Fair Value Measurements

3 Months Ended

Mar. 31, 2013

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 arbitrage 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 March 31, 2013 and December 31, 2012 by Level:

(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2013
Assets:
Fixed maturity securities available for sale:
U.S. government and agency	$	875,712	$	—	$	875,712	$	—
State and municipal	4,409,616		—		4,409,616		—
Mortgage-backed securities	1,544,913		—		1,544,913		—
Corporate	3,571,079		—		3,515,310		55,769
Foreign	1,161,494		—		1,161,494		—
Total fixed maturity securities available for sale	11,562,814		—		11,507,045		55,769
Equity securities:
Common stocks	295,031		293,793		—		1,238
Preferred stocks	104,355		—		103,969		386
Total equity securities	399,386		293,793		103,969		1,624
Arbitrage trading account	701,223		236,670		463,456		1,097
Total	$	12,663,423	$	530,463	$	12,074,470	$	58,490
Liabilities:
Securities sold but not yet purchased	$	79,965	$	70,580	$	9,383	$	2
December 31, 2012
Assets:
Fixed maturity securities available for sale:
U.S. government and agency	$	898,463	$	—	$	898,463	$	—
State and municipal	4,768,519		—		4,768,519		—
Mortgage-backed securities	1,715,697		—		1,715,697		—
Corporate	3,346,719		—		3,287,654		59,065
Foreign	1,111,607		—		1,111,607		—
Total fixed maturity securities available for sale	11,841,005		—		11,781,940		59,065
Equity securities:
Common stocks	282,066		280,658		—		1,408
Preferred stocks	93,956		—		93,335		621
Total equity securities	376,022		280,658		93,335		2,029
Arbitrage trading account	329,077		233,603		94,546		928
Total	$	12,546,104	$	514,261	$	11,969,821	$	62,022
Liabilities:
Securities sold but not yet purchased	$	121,487	$	114,909	$	6,558	$	20

There were no significant transfers between Levels 1 and 2 during the three months ended March 31, 2013 or during the year ended December 31, 2012.

The following tables summarize changes in Level 3 assets and liabilities for the three months ended March 31, 2013 and for the year ended December 31, 2012:

			Gains (Losses) Included in
(In thousands)	Beginning Balance		Earnings			Other Comprehensive Income				Purchases			(Sales)			Maturities			Transfer in		Ending Balance
Three months ended March 31, 2013:
Assets:
Fixed maturities available for sale:
Corporate	$	59,065	$	(15	)	$	144			$	14,297		$	(14,255	)	$	(3,467	)	$	—	$	55,769
Total	59,065		(15		)	144				14,297			(14,255		)	(3,467		)	—		55,769
Equity securities available for sale:
Common stocks	1,408		—			—				—			(170		)	—			—		1,238
Preferred stocks	621		—			(235		)		—			—			—			—		386
Total	2,029		—			(235		)		—			(170		)	—			—		1,624
Arbitrage trading account	928		169			—			—	—		—	—			—			—		1,097
Total	$	62,022	$	154		$	(91	)		$	14,297		$	(14,425	)	$	(3,467	)	$	—	$	58,490
Liabilities:
Securities sold but not yet purchased	$	20	$	(18	)	$	—			$	—		$	—		$	—		$	—	$	2
For the year ended December 31, 2012:
Assets:
Fixed maturities available for sale:
Corporate	$	67,828	$	(1,497	)	$	9,622			$	283		$	—		$	(17,171	)	$	—	$	59,065
Total	67,828		(1,497		)	9,622				283			—			(17,171		)	—		59,065
Equity securities available for sale:
Common stocks	1,559		—			—				—			(151		)	—			—		1,408
Preferred stocks	12,303		1,126			(1,737		)		—			(11,071		)	—			—		621
Total	13,862		1,126			(1,737		)		—			(11,222		)	—			—		2,029
Arbitrage trading account	851		(3,534		)	3,570				—			(52		)	—			93		928
Total	$	82,541	$	(3,905	)	$	11,455			$	283		$	(11,274	)	$	(17,171	)	$	93	$	62,022
Liabilities:
Securities sold but not yet purchased	$	21	$	(1	)	$	—			$	—		$	—		$	—		$	—	$	20

There were no significant transfers in or out of Level 3 during the three months ended March 31, 2013 or during the year ended December 31, 2012.