This security is measured using unobservable inputs, the most significant of which is our assumption regarding the retention of business. If this assumption were to change by +/- 10%, the value of the receivable would increase/decrease by approximately $0.1 million. The following table provides a summary of the changes in the fair value of securities measured using Level 3 inputs and related quantitative information for December 31, 2011:
2011 |  |  |  |  |  |  |  |  |  |
($ 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: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
OCI 1 |  | — |  |  | — |  |  | 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 |
1 Amounts are reported in “Unrealized holding gains arising during period” on the Consolidated Statements of Comprehensive Income. 2 Amounts 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. 3 Amounts 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. The transfers of the government and corporate securities into Level 3 classification at December 31, 2011 were primarily the result of broker-priced securities being transferred from an HTM to an AFS designation in 2011. The following tables provide quantitative information regarding our financial assets and liabilities that were disclosed at fair value at December 31, 2012:
December 31, 2012 |  |  |  | Fair Value Measurements Using
($ in thousands) |  | Assets/ Liabilities Disclosed at Fair Value 12/31/2012 |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Financial Assets |  |  |  |  |  |  |  |
HTM: |  |  |  |  |  |  |  |
Foreign government |  | $ | 5,871 |  |  | — |  |  | 5,871 |  |  | — |
Obligations of states and political subdivisions |  | 526,922 |  |  | — |  |  | 526,922 |  |  | — |
Corporate securities |  | 42,121 |  |  | — |  |  | 37,289 |  |  | 4,832 |
ABS |  | 7,097 |  |  | — |  |  | 5,698 |  |  | 1,399 |
CMBS |  | 12,650 |  |  | — |  |  | 12,650 |  |  | — |
Total HTM fixed maturity securities |  | $ | 594,661 |  |  | — |  |  | 588,430 |  |  | 6,231 |
Financial Liabilities |  |  |  |  |  |  |  |
Notes payable: |  |  |  |  |  |  |  |
2.90% borrowings from FHLBI |  | 13,595 |  |  | — |  |  | 13,595 |  |  | — |
1.25% borrowings from FHLBI |  | 45,590 |  |  | — |  |  | 45,590 |  |  | — |
7.50% Junior Notes |  | 101,480 |  |  | 101,480 |  |  | — |  |  | — |
6.70% Senior Notes |  | 107,707 |  |  | 107,707 |  |  | — |  |  | — |
7.25% Senior Notes |  | 52,689 |  |  | — |  |  | 52,689 |  |  | — |
Total notes payable |  | $ | 321,061 |  |  | 209,187 |  |  | 111,874 |  |  | — |

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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 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -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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Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 7: 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. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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