| Disclosures About Fair Value of Financial Instruments |
Note 3. Disclosures About Fair Value of Financial Instruments
The estimated fair values have been determined by the Company using available market information from various market sources and appropriate valuation methodologies as of the respective dates.
However, considerable judgment is necessary to interpret market data and to develop the estimates of fair value. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, the estimates
presented herein are not necessarily indicative of the amounts which the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated
fair value amounts.
The following describes the fair value hierarchy and provides information as to the extent to which the Company uses fair value to measure the value of its financial instruments and information
about the inputs used to value those financial instruments. The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three broad levels.
| |
Level 1 |
Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. The Company’s financial instruments valued using Level 1
criteria include cash equivalents and exchange traded common stocks.
|
| |
Level 2 |
Observable inputs, other than quoted prices included in Level 1, for an asset or liability or prices for similar assets or liabilities. The Company’s financial instruments valued using Level 2 criteria include significantly most of
its fixed maturity securities, which consist of U.S. Treasury securities, U.S. Government securities, obligations of states and political subdivisions, and certain corporate fixed maturity securities, as well as its non-redeemable
preferred stocks. In determining fair value measurements of its fixed maturity securities and non-redeemable preferred stocks using Level 2 criteria, the Company utilizes data from outside sources, including nationally recognized
pricing services and broker/dealers. Prices for the majority of the Company’s Level 2 fixed maturity securities and non-redeemable preferred stocks were determined using unadjusted prices received from pricing services that utilize
models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities) or can be corroborated by observable market data.
|
| | Level 3 | Valuations that are derived from techniques in which one or more of the significant inputs are unobservable (including assumptions about risk). Fair value is based on criteria that use assumptions or other data that are not readily observable from objective sources. With little or no observable market, the determination of fair values uses considerable judgment and represents the Company’s best estimate of an amount that could be realized in a market exchange for the asset or liability. The Company’s financial instruments valued using Level 3 criteria consist of one equity security. As of December 31, 2025 and December 31, 2024, the value of the equity security valued using Level 3 criteria was $193 and $189, respectively. The equity security is not traded and is valued at cost. The use of different criteria or assumptions regarding data may have yielded materially different valuations. Other policy liabilities consisting of annuities of $4,783 and $4,938 were also included in level 3 valuations. |
Recurring Fair Value Measurements
Cash Equivalents. The carrying amount approximates fair value due to the short-term nature of the instruments.
Fixed Maturity Securities and Common and Non-Redeemable Preferred Stocks. The carrying amount is determined
from publicly quoted market prices. Certain fixed maturity securities do not have publicly quoted values and consist solely of issuances of pooled debt obligations of multiple, smaller financial services companies. They are not actively traded
and valuation techniques used to measure fair value are based on future estimated cash flows discounted at reasonable estimated rates of interest. Other qualitative and quantitative information is also considered, as applicable.
Nonrecurring Fair Value Measurements
Non-publicly Traded Invested Assets. The fair value of investments in certain limited partnerships which are
included in other invested assets on the consolidated balance sheet were determined by officers of those limited partnerships.
Policy Loans. Policy loans, which are categorized as Level 3 fair value measurements, are carried at the unpaid principal balances. Annuities. Annuities, which are categorized as Level 3 fair value measurements, are carried at the present value of future annuity payments. Junior Subordinated Debentures. The fair value is estimated based on observable interest rates and yields for
debt instruments having similar characteristics.
As of December 31, 2025, financial instruments carried at fair value were measured on a recurring basis as summarized below:
| |
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
$
|
- |
|
|
$
|
244,111 |
|
|
$
|
- |
|
|
$
|
244,111 |
|
|
Equity securities
|
|
|
12,202 |
|
|
|
- |
|
|
|
193 |
|
|
|
12,395 |
|
|
Cash equivalents
|
|
|
16,941 |
|
|
|
994 |
|
|
|
- |
|
|
|
17,935 |
|
|
Total
|
|
$
|
29,143 |
|
|
$
|
245,105 |
|
|
$
|
193 |
|
|
$
|
274,441 |
|
As of December 31, 2024, financial instruments carried at fair value were measured on a recurring basis as summarized below:
| |
|
Quoted Prices in
Active Markets
for Identical Assets
(Level 1)
|
|
|
Significant
Other Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed maturity securities
|
|
$
|
- |
|
|
$
|
212,612 |
|
|
$
|
- |
|
|
$
|
212,612 |
|
|
Equity securities
|
|
|
7,711 |
|
|
|
- |
|
|
|
189 |
|
|
|
7,900 |
|
|
Cash equivalents
|
|
|
14,948 |
|
|
|
- |
|
|
|
- |
|
|
|
14,948 |
|
|
Total
|
|
$
|
22,659 |
|
|
$
|
212,612 |
|
|
$
|
189 |
|
|
$
|
235,460 |
|
The following table sets forth the carrying amount, estimated fair value and level within the fair value hierarchy of the Company’s financial instruments as of December 31, 2025 and 2024:
|
|
Level in
Fair Value
Hierarchy(1)
|
|
|
2025
|
|
|
2024
|
|
| |
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Amount
|
|
|
Estimated
Fair Value
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
(1)
|
|
|
$
|
43,636 |
|
|
$
|
43,636 |
|
|
$
|
35,570 |
|
|
$
|
35,570 |
|
|
Fixed maturity securities
|
|
Level 2
|
|
|
|
244,111 |
|
|
|
244,111 |
|
|
|
212,612 |
|
|
|
212,612 |
|
|
Equity securities
|
|
(1)
|
|
|
|
12,395 |
|
|
|
12,395 |
|
|
|
7,900 |
|
|
|
7,900 |
|
|
Policy loans
|
|
Level 3
|
|
|
|
1,683 |
|
|
|
1,683 |
|
|
|
1,722 |
|
|
|
1,722 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Junior subordinated debentures, net
|
|
Level 2
|
|
|
|
33,738 |
|
|
|
33,595 |
|
|
|
33,738 |
|
|
|
35,443 |
|
|
Revolving credit facility
|
|
Level 2
|
|
|
|
5,021 |
|
|
|
5,021 |
|
|
|
4,023 |
|
|
|
4,023 |
|
|
Other policy liabilities -annuities
|
|
Level 3(2)
|
|
|
|
4,783 |
|
|
|
4,783 |
|
|
|
4,938 |
|
|
|
4,938 |
|
| (1) | See the aforementioned information for a description of the fair value hierarchy as well as a disclosure of levels for classes of these financial assets. |
| (2) | This value relates to annuities, which is a financial instrument, whereas the remaining items within other policy liabilities are not financial instruments. |
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