XML 26 R13.htm IDEA: XBRL DOCUMENT

Fair Value

9 Months Ended

Sep. 30, 2021

Financial instruments carried at fair value

Our available-for-sale and equity securities are recorded at fair value, which is the price that would be received to sell the asset in an orderly transaction between willing market participants as of the measurement date.

Valuation techniques used to derive the fair value of our available-for-sale and equity securities are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources. Unobservable inputs reflect our own assumptions regarding fair market value for these securities. Financial instruments are categorized based upon the following characteristics or inputs to the valuation techniques:

•Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.

•Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

•Level 3 – Unobservable inputs for the asset or liability.

Estimates of fair values for our investment portfolio are obtained primarily from a nationally recognized pricing service. Our Level 1 securities are valued using an exchange traded price provided by the pricing service. Pricing service valuations for Level 2 securities include multiple verifiable, observable inputs including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data. Pricing service valuations for Level 3 securities are based upon proprietary models and are used when observable inputs are not available or in illiquid markets.

Although virtually all of our prices are obtained from third party sources, we also perform internal pricing reviews, including evaluating the methodology and inputs used to ensure that we determine the proper classification level of the financial instrument and reviewing securities with price changes that vary significantly from current market conditions or independent price sources. Price variances are investigated and corroborated by market data and transaction volumes. We have reviewed the pricing methodologies of our pricing service as well as other observable inputs and believe that the prices adequately consider market activity in determining fair value.

In limited circumstances we adjust the price received from the pricing service when, in our judgment, a better reflection of fair value is available based upon corroborating information and our knowledge and monitoring of market conditions such as a disparity in price of comparable securities and/or non-binding broker quotes. In other circumstances, certain securities are internally priced because prices are not provided by the pricing service.

When a price from the pricing service is not available, values are determined by obtaining broker/dealer quotes and/or market comparables. When available, we obtain multiple quotes for the same security. The ultimate value for these securities is determined based upon our best estimate of fair value using corroborating market information. As of September 30, 2021, nearly all of our available-for-sale and equity securities were priced using a third party pricing service.

The following tables present our fair value measurements on a recurring basis by asset class and level of input as of:



	September 30, 2021

(in thousands)	Total		Level 1		Level 2		Level 3

Available-for-sale securities:




Corporate debt securities	$	567,966	$	555	$	561,214	$	6,197
Collateralized debt obligations	114,004		0		114,004		0
Commercial mortgage-backed securities	96,827		0		87,133		9,694
Residential mortgage-backed securities	127,231		0		122,943		4,288
Other debt securities	25,727		0		25,273		454



U.S. Treasury	5,749		0		5,749		0
Total available-for-sale securities	937,504		555		916,316		20,633

Equity securities - nonredeemable preferred and common stock:


Financial services sector	70,432		4,850		63,476		2,106
Utilities sector	7,046		1,210		5,836		0
Energy sector	5,316		10		5,306		0
Consumer sector	2,218		0		2,218		0
Communications sector	1,013		0		1,013		0
Industrial sector	255		255		0		0
Total equity securities	86,280		6,325		77,849		2,106

Total	$	1,023,784	$	6,880	$	994,165	$	22,739



	December 31, 2020

(in thousands)	Total		Level 1		Level 2		Level 3

Available-for-sale securities:





Corporate debt securities	$	566,425	$	1,281	$	559,319	$	5,825
Collateralized debt obligations	110,447		0		110,447		0
Commercial mortgage-backed securities	120,201		0		100,739		19,462
Residential mortgage-backed securities	112,179		0		111,242		937
Other debt securities	18,984		0		18,984		0
Total available-for-sale securities	928,236		1,281		900,731		26,224
Equity securities - nonredeemable preferred and common stock:

Financial services sector	76,575		24,981		51,594		0
Utilities sector	8,742		3,957		4,785		0
Energy sector	2,206		676		1,530		0
Consumer sector	3,068		576		2,492		0
Communications sector	2,699		2,699		0		0
Industrial sector	800		800		0		0
Total equity securities	94,090		33,689		60,401		0






Total	$	1,022,326	$	34,970	$	961,132	$	26,224

We review the fair value hierarchy classifications each reporting period. Transfers between hierarchy levels may occur due to changes in available market observable inputs.

