Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

The Carrying Amounts and Estimated Fair Values of Financial Instruments



	June 30, 2013			December 31, 2012
($ in thousands)	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial Assets
Fixed maturity securities:
HTM	$	479,507	507,625	554,069	594,661
AFS	3,419,811		3,419,811	3,296,013	3,296,013
Equity securities, AFS	172,064		172,064	151,382	151,382
Short-term investments	186,499		186,499	214,479	214,479
Receivable for proceeds related to sale of Selective HR Solution (“Selective HR”)	—		—	2,705	2,705
Financial Liabilities
Notes payable:
2.90% borrowings from FHLBI	13,000		13,451	13,000	13,595
1.25% borrowings from FHLBI	45,000		44,927	45,000	45,590
7.50% Junior Notes	—		—	100,000	101,480
6.70% Senior Notes	99,486		109,000	99,475	107,707
7.25% Senior Notes	49,914		52,994	49,912	52,689
5.875% Senior Notes	185,000		170,644	—	—
Total notes payable	$	392,400	391,016	307,387	321,061

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



June 30, 2013			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 6/30/13		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	$	177,994	48,236	129,758	—
Foreign government	29,670		—	29,670	—
Obligations of states and political subdivisions	894,318		—	894,318	—
Corporate securities	1,523,971		—	1,523,971	—
ABS	155,426		—	155,426	—
CMBS	135,584		—	133,953	1,631
RMBS	502,848		—	502,848	—
Total AFS fixed maturity securities	3,419,811		48,236	3,369,944	1,631
Equity securities	172,064		169,164	—	2,900
Short-term investments	186,499		186,499	—	—

Measured on a non-recurring basis:
ABS, HTM²	335		—	335	—
Total assets	$	3,778,709	403,899	3,370,279	4,531


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


²	As of June 30, 2013, as the result of our OTTI analysis, we impaired one ABS HTM security down to fair value, which is typically not carried at fair value.



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



Six Months 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	(537		)	(7	)	(266	)	684		3,935		—		3,809
Net income^2,3	(76		)	—		—		351		—		(1,480	)	(1,205	)
Purchases	—			—		—		—		—		—		—
Sales	—			—		—		—		—		—		—
Issuances	—			—		—		—		—		—		—
Settlements	(1,847		)	(168	)	—		(1,581	)	—		(225	)	(3,821	)
Transfers into Level 3	—			—		—		—		—		—		—
Transfers out of Level 3	(17,329		)	(2,771	)	(5,802	)	(4,985	)	(4,642	)	(1,000	)	(36,529	)
Fair value, June 30, 2013	$	—		—		—		1,631		2,900		—		4,531

¹Amounts are reported in “Unrealized holding (losses) 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



June 30, 2013			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 6/30/2013		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	$	5,658	—	5,658	—
Obligations of states and political subdivisions	446,893		—	446,893	—
Corporate securities	38,881		—	38,881	—
ABS	6,245		—	5,049	1,196
CMBS	9,613		—	9,613	—
Total HTM fixed maturity securities	$	507,290	—	506,094	1,196
Financial Liabilities
Notes payable:
2.90% borrowings from FHLBI	$	13,451	—	13,451	—
1.25% borrowings from FHLBI	44,927		—	44,927	—
6.70% Senior Notes	109,000		—	109,000	—
7.25% Senior Notes	52,994		—	52,994	—
5.875% Senior Notes	170,644		170,644	—	—
Total notes payable	$	391,016	170,644	220,372	—



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).

+ 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 (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.

+ 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

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15

-Subparagraph b-d

-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 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 18

-Subparagraph c(2), d, e, f

-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 157

-Paragraph 32

-Subparagraph a, c(1), c(2), c(3), d

-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 Accounting Standards Codification

-Topic 820

-SubTopic 10

-Section 50

-Paragraph 2

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7578670&loc=d3e19207-110258

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 10

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 11

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13467-108611

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 12

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13476-108611

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 10

-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 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 30

-Subparagraph (a)

-URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 14

-Subparagraph a

-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 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 45

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6447952&loc=d3e13220-108610

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 159

-Paragraph 19

-Subparagraph a, b, c(1), d(1)

-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.

+ Details