| ||
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification Number) | |||||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
Large Accelerated Filer ¨ | þ | Non-accelerated Filer ¨ | Smaller reporting company | ||||||||||||||
Emerging growth company |
| ||
| ||||||||
PART I: FINANCIAL INFORMATION | PAGE | |||||||
ITEM 1 | ||||||||
ITEM 2 | ||||||||
ITEM 3 | ||||||||
ITEM 4 | ||||||||
PART II: OTHER INFORMATION | ||||||||
ITEM 1 | ||||||||
ITEM 1A | ||||||||
ITEM 2 | ||||||||
ITEM 3 | ||||||||
ITEM 4 | ||||||||
ITEM 5 | ||||||||
ITEM 6 | ||||||||
SIGNATURES |
June 30, | December 31, | |||||||||||||
2020 | 2019 | |||||||||||||
ASSETS | ||||||||||||||
Investments: | ||||||||||||||
Debt securities, available-for-sale, at fair value (amortized cost of $ | $ | $ | ||||||||||||
Debt securities, held-to-maturity, at amortized cost | ||||||||||||||
Equity securities, at fair value | ||||||||||||||
Total investments | ||||||||||||||
Cash and cash equivalents | ||||||||||||||
Prepaid reinsurance premiums | ||||||||||||||
Premiums receivable, net of allowance of $ | ||||||||||||||
Reinsurance recoverable, net of allowance of $ | ||||||||||||||
Deferred acquisition costs and value of business acquired, net | ||||||||||||||
Current and deferred income taxes, net | ||||||||||||||
Goodwill | ||||||||||||||
Other assets | ||||||||||||||
Total assets | $ | $ | ||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
Liabilities | ||||||||||||||
Loss and loss adjustment expense reserves | $ | $ | ||||||||||||
Unearned premiums | ||||||||||||||
Reinsurance payable | ||||||||||||||
Long-term debt, net of deferred financing costs of $ | ||||||||||||||
Deferred revenue | ||||||||||||||
Other liabilities | ||||||||||||||
Total liabilities | ||||||||||||||
Commitments and contingencies (see Note 11) | ||||||||||||||
Shareholders' Equity | ||||||||||||||
Preferred stock, $ | ||||||||||||||
Common stock, $ | ||||||||||||||
Additional paid-in capital | ||||||||||||||
Accumulated other comprehensive income (loss) | ||||||||||||||
Retained earnings | ||||||||||||||
Total shareholders’ equity | ||||||||||||||
Total liabilities and shareholders' equity | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||
Net premiums earned | $ | $ | $ | $ | ||||||||||||||||||||||
Net investment income | ||||||||||||||||||||||||||
Net realized and unrealized investment gains (losses) | ||||||||||||||||||||||||||
Direct written policy fees | ||||||||||||||||||||||||||
Other income | ||||||||||||||||||||||||||
Total revenues | ||||||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||
Losses and loss adjustment expenses | ||||||||||||||||||||||||||
Commissions and other underwriting expenses | ||||||||||||||||||||||||||
General and administrative expenses | ||||||||||||||||||||||||||
Interest expense | ||||||||||||||||||||||||||
Total costs and expenses | ||||||||||||||||||||||||||
Income (loss) before income taxes | ( | ( | ||||||||||||||||||||||||
Income tax expense (benefit) | ( | ( | ||||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Net Income (Loss) Per Common Share | ||||||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Diluted | ( | ( | ||||||||||||||||||||||||
Weighted Average Number of Shares of Common Stock Outstanding | ||||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||||
Diluted | ||||||||||||||||||||||||||
Dividends Declared Per Common Share | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Change in net unrealized gains (losses) on investments, available-for-sale, net of tax | ||||||||||||||||||||||||||
Comprehensive income (loss) | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||
Preferred | Issued | Paid-in | Comprehensive | Retained | Shareholders' | |||||||||||||||||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Income (Loss) | Earnings | Equity | ||||||||||||||||||||||||||||||||||||||
Balance as of April 1, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Shares issued under share-based compensation plans | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Repurchases of common stock | — | ( | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | $ | $ | $ | $ | $ | $ |
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||
Preferred | Issued | Paid-in | Comprehensive | Retained | Shareholders' | |||||||||||||||||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Income (Loss) | Earnings | Equity | ||||||||||||||||||||||||||||||||||||||
Balance as of April 1, 2019 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Shares issued under share-based compensation plans | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2019 | $ | $ | $ | $ | $ | $ |
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||
Preferred | Issued | Paid-in | Comprehensive | Retained | Shareholders' | |||||||||||||||||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Income (Loss) | Earnings | Equity | ||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2020 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
Cumulative effect of new accounting standards | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Shares issued under share-based compensation plans | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Repurchases of common stock | — | ( | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | $ | $ | $ | $ | $ | $ |
Accumulated | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Other | Total | |||||||||||||||||||||||||||||||||||||||||
Preferred | Issued | Paid-in | Comprehensive | Retained | Shareholders' | |||||||||||||||||||||||||||||||||||||||
Stock | Shares | Amount | Capital | Income (Loss) | Earnings | Equity | ||||||||||||||||||||||||||||||||||||||
Balance as of January 1, 2019 | $ | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Dividends declared | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||
Shares issued under share-based compensation plans | — | — | — | |||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Balance as of June 30, 2019 | $ | $ | $ | $ | $ | $ |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
Cash flow from operating activities: | ||||||||||||||
Net income (loss) | $ | ( | $ | |||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||
Net realized and unrealized investment (gains) losses | ( | ( | ||||||||||||
Loss (gain) on early extinguishment of debt | ||||||||||||||
Amortization of investment premium or discount, net | ||||||||||||||
Depreciation and amortization | ||||||||||||||
Share-based compensation | ||||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||
Prepaid reinsurance premiums | ||||||||||||||
Premiums receivable, net | ( | ( | ||||||||||||
Reinsurance recoverable, net | ( | |||||||||||||
Deferred acquisition costs and value of business acquired, net | ( | ( | ||||||||||||
Income taxes, net | ( | ( | ||||||||||||
Deferred revenue | ||||||||||||||
Loss and loss adjustment expense reserves | ( | |||||||||||||
Unearned premiums | ||||||||||||||
Reinsurance payable | ( | ( | ||||||||||||
Other | ||||||||||||||
Net cash provided by (used in) operating activities | ||||||||||||||
Cash flow from investing activities: | ||||||||||||||
Proceeds from sales of equity securities | ||||||||||||||
Proceeds from sales of debt securities | ||||||||||||||
