3. Fair Value Measurement
The following table summarizes the Company’s fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis:
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| December 31, 2025 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| (in millions) |
| Financial assets: | | | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 250.1 | | | $ | — | | | $ | — | | | $ | 250.1 | |
| Fixed maturities available-for-sale: | | | | | | | |
| U.S. government and agencies | 75.7 | | | — | | | — | | | 75.7 | |
| States and other territories | — | | | 8.2 | | | — | | | 8.2 | |
| Corporate securities | — | | | 146.4 | | | — | | | 146.4 | |
| | | | | | | |
| Residential mortgage-backed securities | — | | | 37.7 | | | — | | | 37.7 | |
| Commercial mortgage-backed securities | — | | | 5.0 | | | — | | | 5.0 | |
| Asset backed securities | — | | | 20.4 | | | — | | | 20.4 | |
| Total fixed maturities available-for-sale | 75.7 | | | 217.7 | | | — | | | 293.4 | |
| Short-term investments | | | | | | | |
| U.S. government and agencies | 103.5 | | | — | | | — | | | 103.5 | |
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| Corporate securities | — | | | 49.0 | | | — | | | 49.0 | |
| Total short-term investments | 103.5 | | | 49.0 | | | — | | | 152.5 | |
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| Total financial assets | $ | 429.3 | | | $ | 266.7 | | | $ | — | | | $ | 696.0 | |
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| December 31, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
| (in millions) |
| Financial assets: | | | | | | | |
| Cash, cash equivalents, and restricted cash | $ | 232.8 | | | $ | — | | | $ | — | | | $ | 232.8 | |
| Fixed maturities available-for-sale: | | | | | | | |
| U.S. government and agencies | 24.6 | | | — | | | — | | | 24.6 | |
| States and other territories | — | | | 10.9 | | | — | | | 10.9 | |
| Corporate securities | — | | | 131.5 | | | — | | | 131.5 | |
| Foreign securities | — | | | — | | | — | | | — | |
| Residential mortgage-backed securities | — | | | 20.0 | | | — | | | 20.0 | |
| Commercial mortgage-backed securities | — | | | 6.9 | | | — | | | 6.9 | |
| Asset backed securities | — | | | 11.8 | | | — | | | 11.8 | |
| Total fixed maturities available-for-sale | 24.6 | | | 181.1 | | | — | | | 205.7 | |
| Short-term investments | | | | | | | |
| U.S. government and agencies | 118.5 | | | — | | | — | | | 118.5 | |
| Commercial paper | — | | | 17.5 | | | — | | | 17.5 | |
| Corporate securities | — | | | 31.6 | | | — | | | 31.6 | |
| Total short-term investments | 118.5 | | | 49.1 | | | — | | | 167.6 | |
| Total financial assets | $ | 375.9 | | | $ | 230.2 | | | $ | — | | | $ | 606.1 | |
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| Financial liabilities: | | | | | | | |
| Contingent consideration liability | $ | — | | | $ | — | | | $ | 11.7 | | | $ | 11.7 | |
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| Total financial liabilities | $ | — | | | $ | — | | | $ | 11.7 | | | $ | 11.7 | |
The Company’s policy is to recognize transfers into and transfers out of fair value hierarchy levels at the end of each reporting period. There were no other transfers between levels in the fair value hierarchy during the years ended December 31, 2025.
Contingent Consideration
The contingent consideration, relating to the Company’s 2019 acquisition of North American Advantage Insurance Services, LLC is re-valued to fair value at the end of each reporting period using the present value of future payments based on an estimate of revenue and customer renewals of the acquiree. North American Advantage Insurance Services, LLC’s ultimate parent company was Lennar Corporation, a related party of the Company. The contingent consideration liability was part of the net assets transferred in the sale of the Company’s homebuilder distribution network. See Note 18, Acquisitions and Dispositions for further details.
Non-Recurring Fair Value Measurements
The Company has a 19.2% ownership stake in First Connect Insurance Services (“First Connect”), a non-public company. The Company estimates the fair value on a non-recurring basis using the fair value of First Connect’s common stock, as applicable. Because of the nature of the unobservable inputs, the Company classifies this retained interest as Level 3 in the fair value hierarchy. The fair value of the Company’s investment was $4.5 million and $4.1 million as of December 31, 2025 and 2024, is included in Other Assets on the consolidated balance sheets. See Note 18, Acquisitions and Dispositions for further details.
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.