Burford Capital LtdBUR
Burford Capital Ltd Fair Value Disclosure
Fair value of assets and liabilities
The tables below set forth the fair value of financial instruments grouped by the fair value level as of the dates indicated.
| December 31, 2025 | ||||||||||||||||||||||||||
| ($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Capital provision assets | ||||||||||||||||||||||||||
| Derivative financial assets | ||||||||||||||||||||||||||
| Single case | $ | — | $ | — | $ | 819,515 | $ | 819,515 | ||||||||||||||||||
| Portfolio | — | — | 3,383,317 | 3,383,317 | ||||||||||||||||||||||
| Portfolio with equity risk | — | — | 38,524 | 38,524 | ||||||||||||||||||||||
| Legal risk management | — | — | 5,737 | 5,737 | ||||||||||||||||||||||
| Non-derivative financial assets | ||||||||||||||||||||||||||
| Joint ventures and equity method investments | — | — | 189,488 | 189,488 | ||||||||||||||||||||||
| Single case with equity risk | 2,811 | — | — | 2,811 | ||||||||||||||||||||||
| Assets of consolidated investment companies | ||||||||||||||||||||||||||
| Core legal finance (BOF-C) | 2,846 | — | 650,616 | 653,462 | ||||||||||||||||||||||
| Core legal finance (EP Funds) | — | — | 451,407 | 451,407 | ||||||||||||||||||||||
| Lower risk legal finance (Advantage Fund) | — | — | 65,688 | 65,688 | ||||||||||||||||||||||
| Total capital provision assets | 5,657 | — | 5,604,292 | 5,609,949 | ||||||||||||||||||||||
| Due from settlement of capital provision assets | — | — | 164,804 | 164,804 | ||||||||||||||||||||||
| Marketable securities | ||||||||||||||||||||||||||
| Government securities | — | 58,333 | — | 58,333 | ||||||||||||||||||||||
| Corporate bonds | — | 15,861 | — | 15,861 | ||||||||||||||||||||||
| Asset-backed securities | — | 1,177 | — | 1,177 | ||||||||||||||||||||||
| Mutual funds | 7,828 | — | — | 7,828 | ||||||||||||||||||||||
| Certificates of deposit | 6,287 | — | — | 6,287 | ||||||||||||||||||||||
| Total assets | 19,772 | 75,371 | 5,769,096 | 5,864,239 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Financial liabilities relating to third-party interests in capital provision assets | — | — | 858,491 | 858,491 | ||||||||||||||||||||||
| Total liabilities | — | — | 858,491 | 858,491 | ||||||||||||||||||||||
| Net total | 19,772 | 75,371 | 4,910,605 | 5,005,748 | ||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| ($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||
| Capital provision assets | ||||||||||||||||||||||||||
| Derivative financial assets | ||||||||||||||||||||||||||
| Single case | $ | — | $ | — | $ | 1,052,519 | $ | 1,052,519 | ||||||||||||||||||
| Portfolio | — | — | 3,053,800 | 3,053,800 | ||||||||||||||||||||||
| Portfolio with equity risk | — | — | 65,041 | 65,041 | ||||||||||||||||||||||
| Legal risk management | — | — | 6,442 | 6,442 | ||||||||||||||||||||||
| Non-derivative financial assets | ||||||||||||||||||||||||||
| Joint ventures and equity method investments | — | — | 154,220 | 154,220 | ||||||||||||||||||||||
| Single case with equity risk | 8,711 | — | — | 8,711 | ||||||||||||||||||||||
| Assets of consolidated investment companies | ||||||||||||||||||||||||||
| Core legal finance (BOF-C) | 8,581 | — | 705,315 | 713,896 | ||||||||||||||||||||||
| Lower risk legal finance (Advantage Fund) | — | — | 189,288 | 189,288 | ||||||||||||||||||||||
| Total capital provision assets | 17,292 | — | 5,226,625 | 5,243,917 | ||||||||||||||||||||||
| Due from settlement of capital provision assets | — | — | 183,858 | 183,858 | ||||||||||||||||||||||
| Marketable securities | ||||||||||||||||||||||||||
| Government securities | — | 40,405 | — | 40,405 | ||||||||||||||||||||||
| Corporate bonds | — | 20,077 | — | 20,077 | ||||||||||||||||||||||
| Asset-backed securities | — | 1,971 | — | 1,971 | ||||||||||||||||||||||
| Mutual funds | 10,654 | — | — | 10,654 | ||||||||||||||||||||||
| Certificates of deposit | 5,913 | — | — | 5,913 | ||||||||||||||||||||||
| Total assets | 33,859 | 62,453 | 5,410,483 | 5,506,795 | ||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Financial liabilities relating to third-party interests in capital provision assets | — | — | 747,053 | 747,053 | ||||||||||||||||||||||
| Total liabilities | — | — | 747,053 | 747,053 | ||||||||||||||||||||||
| Net total | 33,859 | 62,453 | 4,663,430 | 4,759,742 | ||||||||||||||||||||||
The Group has elected the fair value option for the Group’s equity method investments, marketable securities, due from settlement of capital provision assets and financial liabilities relating to third-party interests in capital provision assets to provide a consistent fair value measurement approach for all capital provision related activity. Realized gains and losses, unrealized gains and losses and interest and dividend income on these assets are recognized as income/(loss) and presented in the consolidated statements of operations when they are earned.
