FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2022

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


	2022
	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in millions)
Assets
Fixed maturities:
U.S. Treasury securities and agencies	$	9.2	$	1.8	$	—	$	11.0
Municipal securities	—		20.2		—		20.2
Corporate debt securities	—		57.8		—		57.8
Residential mortgage-backed securities	—		5.2		—		5.2
Commercial mortgage-backed securities	—		23.2		—		23.2
Other debt obligations	—		11.0		—		11.0
Total fixed maturities	9.2		119.2		—		128.4
Short-term investments	—		0.4		—		0.4
Cash equivalents	487.3		—		—		487.3
Total assets at fair value	$	496.5	$	119.6	$	—	$	616.1

	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. All significant inputs were observable in the active markets.

Private Equity Investments Measured at Fair Value on a Non-Recurring Basis

Private equity investments that have been remeasured during the period due to an observable event or impairment are classified within Level 3 in the fair value hierarchy because we estimate the value based on valuation methods which may include a combination of the observable transaction price at the transaction date and other unobservable inputs including volatility, rights, and obligations of the investments we hold. See Note 3, “Investments,” for further information on our private equity investments.

Fair Value of Long-Term Debt

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


	Carrying amount as of December 31, 2022		Estimated Fair Value as of December 31, 2022		Carrying amount as of December 31, 2021		Estimated Fair Value as of December 31, 2021
	(dollars in millions)
Long-term debt	$	295.4	$	309.7	$	—	$	—

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.

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