XML 18 R9.htm IDEA: XBRL DOCUMENT

Note 3 - Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

3. Fair Value Measurements

Fair value is defined as the price that the Company would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment.

The three‑tier hierarchy of inputs is summarized in the three broad levels listed below:

Level 1—Unadjusted quoted prices are available in active markets for identical investments as of the reporting date.

Level 2—Pricing inputs are quoted prices for similar investments in active markets; quoted prices for identical or similar investments in inactive markets; or valuations based on models where the significant inputs are observable or can be corroborated by observable market data.

Level 3—Pricing inputs into models are unobservable for the investment. The unobservable inputs require significant management judgment or estimation.

To measure fair value, the Company obtains quoted market prices for its investment securities from its outside investment managers. If a quoted market price is not available, the Company uses prices of similar securities. The fair values obtained from the outside investment managers are reviewed for reasonableness and any discrepancies are investigated for final valuation.

The fair value of the Company’s investments in fixed maturity securities is estimated using relevant inputs, including available market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. An Option Adjusted Spread model is also used to develop prepayment and interest rate scenarios. Industry standard models are used to analyze and value securities with embedded options or prepayment sensitivities. These fair value measurements are estimated based on observable, objectively verifiable market information rather than market quotes. Therefore, these investments are classified and disclosed in Level 2 of the hierarchy.

The following tables present the hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.

September 30, 2023		*Level 1*				*Level 2*				*Level 3*				*Total*
		(in thousands)
Assets:
Fixed maturity securities
U.S. Governments		$	—			$	42,690			$	—			$	42,690
States, territories, and possessions			—				5,213				—				5,213
Political subdivisions			—				3,848				—				3,848
Special revenue excluding mortgage/asset-backed securities			—				27,868				—				27,868
Corporate and other			—				276,933				—				276,933
Mortgage/asset-backed securities			—				235,355				—				235,355
Equity securities			39,835				—				—				39,835
Cash, cash equivalents, and restricted cash			53,288				—				—				53,288
Total assets		$	93,123			$	591,907			$	—			$	685,030

December 31, 2022		*Level 1*				*Level 2*				*Level 3*				*Total*
		(in thousands)
Assets:
Fixed maturity securities
U.S. Governments		$	—			$	48,551			$	—			$	48,551
States, territories, and possessions			—				5,354				—				5,354
Political subdivisions			—				4,298				—				4,298
Special revenue excluding mortgage/asset-backed securities			—				32,799				—				32,799
Corporate and other			—				254,095				—				254,095
Mortgage/asset-backed securities			—				169,967				—				169,967
Equity securities			38,576				—				—				38,576
Cash, cash equivalents, and restricted cash			68,164				—				—				68,164
Total assets		$	106,740			$	515,064			$	—			$	621,804

The carrying amounts of financial assets and liabilities reported in the accompanying condensed consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term‑maturity. The carrying amount of the Company’s borrowings under the Federal Home Loan Bank (“FHLB”) line of credit and U.S. Bank credit agreement (the “Credit Agreement”) approximate fair value as the Company is currently borrowing at a variable rate which frequently reprices at market rates.

Transfers between Level 3 and Level 2 securities result from changes in the availability of observable market inputs and are recorded at the beginning of the reporting period. As of September 30, 2023 and December 31, 2022, the Company had no fixed income securities classified as Level 3.

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 + Details