The key risk and sensitivity across all the capital provision assets relate to the underlying litigation associated with each case that is underwritten and financed. The sensitivity to this Level 3 input is therefore considered to be similar across the different types of capital provision assets and is expressed as a portfolio-wide stress.
Movements in Level 3 fair value assets and liabilities
The tables below set forth the analysis of the movements in the Level 3 financial assets and liabilities for the periods indicated.
| Year ended December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Beginning of period | Transfers into Level 3 | Transfers between types | Deployments | Realizations | Foreign exchange gains/(losses) | End of period | |||||||||||||||||||||||||||||||||||||||||||
| Single case | $ | 1,052,519 | $ | — | $ | (304,454) | $ | 194,380 | $ | (243,055) | $ | 109,737 | $ | 10,388 | $ | 819,515 | ||||||||||||||||||||||||||||||||||
| Portfolio | 3,053,800 | — | 17,980 | 219,312 | (143,527) | 228,189 | 7,563 | 3,383,317 | ||||||||||||||||||||||||||||||||||||||||||
| Portfolio with equity risk | 65,041 | — | — | 362 | (28,326) | 1,447 | — | 38,524 | ||||||||||||||||||||||||||||||||||||||||||
| Legal risk management | 6,442 | — | — | — | — | (1,616) | 911 | 5,737 | ||||||||||||||||||||||||||||||||||||||||||
| Joint ventures and equity method investments | 154,220 | — | — | 6,735 | (1,627) | 22,871 | 7,289 | 189,488 | ||||||||||||||||||||||||||||||||||||||||||
| Core legal finance (BOF-C) | 705,315 | — | — | 64,806 | (146,425) | 26,909 | 11 | 650,616 | ||||||||||||||||||||||||||||||||||||||||||
Core legal finance (EP Funds)1 | — | — | 286,474 | 115,301 | — | 49,632 | — | 451,407 | ||||||||||||||||||||||||||||||||||||||||||
| Lower risk legal finance (Advantage Fund) | 189,288 | — | — | 1,591 | (136,651) | 11,460 | — | 65,688 | ||||||||||||||||||||||||||||||||||||||||||
| Total capital provision assets | 5,226,625 | — | — | 602,487 | (699,611) | 448,629 | 26,162 | 5,604,292 | ||||||||||||||||||||||||||||||||||||||||||
| Due from settlement of capital provision assets | 183,858 | — | — | 710,496 | (740,376) | 10,391 | 435 | 164,804 | ||||||||||||||||||||||||||||||||||||||||||
| Total Level 3 assets | 5,410,483 | — | — | 1,312,983 | (1,439,987) | 459,020 | 26,597 | 5,769,096 | ||||||||||||||||||||||||||||||||||||||||||
| Financial liabilities relating to third-party interests in capital provision assets | 747,053 | — | — | 12,281 | — | 99,142 | 15 | 858,491 | ||||||||||||||||||||||||||||||||||||||||||
| Total Level 3 liabilities | 747,053 | — | — | 12,281 | — | 99,142 | 15 | 858,491 | ||||||||||||||||||||||||||||||||||||||||||
1. The restructuring of the EP Funds resulted in the Group being required to consolidate the underlying assets and liabilities of the entities as of December 31, 2025. See note 2 (Summary of significant accounting policies) for additional information with respect to the EP Funds. Prior to consolidation, the Group had a “Single case” capital provision asset with the EP Funds representing its Eton Park interest in the YPF-related assets. This asset is eliminated on consolidation and forms part of the additions to “Core legal finance (EP Funds)”. The “Core legal finance (EP Funds)” end-of-period balance includes $85.5 million attributable to third-party interests, of which approximately $80.0 million were other additions that are offset by other third-party liabilities assumed on consolidation. | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Year ended December 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Beginning of period | Transfers into Level 3 | Transfers between types | Deployments | Realizations | Foreign exchange gains/(losses) | End of period | |||||||||||||||||||||||||||||||||||||||||||
