Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments that are exposed to concentrations of credit risk principally consist of cash and cash equivalents, marketable securities, accounts receivable, and contract assets – commissions receivable.
Our cash, cash equivalents, short-term marketable securities, and restricted cash are summarized as follows (in thousands):
December 31, 2023 December 31, 2022
Cash and cash equivalents (1)(2)
$ 115,722 $ 144,401
Short-term marketable securities (2)
5,930 —
Restricted cash 3,090 3,239
Total cash, cash equivalents, short-term marketable securities, and restricted cash $ 124,742 $ 147,640
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(1) We deposit our cash and cash equivalents in accounts with major banks and financial institutions and such deposits are in excess of federally insured limits. We also have deposits with a major bank in China that are denominated in both U.S. dollars and Chinese Yuan Renminbi and are not insured by the U.S. federal government.
(2) See Note 4 – Fair Value Measurements in our Notes to Consolidated Financial Statements for more information on our cash and cash equivalents and marketable securities.
Our portfolio of available-for-sale debt securities is exposed to credit and interest rate risk. See Note 4 – Fair Value Measurements in our Notes to Consolidated Financial Statements for further discussion on our available-for-sale debt securities.
As of December 31, 2023, our net contract assets – commissions receivable balance was $918.2 million. Our contracts with carriers expose us to credit risk that a financial loss could be incurred if the counterparty does not fulfill its financial obligation. While we are exposed to credit losses due to the non-performance of our counterparties, we consider the risk of this remote. We estimate our maximum credit risk in determining the contract assets – commissions receivable balance recognized on the balance sheet. We had allowances for credit losses of
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$2.1 million and $2.4 million as of December 31, 2023 and 2022, respectively.
Our total contract assets and accounts receivable as of December 31, 2023 and December 31, 2022 are summarized as follows (in thousands):
December 31, 2023 December 31, 2022
Contract assets – commissions receivable – current $ 244,663 $ 242,749
Contract assets – commissions receivable – non-current 673,514 641,555
Accounts receivable 3,993 2,633
Total contract assets and accounts receivable $ 922,170 $ 886,937
Foreign Currency Exchange Risk
Substantially all of our revenue has been derived from transactions denominated in United States Dollars. We have exposure to adverse changes in exchange rates associated with operating expenses of our foreign operations, which are denominated in Chinese Yuan Renminbi. Foreign currency fluctuations have not had a material impact historically on our results of operations; however, they may in the future. We have not engaged in any foreign currency hedging or other derivative transactions to date.
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