3. FAIR VALUE

Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs are based on market data from independent sources, while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. All assets and liabilities that are carried at fair value are classified and disclosed in one of the following categories:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities. An active market is defined as a market where transactions for the financial statement occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2 — Quoted market prices for similar assets or liabilities and valuations, using models or other valuation techniques that use observable market data. 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 market place.

Level 3 — Instruments that use non-binding broker quotes or model driven valuations that do not have observable market data or those that are estimated based on an ownership interest to which a proportionate share of net assets is attributed. Currently, the Company has no level 3 investments.

The Company’s financial instruments measured at fair value and the level of the fair value hierarchy of inputs used were as follows:



	March 31, 2017
	Level 1		Level 2		Level 3		Total
	(in thousands)
Debt securities:
United States government obligations and authorities	$	37,790	$	37,605	$	—	$	75,395
Obligations of states and political subdivisions		—		86,974		—		86,974
Corporate		—		198,047		—		198,047
International		—		15,554		—		15,554
		37,790		338,180		—		375,970

Equity securities		44,003		—		—		44,003

Total investments	$	81,793	$	338,180	$	—	$	419,973



	December 31, 2016
	Level 1		Level 2		Level 3		Total
	(in thousands)
Debt securities:
United States government obligations and authorities	$	36,560	$	25,645	$	—	$	62,205
Obligations of states and political subdivisions		—		151,183		—		151,183
Corporate		—		149,505		—		149,505
International		—		11,863		—		11,863
		36,560		338,196		—		374,756

Equity securities		28,960		415		—		29,375

Total investments	$	65,520	$	338,611	$	—	$	404,131

A third party nationally recognized pricing service provides the fair value of securities in Level 2. A summary of the significant valuation techniques and market inputs for each class of security is as follows:

United States government obligations and authorities: In determining the fair value for U.S. Government securities we use the market approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.

Obligations of states and political subdivisions: In determining the fair value for state and municipal securities we use the market approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.

Corporate and International: In determining the fair value for corporate securities we use the market approach. The primary inputs to the valuation include reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads (for investment grade securities), observations of equity and credit default swap curves (for high-yield corporates), reference data and industry and economic events.

We review the third party pricing methodologies quarterly and test for significant differences between the market price used to value the security and recent sales activity.