| Single case | $ | 934,131 | $ | — | $ | (4,132) | $ | 224,641 | $ | (258,797) | $ | 161,784 | $ | (5,108) | $ | 1,052,519 | ||||||||||||||||||||||||||||||||||
| Portfolio | 2,875,881 | — | 4,132 | 153,251 | (240,566) | 265,675 | (4,573) | 3,053,800 | ||||||||||||||||||||||||||||||||||||||||||
| Portfolio with equity risk | 142,659 | — | — | 363 | (117,040) | 39,059 | — | 65,041 | ||||||||||||||||||||||||||||||||||||||||||
| Legal risk management | 3,523 | — | — | — | — | 3,275 | (356) | 6,442 | ||||||||||||||||||||||||||||||||||||||||||
| Joint ventures and equity method investments | 178,628 | — | — | 9,667 | (1,660) | (25,868) | (6,547) | 154,220 | ||||||||||||||||||||||||||||||||||||||||||
| Core legal finance (BOF-C) | 705,092 | — | — | 98,391 | (180,406) | 82,238 | — | 705,315 | ||||||||||||||||||||||||||||||||||||||||||
| Lower risk legal finance (Advantage Fund) | 185,509 | — | — | 68,775 | (99,196) | 34,200 | — | 189,288 | ||||||||||||||||||||||||||||||||||||||||||
| Total capital provision assets | 5,025,423 | — | — | 555,088 | (897,665) | 560,363 | (16,584) | 5,226,625 | ||||||||||||||||||||||||||||||||||||||||||
| Due from settlement of capital provision assets | 265,540 | — | — | 907,042 | (991,292) | 2,704 | (136) | 183,858 | ||||||||||||||||||||||||||||||||||||||||||
| Total Level 3 assets | 5,290,963 | — | — | 1,462,130 | (1,888,957) | 563,067 | (16,720) | 5,410,483 | ||||||||||||||||||||||||||||||||||||||||||
| Financial liabilities relating to third-party interests in capital provision assets | 704,196 | — | — | 513 | (40) | 42,384 | — | 747,053 | ||||||||||||||||||||||||||||||||||||||||||
| Total Level 3 liabilities | 704,196 | — | — | 513 | (40) | 42,384 | — | 747,053 | ||||||||||||||||||||||||||||||||||||||||||
All transfers into and out of Level 3 are recognized as if they have taken place as of the beginning of each reporting period. There were no transfers into or out of Level 3 during the years ended December 31, 2025 and 2024.
Key unobservable inputs for Level 3 valuations
The Group’s valuation policy for capital provision assets provides for ranges of percentages to be applied against the risk-adjustment factor to more than 70 discrete objective litigation events across five principal different types of litigation in order to calculate the adjusted risk premium. The range for each event is ten percentage points. The Company typically marks assets at the middle of that range unless there are specific factors that cause the Group’s valuation committee to select a different point in the range and, on an exceptional basis, the Group’s valuation committee may also select a point outside the range. To decide which percentage to apply to a given asset, the Group’s valuation committee considers the kind and degree of legal, procedural or other investment-specific circumstances that may be present. See note 2 (Summary of significant accounting policies—Fair value of financial instruments) to the Group’s consolidated financial statements for additional information with respect to the Group’s valuation approach.
