Fair Value Measurements

12 Months Ended

Dec. 31, 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 December 31, 2019 and 2018:



	December 31, 2019				December 31, 2018
($ in thousands)	Carrying Amount			Fair Value	Carrying Amount		Fair Value
Financial Liabilities
Long-term debt:
7.25% Senior Notes	$	49,910		66,365	49,907		57,032
6.70% Senior Notes	99,480			123,104	99,462		107,075
5.875% Senior Notes	—			—	185,000		177,230
5.375% Senior Notes	294,157			357,025	—		—
1.61% Borrowings from FHLBNY	25,000			24,901	25,000		24,218
1.56% Borrowings from FHLBNY	25,000			24,875	25,000		24,162
3.03% Borrowings from FHLBI	60,000			63,002	60,000		58,905
Subtotal long-term debt	553,547			659,272	444,369		448,622
Unamortized debt issuance costs	(3,687		)		(4,829	)
Finance lease obligations	737				—
Total long-term debt	$	550,597			439,540

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 and recorded at fair value at December 31, 2019 and 2018:



December 31, 2019			Fair Value Measurements Using
($ in thousands)	Assets Measured 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)
Description
Measured on a recurring basis:
AFS fixed income securities:
U.S. government and government agencies	$	116,186	41,083	75,103	—
Foreign government	18,542		—	18,542	—
Obligations of states and political subdivisions	1,230,090		—	1,230,090	—
Corporate securities	1,947,477		—	1,930,426	17,051
CLO and other ABS	793,012		3,635	772,343	17,034
CMBS	538,344		—	538,344	—
RMBS	1,451,969		—	1,451,969	—
Total AFS fixed income securities	6,095,620		44,718	6,016,817	34,085
Equity securities:
Common stock¹	69,900		32,145	—	—
Preferred stock	3,037		3,037	—	—
Total equity securities	72,937		35,182	—	—
Short-term investments	282,490		265,306	17,184	—
Total assets measured at fair value	$	6,451,047	345,206	6,034,001	34,085



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)	Significant Other Observable Inputs (Level 2)	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 stock¹	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

¹In accordance with ASU 2015-07, investments amounting to $37.8 million and $37.3 million at December 31, 2019 and December 31, 2018, respectively, were measured at fair value using the 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 the changes in the fair value of securities measured using Level 3 inputs and related quantitative information during 2019:



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	(118		)	(261	)	(379	)
Net income	—			245		245
Purchases	—			21,282		21,282
Sales	—			—		—
Issuances	—			—		—
Settlements	—			(279	)	(279	)
Transfers into Level 3	17,169			18,853		36,022
Transfers out of Level 3	—			(30,215	)	(30,215	)
Fair value, December 31, 2019	$	17,051		17,034		34,085

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

The following tables provide quantitative information regarding our financial assets and liabilities that were not measured, but were disclosed at fair value at December 31, 2019 and 2018:



December 31, 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	$	4,921	—	4,921	—
Corporate securities	17,054		—	17,054	—
Total HTM fixed income securities	$	21,975	—	21,975	—
Financial Liabilities
Long-term debt:
7.25% Senior Notes	$	66,365	—	66,365	—
6.70% Senior Notes	123,104		—	123,104	—
5.375% Senior Notes	357,025		—	357,025	—
1.61% Borrowings from FHLBNY	24,901		—	24,901	—
1.56% Borrowings from FHLBNY	24,875		—	24,875	—
3.03% Borrowings from FHLBI	63,002		—	63,002	—
Total long-term debt	$	659,272	—	659,272	—



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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