NOTE 5. 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 equities 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 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, 2018 and December 31, 2017:

	September 30, 2018
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed Maturities:
U.S. Treasury Bonds, Agency Bonds and Foreign Government Bonds	$	45,093	$	200,192	$	—	$	245,285
States, Municipalities and Political Subdivisions		—		631,514		—		631,514
Mortgage-Backed and Asset-Backed Securities:
Agency Residential Mortgage-Backed Securities		—		344,016		—		344,016
Residential Mortgage Obligations		—		124,191		—		124,191
Asset-Backed Securities		—		540,566		—		540,566
Commercial Mortgage-Backed Securities		—		186,251		—		186,251
Subtotal	$	—	$	1,195,024	$	—	$	1,195,024
Corporate Exposures		—		917,650		—		917,650
Total Fixed Maturities	$	45,093	$	2,944,380	$	—	$	2,989,473
Equity Securities:
Common Stocks	$	40,416	$	150,306	$	—	$	190,722
Preferred Stocks		—		180,958		—		180,958
Total Equity Securities	$	40,416	$	331,264	$	—	$	371,680
Short-Term Investments		—		7,264		—		7,264
Total Assets Measured at Fair Value	$	85,509	$	3,282,908	$	—	$	3,368,417
Senior Notes	$	—	$	274,348	$	—	$	274,348
Total Liabilities Measured at Fair Value	$	—	$	274,348	$	—	$	274,348

	December 31, 2017
amounts in thousands	Level 1		Level 2		Level 3		Total
Fixed Maturities:
U.S. Treasury Bonds, Agency Bonds and Foreign Government Bonds	$	178,251	$	215,312	$	—	$	393,563
States, Municipalities and Political Subdivisions		—		814,632		—		814,632
Mortgage-Backed and Asset-Backed Securities:
Agency Residential Mortgage-Backed Securities		—		407,619		—		407,619
Residential Mortgage Obligations		—		54,104		—		54,104
Asset-Backed Securities		—		328,753		—		328,753
Commercial Mortgage-Backed Securities		—		160,904		—		160,904
Subtotal	$	—	$	951,380	$	—	$	951,380
Corporate Exposures		—		897,479		—		897,479
Total Fixed Maturities	$	178,251	$	2,878,803	$	—	$	3,057,054
Equity Securities:
Common Stocks	$	52,439	$	—	$	—	$	52,439
Preferred Stocks		—		183,542		—		183,542
Total Equity Securities	$	52,439	$	183,542	$	—	$	235,981
Short-Term Investments		6,480		—		—		6,480
Total Assets Measured at Fair Value	$	237,170	$	3,062,345	$	—	$	3,299,515
Senior Notes	$	—	$	277,951	$	—	$	277,951
Total Liabilities Measured at Fair Value	$	—	$	277,951	$	—	$	277,951

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 has overseas deposits in Other Invested Assets of $40.7 million and $28.8 million at September 30, 2018 and December 2017, respectively, which is measured at fair value using the net asset value (“NAV”) as a practical expedient.

Our Company did not have any transfers between Level 1 and Level 2 classifications for the three and nine months ended September 30, 2018 and 2017.

As of September 30, 2018, our Company did not have any Level 3 assets.