Purchases of equity securities | ( | ( | ||||||||||||
Purchases of debt securities | ( | ( | ||||||||||||
Maturities and redemptions of debt securities | ||||||||||||||
Purchases of property and equipment | ( | ( | ||||||||||||
Net cash provided by (used in) investing activities | ( | ( | ||||||||||||
Cash flow from financing activities: | ||||||||||||||
Proceeds from issuance of long-term debt, net of issuance costs | ||||||||||||||
Payment of long-term debt and prepayment penalties | ( | |||||||||||||
Purchases of FedNat Holding Company common stock | ( | |||||||||||||
Issuance of common stock for share-based awards | ||||||||||||||
Dividends paid | ( | ( | ||||||||||||
Net cash provided by (used in) financing activities | ( | |||||||||||||
Net increase (decrease) in cash and cash equivalents | ||||||||||||||
Cash and cash equivalents at beginning-of-period | ||||||||||||||
Cash and cash equivalents at end-of-period | $ | $ |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||
Cash paid (received) during the period for interest | $ | $ | ||||||||||||
Cash paid (received) during the period for income taxes | ( | |||||||||||||
Significant non-cash investing and financing transactions: | ||||||||||||||
Right-of-use asset | ( | ( | ||||||||||||
Lease liability |
Three | Six | |||||||||||||
Months | Months | |||||||||||||
Ended | Ended | |||||||||||||
June 30, 2019 | June 30, 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Revenue | $ | $ | ||||||||||||
Net income (loss) | ( |
June 30, 2020 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Debt securities - available-for-sale, at fair value: | ||||||||||||||||||||||||||
United States government obligations and authorities | $ | $ | $ | $ | ||||||||||||||||||||||
Obligations of states and political subdivisions | ||||||||||||||||||||||||||
Corporate securities | ||||||||||||||||||||||||||
International securities | ||||||||||||||||||||||||||
Debt securities, at fair value | ||||||||||||||||||||||||||
Equity securities, at fair value | ||||||||||||||||||||||||||
Total investments, at fair value | $ | $ | $ | $ |
December 31, 2019 | ||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Debt securities - available-for-sale, at fair value: | ||||||||||||||||||||||||||
United States government obligations and authorities | $ | $ | $ | $ | ||||||||||||||||||||||
Obligations of states and political subdivisions | ||||||||||||||||||||||||||
Corporate securities | ||||||||||||||||||||||||||
International securities | ||||||||||||||||||||||||||
Debt securities, at fair value | ||||||||||||||||||||||||||
Equity securities, at fair value | ||||||||||||||||||||||||||
Total investments, at fair value | $ | $ | $ | $ |
Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
June 30, 2020 | $ | $ | $ | $ | ||||||||||||||||||||||
December 31, 2019 |
Amortized | Gross | Gross | ||||||||||||||||||||||||
Cost | Unrealized | Unrealized | ||||||||||||||||||||||||
or Cost | Gains | Losses | Fair Value | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||||
Debt securities - available-for-sale: | ||||||||||||||||||||||||||
United States government obligations and authorities | $ | $ | $ | $ | ||||||||||||||||||||||
Obligations of states and political subdivisions | ||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||||
Amortized | Gross | Gross | ||||||||||||||||||||||||
Cost | Unrealized | Unrealized | ||||||||||||||||||||||||
or Cost | Gains | Losses | Fair Value | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||
Debt securities - available-for-sale: | ||||||||||||||||||||||||||
United States government obligations and authorities | $ | $ | $ | $ | ||||||||||||||||||||||
Obligations of states and political subdivisions | ||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||
Debt securities - held-to-maturity: | ||||||||||||||||||||||||||
United States government obligations and authorities | ||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||
Total investments, excluding equity securities | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Gross realized and unrealized gains: | ||||||||||||||||||||||||||
Debt securities | $ | $ | $ | $ | ||||||||||||||||||||||
Equity securities | ||||||||||||||||||||||||||
Total gross realized and unrealized gains | ||||||||||||||||||||||||||
Gross realized and unrealized losses: | ||||||||||||||||||||||||||
Debt securities | ( | ( | ( | ( | ||||||||||||||||||||||
Equity securities | ( | ( | ( | |||||||||||||||||||||||
Total gross realized and unrealized losses | ( | ( | ( | ( | ||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | $ | $ | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Net realized and unrealized gains (losses) | $ | $ | $ | ( | $ | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||
Net realized and unrealized gains (losses) on securities sold | ( | ( | ||||||||||||||||||||||||
Net realized and unrealized gains (losses) recognized during the period still held as of the end-of-period | $ | $ | $ | ( | $ |
June 30, 2020 | ||||||||||||||
Amortized | ||||||||||||||
Cost | Fair Value | |||||||||||||
Securities with Maturity Dates | (In thousands) | |||||||||||||
Debt securities, available-for-sale: | ||||||||||||||
One year or less | $ | $ | ||||||||||||
Over one through five years | ||||||||||||||
Over five through ten years | ||||||||||||||
Over ten years | ||||||||||||||
Total | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Interest income | $ | $ | $ | $ | ||||||||||||||||||||||
Dividends income | ||||||||||||||||||||||||||
Net investment income | $ | $ | $ | $ |
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||
June 30, 2020 | ||||||||||||||||||||||||||||||||||||||
Debt securities - available-for-sale: | ||||||||||||||||||||||||||||||||||||||
United States government obligations and authorities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | ||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ |
Less than 12 months | 12 months or longer | Total | ||||||||||||||||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||||||||||||||||
Debt securities - available-for-sale: | ||||||||||||||||||||||||||||||||||||||
United States government obligations and authorities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Obligations of states and political subdivisions | ||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Debt securities, held-to-maturity: | ||||||||||||||||||||||||||||||||||||||
United States government obligations and authorities | ||||||||||||||||||||||||||||||||||||||
Corporate | ||||||||||||||||||||||||||||||||||||||
International | ||||||||||||||||||||||||||||||||||||||
Total investments, excluding equity securities | $ | $ | $ | $ | $ | $ |
June 30, | December 31, | |||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Reinsurance recoverable on paid losses | $ | $ | ||||||||||||
Reinsurance recoverable on unpaid losses | ||||||||||||||
Reinsurance recoverable, net | $ | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Net Premiums Written | ||||||||||||||||||||||||||
Direct | $ | $ | $ | $ | ||||||||||||||||||||||
Ceded | ( | ( | ( | ( | ||||||||||||||||||||||
$ | $ | $ | $ | |||||||||||||||||||||||
Net Premiums Earned | ||||||||||||||||||||||||||
Direct | $ | $ | $ | $ | ||||||||||||||||||||||
