Note 4.

Fair Value Measurement

The fair value of our financial instruments is determined based on the following fair value hierarchy:

Level 1 – Quoted prices for identical instruments in active markets. Examples are listed equity and fixed income securities traded on an exchange. U.S. Treasury securities are reported as Level 1 and are valued based on unadjusted quoted prices for identical assets in active markets that our Company can access.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Examples are asset-backed and mortgage-backed securities that are similar to other asset-backed or mortgage-backed securities observed in the market. U.S. government agency securities are reported as Level 2 and are valued using yields and spreads that are observable in active markets.

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. An example would be a private placement with minimal liquidity.

The following tables present, for each of the fair value hierarchy levels as defined by the accounting guidance for fair value measurements and described below, our Company’s fixed maturities and equity securities by asset class that are measured at fair value on a recurring basis, as well as the fair value of the 5.75% Senior notes due October 15, 2023 (the “Senior notes”) carried at amortized cost as of June 30, 2015 and December 31, 2014:


	As of June 30, 2015
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	80,425	$	215,262	$	—	$	295,687
States, municipalities and political subdivisions		—		565,188		—		565,188
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		343,916		—		343,916
Residential mortgage obligations		—		32,396		—		32,396
Asset-backed securities		—		195,512		—		195,512
Commercial mortgage-backed securities		—		216,185		—		216,185

Subtotal	$	—	$	788,009	$	—	$	788,009
Corporate bonds		—		665,053		—		665,053

Total fixed maturities	$	80,425	$	2,233,512	$	—	$	2,313,937
Equity securities		122,650		72,428		—		195,078
Short-term investments		201,748		—		—		201,748

Total assets measured at fair value	$	404,823	$	2,305,940	$	—	$	2,710,763


Senior notes	$	—	$	282,502	$	—	$	282,502

Total liabilities measured at fair value	$	—	$	282,502	$	—	$	282,502


	As of December 31, 2014
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	146,904	$	251,019	$	—	$	397,923
States, municipalities and political subdivisions		—		541,007		—		541,007
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		364,622		—		364,622
Residential mortgage obligations		—		34,087		—		34,087
Asset-backed securities		—		206,413		—		206,413
Commercial mortgage-backed securities		—		206,318		—		206,318

Subtotal	$	—	$	811,440	$	—	$	811,440
Corporate bonds		—		615,564		—		615,564

Total fixed maturities	$	146,904	$	2,219,030	$	—	$	2,365,934
Equity securities		127,183		57,112		—		184,295
Short-term investments		179,506		—		—		179,506

Total assets measured at fair value	$	453,593	$	2,276,142	$	—	$	2,729,735


Senior notes	$	—	$	285,710	$	—	$	285,710

Total liabilities measured at fair value	$	—	$	285,710	$	—	$	285,710

All other financial assets and liabilities including Cash, Premium receivable, Reinsurance recoverable and Reinsurance balances payable are carried at cost, which approximates fair value.

Our Company did not have any significant transfers between the Level 1 and Level 2 classifications for the three and six months ended June 30, 2015 and 2014.

As of June 30, 2015, our Company did not have any Level 3 assets. During 2014, one security was transferred from Level 3 to Level 2 as our Company was able to obtain a valuation in which all significant inputs to the model are observable in active markets.