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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2016
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Note 7. Fair Value Measurements The Company carries available-for-sale securities at fair value in our consolidated financial statements and determines fair value measurements and disclosure in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures. The Company determines the fair values of its financial instruments based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard defines fair value, describes three levels of inputs that may be used to measure fair value, and expands disclosures about fair value measurements. Fair value is defined in ASC Topic 820 as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is the price to sell an asset or transfer a liability and, therefore, represents an exit price, not an entry price. Fair value is the exit price in the principal market (or, if lacking a principal market, the most advantageous market) in which the reporting entity would transact. Fair value is a market-based measurement, not an entity-specific measurement, and, as such, is determined based on the assumptions that market participants would use in pricing the asset or liability. The exit price objective of a fair value measurement applies regardless of the reporting entity’s intent and/or ability to sell the asset or transfer the liability at the measurement date. ASC Topic 820 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present value amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset, also known as current replacement cost. Valuation techniques used to measure fair value are to be consistently applied. In ASC Topic 820, inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable:
| • | Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.
| • | Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Valuation techniques used to measure fair value are intended to maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:
| • | Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
| • | Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data.
| • | Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are to be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. The fair values of the Company’s investments are based upon prices provided by an independent pricing service. The Company has reviewed these prices for reasonableness and has not adjusted any prices received from the independent provider. Securities reported at fair value utilizing Level 1 inputs represent assets whose fair value is determined based upon observable unadjusted quoted market prices for identical assets in active markets. Level 2 securities represent assets whose fair value is determined using observable market information such as previous day trade prices, quotes from less active markets or quoted prices of securities with similar characteristics. There were no transfers between Level 1 and Level 2 during the nine months ended September 30, 2016. At September 30, 2016, assets and liabilities measured at fair value on a recurring basis are summarized below:
|  | September 30, 2016 |
|  | Level 1 Inputs |  |  | Level 2 Inputs |  |  | Level 3 Inputs |  |  | Total Fair Value |
|  | (in thousands) |
Financial instruments carried at fair value, classified as a part of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale—equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic common stock |  | $ | 32 |  |  | $ | — |  |  | $ | — |  |  | $ | 32 |
Securities available for sale—fixed maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  |  | — |  |  |  | 196,780 |  |  |  | — |  |  |  | 196,780 |
Corporate bonds |  |  | — |  |  |  | 199,212 |  |  |  | — |  |  |  | 199,212 |
U.S. agency-based mortgage-backed securities |  |  | — |  |  |  | 11,280 |  |  |  | — |  |  |  | 11,280 |
U.S. Treasury securities |  |  | 63,348 |  |  |  | — |  |  |  | — |  |  |  | 63,348 |
Total securities available for sale—fixed maturity |  |  | 63,348 |  |  |  | 407,272 |  |  |  | — |  |  |  | 470,620 |
Total available for sale |  | $ | 63,380 |  |  | $ | 407,272 |  |  | $ | — |  |  | $ | 470,652 |
At September 30, 2016, assets and liabilities measured at amortized cost are summarized below:
|  | September 30, 2016 |
|  | Level 1 Inputs |  |  | Level 2 Inputs |  |  | Level 3 Inputs |  |  | Total Fair Value |
|  | (in thousands) |
Securities held-to-maturity—fixed maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | — |  |  | $ | 433,734 |  |  | $ | — |  |  | $ | 433,734 |
Corporate bonds |  |  | — |  |  |  | 159,659 |  |  |  | — |  |  |  | 159,659 |
Commercial mortgage-backed securities |  |  | — |  |  |  | 290 |  |  |  | — |  |  |  | 290 |
U.S. agency-based mortgage-backed securities |  |  | — |  |  |  | 12,136 |  |  |  | — |  |  |  | 12,136 |
U.S. Treasury securities |  |  | 7,029 |  |  |  | — |  |  |  | — |  |  |  | 7,029 |
Obligations of U.S. government agencies |  |  | — |  |  |  | 5,819 |  |  |  | — |  |  |  | 5,819 |
Asset-backed securities |  |  | — |  |  |  | 2,114 |  |  |  | — |  |  |  | 2,114 |
Total held-to-maturity |  | $ | 7,029 |  |  | $ | 613,752 |  |  | $ | — |  |  | $ | 620,781 |
