Fair Value Measurements

3 Months Ended

Mar. 31, 2012

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.

Preferred Stocks – At March 31, 2012, there were five preferred stocks in an unrealized loss position, with an aggregate fair value of $66 million and a gross unrealized loss of $7 million. Two of those preferred stocks with an aggregate fair value of $17 million and a gross unrealized loss of $4 million were rated non-investment grade. Based upon management’s view of the underlying value of these securities, the Company does not consider these preferred stocks to be OTTI.

Common Stocks – At March 31, 2012, the Company owned five common stocks in an unrealized loss position with an aggregate fair value of $47 million and an aggregate unrealized loss of $0.7 million. The Company does not consider these common stocks to be OTTI.

The following tables present the assets and liabilities measured at fair value, on a recurring basis, as of March 31, 2012 and December 31, 2011 by Level:

(Dollars in thousands)	Total		Level 1		Level 2		Level 3
March 31, 2012
Assets:
Fixed maturity securities available for sale:
U.S. government and agency	$	1,026,262	$	—	$	1,026,262	$	—
State and municipal	5,261,808		—		5,261,808		—
Mortgage-backed securities	1,534,174		—		1,534,174		—
Corporate	2,610,280		—		2,544,459		65,821
Foreign	1,005,993		—		1,005,993		—
Total fixed maturity securities available for sale	11,438,517		—		11,372,696		65,821
Equity securities available for sale:
Common stocks	365,237		363,828		—		1,409
Preferred stocks	123,983		—		120,802		3,181
Total equity securities available for sale	489,220		363,828		120,802		4,590
Arbitrage trading account	344,892		179,400		164,818		674
Total	$	12,272,629	$	543,228	$	11,658,316	$	71,085
Liabilities:
Securities sold but not yet purchased	$	71,386	$	62,924	$	8,421	$	41
December 31, 2011
Assets:
Fixed maturity securities available for sale:
U.S. government and 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

There were no significant transfers between Levels 1 and 2 during the three months ended March 31, 2012 or during the year ended December 31, 2011.

The following tables summarize changes in Level 3 assets and liabilities for the three months ended March 31, 2012 and for the year ended December 31, 2011:

			Gains (Losses) Included in
(Dollars in thousands)	Beginning Balance		Earnings			Other Comprehensive Income				Purchases			(Sales)			Maturities			Transfer in		Ending Balance
For the three months ended March 31, 2012:
Assets:
Fixed maturity securities available for sale:
Corporate	$	67,828	$	113		$	1,294			$	74		$	—		$	(3,488	)	$	—	$	65,821
Total	67,828		113			1,294				74			—			(3,488		)	—		65,821
Equity securities available for sale:
Common stocks	1,559		—			—				—			(150		)	—			—		1,409
Preferred stocks	12,303		1,962			(1,751		)		—			(9,333		)	—			—		3,181
Total	13,862		1,962			(1,751		)		—			(9,483		)	—			—		4,590
Arbitrage trading account	851		(192		)	—			—	—		—	—			—			15		674
Total	$	82,541	$	1,883		$	(457	)		$	74		$	(9,483	)	$	(3,488	)	$	15	$	71,085
Liabilities:
Securities sold but not yet purchased	$	21	$	20		$	—			$	—		$	—		$	—		$	—	$	41
For the 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

There were no significant transfers in or out of Level 3 during the three months ended March 31, 2012 or during the year ended December 31, 2011.