| DECONSOLIDATION OF BRIGHT HEALTHCARE INSURANCE COMPANY OF TEXAS | DECONSOLIDATION OF BRIGHT HEALTHCARE INSURANCE COMPANY OF TEXAS On November 29, 2023, BHIC-Texas (the “Deconsolidated Entity”) was placed into liquidation and the Texas Department of Insurance was appointed as receiver. The Deconsolidated Entity’s financial results are included in the Company’s consolidated results through November 28, 2023, the day prior to the date of the receivership. However, under ASC 810, consolidation of a majority-owned subsidiary is precluded where control of the subsidiary does not rest with the majority owners. Once the Texas Department of Insurance was appointed as receiver of BHIC-Texas we concluded the Company no longer controlled the subsidiary, and we deconsolidated BHIC-Texas as of that date. The deconsolidation of BHIC-Texas resulted in certain related party balances that had previously been eliminated upon consolidation to become liabilities of the Company. In 2022, BHIC-Texas entered into a risk share contract with a different NeueHealth affiliate, whereby losses incurred at BHIC-Texas over a specified medical loss ratio target were transferred from BHIC-Texas to the affiliated entity. On November 29, 2023 the accrued loss of BHIC-Texas related to the risk share contract was $124.0 million. Upon deconsolidation of BHIC-Texas, this liability is required to be recorded as risk share payable to deconsolidated entity on the Consolidated Balance Sheet. The corresponding receivable on BHIC-Texas was included in our carrying value evaluation described below. The table below presents the balance sheet of BHIC-Texas on November 29, 2023, the date the Deconsolidated Entity was placed into receivership. Cash and cash equivalents $ 60,560 Prepaids and other current assets 1,522 Risk Share Receivable 123,981 Total Assets $ 186,063 Accounts payable 135 Medical costs payable 3,283 Other current liabilities 1,523 Risk adjustment payable 89,638 Total Liabilities $ 94,579 Additional paid in capital 204,753 Accumulated deficit (113,269) Total Equity $ 91,484 Total Liabilities and Equity $ 186,063 Under ASC 810, this loss of control would likely trigger a gain or loss for the parent as the parent would remeasure its retained noncontrolling investment at fair value. Upon deconsolidation, the Company valued its investment in BHIC-Texas to be $91.5 million , which is equivalent to the Deconsolidated Entity's carrying value. Upon valuing the investment in BHIC-Texas we assessed the current expected credit loss associated with the underlying receivables; as a result of our analysis we recorded a full valuation allowance on the investment due to uncertainties related to the collection of the risk share receivable. The $91.5 million bad debt expense within the discontinued Bright HealthCare - Commercial reporting segment is recorded within net loss from discontinued operations on the consolidated statements of income (loss). In April 2023, we announced that we were exploring strategic alternatives for our California Medicare Advantage business, the Bright HealthCare reporting segment, with the focus on a potential sale. At that time, we met the criteria for “held for sale,” in accordance with ASC 205-20. This represents a strategic shift that will have a material impact on our business and financial results. As such, we have reflected amounts relating to Bright HealthCare as a disposal group as part of discontinued operations. On June 30, 2023, the Company entered into the Molina Purchase Agreement to sell its California Medicare Advantage business, which consists of Brand New Day and Central Health Plan. On December 13, 2023, the Company, Molina, BHCC, CHP and BND amended the Molina Purchase Agreement, pursuant to which, the parties agreed to amend the total purchase considerations to $500.0 million subject to certain contingencies and tangible net equity (“TNE”) adjustments. The transaction was consummated on January 1, 2024. In October 2022, we announced that we will no longer offer commercial plans through our Bright HealthCare - Commercial segment in 2023. As a result, we exited the Commercial marketplace effective December 31, 2022. We determined this exit represented a strategic shift that will have a material impact on our business and financial results that requires presentation as discontinued operations. The Bright HealthCare - Commercial segment is also inclusive of our MA Legacy business; all periods presented have been recast to reflect this presentation. While we are no longer offering plans in the Commercial marketplace as of December 31, 2022, we continue to have involvement in the states where we formerly operated in as we support run out activities of medical claims incurred in the 2022 plan year and perform other activities necessary to wind down our operations in each state, including making payments of 2022 risk adjustment payable liabilities during the third quarter of 2023. We are substantially complete with medical claim payments as of the end of 2023, and we will continue to make remaining medical claim payments and payments towards the remaining risk adjustment obligations through 2024 and early 2025. Our discontinued operations are also inclusive of our DocSquad business that was sold in March 2023; this is