FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2020

The following tables provide information about our financial assets and liabilities measured and reported at fair value:


	2020
	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in millions)
Assets
Fixed maturities:
U.S. Treasury securities and agencies	$	17.0	$	—	$	—	$	17.0
Municipal securities	—		23.4		—		23.4
Corporate debt securities	—		90.5		—		90.5
Residential mortgage-backed securities	—		7.8		—		7.8
Commercial mortgage-backed securities	—		58.4		—		58.4
Other debt obligations	—		23.9		—		23.9
Total fixed maturities	17.0		204.0		—		221.0
Short-term investments	2.2		0.8		—		3.0
Cash equivalents	568.4		—		—		568.4
Total Assets at fair value	$	587.6	$	204.8	$	—	$	792.4

	2019
	Level 1		Level 2		Level 3		Total Fair Value
	(dollars in millions)
Assets
Fixed maturities:
U.S. Treasury securities and agencies	$	9.8	$	—	$	—	$	9.8
Municipal securities	—		10.3		—		10.3
Corporate debt securities	—		38.6		—		38.6
Residential mortgage-backed securities	—		3.3		—		3.3
Commercial mortgage-backed securities	—		31.5		—		31.5
Other debt obligations	—		25.8		—		25.8
Total fixed maturities	9.8		109.5		—		119.3
Short-term investments	3.0		0.5		—		3.5
Cash equivalents	316.6		—		—		316.6
Total Assets at fair value	$	329.4	$	110.0	$	—	$	439.4
Liabilities
Warrant liability	$	—	$	—	$	20.3	$	20.3
Total Liabilities at fair value	$	—	$	—	$	20.3	$	20.3

We estimate the fair value of all our different classes of Level 2 fixed rate 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.

In conjunction with the closing of a note purchase agreement, we issued warrants that were disaggregated from the long-term debt in order to appropriately determine their standalone fair value. To calculate the fair value we utilized the BSM approach. The significant inputs in calculating the fair value of the warrants were the current price from the most recently completed 409A, the current risk-free rate used by the United States Treasury, the expected

term and the volatility assumption. As of December 31, 2019, the BSM calculation yielded a fair value of $7.2497 per share for each of the 2.8 million warrants for a standalone fair value of $20.3 million classified as long-term debt and warrants on the consolidated balance sheets. Upon the completion of our IPO, the warrant to purchase shares of preferred stock was converted into a warrant to purchase shares of our common stock. All warrants were exercised into shares of Class B common stock. As a result, the warrant liability was remeasured immediately prior to the IPO and reclassified to additional paid in capital within stockholders' equity on our consolidated balance sheets. During the year ended December 31, 2020 and 2019, we recognized an adjustment of $54.7 million and zero, respectively, to the fair value of the warrants within interest expense of our consolidated statements of operations and comprehensive loss.

The carrying amount of long-term debt is recorded at historical amounts. 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. For the years ended December 31, 2020 and 2019 the carrying amounts and fair values of these financial instruments were as follows:


	Carrying amount as of December 31, 2020		Estimated Fair Value as of December 31, 2020		Carrying amount as of December 31, 2019		Estimated Fair Value as of December 31, 2019
	(dollars in millions)
Long-term debt	$	188.2	$	209.0	$	172.7	$	200.8

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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