TRUPANION, INC.TRUP

TRUPANION, INC. Fair Value Disclosure

10-KFiled Feb 13, 20263 min read
Fair Value
Fair Value Disclosures
The following table summarizes, by major security type, the Company's assets that are measured at fair value on a recurring basis, and placement within the fair value hierarchy (in thousands):
 As of December 31, 2025
 Fair ValueLevel 1Level 2Level 3
Assets
Money market funds$46,818 $46,818 $— $— 
Fixed maturities:
Mortgage-backed securities and collateralized mortgage obligations24,687 — 24,687 — 
Other asset-backed securities23,837 — 23,837 — 
Corporate bonds47,835 — 47,835 — 
U.S. Treasury securities104,158 — 104,158 — 
Total$247,335 $46,818 $200,517 $— 
 As of December 31, 2024
 Fair ValueLevel 1Level 2Level 3
Assets
Money market funds$91,534 $91,534 $— $— 
Fixed maturities:
Mortgage-backed securities and collateralized mortgage obligations12,596 — 12,596 — 
Other asset-backed securities15,956 — 15,956 — 
Corporate bonds35,623 — 35,623 — 
U.S. Treasury securities70,291 — 70,291 — 
Preferred stock investment7,916 — — 7,916 
Total$233,916 $91,534 $134,466 $7,916 
The Company measures the fair value of money market funds, classified as Level 1, based on quoted prices in active markets for identical assets. The fair values of the Company's fixed maturity investments classified as Level 2 are based on either recent trades in inactive markets or quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. Held-to-maturity investments are carried at amortized cost and the fair value and changes in unrealized gains and losses are disclosed in Note 5, Investments. The fair value of these investments is determined in the same manner as available-for-sale securities and are considered either a Level 1 or Level 2 measurement.
The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers between levels for the years ended December 31, 2025 and 2024.
The Company's preferred stock investment (see Note 6) was accounted for as an available-for-sale debt security, and measured at fair value at each balance sheet date and as of the transaction date. The estimated fair value of the preferred stock investment was a Level 3 measurement derived by discounted cash flow and market valuation techniques which utilized certain unobservable inputs such as the value of the underlying enterprise, volatility, time to liquidity and market interest rates. Significant changes in any of these unobservable inputs would result in a change in the fair value measurement.
The following table presents the change in fair value of the Company’s preferred stock investment previously carried at fair value and classified as Level 3 (in thousands):
 December 31,
 20252024
Balance at beginning of period$7,916 $5,326 
Unrealized gain included in other comprehensive income (loss)— 916 
Reversal of cumulative unrealized gain included in other comprehensive income (loss)(916)— 
Recovery of credit loss included in earnings— 1,674 
Realized gain on nonmonetary exchange of preferred stock investment in Other (income), net7,783 — 
Exchange of preferred stock for intellectual property (14,783)— 
Balance at end of period$— $7,916 
Fair Value Disclosures - Other Assets and Liabilities
The Company's other long-term assets balance also included notes receivable of $2.5 million and $4.3 million as of December 31, 2025 and 2024, respectively, recorded at their estimated collectible amount. The Company estimates that the carrying value of the notes receivable approximates the fair value. The estimated fair value represents a Level 3 measurement within the fair value hierarchy and is based on market interest rates and the assessed creditworthiness of the third party.
The Company estimates the fair value of long-term debt based upon rates currently available to the Company for debt with similar terms and remaining maturities. This is a Level 3 measurement. Based upon the terms of the debt, the carrying amount of long-term debt approximated fair value at December 31, 2025.
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Historical Timeline

Fiscal YearFiled
2025Feb 13, 2026Showing above
2024Feb 27, 2025
2023Feb 27, 2024
2022Feb 16, 2023
2021Feb 17, 2022
2020Feb 12, 2021
2019Feb 14, 2020
2018Feb 14, 2019
2017Feb 14, 2018
2016Feb 15, 2017
2015Feb 17, 2016

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.

Other Available Disclosures

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