Note 5 - Fair Value of Financial Instruments Level 1 (Notes)

12 Months Ended

Dec. 31, 2019

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

Fair Value of Financial Instruments

The following is a list of assets that are measured at fair value by hierarchy level as of December 31, 2019:

(In thousands)	Level I		Level II		Total
Assets at fair value
Investments:
Fixed-maturities available for sale:
U.S. government and agency securities	$	143,884	$	35,700	$	179,584
State and municipal obligations	—		119,994		119,994
Corporate bonds and notes	—		2,237,611		2,237,611
RMBS	—		779,354		779,354
CMBS	—		608,015		608,015
Other ABS	—		759,129		759,129
Foreign government and agency securities	—		5,224		5,224
Total fixed-maturities available for sale	143,884		4,545,027		4,688,911
Trading securities:
State and municipal obligations	—		118,949		118,949
Corporate bonds and notes	—		147,232		147,232
RMBS	—		16,180		16,180
CMBS	—		34,789		34,789
Total trading securities	—		317,150		317,150
Equity securities	124,009		6,212		130,221
Short-term investments:
U.S. government and agency securities	127,152		—		127,152
State and municipal obligations	—		21,475		21,475
Money market instruments	202,461		—		202,461
Corporate bonds and notes	—		20,298		20,298
Other investments (1)	—		147,007		147,007
Total short-term investments	329,613		188,780		518,393
Total investments at fair value (2)	597,506		5,057,169		5,654,675
Other assets:
Loaned securities: (3)
U.S. government and agency securities	35,309		—		35,309
Corporate bonds and notes	—		3,669		3,669
Equity securities	27,464		—		27,464
Total assets at fair value (2)	$	660,279	$	5,060,838	$	5,721,117

______________________

(1) Comprising short-term certificates of deposit and commercial paper.

(2) Does not include other invested assets of $2.6 million that are primarily invested in limited partnership investments valued using the net asset value as a practical expedient and $1.5 million invested in a private convertible promissory note.

(3) Securities loaned to third-party borrowers under securities lending agreements are classified as other assets in our consolidated balance sheets. See Note 6 for more information.

The following is a list of assets that are measured at fair value by hierarchy level as of December 31, 2018:

(In thousands)	Level I		Level II		Total
Assets at fair value
Investments:
Fixed-maturities available for sale:
U.S. government and agency securities	$	55,658	$	28,412	$	84,070
State and municipal obligations	—		138,313		138,313
Corporate bonds and notes	—		2,222,473		2,222,473
RMBS	—		332,142		332,142
CMBS	—		539,915		539,915
Other ABS	—		704,662		704,662
Total fixed-maturities available for sale	55,658		3,965,917		4,021,575
Trading securities:
State and municipal obligations	—		168,359		168,359
Corporate bonds and notes	—		228,152		228,152
RMBS	—		21,082		21,082
CMBS	—		51,478		51,478
Total trading securities	—		469,071		469,071
Equity securities	126,607		3,958		130,565
Short-term investments:
U.S. government and agency securities	133,657		—		133,657
State and municipal obligations	—		18,070		18,070
Money market instruments	95,132		—		95,132
Corporate bonds and notes	—		105,625		105,625
Other ABS	—		806		806
Other investments (1)	—		175,113		175,113
Total short-term investments	228,789		299,614		528,403
Total investments at fair value (2)	411,054		4,738,560		5,149,614
Other assets:
Loaned securities: (3)
U.S. government and agency securities	9,987		—		9,987
Corporate bonds and notes	—		7,818		7,818
Equity securities	10,055		—		10,055
Total assets at fair value (2)	$	431,096	$	4,746,378	$	5,177,474

______________________

(1) Comprising short-term certificates of deposit and commercial paper.

(2) Does not include other invested assets of $3.4 million that are primarily invested in limited partnerships valued using the net asset value as a practical expedient.

(3) Securities loaned to third-party borrowers under securities lending agreements are classified as other assets in our consolidated balance sheets. See Note 6 for more information.

