FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2022

The following tables provide information about our financial assets measured and reported at fair value as of March 31, 2022 and December 31, 2021:


	March 31, 2022
	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in millions)
Assets
Fixed maturities:
U.S. Treasury securities and agencies	$	22.3	$	0.8	$	—	$	23.1
Municipal securities	—		19.7		—		19.7
Corporate debt securities	—		48.7		—		48.7
Residential mortgage-backed securities	—		2.7		—		2.7
Commercial mortgage-backed securities	—		31.9		—		31.9
Other debt obligations	—		3.0		—		3.0
Total fixed maturities	22.3		106.8		—		129.1
Short-term investments	—		0.5		—		0.5
Cash equivalents	124.1		—		—		124.1
Total assets at fair value	$	146.4	$	107.3	$	—	$	253.7

	December 31, 2021
	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in millions)
Assets
Fixed maturities:
U.S. Treasury securities and agencies	$	22.6	$	0.7	$	—	$	23.3
Municipal securities	—		20.6		—		20.6
Corporate debt securities	—		48.7		—		48.7
Residential mortgage-backed securities	—		3.5		—		3.5
Commercial mortgage-backed securities	—		30.3		—		30.3
Other debt obligations	—		3.5		—		3.5
Total fixed maturities	22.6		107.3		—		129.9

Cash equivalents	127.0		—		—		127.0
Total assets at fair value	$	149.6	$	107.3	$	—	$	256.9

We estimate the fair value of all our different classes of Level 2 fixed maturities and short-term investments by using quoted prices from a combination of an independent pricing vendor or broker/dealer, pricing models, quoted prices of securities with similar characteristics or discounted cash flows.

Fair Value of Long-Term Debt

The carrying amount of long-term debt is recorded at the unpaid balance, net of debt issuance costs. The fair value of outstanding long-term debt is classified within Level 2 of the fair value hierarchy. The fair value is based on a model referencing observable interest rates and spreads to project and discount cash flows to present value. As of March 31, 2022 and December 31, 2021, the carrying amounts and fair values of these financial instruments were as follows:


	Carrying Amount as of March 31, 2022		Estimated Fair Value as of March 31, 2022		Carrying Amount as of December 31, 2021		Estimated Fair Value as of December 31, 2021
	(dollars in millions)
Long-term debt	$	290.8	$	304.0	$	—	$	—

The carrying amounts of other short-term financial instruments approximates their fair value due to their short-term nature.

- 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 + Details