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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period endedJune 30, 2020
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  _______________ to _______________
Commission File No. 1-13998
Insperity, Inc.

(Exact name of registrant as specified in its charter)
Delaware 76-0479645
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
19001 Crescent Springs Drive
Kingwood,Texas77339
(Address of principal executive offices)
(Registrant’s Telephone Number, Including Area Code):  (281) 358-8986
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTicker symbol(s)Name of each exchange on which registered
Common Stock, $.01 par value per shareNSPNew York Stock Exchange
Rights to Purchase Series A Junior Participating Preferred StockNSPNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See definition of “large accelerated filer,” “accelerated filer”, “non-accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerEmerging growth company
Smaller reporting company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No

As of July 27, 2020, 38,800,936 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.


TABLE OF CONTENTS
Page
Part I, Item 1.
Financial Statements
Part I, Item 2.
Part I, Item 3.
Part I, Item 4.
Part II, Item 1.
Part II, Item 1A.
Part II, Item 2.
Part II, Item 6.


FINANCIAL STATEMENTS
(Unaudited)
PART I
Item 1. Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)June 30, 2020December 31, 2019
Assets
Cash and cash equivalents$459,399  $367,342  
Restricted cash45,216  49,295  
Marketable securities31,952  34,728  
Accounts receivable, net473,935  465,779  
Prepaid insurance23,494  10,418  
Other current assets34,651  43,493  
Income taxes receivable  3,691  
Total current assets1,068,647  974,746  
Property and equipment, net of accumulated depreciation177,762  147,706  
Right-of-use leased assets57,421  56,886  
Prepaid health insurance9,000  9,000  
Deposits – health insurance8,100  8,100  
Deposits – workers’ compensation177,944  175,913  
Goodwill and other intangible assets, net12,708  12,714  
Deferred income taxes, net  3,956  
Other assets6,151  5,975  
Total assets$1,517,733  $1,394,996  
Liabilities and stockholders' equity
Accounts payable$2,885  $4,565  
Payroll taxes and other payroll deductions payable219,492  277,248  
Accrued worksite employee payroll cost409,068  401,859  
Accrued health insurance costs29,714  21,180  
Accrued workers’ compensation costs48,618  52,868  
Accrued corporate payroll and commissions41,507  52,612  
Other accrued liabilities60,742  58,713  
Income taxes payable28,537    
Total current liabilities840,563  869,045  
Accrued workers’ compensation cost, net of current197,501  193,609  
Long-term debt369,400  269,400  
Operating lease liabilities, net of current60,815  58,863  
Deferred income taxes, net712    
Other accrued liabilities, net of current4,104    
Total noncurrent liabilities632,532  521,872  
Commitments and contingencies    
Common stock555  555  
Additional paid-in capital54,783  48,141  
Treasury stock, at cost(592,313) (544,102) 
Retained earnings581,613  499,485  
Total stockholders’ equity44,638  4,079  
Total liabilities and stockholders’ equity$1,517,733  $1,394,996  
See accompanying notes.
Insperity | 2020 Second Quarter Form 10-Q
4

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended June 30,Six Months Ended June 30,
(in thousands, except per share amounts)2020201920202019
Revenues(1)
$993,366  $1,043,316  $2,222,849  $2,196,326  
Payroll taxes, benefits and workers’ compensation costs
773,117  869,581  1,768,578  1,795,874  
Gross profit220,249  173,735  454,271  400,452  
Salaries, wages and payroll taxes90,710  74,696  177,211  158,076  
Stock-based compensation10,694  8,256  17,246  14,296  
Commissions7,475  7,741  15,935  14,693  
Advertising5,720  7,548  10,553  12,579  
General and administrative expenses24,755  29,866  59,608  63,028  
Depreciation and amortization7,908  6,908  15,510  13,599  
Total operating expenses147,262  135,015  296,063  276,271  
Operating income72,987  38,720  158,208  124,181  
Other income (expense):  
Interest income369  2,802  2,248  6,047  
Interest expense(2,219) (1,639) (4,581) (3,320) 
Income before income tax expense71,137  39,883  155,875  126,908  
Income tax expense19,286  11,327  41,932  22,063  
Net income$51,851  $28,556  $113,943  $104,845  
Less distributed and undistributed earnings allocated to participating securities
(276) (309) (724) (1,183) 
Net income allocated to common shares$51,575  $28,247  $113,219  $103,662  
Net income per share of common stock
Basic$1.34  $0.69  $2.93  $2.55  
Diluted$1.33  $0.69  $2.91  $2.54  
 ____________________________________
(1)Revenues are comprised of gross billings less worksite employee (“WSEE”) payroll costs as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)2020201920202019
Gross billings$6,355,683  $6,377,014  $13,792,437  $13,248,684  
Less: WSEE payroll cost5,362,317  5,333,698  11,569,588  11,052,358  
Revenues$993,366  $1,043,316  $2,222,849  $2,196,326  

