Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

The Carrying Amounts and Estimated Fair Values of Financial Instruments



	March 31, 2013			December 31, 2012
($ in thousands)	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial Assets
Fixed maturity securities:
HTM	$	507,771	543,553	554,069	594,661
AFS	3,465,981		3,465,981	3,296,013	3,296,013
Equity securities, AFS	174,745		174,745	151,382	151,382
Short-term investments	163,440		163,440	214,479	214,479
Receivable for proceeds related to sale of Selective HR Solutions (“Selective HR”)	—		—	2,705	2,705
Financial Liabilities
Notes payable:
2.90% borrowings from FHLBI	13,000		13,539	13,000	13,595
1.25% borrowings from FHLBI	45,000		45,649	45,000	45,590
7.50% Junior Notes	—		—	100,000	101,480
6.70% Senior Notes	99,481		110,815	99,475	107,707
7.25% Senior Notes	49,912		52,641	49,912	52,689
5.875% Senior Notes	185,000		184,630	—	—
Total notes payable	$	392,393	407,274	307,387	321,061

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



March 31, 2013			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 3/31/13		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:
AFS:
U.S. government and government agencies	$	245,664	104,507	122,185	18,972
Foreign government	30,163		—	30,163	—
Obligations of states and political subdivisions	849,946		—	849,946	—
Corporate securities	1,532,753		—	1,529,851	2,902
ABS	171,943		—	165,887	6,056
CMBS	146,540		—	140,179	6,361
RMBS	488,972		—	488,972	—
Total AFS fixed maturity securities	3,465,981		104,507	3,327,183	34,291
Equity securities	174,745		167,203	4,642	2,900
Short-term investments	163,440		163,440	—	—
Total assets	$	3,804,166	435,150	3,331,825	37,191



December 31, 2012			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 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:
AFS:
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


¹	There were no transfers of securities between Level 1 and Level 2.

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



March 31, 2013
($ in thousands)	Government			Corporate		ABS		CMBS		Equity		Receivable for Proceeds Related to Sale of Selective HR		Total
Fair value, December 31, 2012	$	19,789		2,946		6,068		7,162		3,607		2,705		42,277
Total net (losses) gains for the period included in:
OCI¹	(153		)	16		(12	)	248		3,935		—		4,034
Net income^2,3	(43		)	—		—		134		—		(1,480	)	(1,389	)
Purchases	—			—		—		—		—		—		—
Sales	—			—		—		—		—		—		—
Issuances	—			—		—		—		—		—		—
Settlements	(621		)	(60	)	—		(1,183	)	—		(225	)	(2,089	)
Transfers into Level 3	—			—		—		—		—		—		—
Transfers out of Level 3	—			—		—		—		(4,642	)	(1,000	)	(5,642	)
Fair value, March 31, 2013	$	18,972		2,902		6,056		6,361		2,900		—		37,191

¹Amounts are reported in “Unrealized holding gains arising during period” on the Consolidated Statements of Comprehensive Income.

²Amounts are reported in “Net realized gains ” for realized gains and “Net investment income earned” for amortization of securities on the Consolidated Statements of Income.

³For the receivable related to the sale of Selective HR, amounts in “Loss on disposal of discontinued operations, net of tax” relate to an impairment charge and amounts in “Other income” relate to interest accretion on the Consolidated Statements of Income.



December 31, 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:
OCI¹	(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

¹Amounts are reported in “Unrealized holding gains arising during period” on the Consolidated Statements of Comprehensive Income in our 2012 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 2012 Annual Report.

³Amounts are reported in “Other income” for the receivable related to the sale of Selective HR on the Consolidated Statements of Income in our 2012 Annual Report and are related to interest accretion on the receivable.

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



March 31, 2013			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 3/31/2013		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	$	5,674	—	5,674	—
Obligations of states and political subdivisions	481,137		—	481,137	—
Corporate securities	39,634		—	34,802	4,832
ABS	6,920		—	6,920	—
CMBS	10,188		—	10,188	—
Total HTM fixed maturity securities	$	543,553	—	538,721	4,832
Financial Liabilities
Notes payable:
2.90% borrowings from FHLBI	$	13,539	—	13,539	—
1.25% borrowings from FHLBI	45,649		—	45,649	—
6.70% Senior Notes	110,815		110,815	—	—
7.25% Senior Notes	52,641		—	52,641	—
5.875% Senior Notes	184,630		184,630	—	—
Total notes payable	$	407,274	295,445	111,829	—



December 31, 2012			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 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	—

- 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).

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- 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 (loss), 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, issues, 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.

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- 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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