Ceded | ( | ( | ( | ( | ||||||||||||||||||||||
$ | $ | $ | $ |
Debt | ||||||||||||||||||||||||||
Securities, | Reinsurance | |||||||||||||||||||||||||
Held-to- | Premiums | Recoverable, | ||||||||||||||||||||||||
Maturity | Receivable | Net | Total | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Balance as of December 31, 2019 | $ | $ | $ | $ | ||||||||||||||||||||||
Cumulative effect of new accounting standard (1) | ||||||||||||||||||||||||||
Credit loss expense (recovery) (2) | ( | ( | ( | |||||||||||||||||||||||
Balance as of June 30, 2020 | $ | $ | $ | $ |
Days Past Due | ||||||||||||||||||||||||||||||||||||||
Current | 1-29 | 30-59 | 60-89 | 90 plus | 0 | Total | ||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||
Amortized cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Allowance for credit loss | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
Net | $ | $ | $ | $ | $ | $ |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Gross reserves, beginning-of-period | $ | $ | ||||||||||||
Less: reinsurance recoverable (1) | ( | ( | ||||||||||||
Net reserves, beginning-of-period | ||||||||||||||
Incurred loss, net of reinsurance, related to: | ||||||||||||||
Current year | ||||||||||||||
Prior year loss development (redundancy) (2) | ||||||||||||||
Ceded losses subject to offsetting experience account adjustments (3) | ( | ( | ||||||||||||
Prior years | ||||||||||||||
Amortization of acquisition fair value adjustment | ( | |||||||||||||
Total incurred loss and LAE, net of reinsurance | ||||||||||||||
Paid loss, net of reinsurance, related to: | ||||||||||||||
Current year | ||||||||||||||
Prior years | ||||||||||||||
Total paid loss and LAE, net of reinsurance | ||||||||||||||
Net reserves, end-of-period | ||||||||||||||
Plus: reinsurance recoverable (1) | ||||||||||||||
Gross reserves, end-of-period | $ | $ |
June 30, | ||||||||
2020 | ||||||||
(In thousands) | ||||||||
Right-of-use asset | $ | |||||||
Accrued rent | ( | |||||||
Right-of-use asset, net | $ | |||||||
Lease liability | $ | |||||||
Weighted average discount rate | % | |||||||
Weighted average remaining years of lease term |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Lease expense | $ | $ | $ | $ | ||||||||||||||||||||||
Sublease income | ( | ( | ( | ( | ||||||||||||||||||||||
Lease expense, net | $ | $ | $ | $ | ||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | ( | $ | ( | $ | ( | $ | ( |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Restricted stock | $ | $ | $ | $ | ||||||||||||||||||||||
Performance stock | ( | |||||||||||||||||||||||||
Total share-based compensation expense | $ | $ | $ | $ | ||||||||||||||||||||||
Recognized tax benefit | $ | $ | $ | $ | ||||||||||||||||||||||
Intrinsic value of options exercised | ||||||||||||||||||||||||||
Fair value of restricted stock vested |
Number of Shares | Weighted Average Option Exercise Price | |||||||||||||
Outstanding at January 1, 2020 | $ | |||||||||||||
Granted | ||||||||||||||
Exercised | ( | |||||||||||||
Cancelled | ||||||||||||||
Outstanding at June 30, 2020 | $ |
Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
Outstanding at January 1, 2020 | $ | |||||||||||||
Granted | ||||||||||||||
Vested | ( | |||||||||||||
Cancelled | ||||||||||||||
Outstanding at June 30, 2020 | $ |
Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||||||||||||||
Before Tax | Income Tax | Net | Before Tax | Income Tax | Net | |||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss), beginning-of-period | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Other comprehensive income (loss) due to debt securities - held to maturity reclassified to available-for-sale | ( | ( | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassification | ( | ( | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for realized losses (gains) included in net income | ( | ( | ( | |||||||||||||||||||||||||||||||||||
( | ( | |||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss), end-of-period | $ | $ | ( | $ | $ | $ | ( | $ |
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||||||||||||||
Before Tax | Income Tax | Net | Before Tax | Income Tax | Net | |||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss), beginning-of-period | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
Other comprehensive income (loss) due to debt securities - held to maturity reclassified to available-for-sale | ( | ( | ||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassification | ( | ( | ||||||||||||||||||||||||||||||||||||
Reclassification adjustment for realized losses (gains) included in net income | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||||||||||||||||
Accumulated other comprehensive income (loss), end-of-period | $ | $ | ( | $ | $ | $ | ( | $ |
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||||||
Net income (loss) attributable to FedNat Holding Company shareholders | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Weighted average number of common shares outstanding - basic | ||||||||||||||||||||||||||
Net income (loss) per common share - basic | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Weighted average number of common shares outstanding - basic | ||||||||||||||||||||||||||
Dilutive effect of stock compensation plans | ||||||||||||||||||||||||||
Weighted average number of common shares outstanding - diluted | ||||||||||||||||||||||||||
Net income (loss) per common share - diluted | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||
Dividends per share | $ | $ | $ | $ |
Three Months Ended | ||||||||||||||||||||
June 30, | ||||||||||||||||||||
2020 | % Change | 2019 | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Gross premiums written | $ | 205,378 | 21.4 | % | $ | 169,170 | ||||||||||||||
Gross premiums earned | 179,896 | 27.4 | % | 141,220 | ||||||||||||||||
Ceded premiums | (68,418) | 39.9 | % | (48,914) | ||||||||||||||||
Net premiums earned | 111,478 | 20.8 | % | 92,306 | ||||||||||||||||
Net investment income | 3,341 | (21.6) | % | 4,259 | ||||||||||||||||
Net realized and unrealized investment gains (losses) | 10,383 | 431.1 | % | 1,955 | ||||||||||||||||
Direct written policy fees | 3,593 | 49.5 | % | 2,403 | ||||||||||||||||
Other income | 5,224 | 19.3 | % | 4,378 | ||||||||||||||||
Total revenues | 134,019 | 27.3 | % | 105,301 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Losses and loss adjustment expenses | 129,916 | 98.8 | % | 65,340 | ||||||||||||||||
Commissions and other underwriting expenses | 29,270 | 29.7 | % | 22,562 | ||||||||||||||||
General and administrative expenses | 5,663 | (2.0) | % | 5,779 | ||||||||||||||||
Interest expense | 1,915 | — | % | 1,915 | ||||||||||||||||
Total costs and expenses | 166,764 | 74.4 | % | 95,596 | ||||||||||||||||
Income (loss) before income taxes | (32,745) | (437.4) | % | 9,705 | ||||||||||||||||
Income tax expense (benefit) | (11,266) | (534.1) | % | 2,595 | ||||||||||||||||
Net income (loss) | $ | (21,479) | (402.1) | % | $ | 7,110 | ||||||||||||||
Ratios to net premiums earned: | ||||||||||||||||||||
Net loss ratio | 116.5 | % | 70.8 | % | ||||||||||||||||
Net expense ratio | 31.4 | % | 30.7 | % | ||||||||||||||||
Combined ratio | 147.9 | % | 101.5 | % |
