Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Company's Invested Assets and Derivative Instruments Measured at Fair Value on Recurring Basis

The following table presents information about the Company’s invested assets and derivative instruments measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.


As of September 30, 2014	Fair Value Measurements
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
U.S. treasury and agency obligations	$	99,488	$	8,473	$	—	$	107,961
Obligations of states and political subdivisions		—		196,446		—		196,446
Mortgage-backed securities		—		222,577		—		222,577
Commercial mortgage-backed securities		—		117,332		—		117,332
Asset-backed securities		—		173,307		—		173,307
Corporate bonds and loans		—		384,545		—		384,545
Foreign corporate bonds		—		106,603		—		106,603

Total fixed maturities		99,488		1,209,283		—		1,308,771
Common stock		120,736		—		—		120,736
Other invested assets		—		—		21,118		21,118

Total assets measured at fair value	$	220,224	$	1,209,283	$	21,118	$	1,450,625

Liabilities:
Derivative instruments	$	—	$	7,780	$	—	$	7,780

Total liabilities measured at fair value	$	—	$	7,780	$	—	$	7,780


As of December 31, 2013	Fair Value Measurements
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
U.S. treasury and agency obligations	$	71,294	$	10,380	$	—	$	81,674
Obligations of states and political subdivisions		—		180,936		—		180,936
Mortgage-backed securities		—		229,910		—		229,910
Commercial mortgage-backed securities		—		53,975		—		53,975
Asset-backed securities		—		168,436		—		168,436
Corporate bonds and loans		—		435,392		—		435,392
Foreign corporate bonds		—		54,041		—		54,041

Total fixed maturities		71,294		1,133,070		—		1,204,364
Common stock		254,070		—		—		254,070
Other invested assets		—		—		3,489		3,489
Derivative instruments		—		1,668		—		1,668

Total assets measured at fair value	$	325,364	$	1,134,738	$	3,489	$	1,463,591

Changes in Level 3 Investments Measured at Fair Value on a Recurring Basis

The following table presents changes in Level 3 investments measured at fair value on a recurring basis for the quarters and nine months ended September 30, 2014 and 2013:


	Other Invested Assets
	Quarters Ended September 30,					Nine Months Ended September 30,
(Dollars in thousands)	2014			2013		2014			2013
Beginning balance	$	15,034		$	3,226	$	3,489		$	3,132
Total gains (losses) (realized / unrealized):
Included in accumulated other comprehensive income (loss)		(404	)		37		(834	)		121
Purchases		6,500			6		18,475			16
Sales		(12	)		—		(12	)		—

Ending balance	$	21,118		$	3,269	$	21,118		$	3,269

Fair Value and Future Funding Commitments Related to These Investments

The following table provides the fair value and future funding commitments related to these investments at September 30, 2014 and December 31, 2013.


	September 30, 2014				December 31, 2013
(Dollars in thousands)	Fair Value		Future Funding Commitment		Fair Value		Future Funding Commitment
Equity Fund, LP (1)	$	3,428	$	2,436	$	3,489	$	2,490
Real Estate Fund, LP (2)		—		—		—		—
European Non-Performing Loan Fund, LP (3)		17,690		31,664		—		—

Total	$	21,118	$	34,100	$	3,489	$	2,490

(1)

This limited partnership invests in companies from various business sectors whereby the partnership has acquired control of the operating business as a lead or organizing investor. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner.

(2)

This limited partnership invests in real estate assets through a combination of direct or indirect investments in partnerships, limited liability companies, mortgage loans, and lines of credit. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company continues to hold an investment in this limited partnership and has written the fair value down to zero.

(3)

This limited partnership invests in distressed securities and assets through senior and subordinated, secured and unsecured debt and equity, in both public and private large-cap and middle-market companies. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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