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Fair Value Measurements | 9 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measurements | 4 — Fair Value Measurements Fair value measurements are classified within one of three levels in the fair value hierarchy. The level assigned to a fair value measurement is based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a particular input requires judgment. The three levels of the fair value hierarchy are as follows: •Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. •Level 2 — Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date for substantially the full term of the asset or liability. •Level 3 — Pricing inputs are unobservable, but management believes that such inputs are predicated on the assumptions market participants would use to measure the asset or liability at fair value. The Company's policy is to recognize significant transfers between levels, if any, at the end of the reporting period. There were no transfers between levels during the current and prior reporting periods. Investments Fixed maturity securities are classified as Level 2 within the fair value hierarchy and equity securities are classified as Level 1. The fair value of these investments is determined after considering various sources of information, including information provided by a third-party pricing service, which provides prices for substantially all of the Company's fixed maturity securities and equity securities. In determining fair value, the Company generally does not adjust the prices obtained from the pricing service. The Company obtains an understanding of the pricing service's valuation methodologies and related inputs, which include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, duration, credit ratings, estimated cash flows, and prepayment speeds. Refer to Note 3 — Investments for additional information related to the Company's investment portfolio. Interest rate swap In December 2020, the Company entered into an interest rate swap with an original notional amount of $35.0 million, a fixed swap rate of 0.81%, and a maturity date in December 2025. The interest rate swap was designated as a cash flow hedge and the Company formally documented the relationship between the interest rate swap and its variable rate borrowings, as well as its risk management objective and strategy for undertaking the hedge transaction. The Company also assessed whether the interest rate swap was highly effective in offsetting variability in the cash flows of its variable rate borrowings. The hedge was deemed effective at inception and on an ongoing basis; therefore, any changes in fair value were recorded within "Change in unrealized gain (loss) on interest rate swap" in the Condensed Consolidated Statements of Comprehensive Income. The differential paid or received on the interest rate swap agreement was recognized as an adjustment to interest expense within "Interest and other income (expense), net" in the Condensed Consolidated Statements of Operations. As of December 31, 2023, the interest rate swap was in an asset position and had a fair value of $2.2 million, which was recorded within "Other long-term assets" on the Condensed Consolidated Balance Sheets. The interest rate swap was classified as Level 2 within the fair value hierarchy. The significant inputs used to determine the fair value of the interest rate swap, such as the Secured Overnight Financing Rate ("SOFR") forward curve, are considered observable market inputs. In the second quarter of 2024, the Company reduced its borrowings under the JPM Credit Facility (as defined in Note 14 — Long-Term Debt) below the $35.0 million notional amount of the interest rate swap and, as a result, the interest rate swap was settled prior to its maturity date. In connection with the settlement of the interest rate swap, the Company received $2.3 million in cash proceeds and recognized a $2.3 million gain in the second quarter of 2024 within "Interest and other income (expense), net" in the Condensed Consolidated Statements of Operations, with a corresponding amount reclassified from Accumulated other comprehensive income (loss). Warrant liabilities As of December 31, 2023, the Company's Public Warrants were classified as Level 1 within the fair value hierarchy as they were measured utilizing quoted market prices. The Company's Private Warrants, Underwriter Warrants, OTM Warrants (together with the Private Warrants and Underwriter Warrants, the "Private Placement Warrants"), and PIPE Warrants were classified as Level 3 within the fair value hierarchy. The Company utilized a Monte Carlo simulation model to measure the fair value of the Level 3 warrants. The Company's Monte Carlo simulation model included assumptions related to the expected stock price volatility, expected term, dividend yield, and risk-free interest rate. In the third quarter of 2024, the Company completed the Warrant Exchange, which resulted in the settlement of all outstanding warrants. Refer to Note 17 — Warrant Exchange for additional information related to the Warrant Exchange. Summary of assets and liabilities measured at fair value The fair values of the Company's financial assets and liabilities as of September 30, 2024 and December 31, 2023 are shown in the following tables:
| Estimated Fair Value as of September 30, 2024
| Total |  | Level 1 |  | Level 2 |  | Level 3
| in thousands
Financial Assets |  |  |  |  |  |  |
Investments: |  |  |  |  |  |  |
Corporate | $ | 213,964 |  |  | $ | — |  |  | $ | 213,964 |  |  | $ | — |
U.S. Treasury | 109,561 |  |  | — |  |  | 109,561 |  |  | — |
States and municipalities | 39,929 |  |  | — |  |  | 39,929 |  |  | — |
Foreign | 18,634 |  |  | — |  |  | 18,634 |  |  | — |
Asset-backed securities | 25,767 |  |  | — |  |  | 25,767 |  |  | — |
Mortgage-backed securities | 114,357 |  |  | — |  |  | 114,357 |  |  | — |
Common stocks | 11,580 |  |  | 11,580 |  |  | — |  |  | — |
Total | $ | 533,792 |  |  | $ | 11,580 |  |  | $ | 522,212 |  |  | $ | — |
| Estimated Fair Value as of December 31, 2023
| Total |  | Level 1 |  | Level 2 |  | Level 3
| in thousands
Financial Assets |  |  |  |  |  |  |
Fixed maturity securities, held to maturity: |  |  |  |  |  |  |
Foreign | $ | 16,472 |  |  | $ | — |  |  | $ | 16,472 |  |  | $ | — |
Interest rate swap | 2,234 |  |  | — |  |  | 2,234 |  |  | — |
Total | $ | 18,706 |  |  | $ | — |  |  | $ | 18,706 |  |  | $ | — |
Financial Liabilities |  |  |  |  |  |  |
Public Warrants | $ | 9,488 |  |  | $ | 9,488 |  |  | $ | — |  |  | $ | — |
Private Warrants | 476 |  |  | — |  |  | — |  |  | 476 |
Underwriter Warrants | 53 |  |  | — |  |  | — |  |  | 53 |
OTM Warrants | 3,981 |  |  | — |  |  | — |  |  | 3,981 |
PIPE Warrants | 20,020 |  |  | — |  |  | — |  |  | 20,020 |
Total | $ | 34,018 |  |  | $ | 9,488 |  |  | $ | — |  |  | $ | 24,530 |
The following table presents a reconciliation of the Company's warrant liabilities that are classified as Level 3 within the fair value hierarchy for the nine months ended September 30, 2024 and 2023:
| Private Warrants |  | Underwriter Warrants |  | OTM Warrants |  | PIPE Warrants |  | Total
| in thousands
Balance at December 31, 2023 | $ | 476 |  |  | $ | 53 |  |  | $ | 3,981 |  |  | $ | 20,020 |  |  | $ | 24,530 |
Change in fair value of warrant liabilities | 55 |  |  | 5 |  |  | 546 |  |  | 4,056 |  |  | 4,662 |
Warrant Exchange (see Note 17) | (531) |  |  | (58) |  |  | (4,527) |  |  | (24,076) |  |  | (29,192) |
Balance at September 30, 2024 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Balance at December 31, 2022 | $ | 673 |  |  | $ | 75 |  |  | $ | 4,706 |  |  | $ | 27,227 |  |  | $ | 32,681 |
Change in fair value of warrant liabilities | 33 |  |  | 4 |  |  | 541 |  |  | 554 |  |  | 1,132 |
Balance at September 30, 2023 | $ | 706 |  |  | $ | 79 |  |  | $ | 5,247 |  |  | $ | 27,781 |  |  | $ | 33,813 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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