See accompanying notes.
Insperity | 2020 Second Quarter Form 10-Q
5

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
(in thousands)20202019
Cash flows from operating activities
Net income$113,943  $104,845  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization15,510  13,599  
Stock-based compensation17,246  14,296  
Deferred income taxes4,668  8,260  
Changes in operating assets and liabilities:
Accounts receivable(8,156) (23,512) 
Prepaid insurance(13,076) (16,058) 
Other current assets8,842  (2,073) 
Other assets and ROU assets6,979  (2,033) 
Accounts payable(1,680) (4,074) 
Payroll taxes and other payroll deductions payable(57,756) (16,472) 
Accrued worksite employee payroll expense7,209  43,553  
Accrued health insurance costs8,534  (14,777) 
Accrued workers’ compensation costs(357) 2,133  
Accrued corporate payroll, commissions and other accrued liabilities(19,273) (22,878) 
Income taxes payable/receivable32,228  (12,381) 
Total adjustments918  (32,417) 
Net cash provided by operating activities114,861  72,428  
Cash flows from investing activities  
Marketable securities:  
Purchases(25,438) (60,609) 
Proceeds from dispositions484  5,499  
Proceeds from maturities27,625  55,110  
Property and equipment:
Purchases(39,466) (17,207) 
Net cash used in investing activities(36,795) (17,207) 
Cash flows from financing activities
Purchase of treasury stock(61,230) (38,796) 
Dividends paid(31,074) (24,740) 
Borrowings under revolving line of credit100,000  25,000  
Other4,247  3,763  
Net cash provided by (used in) financing activities11,943  (34,773) 
Net increase in cash, cash equivalents and restricted cash90,009  20,448  
Cash, cash equivalents and restricted cash beginning of period592,550  535,474  
Cash, cash equivalents and restricted cash end of period$682,559  $555,922  
Insperity | 2020 Second Quarter Form 10-Q
6

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Six Months Ended June 30,
(in thousands)20202019
Supplemental schedule of cash and cash equivalents and restricted cash
Cash and cash equivalents$367,342  $326,773  
Restricted cash49,295  42,227  
Deposits – workers’ compensation175,913  166,474  
Cash, cash equivalents and restricted cash beginning of period$592,550  $535,474  
Cash and cash equivalents$459,399  $324,926  
Restricted cash45,216  43,268  
Deposits – workers’ compensation177,944  187,728  
Cash, cash equivalents and restricted cash end of period$682,559  $555,922  
Supplemental operating lease cash flow information:
ROU assets obtained in exchange for lease obligations$10,196  $11,894  

See accompanying notes.
Insperity | 2020 Second Quarter Form 10-Q
7

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2020 and 2019

Common Stock IssuedAdditional Paid-In CapitalTreasury StockRetained Earnings and AOCITotal
(in thousands)SharesAmount
Balance at December 31, 201955,489  $555  $48,141  $(544,102) $499,485  $4,079  
Purchase of treasury stock, at cost—      (61,230)   (61,230) 
Issuance of long-term incentive awards and dividend equivalents
—    (7,088) 7,898  (810)   
Stock-based compensation expense—    13,341  3,905    17,246  
Other—    389  1,216    1,605  
Dividends paid—        (31,074) (31,074) 
Unrealized gain on marketable securities, net of tax
—        69  69  
Net income—        113,943  113,943  
Balance at June 30, 202055,489  $555  $54,783  $(592,313) $581,613  $44,638  
Balance at December 31, 201855,489  $555  $36,752  $(357,569) $397,938  $77,676  
Purchase of treasury stock, at cost—      (38,796)   (38,796) 
Issuance of long-term incentive awards and dividend equivalents
—    (7,695) 8,646  (951)   
Stock-based compensation expense—    10,776  3,520    14,296  
Other—    1,176  369    1,545  
Dividends paid—        (24,740) (24,740) 
Unrealized gain on marketable securities, net of tax
—        63  63  
Net income—        104,845  104,845  
Balance at June 30, 201955,489  $555  $41,009  $(383,830) $477,155  $134,889  
Insperity | 2020 Second Quarter Form 10-Q
8

