NOTE 4. FAIR VALUE OF FINANCIAL INSTRUMENTS

For the Company’s investments in U.S. government securities that do not have prices in active markets, agency securities, state and municipal government securities, and corporate bonds, the Company obtains the fair values from its custodian, which uses a third-party valuation service, and we evaluate the relevant inputs, assumptions, methodologies and conclusions associated with such valuations. The valuation service calculates prices for the Company’s investments in the aforementioned security types on a month-end basis by using several matrix-pricing methodologies that incorporate inputs from various sources. The model the valuation service uses to price U.S. government securities and securities of states and municipalities incorporates inputs from active market makers and inter-dealer brokers. To price corporate bonds and agency securities, the valuation service calculates non-call yield spreads on all issuers, uses option-adjusted yield spreads to account for any early redemption features, then adds final spreads to the U.S. Treasury curve as of quarter end. The inputs the valuation service uses in its calculations are not quoted prices in active markets, but are observable inputs, and therefore represent Level 2 inputs.

The following tables present information about the Company’s assets measured at fair value on a recurring basis. The Company assesses the levels for the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the Company’s accounting policy regarding the recognitions of transfers between levels of the fair value hierarchy. For the nine months ended September 30, 2015 and the year ended and December 31, 2014, there were no transfers in or out of Level 1, 2, and 3.


*September 30, 2015*	*Total*		*Level 1*		*Level 2*		*Level 3*
	(In thousands)
Fixed maturities investments:
U.S. government and agency securities	$	23,928	$	20,099	$	3,829	$	—
States, municipalities and political subdivisions		54,296		—		54,296		—
Special revenue		170,208		—		170,208		—
Industrial and miscellaneous		116,534		—		116,534		—
Redeemable preferred stocks		15,344		15,344		—		—

Total fixed maturities investments	$	380,310	$	35,443	$	344,867	$	—

Nonredeemable preferred stocks	$	350	$	350	$	—	$	—
Equity securities		15,028		15,028		—		—

Total equity securities	$	15,378	$	15,378	$	—	$	—

Total investments	$	395,688	$	50,281	$	344,867	$	—


*December 31, 2014*	*Total*		*Level 1*		*Level 2*		*Level 3*
	(In thousands)
Fixed maturities investments:
U.S. government and agency securities	$	7,008	$	3,211	$	3,797	$	—
States, municipalities and political subdivisions		42,120		—		42,120		—
Special revenue		134,381		—		134,381		—
Industrial and miscellaneous		106,005		—		106,005		—
Redeemable preferred stocks		3,571		3,571		—		—

Total fixed maturities investments	$	293,085	$	6,782	$	286,303	$	—

Nonredeemable preferred stocks	$	11,678	$	11,678	$	—	$	—
Equity securities		19,547		19,547		—		—

Total equity securities	$	31,225	$	31,225	$	—	$	—

Total investments	$	324,310	$	38,007	$	286,303	$	—

The Company acquired a 55% participation in a commercial real estate mortgage loan for $6.1 million in 2013. The underlying $11.5 million loan was originated by unaffiliated lenders, and collateralized by commercial real estate located in Polk County, Florida. The Company records an asset in the amount of its pro rata share of the outstanding principal and carries the investment at amortized cost. The Company receives monthly principal and interest payments and recognizes income when collectible. During the three months ended September 30, 2015, the Company sold its participation in exchange for cash of $6.8 million.