presented within the column labeled Other in the tables below. The discontinued operations presentation has been retrospectively applied to all prior periods presented. The financial results of discontinued operations by major line item for the years ended December 31 were as follows (in thousands) : For the year ending December 31, 2023 Bright HealthCare - Commercial Bright HealthCare Other Total Revenue: Premium revenue $ (18,129) $ 1,728,182 $ — $ 1,710,053 Service revenue 30 — 2,383 2,413 Investment income (loss) 57,415 7,419 — 64,834 Total revenue from discontinued operations 39,316 1,735,601 2,383 1,777,300 Operating expenses: Medical costs 137,239 1,621,696 — 1,758,935 Operating costs 118,870 222,460 2,380 343,710 Bad debt expense 97,141 93 92 97,326 Restructuring charges 11,620 5 1 11,626 Goodwill impairment — 186,150 — 186,150 Intangible assets impairment — — — — Depreciation and amortization — 5,871 — 5,871 Total operating expenses from discontinued operations 364,870 2,036,275 2,473 2,403,618 Operating loss from discontinued operations (325,554) (300,674) (90) (626,318) Interest expense 11,608 — — 11,608 Loss from discontinued operations before income taxes (337,162) (300,674) (90) (637,926) Income tax expense (benefit) 140 — — 140 Net loss from discontinued operations $ (337,302) $ (300,674) $ (90) $ (638,066) For the year ending December 31, 2022 Bright HealthCare - Commercial Bright HealthCare Other Total Revenue: Premium revenue $ 4,064,119 $ 1,586,548 $ — $ 5,650,667 Service revenue 148 — 8,411 8,559 Investment income (loss) (41,221) 410 — (40,811) Total revenue from discontinued operations 4,023,046 1,586,958 8,411 5,618,415 Operating expenses: Medical costs 3,808,006 1,475,683 — 5,283,689 Operating costs 916,048 190,549 25,633 1,132,230 Bad debt expense 20,271 194 556 21,021 Restructuring charges 50,748 445 2,072 53,265 Goodwill impairment 4,147 70,017 1,208 75,372 Intangible assets impairment 6,720 — — 6,720 Depreciation and amortization 145 17,702 2,018 19,865 Total operating expenses from discontinued operations 4,806,085 1,754,590 31,487 6,592,162 Operating loss from discontinued operations (783,039) (167,632) (23,076) (973,747) Other income — — 799 799 Loss from discontinued operations before income taxes (783,039) (167,632) (22,277) (972,948) Income tax expense (benefit) 1,674 3 13 1,690 Net loss from discontinued operations $ (784,713) $ (167,635) $ (22,290) $ (974,638) The following table presents cash flows from operating and investing activities for discontinued operations (in thousands) : For the years ending December 31, 2023 2022 Cash provided by (used in) operating activities - discontinued operations $ (2,656,876) $ 362,695 Cash provided by (used in) investing activities - discontinued operations 1,127,673 (466,385) Assets and liabilities of discontinued operations were as follows (in thousands) : December 31, 2023 Bright HealthCare - Commercial Bright HealthCare Total Assets Current assets: Cash and cash equivalents $ 159,769 $ 128,212 $ 287,981 Short-term investments 9,163 20,218 29,381 Accounts receivable, net of allowance 1,430 51,929 53,359 Prepaids and other current assets 7,838 114,532 122,370 Goodwill — 172,543 172,543 Intangible assets, net — 138,982 138,982 Property, equipment, and capitalized software, net — 17,954 17,954 Current assets of discontinued operations 178,200 644,370 822,570 Total assets of discontinued operations $ 178,200 $ 644,370 $ 822,570 Liabilities Current liabilities: Medical costs payable $ 31,881 $ 272,138 $ 304,019 Accounts payable 25,648 7,719 33,367 Risk adjustment payable 291,146 — 291,146 Other current liabilities 28,045 43,181 71,226 Current liabilities of discontinued operations 376,720 323,038 699,758 Total liabilities of discontinued operations $ 376,720 $ 323,038 $ 699,758 December 31, 2022 Bright HealthCare - Commercial Bright HealthCare Other Total Assets Current assets: Cash and cash equivalents $ 1,469,577 $ 244,616 $ 1,091 $ 1,715,284 Short-term investments 1,129,800 3,972 — 1,133,772 Accounts receivable, net of allowance 4,167 59,308 1,636 65,111 Prepaids and other current assets 187,818 85,479 — 273,297 Current assets of discontinued operations 2,791,362 393,375 2,727 3,187,464 Other assets: Goodwill — 358,693 — 358,693 Intangible assets, net — 144,131 — 144,131 Property, equipment, and capitalized software, net — 21,298 — 21,298 Other non-current assets — 4,995 — 4,995 Long-term assets of discontinued operations — 529,117 — 529,117 Total assets of discontinued operations $ 2,791,362 $ 922,492 $ 2,727 $ 3,716,581 Liabilities Current liabilities: Medical costs payable $ 691,221 $ 290,296 $ — $ 981,517 Accounts payable 160,707 10,858 — 171,565 Risk adjustment payable 1,942,643 1,247 — 1,943,890 Unearned revenue — — 242 242 Other current liabilities 19,373 40,002 647 60,022 Current liabilities of discontinued operations 2,813,944 342,403 889 3,157,236 Total liabilities of discontinued operations $ 2,813,944 $ 342,403 $ 889 $ 3,157,236 Revenue Recognition: Premium revenue includes revenue derived from insurance contracts of Bright HealthCare - Commercial, within the scope of ASC 944, Financial Services - Insurance . Premium revenue is recognized in the period for which services are covered. Individual policies can be terminated by