Three Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue | ||||||||||||||
Total revenues | $ | 134,019 | $ | 105,301 | ||||||||||
Less: | ||||||||||||||
Net realized and unrealized investment gains (losses) | 10,383 | 1,955 | ||||||||||||
Adjusted operating revenues | $ | 123,636 | $ | 103,346 | ||||||||||
Net Income (Loss) | ||||||||||||||
Net income (loss) | $ | (21,479) | $ | 7,110 | ||||||||||
Less: | ||||||||||||||
Net realized and unrealized investment gains (losses) | 6,659 | 1,460 | ||||||||||||
Acquisition and other costs | 1 | (16) | ||||||||||||
Amortization of identifiable intangibles | (17) | — | ||||||||||||
Adjusted operating income (loss) | $ | (28,122) | $ | 5,666 | ||||||||||
Income tax rate assumed for reconciling items above | 35.74 | % | 25.35 | % |
Three Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Gross premiums written: | ||||||||||||||
Homeowners Florida | $ | 122,151 | $ | 128,016 | ||||||||||
Homeowners non-Florida | 77,508 | 36,212 | ||||||||||||
Federal flood | 5,647 | 4,991 | ||||||||||||
Non-core (1) | 72 | (49) | ||||||||||||
Total gross premiums written | $ | 205,378 | $ | 169,170 |
Three Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Gross premiums earned: | ||||||||||||||
Homeowners Florida | $ | 115,791 | $ | 112,747 | ||||||||||
Homeowners non-Florida | 59,787 | 24,327 | ||||||||||||
Federal flood | 4,246 | 3,642 | ||||||||||||
Non-core (1) | 72 | 504 | ||||||||||||
Total gross premiums earned | $ | 179,896 | $ | 141,220 |
Three Months Ended | ||||||||||||||||||||
June 30, | ||||||||||||||||||||
2020 | % Change | 2019 | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Other income: | ||||||||||||||||||||
Commission income | $ | 838 | (34.6) | % | $ | 1,282 | ||||||||||||||
Brokerage | 3,955 | 46.9 | % | 2,692 | ||||||||||||||||
Financing and other revenue | 431 | 6.7 | % | 404 | ||||||||||||||||
Total other income | $ | 5,224 | 19.3 | % | $ | 4,378 |
Three Months Ended | ||||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||
Net Loss | Net Loss | |||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Current accident year, excluding catastrophes: | ||||||||||||||||||||||||||
Homeowners | $ | 63,463 | 56.9 | % | $ | 47,634 | 51.6 | % | ||||||||||||||||||
Non-core (1) | — | — | % | 390 | 0.4 | % | ||||||||||||||||||||
Total current accident year, excluding catastrophes | 63,463 | 56.9 | % | 48,024 | 52.0 | % | ||||||||||||||||||||
Current year catastrophes (2): | ||||||||||||||||||||||||||
Florida | 21,316 | 19.2 | % | 1,506 | 1.6 | % | ||||||||||||||||||||
Texas | 21,772 | 19.5 | % | 8,941 | 9.7 | % | ||||||||||||||||||||
Louisiana | 14,532 | 13.0 | % | 5,965 | 6.5 | % | ||||||||||||||||||||
Other states | 1,609 | 1.4 | % | 603 | 0.7 | % | ||||||||||||||||||||
Total current year catastrophes | 59,229 | 53.1 | % | 17,015 | 18.5 | % | ||||||||||||||||||||
Prior year loss development (redundancy): | ||||||||||||||||||||||||||
Homeowners | 6,484 | 5.8 | % | (1,155) | (1.3) | % | ||||||||||||||||||||
Non-core (1) | 973 | 0.9 | % | 1,958 | 2.1 | % | ||||||||||||||||||||
Ceded losses subject to offsetting experience account adjustments (3) | (233) | (0.2) | % | (502) | (0.5) | % | ||||||||||||||||||||
Total prior year loss development (redundancy) | 7,224 | 6.5 | % | 301 | 0.3 | % | ||||||||||||||||||||
Total losses and loss adjustment expenses | $ | 129,916 | 116.5 | % | $ | 65,340 | 70.8 | % |
Three Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Commissions and other underwriting expenses: | ||||||||||||||
Homeowners Florida | $ | 13,618 | $ | 13,401 | ||||||||||
All others | 12,834 | 5,920 | ||||||||||||
Ceding commissions | (3,161) | (2,906) | ||||||||||||
Total commissions | 23,291 | 16,415 | ||||||||||||
Fees | 1,222 | 759 | ||||||||||||
Salaries and wages | 3,119 | 3,072 | ||||||||||||
Other underwriting expenses | 1,638 | 2,316 | ||||||||||||
Total commissions and other underwriting expenses | $ | 29,270 | $ | 22,562 |
Six Months Ended | ||||||||||||||||||||
June 30, | ||||||||||||||||||||
2020 | % Change | 2019 | ||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Gross premiums written | $ | 378,340 | 25.5 | % | $ | 301,403 | ||||||||||||||
Gross premiums earned | 355,470 | 27.1 | % | 279,587 | ||||||||||||||||
Ceded premiums | (138,082) | 40.2 | % | (98,497) | ||||||||||||||||
Net premiums earned | 217,388 | 20.0 | % | 181,090 | ||||||||||||||||
Net investment income | 7,233 | (9.2) | % | 7,969 | ||||||||||||||||
Net realized and unrealized investment gains (losses) | 7,558 | 77.6 | % | 4,256 | ||||||||||||||||
Direct written policy fees | 7,059 | 47.2 | % | 4,794 | ||||||||||||||||
Other income | 10,480 | 24.9 | % | 8,389 | ||||||||||||||||
Total revenues | 249,718 | 20.9 | % | 206,498 | ||||||||||||||||
Costs and expenses: | ||||||||||||||||||||
Losses and loss adjustment expenses | 198,846 | 50.4 | % | 132,179 | ||||||||||||||||
Commissions and other underwriting expenses | 65,625 | 29.2 | % | 50,796 | ||||||||||||||||
General and administrative expenses | 11,908 | (1.5) | % | 12,090 | ||||||||||||||||
Interest expense | 3,830 | (45.0) | % | 6,966 | ||||||||||||||||
Total costs and expenses | 280,209 | 38.7 | % | 202,031 | ||||||||||||||||
Income (loss) before income taxes | (30,491) | (782.6) | % | 4,467 | ||||||||||||||||
Income tax expense (benefit) | (11,145) | (1,012.0) | % | 1,222 | ||||||||||||||||
Net income (loss) | $ | (19,346) | (696.2) | % | $ | 3,245 | ||||||||||||||
Ratios to net premiums earned: | ||||||||||||||||||||
Net loss ratio | 91.5 | % | 73.0 | % | ||||||||||||||||
Net expense ratio | 35.6 | % | 34.7 | % | ||||||||||||||||
Combined ratio | 127.1 | % | 107.7 | % |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(Dollars in thousands) | ||||||||||||||
Revenue | ||||||||||||||
Total revenues | $ | 249,718 | $ | 206,498 | ||||||||||
Less: | ||||||||||||||
Net realized and unrealized investment gains (losses) | 7,558 | 4,256 | ||||||||||||
Adjusted operating revenues | $ | 242,160 | $ | 202,242 | ||||||||||
Net Income (Loss) | ||||||||||||||
Net income (loss) | $ | (19,346) | $ | 3,245 | ||||||||||
Less: | ||||||||||||||
Net realized and unrealized investment gains (losses) | 4,527 | 3,178 | ||||||||||||
Acquisition and other costs | (26) | (536) | ||||||||||||
Amortization of identifiable intangibles | (45) | — | ||||||||||||
Gain (loss) on early extinguishment of debt | — | (2,669) | ||||||||||||
Adjusted operating income (loss) | $ | (23,802) | $ | 3,272 | ||||||||||
Income tax rate assumed for reconciling items above | 40.10 | % | 25.35 | % |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Gross premiums written: | ||||||||||||||
Homeowners Florida | $ | 233,698 | $ | 231,979 | ||||||||||
Homeowners non-Florida | 135,450 | 61,532 | ||||||||||||
Federal flood | 9,307 | 7,995 | ||||||||||||
Non-core (1) | (115) | (103) | ||||||||||||
Total gross premiums written | $ | 378,340 | $ | 301,403 |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Gross premiums earned: | ||||||||||||||
Homeowners Florida | $ | 231,891 | $ | 225,419 | ||||||||||
Homeowners non-Florida | 115,312 | 45,497 | ||||||||||||
Federal flood | 8,382 | 7,109 | ||||||||||||
Non-core (1) | (115) | 1,562 | ||||||||||||
Total gross premiums earned | $ | 355,470 | $ | 279,587 |
