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.

Other invested assets are measured at net asset value as a practical expedient for fair value.

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 September 30, 2016 and December 31, 2015:

	September 30, 2016
amounts in thousands	Level 1		Level 2		Level 3		Fair Value based on net asset value		Total
Fixed maturities:
U.S. Treasury bonds, agency bonds and foreign government bonds	$	55,159	$	206,871	$	—	$	—	$	262,030
States, municipalities and political subdivisions		—		580,324		—		—		580,324
Mortgage-backed and asset-backed securities:
Agency mortgage-backed securities		—		526,069		—		—		526,069
Residential mortgage obligations		—		27,055		—		—		27,055
Asset-backed securities		—		288,636		—		—		288,636
Commercial mortgage-backed securities		—		165,405		—		—		165,405
Subtotal	$	—	$	1,007,165	$	—	$	—	$	1,007,165
Corporate bonds		—		810,898		—		—		810,898
Total fixed maturities	$	55,159	$	2,605,258	$	—	$	—	$	2,660,417
Equity securities		158,963		183,714		—				342,677
Other invested assets		—		—		—		2,021		2,021
Short-term investments		134,273		—		—		—		134,273
Total assets measured at fair value	$	348,395	$	2,788,972	$	—	$	2,021	$	3,139,388
Senior notes	$	—	$	294,080	$	—	$	—	$	294,080
Total liabilities measured at fair value	$	—	$	294,080	$	—	$	—	$	294,080

	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 nine months ended September 30, 2016 and 2015.

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