a consumer without advance notice to the Company. Consumers that have unpaid premium balances for the coverage period are subject to certain termination requirements depending on whether the premium is subsidized or nonsubsidized by CMS. The Company estimates the portion of unpaid balances that will not be collected from consumers and records an allowance accordingly. For Bright HealthCare - Commercial, we record adjustments for changes to the risk adjustment balances for individual policies in premium revenue. The risk adjustment program adjusts premiums based on the demographic factors and health status of each consumer as derived from current-year medical diagnoses as reported throughout the year. Under the risk adjustment program, a risk score is assigned to each covered consumer to determine an average risk score at the individual and small-group level by legal entity in a particular market in a state. Additionally, an average risk score is determined for the entire subject population for each market in each state. Settlements are determined on a net basis by legal entity and state and are made in the middle of the year following the end of the contract year. Each health insurance issuer’s average risk score is compared to the state’s average risk score. Risk adjustment is subject to audit by the Department of Health and Human Services (“HHS”), which could result in future payments applicable to benefit years. The Company, in conjunction with the MA program, covers prescription drug benefits under the Medicare Prescription Drug Benefit (“Medicare Part D”) program. Premium revenue includes CMS monthly premiums, consumer premium and CMS low-income premium subsidy for our insurance risk coverage. Premiums are recognized ratably over the period in which eligible individuals are entitled to receive covered benefits. CMS covers 80% of allowed claims costs above the defined standard true out-of-pocket threshold of $7,050 for any individual beneficiary enrolled in a Medicare Advantage plan (“MAO”). The reinsurance calculation is based on the benefit actually offered (i.e. basic or enhanced) and with CMS covering 80% of a member’s drug costs in the catastrophic phase. CMS provides upfront subsidies to MAO’s through a monthly payment in the Monthly Membership Report to cover the estimated cost of federal reinsurance on a per-member-per-month basis. Reinsurance subsidies in excess of federal reinsurance claims are paid back to CMS (a payable). If the MAO does not have enough federal reinsurance revenue to cover the federal reinsurance claims, CMS will pay the shortfall to the MAO. Premium revenue under the MA program includes CMS monthly premiums that are risk adjusted based on CMS defined formulas using consumer demographics and hierarchical condition category codes calculated based on historical data submitted to CMS on a lagged basis. Risk Adjustment Factor-related (“RAF”) premiums settle between CMS and the Company during both a midyear and final reconciliation process. Due to the lagged nature of the reconciliation and settlement, RAF-related premiums are estimated based on the lagged information that we submitted to CMS. The accuracy of the data submissions to CMS used in the RAF reconciliation are subject to CMS audit under the risk adjustment data validation audits and could result in future adjustments to premiums. As of December 31, 2023 and 2022, our MA risk adjustment receivable was $51.3 million and $62.2 million, respectively, recorded in accounts receivable within current assets of discontinued operations. Our monthly payment from CMS includes prospective subsidies to cover catastrophic reinsurance and low-income cost subsidies, and the Medicare Part D coverage gap discount that the Company must cover at the point-of-sale for prescription drugs. We are not at risk for these portions of the Medicare Part D benefit design. We account for these CMS-provided subsidies and related costs on the Consolidated Balance Sheets and ultimately settle with CMS and pharmaceutical companies during the final Medicare Part D reconciliation subsequent to the plan year. As of December 31, 2023 and 2022, we had receivables of $6.9 million and $6.7 million, respectively, recorded as prepaid and other current assets in current assets of discontinued operations, and payables of $35.0 million and $24.6 million, respectively, recorded as other current liabilities, within current liabilities of discontinued operations related to these programs. Our Medicare Part D premiums are subject to risk sharing with CMS under the risk corridor provisions. The risk corridor provisions compare costs targeted in our annual bid to actual prescription drug costs incurred. Our profit or loss is shared with or covered by CMS depending on the relative position within the risk corridor band. Changes in the risk corridor payable or receivable are recognized in premium revenue. As of December 31, 2023 and 2022, we had a risk corridor payable of $29.3 million and $15.2 million, respectively, included in other current liabilities in current liabilities of discontinued operations. The 2022 risk corridor payable was not settled as of December 31, 2023. We had no material risk corridor receivable as of December 31, 2023 and 2022, respectively. Investments: