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 above, 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, 2016 and December 31, 2015:

	June 30, 2016
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	136,923	$	216,656	$	—	$	353,579
States, municipalities and political subdivisions		—		553,824		—		553,824
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		504,731		—		504,731
Residential mortgage obligations		—		28,258		—		28,258
Asset-backed securities		—		262,903		—		262,903
Commercial mortgage-backed securities		—		172,579		—		172,579
Subtotal	$	—	$	968,471	$	—	$	968,471
Corporate bonds		—		756,439		—		756,439
Total fixed maturities	$	136,923	$	2,495,390	$	—	$	2,632,313
Equity securities		154,551		175,084		—		329,635
Short-term investments		144,843		—		—		144,843
Total assets measured at fair value	$	436,317	$	2,670,474	$	—	$	3,106,791
Senior notes	$	—	$	288,738	$	—	$	288,738
Total liabilities measured at fair value	$	—	$	288,738	$	—	$	288,738

	December 31, 2015
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	67,394	$	185,488	$	—	$	252,882
States, municipalities and political subdivisions		—		576,859		—		576,859
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		379,269		—		379,269
Residential mortgage obligations		—		30,465		—		30,465
Asset-backed securities		—		225,012		—		225,012
Commercial mortgage-backed securities		—		189,713		—		189,713
Subtotal	$	—	$	824,459	$	—	$	824,459
Corporate bonds		—		760,010		—		760,010
Total fixed maturities	$	67,394	$	2,346,816	$	—	$	2,414,210
Equity securities		126,455		178,816		—		305,271
Short-term investments		217,745		—		—		217,745
Total assets measured at fair value	$	411,594	$	2,525,632	$	—	$	2,937,226
Senior notes	$	—	$	282,486	$	—	$	282,486
Total liabilities measured at fair value	$	—	$	282,486	$	—	$	282,486

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 Level 1 and Level 2 classifications for the three and six months ended June 30, 2016 and 2015.

As of June 30, 2016, our Company did not have any Level 3 assets.