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Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

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 June 30, 2022, and December 31, 2021:

						June 30, 2022												December 31, 2021
($ in thousands)						Carrying Amount						Fair Value						Carrying Amount						Fair Value
Financial Liabilities
Long-term debt:
7.25% Senior Notes						$	49,919					54,815						49,917						63,719
6.70% Senior Notes						99,531						106,571						99,520						127,574
5.375% Senior Notes						294,376						287,115						294,330						395,652
3.03% borrowings from FHLBI						60,000						59,252						60,000						64,126
Subtotal long-term debt						503,826						507,753						503,767						651,071
Unamortized debt issuance costs						(3,046)												(3,167)
Finance lease obligations						4,289												5,450
Total long-term debt						$	505,069											506,050

For discussion regarding the fair value techniques of our financial instruments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

The following tables provide quantitative disclosures of our financial assets that were measured and recorded at fair value at June 30, 2022, and December 31, 2021:

June 30, 2022												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						$	114,345					35,242						79,103						—
Foreign government						15,298						—						15,298						—
Obligations of states and political subdivisions						1,066,238						—						1,059,230						7,008
Corporate securities						2,276,327						—						2,117,038						159,289
CLO and other ABS						1,437,778						—						1,314,162						123,616
RMBS						911,800						—						911,800						—
CMBS						617,492						—						617,085						407
Total AFS fixed income securities						6,439,278						35,242						6,113,716						290,320
Equity securities:
Common stock1						256,773						159,243						—						—
Preferred stock						1,742						1,742						—						—
Total equity securities						258,515						160,985						—						—
Short-term investments						289,219						288,717						502						—
Total assets measured at fair value						$	6,987,012					484,944						6,114,218						290,320

December 31, 2021												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						$	130,458					60,615						69,843						—
Foreign government						15,860						—						15,860						—
Obligations of states and political subdivisions						1,189,308						—						1,181,563						7,745
Corporate securities						2,573,603						—						2,459,476						114,127
CLO and other ABS						1,350,814						—						1,225,905						124,909
RMBS						776,252						—						776,007						245
CMBS						673,681						—						669,425						4,256
Total AFS fixed income securities						6,709,976						60,615						6,398,079						251,282
Equity securities:
Common stock1						333,449						249,846						—						—
Preferred stock						2,088						2,088						—						—
Total equity securities						335,537						251,934						—						—
Short-term investments						447,863						442,723						5,140						—
Total assets measured at fair value						$	7,493,376					755,272						6,403,219						251,282

1Investments amounting to $97.5 million at June 30, 2022, and $83.6 million at December 31, 2021, 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. These investments are not redeemable and the timing of liquidations of the underlying assets is unknown at each reporting period. The fair value amounts in this table are intended to permit reconciliation of the fair value hierarchy to total assets measured at fair value.

The following tables provide a summary of Level 3 changes in Six Months 2022 and Six Months 2021:

June 30, 2022
($ in thousands)									Obligations of States and Political Subdivisions						Corporate Securities						CLO and Other ABS						RMBS						CMBS						Total
Fair value, December 31, 2021									$	7,745					114,127						124,909						245						4,256						251,282
Total net (losses) gains for the period included in:
OCI									(581)						(16,422)						(8,592)						(17)						(446)						(26,058)
Net realized and unrealized (losses) gains									(156)						(2,047)						(777)						—						(7)						(2,987)
Net investment income earned									—						14						68						—						47						129
Purchases									—						55,343						39,133						—						—						94,476
Sales									—						—						—						—						—						—
Issuances									—						—						—						—						—						—
Settlements									—						(3,903)						(6,479)						(11)						(12)						(10,405)
Transfers into Level 3									—						19,214						—						—						—						19,214
Transfers out of Level 3									—						(7,037)						(24,646)						(217)						(3,431)						(35,331)
Fair value, June 30, 2022									$	7,008					159,289						123,616						—						407						290,320
Change in unrealized losses for the period included in earnings for assets held at period end									(156)						(2,047)						(777)						—						(7)						(2,987)
Change in unrealized losses for the period included in OCI for assets held at period end									(581)						(16,424)						(8,551)						(17)						(446)						(26,019)

