Fair Value Measurements

9 Months Ended

Sep. 30, 2020

The fair value hierarchy established by the accounting standards on fair value measurements includes three levels that are based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities that are recorded in the Condensed Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that we have the ability to access.

Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.

Level 3. Financial assets and liabilities whose values are based on model inputs that are unobservable.

Recurring Fair Value Measurements

The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019, respectively:


	September 30, 2020
	Level 1		Level 2		Level 3		Total
	(In millions)

Fixed-maturity securities available for sale:
Corporate debt securities	$	—	$	—	$	34.5	$	34.5
Equity Securities:
Ceridian	1,333.9		—		—		1,333.9
CoreLogic	155.6		—		—		155.6
Forward Purchase Agreements	—		—		26.0		26.0
Other	1.1		—		—		1.1
Total	$	1,490.6	$	—	$	60.5	$	1,551.1


	December 31, 2019
	Level 1		Level 2		Level 3		Total
	(In millions)

Fixed-maturity securities available for sale:
Corporate debt securities	$	—	$	—	$	19.2	$	19.2


Total	$	—	$	—	$	19.2	$	19.2

Our Level 3 fair value measurement for our fixed maturity securities available for sale are provided by a single third-party pricing service. Depending on security specific characteristics, either a combination of an income approach or a contingent claims approach was utilized in determining the fair value of our Level 3 fixed-maturity securities available for sale. Discount rates are the primary unobservable inputs utilized for the securities valued using a combination of an income and net recovery approach. The discount rates used are based on company-specific risk premiums, public company comparable securities, and leveraged loan indices. The discount rates used in our determination of the fair value of our Level 3 fixed-maturity securities available for sale varies by security type and ranged from 7.8% to 17.5% as of September 30, 2020 and a weighted average based on relative fair value of the underlying securities of 12.3%. Based on the total fair value of our Level 3 fixed-maturity securities available for sale as of September 30, 2020, changes in the discount rate utilized will not result in a change in fair value significant or material to the Company's financial position or results of operations.

The Forward Purchase Agreements are accounted for at fair value pursuant to ASC 321. We utilized a Monte Carlo Simulation in determining the fair value of the Forward Purchase Agreements, which are considered to be a Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the Forward Purchase Agreements is the probability of consummation of the FTAC Initial Business Combination, Trebia Initial Business Combination and FTAC II Initial Business Combination. The probabilities assigned to the consummation of each of the FTAC Initial Business Combination, the Trebia Initial Business Combination and the FTAC II Initial Business Combination was 90% and is based on a hybrid approach of both observed success rates of business combinations for special purpose acquisition companies and the sponsors of FTAC, FTAC II and Trebia's track record for consummating similar transactions. Based on the total fair value of the Forward Purchase Agreements as of September 30, 2020, changes in the probabilities utilized will not result in a change in fair value significant or material to the Company's financial position or results of operations.

The following table presents a summary of the changes in the fair values of Level 3 assets, measured on a recurring basis, for the three and nine months ended September 30, 2020 and 2019 (in millions).


	Three months ended September 30, 2020						Three months ended September 30, 2019
	Corporate debt		Forward Purchase				Corporate debt
	securities		Agreements		Total		securities

Fair value, beginning of period	$	33.9	$	12.5	$	46.4	$	17.7


Net valuation gain included in earnings (2)	—		13.5		13.5		—
Net valuation gain included in other comprehensive earnings (3)	0.6		—		0.6		1.0
Fair value, end of period	$	34.5	$	26.0	$	60.5	$	18.7


	Nine months ended September 30, 2020						Nine months ended September 30, 2019
	Corporate debt		Forward Purchase				Corporate debt
	securities		Agreements		Total		securities

Fair value, beginning of period	$	19.2	$	—	$	19.2	$	17.8

Paid-in-kind dividends (1)	—		—		—		0.1
Net valuation gain included in earnings (2)	—		26.0		26.0		—
Impairment (2)	—		—		—		(0.4)
Net valuation gain included in other comprehensive earnings (3)	15.3		—		15.3		1.2
Fair value, end of period	$	34.5	$	26.0	$	60.5	$	18.7

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(1) Included in Interest, investment and other income on the Condensed Consolidated Statements of Operations

(2) Included in Recognized gains and losses, net on the Condensed Consolidated Statements of Operations

(3) Included in Unrealized gain (loss) on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) on the Condensed Consolidated Statements of Comprehensive Earnings

Transfers into or out of the Level 3 fair value category occur when unobservable inputs become more or less significant to the fair value measurement or upon a change in valuation technique. There were no transfers between Level 2 and Level 3 in the nine months ended September 30, 2020 and 2019.

All of the unrealized gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) on our Condensed Consolidated Statements of Comprehensive Earnings (Loss) for the three and nine months ended September 30, 2020 relate to fixed maturity securities considered Level 3 fair value measures.

Additional information regarding the fair value of our investment portfolio is included in Note D.

The carrying amounts of trade receivables and notes receivable approximate fair value due to their short-term nature. The fair value of our notes payable is included in Note F.

- 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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