| Fair Value Measurement of Financial Assets and Financial Liabilities on Recurring Basis |
The following table presents the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis as of September 30, 2012: | | | | | | | | | | | | | | | | | (Amounts in Thousands) | Total | | Level 1 | | Level 2 | | Level 3 | Assets: | |
| | |
| | |
| | |
| U.S. treasury securities | $ | 48,341 |
| | $ | 48,341 |
| | $ | — |
| | $ | — |
| U.S. government agencies | 46,305 |
| | — |
| | 46,305 |
| | — |
| Municipal bonds | 265,011 |
| | — |
| | 265,011 |
| | — |
| Corporate bonds and other bonds: | |
| | |
| | |
| | |
| Finance | 773,474 |
| | — |
| | 773,474 |
| | — |
| Industrial | 330,269 |
| | — |
| | 330,269 |
| | — |
| Utilities | 35,228 |
| | — |
| | 35,228 |
| | — |
| Commercial mortgage backed securities | 10,209 |
| | — |
| | 10,209 |
| | — |
| Residential mortgage backed securities: | |
| | |
| | |
| | |
| Agency backed | 332,027 |
| | — |
| | 332,027 |
| | — |
| Non-agency backed | 6,759 |
| | — |
| | 6,759 |
| | — |
| Equity securities | 18,318 |
| | 18,318 |
| | — |
| | — |
| Short term investments | 485 |
| | 485 |
| | — |
| | — |
| Other investments | 14,324 |
| | — |
| | — |
| | 14,324 |
| Life settlement contracts | 171,476 |
| | — |
| | — |
| | 171,476 |
| | $ | 2,052,226 |
| | $ | 67,144 |
| | $ | 1,799,282 |
| | $ | 185,800 |
| Liabilities: | |
| | |
| | |
| | |
| Equity securities sold but not yet purchased, market | $ | 43 |
| | $ | 43 |
| | $ | — |
| | $ | — |
| Fixed maturity securities sold but not yet purchased, market | 57,155 |
| | 57,155 |
| | — |
| | — |
| Securities sold under agreements to repurchase, at contract value | 226,098 |
| | — |
| | 226,098 |
| | — |
| Life settlement contract profit commission | 9,550 |
| | — |
| | — |
| | 9,550 |
| Derivatives | 4,973 |
| | — |
| | 4,973 |
| | — |
| | $ | 297,819 |
| | $ | 57,198 |
| | $ | 231,071 |
| | $ | 9,550 |
|
|
| Changes in Fair Value of Level 3 Financial Assets And Liabilities |
The following table provides a summary of changes in fair value of the Company’s Level 3 financial assets and liabilities for the three and nine months ended September 30, 2012 and 2011: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Amounts in Thousands) | | Balance as of June 30, 2012 | | Net income | | Other comprehensive income | | Purchases and issuances | | Sales and settlements | | Net transfers into (out of) Level 3 | | Balance as of September 30,
2012 | Other investments | | $ | 15,103 |
| | $ | 1,491 |
| | $ | — |
| | $ | 315 |
| | $ | (2,585 | ) | | $ | — |
| | $ | 14,324 |
| Life settlement contracts | | 151,092 |
| | 10,758 |
| | — |
| | 9,626 |
| | — |
| | — |
| | 171,476 |
| Life settlement contract profit commission | | (11,465 | ) | | 1,915 |
| | — |
| | — |
| | — |
| | — |
| | (9,550 | ) | Derivatives | | (4,472 | ) | | — |
| | (501 | ) | | — |
| | — |
| | 4,973 |
| | — |
| Total | | $ | 150,258 |
| | $ | 14,164 |
| | $ | (501 | ) | | $ | 9,941 |
| | $ | (2,585 | ) | | $ | 4,973 |
| | $ | 176,250 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Amounts in Thousands) | | Balance as of December 31,
2011 | | Net income | | Other comprehensive income | | Purchases and issuances | | Sales and settlements | | Net transfers into (out of) Level 3 | | Balance as of September 30,
2012 | Other investments | | $ | 14,588 |
| | $ | (2,861 | ) | | $ | 4,535 |
| | $ | 1,062 |
| | $ | (3,000 | ) | | $ | — |
| | $ | 14,324 |
| Life settlement contracts | | 131,387 |
