Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of December 31, 2016 and September 30, 2016 were as follows:
|
| | | | | | | | | | | | | | | | |
| | Fair Value at | | | | | | Range (Weighted average) |
Assets | | December 31,
2016 | | September 30,
2016 | | Valuation Technique | | Unobservable Input(s) | | December 31,
2016 | | September 30,
2016 |
Funds withheld receivables: | | | | | | | | | | | | |
Fixed maturity and equity securities | | $ | 34.0 |
| | $ | 35.2 |
| | Matrix pricing | | Quoted prices | | 99% - 117% (107%) | | 98% - 122% (109%) |
Fixed maturity securities | | 5.3 |
| | 5.4 |
| | Loan Recovery Value | | Recovery rate | | 56% - 100% (82%) | | 56% - 100% (82%) |
Fixed maturity securities | | 6.4 |
| | 35.7 |
| | Broker-quoted | | Offered quotes | | 96% - 100% (98%) | | 97% - 100% (100%) |
Loan participations | | 0.7 |
| | 1.8 |
| | Loan Recovery Value | | Recovery rate | | 18% - 50% (38%) | | 52% - 100% (71%) |
Total | | $ | 46.4 |
| | $ | 78.1 |
| | | | | | | | |
Liabilities | | | | | | | | | | | | |
Front Street future policyholder benefit liability | | $ | 634.5 |
| | $ | 631.8 |
| | Discounted cash flow | | Non-performance risk spread | | 0.35% | | 0.32% |
| | | | | | | | Risk margin to reflect uncertainty | | 0.50% | | 0.50% |
Embedded derivatives in Front Street's assumed FIA business | | 121.2 |
| | 131.2 |
| | Discounted cash flow | | Market value of option | | 0% - 22%
(3%) | | 0% - 27%
(2%) |
| | | | | | | | SWAP rates | | 2.0% | | 1.0% |
| | | | | | | | Mortality multiplier | | 80% | | 80% |
| | | | | | | | Surrender rates | | 0.50% - 75%
(12%) | | 0.50% - 75%
(10%) |
| | | | | | | | Non-performance risk spread | | 0.25% | | 0.25% |
Total | | $ | 755.7 |
| | $ | 763.0 |
| | | | | | | | |
The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the three months ended December 31, 2016 and 2015. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended December 31, 2016 |
| Balance at Beginning of Period | | Total Gains (Losses) | | | | | | | | Net transfer In (Out) of Level 3 (a) | | Balance at End of Period |
| | Included in Earnings | | Included in AOCI | | Purchases | | Sales | | Settlements | | |
Assets | | | | | | | | | | | | | | | |
Funds withheld receivables | $ | 78.1 |
| | $ | (1.3 | ) | | $ | — |
| | $ | 3.0 |
| | $ | (6.3 | ) | | $ | — |
| | $ | (27.1 | ) | | $ | 46.4 |
|
Total assets at fair value | $ | 78.1 |
| | $ | (1.3 | ) | | $ | — |
| | $ | 3.0 |
| | $ | (6.3 | ) | | $ | — |
| | $ | (27.1 | ) | | $ | 46.4 |
|
| | | | | | | | | | | | | | | |
| Balance at Beginning
of Period | | Total (Gains) Losses | | | | | | | | Net transfer In (Out) of
Level 3 | | Balance at End of
Period |
| | Included in
Earnings | | Included in
AOCI | | Purchases | | Sales | | Settlements | | |
Liabilities | | | | | | | | | | | | | | | |
Front Street future policyholder benefit liability | $ | 631.8 |
| | $ | (12.6 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 15.3 |
| | $ | — |
| | $ | 634.5 |
|
Embedded derivatives in Front Street's assumed FIA business | 131.2 |
| | (10.0 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | 121.2 |
|
Total liabilities at fair value | $ | 763.0 |
| | $ | (22.6 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | 15.3 |
| | $ | — |
| | $ | 755.7 |
|
(a) During the three months ended December 31, 2016, the net transfer out of Level 3 was exclusively to Level 2.