FINANCIAL STATEMENTS
(Unaudited)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
For the Three Months Ended June 30, 2020 and 2019
Common Stock IssuedAdditional Paid-In CapitalTreasury StockRetained Earnings and AOCITotal
(in thousands)SharesAmount
Balance at March 31, 202055,489  $555  $46,327  $(595,487) $545,295  $(3,310) 
Purchase of treasury stock, at cost—      (27)   (27) 
Stock-based compensation expense—    8,448  2,246    10,694  
Other—    8  955    963  
Dividends paid—        (15,517) (15,517) 
Unrealized loss on marketable securities, net of tax
—        (16) (16) 
Net income—        51,851  51,851  
Balance at June 30, 202055,489  $555  $54,783  $(592,313) $581,613  $44,638  
Balance at March 31, 201955,489  $555  $33,833  $(376,097) $460,903  $119,194  
Purchase of treasury stock, at cost—      (9,759)   (9,759) 
Stock-based compensation expense—    6,436  1,820    8,256  
Other—    740  206    946  
Dividends paid—        (12,354) (12,354) 
Unrealized gain on marketable securities, net of tax
—        50  50  
Net income—        28,556  28,556  
Balance at June 30, 201955,489  $555  $41,009  $(383,830) $477,155  $134,889  
See accompanying notes.
Insperity | 2020 Second Quarter Form 10-Q
9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.Basis of Presentation
Insperity, Inc., a Delaware corporation (“Insperity,” “we,” “our,” and “us”), provides an array of human resources (“HR”) and business solutions designed to help improve business performance. Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as Workforce Optimization® and Workforce SynchronizationTM solutions (together, our “PEO HR Outsourcing solutions”), which encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management solution, the Insperity PremierTM platform.
In addition to our PEO HR Outsourcing solutions, we also offer a comprehensive traditional payroll and human capital management solution, known as Workforce Acceleration. We also offer a number of other business performance solutions, including Time and Attendance, Performance Management, Organizational Planning, Recruiting Services, Employment Screening, Expense Management Services, Retirement Services and Insurance Services, many of which are offered as a cloud-based software solution. These other products or services are offered separately or with our other solutions.
The Consolidated Financial Statements include the accounts of Insperity, Inc. and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
The accompanying Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements at and for the year ended December 31, 2019. Our Condensed Consolidated Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information or footnotes required by GAAP for complete financial statements. Our Condensed Consolidated Balance Sheet at June 30, 2020 and our Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019, our Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019 and our Consolidated Statements of Stockholders’ Equity for the six month periods ended June 30, 2020 and 2019, have been prepared by us without audit. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows, have been made.
The results of operations for the interim periods are not necessarily indicative of the operating results for a full year or of future operations.

