Fair Value Measurements

9 Months Ended

Sep. 30, 2019

The financial assets in our investment portfolio are primarily measured at fair value as disclosed on the Consolidated Balance Sheets. The following table presents the carrying amounts and estimated fair values of our financial liabilities as of September 30, 2019 and December 31, 2018:



	September 30, 2019			December 31, 2018
($ in thousands)	Carrying Amount		Fair Value	Carrying Amount		Fair Value
Financial Liabilities
Long-term debt:
7.25% Senior Notes	49,909		65,770	49,907		57,032
6.70% Senior Notes	99,476		125,954	99,462		107,075
5.875% Senior Notes	—		—	185,000		177,230
5.375% Senior Notes	294,136		352,156	—		—
1.61% borrowings from FHLBNY	25,000		24,838	25,000		24,218
1.56% borrowings from FHLBNY	25,000		24,808	25,000		24,162
3.03% borrowings from FHLBI	60,000		63,741	60,000		58,905
Subtotal long-term debt	553,521		657,267	444,369		448,622
Unamortized debt issuance costs	(3,756	)		(4,829	)
Finance lease obligations	904			—
Total long-term debt	550,669			439,540

For a discussion of our long-term debt activity in 2019, see Note 5. "Indebtedness" in this Form 10-Q, and for a discussion of the fair value hierarchy and 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 2018 Annual Report.

The following tables provide quantitative disclosures of our financial assets that were measured and recorded at fair value at September 30, 2019 and December 31, 2018:



September 30, 2019			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value		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	$	120,900	41,619	79,281	—
Foreign government	21,520		—	21,520	—
Obligations of states and political subdivisions	1,190,615		—	1,190,615	—
Corporate securities	1,838,927		—	1,822,577	16,350
CLO and other ABS	768,383		—	748,504	19,879
CMBS	555,731		—	555,731	—
RMBS	1,434,161		—	1,434,161	—
Total AFS fixed income securities	5,930,237		41,619	5,852,389	36,229
Equity securities:
Common stock²	76,179		42,988	—	—
Preferred stock	3,034		3,034	—	—
Total equity securities	79,213		46,022	—	—
Short-term investments	326,121		319,599	6,522	—
Total assets measured at fair value	$	6,335,571	407,240	5,858,911	36,229



December 31, 2018			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value		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	$	121,310	78,381	42,929	—
Foreign government	23,131		—	23,131	—
Obligations of states and political subdivisions	1,138,469		—	1,138,469	—
Corporate securities	1,617,408		—	1,617,408	—
CLO and other ABS	717,362		—	709,953	7,409
CMBS	527,078		—	527,078	—
RMBS	1,128,342		—	1,128,342	—
Total AFS fixed income securities	5,273,100		78,381	5,187,310	7,409
Equity securities:
Common stock²	144,727		107,397	—	—
Preferred stock	2,912		2,912	—	—
Total equity securities	147,639		110,309	—	—
Short-term investments	323,864		321,370	2,494	—
Total assets measured at fair value	$	5,744,603	510,060	5,189,804	7,409


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

Investments amounting to $33.2 million at September 30, 2019, and $37.3 million at December 31, 2018, were measured at fair value using net asset value per share (or its practical expedient) and have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total assets measured at fair value.

The following table provides a summary of Level 3 changes in Nine Months 2019:



September 30, 2019
($ in thousands)	Corporate Securities		CLO and Other ABS		Total
Fair value, December 31, 2018	—		7,409		7,409
Total net (losses) gains for the period included in:
OCI	(69	)	(14	)	(83	)
Net income	—		244		244
Purchases	—		18,404		18,404
Sales	—		—		—
Issuances	—		—		—
Settlements	—		(105	)	(105	)
Transfers into Level 3	16,419		13,603		30,022
Transfers out of Level 3	—		(19,662	)	(19,662	)
Fair value, September 30, 2019	16,350		19,879		36,229

There were no material changes in the fair value of securities measured using Level 3 prices in Nine Months 2018.

The following tables provide quantitative information regarding our financial assets and liabilities that were disclosed at fair value at September 30, 2019 and December 31, 2018:



September 30, 2019			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value		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	$	9,426	—	9,426	—
Corporate securities	18,930		—	18,930	—
Total HTM fixed income securities	$	28,356	—	28,356	—

Financial Liabilities
Long-term debt:
7.25% Senior Notes	$	65,770	—	65,770	—
6.70% Senior Notes	125,954		—	125,954	—
5.375% Senior Notes	352,156		—	352,156	—
1.61% borrowings from FHLBNY	24,838		—	24,838	—
1.56% borrowings from FHLBNY	24,808		—	24,808	—
3.03% borrowings from FHLBI	63,741		—	63,741	—
Total long-term debt	$	657,267	—	657,267	—



December 31, 2018			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value		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	$	17,969	—	17,969	—
Corporate securities	20,348		—	20,348	—
Total HTM fixed income securities	$	38,317	—	38,317	—

Financial Liabilities
Long-term debt:
7.25% Senior Notes	$	57,032	—	57,032	—
6.70% Senior Notes	107,075		—	107,075	—
5.875% Senior Notes	177,230		177,230	—	—
1.61% borrowings from FHLBNY	24,218		—	24,218	—
1.56% borrowings from FHLBNY	24,162		—	24,162	—
3.03% borrowings from FHLBI	58,905		—	58,905	—
Total long-term debt	$	448,622	177,230	271,392	—

- 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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