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Fair Value Measurement
 9 Months Ended
Sep. 30, 2023
Financial Instruments, Financial Assets, Balance Sheet Groupings [Abstract]  
Fair Value Measurement Fair Value Measurements
The Company employs a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date using the exit price. Accordingly, when market observable data are not readily available, the Company’s own assumptions are used to reflect those that market participants would be presumed to use in pricing the asset or liability at the measurement date.

Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the level of judgment associated with inputs used to measure their fair values and the level of market price observability, as follows:

Level 1Unadjusted quoted prices are available in active markets for identical assets or liabilities as of the reporting date.
Level 2
Pricing inputs are other than quoted prices in active markets, which are based on the following:
 
•     Quoted prices for similar assets or liabilities in active markets;
 
•     Quoted prices for identical or similar assets or liabilities in non-active markets; or
 
•     Either directly or indirectly observable inputs as of the reporting date.
Level 3Pricing inputs are unobservable and significant to the overall fair value measurement, and the determination of fair value requires significant management judgment or estimation.

In certain cases, inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Level 1 or Level 2) and unobservable (Level 3). The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset or liability.

The Company uses prices and inputs that are current as of the measurement date, including during periods of market disruption. In periods of market disruption, the ability to observe prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified from Level 1 to Level 2, or from Level 2 to Level 3. The Company recognizes transfers between levels at either the actual date of the event or a change in circumstances that caused the transfer.

Summary of Significant Valuation Techniques for Financial Assets and Financial Liabilities
The Company’s fair value measurements are based on the market approach, which utilizes market transaction data for the same or similar instruments. The Company obtained unadjusted fair values on 98.2% of its investment portfolio at fair value from an independent pricing service at September 30, 2023.
Level 1 measurements - Fair values of financial assets and financial liabilities are obtained from an independent pricing service, and are based on unadjusted quoted prices for identical assets or liabilities in active markets. Additional pricing services and closing exchange values are used as a comparison to ensure that reasonable fair values are used in pricing the investment portfolio.
U.S. government bonds and agencies /Short-term bonds: Valued using unadjusted quoted market prices for identical assets in active markets.
Common stock: Comprised of actively traded, exchange listed U.S. and international equity securities and valued based on unadjusted quoted prices for identical assets in active markets.
Money market instruments: Valued based on unadjusted quoted prices for identical assets in active markets.
Options sold: Comprised of free-standing exchange listed derivatives that are actively traded and valued based on unadjusted quoted prices for identical instruments in active markets.
Level 2 measurements - Fair values of financial assets and financial liabilities are obtained from an independent pricing service or outside brokers, and are based on prices for similar assets or liabilities in active markets or valuation models whose inputs are observable, directly or indirectly, for substantially the full term of the asset or liability. Additional pricing services are used as a comparison to ensure reliable fair values are used in pricing the investment portfolio.
Municipal securities: Valued based on models or matrices using inputs such as quoted prices for identical or similar assets in active markets.
Mortgage-backed securities: Comprised of securities that are collateralized by residential and commercial mortgage loans valued based on models or matrices using multiple observable inputs, such as benchmark yields, reported trades and broker/dealer quotes, for identical or similar assets in active markets. The Company had holdings of $25.5 million and $27.3 million at fair value in commercial mortgage-backed securities at September 30, 2023 and December 31, 2022, respectively.

Corporate securities/Short-term bonds: Valued based on a multi-dimensional model using multiple observable inputs, such as benchmark yields, reported trades, broker/dealer quotes and issue spreads, for identical or similar assets in active markets.
Non-redeemable preferred stock: Valued based on observable inputs, such as underlying and common stock of same issuer and appropriate spread over a comparable U.S. Treasury security, for identical or similar assets in active markets.
Collateralized loan obligations ("CLOs"): Valued based on underlying debt instruments and the appropriate benchmark spread for similar assets in active markets.
Other asset-backed securities: Comprised of securities that are collateralized by non-mortgage assets, such as automobile loans, valued based on models or matrices using multiple observable inputs, such as benchmark yields, reported trades and broker/dealer quotes, for identical or similar assets in active markets.
Note receivable: Valued based on observable inputs, such as benchmark yields, and considering any premium or discount for the differential between the stated interest rate and market interest rates, based on quoted market prices of similar instruments.
Level 3 measurements - Fair values of financial assets and financial liabilities are based on inputs that are both unobservable and significant to the overall fair value measurement, including any items in which the evaluated prices obtained elsewhere are deemed to be of a distressed trading level. At September 30, 2023 and December 31, 2022, the Company did not have any financial assets or financial liabilities based on Level 3 measurements.
Fair value measurement using NAV practical expedient - The fair value of the Company's investment in private equity funds measured at net asset value ("NAV") is determined using NAV as advised by the external fund managers and the third party administrators. The NAV of the Company's limited partnership or limited liability company interest in such a fund is based on the manager's and the administrator's valuation of the underlying holdings in accordance with the fund's governing documents and GAAP. In accordance with applicable accounting guidance, private equity funds measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy. At September 30, 2023, the Company had capital invested in five such funds: the strategy of three such funds with a combined fair value of approximately $89.2 million at September 30, 2023 is to provide current income to investors by investing mainly in secured loans, CLOs or CLO issuers, and equity interests in vehicles established to purchase and warehouse loans; the strategy of another such fund with a fair value of approximately $0 at September 30, 2023 is to achieve favorable long-term financial returns and measurable positive social and environmental returns by investing in privately held technology, healthcare, specialty consumer goods and service companies; and the strategy
of the other such fund with a fair value of approximately $1.7 million at September 30, 2023 is to achieve long-term capital appreciation through privately-negotiated venture capital investments in seed- and early-stage portfolio companies with technology-enabled business models. The Company had approximately $8 million in unfunded commitments at September 30, 2023 with respect to the private equity funds measured at NAV. The underlying assets of the funds are expected to be liquidated over the period of approximately one year to nine years from September 30, 2023. In addition, the Company does not have the ability to redeem or withdraw from the funds, or to sell, assign, pledge or transfer its investment, without the consent from the General Partner or Managers of each fund, but will receive distributions based on the liquidation of the underlying assets and the interest proceeds from the underlying assets.
The Company’s financial instruments at fair value are reflected in the consolidated balance sheets on a trade-date basis. Related unrealized gains or losses are recognized in net realized investment gains or losses in the consolidated statements of operations. Fair value measurements are not adjusted for transaction costs.