At December 31, 2019 and 2018, there were no material Level III assets measured at fair value, and no Level III liabilities. There were no investment transfers to or from Level III for the years ended December 31, 2019 and 2018. Activity

related to Level III assets and liabilities (including realized and unrealized gains and losses, purchases, sales, issuances, settlements and transfers) was immaterial for the years ended December 31, 2019 and 2018.

Valuation Methodologies for Assets Measured at Fair Value

The following are descriptions of our valuation methodologies for financial assets measured at fair value.

We are responsible for the determination of the value of all investments carried at fair value and the supporting methodologies and assumptions. To assist us in this responsibility, we utilize independent third-party valuation service providers to gather, analyze and interpret market information and estimate fair values based upon relevant methodologies and assumptions for various asset classes and individual securities. We perform monthly quantitative and qualitative analyses on the prices received from third parties to determine whether the prices are reasonable estimates of fair value. Our analysis includes: (i) a review of the methodology used by third-party pricing services; (ii) a comparison of pricing services’ valuations to other independent sources; (iii) a review of month-to-month price fluctuations; and (iv) a comparison of actual purchase and sale transactions with valuations received from third parties. These processes are designed to ensure that our investment values are accurately recorded, that the data inputs and valuation techniques utilized are appropriate and consistently applied and that the assumptions are reasonable and consistent with the objective of determining fair value.

U.S. Government and Agency Securities. The fair value of U.S. government and agency securities is estimated using observed market transactions, including broker-dealer quotes and actual trade activity as a basis for valuation. U.S. government and agency securities are categorized in either Level I or Level II of the fair value hierarchy.

State and Municipal Obligations. The fair value of state and municipal obligations is estimated using recent transaction activity, including market observations. Valuation models are used, which incorporate bond structure, yield curve, credit spreads and other factors. These securities are generally categorized in Level II of the fair value hierarchy or in Level III when market-based transaction activity is unavailable.

Money Market Instruments. The fair value of money market instruments is based on daily prices, which are published and available to all potential investors and market participants. As such, these securities are categorized in Level I of the fair value hierarchy.

Corporate Bonds and Notes. The fair value of corporate bonds and notes is estimated using recent transaction activity, including market observations. Spread models are used that incorporate issuer and structure characteristics, such as credit risk and early redemption features, where applicable. These securities are generally categorized in Level II of the fair value hierarchy or in Level III when market-based transaction activity is unavailable.

RMBS, CMBS, and Other ABS. The fair value of these instruments is estimated based on prices of comparable securities and spreads and observable prepayment speeds. These securities are generally categorized in Level II of the fair value hierarchy or in Level III when market-based transaction activity is unavailable. The fair value of any Level III securities is generally estimated by discounting estimated future cash flows.

Foreign Government and Agency Securities. The fair value of foreign government and agency securities is estimated using observed market yields used to create a maturity curve and observed credit spreads from market makers and broker-dealers. These securities are categorized in Level II of the fair value hierarchy.

Equity Securities. The fair value of these securities is generally estimated using observable market data in active markets or bid prices from market makers and broker-dealers. Generally, these securities are categorized in Level I or II of the fair value hierarchy, as observable market data are readily available. From time to time, certain equity securities may be categorized in Level III of the fair value hierarchy due to a lack of market-based transaction data or the use of model-based valuations.

Other Investments. These securities primarily consist of commercial paper and short-term certificates of deposit, which are categorized in Level II of the fair value hierarchy. The fair value of these investments is estimated using market data for comparable instruments of similar maturity and average yield.

Other Fair Value Disclosure

The carrying value and estimated fair value of other selected liabilities not carried at fair value in our consolidated balance sheets were as follows as of the dates indicated:

	December 31, 2019				December 31, 2018
(In thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Liabilities:
Senior notes	$	887,110	$	949,500	$	1,030,348	$	1,007,687
FHLB advances	134,875		135,997		82,532		82,899

The fair value of our senior notes is estimated based on the quoted market prices. The fair value of our FHLB advances is estimated based on expected cash flows for similar borrowings. These liabilities are categorized in Level II of the fair value hierarchy. See Note 12 for further information.