Note 6 — Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair value. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Valuation Methodology

Cash and cash equivalents

Cash and cash equivalents primarily consist of money-market funds. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

Short-term investments

Short-term investments consist of certificates of deposit and zero-coupon commercial paper maturing in one year. Due to their short maturity, the carrying value approximates fair value.

Fixed-maturity and equity securities

Estimated fair values are determined in accordance with U.S. GAAP, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The estimated fair values for securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers, which are level 2 inputs. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

Limited Partnership Investments

As described in Note 4 — “Investments” under Limited Partnership Investments, the Company has interests in limited partnerships which are private equity funds. Pursuant to U.S. GAAP, these funds are required to use fair value accounting; therefore, the estimated fair value approximates the carrying value of these funds.

Long-term debt

The following table summarizes components of the Company’s long-term debt and methods used in estimating their fair values:


	Maturity Date		Valuation Methodology
3.875% Convertible Senior Notes		2019	Quoted price
4.25% Convertible Senior Notes		2037	Quoted price
3.95% Promissory Note		2020	Discounted cash flow method/Level 3 inputs
4% Promissory Note		2031	Discounted cash flow method/Level 3 inputs
3.75% Promissory Note		2036	Discounted cash flow method/Level 3 inputs

Assets Measured at Estimated Fair Value on a Recurring Basis

The following table presents information about the Company’s financial assets measured at estimated fair value on a recurring basis. The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of June 30, 2018 and December 31, 2017:


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
*As of June 30, 2018*
Financial Assets:
Cash and cash equivalents	$	216,453	$	—	$	—	$	216,453
Short-term investments		—		—		110,042		110,042
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies		68,115		1,500		—		69,615
Corporate bonds		72,272		—		—		72,272
State, municipalities, and political subdivisions		—		13,646		—		13,646
Exchange-traded debt		9,600		—		—		9,600

Total available-for-sale securities		149,987		15,146		—		165,133

Equity securities		40,125		—		—		40,125

Total	$	406,565	$	15,146	$	110,042	$	531,753


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
*As of December 31, 2017*
Financial Assets:
Cash and cash equivalents	$	255,884	$	—	$	—	$	255,884
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies		40,527		1,500		—		42,027
Corporate bonds		106,109		994		—		107,103
State, municipalities, and political subdivisions		—		80,695		—		80,695
Exchange-traded debt		7,659		—		—		7,659

Total available-for-sale securities		154,295		83,189		—		237,484

Equity securities		59,956		—		—		59,956

Total	$	470,135	$	83,189	$	—	$	553,324

Assets and Liabilities Carried at Other Than Estimated Fair Value

The following tables present fair value information for assets and liabilities that are carried on the balance sheet at amounts other than fair value as of June 30, 2018 and December 31, 2017:


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
*As of June 30, 2018*
Financial Assets:
Limited partnership investments	$	25,591	$	—	$	—	$	25,591	$	25,591
Financial Liabilities:
Long-term debt:
3.875% Convertible senior notes	$	87,270	$	—	$	87,853	$	—	$	87,853
4.25% Convertible senior notes		128,252		—		140,556		—		140,556
3.95% Promissory note		9,174		—		—		9,063		9,063
4% Promissory note		7,972		—		—		7,460		7,460
3.75% Promissory note		8,315		—		—		7,411		7,411

Total long-term debt	$	240,983	$	—	$	228,409	$	23,934	$	252,343


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
*As of December 31, 2017*
Financial Assets:
Limited partnership investments	$	23,184	$	—	$	—	$	23,184	$	23,184
Financial Liabilities:
Long-term debt:
3.875% Convertible senior notes	$	85,436	$	—	$	90,827	$	—	$	90,827
4.25% Convertible senior notes		126,454		—		124,444		—		124,444
3.95% Promissory note		9,270		—		—		9,227		9,227
4% Promissory note		8,206		—		—		7,894		7,894
3.75% Promissory note		8,469		—		—		7,820		7,820

Total long-term debt	$	237,835	$	—	$	215,271	$	24,941	$	240,212

Unadjusted quoted prices in active markets for identical assets or liabilities.

Other inputs that are observable for the asset, either directly or indirectly such as quoted prices for identical assets that are not observable throughout the full term of the asset.

Inputs that are unobservable.