Fair Value Measurements Fair Value Measurements

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Disclosures

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, 2014 and December 31, 2013 by level:

(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2014
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	930,857	$	—	$	930,857	$	—
State and municipal	4,257,032		—		4,257,032		—
Mortgage-backed securities	1,348,908		—		1,348,908		—
Corporate	4,437,199		—		4,399,116		38,083
Foreign government	911,146		—		911,146		—
Total fixed maturity securities available for sale	11,885,142		—		11,847,059		38,083
Equity securities available for sale:
Common stocks	164,062		162,824		—		1,238
Preferred stocks	158,711		—		154,951		3,760
Total equity securities available for sale	322,773		162,824		154,951		4,998
Arbitrage trading account	681,077		221,536		458,777		764
Total	$	12,888,992	$	384,360	$	12,460,787	$	43,845
Liabilities:
Securities sold but not yet purchased	$	91,118	$	91,118	$	—	$	—
December 31, 2013
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	884,859	$	—	$	884,859	$	—
State and municipal	4,218,284		—		4,218,284		—
Mortgage-backed securities	1,329,783		—		1,329,783		—
Corporate	4,202,741		—		4,159,877		42,864
Foreign government	879,857		—		879,857		—
Total fixed maturity securities available for sale	11,515,524		—		11,472,660		42,864
Equity securities available for sale:
Common stocks	160,775		159,537		—		1,238
Preferred stocks	122,563		—		118,811		3,752
Total equity securities available for sale	283,338		159,537		118,811		4,990
Arbitrage trading account	522,128		192,281		328,067		1,780
Total	$	12,320,990	$	351,818	$	11,919,538	$	49,634
Liabilities:
Securities sold but not yet purchased	$	162,278	$	162,126	$	152	$	—

There were no significant transfers between Levels 1 and 2 during the three months ended March 31, 2014 or during the year ended December 31, 2013.

The following tables summarize changes in Level 3 assets and liabilities for the three months ended March 31, 2014 and for the year ended December 31, 2013:

			Gains (Losses) Included in
(In thousands)	Beginning Balance		Earnings			Other Comprehensive Income		Purchases		(Sales)			Maturities			Transfer in (out)			Ending Balance
Three months ended March 31, 2014:
Assets:
Fixed maturities available for sale:
Corporate	$	42,864	$	12		$	140	$	42	$	(4,587	)	$	(388	)	$	—		$	38,083
Total	42,864		12			140		42		(4,587		)	(388		)	—			38,083
Equity securities available for sale:
Common stocks	1,238		—			—		—		—			—			—			1,238
Preferred stocks	3,752		30			—		—		(22		)	—			—			3,760
Total	4,990		30			—		—		(22		)	—			—			4,998
Arbitrage trading account	1,780		(1,016		)	—		—		—			—			—			764
Total	$	49,634	$	(974	)	$	140	$	42	$	(4,609	)	$	(388	)	$	—		$	43,845
Year ended December 31, 2013:
Assets:
Fixed maturities available for sale:
Corporate	$	59,065	$	677		$	309	$	170	$	(4,753	)	$	(12,604	)	$	—		$	42,864
Total	59,065		677			309		170		(4,753		)	(12,604		)	—			42,864
Equity securities available for sale:
Common stocks	1,408		—			—		—		(170		)	—			—			1,238
Preferred stocks	621		(299		)	—		3,430		—			—			—			3,752
Total	2,029		(299		)	—		3,430		(170		)	—			—			4,990
Arbitrage trading account	928		1,458			730		824		(853		)	—			(1,307		)	1,780
Total	$	62,022	$	1,836		$	1,039	$	4,424	$	(5,776	)	$	(12,604	)	$	(1,307	)	$	49,634
Liabilities:
Securities sold but not yet purchased	$	20	$	(4	)	$	—	$	4	$	(20	)	$	—		$	—		$	—

There were no significant transfers in or out of Level 3 during the three months ended March 31, 2014 or during the year ended December 31, 2013.

Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments:

	March 31, 2014				December 31, 2013
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturity securities	$	11,986,477	$	12,004,315	$	11,616,844	$	11,631,744
Equity securities available for sale	322,773		322,773		283,338		283,338
Arbitrage trading account	681,077		681,077		522,128		522,128
Loans receivable	373,166		376,198		343,583		346,746
Cash and cash equivalents	643,575		643,575		839,738		839,738
Trading account receivables from brokers and clearing organizations	74,786		74,786		304,936		304,936
Due from broker	—		—		17,735		17,735
Liabilities:
Due to broker	42,095		42,095		8,273		8,273
Trading account securities sold but not yet purchased	91,118		91,118		162,278		162,278
Junior subordinated debentures	339,865		301,560		339,800		288,540
Senior notes and other debt	1,692,690		1,897,820		1,692,442		1,861,898

The estimated fair values of the Company’s fixed maturity securities, equity securities available for sale and arbitrage trading account securities are based on various valuation techniques that rely on fair value measurements as described in Note 16 above. The fair value of loans receivable are estimated by using current institutional purchaser yield requirements for loans with similar credit characteristics, which is considered a Level 2 input. The fair value of the senior notes and other debt and the junior subordinated debentures is based on spreads for similar securities, which is considered a Level 2 input.