Note 15. Fair Value Measurements

Fair values of cash equivalents approximate carrying value due to the short period of time to maturity. Fair values of short term investments, investments available-for-sale, long term investments, mortgage loans and notes on real estate, and interest rate swap contracts are based on quoted market prices, dealer quotes or discounted cash flows. Fair values of trade receivables approximate their recorded value.

Our financial instruments that are exposed to concentrations of credit risk consist primarily of temporary cash investments, trade receivables, reinsurance recoverables and notes receivable. Limited credit risk exists on trade receivables due to the diversity of our customer base and their dispersion across broad geographic markets. We place our temporary cash investments with financial institutions and limit the amount of credit exposure to any one financial institution.

We have mortgage receivables, which potentially expose us to credit risk. The portfolio of notes is principally collateralized by self-storage facilities and commercial properties. We have not experienced any material losses related to the notes from individual or groups of notes in any particular industry or geographic area. The estimated fair values were determined using the discounted cash flow method and using interest rates currently offered for similar loans to borrowers with similar credit ratings.

The carrying amount of long term debt and short term borrowings are estimated to approximate fair value as the actual interest rate is consistent with the rate estimated to be currently available for debt of similar term and remaining maturity.

Other investments including short term investments are substantially current or bear reasonable interest rates. As a result, the carrying values of these financial instruments approximate fair value.

Assets and liabilities are recorded at fair value on the condensed consolidated balance sheets and are measured and classified based upon a three tiered approach to valuation. ASC 820 - Fair Value Measurements and Disclosures (“ASC 820”) requires that financial assets and liabilities recorded at fair value be classified and disclosed in one of the following three categories:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices for identical or similar financial instruments in markets that are not considered to be active, or similar financial instruments for which all significant inputs are observable, either directly or indirectly, or inputs other than quoted prices that are observable, or inputs that are derived principally from or corroborated by observable market data through correlation or other means; and

Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and are unobservable. These reflect management’s assumptions about the assumptions a market participant would use in pricing the asset or liability.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The following tables represent the financial assets and liabilities on the condensed consolidated balance sheet at March 31, 2015 and 2014, that are subject to ASC 820 and the valuation approach applied to each of these items.

Year Ended March 31, 2015		Total		Level 1		Level 2		Level 3
		(In thousands)
Assets
Short-term investments	$	460,762	$	460,762	$	–	$	–
Fixed maturities - available for sale		1,262,012		967,986		293,022		1,004
Preferred stock		18,296		18,296		–		–
Common stock		24,654		24,654		–		–
Derivatives		4,876		4,876		–		–
Total	$	1,770,600	$	1,476,574	$	293,022	$	1,004


Liabilities
Guaranteed residual values of TRAC leases	$	–	$	–	$	–	$	–
Derivatives		24,484		–		24,484		–
Total	$	24,484	$	–	$	24,484	$	–

In light of our definition of an active market at the end of the fourth quarter of fiscal 2015, we reclassified $28.9 million of fixed maturities – available for sale from Level 1 to Level 2 due to a review of their trading activity.

Year Ended March 31, 2014		Total		Level 1		Level 2		Level 3
		(In thousands)
Assets
Short-term investments	$	457,723	$	457,723	$	–	$	–
Fixed maturities - available for sale		1,099,467		898,209		200,154		1,104
Preferred stock		17,533		17,533		–		–
Common stock		21,275		21,275		–		–
Derivatives		3,868		3,868		–		–
Total	$	1,599,866	$	1,398,608	$	200,154	$	1,104


Liabilities
Guaranteed residual values of TRAC leases	$	–	$	–	$	–	$	–
Derivatives		32,716		–		32,716		–
Total	$	32,716	$	–	$	32,716	$	–

In light of our definition of an active market at the end of the fourth quarter of fiscal 2014, we reclassified $95.4 million of fixed maturities – available for sale from Level 1 to Level 2 due to a review of their trading activity.

The following tables represent the fair value measurements for our assets at March 31, 2015 using significant unobservable inputs (Level 3).

		Fixed Maturities - Asset Backed Securities
		(In thousands)
Balance at March 31, 2014	$	1,104

Fixed Maturities - Asset Backed Securities - redeemed		(75)
Fixed Maturities - Asset Backed Securities - net gain (realized)		26
Fixed Maturities - Asset Backed Securities - net loss (unrealized)		(51)
Balance at March 31, 2015	$	1,004