• Filing Date: 2015-03-10
  • Form Type: 10-K
  • Description: Annual report
v2.4.1.9
Fair Value Measurements
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 5 — Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair value. 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.

Valuation Methodology

Cash and cash equivalents

Cash and cash equivalents primarily consist of money-market funds. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

 

Available-for-sale securities

Estimated fair values of the Company’s available-for-sale securities are determined in accordance with U.S. GAAP, 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 estimated fair values for 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.

ADC Arrangement Classified as Real Estate Investment

As described in Note 4 — “Investments” under ADC Arrangement, the ADC Arrangement represents a financing agreement with a purchase option between Greenleaf Capital and a property developer. Based on the characteristics of this ADC Arrangement which are similar to those of an investment, combined with the expected residual profit being greater than 50%, the arrangement is included in real estate investments at its carrying value in the balance sheet. Projected future cash inflows at maturity are discounted using a prevailing borrowing rate to estimate its fair value that relies on Level 3 inputs.

Limited Partnership Investment

As described in Note 4 — “Investments” under Limited Partnership Investment, the Company entered into a subscription agreement to invest up to a maximum of $12,500 for a 16.5% limited partnership interest. The initial contribution was made in December 2014. Valuation of the Company’s limited partnership interest will be based upon the net asset value provided by the fund manager. The net asset value will be on a three- to six-month lag and was not available as of December 31, 2014 as the partnership was newly formed during the quarter ended December 31, 2014.

 

Long-term debt

Long-term debt includes the Company’s 8% senior notes due 2020 and 3.875% convertible senior notes due 2019. The 8% senior notes were initially sold to the public in January 2013 and trade on the New York Stock Exchange. The estimated fair value of the 8% senior notes is based on the closing market price on December 31, 2014. The 3.875% convertible senior notes were sold in a private offering completed on December 30, 2013. The fair value of the 3.875% convertible senior notes is estimated using a discounted cash flow method that relies on Level 3 inputs.

Assets Measured at Estimated Fair Value on a Recurring Basis:

The following tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of December 31, 2014 and 2013:

 

     Fair Value Measurements Using         
     (Level 1)      (Level 2)      (Level 3)      Total  

As of December 31, 2014

           

Financial Assets:

           

Cash and cash equivalents

   $ 314,716       $ —         $ —         $ 314,716   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fixed-maturity securities:

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

  1,069      2,679      —        3,748   

Corporate bonds

  22,274      1,695      —        23,969   

Mortgage-backed securities

  —        2,139      —        2,139   

State, municipalities, and political subdivisions

  —        57,503      —        57,503   

Redeemable preferred stock

  9,557      —        —        9,557   

Other

  —        168      —        168   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity securities

  32,900      64,184      —        97,084   

Equity securities

  45,550      —        —        45,550   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

  78,450      64,184      —        142,634   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 393,166    $ 64,184    $ —      $ 457,350   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements Using         
     (Level 1)      (Level 2)      (Level 3)      Total  

As of December 31, 2013

           

Financial Assets:

           

Cash and cash equivalents

   $ 293,398       $ —         $ —         $ 293,398   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fixed-maturity securities:

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

  3,520      1,044      —        4,564   

Corporate bonds

  24,476      928      —        25,404   

Mortgage-backed securities

  —        11,332      —        11,332   

State, municipalities, and political subdivisions

  —        70,451      —        70,451   

Redeemable preferred stock

  400      —        —        400   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity securities

  28,396      83,755      —        112,151   

Equity securities

  17,649      —        —        17,649   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

  46,045      83,755      —        129,800   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

$ 339,443    $ 83,755    $ —      $ 423,198   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

There were no transfers between Level 1, 2 or 3 during the year ended December 31, 2014. During the second quarter of 2013, the Company analyzed its investment portfolio and determined the municipal bonds, which were previously classified as Level 1, should be classified as Level 2 based on the inputs used to measure fair value and the level of market activity in those instruments. As such, transfers into Level 2 from Level 1 were $10,684 during the year ended December 31, 2013.

Assets and Liabilities Carried at Other Than Fair Value

The following tables present fair value information for assets and liabilities that are carried on the balance sheet at amounts other than fair value as of December 31, 2014 and 2013:

 

     Fair Value Measurements Using         
     (Level 1)      (Level 2)      (Level 3)      Total  

As of December 31, 2014

           

Financial Assets:

           

ADC Arrangement classified as real estate investment

   $ —         $ —         $ 2,835       $ 2,835   

Financial Liabilities:

           

Long-term debt:

           

8% Senior notes

   $ —         $ 42,955       $ —         $ 42,955   

3.875% Convertible senior notes

     —           —           93,367         93,367   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

$ —      $ 42,955    $ 93,367    $ 136,322   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurements Using         
     (Level 1)      (Level 2)      (Level 3)      Total  

As of December 31, 2013

           

Financial Liabilities:

           

Long-term debt:

           

8% Senior notes

   $ —         $ 43,390       $ —         $ 43,390   

3.875% Convertible senior notes

     —           —           86,630         86,630   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

$ —      $ 43,390    $ 86,630    $ 130,020