Fair Value of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Summary of Company's fair value hierarchy measured at recurring basis

The following table presents the Company's fair value hierarchy for those assets and liabilities measured and carried at fair value on a recurring basis. At December 31, 2018, Level 3 investments comprised approximately 3.0% of the Company's total investment portfolio at fair value.



($ in thousands)	Carrying		Fair		Fair Value Measurements at Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
December 31, 2018
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	787,441	$	787,441	$	—	$	784,224	$	3,217
Other, including U.S. Treasury securities	833,542		833,542		13,291		820,251		—
Municipal bonds	2,003,969		2,003,969		—		1,956,438		47,531
Foreign government bonds	84,904		84,904		—		84,904		—
Corporate bonds	2,079,510		2,079,510		12,281		1,986,487		80,742
Other mortgage-backed securities	1,725,952		1,725,952		—		1,608,958		116,994
Total fixed maturity securities	7,515,318		7,515,318		25,572		7,241,262		248,484
Equity securities	111,750		111,750		64,330		47,415		5
Short-term investments	122,222		122,222		117,296		4,926		—
Other investments	16,147		16,147		—		16,147		—
Totals	$	7,765,437	$	7,765,437	$	207,198	$	7,309,750	$	248,489
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	248	$	248	$	—	$	248	$	—
Other policyholder funds, embedded derivatives	$	78,700	$	78,700	$	—	$	—	$	78,700

December 31, 2017
Financial Assets
Investments
Fixed maturity securities
U.S. Government and federally sponsored agency obligations:
Mortgage-backed securities	$	696,725	$	696,725	$	—	$	693,375	$	3,350
Other, including U.S. Treasury securities	735,408		735,408		13,393		722,015		—
Municipal bonds	1,893,253		1,893,253		—		1,843,925		49,328
Foreign government bonds	102,738		102,738		—		102,738		—
Corporate bonds	2,578,954		2,578,954		14,345		2,491,630		72,979
Other mortgage-backed securities	1,716,997		1,716,997		—		1,612,403		104,594
Total fixed maturity securities	7,724,075		7,724,075		27,738		7,466,086		230,251
Equity securities	135,466		135,466		82,208		53,252		6
Short-term investments	62,593		62,593		62,593		—		—
Other investments	28,050		28,050		—		28,050		—
Totals	$	7,950,184	$	7,950,184	$	172,539	$	7,547,388	$	230,257
Financial Liabilities
Investment contract and life policy reserves, embedded derivatives	$	594	$	594	$	—	$	594	$	—
Other policyholder funds, embedded derivatives	$	80,733	$	80,733	$	—	$	—	$	80,733

Table for reconciliations for all Level 3 assets measured at fair value on a recurring basis

The following tables present reconciliations for the periods indicated for all Level 3 assets and liabilities measured at fair value on a recurring basis.



($ in thousands)	Financial Assets																					Financial Liabilities⁽¹⁾
	Municipal Bonds			Corporate Bonds			Other Mortgage- Backed Securities ⁽²⁾			Total Fixed Maturity Securities			Equity Securities			Short-term Investments			Total

Beginning balance, January 1, 2018	$	49,328		$	72,979		$	107,944		$	230,251		$	6		$	—		$	230,257		$	80,733
Transfers into Level 3 ⁽³⁾	—			40,488			50,771			91,259			—			—			91,259			—
Transfers out of Level 3 ⁽³⁾	—			(11,279		)	(5,200		)	(16,479		)	—			—			(16,479		)	—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			(487		)	—			(487		)	3			—			(484		)	—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—			—			—			(7,518		)
Net unrealized investment gains (losses) included in OCI	(1,195		)	(2,840		)	(5,570		)	(9,605		)	—			—			(9,605		)	—
Purchases	—			—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			—			11,183
Sales	—			(6,135		)	(187		)	(6,322		)	(4		)	—			(6,326		)	—
Settlements	—			—			—			—			—			—			—			—
Paydowns, maturities and distributions	(602		)	(11,984		)	(27,547		)	(40,133		)	—			—			(40,133		)	(5,698		)
Ending balance, December 31, 2018	$	47,531		$	80,742		$	120,211		$	248,484		$	5		$	—		$	248,489		$	78,700

Beginning balance, January 1, 2017	$	46,497		$	60,191		$	104,659		$	211,347		$	6		$	751		$	212,104		$	59,393
Transfers into Level 3 ⁽³⁾	5,214			38,483			43,091			86,788			—			—			86,788			—
Transfers out of Level 3 ⁽³⁾	(5,557		)	(16,252		)	(6,542		)	(28,351		)	—			(751		)	(29,102		)	—
Total gains or losses
Net investment gains (losses) included in net income related to financial assets	—			(1		)	(1,832		)	(1,833		)	—			—			(1,833		)	—
Net realized (gains) losses included in net income related to financial liabilities	—			—			—			—			—			—			—			12,942
Net unrealized investment gains (losses) included in OCI	3,977			661			2,075			6,713			—			—			6,713			—
Purchases	—			—			—			—			—			—			—			—
Issuances	—			—			—			—			—			—			—			12,605
Sales	—			(1,999		)	(9,179		)	(11,178		)	—			—			(11,178		)	—
Settlements	—			—			—			—			—			—			—			—
Paydowns, maturities and distributions	(803		)	(8,104		)	(24,328		)	(33,235		)	—			—			(33,235		)	(4,207		)
Ending balance, December 31, 2017	$	49,328		$	72,979		$	107,944		$	230,251		$	6		$	—		$	230,257		$	80,733

____________________


⁽¹⁾	Represents embedded derivatives, all related to the Company's FIA products, reported in Other policyholder funds in the Company's Consolidated Balance Sheets.


⁽²⁾	Includes U.S. Government and federally sponsored agency obligations for mortgage-backed securities and other mortgage-backed securities.

⁽³⁾

Transfers into and out of Level 3 during the years ended December 31, 2018 and 2017 were attributable to changes in the availability of observable market information for individual fixed maturity securities and short-term investments. The Company's policy is to recognize transfers into and transfers out of the levels as having occurred at the end of the reporting period in which the transfers were determined.

Summary of fair value assets and liabilities measured on nonrecurring basis

The following table presents the carrying value, fair value and fair value hierarchy of these financial assets and financial liabilities.



($ in thousands)	Carrying		Fair		Fair Value Measurements at Reporting Date Using
	Amount		Value		Level 1		Level 2		Level 3
December 31, 2018
Financial Assets
Investments
Other investments	$	156,725	$	161,449	$	—	$	—	$	161,449
Financial Liabilities
Investment contract and life policy reserves, fixed annuity contracts	4,555,849		4,478,338		—		—		4,478,338
Investment contract and life policy reserves, account values on life contracts	87,229		90,402		—		—		90,402
Other policyholder funds	689,287		689,287		—		626,325		62,962
Long-term debt	297,740		291,938		—		291,938		—

December 31, 2017
Financial Assets
Investments
Other investments	$	154,898	$	159,575	$	—	$	—	$	159,575
Financial Liabilities
Investment contract and life policy reserves, fixed annuity contracts	4,452,972		4,366,334		—		—		4,366,334
Investment contract and life policy reserves, account values on life contracts	82,911		88,620		—		—		88,620
Other policyholder funds	643,528		643,528		—		575,622		67,906
Long-term debt	297,469		311,315		—		311,315		—