June 30, 2021
($ in thousands)			Obligation of state and Political Subdivisions						Corporate Securities						CLO and Other ABS																		Total
Fair value, December 31, 2020			$	2,894					70,700						56,375																		129,969
Total net (losses) gains for the period included in:
OCI			(13)						1,899						396																		2,282
Net realized and unrealized (losses) gains			—						11						(82)																		(71)
Net investment income earned			—						13						6																		19
Purchases			—						25,403						17,639																		43,042
Sales			—						—						—																		—
Issuances			—						—						—																		—
Settlements			—						(167)						(1,429)																		(1,596)
Transfers into Level 3			5,101						—						3,226																		8,327
Transfers out of Level 3			—						(7,454)						(5,394)																		(12,848)
Fair value, June 30, 2021			$	7,982					90,405						70,737																		169,124
Change in unrealized (losses) gains for the period included in earnings for assets held at period end			—						11						(82)																		(71)
Change in unrealized gains (losses) for the period included in OCI for assets held at period end			(13)						1,899						396																		2,282

The following tables present quantitative information about the significant unobservable inputs used in the fair value measurements of Level 3 assets at June 30, 2022, and December 31, 2021:

June 30, 2022

($ in thousands)

Assets Measured at Fair Value

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Internal valuations:

Corporate securities

$

76,726

Discounted Cash Flow

Illiquidity Spread

(4.4)% - 19.6%

1.8%

CLO and other ABS

40,429

Discounted Cash Flow

Illiquidity Spread

0.01% - 8.0%

2.0%

Total internal valuations

117,155

Other1

173,165

Total Level 3 securities

$

290,320

December 31, 2021

($ in thousands)

Assets Measured at Fair Value

Valuation Techniques

Unobservable Inputs

Range

Weighted Average

Internal valuations:

Corporate securities

$

54,135

Discounted Cash Flow

Illiquidity Spread

0.3% - 3.0%

1.2%

CLO and other ABS

34,903

Discounted Cash Flow

Illiquidity Spread

0.7% - 8.0%

2.1%

Total internal valuations

89,038

Other1

162,244

Total Level 3 securities

$

251,282

1Other is comprised of broker quotes or other third-party pricing for which there is a lack of transparency into the inputs used to develop the valuations. The quantitative details of these unobservable inputs is neither provided to us, nor reasonably available to us, and therefore are not included in the tables above.

For the securities in the tables above valued using a discounted cash flow analysis, we apply an illiquidity spread in our determination of fair value. An increase in this assumption would result in a lower fair value measurement.

The following tables provide quantitative information about our financial assets and liabilities that were not measured at fair value, but were disclosed as such at June 30, 2022, and December 31, 2021:

June 30, 2022												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						$	3,468					—						3,468						—
Corporate securities						27,837						—						27,837						—
Total HTM fixed income securities						$	31,305					—						31,305						—
CMLs						$	130,044					—						—						130,044
Financial Liabilities
Long-term debt:
7.25% Senior Notes						$	54,815					—						54,815						—
6.70% Senior Notes						106,571						—						106,571						—
5.375% Senior Notes						287,115						—						287,115						—
3.03% borrowings from FHLBI						59,252						—						59,252						—
Total long-term debt						$	507,753					—						507,753						—

December 31, 2021												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						$	3,576					—						3,576						—
Corporate securities						25,884						—						25,884						—
Total HTM fixed income securities						$	29,460					—						29,460						—
CMLs						$	97,598					—						—						97,598
Financial Liabilities
Long-term debt:
7.25% Senior Notes						$	63,719					—						63,719						—
6.70% Senior Notes						127,574						—						127,574						—
5.375% Senior Notes						395,652						—						395,652						—
3.03% borrowings from FHLBI						64,126						—						64,126						—
Total long-term debt						$	651,071					—						651,071						—

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No definition available.

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- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258

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