Six Months Ended | ||||||||||||||||||||
June 30, | ||||||||||||||||||||
2020 | % Change | 2019 | ||||||||||||||||||
(In thousands) | ||||||||||||||||||||
Other income: | ||||||||||||||||||||
Commission income | $ | 1,623 | (6.7) | % | $ | 1,740 | ||||||||||||||
Brokerage | 7,992 | 37.2 | % | 5,826 | ||||||||||||||||
Financing and other revenue | 865 | 5.1 | % | 823 | ||||||||||||||||
Total other income | $ | 10,480 | 24.9 | % | $ | 8,389 |
Six Months Ended | ||||||||||||||||||||||||||
June 30, | ||||||||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||||||||
Net Loss | Net Loss | |||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Current accident year, excluding catastrophes: | ||||||||||||||||||||||||||
Homeowners | $ | 122,372 | 56.3 | % | $ | 94,862 | 52.4 | % | ||||||||||||||||||
Non-core (1) | — | — | % | 1,240 | 0.7 | % | ||||||||||||||||||||
Total current accident year, excluding catastrophes | 122,372 | 56.3 | % | 96,102 | 53.1 | % | ||||||||||||||||||||
Current year catastrophes (2): | ||||||||||||||||||||||||||
Florida | 26,695 | 12.2 | % | 20,476 | 11.2 | % | ||||||||||||||||||||
Texas | 24,787 | 11.4 | % | 8,941 | 4.9 | % | ||||||||||||||||||||
Louisiana | 16,440 | 7.6 | % | 5,965 | 3.3 | % | ||||||||||||||||||||
Other states | 1,740 | 0.8 | % | 603 | 0.3 | % | ||||||||||||||||||||
Total current year catastrophes | 69,662 | 32.0 | % | 35,985 | 19.7 | % | ||||||||||||||||||||
Prior year loss development (redundancy): | ||||||||||||||||||||||||||
Homeowners | 5,455 | 2.5 | % | (2,735) | (1.5) | % | ||||||||||||||||||||
Non-core (1) | 1,885 | 0.9 | % | 4,259 | 2.4 | % | ||||||||||||||||||||
Ceded losses subject to offsetting experience account adjustments (3) | (528) | (0.2) | % | (1,432) | (0.7) | % | ||||||||||||||||||||
Total prior year loss development (redundancy) | 6,812 | 3.2 | % | 92 | 0.2 | % | ||||||||||||||||||||
Total losses and loss adjustment expenses | $ | 198,846 | 91.5 | % | $ | 132,179 | 73.0 | % |
Six Months Ended | ||||||||||||||
June 30, | ||||||||||||||
2020 | 2019 | |||||||||||||
(In thousands) | ||||||||||||||
Commissions and other underwriting expenses: | ||||||||||||||
Homeowners Florida | $ | 27,445 | $ | 26,623 | ||||||||||
All others | 24,452 | 11,187 | ||||||||||||
Ceding commissions | (6,060) | (5,690) | ||||||||||||
Total commissions | 45,837 | 32,120 | ||||||||||||
Fees | 2,336 | 1,438 | ||||||||||||
Salaries and wages | 6,717 | 6,394 | ||||||||||||
Other underwriting expenses | 10,735 | 10,844 | ||||||||||||
Total commissions and other underwriting expenses | $ | 65,625 | $ | 50,796 |
Total Number of | Approximate Dollar | |||||||||||||||||||||||||
Total Number | Average | Shares Purchased | Value of Shares That | |||||||||||||||||||||||
of Shares | Price Paid | as Part of Publicly | May Yet Be Purchased | |||||||||||||||||||||||
Repurchased | Per Share | Announced Plans | Under the Plans (1) | |||||||||||||||||||||||
April 2020 | 276,652 | $ | 11.75 | 276,652 | $ | 10,000,011 | ||||||||||||||||||||
May 2020 | — | — | — | 10,000,011 | ||||||||||||||||||||||
June 2020 | — | — | — | 10,000,011 |
Exhibit No. | Description | ||||
31.1 | |||||
31.2 | |||||
32.1 | |||||
32.2 | |||||
101.INS | Inline XBRL Instance Document | ||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||||
104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
FEDNAT HOLDING COMPANY | |||||||||||
By: | /s/ Michael H. Braun | ||||||||||
Michael H. Braun, Chief Executive Officer | |||||||||||
(Principal Executive Officer) | |||||||||||
/s/ Ronald Jordan | |||||||||||
Ronald Jordan, Chief Financial Officer | |||||||||||
(Principal Financial Officer) |
| |||||
/s/ Michael H. Braun | |||||
Michael H. Braun | |||||
Chief Executive Officer (Principal Executive Officer) |
/s/ Ronald Jordan | |||||
Ronald Jordan | |||||
Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FedNat Holding Company. |
/s/ Michael H. Braun | |||||
Michael H. Braun | |||||
Chief Executive Officer (Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of FedNat Holding Company. |
/s/ Ronald Jordan | |||||
Ronald Jordan | |||||
Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) |
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Investments: | ||
Debt securities, available-for-sale, at amortized cost | $ 536,896 | $ 512,645 |
Premium receivable, allowance for credit loss | 150 | 159 |
Reinsurance recoverable, allowance for credit loss | 34 | 0 |
Liabilities | ||
Deferred financing costs | $ 1,397 | $ 1,478 |
Shareholders' Equity | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 25,000,000 | 25,000,000 |
Common stock, shares issued (in shares) | 13,703,175 | 14,414,821 |
Common stock, shares outstanding (in shares) | 13,703,175 | 14,414,821 |
Reinsurance Recoverable, Net of Allowance | $ 228,709 | $ 209,615 |
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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Revenues: | ||||
Net premiums earned | $ 111,478 | $ 92,306 | $ 217,388 | $ 181,090 |
Net investment income | 3,341 | 4,259 | 7,233 | 7,969 |
Net realized and unrealized investment gains (losses) | 10,383 | 1,955 | 7,558 | 4,256 |
Direct written policy fees | 3,593 | 2,403 | 7,059 | 4,794 |
Other income | 5,224 | 4,378 | 10,480 | 8,389 |
Total revenues | 134,019 | 105,301 | 249,718 | 206,498 |
Costs and expenses: | ||||
Losses and loss adjustment expenses | 129,916 | 65,340 | 198,846 | 132,179 |
Commissions and other underwriting expenses | 29,270 | 22,562 | 65,625 | 50,796 |
General and administrative expenses | 5,663 | 5,779 | 11,908 | 12,090 |
Interest expense | 1,915 | 1,915 | 3,830 | 6,966 |
Total costs and expenses | 166,764 | 95,596 | 280,209 | 202,031 |
Income (loss) before income taxes | (32,745) | 9,705 | (30,491) | 4,467 |
Income tax expense (benefit) | (11,266) | 2,595 | (11,145) | 1,222 |
Net income (loss) | $ (21,479) | $ 7,110 | $ (19,346) | $ 3,245 |
Net Income (Loss) Per Common Share | ||||
Basic (in dollars per share) | $ (1.57) | $ 0.55 | $ (1.38) | $ 0.25 |
Diluted (in dollars per share) | $ (1.57) | $ 0.55 | $ (1.38) | $ 0.25 |
Weighted Average Number of Shares of Common Stock Outstanding | ||||
Basic (in shares) | 13,714 | 12,844 | 13,981 | 12,820 |
Diluted (in shares) | 13,714 | 12,883 | 13,981 | 12,876 |
Dividends declared per share of common stock (in dollars per share) | $ 0.09 | $ 0.08 | $ 0.18 | $ 0.16 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ (21,479) | $ 7,110 | $ (19,346) | $ 3,245 |
Change in net unrealized gains (losses) on investments, available-for-sale, net of tax | 8,137 | 6,122 | 4,109 | 13,010 |
Comprehensive income (loss) | $ (13,342) | $ 13,232 | $ (15,237) | $ 16,255 |
ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION |
6 Months Ended |
