• Filing Date: 2018-03-07
  • Form Type: 10-K
  • Description: Annual report
v3.8.0.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2017
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 and certificates of deposit. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

Available-for-sale and trading securities

Estimated fair values of the Company’s available-for-sale and trading 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, which are level 2 inputs. 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.

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 was periodically adjusted based on the London Interbank Offered Rate plus a spread. As a result, its carrying value at December 31, 2016 approximated fair value. In February 2017, this credit facility was converted into a 3.95% three-year promissory note. See Note 13 — “Long-Term Debt” under 3.95% Promissory Note.

 

Long-term debt

The following table summarizes components of the Company’s long-term debt and methods used in estimating their fair values:

 

     Maturity
Date
   Valuation Methodology

8% Senior Notes

   *    Closing price listed on the New York Stock Exchange

3.875% Convertible Senior Notes

   2019    Quoted price at January 3, 2018; Discounted cash flow method/Level 3 inputs at December 31, 2016

4.25% Convertible Senior Notes

   2037    Quoted price

3.95% Promissory Note

   2020    Discounted cash flow method/Level 3 inputs

4% Promissory Note

   2031    Discounted cash flow method/Level 3 inputs

3.75% Promissory Note

   2036    Discounted cash flow method/Level 3 inputs

 

* Redeemed on April 3, 2017.

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, 2017 and 2016:

 

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

As of December 31, 2017

           

Financial Assets:

           

Cash and cash equivalents

   $ 255,884      $ —        $ —        $ 255,884  
  

 

 

    

 

 

    

 

 

    

 

 

 

Fixed-maturity securities:

           

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

     40,527        1,500        —          42,027  

Corporate bonds

     106,109        994        —          107,103  

State, municipalities, and political subdivisions

     —          80,695        —          80,695  

Exchange-traded debt

     7,659        —          —          7,659  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity securities

     154,295        83,189        —          237,484  

Equity securities

     58,911        —          —          58,911  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

     213,206        83,189        —          296,395  
  

 

 

    

 

 

    

 

 

    

 

 

 

Trading equity securities

     1,045        —          —          1,045  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 470,135      $ 83,189      $ —        $ 553,324  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     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  
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2017 and 2016.

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, 2017 and 2016:

 

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

As of December 31, 2017

              

Financial Assets:

              

Limited partnership investments

   $ 23,184      $ —        $ —        $ 23,184      $ 23,184  

Financial Liabilities:

              

Long-term debt:

              

3.875% Convertible senior notes

   $ 85,436      $ —        $ 90,827      $ —        $ 90,827  

4.25% Convertible senior notes

     126,454        —          124,444        —          124,444  

3.95% Promissory note

     9,270        —          —          7,894        7,894  

4% Promissory note

     8,206        —          —          7,820        7,820  

3.75% Promissory note

     8,469        —          —          9,227        9,227  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 237,835      $ —        $ 215,271      $ 24,941      $ 240,212  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     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