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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2020

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, 2020 and December 31, 2019 and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value.

	Fair Value Measurements
As of September 30, 2020 (Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
U.S. treasury and agency obligations	$	200,457	$	1,500	$	—	$	201,957
Obligations of states and political subdivisions		—		62,001		—		62,001
Mortgage-backed securities		—		401,084		—		401,084
Commercial mortgage-backed securities		—		138,911		—		138,911
Asset-backed securities		—		139,150		—		139,150
Corporate bonds		—		258,861		—		258,861
Foreign corporate bonds		—		101,811		—		101,811
Total fixed maturities		200,457		1,103,318		—		1,303,775
Equity securities		64,673		11,268		—		75,941
Total assets measured at fair value	$	265,130	$	1,114,586	$	—	$	1,379,716
Liabilities:
Derivative instruments	$	—	$	17,931	$	—	$	17,931
Total liabilities measured at fair value	$	—	$	17,931	$	—	$	17,931

	Fair Value Measurements
As of December 31, 2019 (Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Fixed maturities:
U.S. treasury and agency obligations	$	156,689	$	—	$	—	$	156,689
Obligations of states and political subdivisions		—		63,838		—		63,838
Mortgage-backed securities		—		328,374		—		328,374
Commercial mortgage-backed securities		—		188,104		—		188,104
Asset-backed securities		—		168,537		—		168,537
Corporate bonds		—		248,259		—		248,259
Foreign corporate bonds		—		99,358		—		99,358
Total fixed maturities		156,689		1,096,470		—		1,253,159
Equity securities		251,448		11,656		—		263,104
Total assets measured at fair value	$	408,137	$	1,108,126	$	—	$	1,516,263
Liabilities:
Derivative instruments	$	—	$	10,275	$	—	$	10,275
Total liabilities measured at fair value	$	—	$	10,275	$	—	$	10,275

Current Fair Value of Debt

For the Company’s material debt arrangements, the current fair value of the Company’s debt at September 30, 2020 and December 31, 2019 was as follows:

	September 30, 2020				December 31, 2019
(Dollars in thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Margin Borrowing Facility (1)	$	—	$	—	$	73,629	$	73,629
7.75% Subordinated Notes due 2045 (2)		—		—		96,864		100,264
7.875% Subordinated Notes due 2047 (3)		126,253		130,153		126,147		134,462
Total	$	126,253	$	130,153	$	296,640	$	308,355

(1)	The Margin Borrowing Facility was fully paid down in August 2020.

(2)

As of December 31, 2019, the carrying value and fair value of the 7.75% Subordinated Notes due 2045 are net of unamortized debt issuance cost of $3.1 million. In August 2020, the Company redeemed all of its outstanding 7.75% subordinated notes due 2045 and unamortized debt issuance cost of $3.1 million was written off and included in the consolidated statements of operations as loss on the extinguishment of debt.

(3)	As of September 30, 2020 and December 31, 2019, the carrying value and fair value of the 7.875% Subordinated Notes due 2047 are net of unamortized debt issuance cost of $3.7 million and $3.9 million, respectively.

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, 2020 and December 31, 2019.

	September 30, 2020				December 31, 2019
(Dollars in thousands)	Fair Value		Future Funding Commitment		Fair Value		Future Funding Commitment
European Non-Performing Loan Fund, LP ₍₁₎	$	11,283	$	14,214	$	13,530	$	14,214
Distressed Debt Fund, LP ₍₂₎		16,979		17,000		23,966		17,000
Mortgage Debt Fund, LP ₍₃₎		9,487		—		9,783		506
Total	$	37,749	$	31,214	$	47,279	$	31,720

(1)

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 ability to sell or transfer its limited partnership interest without consent from the general partner. 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.

(2)

This limited partnership invests in stressed and distressed securities and structured products. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. 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.

(3)

This limited partnership invests in REIT qualifying assets such as mortgage loans, investor property loans, and commercial mortgage loans. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. 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.

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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