Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value, Assets and Liabilities Measured on Recurring Basis [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company’s fixed maturity and equity securities available for sale and its trading account securities are carried at fair value. Fair value is defined as “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.” The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for similar assets in active markets. Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs may only be used to measure fair value to the extent that observable inputs are not available.

Because many fixed maturity securities do not trade on a daily basis, the Company utilizes pricing models and processes which may include benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Market inputs used to evaluate securities include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Quoted prices are often unavailable for recently issued securities, securities that are infrequently traded or securities that are only traded in private transactions. For publicly traded securities for which quoted prices are unavailable, the Company determines fair value based on independent broker quotations and other observable market data. For securities traded only in private negotiations, the Company determines fair value based primarily on the cost of such securities, which is adjusted to reflect prices of recent placements of securities of the same issuer, financial projections, credit quality and business developments of the issuer and other relevant information.

The following tables present the assets and liabilities measured at fair value on a recurring basis as of December 31, 2011 and 2010 by level:

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
December 31, 2011
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	976,493	$	—	$	976,493	$	—
State and municipal	5,323,070		—		5,323,070		—
Mortgage-backed securities	1,584,587		—		1,584,587		—
Corporate	2,424,424		—		2,356,596		67,828
Foreign	888,354		—		888,354		—
Total fixed maturity securities available for sale	11,196,928		—		11,129,100		67,828
Equity securities available for sale:
Common stocks	319,982		318,423		—		1,559
Preferred stocks	123,457		—		111,154		12,303
Total equity securities available for sale	443,439		318,423		111,154		13,862
Arbitrage trading account	397,312		208,516		187,945		851
Total	$	12,037,679	$	526,939	$	11,428,199	$	82,541
Liabilities:
Securities sold but not yet purchased	$	62,514	$	62,493	$	—	$	21
December 31, 2010
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	1,347,875	$	—	$	1,347,875	$	—
State and municipal	5,461,446		—		5,461,446		—
Mortgage-backed securities	1,411,846		—		1,411,846		—
Corporate	2,119,922		—		2,031,859		88,063
Foreign	752,070		—		752,070		—
Total fixed maturity securities available for sale	11,093,159		—		11,005,096		88,063
Equity securities available for sale:
Common stocks	316,056		204,749		109,748		1,559
Preferred stocks	244,997		—		155,551		89,446
Total equity securities available for sale	561,053		204,749		265,299		91,005
Arbitrage trading account	359,192		162,292		193,713		3,187
Total	$	12,013,404	$	367,041	$	11,464,108	$	182,255
Liabilities:
Securities sold but not yet purchased	$	53,494	$	51,672	$	1,822	$	—

There were no transfers between Levels 1 and 2 for the year ended December 31, 2011.

The following tables summarize changes in Level 3 assets and liabilities for the years ended December 31, 2011 and 2010:

	Gains (Losses) Included in:
(Dollars in thousands)	Beginning Balance		Earnings			Other Comprehensive Income				Purchases		Sales			Paydowns/Maturities			In		Out			Ending Balance
Year ended December 31, 2011
Assets:
Fixed maturity securities available for sale:
Corporate	$	88,063	$	(454	)	$	(870	)		$	15,271	$	(11,864	)	$	(22,318	)	$	—	$	—		$	67,828
Total	88,063		(454		)	(870		)		15,271		(11,864		)	(22,318		)	—		—			67,828
Equity securities available for sale:
Common stocks	1,559		—			—				—		—			—			—		—			1,559
Preferred stocks	89,446		28,947			(30,865		)		—		(75,225		)	—			—		—			12,303
Total	91,005		28,947			(30,865		)		—		(75,225		)	—			—		—			13,862
Arbitrage trading account	3,187		572			—			—	269		(3,266		)	—			89		—			851
Total	$	182,255	$	29,065		$	(31,735	)		$	15,540	$	(90,355	)	$	(22,318	)	$	89	$	—		$	82,541
Liabilities:
Securities sold but not yet purchased	—		$	40		—				$	67	$	(86	)	—			—		—			$	21
Year ended December 31, 2010
Fixed maturity securities available for sale:
Mortgage-backed securities	$	25,900	$	—		$	—			$	—	$	—		$	—		$	—	$	(25,900	)	$	—
Corporate	90,160		(850		)	1,558				19,632		(5,324		)	(17,113		)	—		—			88,063
Total	116,060		(850		)	1,558				19,632		(5,324		)	(17,113		)	—		(25,900		)	88,063
Equity securities available for sale:
Common stocks	1,559		—			—				—		—			—			—		—			1,559
Preferred stocks	54,713		23,535			31,633				19,542		(39,977		)	—			—		—			89,446
Total	56,272		23,535			31,633				19,542		(39,977		)	—			—		—			91,005
Arbitrage trading account	353		(353		)	—				3,187		—			—			—		—			3,187
Total	$	172,685	$	22,332		$	33,191			$	42,361	$	(45,301	)	$	(17,113	)	$	—	$	(25,900	)	$	182,255

The transfers out of Level 3 for mortgage-backed securities in 2010 were based upon the availability of broker dealer quotations. In certain circumstances, the Company was able to obtain quotations from third party broker dealers.