Fair Value Measurements

12 Months Ended

Dec. 31, 2014

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company’s fixed maturity, 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, 2014 and 2013 by level:

(In thousands)	Total		Level 1		Level 2		Level 3
December 31, 2014
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	803,388	$	—	$	803,388	$	—
State and municipal	4,362,996		—		4,362,996		—
Mortgage-backed securities	1,295,636		—		1,295,636		—
Corporate	5,200,137		—		5,179,372		20,765
Foreign government	941,826		—		941,826		—
Total fixed maturity securities available for sale	12,603,983		—		12,583,218		20,765
Equity securities available for sale:
Common stocks	76,346		65,605		—		10,741
Preferred stocks	94,645		—		90,932		3,713
Total equity securities available for sale	170,991		65,605		90,932		14,454
Arbitrage trading account	450,648		295,047		154,881		720
Total	$	13,225,622	$	360,652	$	12,829,031	$	35,939
Liabilities:
Securities sold but not yet purchased	$	106,079	$	106,074	$	5	$	—
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 transfers between Levels 1 and 2 for the years ended December 31, 2014 and 2013.

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

	Gains (Losses) Included in:
(In thousands)	Beginning Balance		Earnings			Other Comprehensive Income			Purchases		Sales			Paydowns/Maturities			In		Out			Ending Balance
Year ended December 31, 2014
Assets:
Fixed maturity securities available for sale:
Corporate	$	42,864	$	47		$	(3,711	)	$	238	$	(15,244	)	$	(3,429	)	$	—	$	—		$	20,765
Total	42,864		47			(3,711		)	238		(15,244		)	(3,429		)	—		—			20,765
Equity securities available for sale:
Common stocks	1,238		—			(911		)	11,343		(929		)	—			—		—			10,741
Preferred stocks	3,752		(17		)	—			3,430		(3,452		)	—			—		—			3,713
Total	4,990		(17		)	(911		)	14,773		(4,381		)	—			—		—			14,454
Arbitrage trading account	1,780		2,274			—			4,942		(14,073		)	—			9,064		(3,267		)	720
Total	$	49,634	$	2,304		$	(4,622	)	$	19,953	$	(33,698	)	$	(3,429	)	$	9,064	$	(3,267	)	$	35,939
Liabilities:
Securities sold but not yet purchased	$	—	$	(20	)	$	—		$	31	$	(11	)	$	—		$	—	$	—		$	—
Year ended December 31, 2013
Assets:
Fixed maturity securities 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		)	—			22		(1,329		)	1,780
Total	$	62,022	$	1,836		$	1,039		$	4,424	$	(5,776	)	$	(12,604	)	$	22	$	(1,329	)	$	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 years ended December 31, 2014 or 2013.

Fair Value of Financial Instruments

The following table presents the carrying amounts and estimated fair values of the Company’s financial instruments as of December 31, 2014 and 2013:

	2014				2013
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturity securities	$	12,705,160	$	12,725,806	$	11,616,844	$	11,631,744
Equity securities available for sale	170,991		170,991		283,338		283,338
Arbitrage trading account	450,648		450,648		522,128		522,128
Loans receivable	322,012		325,219		343,583		346,746
Cash and cash equivalents	674,441		674,441		839,738		839,738
Trading accounts receivable from brokers and clearing organizations	371,034		371,034		304,936		304,936
Due from broker	—		—		17,735		17,735
Liabilities:
Due to broker	23,133		23,133		8,273		8,273
Trading account securities sold but not yet purchased	106,079		106,079		162,278		162,278
Subordinated debentures	340,060		332,640		339,800		288,540
Senior notes and other debt	2,115,527		2,344,292		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. 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. 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, other debt and the subordinated debentures is based on spreads for similar securities, which is considered a Level 2 input.