We invest in debt securities of the U.S. government and other government agencies, corporate investment grade, money market funds and various other securities. We determine the appropriate classification of investments at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. We classify our investments in individual debt securities as available-for-sale securities or held-to-maturity securities. All available-for-sale investments maturing less than one year from the statement date that management intends to liquidate within the next year are reflected as short-term investments. Available-for-sale investments with a maturity date greater than one year are classified as long-term investments. All available-for-sale investments are measured and carried at fair value. Changes in unrealized holding gains and losses on available-for-sale securities are reflected in other comprehensive income (loss). Realized gains and losses for all investments are included in investment income. The basis for determining realized gains and losses is the specific-identification method. Interest on debt securities is recognized in investment income when earned. Premiums and discounts are amortized/accreted using methods that result in a constant yield over the securities’ expected lives. Beginning January 1, 2020, we adopted the new current expected credit losses (“CECL”) model. The CECL model retained many similarities from the previous OTTI model, except it eliminated the length of time over which the fair value had been less than cost from consideration in the impairment analysis. Also, under the CECL model, expected losses on available-for-sale debt securities are recognized through an allowance for credit losses rather than as a reduction in the amortized cost of the securities. For debt securities whose fair value is less than their amortized cost which we do not intend to sell or are not required to sell, we evaluate the expected cash flows to be received as compared to amortized cost and determine if an expected credit loss has occurred. In the event of an expected credit loss, only the amount of the impairment associated with the expected credit loss is recognized in income with the remainder, if any, of the loss recognized in other comprehensive income (loss). To the extent we have the intent to sell the debt security, or it is more likely than not we will be required to sell the debt security, before recovery of our amortized cost basis, we recognize an impairment loss in income in an amount equal to the full difference between the amortized cost basis and the fair value. Potential expected credit loss impairment is considered using a variety of factors, including the extent to which the fair value has been less than cost; adverse conditions specifically related to the industry, geographic area or financial condition of the issuer or underlying collateral of a debt security; changes in the quality of the debt security's credit enhancement; payment structure of the debt security; changes in credit rating of the debt security by the rating agencies; failure of the issuer to make scheduled principal or interest payments on the debt security and changes in prepayment speeds. For debt securities, we take into account expectations of relevant market and economic data. We estimate the amount of the expected credit loss component of a debt security as the difference between the amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate of future cash flows discounted at the implicit interest rate at the date of purchase. The expected credit loss cannot exceed the full difference between the amortized cost basis and the fair value. Accrued interest receivable relating to our debt securities is presented within prepaids and other current assets of current assets of discontinued operations. We do not measure an allowance for credit losses on accrued interest receivable. We recognize interest receivable write offs as a reversal of interest income. We had no write offs of accrued interest receivable in the years ended December 31, 2023 and 2022. Medical Costs and Medical Costs Payable: In developing our medical costs payable estimates, we apply completion factors to actual claims adjudicated-to-date to estimate the expected amount of ultimate incurred claims for those months, and also review our remaining claims inventory to further validate expected medical costs. These estimates may change as actuarial methods change or as underlying facts upon which the estimates are based change. Management believes the amount of medical costs payable is the best estimate of our liability as of December 31, 2023; however, actual payments may differ from those established estimates. Restricted Investments and Statutory Deposits: The regulated insurance entities of NeueHealth are required to, among other things, hold certain statutory deposits and comply with certain minimum capital requirements, such as risk-based capital requirements, under applicable state regulations. Statutory deposits are classified as held-to-maturity investments and are carried at cost. The Company’s regulated legal entities held the required deposit amounts at December 31, 2023 and 2022, totaling $6.8 million and $8.6 million , respectively. The statutory deposits are principally