• Filing Date: 2017-02-22
  • Form Type: 10-K
  • Description: Annual report
v3.6.0.2
Fair Value Measurements
12 Months Ended
Dec. 31, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements

Note 7 — 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 assets, either directly or indirectly such as quoted prices for identical assets that are not observable throughout the full term of the asset.
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 represented 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 was included in real estate investments at its carrying value in the consolidated balance sheet as of December 31, 2015. Projected future cash inflows at maturity are discounted using a prevailing borrowing rate to estimate its fair value that relies on Level 3 inputs. This ADC Arrangement was terminated at the time the Company exercised the purchase option to acquire the related property in August 2016. This property was included in real estate investments at December 31, 2016.

Limited Partnership Investments

As described in Note 4 — “Investments” under Limited Partnership Investments, the Company has interests in limited partnerships which are private equity funds. Pursuant to U.S. GAAP, these funds are required to use fair value accounting; therefore, the estimated fair value approximates the carrying value of these funds.

Revolving Credit Facility

The interest rate on the Company’s revolving credit facility is periodically adjusted based on the LIBOR rate plus a spread. As a result, its carrying value approximates fair value. See Note 12 — “Revolving Credit Facility.”

 

Long-term debt

Long-term debt includes the Company’s 8% senior notes due 2020, 3.875% convertible senior notes due 2019, one promissory note due 2031 and one promissory note due in 2036. The 8% senior notes trade on the New York Stock Exchange. The estimated fair value of the 8% senior notes is based on the closing market price at each balance sheet date. The 3.875% convertible senior notes were sold in a private offering. The fair values of the 3.875% convertible senior notes and the promissory notes are 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, 2016 and 2015:

 

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

As of December 31, 2016

           

Financial Assets:

           

Cash and cash equivalents

   $ 280,531      $ —        $ —        $ 280,531  
  

 

 

    

 

 

    

 

 

    

 

 

 

Fixed-maturity securities:

           

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

     1,939        —          —          1,939  

Corporate bonds

     73,519        985        —          74,504  

State, municipalities, and political subdivisions

     —          78,306        —          78,306  

Exchange-traded debt

     11,262        —          —          11,262  

Redeemable preferred stock

     237        —          —          237  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity securities

     86,957        79,291        —          166,248  

Equity securities

     53,035        —          —          53,035  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

     139,992        79,291        —          219,283  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 420,523      $ 79,291      $ —        $ 499,814  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

As of December 31, 2015

           

Financial Assets:

           

Cash and cash equivalents

   $ 267,738      $ —        $ —        $ 267,738  
  

 

 

    

 

 

    

 

 

    

 

 

 

Fixed-maturity securities:

           

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

     113        —          —          113  

Corporate bonds

     36,836        983        —          37,819  

State, municipalities, and political subdivisions

     —          77,324        —          77,324  

Exchange-traded debt

     9,429        —          —          9,429  

Redeemable preferred stock

     324        —          —          324  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity securities

     46,702        78,307        —          125,009  

Equity securities

     48,237        —          —          48,237  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

     94,939        78,307        —          173,246  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 362,677      $ 78,307      $ —        $ 440,984  
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2016 and 2015.

 

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, 2016 and 2015:

 

     Carrying      Fair Value Measurements Using      Estimated  
     Value      (Level 1)      (Level 2)      (Level 3)      Fair Value  

As of December 31, 2016

              

Financial Assets:

              

Limited partnership investments

   $ 29,263       $ —         $ —         $ 29,263       $ 29,263   

Financial Liabilities:

              

Revolving credit facility

   $ 9,463       $ —         $ —         $ 9,463       $ 9,463   

Long-term debt:

              

8% Senior notes

   $ 39,448       $ —         $ 41,618       $ —         $ 41,618   

3.875% Convertible senior notes

     81,988         —           —           84,696         84,696   

4% Promissory note

     8,660         —           —           8,664         8,664   

3.75% Promissory note

     8,767         —           —           8,506         8,506   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 138,863       $ —         $ 41,618       $ 101,866       $ 143,484   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     Carrying      Fair Value Measurements Using      Estimated  
     Value      (Level 1)      (Level 2)      (Level 3)      Fair Value  

As of December 31, 2015

              

Financial Assets:

              

Limited partnership investments

   $ 23,930       $ —         $ —         $ 23,930       $ 23,930   

ADC Arrangement classified as real estate investment

   $ 10,200       $ —         $ —         $ 10,140       $ 10,140   

Financial Liabilities:

              

Long-term debt:

              

8% Senior notes

   $ 39,231       $ —         $ 41,103       $ —         $ 41,103   

3.875% Convertible senior notes

     90,198         —           —           92,782         92,782   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 129,429       $ —         $ 41,103       $ 92,782       $ 133,885