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Disclosures About Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2020
Disclosures About Fair Value of Financial Instruments [Abstract]  
Disclosures About Fair Value of Financial Instruments

Note 3.
Disclosures About Fair Value of Financial Instruments

The estimated fair values have been determined by the Company using available market information from various market sources and appropriate valuation methodologies as of the respective dates. However, considerable judgment is necessary to interpret market data and to develop the estimates of fair value. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, the estimates presented herein are not necessarily indicative of the amounts which the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.


Level 1
Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using Level 1 criteria include cash equivalents and exchange traded common stocks.


Level 2
Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include significantly most of its fixed maturities, which consist of U.S. Treasury securities, U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturities, as well as its non-redeemable preferred stocks. In determining fair value measurements of its fixed maturities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources, including nationally recognized pricing services and broker/dealers. Prices for the majority of the Company’s Level 2 fixed maturities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.


Level 3
Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. The Company’s financial instruments valued using Level 3 criteria consist of one fixed maturity security and one equity security.  As of December 31, 2020 and December 31, 2019, the value of the fixed maturity valued using Level 3 criteria was $0 for both years. As of December 31, 2020 and December 31, 2019, the value of the equity security valued using Level 3 criteria was $143 and $0, respectively.   The equity security is not traded and valued at cost. The use of different criteria or assumptions regarding data may have yielded materially different valuations.

Recurring Fair Value Measurements

Cash Equivalents. The carrying amount approximates fair value due to the short-term nature of the instruments.

Fixed Maturities and Common and Non-Redeemable Preferred Stocks. The carrying amount is determined from publicly quoted market prices. Certain fixed maturities do not have publicly quoted values and consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies. They are not actively traded and valuation techniques used to measure fair value are based on future estimated cash flows discounted at reasonable estimated rates of interest. Other qualitative and quantitative information is also considered, as applicable.

Nonrecurring Fair Value Measurements

Non-publicly Traded Invested Assets. The fair value of investments in certain limited partnerships which are included in other invested assets on the consolidated balance sheet were determined by officers of those limited partnerships.

Policy Loans. Policy loans, which are categorized as Level 2 fair value measurements, are carried at the unpaid principal balances.

Junior Subordinated Debentures. The fair value is estimated based on observable interest rates and yields for debt instruments having similar characteristics.

As of December 31, 2020, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Assets:
 
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
  
Significant
Other Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total
 
Fixed maturities
 
$
  
$
254,106
  
$
  
$
254,106
 
Equity securities
  
18,573
   
   
143
   
18,716
 
Cash equivalents
  
12,010
   
   
   
12,010
 
Total
 
$
30,583
  
$
254,106
  
$
143
  
$
284,832
 

As of December 31, 2019, financial instruments carried at fair value were measured on a recurring basis as summarized below:

Assets:
 
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
  
Significant
Other Observable
Inputs
(Level 2)
  
Significant
Unobservable
Inputs
(Level 3)
  
Total
 
Fixed maturities
 
$
  
$
232,472
  
$
  
$
232,472
 
Equity securities
  
22,922
   
   
   
22,922
 
Cash equivalents
  
7,173
   
   
   
7,173
 
Total
 
$
30,095
  
$
232,472
  
$
  
$
262,567
 

The Company does not have any fixed maturities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of years ended December 31, 2020 and 2019.

The following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of December 31, 2020 and 2019.

  
Level in
  
2020
  
2019
 
  
Fair Value
Hierarchy(1)
  
Carrying
Amount
  
Estimated
Fair Value
  
Carrying
Amount
  
Estimated
Fair Value
 
Assets:
               
Cash and cash equivalents
 
Level 1
  
$
19,319
  
$
19,319
  
$
12,893
  
$
12,893
 
Fixed maturities
   
(1) 
  
254,106
   
254,106
   
232,472
   
232,472
 
Equity securities
   
(1) 
  
18,716
   
18,716
   
22,922
   
22,922
 
Other invested assets
 
Level 3
   
3,238
   
3,238
   
9,960
   
9,960
 
Policy loans
 
Level 2
   
1,975
   
1,975
   
2,007
   
2,007
 
Investments in unconsolidated trusts
 
Level 2
   
1,238
   
1,238
   
1,238
   
1,238
 
                     
Liabilities:
                    
Junior Subordinated Debentures, net
 
Level 2
   
33,738
   
32,297
   
33,738
   
35,977
 

(1)
See the aforementioned information for a description of the fair value hierarchy as well as a disclosure of levels for classes of these financial assets.