The tables below set forth each of the key unobservable inputs used to value the Group’s capital provision assets and the applicable ranges and weighted average by relative fair value for such inputs as of the dates indicated.
| ($ in thousands) | December 31, 2025 | |||||||||||||||||||||||||||||||||||||
| Type: | Single case, Portfolio, Joint ventures and equity method investments, Legal risk management, Core legal finance (BOF-C)(1), Core legal finance (EP Funds), Financial liabilities relating to third-party interests in capital provision assets | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 4.6% | 7.5% | 6.1% | |||||||||||||||||||||||||||||||||||
Duration(2) (years) | 0.2 | 13.0 | 2.8 | |||||||||||||||||||||||||||||||||||
| Adjusted risk premium | 0.0% | 100.0% | 31.1% | |||||||||||||||||||||||||||||||||||
| Positive case milestone factor: | ||||||||||||||||||||||||||||||||||||||
| Significant ruling or other objective event prior to trial court judgment | $162,058 | $114,685 | $276,743 | 5.0% | 40.0% | 24.9% | ||||||||||||||||||||||||||||||||
| Trial court judgment or tribunal award | 83,550 | 94,354 | 177,904 | 25.0% | 60.0% | 54.1% | ||||||||||||||||||||||||||||||||
| Appeal judgment | 62,916 | 77,731 | 140,647 | 68.6% | 80.0% | 70.0% | ||||||||||||||||||||||||||||||||
| Asset freeze | 5,000 | 7,350 | 12,350 | 80.0% | 80.0% | 80.0% | ||||||||||||||||||||||||||||||||
| Exhaustion of as-of-right appeals | 79,320 | 119,559 | 198,879 | 100.0% | 100.0% | 100.0% | ||||||||||||||||||||||||||||||||
| Exhaustion of all appeals | 2,441 | 830 | 3,271 | 4.4% | 4.4% | 4.4% | ||||||||||||||||||||||||||||||||
| Settlement | 420 | 1,379 | 1,799 | 40.0% | 80.0% | 78.1% | ||||||||||||||||||||||||||||||||
| Portfolios with multiple factors | 641,286 | 384,916 | 1,026,202 | 0.5% | 100.0% | 21.3% | ||||||||||||||||||||||||||||||||
| Other | 332 | (168) | 164 | 100.0% | 100.0% | 100.0% | ||||||||||||||||||||||||||||||||
| Negative case milestone factor: | ||||||||||||||||||||||||||||||||||||||
| Significant ruling or other objective event prior to trial court judgment | 76,582 | (53,750) | 22,832 | (40.0) | % | (60.0) | % | (49.9) | % | |||||||||||||||||||||||||||||
| Trial court judgment or tribunal award | 46,376 | (28,340) | 18,036 | (10.0) | % | (60.0) | % | (56.6) | % | |||||||||||||||||||||||||||||
| Appeal judgment | 14,164 | (16,992) | (2,828) | (80.0) | % | (100.0) | % | (80.0) | % | |||||||||||||||||||||||||||||
| Portfolios with multiple factors | 48,542 | (29,953) | 18,589 | (10.0) | % | (80.0) | % | (31.2) | % | |||||||||||||||||||||||||||||
| No case milestone: | 1,029,323 | 21,655 | 1,050,978 | |||||||||||||||||||||||||||||||||||
| YPF-related assets: | 117,577 | 1,571,781 | 1,689,358 | |||||||||||||||||||||||||||||||||||
| 2,369,887 | 2,265,037 | 4,634,924 | ||||||||||||||||||||||||||||||||||||
| Type: | Lower risk legal finance (Advantage Fund) | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 58,790 | 6,898 | 65,688 | 11.4% | 20.3% | 14.3% | ||||||||||||||||||||||||||||||||
Duration(2) (years) | 0.7 | 2.5 | 1.3 | |||||||||||||||||||||||||||||||||||
| Type: | Portfolio with equity risk, Core legal finance (BOF-C)(1) | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 30,723 | 14,466 | 45,189 | 12.8% | 12.8% | 12.8% | ||||||||||||||||||||||||||||||||
| Resolution timing (years) | 0.8 | 2.8 | 1.5 | |||||||||||||||||||||||||||||||||||
| Conversion ratio | 0.5 | 0.5 | 0.5 | |||||||||||||||||||||||||||||||||||
| Type: | Due from settlement of capital provision assets | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 160,444 | 4,360 | 164,804 | 6.2% | 6.2% | 6.2% | ||||||||||||||||||||||||||||||||
| Collection risk | 0.0% | 0.0% | 0.0% | |||||||||||||||||||||||||||||||||||
| Level 3 assets and liabilities, net | 2,619,844 | 2,290,761 | 4,910,605 | |||||||||||||||||||||||||||||||||||
| 1. Includes the proportional participation in these capital provision assets held by BOF-C. | ||||||||||||||||||||||||||||||||||||||
