Fair Value Measurements

3 Months Ended

Mar. 31, 2015

The following table presents the carrying amounts and estimated fair values of our financial instruments as of March 31, 2015 and December 31, 2014:



	March 31, 2015			December 31, 2014
($ in thousands)	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial Assets
Fixed income securities:
HTM	$	296,557	311,093	318,137	333,961
AFS	4,174,242		4,174,242	4,066,122	4,066,122
Equity securities, AFS	211,571		211,571	191,400	191,400
Short-term investments	124,376		124,376	131,972	131,972
Financial Liabilities
Notes payable:
0.63% borrowings from FHLBI	15,000		14,994	—	—
1.25% borrowings from FHLBI	45,000		45,338	45,000	45,244
7.25% Senior Notes	49,896		60,407	49,896	59,181
6.70% Senior Notes	99,405		117,389	99,401	114,845
5.875% Senior Notes	185,000		189,440	185,000	185,000
Total notes payable	$	394,301	427,568	379,297	404,270

The fair values of our financial assets and liabilities are generated using various valuation techniques and are placed into the fair value hierarchy considering the following: (i) the highest priority is given to quoted prices in active markets for identical assets (Level 1); (ii) the next highest priority is given to quoted prices in markets that are not active or inputs that are observable either directly or indirectly, including quoted prices for similar assets in markets that are not active and other inputs that can be derived principally from, or corroborated by, observable market data for substantially the full term of the assets (Level 2); and (iii) the lowest priority is given to unobservable inputs supported by little or no market activity and that reflect our assumptions about the exit price, including assumptions that market participants would use in pricing the asset (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. Transfers between levels in the fair value hierarchy are recognized at the end of the reporting period.

For a discussion of the techniques used to value our financial assets and liabilities, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2014 Annual Report.

The following tables provide quantitative disclosures of our financial assets that were measured at fair value at March 31, 2015 and December 31, 2014:



March 31, 2015			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 3/31/2015		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	$	119,486	52,977	66,509	—
Foreign government	27,915		—	27,915	—
Obligations of states and political subdivisions	1,294,375		—	1,294,375	—
Corporate securities	1,824,265		—	1,824,265	—
ABS	185,387		—	185,387	—
CMBS	200,511		—	200,511	—
RMBS	522,303		—	522,303	—
Total AFS fixed income securities	4,174,242		52,977	4,121,265	—
Equity securities	211,571		208,671	—	2,900
Total AFS Securities	4,385,813		261,648	4,121,265	2,900
Short-term investments	124,376		124,376	—	—
Total assets measured at fair value	$	4,510,189	386,024	4,121,265	2,900


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



December 31, 2014			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 12/31/14		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	$	124,130	53,199	70,931	—
Foreign government	27,831		—	27,831	—
Obligations of states and political subdivisions	1,246,264		—	1,246,264	—
Corporate securities	1,799,806		—	1,799,806	—
ABS	177,224		—	177,224	—
CMBS	179,593		—	179,593	—
RMBS	511,274		—	511,274	—
Total AFS fixed income securities	4,066,122		53,199	4,012,923	—
Equity securities	191,400		188,500	—	2,900
Total AFS Securities	4,257,522		241,699	4,012,923	2,900
Short-term investments	131,972		131,972	—	—
Total assets measured at fair value	$	4,389,494	373,671	4,012,923	2,900


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

The $2.9 million fair value of securities measured using Level 3 prices remained unchanged during First Quarter 2015 and full year 2014. The price for the securities, which were measured using Level 3 inputs at March 31, 2015 and December 31, 2014, was obtained through statements provided by the issuer, which we review for reasonabless.

The following tables provide quantitative information regarding our financial assets and liabilities that were disclosed at fair value at March 31, 2015 and December 31, 2014:



March 31, 2015			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 3/31/2015		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	$	5,338	—	5,338	—
Obligations of states and political subdivisions	277,030		—	277,030	—
Corporate securities	21,199		—	21,199	—
ABS	2,480		—	2,480	—
CMBS	5,046		—	5,046	—
Total HTM fixed income securities	$	311,093	—	311,093	—
Financial Liabilities
Notes payable:
0.63% borrowings from FHLBI	$	14,994	—	14,994	—
1.25% borrowings from FHLBI	45,338		—	45,338	—
7.25% Senior Notes	60,407		—	60,407	—
6.70% Senior Notes	117,389		—	117,389	—
5.875% Senior Notes	189,440		189,440	—	—
Total notes payable	$	427,568	189,440	238,128	—



December 31, 2014			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 12/31/2014		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	$	5,394	—	5,394	—
Obligations of states and political subdivisions	299,132		—	299,132	—
Corporate securities	21,422		—	21,422	—
ABS	2,823		—	2,823	—
CMBS	5,190		—	5,190	—
Total HTM fixed income securities	$	333,961	—	333,961	—
Financial Liabilities
Notes payable:
1.25% borrowings from FHLBI	$	45,244	—	45,244	—
7.25% Senior Notes	59,181		—	59,181	—
6.70% Senior Notes	114,845		—	114,845	—
5.875% Senior Notes	185,000		185,000	—	—
Total notes payable	$	404,270	185,000	219,270	—

- 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.

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