Palomar Holdings, Inc. Fair Value Disclosure
5. Fair value measurements
The following tables present the Company’s fair value hierarchy for financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024:
December 31, 2025 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Governments |
|
$ |
— |
|
|
$ |
23,587 |
|
|
$ |
— |
|
|
$ |
23,587 |
|
U.S. States, Territories, and Political Subdivisions |
|
|
— |
|
|
|
18,862 |
|
|
|
— |
|
|
|
18,862 |
|
Special revenue excluding mortgage/asset-backed securities |
|
|
— |
|
|
|
17,465 |
|
|
|
— |
|
|
|
17,465 |
|
Corporate and other |
|
|
— |
|
|
|
608,235 |
|
|
|
— |
|
|
|
608,235 |
|
Mortgage/asset-backed securities |
|
|
— |
|
|
|
556,038 |
|
|
|
— |
|
|
|
556,038 |
|
Equity securities |
|
|
99,333 |
|
|
|
— |
|
|
|
— |
|
|
|
99,333 |
|
Cash, cash equivalents, and restricted cash |
|
|
106,892 |
|
|
|
— |
|
|
|
— |
|
|
|
106,892 |
|
Derivative assets |
|
|
9,934 |
|
|
|
— |
|
|
|
— |
|
|
|
9,934 |
|
Total assets |
|
$ |
216,159 |
|
|
$ |
1,224,187 |
|
|
$ |
— |
|
|
$ |
1,440,346 |
|
December 31, 2024 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
|
|
($ in thousands) |
|
|||||||||||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Governments |
|
$ |
— |
|
|
$ |
32,806 |
|
|
$ |
— |
|
|
$ |
32,806 |
|
U.S. States, Territories, and Political Subdivisions |
|
|
— |
|
|
|
9,778 |
|
|
|
— |
|
|
|
9,778 |
|
Special revenue excluding mortgage/asset-backed securities |
|
|
— |
|
|
|
26,634 |
|
|
|
— |
|
|
|
26,634 |
|
Corporate and other |
|
|
— |
|
|
|
475,491 |
|
|
|
— |
|
|
|
475,491 |
|
Mortgage/asset-backed securities |
|
|
— |
|
|
|
394,337 |
|
|
|
— |
|
|
|
394,337 |
|
Equity securities |
|
|
40,529 |
|
|
|
— |
|
|
|
— |
|
|
|
40,529 |
|
Cash, cash equivalents, and restricted cash |
|
|
80,539 |
|
|
|
— |
|
|
|
— |
|
|
|
80,539 |
|
Total assets |
|
$ |
121,068 |
|
|
$ |
939,046 |
|
|
$ |
— |
|
|
$ |
1,060,114 |
|
The carrying amounts of financial assets and liabilities reported in the accompanying consolidated balance sheet including cash and cash equivalents, restricted cash, receivables, reinsurance recoverable, and accounts payable and other accrued liabilities approximate fair value due to their short term-maturity. The carrying amount of the Company’s borrowings under the Federal Home Loan Bank (“FHLB”) line of credit approximates fair value as the Company borrows at a rate which is adjusted daily.
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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.