2.Accounting Policies
Health Insurance Costs
We provide group health insurance coverage to our WSEEs in our PEO HR Outsourcing solutions through a national network of carriers, including UnitedHealthcare (“United”), UnitedHealthcare of California, Kaiser Permanente, Blue Shield of California, HMSA BlueCross BlueShield of Hawaii, and Tufts, all of which provide fully insured policies or service contracts.
The policy with United provides approximately 87% of our health insurance coverage. While the policy with United is a fully-insured plan, as a result of certain contractual terms, we have accounted for this plan since its inception using a partially self-funded insurance accounting model. Effective January 1, 2020, under the amended agreement with United, we no longer have financial responsibilities for a participant’s annual claim costs that exceed $1 million. Accordingly, we record the costs of the United plan, including an estimate of the incurred claims, taxes and administrative fees (collectively the “Plan Costs”) as benefits expense, which is a component of direct costs, in our Consolidated Statements of Operations. The estimated incurred claims are based upon: (1) the level of claims processed during the quarter; (2) estimated completion rates based upon recent claim development patterns under the plan; and (3) the number of participants in the plan, including both active and COBRA enrollees. Each reporting period, changes in the estimated ultimate costs resulting from claim trends, plan design and migration, participant
Insperity | 2020 Second Quarter Form 10-Q
10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
demographics and other factors are incorporated into the benefits costs, which requires a significant level of judgment.
Additionally, since the plan’s inception, under the terms of the contract, United establishes cash funding rates 90 days in advance of the beginning of a reporting quarter. If the Plan Costs for a reporting quarter are greater than the premiums paid and owed to United, a deficit in the plan would be incurred and a liability for the excess costs would be accrued in our Condensed Consolidated Balance Sheets. On the other hand, if the Plan Costs for the reporting quarter are less than the premiums paid and owed to United, a surplus in the plan would be incurred and we would record an asset for the excess premiums in our Condensed Consolidated Balance Sheets. The terms of the arrangement require us to maintain an accumulated cash surplus in the plan of $9.0 million, which is reported as long-term prepaid insurance. In addition, United requires a deposit equal to approximately one day of claims funding activity, which was $6.5 million at June 30, 2020, and is included in deposits - health insurance as a long-term asset on our Condensed Consolidated Balance Sheets. As of June 30, 2020, Plan Costs were less than the net premiums paid and owed to United by $19.5 million. As this amount is in excess of the agreed-upon $9.0 million surplus maintenance level, the $10.5 million difference is included in prepaid insurance, a current asset, in our Condensed Consolidated Balance Sheets. The premiums, including the additional quarterly premiums, owed to United at June 30, 2020 were $23.4 million, which is included in accrued health insurance costs, a current liability in our Condensed Consolidated Balance Sheets. Our benefits costs incurred in the first six months of 2020 included a reduction of $3.0 million for changes in estimated run-off related to prior periods. Our benefits costs incurred in the first six months of 2019 included a charge of $3.5 million for changes in estimated run-off related to prior periods.
Workers’ Compensation Costs
Our workers’ compensation coverage for our WSEEs in our PEO HR Outsourcing solutions has been provided through an arrangement with the Chubb Group of Insurance Companies or its predecessors (the “Chubb Program”) since 2007. The Chubb Program is fully insured in that Chubb has the responsibility to pay all claims incurred under the policy regardless of whether we satisfy our responsibilities. Under the Chubb Program for claims incurred on or before September 30, 2019, we have financial responsibility to Chubb for the first $1 million layer of claims per occurrence and, for claims over $1 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1 million. Chubb bears the financial responsibility for all claims in excess of these levels. Effective for claims incurred on or after October 1, 2019, we have financial responsibility to Chubb for the first $1.5 million layer of claims per occurrence and, for claims over $1.5 million, up to a maximum aggregate amount of $6 million per policy year for claims that exceed $1.5 million.
Because we bear the financial responsibility for claims up to the levels noted above, such claims, which are the primary component of our workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment.
We utilize a third-party actuary to estimate our loss development rate, which is primarily based upon the nature of WSEEs job responsibilities, the location of WSEEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our workers’ compensation claims cost estimates. During the six months ended June 30, 2020 and 2019, we reduced accrued workers’ compensation costs by $22.2 million and $19.0 million, respectively, for changes in estimated losses related to prior reporting periods. Workers’ compensation cost estimates are discounted to present value at a rate based upon the U.S. Treasury rates that correspond with the weighted average estimated claim payout period (the average discount rate utilized in the 2020 period was 0.8% and in the 2019 period was 2.3%) and are accreted over the estimated claim payment period and included as a component of direct costs in our Consolidated Statements of Operations.
Insperity | 2020 Second Quarter Form 10-Q
11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides the activity and balances related to incurred but not paid workers’ compensation claims:
Six Months Ended June 30,
(in thousands)20202019
Beginning balance, January 1,$242,904  $229,639  
Accrued claims21,888  27,299  
Present value discount, net of accretion223  (2,703) 
Paid claims(22,298) (22,727) 
Ending balance$242,717  $231,508  
Current portion of accrued claims$45,216  $43,267  
Long-term portion of accrued claims197,501  188,241  
Total accrued claims$242,717  $231,508  

