Fair Value Measurements

The following table presents the carrying amounts and estimated fair values of our financial instruments as of September 30, 2015 and December 31, 2014:



	September 30, 2015			December 31, 2014
($ in thousands)	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial Assets
Fixed income securities:
HTM	$	229,869	240,388	318,137	333,961
AFS	4,351,046		4,351,046	4,066,122	4,066,122
Equity securities, AFS	221,951		221,951	191,400	191,400
Short-term investments	125,855		125,855	131,972	131,972
Financial Liabilities
Notes payable:
0.63% borrowings from FHLBI	15,000		14,995	—	—
1.25% borrowings from FHLBI	45,000		45,277	45,000	45,244
7.25% Senior Notes	49,898		57,929	49,896	59,181
6.70% Senior Notes	99,411		112,387	99,401	114,845
5.875% Senior Notes	185,000		187,960	185,000	185,000
Total notes payable	$	394,309	418,548	379,297	404,270

The fair values of our financial assets and liabilities are generated using various valuation techniques and are placed into the fair value hierarchy considering the following: (i) the highest priority is given to quoted prices in active markets for identical assets (Level 1); (ii) the next highest priority is given to quoted prices in markets that are not active or inputs that are observable either directly or indirectly, including quoted prices for similar assets in markets that are not active and other inputs that can be derived principally from, or corroborated by, observable market data for substantially the full term of the assets (Level 2); and (iii) the lowest priority is given to unobservable inputs supported by little or no market activity and that reflect our assumptions about the exit price, including assumptions that market participants would use in pricing the asset (Level 3). An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. Transfers between levels in the fair value hierarchy are recognized at the end of the reporting period.

For a discussion of the techniques used to value our financial assets and liabilities, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2014 Annual Report.

The following tables provide quantitative disclosures of our financial assets that were measured at fair value at September 30, 2015 and December 31, 2014:



September 30, 2015			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 9/30/2015		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)¹	Significant Other Observable Inputs (Level 2)¹	Significant Unobservable Inputs (Level 3)
Description
Measured on a recurring basis:
AFS fixed income securities:
U.S. government and government agencies	$	115,130	51,963	63,167	—
Foreign government	19,687		—	19,687	—
Obligations of states and political subdivisions	1,338,195		—	1,338,195	—
Corporate securities	1,886,174		—	1,886,174	—
ABS	256,923		—	256,923	—
CMBS	222,002		—	222,002	—
RMBS	512,935		—	512,935	—
Total AFS fixed income securities	4,351,046		51,963	4,299,083	—
AFS equity securities:
Common stock	210,197		207,412	—	2,785
Preferred stock	11,754		11,754	—	—
Total AFS equity securities	221,951		219,166	—	2,785
Total AFS securities	4,572,997		271,129	4,299,083	2,785
Short-term investments	125,855		125,855	—	—
Total assets measured at fair value	$	4,698,852	396,984	4,299,083	2,785


¹	There were no transfers of securities between Level 1 and Level 2.



December 31, 2014			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value at 12/31/14		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)¹	Significant Other Observable Inputs (Level 2)¹	Significant Unobservable Inputs (Level 3)
Description
Measured on a recurring basis:
AFS fixed income securities:
U.S. government and government agencies	$	124,130	53,199	70,931	—
Foreign government	27,831		—	27,831	—
Obligations of states and political subdivisions	1,246,264		—	1,246,264	—
Corporate securities	1,799,806		—	1,799,806	—
ABS	177,224		—	177,224	—
CMBS	179,593		—	179,593	—
RMBS	511,274		—	511,274	—
Total AFS fixed income securities	4,066,122		53,199	4,012,923	—
AFS equity securities:
Common stock	191,400		188,500	—	2,900
Total AFS equity securities	191,400		188,500	—	2,900
Total AFS securities	4,257,522		241,699	4,012,923	2,900
Short-term investments	131,972		131,972	—	—
Total assets measured at fair value	$	4,389,494	373,671	4,012,923	2,900


¹	There were no transfers of securities between Level 1 and Level 2.

The following table provides a summary of the changes in the fair value of securities measured using Level 3 inputs and related

quantitative information for the nine-month period ended September 30, 2015.



September 30, 2015	Common Stock
($ in thousands)	Common Stock
Fair value, December 31, 2014	$	2,900
Total net (losses) gains for the period included in:
OCI	—
Net income	—
Purchases	—
Sales	(115		)
Issuances	—
Settlements	—
Transfers into Level 3	—
Transfers out of Level 3	—
Fair value, September 30, 2015	$	2,785

The $2.9 million in fair value of securities measured using Level 3 prices remained unchanged during the full year 2014. The price for these securities, which were measured using Level 3 inputs at September 30, 2015 and December 31, 2014, was obtained through statements provided by the issuer, which we review for reasonableness.

The following tables provide quantitative information regarding our financial assets and liabilities that were disclosed at fair value at September 30, 2015 and December 31, 2014:



September 30, 2015			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 9/30/2015		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets
HTM:
Obligations of states and political subdivisions	$	213,974	—	213,974	—
Corporate securities	20,373		—	20,373	—
ABS	1,210		—	1,210	—
CMBS	4,831		—	4,831	—
Total HTM fixed income securities	$	240,388	—	240,388	—
Financial Liabilities
Notes payable:
0.63% borrowings from FHLBI	$	14,995	—	14,995	—
1.25% borrowings from FHLBI	45,277		—	45,277	—
7.25% Senior Notes	57,929		—	57,929	—
6.70% Senior Notes	112,387		—	112,387	—
5.875% Senior Notes	187,960		187,960	—	—
Total notes payable	$	418,548	187,960	230,588	—



December 31, 2014			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value at 12/31/2014		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets
HTM:
Foreign government	$	5,394	—	5,394	—
Obligations of states and political subdivisions	299,132		—	299,132	—
Corporate securities	21,422		—	21,422	—
ABS	2,823		—	2,823	—
CMBS	5,190		—	5,190	—
Total HTM fixed income securities	$	333,961	—	333,961	—
Financial Liabilities
Notes payable:
1.25% borrowings from FHLBI	$	45,244	—	45,244	—
7.25% Senior Notes	59,181		—	59,181	—
6.70% Senior Notes	114,845		—	114,845	—
5.875% Senior Notes	185,000		185,000	—	—
Total notes payable	$	404,270	185,000	219,270	—