Level 3 Assets – 2021 Quarterly Change:



(in thousands)	Beginning balance at June 30, 2021		Included in earnings(1)		Included in other comprehensive income		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at September 30, 2021
Available-for-sale securities:
Corporate debt securities	$	6,078	$	7	$	3	$	1,995	$	(1,213)	$	1,129	$	(1,802)	$	6,197
Collateralized debt obligations	750		0		0		0		0		0		(750)		0
Commercial mortgage-backed securities	17,133		(90)		(143)		229		(2,912)		0		(4,523)		9,694
Residential mortgage-backed securities	3,041		(5)		(26)		0		(366)		4,288		(2,644)		4,288
Other debt securities	2,544		0		1		0		(757)		0		(1,334)		454
Total available-for-sale securities	29,546		(88)		(165)		2,224		(5,248)		5,417		(11,053)		20,633
Nonredeemable preferred stock	1,000		13		0		0		0		1,093		0		2,106
Total Level 3 securities	$	30,546	$	(75)	$	(165)	$	2,224	$	(5,248)	$	6,510	$	(11,053)	$	22,739

Level 3 Assets – 2021 Year-to-Date Change:


(in thousands)	Beginning balance at December 31, 2020		Included in earnings(1)		Included in other comprehensive income		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at September 30, 2021
Available-for-sale securities:
Corporate debt securities	$	5,825	$	27	$	82	$	4,253	$	(1,886)	$	3,678	$	(5,782)	$	6,197
Collateralized debt obligations	0		0		0		750		0		0		(750)		0
Commercial mortgage-backed securities	19,462		(287)		(590)		3,073		(3,878)		3,854		(11,940)		9,694
Residential mortgage-backed securities	937		(11)		(26)		0		(842)		7,318		(3,088)		4,288
Other debt securities	0		0		(1)		2,588		(799)		0		(1,334)		454
Total available-for-sale securities	26,224		(271)		(535)		10,664		(7,405)		14,850		(22,894)		20,633
Nonredeemable preferred stock	0		18		0		1,000		0		2,183		(1,095)		2,106
Total Level 3 securities	$	26,224	$	(253)	$	(535)	$	11,664	$	(7,405)	$	17,033	$	(23,989)	$	22,739

Level 3 Assets – 2020 Quarterly Change:




(in thousands)	Beginning balance at June 30, 2020		Included in earnings(1)		Included in other comprehensive income		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at September 30, 2020
Available-for-sale securities:
Corporate debt securities	$	4,916	$	4	$	157	$	2,258	$	(198)	$	1,644	$	(1,751)	$	7,030
Collateralized debt obligations	259		0		(9)		0		0		0		(250)		0
Commercial mortgage-backed securities	18,066		(47)		351		2,077		0		29,786		0		50,233
Residential mortgage-backed securities	0		0		0		287		0		10,559		0		10,846

Total available-for-sale securities	23,241		(43)		499		4,622		(198)		41,989		(2,001)		68,109
Nonredeemable preferred stock	795		194		0		2,016		0		0		0		3,005
Total Level 3 securities	$	24,036	$	151	$	499	$	6,638	$	(198)	$	41,989	$	(2,001)	$	71,114

Level 3 Assets – 2020 Year-to-Date Change:



(in thousands)	Beginning balance at December 31, 2019		Included in earnings(1)		Included in other comprehensive income		Purchases		Sales		Transfers into Level 3(2)		Transfers out of Level 3(2)		Ending balance at September 30, 2020
Available-for-sale securities:
Corporate debt securities	$	8,324	$	9	$	(354)	$	4,759	$	(740)	$	9,681	$	(14,649)	$	7,030
Collateralized debt obligations	0		0		3		247		0		0		(250)		0
Commercial mortgage-backed securities	3,321		(89)		471		9,281		(287)		38,677		(1,141)		50,233
Residential mortgage-backed securities	0		0		0		287		0		10,559		0		10,846

Total available-for-sale securities	11,645		(80)		120		14,574		(1,027)		58,917		(16,040)		68,109
Nonredeemable preferred stock	0		169		0		2,836		0		0		0		3,005
Total Level 3 securities	$	11,645	$	89	$	120	$	17,410	$	(1,027)	$	58,917	$	(16,040)	$	71,114

(1)These amounts are reported as net investment income and net realized investment gains (losses) for each of the periods presented above.

(2)Transfers into and/or (out) of Level 3 are primarily attributable to the availability of market observable information and the re-evaluation of the observability of pricing inputs.

Financial instruments not carried at fair value

The following table presents the carrying values and fair values of financial instruments categorized as Level 3 in the fair value hierarchy that are recorded at carrying value as of:



	September 30, 2021				December 31, 2020
(in thousands)	Carrying value		Fair value		Carrying value		Fair value

Agent loans (1)	$	67,789	$	69,805	$	69,212	$	73,854
Long-term borrowings (2)	94,589		103,283		96,113		113,054

(1)The discount rate used to calculate fair value at September 30, 2021 is reflective of a decrease in the BB+ financial yield curve.

(2)The discount rate used to calculate fair value at September 30, 2021 is reflective of an increase in U.S. Treasury bond yields.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details