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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2014
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 13. Fair Value Measurements GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP describes three approaches to measuring the fair value of assets and liabilities: the market approach, the income approach and the cost approach. Each approach includes multiple valuation techniques. GAAP does not prescribe which valuation technique should be used when measuring fair value, but does establish a fair value hierarchy that prioritizes the inputs used in applying the various techniques. Inputs broadly refer to the assumptions that market participants use to make pricing decisions, including assumptions about risk. Level 1 inputs are given the highest priority in the hierarchy while Level 3 inputs are given the lowest priority. Assets and liabilities carried at fair value are classified in one of the following three categories based on the nature of the inputs to the valuation technique used:
• | Level 1 — Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
• | Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.
• | Level 3 — Unobservable inputs that are not corroborated by market data. These inputs reflect management’s best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability.
Summary of significant valuation techniques for assets measured at fair value on a recurring basis Level 1 Cash and cash equivalents and restricted cash and cash equivalents: Cash equivalents and restricted cash equivalents comprise cash, restricted cash, certificates of deposit with original maturities of three months or less, and actively traded money market funds that have daily quoted net asset values for identical assets that the Company can access. The carrying value of cash and cash equivalents and restricted cash and cash equivalents approximates fair value due to its liquid nature. Common stock: Comprise actively traded, exchange-listed U.S. and international equity securities. Valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access. Mutual funds: Comprise actively traded funds. Valuation is based on daily quoted net asset values for identical assets in active markets that the Company can access. Short-term investments: Comprise certificates of deposit with original maturities within one year but more than three months. The carrying value of short-term investments is cost which approximates fair value. Level 2 U.S. government obligations and agencies: Comprise U.S. Treasury Bills or Notes or U.S. Treasury Inflation Protected Securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads. Corporate Bonds: Comprise investment-grade fixed income securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads. Mortgage-backed and asset-backed securities: Comprise securities that are collateralized by mortgage obligations and other assets. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields, collateral performance and credit spreads. Redeemable Preferred Stock: Comprise preferred stock securities that are redeemable. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active. Short-term investments: Comprise investment securities with original maturities within one year but more than three months. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active. As required by GAAP, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of the asset or liability within the fair value hierarchy levels. The following tables set forth by level within the fair value hierarchy the Company’s assets that were measured at fair value including those on a recurring basis as of the dates presented (in thousands):
| Fair Value Measurements |
| September 30, 2014 |
| Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Cash and cash equivalents | $ | 170,352 |  |  | $ | — |  |  | $ | — |  |  | $ | 170,352 |
Restricted cash and cash equivalents |  | 6,597 |  |  |  | — |  |  |  | — |  |  |  | 6,597 |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies |  | — |  |  |  | 116,083 |  |  |  | — |  |  |  | 116,083 |
Corporate bonds |  | — |  |  |  | 109,837 |  |  |  | — |  |  |  | 109,837 |
Mortgage-backed and asset-backed securities |  | — |  |  |  | 95,238 |  |  |  | — |  |  |  | 95,238 |
Redeemable preferred stock |  | — |  |  |  | 6,852 |  |  |  | — |  |  |  | 6,852 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  | 250 |  |  |  | — |  |  |  | — |  |  |  | 250 |
Mutual funds |  | 20,137 |  |  |  | — |  |  |  | — |  |  |  | 20,137 |
Short-term investments |  | 12,500 |  |  |  | 24,973 |  |  |  | — |  |  |  | 37,473 |
Total investments |  | 32,887 |  |  |  | 352,983 |  |  |  | — |  |  |  | 385,870 |
Total assets accounted for at fair value | $ | 209,836 |  |  | $ | 352,983 |  |  | $ | — |  |  | $ | 562,819 |
| Fair Value Measurements |
| December 31, 2013 |
| Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Cash and cash equivalents | $ | 117,275 |  |  | $ | — |  |  | $ | — |  |  | $ | 117,275 |
Restricted cash and cash equivalents |  | 2,600 |  |  |  | — |  |  |  | — |  |  |  | 2,600 |
Fixed maturities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. government obligations and agencies |  | — |  |  |  | 104,215 |  |  |  | — |  |  |  | 104,215 |
Corporate bonds |  | — |  |  |  | 94,203 |  |  |  | — |  |  |  | 94,203 |
Mortgage-backed and asset-backed securities |  | — |  |  |  | 91,000 |  |  |  | — |  |  |  | 91,000 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stock |  | 9,295 |  |  |  | — |  |  |  | — |  |  |  | 9,295 |
Mutual funds |  | 55,727 |  |  |  | — |  |  |  | — |  |  |  | 55,727 |
Total investments |  | 65,022 |  |  |  | 289,418 |  |  |  | — |  |  |  | 354,440 |
Total assets accounted for at fair value | $ | 184,897 |  |  | $ | 289,418 |  |  | $ | — |  |  | $ | 474,315 |
The Company utilizes third-party independent pricing services that provide a price quote for each fixed maturity and equity security. Management reviews the methodology used by the pricing services. If management believes that the price used by the pricing service does not reflect an orderly transaction between participants, management will use an alternative valuation methodology. There were no adjustments made by the Company to the prices obtained from the independent pricing source for any fixed maturities or equity securities included in the tables above. The following table summarizes the carrying value and estimated fair values of the Company’s financial instruments that are not carried at fair value as of the dates presented (in thousands):
| September 30, 2014 |  |  | December 31, 2013 |
|  |  |  |  | (Level 3) |  |  |  |  |  |  | (Level 3) |
|  |  |  |  | Estimated Fair |  |  |  |  |  |  | Estimated Fair |
| Carrying Value |  |  | Value |  |  | Carrying Value |  |  | Value |
Liabilities (debt): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Surplus note | $ | 17,647 |  |  | $ | 15,188 |  |  | $ | 18,750 |  |  | $ | 15,900 |
Term loan | $ | 13,149 |  |  | $ | 13,149 |  |  | $ | 18,490 |  |  | $ | 18,490 |
Level 3 Long-term debt: The fair value of the surplus note was determined by management from the expected cash flows discounted using the interest rate quoted by the holder. The State Board of Administration of Florida (“SBA”) is the holder of the surplus note and the quoted interest rate is below prevailing rates quoted by private lending institutions. However, as the Company’s use of funds from the surplus note is limited by the terms of the agreement, the Company has determined the interest rate quoted by the SBA to be appropriate for purposes of establishing the fair value of the note. The fair value of the Term Loan approximates the carrying value given the original issue discount which was calculated based on the present value of future cash flows using the Company’s effective borrowing rate for similar instruments.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13537-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13433-108611 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: 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=36462937&loc=d3e19207-110258 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=35750535&loc=d3e13504-108611 + Details
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