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Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION | 1. ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION Organization FedNat Holding Company (“FNHC,” the “Company,” “we,” “us,” or “our”) is a regional insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through our subsidiaries and contractual relationships with independent agents and general agents. We, through our wholly owned subsidiaries, are authorized to underwrite and/or place homeowners multi-peril (“homeowners”), federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers’ products and other services through a network of independent and general agents. FedNat Insurance Company (“FNIC”), our largest wholly owned insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance by the state’s insurance departments, in Florida, Louisiana, Texas, Georgia, South Carolina, Alabama and Mississippi. Maison Insurance Company ("MIC"), an insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance as well as wind/hail-only exposures by the state's insurance departments in Louisiana, Texas and Florida. Monarch National Insurance Company (“MNIC”), an insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance in Florida. Material Distribution Relationships Ivantage Select Agency, Inc. The Company is a party to an insurance agency master agreement with Ivantage Select Agency, Inc. (“ISA”), an affiliate of Allstate Insurance Company (“Allstate”), pursuant to which the Company has been authorized by ISA to appoint Allstate agents to offer our FNIC homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 21.2% and 23.9% were from Allstate’s network of Florida agents, for the three months ended June 30, 2020 and 2019, respectively. As a percentage of the total homeowners premiums we underwrote, 20.9% and 23.4% were from Allstate’s network of Florida agents, for the six months ended June 30, 2020 and 2019, respectively. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (“SageSure”) to facilitate growth in our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 27.2% and 22.0% of the Company’s premiums were underwritten by SageSure, for the three months ended June 30, 2020 and 2019, respectively. As a percentage of the total homeowners premiums, 25.8% and 21.0% of the Company’s premiums were underwritten by SageSure, for the six months ended June 30, 2020 and 2019, respectively. As part of our partnership with SageSure, we entered into a profit share agreement, whereby we share 50% of net profits of this line of business, as calculated per the terms of the agreement, subject to certain limitations. In addition, refer to Note 6 for information regarding a fully collateralized quota-share treaty. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (“VIE”) of which the Company is the primary beneficiary. The Company’s management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Company’s interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES |
6 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES Our significant accounting policies were described in Note 2 of our 2019 Form 10-K. Other than the changes noted in "Recently Issued Accounting Pronouncements, Adopted" below, there have been no significant changes in our significant accounting policies for the six months ended June 30, 2020. Accounting Estimates and Assumptions The Company prepares the accompanying consolidated financial statements in accordance with GAAP, which requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may materially differ from those estimates. Similar to other property and casualty insurers, the Company’s liability for loss and loss adjustment expenses ("LAE") reserves, although supported by actuarial projections and other data, is ultimately based on management’s reasoned expectations of future events. Although considerable variability is inherent in these estimates, the Company believes that the liability and LAE reserve is adequate. The Company reviews and evaluates its estimates and assumptions regularly and makes adjustments, reflected in current operations, as necessary, on an ongoing basis. Recently Issued Accounting Pronouncements, Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The update requires entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as currently performed under the other-than-temporary impairment ("OTTI") model. The update also requires enhanced disclosures for financial assets measured at amortized cost and available-for-sale debt securities to help the financial statement users better understand significant judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The Company adopted the guidance effective January 1, 2020, by reflecting a cumulative effect adjustment of less than $0.1 million, after-tax, which decreased retained earnings, held-to-maturity debt securities and reinsurance recoverable. Refer to Note 7 for additional information regarding allowances for credit loss. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The Company adopted the guidance effective January 1, 2020, which did not have any impact on the Company’s consolidated financial condition or results of operations. Recently Issued Accounting Pronouncements, Not Yet Adopted In January 2020, the FASB issued ASU 2020-1, Accounting for Equity Securities and Equity Investments, which clarifies the interaction between accounting standards related to equity securities (Topic 321), equity method investments (Topic 323), and certain derivatives (Topic 815). The update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The update is effective for interim and annual reporting periods beginning after December 15, 2021, with early adoption permitted. The Company is in the early stage of evaluating the impact that the update will have on the Company’s consolidated financial position or results of operations.
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ACQUISITIONS |
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ACQUISITIONS | 3. ACQUISITIONS On December 2, 2019, the Company completed its acquisition of the insurance operations of 1347 Property Insurance Holdings, Inc. ("PIH"). Specifically, the Company purchased from PIH all of the outstanding equity of MIC, Maison Managers, Inc., and ClaimCor LLC (collectively, the "Maison Companies"). The Maison Companies provide multi-peril and wind/hail only coverage to personal residential dwellings and manufactured/mobile homes in Louisiana, Texas and Florida. The acquisition enables us to increase geographic diversification of our book of business outside Florida and generate additional business with operating synergies and general and administrative expense savings. Revenues and net loss of the business acquired were $16.8 million and $6.8 million, respectively for the three months ended June 30, 2020. Revenues and net loss of the business acquired were $32.3 million and $5.1 million, respectively for the six months ended June 30, 2020. The following unaudited pro forma condensed consolidated statements of operations of the Company assume that the acquisition of the Maison Companies was completed on January 1, 2019:
Pro forma adjustments include the revenue and net income (loss) of the Maison Companies for each period as well as estimates for amortization of identifiable intangible assets acquired and fair value adjustments associated with investments, VOBA (different than deferred acquisition costs) and reinsurance recoverable. Other pro forma adjustments include the incremental increase to interest expense attributable to financing the acquisition and the impact of reflecting acquisition and integration costs earlier in 2019. For more information regarding our acquisition, refer to Note 3 of our 2019 Form 10-K.
