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Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2018
Company's Invested Assets and Derivative Instruments Measured at Fair Value on Recurring Basis

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

 

As of June 30, 2018    Fair Value Measurements  
(Dollars in thousands)    Level 1      Level 2      Level 3      Total  

Assets:

           

Fixed maturities:

           

U.S. treasury and agency obligations

   $ 92,725      $ —        $ —        $ 92,725  

Obligations of states and political subdivisions

     —          102,191        —          102,191  

Mortgage-backed securities

     —          181,897        —          181,897  

Commercial mortgage-backed securities

     —          153,609        —          153,609  

Asset-backed securities

     —          208,054        —          208,054  

Corporate bonds

     —          425,753        —          425,753  

Foreign corporate bonds

     —          119,641        —          119,641  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

     92,725        1,191,145        —          1,283,870  

Common stock

     137,789        —          —          137,789  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets measured at fair value (1)

   $ 230,514      $ 1,191,145      $ —        $ 1,421,659  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative instruments

   $ —        $ 1,201      $ —        $ 1,201  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities measured at fair value

   $ —        $ 1,201      $ —        $ 1,201  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Excluded from the table above are limited partnerships of $83.5 million at June 30, 2018 whose fair value is based on net asset value as a practical expedient.

As of December 31, 2017    Fair Value Measurements  
(Dollars in thousands)    Level 1      Level 2      Level 3      Total  

Assets:

           

Fixed maturities:

           

U.S. treasury and agency obligations

   $ 104,680      $ —        $ —        $ 104,680  

Obligations of states and political subdivisions

     —          95,114        —          95,114  

Mortgage-backed securities

     —          149,350        —          149,350  

Commercial mortgage-backed securities

     —          139,795        —          139,795  

Asset-backed securities

     —          203,701        —          203,701  

Corporate bonds

     —          423,390        —          423,390  

Foreign corporate bonds

     —          125,407        —          125,407  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

     104,680        1,136,757        —          1,241,437  

Common stock

     140,229        —          —          140,229  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets measured at fair value (1)

   $ 244,909      $ 1,136,757      $ —        $ 1,381,666  
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Derivative instruments

   $ —        $ 7,968      $ —        $ 7,968  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities measured at fair value

   $ —        $ 7,968      $ —        $ 7,968  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

Excluded from the table above are limited partnerships of $77.8 million at December 31, 2017 whose fair value is based on net asset value as a practical expedient.

Current Fair Value of Debt

For the Company’s material debt arrangements, the current fair value of the Company’s debt at June 30, 2018 and December 31, 2017 was as follows:

 

     June 30, 2018      December 31, 2017  
(Dollars in thousands)    Carrying Value      Fair Value      Carrying Value      Fair Value  

Margin Borrowing Facility

   $ 64,709      $ 64,709      $ 72,230      $ 72,230  

7.75% Subordinated Notes due 2045 (1)

     96,680        99,320        96,619        100,059  

7.875% Subordinated Notes due 2047 (2)

     125,935        129,782        125,864        130,429  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 287,324      $ 293,811      $ 294,713      $ 302,718  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

As of June 30, 2018 and December 31, 2017, the carrying value and fair value of the 7.75% Subordinated Notes due 2045 are net of unamortized debt issuance cost of $3.3 million.

(2)

As of June 30, 2018 and December 31, 2017, the carrying value and fair value of the 7.875% Subordinated Notes due 2047 are net of unamortized debt issuance cost of $4.1 million.

Fair Value and Future Funding Commitments Related to These Investments

The following table provides the fair value and future funding commitments related to these investments at June 30, 2018 and December 31, 2017.

 

     June 30, 2018      December 31, 2017  
(Dollars in thousands)    Fair Value      Future Funding
Commitment
     Fair Value      Future Funding
Commitment
 

Real Estate Fund, LP (1)

   $ —        $ —        $ —        $ —    

European Non-Performing Loan Fund, LP (2)

     20,069        14,214        26,262        14,214  

Private Middle Market Loan Fund, LP (3)

     37,244        5,200        33,760        10,000  

Distressed Debt Fund, LP (4)

     26,186        25,750        17,798        33,500  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 83,499      $ 45,164      $ 77,820      $ 57,714  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

This limited partnership invests in real estate assets through a combination of direct or indirect investments in partnerships, limited liability companies, mortgage loans, and lines of credit. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company continues to hold an investment in this limited partnership and has written the fair value down to zero.

(2)

This limited partnership invests in distressed securities and assets through senior and subordinated, secured and unsecured debt and equity, in both public and private large-cap and middle-market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. Based on the terms of the partnership agreement, the Company anticipates its interest in this partnership to be redeemed by 2020.

(3)

This limited partnership provides financing for middle market companies. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. Based on the terms of the investment management agreement, the Company anticipates its interest to be redeemed no later than 2024.

(4)

This limited partnership invests in stressed and distressed securities and structured products. The Company does not have the ability to sell or transfer its limited partnership interest without consent from the general partner. The Company does not have the contractual option to redeem its limited partnership interest but receives distributions based on the liquidation of the underlying assets. Based on the terms of the partnership agreement, the Company anticipates its interest to be redeemed no later than 2027.