| | 26,174 |
| | — |
| | 23,989 |
| | (10,074 | ) | | — |
| | 171,476 |
| Life settlement contract profit commission | | (12,022 | ) | | 2,472 |
| | — |
| | — |
| | — |
| | — |
| | (9,550 | ) | Derivatives | | (3,508 | ) | | — |
| | (1,465 | ) | | — |
| | — |
| | 4,973 |
| | — |
| Total | | $ | 130,445 |
| | $ | 25,785 |
|
| $ | 3,070 |
| | $ | 25,051 |
| | $ | (13,074 | ) | | $ | 4,973 |
| | $ | 176,250 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Amounts in Thousands) | | Balance as of June 30,
2011 | | Net income | | Other comprehensive income | | Purchases and issuances | | Sales and settlements | | Net transfers into (out of) Level 3 | | Balance as of September 30,
2011 | Other investments | | $ | 22,008 |
| | $ | — |
| | $ | (1,348 | ) | | $ | 5,672 |
| | $ | (5,128 | ) | | $ | — |
| | $ | 21,204 |
| Life settlement contracts | | 108,710 |
| | 17,188 |
| | — |
| | 6,298 |
| | (10,530 | ) | | — |
| | 121,666 |
| Life settlement contract profit commission | | (9,267 | ) | | (3,369 | ) | | — |
| | — |
| | — |
| | — |
| | (12,636 | ) | Total | | $ | 121,451 |
| | $ | 13,819 |
| | $ | (1,348 | ) | | $ | 11,970 |
| | $ | (15,658 | ) | | $ | — |
| | $ | 130,234 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (Amounts in Thousands) | | Balance as of December 31,
2010 | | Net income | | Other comprehensive income | | Purchases and issuances | | Sales and settlements | | Net transfers into (out of) Level 3 | | Balance as of September 30,
2011 | Other investments | | $ | 21,514 |
| | $ | 661 |
| | $ | (1,725 | ) | | $ | 6,538 |
| | $ | (5,784 | ) | | $ | — |
| | $ | 21,204 |
| Life settlement contracts | | 22,155 |
| | 75,209 |
| | — |
| | 34,832 |
| | (10,530 | ) | | — |
| | 121,666 |
| Life settlement contract profit commission | | (4,711 | ) | | (7,925 | ) | | — |
| | — |
| | — |
| | — |
| | (12,636 | ) | Total | | $ | 38,958 |
| | $ | 67,945 |
| | $ | (1,725 | ) | | $ | 41,370 |
| | $ | (16,314 | ) | | $ | — |
| | $ | 130,234 |
|
|
| Increase or (Decrease) in Carrying Value of Investment in Life Insurance Policies |
These assumptions are, by their nature, inherently uncertain and the effect of changes in estimates may be significant. The fair value measurements used in estimating the present value calculation are derived from valuation techniques generally used in the industry that include inputs for the asset that are not based on observable market data. The extent to which the fair value could reasonable vary in the near term has been quantified by evaluating the effect of changes in significant underlying assumptions used to estimate the fair value amount. If the life expectancies were increased or decreased by 4 months and the discount factors were increased or decreased by 1% while all other variables are held constant, the carrying value of the investment in life insurance policies would increase or (decrease) by the unaudited amounts summarized below as of September 30, 2012 and December 31, 2011: | | | | | | | | | | Change in life expectancy | (Amounts in Thousands) | Plus 4 Months | | Minus 4 Months | Investment in life policies: | |
| | |
| September 30, 2012 | $ | (25,386 | ) | | $ | 28,250 |
| December 31, 2011 | $ | (18,778 | ) | | $ | 20,785 |
|
| | | | | | | | | | Change in discount rate | (Amounts in Thousands) | Plus 1% | | Minus 1% | Investment in life policies: | |
| | |
| September 30, 2012 | $ | (17,167 | ) | | $ | 20,030 |
| December 31, 2011 | $ | (13,802 | ) | | $ | 15,804 |
|
|