2. Duration refers to the expected timing of a favorable outcome. See note 2 (Summary of significant accounting policies—Fair value of financial instruments) to the Group’s consolidated financial statements for additional information with respect to the valuation methodology for Level 3 assets. | ||||||||||||||||||||||||||||||||||||||
| ($ in thousands) | December 31, 2024 | |||||||||||||||||||||||||||||||||||||
| Type: | Single case, Portfolio, Joint ventures and equity method investments, Legal risk management, Core legal finance (BOF-C)(1), Financial liabilities relating to third-party interests in capital provision assets | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 4.8% | 7.6% | 6.9% | |||||||||||||||||||||||||||||||||||
Duration(2) (years) | 0.2 | 14.0 | 2.9 | |||||||||||||||||||||||||||||||||||
| Adjusted risk premium | 0% | 100.0% | 31.4% | |||||||||||||||||||||||||||||||||||
| Positive case milestone factor: | ||||||||||||||||||||||||||||||||||||||
| Significant ruling or other objective event prior to trial court judgment | $184,540 | $109,991 | $294,531 | 5% | 50% | 23% | ||||||||||||||||||||||||||||||||
| Trial court judgment or tribunal award | 86,880 | 98,453 | 185,333 | 25% | 60% | 54% | ||||||||||||||||||||||||||||||||
| Appeal judgment | 61,192 | 67,177 | 128,369 | 69% | 80% | 70% | ||||||||||||||||||||||||||||||||
| Asset freeze | 2,401 | 512 | 2,913 | 4% | 4% | 4% | ||||||||||||||||||||||||||||||||
| Exhaustion of all appeals | 78,093 | 66,664 | 144,757 | 100% | 100% | 100% | ||||||||||||||||||||||||||||||||
| Settlement | 1,911 | 4,889 | 6,800 | 40% | 80% | 60% | ||||||||||||||||||||||||||||||||
| Portfolios with multiple factors | 555,828 | 424,005 | 979,833 | 0% | 100% | 23% | ||||||||||||||||||||||||||||||||
| Other | 307 | (165) | 142 | 100% | 100% | 100% | ||||||||||||||||||||||||||||||||
| Negative case milestone factor: | ||||||||||||||||||||||||||||||||||||||
| Significant ruling or other objective event prior to trial court judgment | 17,209 | (16,343) | 866 | (50) | % | (60) | % | (57) | % | |||||||||||||||||||||||||||||
| Trial court judgment or tribunal award | 44,973 | (24,439) | 20,534 | (10) | % | (60) | % | (57) | % | |||||||||||||||||||||||||||||
| Appeal judgment | 11,825 | (11,506) | 319 | (80) | % | (100) | % | (80) | % | |||||||||||||||||||||||||||||
| Portfolios with multiple factors | 59,877 | (28,404) | 31,473 | (10) | % | (60) | % | (39) | % | |||||||||||||||||||||||||||||
| No case milestone: | 924,530 | 28,112 | 952,642 | |||||||||||||||||||||||||||||||||||
| YPF-related assets: | 69,576 | 1,395,899 | 1,465,475 | |||||||||||||||||||||||||||||||||||
| 2,099,142 | 2,114,845 | 4,213,987 | ||||||||||||||||||||||||||||||||||||
| Type: | Lower risk legal finance (Advantage Fund) | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 159,816 | 29,472 | 189,288 | 12.1% | 21.0% | 17.2% | ||||||||||||||||||||||||||||||||
Duration(2) (years) | 0.2 | 4.0 | 1.3 | |||||||||||||||||||||||||||||||||||
| Type: | Portfolio with equity risk, Core legal finance (BOF-C)(1) | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 45,741 | 30,556 | 76,297 | 14.0% | 14.0% | 14.0% | ||||||||||||||||||||||||||||||||
| Resolution timing (years) | 0.8 | 3.8 | 1.4 | |||||||||||||||||||||||||||||||||||
| Conversion ratio | 1.0 | 1.0 | 1.0 | |||||||||||||||||||||||||||||||||||
| Type: | Due from settlement of capital provision assets | |||||||||||||||||||||||||||||||||||||
| Principal value technique: | Discounted cash flow | |||||||||||||||||||||||||||||||||||||
| Unobservable input: | Cost | Unrealized | Fair value | Minimum | Maximum | Weighted average | ||||||||||||||||||||||||||||||||
| Discount rate | 182,657 | 1,201 | 183,858 | 6.8% | 6.8% | 6.8% | ||||||||||||||||||||||||||||||||
| Collection risk | 0.0% | 0.0% | 0.0% | |||||||||||||||||||||||||||||||||||
| Level 3 assets and liabilities, net | 2,487,356 | 2,176,074 | 4,663,430 | |||||||||||||||||||||||||||||||||||
| 1. Includes the proportional participation in these capital provision assets held by BOF-C. | ||||||||||||||||||||||||||||||||||||||
2. Duration refers to the expected timing of a favorable outcome. See note 2 (Summary of significant accounting policies—Fair value of financial instruments) to the Group’s consolidated financial statements for additional information with respect to the valuation methodology for Level 3 assets. | ||||||||||||||||||||||||||||||||||||||
