• Filing Date: 2012-03-30
  • Form Type: 10-K
  • Description: Annual report
v2.4.0.6
Fair Value Measurements
12 Months Ended
Dec. 31, 2011
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 4 – Fair Value Measurements

Fair values of the Company's available-for-sale fixed maturity securities are determined in accordance with ASC Topic 820, Fair Value Measurements and Disclosure, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company's own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The fair values for fixed maturity securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets.

Level 2 – Other inputs that are observable for the asset, either directly or indirectly.

Level 3 – Inputs that are unobservable.

 

The following table presents information about the Company's available-for-sale securities measured at fair value as of December 31, 2011 and December 31, 2010, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

 

                                 
    

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

    

Significant
Other
Observable
Inputs
(Level 2)

    

Significant
Unobservable
Inputs

(Level 3)

    

Total

 

As of December 31, 2011

                                   

Fixed maturity securities

                                   

U.S. Treasury and U.S. government agencies

     $      556         --         --         556   

Corporate bonds

     9,840         --         --         9,840   

Commercial mortgage-backed securities

     --         10,874         --         10,874   

State, municipalities, and political subdivisions

     10,372         --         --         10,372   

Other

       2,735              265         --           3,000   

Total fixed maturity securities

     23,503         11,139         --         34,642   

Equity securities

       5,207                 --         --           5,207   

Total available-for-sale securities

     $28,710         11,139         --         39,849   

 

                                 
    

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

    

Significant
Other
Observable
Inputs
(Level 2)

    

Significant
Unobservable
Inputs

(Level 3)

    

Total

 

As of December 31, 2010

                                   

Fixed maturity securities

                                   

U.S. Treasury and U.S. government agencies

     $ 8,095         --         --         8,095   

Corporate bonds

     12,266         --         --         12,266   

Commercial mortgage-backed securities

     --         7,743         --         7,743   

Other

             --            460         --              460   

Total fixed maturity securities

     20,361         8,203         --         28,564   

Equity securities

          884               --         --              884   

Total available-for-sale securities

     $21,245         8,203         --         29,448   

With respect to the Company's business acquisitions completed in 2011 (see Note 5 – "Business Acquisitions"), all assets acquired and liabilities assumed were valued based on Level 3 measurements. Property, plant and equipment related to the April 2011 acquisition was valued based on an external appraisal using the sales comparison approach and other unobservable inputs. The environmental liability was valued based on third party estimates to complete the site assessment and remediation plan. The November 2011 acquisition was valued using the market approach and other unobservable inputs. The carrying amounts of all other assets and liabilities approximated their fair values at the acquisition date.

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2011 and 2010.