held in U.S. Treasury securities within a custodial or controlled account with a custodial trustee and are included primarily in short-term investments and long-term investments, consistent with classification of other similar invested assets, in the Consolidated Balance Sheets. Reinsurance Recoveries: We have a quota share agreement with RGA, an alien unauthorized reinsurer, which cedes proportional percentages of premiums and medical costs of covered business of the Company, with the difference as an experience refund of ceded premiums, less a ceding fee paid to the reinsurer. Coverage includes comprehensive individual commercial policies in Colorado, Nebraska, Oklahoma and Florida. Effective January 1, 2021, we entered into a quota share agreement with the Canada Life Assurance Company, an alien unauthorized reinsurer, which cedes proportional percentages of premiums and medical costs of covered business of the Company, with the difference as an experience refund of ceded premiums, less a ceding fee paid to the reinsurer. Coverage includes comprehensive individual commercial policies in Florida. Deposit accounting is used for this arrangement and only ceding fees are recognized in the Consolidated Statements of Income (Loss) for the years ended December 31, 2023 and 2022, respectively. Within our Medicare Advantage business we have an agreement with Swiss Re Life & Health America, Inc. (“Swiss Re”) in which Swiss Re provides excess loss reinsurance coverage to the Company on individuals covered under our individual and small group policies. Effective January 1, 2021 we entered an agreement with RGA Reinsurance Company (“RGA”) in which RGA provides loss reinsurance coverage to the Company on individuals covered under our MA polices. Receivables from reinsurers under these agreements totaled $10.6 million and $14.9 million as of December 31, 2023 and 2022, respectively, and are recorded in prepaids and other current assets within current assets of discontinued operations in the Consolidated Balance Sheets. Payables for reinsurance premiums and ceding fees of $0.5 million and $4.7 million are recorded as other current liabilities within current liabilities of discontinued operations in the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively. Net reinsurance recoveries (net ceded premiums) of $3.4 million and $10.6 million were recorded as a reduction of medical costs within loss from discontinued operations in the Consolidated Statements of Income (Loss) for the years ended December 31, 2023 and 2022, respectively. Provider Risk Sharing: Our MA insurance business in California maintains a risk-sharing program with contracted primary care providers and hospitals. Risk-sharing payables of $30.7 million and $30.6 million for our MA insurance business in California and risk-sharing receivables of $28.7 million and $17.8 million for agreements between our provider practices and insurers were recorded as of December 31, 2023 and 2022, respectively. Risk-sharing payables are presented within medical costs payable of our current liabilities of discontinued operations while risk-sharing receivables are presented in prepaids and other current assets of our current assets of discontinued operations. Premium Deficiency Reserve: Premium deficiency reserve (“PDR”) liabilities are established when it is probable that expected future claims and maintenance expenses will exceed future premium and reinsurance recoveries on existing medical insurance contracts, including consideration of investment income. We assess if a PDR liability is needed through review of current results and forecasts. For purposes of determining premium deficiency losses, contracts are grouped consistent with our method of acquiring, servicing, and measuring the profitability of such contracts. As of December 31, 2023 and 2022 we accrued no PDR liability. Goodwill and Other Intangible Assets: On December 13, 2023 we announced the $100.0 million decrease in the purchase price of our California MA business from $600.0 million to $500.0 million; we identified this decrease in purchase price as an event that indicated the carrying value of our Bright HealthCare reporting unit may not be recoverable. As such we performed an interim impairment test as of December 31, 2023. To estimate the fair value of the Bright HealthCare reporting unit we reduced the $500.0 million purchase price by $175.8 million, the amount subject to contingencies and TNE adjustments that create uncertainties in what will be the final adjusted purchase prices as well as the transaction costs incurred to complete the sale. As a result of the decreased purchase price , we recognized a $186.2 million goodwill impairment related to our Bright HealthCare reporting unit within discontinued operations f or the year ended December 31, 2023 . For the year ended December 31, 2022, we recognized a $70.0 million goodwill impairment of the Bright HealthCare reporting unit primarily driven by an increase in the discount rate, which was impacted by higher interest rates and other market factors. The Company classifies its valuation of the held for sale Bright Healthcare reporting unit as Level 1 fair value because the adjusted purchase price serves as a quoted price for the exact disposal