XML 45 R11.htm IDEA: XBRL DOCUMENT v3.22.4
Fair Value Measurements
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair value is 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.  We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through comprehensive income (loss). We also report our equity securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations.

Fair value measurements are generally based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions
in the absence of observable market information.  We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories:
 
•Level 1 - Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs or whose significant value drivers are observable.
•Level 3 - Instruments whose significant value drivers are unobservable.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments.

Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes.  These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments.  All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace.  Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities.

Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information. We have no investments in this category.
The following tables set forth our assets that are measured at fair value on a recurring basis.
 
December 31, 2022
(In thousands)
Level 1Level 2Level 3Total
Fair Value
Financial assets:
Fixed maturity securities, available-for-sale:    
U.S. Treasury and U.S. Government-sponsored enterprises$9,567 3,711 — 13,278 
States and political subdivisions— 307,358 — 307,358 
Corporate44 715,601 — 715,645 
Commercial mortgage-backed— 169 — 169 
Residential mortgage-backed— 99,826 — 99,826 
Asset-backed— 43,242 — 43,242 
Foreign governments— 101 — 101 
Total fixed maturity securities available-for-sale9,611 1,170,008 — 1,179,619 
Equity securities:    
Stock mutual funds2,615 — — 2,615 
Bond mutual funds4,337 — — 4,337 
Common stock857 — — 857 
Non-redeemable preferred stock8 — — 8 
Non-redeemable preferred stock fund3,773 — — 3,773 
Total equity securities11,590 — — 11,590 
Other long-term investments (1)
— — — 66,846 
Total financial assets$21,201 1,170,008 — 1,258,055 
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. 
December 31, 2021
(In thousands)
Level 1Level 2Level 3Total
Fair Value
Financial assets:    
Fixed maturity securities, available-for-sale:    
U.S. Treasury and U.S. Government-sponsored enterprises$10,611 4,459 — 15,070 
States and political subdivisions— 383,958 — 383,958 
Corporate51 892,957 — 893,008 
Residential mortgage-backed— 133,795 — 133,795 
Asset-backed— 44,676 — 44,676 
Foreign governments— 110 — 110 
Total fixed maturity securities available-for-sale10,662 1,459,955 — 1,470,617 
Equity securities:    
Stock mutual funds3,571 — — 3,571 
Bond mutual funds5,060 — — 5,060 
Common stock990 — — 990 
Non-redeemable preferred stock161 — — 161 
Non-redeemable preferred stock fund5,062 — — 5,062 
Total equity securities14,844 — — 14,844 
Other long-term investments (1)
— — — 56,038 
Total financial assets$25,506 1,459,955 — 1,541,499 
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. 

FINANCIAL INSTRUMENTS VALUATION

FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
 
Fixed maturity securities, available-for-sale.  At December 31, 2022, fixed maturity securities, valued using a third-party pricing source, totaled $1.2 billion for Level 2 assets and comprised 93.0% of total reported fair value of our financial assets. The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades. In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness. There were no Level 3 assets as of December 31, 2022 and 2021. For the year ended December 31, 2022, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.
 
Equity securities.  Our equity securities are classified as Level 1 assets as their fair values are based upon quoted market prices.

Limited partnerships. The Company considers the net asset value ("NAV") to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities. The following table includes information related to our investments in limited partnerships that calculate NAV per share. For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value. The Company recognized net investment related losses of $9.7 million on limited partnerships held for the year ended
December 31, 2022 and gains of $7.5 million for year 2021. These investments are included in other long-term investments on the consolidated balance sheets.

December 31, 2022December 31, 2021

(In thousands, except years)
Fair Value Using NAV Per ShareUnfunded Commit-
ments		Range
(In years)		Fair Value Using NAV Per ShareUnfunded Commit-
ments		Range
(In years)
Description
Limited partnerships
Middle marketInvestments in privately-originated, performing senior secured debt primarily in North America-based companies$33,234 6,011 5$21,947 18,712 10
Global equity fundInvestments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth9,037 — 010,607 — 0
Late-stage growthInvestments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale16,892 18,444 
5 to 7
20,468 4,459 6
InfrastructureInvestments in environmental infrastructure and related technology, focusing on renewable power generation and distribution7,683 4,107 113,016 16,653 12
Total limited partnerships$66,846 28,562 $56,038 39,824 

The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated. The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments. The global equity fund is redeemable monthly.

FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE
 
Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments.  The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.  

The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows:
 December 31, 2022December 31, 2021
(In thousands)Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Financial assets:    
Policy loans$78,773 78,773 80,307 80,307 
Commercial mortgage loan— — 1,000 1,000 
Residential mortgage loans49 50 148 169 
Cash and cash equivalents22,973 22,973 27,294 27,294 
Financial liabilities:  
Annuity - investment contracts67,344 61,701 64,384 72,352 
 
Policy loans. Policy loans had a weighted average annual interest rate of 7.7% at both December 31, 2022 and 2021 and no specified maturity dates.  The aggregate fair value of policy loans approximates the carrying value reflected on the consolidated balance sheets.  Policy loans are an integral part of the life insurance policies we have
in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value and policy loans are considered Level 3 assets in the fair value hierarchy.

Commercial mortgage loan. We financed $1.0 million of the sale of our training facility at a 6.0% interest rate. The loan was paid in full during the third quarter of 2022. Due to the short-term nature of the loan, the carrying value approximated fair value and was considered a Level 3 asset in the fair value hierarchy.

Residential mortgage loans. Mortgage loans are secured principally by residential properties.  Weighted average interest rates for these loans were approximately 7.0% at December 31, 2022 and 6.4% at December 31, 2021. At December 31, 2022, the remaining loan matures in six years.  Management estimated the fair value using an annual interest rate of 6.25% at both December 31, 2022 and 2021. Our mortgage loans are considered Level 3 assets in the fair value hierarchy.

Cash and cash equivalents. The fair value of cash and cash equivalents approximate carrying value and are characterized as Level 1 assets in the fair value hierarchy.

Annuity liabilities. The fair value of the Company's liabilities under annuity contract policies, which are considered Level 3 liabilities, was estimated at December 31, 2022 and 2021 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.74% to 5.09% and 0.50% to 2.63%, respectively. The fair value of liabilities under all insurance contracts are taken into consideration in the overall management of interest rate risk, which seeks to minimize exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.

Other long-term investments. The following table summarizes the carrying amounts of other long-term investments.

As of December 31,
(In thousands)
20222021
Other long-term investments:
Limited partnerships$69,294 56,038 
FHLB common stock193 192 
Mortgage loans49 1,148 
All other investments22 21 
Total other long-term investments$69,558 57,399 

We carried $2.4 million of limited partnership investments at cost at December 31, 2022. None were carried at cost at December 31, 2021.
We are a member of the FHLB of Dallas and such membership requires members to own stock in the FHLB. Our FHLB stock is carried at amortized cost, which approximates fair value.