Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Note 6 -- Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair values. 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 asset, 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 maturing within 90 days. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

Restricted Cash

Restricted cash represents cash held by state authorities and the carrying value approximates fair value.

Fixed-Maturity and Equity Securities

Estimated fair values of the Company’s fixed-maturity and equity 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.

Revolving Credit Facility

From time to time, the Company has an amount outstanding under a revolving credit facility. The interest rate is variable and is periodically adjusted based on the London Interbank Offered Rate plus a spread. As a result, carrying value, when outstanding, approximates fair value.

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
4.75% Convertible Senior Notes	2042	Quoted price
4.25% Convertible Senior Notes	2037	Quoted price
3.90% Promissory Note	2032	Discounted cash flow method/Level 3 inputs
3.75% Callable Promissory Note	2036	Discounted cash flow method/Level 3 inputs
4.55% Promissory Note	2036	Discounted cash flow method/Level 3 inputs

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 tables indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of June 30, 2022 and December 31, 2021:


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
As of June 30, 2022
Financial Assets:
Cash and cash equivalents	$	360,488	$	—	$	—	$	360,488
Restricted cash	$	2,600	$	—	$	—	$	2,600
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	366,134	$	1,429	$	—	$	367,563
Corporate bonds		28,424		—		—		28,424
State, municipalities, and political subdivisions		—		1,767		—		1,767
Exchange-traded debt		713		—		—		713
Redeemable preferred stock		104		—		—		104
Total available-for-sale securities	$	395,375	$	3,196	$	—	$	398,571
Equity securities	$	35,719	$	—	$	—	$	35,719


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2021
Financial Assets:
Cash and cash equivalents	$	628,943	$	—	$	—	$	628,943
Restricted cash	$	2,400	$	—	$	—	$	2,400
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	15,536	$	1,488	$	—	$	17,024
Corporate bonds		22,492		—		—		22,492
State, municipalities, and political subdivisions		—		1,808		—		1,808
Exchange-traded debt		811		—		—		811
Redeemable preferred stock		448		—		—		448
Total available-for-sale securities	$	39,287	$	3,296	$	—	$	42,583
Equity securities	$	51,740	$	—	$	—	$	51,740

Liabilities Carried at Other Than Fair Value

The following tables present fair value information for liabilities that are carried on the consolidated balance sheets at amounts other than fair value as of June 30, 2022 and December 31, 2021:


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of June 30, 2022
Financial Liabilities:
Long-term debt:
4.75% Convertible Senior Notes	$	166,596	$	—	$	178,522	$	—	$	178,522
4.25% Convertible Senior Notes		23,916		—		27,143		—		27,143
3.90% Promissory Note		9,117		—		—		8,711		8,711
3.75% Callable Promissory Note		6,973		—		—		6,604		6,604
4.55% Promissory Note		5,025		—		—		4,959		4,959
Total long-term debt	$	211,627	$	—	$	205,665	$	20,274	$	225,939


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of December 31, 2021
Financial Liabilities:
Revolving credit facility	$	15,000	$	—	$	15,000	$	—	$	15,000
Long-term debt:
4.25% Convertible Senior Notes	$	23,885	$	—	$	33,248	$	—	$	33,248
3.90% Promissory Note		9,287		—		—		10,488		10,488
3.75% Callable Promissory Note		7,153		—		—		7,852		7,852
4.55% Promissory Note		5,148		—		—		6,051		6,051
Total long-term debt	$	45,473	$	—	$	33,248	$	24,391	$	57,639

- 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.

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