group. Restructuring Charges: As a result of the strategic changes, we announced and have taken actions to restructure the Company’s workforce and reduce expenses based on our updated business model. Restructuring charges within our discontinued operations for the years ended December 31, 2023, and 2022 were as follows (in thousands): For the years ending December 31, 2023 2022 Employee termination benefits 3,743 16,097 Long-lived asset impairments 8,398 7,126 Contract termination and other costs (515) 30,042 Total discontinued operations restructuring charges $ 11,626 $ 53,265 Restructuring accrual activity recorded by major type for the years ended December 31, 2023, and 2022 was as follows; employee termination benefits are within Other current liabilities of discontinued operations while contract termination costs are within Accounts payable of discontinued operations (in thousands) : Employee Termination Benefits Contract Termination Costs Total Balance at January 1, 2023 $ 16,053 $ 29,053 $ 45,106 Charges 3,743 (515) 3,228 Cash payments (16,929) (6,046) (22,975) Balance at December 31, 2023 $ 2,867 $ 22,492 $ 25,359 Employee Termination Benefits Contract Termination Costs Total Balance at January 1, 2022 $ — $ — $ — Charges 16,053 29,053 45,106 Cash payments — — — Balance at December 31, 2022 $ 16,053 $ 29,053 $ 45,106 Fixed Maturity Securities: Available-for-sale securities within our discontinued operations are reported at fair value as of December 31, 2023 and 2022. Held-to-maturity securities are reported at amortized cost as of December 31, 2023 and 2022. The following is a summary of our investment securities as of December 31, (in thousands) : 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Carrying Value Cash equivalents $ 150,939 $ — $ — $ 150,939 Available for sale: U.S. government and agency obligations 1,557 — (100) 1,457 Corporate obligations 615 — (11) 604 Certificates of deposit 19,653 — — 19,653 Mortgage-backed securities 951 — (63) 888 Total available-for-sale securities 22,776 — (174) 22,602 Held to maturity: U.S. government and agency obligations 6,503 1 (59) 6,445 Certificates of deposit 334 — — 334 Total held-to-maturity securities 6,837 1 (59) 6,779 Total investments $ 180,552 $ 1 $ (233) $ 180,320 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Carrying Value Cash equivalents $ 963,062 $ 32 $ — $ 963,094 Available for sale: U.S. government and agency obligations 372,244 1 (3,239) 369,006 Corporate obligations 520,619 521 (714) 520,426 State and municipal obligations 10,308 — (96) 10,212 Certificates of deposit 12,012 — (2) 12,010 Mortgage backed securities 154,167 46 (156) 154,057 Asset backed securities 59,289 — — 59,289 Other 386 — (14) 372 Total available-for-sale securities 1,129,025 568 (4,221) 1,125,372 Held to maturity: U.S. government and agency obligations 6,622 — (158) 6,464 Certificates of deposit $ 1,936 $ — $ — $ 1,936 Total held-to-maturity securities $ 8,558 $ — $ (158) $ 8,400 Total investments $ 2,100,645 $ 600 $ (4,379) $ 2,096,866 As of December 31, 2023, we believe that we will collect the principal and interest due on our debt securities that have an amortized cost in excess of fair value. The unrealized losses were primarily caused by interest rate increases and not by unfavorable changes in the credit quality associated with these securities. As of December 31, 2022, we concluded that it was more likely than not that we would have to sell some of the securities before recovering the amortized cost basis due to our decision to exit the commercial business. We recognized an impairment of $67.7 million in our available-for-sale securities portfolio. This impairment is related to the decrease in the fair value of debt securities primarily driven by an increase in market interest rates since the time the securities were purchased. At each reporting period, we evaluate securities for impairment when the fair value of the investment is less than its amortized cost. We evaluated the underlying credit quality and credit ratings of the issuers, noting no significant deterioration since purchase. Fair Value Measurements: The Fair Value Measurements and Disclosures topic in FASB ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures of fair value measurements, which applies to all assets and liabilities measured on a fair value basis. The standard establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Basis of fair value measurement: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities Level 2: Quoted prices for similar assets or liabilities in active markets or quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity) There were no investments in Level 3 securities and no transfers in or out of Level 3 financial assets or liabilities as of and during the years ended December 31, 2023 or 2022. Nonfinancial assets and liabilities or financial assets and liabilities that are measured at fair value on a nonrecurring basis are subject to fair value adjustments only in certain circumstances, such as when the Company records an impairment. There were no significant fair value adjustments for these assets and liabilities recorded during the years ended December 31, 2023 or 2022. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following methods and as |
