Ethos Technologies Inc. Fair Value Disclosure
5. Fair Value Measurement
Certain assets and liabilities are required to be recorded at fair value on a recurring basis.
The accounting guidance for fair value measurements prioritizes valuation methodologies based on the reliability of the inputs in the following three-tier value hierarchy:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Assets and liabilities valued based on observable market data for similar instruments, such as quoted prices for similar assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.
The Company applied the following methods and assumptions in estimating its fair value measurements. The Company’s investments in U.S. Government bonds are classified as Level 1 within the fair value hierarchy given that they are valued based on quoted market prices for identical assets in active markets. Agency bonds, municipal bonds, and corporate bonds are classified as Level 2 within the fair value hierarchy because they are valued using inputs other than quoted prices in active markets that are observable directly or indirectly. Accounts receivable and accounts payable balances approximate fair value due to their generally short-term maturities.
Financial instruments measured at fair value are as follows (in thousands):
December 31, 2025 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
U.S. government bonds |
|
$ |
9,234 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,234 |
|
Corporate debt securities |
|
|
— |
|
|
|
45,173 |
|
|
|
— |
|
|
|
45,173 |
|
Agency bond |
|
|
— |
|
|
|
11,937 |
|
|
|
— |
|
|
|
11,937 |
|
Total assets measured at fair value on a recurring basis |
|
$ |
9,234 |
|
|
$ |
57,110 |
|
|
$ |
— |
|
|
$ |
66,344 |
|
December 31, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
U.S. government bonds |
|
$ |
32,564 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
32,564 |
|
Corporate debt securities |
|
|
— |
|
|
|
48,352 |
|
|
|
— |
|
|
|
48,352 |
|
Municipal bond |
|
|
— |
|
|
|
3,977 |
|
|
|
— |
|
|
|
3,977 |
|
Agency bond |
|
|
— |
|
|
|
18,388 |
|
|
|
— |
|
|
|
18,388 |
|
Total investments |
|
$ |
32,564 |
|
|
$ |
70,717 |
|
|
$ |
— |
|
|
$ |
103,281 |
|
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.