Fair Value Measurements

12 Months Ended

Dec. 31, 2015

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



	December 31, 2015				December 31, 2014
($ in thousands)	Carrying Amount			Fair Value	Carrying Amount		Fair Value
Financial Assets
Fixed income securities:
HTM	$	201,354		209,544	318,137		333,961
AFS	4,408,203			4,408,203	4,066,122		4,066,122
Equity securities, AFS	207,051			207,051	191,400		191,400
Short-term investments	194,819			194,819	131,972		131,972

Financial Liabilities
Notes payable:
0.63% borrowings from FHLBI	15,000			14,977	—		—
1.25% borrowings from FHLBI	45,000			45,083	45,000		45,244
7.25% Senior Notes	49,898			56,929	49,896		59,181
6.70% Senior Notes	99,415			110,363	99,401		114,845
5.875% Senior Notes	185,000			192,474	185,000		185,000
Subtotal	394,313			419,826	379,297		404,270
Unamortized debt issuance costs	(6,121		)		(6,608	)
Total notes payable	$	388,192			372,689

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, 2015 and 2014:



December 31, 2015			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value 12/31/15		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 fixed income securities:
U.S. government and government agencies	$	104,115	42,702	61,413	—
Foreign government	15,181		—	15,181	—
Obligations of states and political subdivisions	1,359,142		—	1,359,142	—
Corporate securities	1,900,182		—	1,900,182	—
ABS	244,154		—	244,154	—
CMBS	243,592		—	243,592	—
RMBS	541,837		—	541,837	—
Total AFS fixed income securities	4,408,203		42,702	4,365,501	—
AFS equity securities:
Common stock	194,789		191,517	—	3,272
Preferred stock	12,262		12,262	—	—
Total AFS equity securities	207,051		203,779	—	3,272
Total AFS securities	4,615,254		246,481	4,365,501	3,272
Short-term investments	194,819		194,819	—	—
Total assets	$	4,810,073	441,300	4,365,501	3,272



December 31, 2014			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value 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 fixed income securities:
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	—
AFS equity securities:
Common stock	191,400		188,500	—	2,900
Total AFS 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	$	4,389,494	373,671	4,012,923	2,900

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

There were no changes in the fair value of securities measured using Level 3 prices during 2014. The following table provides a summary of these changes during 2015:



2015
($ in thousands)	Common Stock
Fair value, December 31, 2014	$	2,900
Total net (losses) gains for the period included in:
OCI	—
Net income	—
Purchases	487
Sales	(115		)
Issuances	—
Settlements	—
Transfers into Level 3	—
Transfers out of Level 3	—
Fair value, December 31, 2015	$	3,272

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



December 31, 2015			Fair Value Measurements Using
($ in thousands)	Assets/Liabilities Disclosed at Fair Value 12/31/2015		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:
Obligations of states and political subdivisions	$	181,880	—	181,880	—
Corporate securities	22,015		—	18,679	3,336
ABS	1,028		—	1,028	—
CMBS	4,621		—	4,621	—
Total HTM fixed income securities	$	209,544	—	206,208	3,336
Financial Liabilities
Notes payable:
0.63% borrowings from FHLBI	$	14,977	—	14,977	—
1.25% borrowings from FHLBI	45,083		—	45,083	—
7.25% Senior Notes	56,929		—	56,929	—
6.70% Senior Notes	110,363		—	110,363	—
5.875% Senior Notes	192,474		192,474	—	—
Total notes payable	$	419,826	192,474	227,352	—



December 31, 2014			Fair Value Measurements Using
($ in thousands)	Assets/Liabilities Disclosed at Fair Value 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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