Disclosures about Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2013

Disclosures about Fair Value of Financial Instruments

21. Disclosures about Fair Value of Financial Instruments

Cash. The carrying amount approximates fair value.

Investment securities and short-term investments. See Note 2, “Investments,” for additional information.

Premiums receivable and reinsurance recoverables on paid losses. The carrying value of current receivables approximates fair value. At December 31, 2013 and 2012, the carrying values of premiums receivable over 90 days were $9.8 million and $24.3 million, respectively. Included in “Reinsurance recoverables” in our Consolidated Balance Sheets at December 31, 2013 and 2012, are amounts that are due from third party trade capital providers associated with the operations of Argo International. Upon settlement, the receivable is offset against the liability also reflected in our accompanying Consolidated Balance Sheets. At December 31, 2013 and 2012, the payable was in excess of the receivable. Of our reinsurance recoverables on paid losses, excluding amounts attributable to Argo International’s third party trade capital providers, at December 31, 2013 and 2012, the carrying values over 90 days were $22.2 million and $18.0 million, respectively. Our methodology for establishing our allowances for doubtful accounts includes specifically identifying all potential uncollectible balances regardless of aging. Any of the over 90 day balances, where collectability was deemed questionable, have been included in the allowances. At December 31, 2013 and 2012, the allowance for doubtful accounts for premiums receivable was $4.5 million and $2.5 million, respectively, and the allowance for doubtful accounts for reinsurance recoverables on paid losses was $1.6 million and $2.2 million, respectively. Premiums receivable over 90 days were secured by collateral in the amount of $0.4 million at December 31, 2013 and 2012. Reinsurance recoverables on paid losses over 90 days were secured by collateral in the amount of $0.3 million at December 31, 2013 and 2012.

At December 31, 2013 and 2012, the fair value of our Junior subordinated debentures, Senior unsecured fixed rate notes and Other indebtedness was estimated using appropriate market indices or quoted prices from external sources based on current market conditions.

A summary of our financial instruments whose carrying value did not equal fair value at December 31, 2013 and 2012 is shown below:


	December 31, 2013				December 31, 2012
(in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Junior subordinated debentures	$	193.3	$	155.5	$	193.3	$	151.8
Senior unsecured fixed rate notes		143.8		116.2		143.8		143.2
Other indebtedness:
Floating rate loan stock		65.5		52.7		63.0		49.5
Note payable		0.8		0.6		0.8		0.6

	$	403.4	$	325.0	$	400.9	$	345.1

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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