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FAIR VALUE |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | 4. FAIR VALUE Fair Value Disclosures of Financial Instruments The Company accounts for financial instruments at fair value or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs are based on market data from independent sources, while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. All assets and liabilities that are recorded at fair value are classified and disclosed in one of the following three categories: •Level 1 - Quoted market prices (unadjusted) for identical assets or liabilities in active markets is defined as a market where transactions for the financial statement occur with sufficient frequency and volume to provide pricing information on an ongoing basis, or observable inputs. •Level 2 - Quoted market prices for similar assets or liabilities and valuations, using models or other valuation techniques using observable market data. Significant other observable that can be corroborated by observable market data; and •Level 3 - Instruments that use non-binding broker quotes or model driven valuations that do not have observable market data or those that are estimated based on an ownership interest to which a proportionate share of net assets is attributed. If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. The Company’s financial instruments measured at fair value on a recurring basis and the level of the fair value hierarchy of inputs used consisted of the following:
Held-to-maturity debt securities reported on the consolidated balance sheets at amortized cost and disclosed at fair value below (and in Note 5) and the level of fair value hierarchy of inputs used consisted of the following:
We measure the fair value of our securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the security, and we consistently apply the valuation methodology to measure the security’s fair value. Our fair value measurement is based on a market approach that utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. We review the third-party pricing methodologies on a quarterly basis and validate the fair value prices to a separate independent data service and ensure there are no material differences. Additionally, market indicators, industry and economic events are monitored. A summary of the significant valuation techniques and market inputs for each financial instrument carried at fair value includes the following: •United States Government Obligations and Authorities - In determining the fair value for United States government securities in Level 1, the Company uses quoted prices (unadjusted) in active markets for identical or similar assets. In determining the fair value for United States government securities in Level 2, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events. •Obligations of States and Political Subdivisions - In determining the fair value for state and municipal securities, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events. •Corporate and International Securities - In determining the fair value for corporate securities the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads (for investment grade securities), observations of equity and credit default swap curves (for high-yield corporates), reference data and industry and economic events. •Equity Securities - In determining the fair value for equity securities in Level 1, the Company uses quoted prices (unadjusted) in active markets for identical or similar assets. In determining the fair value for equity securities in Level 2, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events. We did not have securities trading in less liquid or illiquid markets with limited or no pricing information, therefore we did not use unobservable inputs to measure fair value as of June 30, 2020 and December 31, 2019. Additionally, we did not have any assets or liabilities measured at fair value on a nonrecurring basis as of June 30, 2020 or December 31, 2019, and we noted no significant changes in our valuation methodologies between those periods. There were no changes to the Company’s valuation methodology and the Company is not aware of any events or circumstances that would have a significant adverse effect on the carrying value of its assets and liabilities measured at fair value as of June 30, 2020 and December 31, 2019. There were no transfers between the fair value hierarchy levels during the six months ended June 30, 2020 and 2019.
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INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | 5. INVESTMENTS Unrealized Gains and Losses The difference between amortized cost or cost and estimated fair value and gross unrealized gains and losses, by major investment category, consisted of the following:
Net Realized and Unrealized Gains and Losses The Company calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or amortized cost of the security sold. Net realized gains and losses on investments are determined in accordance with the specific identification method. Net realized and unrealized gains (losses) recognized in earnings, by major investment category, consisted of the following:
The above line item, net realized and unrealized gains (losses) on investments, includes the following equity securities gains (losses) recognized in earnings:
Contractual Maturity Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations. Amortized cost and estimated fair value of debt securities, by contractual maturity, consisted of the following:
Net Investment Income Net investment income consisted of the following:
Aging of Gross Unrealized Losses Gross unrealized losses and related fair values for debt securities, grouped by duration of time in a continuous unrealized loss position, consisted of the following:
As of June 30, 2020, the Company held a total of 83 debt securities that were in an unrealized loss position, of which 3 securities were in an unrealized loss position continuously for 12 months or more. As of December 31, 2019, the Company held a total of 203 debt securities that were in an unrealized loss position, of which 24 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these securities consisted primarily of losses related to corporate securities. Collateral DepositsCash and cash equivalents and investments, the majority of which were debt securities, with fair values of $9.4 million and $11.2 million, were deposited with governmental authorities and into custodial bank accounts as required by law or contractual obligations as of June 30, 2020 and December 31, 2019, respectively.
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REINSURANCE |
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Reinsurance Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REINSURANCE | 6. REINSURANCE Overview Reinsurance is used to mitigate the exposure to losses, manage capacity and protect capital resources. The Company reinsures (cedes) a portion of written premiums on an excess of loss or a quota-share basis in order to limit the Company’s loss exposure. To the extent that reinsuring companies are unable to meet their obligations assumed under these reinsurance agreements, the Company remains primarily liable to its policyholders. The Company is selective in choosing reinsurers and considers numerous factors, the most important of which is the financial stability of the reinsurer or capital specifically pledged to uphold the contract, its history of responding to claims and its overall reputation. In an effort to minimize the Company’s exposure to the insolvency of a reinsurer, the Company evaluates the acceptability and review the financial condition of the reinsurer at least annually with the assistance of the Company’s reinsurance broker. Significant Reinsurance Contracts 2019-2020 Catastrophe Excess of Loss Reinsurance Program Given the December 2, 2019 acquisition of the Maison Companies, the Company and PIH agreed to combine FNIC, MNIC, and MIC under a single reinsurance program allowing the carriers to capitalize on efficiencies, spread of risk and scale. The combined reinsurance treaties provide approximately $1.3 billion of single-event reinsurance coverage in excess of a $27 million retention for catastrophic losses on the first event (and $15 million on the second and third events), including hurricanes, and aggregate coverage of $1.9 billion, at an approximate total cost of $224.3 million. The combined FNIC, MIC and MNIC private market excess of loss treaties, covering both Florida and non-Florida exposures, became effective July 1, 2019 and all private layers have prepaid automatic reinstatement protection, which affords the carriers additional coverage for subsequent events. This private market excess of loss treaty structure breaks coverage into layers, with a cascading feature such that substantially all layers attach after $20 million in losses for FNIC, $2 million in losses for MNIC and $5 million in losses for MIC. For FNIC and MNIC, the second and third event attaches at $10 million per event, on a combined basis. If the aggregate limit of the preceding layer is exhausted, the next layer drops down (cascades) in its place. Additionally, any unused layer protection drops down for subsequent events until exhausted. The overall reinsurance program is with reinsurers that currently have an A.M. Best Company or Standard & Poor’s rating of “A-” or better, or have fully collateralized their maximum potential obligations in dedicated trusts. As indicated above, FNIC, MIC and MNIC's combined 2019-2020 reinsurance program is estimated to cost $224.3 million. This amount includes approximately $178.5 million for private reinsurance for the carriers’ exposure described above, including prepaid automatic premium reinstatement protection, along with approximately $45.8 million payable to the FHCF. The combination of private and FHCF reinsurance treaties affords FNIC, MNIC, and MIC approximately $1.9 billion of aggregate coverage with a maximum single event coverage totaling approximately $1.3 billion, exclusive of retentions. Each carrier will pay directly its allocated portion of the aggregate reinsurance ceded premium cost. The allocation methodology by which FNIC, MNIC, and MIC determines their share of the premium and distribution of reinsurance