Schedule II - Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Financial Information of Registrant Condensed Balance Sheets

Schedule II – Condensed Financial Information of Registrant

Condensed Balance Sheets

FEDNAT HOLDING COMPANY (Parent Company Only)

December 31, 2019 and 2018

໿

	December 31,
	2019		2018
	(In thousands)
ASSETS
Investments in subsidiaries (1)	$	268,767	$	224,951
Investment securities, available-for-sale, at fair value	24,951		19,431
Equity securities, at fair value	1,751		1,490
Cash and cash equivalents	21,031		4,109
Deferred income taxes, net	1,940		786
Income taxes receivable	13,850		9,885
Note receivable and accrued interest to subsidiary (1)	18,107		—
Right-of-use assets	7,716		—
Other assets	2,878		2,436
Total assets	$	360,991	$	263,088
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Due to subsidiaries, net (1)	$	1,779	$	987
Long-term debt	98,522		44,404
Lease liabilities	7,716		—
Other liabilities	4,281		2,438
Total liabilities	112,298		47,829
Shareholders' Equity
Preferred stock	—		—
Common stock	144		128
Additional paid-in capital	167,677		141,128
Accumulated other comprehensive income (loss)	10,281		(3,750)
Retained earnings	70,591		77,753
Total shareholders’ equity	248,693		215,259
Total liabilities and shareholders' equity	$	360,991	$	263,088

(1)Eliminated in consolidation.

The accompanying note is an integral part of the condensed financial statements.

Schedule II – Condensed Financial Information of Registrant (Continued)

Condensed Statements of Earnings

FEDNAT HOLDING COMPANY (Parent Company Only)

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	Year Ended December 31,
	2019		2018		2017
	(In thousands)
Revenues:
Management fees (1)	$	2,160	$	2,608	$	2,611
Interest from subsidiaries (1)	107		—		—
Net investment income	1,757		843		501
Net realized and unrealized investment gains (losses)	448		(765)		—
Equity in income of consolidated subsidiaries	20,909		30,895		16,902
Total revenue	25,381		33,581		20,014
Costs and expenses:
General and administrative expenses	13,892		9,296		11,087
Interest expense	10,776		4,077		—
Total costs and expenses	24,668		13,373		11,087
Income (loss) before income taxes	713		20,208		8,927
Income tax expense (benefit)	(298)		5,498		3,585
Net income (loss)	1,011		14,710		5,342
Net income (loss) attributable to non-controlling interest	—		(218)		(2,647)
Net income (loss) attributable to FedNat Holding Company shareholders	$	1,011	$	14,928	$	7,989

(1)Eliminated in consolidation.

The accompanying note is an integral part of the condensed financial statements.

Schedule II – Condensed Financial Information of Registrant (Continued)

Condensed Statements of Cash Flows

FEDNAT HOLDING COMPANY (Parent Company Only)

໿

	Year Ended December 31,
	2019		2018		2017
	(In thousands)
Cash flow from operating activities:
Net income (loss)	$	1,011	$	14,710	$	5,342
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net realized and unrealized investment (gains) losses	(448)		765		—
Equity in undistributed income of consolidated subsidiaries (1)	(20,909)		(30,895)		(16,902)
Amortization of investment premium or discount, depreciation and amortization	369		141		88
Loss (gain) on early extinguishment of debt	3,575		—		—
Share-based compensation	1,050		1,183		2,846
Changes in operating assets and liabilities:
Income taxes, net	(5,379)		(2,371)		4,354
Due to subsidiaries, net (1)	3,044		(9,317)		20,468
Other, net	998		1,497		1,450
Net cash provided by (used in) operating activities	(16,689)		(24,287)		17,646
Cash flow from investing activities:
Capital contributions to consolidated subsidiaries (1)	—		(30,000)		(25,000)
Sales, maturities and redemptions of investments securities	11,276		54,543		42,979
Purchases of investment securities	(15,617)		(61,009)		(26,828)
Payment for acquisition	(25,566)		—		—
Issuance of note receivable to subsidiary (1)	(18,000)		—		—
Purchases of property and equipment	(289)		(639)		(102)
Net cash provided by (used in) investing activities	(48,196)		(37,105)		(8,951)
Cash flow from financing activities:
Proceeds from issuance of long-term debt, net of issuance costs	98,390		—		—
Payment of long-term debt and prepayment penalties	(48,000)		—		45,000
Issuance of common stock for share-based awards	1		39		103
Purchases of FedNat Holding Company common stock	(3,449)		(5,061)		(10,616)
Dividends from consolidated subsidiaries	39,174		27,990		—
Dividends paid	(4,309)		(4,184)		(4,251)
Net cash provided by (used in) financing activities	81,807		18,784		30,236
Net increase (decrease) in cash and cash equivalents	16,922		(42,608)		38,931
Cash and cash equivalents at beginning of period	4,109		46,717		7,786
Cash and cash equivalents at end of period	$	21,031	$	4,109	$	46,717

(1)Eliminated in consolidation.

The accompanying note is an integral part of the condensed financial statements.

Schedule II – Condensed Financial Information of Registrant (Continued)

Note to Condensed Financial Statements

FEDNAT HOLDING COMPANY (Parent Company Only)

(1)   ORGANIZATION AND BASIS OF PRESENTATION

FedNat Holding Company (“FNHC”), the Parent Company, is an insurance holding company that controls substantially all steps in the insurance underwriting, distribution and claims processes through our subsidiaries and our contractual relationships with our independent agents and general agents.

The accompanying condensed financial statements include the activity of the Parent Company and on an equity basis, its consolidated subsidiaries.  Accordingly, these condensed financial statements have been presented for the parent company only.  These condensed financial statements should be read in conjunction with the consolidated financial statements and related notes of FNHC and subsidiaries set forth in Part II, Item 8 Financial Statements and Supplemental Data of this Annual Report.

In applying the equity method to our consolidated subsidiaries, we record the investment at cost and subsequently adjust for additional capital contributions, distributions and proportionate share of earnings or losses.