Fair Value Of Financial Instruments Fair Value of Financial Instruments (Notes)

3 Months Ended

Mar. 31, 2015

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, 2015 and December 31, 2014 by level:

(In thousands)	Total		Level 1		Level 2		Level 3
March 31, 2015
Assets:
Fixed maturity securities available for sale:
U.S. government and government agency	$	752,467	$	—	$	752,467	$	—
State and municipal	4,448,704		—		4,448,704		—
Mortgage-backed securities	1,198,466		—		1,198,466		—
Corporate	5,212,640		—		5,210,710		1,930
Foreign government	938,719		—		938,719		—
Total fixed maturity securities available for sale	12,550,996		—		12,549,066		1,930
Equity securities available for sale:
Common stocks	61,100		52,205		—		8,895
Preferred stocks	113,609		—		109,944		3,665
Total equity securities available for sale	174,709		52,205		109,944		12,560
Arbitrage trading account	972,629		269,697		630,316		72,616
Total	$	13,698,334	$	321,902	$	13,289,326	$	87,106
Liabilities:
Securities sold but not yet purchased	$	99,299	$	99,299	$	—	$	—
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	$	—

There were no significant transfers between Levels 1 and 2 during the three months ended March 31, 2015 or during the year ended December 31, 2014.

The following tables summarize changes in Level 3 assets and liabilities for the three months ended March 31, 2015 and for the year ended December 31, 2014:

			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, 2015:
Assets:
Fixed maturities available for sale:
Corporate	$	20,765	$	15		$	180		$	—	$	—		$	(1,673	)	$	(17,357	)	$	1,930
Total	20,765		15			180			—		—			(1,673		)	(17,357		)	1,930
Equity securities available for sale:
Common stocks	10,741		—			(1,846		)	—		—			—			—			8,895
Preferred stocks	3,713		(48		)	—			—		—			—			—			3,665
Total	14,454		(48		)	(1,846		)	—		—			—			—			12,560
Arbitrage trading account	720		(277		)	—			72,173		—			—			—			72,616
Total	$	35,939	$	(310	)	$	(1,666	)	$	72,173	$	—		$	(1,673	)	$	(17,357	)	$	87,106
Liabilities:
Securities sold but not yet purchased	—		—			—			$	—	—			—			$	—		$	—
Year ended December 31, 2014:
Assets:
Fixed maturities 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		)	—			5,797			720
Total	$	49,634	$	2,304		$	(4,622	)	$	19,953	$	(33,698	)	$	(3,429	)	$	5,797		$	35,939
Liabilities:
Securities sold but not yet purchased	$	—	$	(20	)	$	—		$	31	$	(11	)	$	—		$	—		$	—

During the three months ended March 31, 2015, one security was transferred out of Level 3 where an observable price was available. During the year ended December 31, 2014, two securities were transferred into Level 3 where the quoted prices were no longer available. One of these securities was sold during the second quarter of 2014.

Fair Value of Financial Instruments

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

	March 31, 2015				December 31, 2014
(In thousands)	Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
Fixed maturity securities	$	12,652,269	$	12,673,353	$	12,705,160	$	12,725,806
Equity securities available for sale	174,709		174,709		170,991		170,991
Arbitrage trading account	972,629		972,629		450,648		450,648
Loans receivable	280,769		283,836		322,012		325,219
Cash and cash equivalents	614,695		614,695		674,441		674,441
Trading account receivables from brokers and clearing organizations	—		—		371,034		371,034
Liabilities:
Due to broker	18,260		18,260		23,133		23,133
Trading account payable to brokers and clearing organizations	165,420		165,420		—		—
Trading account securities sold but not yet purchased	99,299		99,299		106,079		106,079
Subordinated debentures	340,125		354,480		340,060		332,640
Senior notes and other debt	2,112,456		2,388,949		2,115,527		2,344,292

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.