The current portion of accrued workers’ compensation costs on our Condensed Consolidated Balance Sheets at June 30, 2020 includes $3.4 million of workers’ compensation administrative fees.
As of June 30, 2020 and 2019, the undiscounted accrued workers’ compensation costs were $261.4 million and $250.9 million, respectively.
At the beginning of each policy period, the workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim funds”). The level of claim funds is primarily based upon anticipated WSEE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as restricted cash, a short-term asset, while the remainder of claim funds are included in deposits – workers’ compensation, a long-term asset in our Condensed Consolidated Balance Sheets. During the first six months of 2020, we received $24.8 million for the return of excess claim funds related to the workers’ compensation program, which resulted in a net decrease to deposits – workers’ compensation. During the first six months of 2019, we funded a collateral deposit of $6.4 million for policy years prior to 2017, which increased deposits – workers’ compensation. At June 30, 2020, we had restricted cash of $45.2 million and deposits – workers’ compensation of $177.9 million.
Our estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on our Condensed Consolidated Balance Sheets.
Revenue and Direct Cost Recognition
We enter into contracts with our customers for human resources services based on a stated rate and price in the contract. Our contracts generally have a term of 12 months, but are cancellable at any time by either party with 30-days’ notice. Our performance obligations are satisfied as services are rendered each month. The term between invoicing and when our performance obligations are satisfied is not significant. Payment terms are typically due concurrently with the invoicing of our PEO services. We do not have significant financing components or significant payment terms.
Our revenue is generally recognized ratably over the payroll period as WSEEs perform their service at the client worksite. Customers are invoiced concurrently with each periodic payroll of its WSEEs. Revenues that have been recognized but unbilled of $463.1 million and $448.1 million at June 30, 2020 and December 31, 2019, respectively, are included in accounts receivable, net on our Condensed Consolidated Balance Sheets.
Pursuant to the “practical expedients” provided under Accounting Standards Update (“ASU”) No 2014-09, we expense sales commissions when incurred because the terms of our contracts generally are cancellable by either party with a 30-day notice. These costs are recorded in commissions in our Consolidated Statements of Operations.
Insperity | 2020 Second Quarter Form 10-Q
12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Our revenue for our PEO HR Outsourcing solutions by geographic region and for our other products and services offerings are as follows:
Three Months Ended June 30,Six Months Ended June 30,
(in thousands)20202019% Change20202019% Change
Northeast$273,543  $270,475  1.1 %$617,401  $581,422  6.2 %
Southeast117,013  120,148  (2.6)%258,175  250,054  3.2 %
Central177,022  179,443  (1.3)%388,314  375,196  3.5 %
Southwest222,734  244,462  (8.9)%494,658  514,294  (3.8)%
West192,310  215,639  (10.8)%439,121  448,842  (2.2)%
982,622  1,030,167  (4.6)%2,197,669  2,169,808  1.3 %
Other revenue10,744  13,149  (18.3)%25,180  26,518  (5.0)%
Total revenue$993,366  $1,043,316  (4.8)%$2,222,849  $2,196,326  1.2 %

Recently Adopted Accounting Standards
We adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) effective January 1, 2020 with no material impact. Under this standard, we estimate our reserves using information about past events, current conditions and risk characteristics of our customer when assessing risk associated with the collectability of accounts receivables, including unbilled accounts receivables. We require clients to pay invoices for service fees not later than the same day as the applicable payroll date. As such, we generally do not require collateral. As of June 30, 2020, allowance for bad debts was immaterial.

3.Cash, Cash Equivalents and Marketable Securities
The following table summarizes our cash and investments in cash equivalents and marketable securities held by investment managers and overnight investments:
June 30, 2020December 31, 2019
(in thousands)Cash & Cash EquivalentsMarketable SecuritiesTotalCash & Cash EquivalentsMarketable SecuritiesTotal
Overnight holdings$398,668  $  $398,668  $349,857  $  $349,857  
Investment holdings43,278  31,952  75,230  13,218  34,728  47,946  
Cash in demand accounts29,378    29,378  36,521    36,521  
Outstanding checks(11,925)   (11,925) (32,254)   (32,254) 
Total$459,399  $31,952  $491,351  $367,342  $34,728  $402,070  

Our cash and overnight holdings fluctuate based on the timing of clients’ payroll processing cycles. Our cash, cash equivalents and marketable securities at June 30, 2020 and December 31, 2019 included $190.9 million and $234.6 million, respectively, of funds associated with federal and state income tax withholdings, employment taxes and other payroll deductions, as well as $31.5 million and $59.6 million, respectively, in client prepayments.

4.Fair Value Measurements
We account for our financial assets in accordance with Accounting Standard Codification 820, Fair Value Measurement. This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The fair value measurement disclosures are grouped into three levels based on valuation factors:
Insperity | 2020 Second Quarter Form 10-Q
13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Level 1 - quoted prices in active markets using identical assets
Level 2 - significant other observable inputs, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs
Level 3 - significant unobservable inputs
Fair Value of Instruments Measured and Recognized at Fair Value
The following table summarizes the levels of fair value measurements of our financial assets:
June 30, 2020December 31, 2019
(in thousands)TotalLevel 1Level 2TotalLevel 1Level 2
Money market funds$439,496  $439,496  $  $363,075  $363,075  $  
U.S. Treasury bills11,197  11,197    34,728  34,728    
Municipal bonds23,205    23,205        
Total$473,898  $450,693  $23,205  $397,803  $397,803  $  

The municipal bond securities valued as Level 2 are primarily pre-refunded municipal bonds that are secured by escrow funds containing U.S. government securities. Our valuation techniques used to measure fair value for these securities during the period consisted primarily of third-party pricing services that utilized actual market data such as trades of comparable bond issues, broker/dealer quotations for the same or similar investments in active markets and other observable inputs.
The following is a summary of our available-for-sale marketable securities:
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
June 30, 2020
U.S. Treasury bills$11,170  $27  $  $11,197  
Municipal bonds20,700  56  (1) 20,755  
Total$31,870  $83  $(1) $31,952  
December 31, 2019
U.S. Treasury bills$34,716