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis, and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair values:

 September 30, 2023
 Level 1Level 2Level 3Total
 (Amounts in thousands)
Assets
Fixed maturity securities:
U.S. government bonds and agencies$118,528 $42,657 $— $161,185 
Municipal securities— 2,645,979 — 2,645,979 
Mortgage-backed securities — 175,965 — 175,965 
Corporate securities— 590,545 — 590,545 
Collateralized loan obligations— 436,217 — 436,217 
Other asset-backed securities— 104,766 — 104,766 
Total fixed maturity securities118,528 3,996,129 — 4,114,657 
Equity securities:
Common stock530,267 — — 530,267 
Non-redeemable preferred stock— 49,865 — 49,865 
Private equity funds measured at net asset value (1)
90,861 
Total equity securities530,267 49,865 — 670,993 
Short-term investments:
Short-term bonds29,848 4,488 — 34,336 
Money market instruments177,397 — — 177,397 
Other45 — — 45 
Total short-term investments207,290 4,488 — 211,778 
Other assets:
Note receivable
— 9,888 — 9,888 
Total assets at fair value$856,085 $4,060,370 $— $5,007,316 
Liabilities
Other liabilities:
Options sold$512 $— $— $512 
Total liabilities at fair value$512 $— $— $512 
 December 31, 2022
 Level 1Level 2Level 3Total
 (Amounts in thousands)
Assets
Fixed maturity securities:
U.S. government bonds $103,519 $55,088 $— $158,607 
Municipal securities— 2,737,183 — 2,737,183 
Mortgage-backed securities — 166,260 — 166,260 
Corporate securities— 569,553 — 569,553 
Collateralized loan obligations— 320,252 — 320,252 
Other asset-backed securities— 136,456 — 136,456 
Total fixed maturity securities103,519 3,984,792 — 4,088,311 
Equity securities:
Common stock558,169 —— 558,169 
Non-redeemable preferred stock— 51,236 — 51,236 
Private equity funds measured at net asset value (1)
90,147 
Total equity securities558,169 51,236 — 699,552 
Short-term investments:
Short-term bonds51,638 8,238 — 59,876 
Money market instruments63,021 — — 63,021 
Other40 — — 40 
Total short-term investments114,699 8,238 — 122,937 
Total assets at fair value$776,387 $4,044,266 $— $4,910,800 
Liabilities
Other liabilities:
Options sold$162 $— $— $162 
Total liabilities at fair value$162 $— $— $162 
__________ 
(1) The fair value is measured using the NAV practical expedient; therefore, it is not categorized within the fair value hierarchy. The fair value amount is presented in this table to permit reconciliation of the fair value hierarchy to the amounts presented in the Company's consolidated balance sheets.

There were no transfers between Levels 1, 2, and 3 of the fair value hierarchy during the nine months ended September 30, 2023 and 2022.

At September 30, 2023, there were no material assets or liabilities measured at fair value on a nonrecurring basis.
Financial Instruments Disclosed, But Not Carried, at Fair Value
The following tables present the carrying value and fair value of the Company’s financial instruments disclosed, but not carried, at fair value, and the level within the fair value hierarchy at which such instruments are categorized:
 September 30, 2023
 Carrying ValueFair ValueLevel 1Level 2Level 3
 (Amounts in thousands)
Liabilities
Notes payable:
Unsecured notes$373,629 $349,556 $— $349,556 $— 
Unsecured credit facility200,000 199,983 — 199,983 — 
Total$573,629 $549,539 $— $549,539 $— 
 December 31, 2022
 Carrying ValueFair ValueLevel 1Level 2Level 3
 (Amounts in thousands)
Liabilities
Notes payable:
Unsecured notes$373,330 $350,644 $— $350,644 $— 
Unsecured credit facility25,000 24,987 — 24,987 — 
Total$398,330 $375,631 $— $375,631 $— 

Unsecured Notes
The fair value of the Company’s publicly traded $375 million unsecured notes at September 30, 2023 and December 31, 2022 was based on the spreads above the risk-free yield curve. These spreads are generally obtained from the new issue market, secondary trading and broker-dealer quotes. See Note 11. Notes Payable for additional information on unsecured notes.

Unsecured Credit Facility
The fair values of the Company's $200 million and $25 million drawn under the unsecured credit facility at September 30, 2023 and December 31, 2022, respectively, are based on the unadjusted quoted price for similar notes in active markets. See Note 11. Notes Payable for additional information on the unsecured credit facility.