Sensitivity of Level 3 valuations
Following origination, the Group engages in a review of each capital provision asset’s fair value in connection with the preparation of the consolidated financial statements. Should the prices of the Level 3 due from settlement of capital provision assets, capital provision assets and financial liabilities relating to third-party interests in capital provision assets have been 10% higher or lower, while all other variables remained constant, the Group’s consolidated income and net assets would have increased or decreased, respectively, by $491.1 million and $466.3 million as of December 31, 2025 and 2024, respectively (the comparative data as of December 31, 2024, has been amended for immaterial differences).
In addition, as of December 31, 2025 and 2024, should interest rates have been 50 or 100 basis points lower or higher, as applicable, than the actual interest rates used in the fair value estimates, while all other variables remained constant, the Group’s consolidated income and net assets would have increased or decreased, respectively, by the following amounts.
| December 31, | ||||||||||||||
| ($ in thousands) | 2025 | 2024 | ||||||||||||
| +100 bps interest rates | $ | (166,466) | $ | (153,241) | ||||||||||
| +50 bps interest rates | (83,662) | (77,644) | ||||||||||||
| -50 bps interest rates | 87,423 | 78,514 | ||||||||||||
| -100 bps interest rates | 175,812 | 159,169 | ||||||||||||
Furthermore, as of December 31, 2025 and 2024, should duration have been or 12 months shorter or longer, as applicable, than the actual durations used in the fair value estimates, while all other variables remained constant, the Group’s consolidated income and net assets would have decreased or increased, respectively, by the following amounts.
| December 31, | ||||||||||||||
| ($ in thousands) | 2025 | 2024 | ||||||||||||
+12 months duration(1) | $ | (422,303) | $ | (396,845) | ||||||||||
+6 months duration(1) | (229,491) | (200,908) | ||||||||||||
-6 months duration(1) | 199,038 | 196,721 | ||||||||||||
-12 months duration(1) | 383,172 | 405,926 | ||||||||||||
1. Duration refers to the expected timing of a favorable outcome. See note 2 (Summary of significant accounting policies—Fair value of financial instruments) to the Group’s consolidated financial statements contained in this 2025 Form 10-K for additional information with respect to the valuation methodology for Level 3 assets. | ||||||||||||||
The sensitivity impact has been provided on a pre-tax basis for both the Group’s consolidated income and net assets as the Group considers the fluctuation in its effective tax rate from period to period could indicate changes in sensitivity not driven by the valuation that are difficult to follow and detract from the comparability of this information.
Reasonably possible alternative assumptions
The determination of fair value for capital provision assets, due from settlement of capital provision assets and financial liabilities relating to third-party interests in capital provision assets involves significant judgments and estimates. While the potential range of outcomes for the assets is wide, the Group’s fair value estimation is its best assessment of the current fair value of each asset or liability, as applicable. Such estimate is inherently subjective, being based largely on an assessment of how individual events have changed the possible outcomes of the asset or liability, as applicable, and their relative probabilities and hence the extent to which the fair value has altered. The aggregate of the fair values selected falls within a wide range of reasonably possible estimates. In the Group’s opinion, there is no useful alternative valuation that would better quantify the market risk inherent in the portfolio and there are no inputs or variables to which the values of the assets are correlated other than interest rates which impact the discount rates applied.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.