At December 31, 2015, assets and liabilities measured at fair value on a recurring basis are summarized below:
|  | December 31, 2015 |
|  | Level 1 Inputs |  |  | Level 2 Inputs |  |  | Level 3 Inputs |  |  | Total Fair Value |
|  | (in thousands) |
Financial instruments carried at fair value, classified as part of: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities available for sale—equity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domestic common stock |  | $ | 31 |  |  | $ | — |  |  | $ | — |  |  | $ | 31 |
Securities available for sale—fixed maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  |  | — |  |  |  | 171,419 |  |  |  | — |  |  |  | 171,419 |
Corporate bonds |  |  | — |  |  |  | 201,304 |  |  |  | — |  |  |  | 201,304 |
U.S. agency-based mortgage-backed securities |  |  | — |  |  |  | 7,299 |  |  |  | — |  |  |  | 7,299 |
Total available for sale—fixed maturity |  | $ | — |  |  | $ | 380,022 |  |  | $ | — |  |  | $ | 380,022 |
Total available for sale |  | $ | 31 |  |  | $ | 380,022 |  |  | $ | — |  |  | $ | 380,053 |
At December 31, 2015, assets and liabilities measured at amortized cost are summarized below:
|  | December 31, 2015 |
|  | Level 1 Inputs |  |  | Level 2 Inputs |  |  | Level 3 Inputs |  |  | Total Fair Value |
|  | (in thousands) |
Securities held-to-maturity—fixed maturity: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
States and political subdivisions |  | $ | — |  |  | $ | 423,754 |  |  | $ | — |  |  | $ | 423,754 |
Corporate bonds |  |  | — |  |  |  | 170,573 |  |  |  | — |  |  |  | 170,573 |
Commercial mortgage-backed securities |  |  | — |  |  |  | 37,683 |  |  |  | — |  |  |  | 37,683 |
U.S. agency-based mortgage-backed securities |  |  | — |  |  |  | 14,471 |  |  |  | — |  |  |  | 14,471 |
U.S. Treasury securities |  |  | 7,599 |  |  |  | — |  |  |  | — |  |  |  | 7,599 |
Obligations of U.S. government agencies |  |  | — |  |  |  | 5,781 |  |  |  | — |  |  |  | 5,781 |
Asset-backed securities |  |  | — |  |  |  | 2,415 |  |  |  | — |  |  |  | 2,415 |
Total held-to-maturity |  | $ | 7,599 |  |  | $ | 654,677 |  |  | $ | — |  |  | $ | 662,276 |
The Company determines fair value amounts for financial instruments using available third-party market information. When such information is not available, the Company determines the fair value amounts using appropriate valuation methodologies. Nonfinancial instruments such as real estate, property and equipment, deferred policy acquisition costs, deferred income taxes and loss and loss adjustment expense reserves are excluded from the fair value disclosure. Cash and Cash Equivalents —The carrying amounts reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values, which are characterized as Level 1 assets. Investments —The fair values for fixed maturity and equity securities are based on prices obtained from an independent pricing service. Equity and treasury securities are characterized as Level 1 assets, as their fair values are based on quoted prices in active markets. Fixed maturity securities, other than treasury securities, are characterized as Level 2 assets, as their fair values are determined using observable market inputs. Short Term Investments —The carrying amounts reported in the accompanying consolidated balance sheets for these financial instruments approximate their fair values. These securities are characterized as Level 2 assets in the fair value hierarchy. Other Investments —Other investments consist of a limited partnership (“LP”) interest that is accounted for under the equity method valued using the net asset value provided by the general partner of the LP, which approximates the fair value of the interest. The LP’s objective is to generate absolute returns by investing long and short in publicly-traded global securities. Redemptions are allowed monthly following a 60-day notice with no lock up periods. The Company has no unfunded commitments related to the LP. The following table summarizes the carrying values and corresponding fair values for financial instruments:
|  | As of September 30, 2016 |  |  | As of December 31, 2015 |
|  | Carrying Amount |  |  | Fair Value |  |  | Carrying Amount |  |  | Fair Value |
|  | (in thousands) |
Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities—held-to-maturity |  | $ | 601,314 |  |  | $ | 620,781 |  |  | $ | 645,164 |  |  | $ | 662,276 |
Fixed maturity securities—available-for-sale |  |  | 470,620 |  |  |  | 470,620 |  |  |  | 380,022 |  |  |  | 380,022 |
Equity securities |  |  | 32 |  |  |  | 32 |  |  |  | 31 |  |  |  | 31 |
Cash and cash equivalents |  |  | 86,612 |  |  |  | 86,612 |  |  |  | 69,481 |  |  |  | 69,481 |
Short-term investments |  |  | 11,494 |  |  |  | 11,494 |  |  |  | 7,718 |  |  |  | 7,718 |
Other investments |  |  | 12,174 |  |  |  | 12,174 |  |  |  | 12,217 |  |  |  | 12,217 |

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- Definition The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19279-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19207-110258 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=66048111&loc=d3e19190-110258 + Details
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