recoveries under the combined reinsurance tower is based on catastrophe loss modeling of the separate books of business. Each carrier shares the combined program cost in proportion to its contribution to the total expected loss in each reinsurance layer. Each carrier's reinsurance recoveries will be based on that carrier's contributing share of a given event's total loss. Both FNIC and MNIC maintained their FHCF participation at 75% for the 2019 hurricane season, and MIC increased its FHCF participation to 90%. FNIC’s non-Florida excess of loss reinsurance treaty affords us an additional $18 million of coverage for a second event, which applies to hurricane losses only. The result is a non-Florida retention of $20 million for FNIC for the first event and $2 million for the second event, although these retentions are reduced to $10 million and $1 million after taking into account the profit-sharing agreement that FNIC has with the non-affiliated managing general underwriter that writes FNIC’s non-Florida property business. FNIC’s non-Florida reinsurance program cost for the above specific coverage approximates $1.8 million for this private reinsurance. The insurance carriers’ cost and amounts of reinsurance are based on current analysis of exposure to catastrophic risk. The data is subjected to exposure level analysis at various dates through December 31, 2019. This analysis of the carriers’ exposure level in relation to the total exposures to the FHCF and excess of loss treaties may produce changes in retentions, limits and reinsurance premiums in total, and by carrier, as a result of increases or decreases in the carriers’ exposure levels. 2020-2021 Catastrophe Excess of Loss Reinsurance Program The Company’s excess of loss catastrophe reinsurance program for 2020-2021 (the “Program”), which covers the Company and its wholly-owned insurance subsidiaries, FNIC, MIC and MNIC was renewed effective July 1, 2020. FNIC, MIC, and MNIC are collectively referred to herein as the “carriers”. The Program provides up to approximately $1.3 billion of single-event reinsurance coverage in excess of up to a $31 million retention for catastrophic losses, including hurricanes, and aggregate coverage up to $1.9 billion, at an approximate total cost of $265.7 million, subject to adjustments based on actual exposure or premium of policies at different points in time in the coming months. The Company will retain 100% of the first $25 million retention plus up to an additional $6 million in retention by retaining an approximate 8.6% co-participation of the next $70 million of limit after the first $25 million. More specifically, the Program includes up to approximately $1.3 billion in aggregate private reinsurance for coverage in all states in which the Company operates, of which up to approximately $650 million is limited to any one event, plus an additional $650 million of reinsurance provided by the Florida Hurricane Catastrophe Fund (“FHCF”), that responds on both a per occurrence and in the aggregate basis, and which coverage is exclusive to the state of Florida. The private layers of the Program, covering both Florida and non-Florida exposures have prepaid automatic reinstatement protection, which affords the carriers additional coverage for subsequent events. The private reinsurance market continued to harden this year due to a number of factors, including issues unique to the U.S. coastal catastrophe reinsurance marketplace generally and the Florida market specifically. These factors result in more restrictive terms by some of our individual reinsurers. The change in terms from the prior year’s program includes some portion of the program having a single aggregate retention for our carriers taken as a whole, versus each carrier’s own individual retention, plus some portions of the program not “cascading”, which could create less broad coverage on events, if any, beyond two large events. As of June 30, 2020, the overall reinsurance Program was placed with reinsurers with an A.M. Best Company or Standard & Poor’s rating of “A-” or better, or that have fully collateralized their maximum potential obligations in dedicated trusts. For the purpose of debt covenant compliance, if any reinsurer on the program is not collateralized or has a rating lower than “A-“ by A.M. Best Company or Standard & Poor’s then the Company treats that reinsurer’s participation as if it was part of the Company’s net retention. The total Program cost includes approximately $221.4 million for private reinsurance for the carriers’ exposure described above, including prepaid automatic premium reinstatement protection, along with approximately $44.3 million payable to the FHCF. The combination of private and FHCF reinsurance treaties will afford the carriers up to approximately $1.9 billion of aggregate coverage within Florida and $1.3 billion in states outside Florida with a maximum single event coverage totaling up to approximately $1.3 billion within Florida and approximately $650 million outside Florida, exclusive of retentions. Each carrier will share the combined program cost in proportion to its contribution to the total expected loss in each reinsurance layer. Each carrier’s reinsurance recoveries will be based on that carrier’s contributing share of a given event’s total loss and each carrier will be responsible for its portion of the Program’s $31 million per event retention based on a specific allocation formula. Both FNIC and MNIC increased their FHCF participation to 90% for the 2020 hurricane season, and MIC maintained its FHCF participation at 90%. In addition, the Company purchased subsequent event reinsurance coverage that has a lower retention than the first event. Under the Program, FNIC’s non-Florida book of business as written by SageSure has excess of loss reinsurance treaties which afford this specific book of business additional protection through an additional $16 million of coverage for a second event, which applies to hurricane losses only. This additional reinsurance coverage is specific to FNIC's non-Florida business and does not afford coverage to MIC's non-Florida business. The result is a retention of approximately $18 million for FNIC's book with SageSure for the first event and approximately $2 million for the second event, although these retentions are reduced to approximately $9 million and approximately $1 million after taking into account the profit-sharing agreement that FNIC has with SageSure. Furthermore, for Florida only losses, the carriers purchased second and third event coverage of 71.5% of $15 million excess of $10 million that reduces the second and third event retention for the carriers, from $25 million to $14.3 million per event, on a combined basis, which could be reduced further by an additional 28.5% placed on a parametric basis with an Excess and Surplus lines carrier that will provide coverage for the Second and Third Florida hurricane loss to the carriers after the inception of treaty. The amount of recovery with the parametric product is based on the magnitude of the hurricane and the proximity of the individual insured risk to the hurricane path. This coverage terminates on May 31, 2021. The carriers’ cost and amounts of reinsurance are based on current analysis of exposure to catastrophic risk. The data is subjected to exposure level analysis at various dates through December 31, 2020. This analysis of the carriers’ exposure levels in relation to the total exposures to the FHCF and excess of loss treaties may produce changes in retentions, limits and reinsurance premiums in total, and by carrier, as a result of increases or decreases in the carriers’ exposure levels. Quota-Share Reinsurance Programs FNIC's reinsurance programs also include quota-share treaties. One such treaty for 30% became effective July 1, 2014, and another for 10% became effective on July 1, 2015 with each running for two years. The combined treaties provided up to a 40% quota-share reinsurance on covered losses for the homeowners’ property and liability insurance program in Florida. The treaties are accounted for as retrospectively rated contracts whereby the estimated ultimate premium or commission is recognized over the period of the contracts. On July 1, 2016, the 30% quota-share treaty expired on a cut-off basis, which means as of that date the Company retained an incremental 30% of its unearned premiums and losses. On July 1, 2017, the 10% quota-share treaty expired on a cut-off basis, which means as of that date we retained an incremental 10% of the underlying unearned premiums and losses. The reinsurers remain liable for the paid losses occurring during the terms of the treaties, until each treaty is commuted. On July 1, 2017, FNIC bound a 10% quota-share on its Florida homeowners book of business, which excluded named storms, subject to certain limitations. This treaty is not subject to accounting as a retrospectively rated contract. This treaty expired on July 1, 2018 on a cut-off basis, meaning that the reinsurer will not be liable (under this agreement) for losses as a result of occurrences taking place after the date of termination, and the unearned premium previously ceded was returned to FNIC. On July 1, 2018, FNIC renewed the quota-share treaty on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms, which was initially set at a 2%, cession and is subject to certain limitations. In addition, this quota-share allowed FNIC to prospectively increase or decrease the cession percentage up to three times during the term of the agreement. Effective October 1, 2018, FNIC elected to increase the cession percentage from 2% to 10% on an in-force, new and renewal basis. The treaty expired on July 1, 2019 on a cut-off basis, meaning that the reinsurer will not be liable (under this agreement) for losses as a result of occurrences taking place after the date of termination, and the unearned premium previously ceded was returned to FNIC. On July 1, 2019, FNIC renewed the quota-share treaty on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms, which was set at a 10% cession and is subject to certain limitations. In addition, this quota-share allows FNIC the flexibility to prospectively increase or decrease the cession percentage up to three times during the term of the agreement. The treaty expired on July 1, 2020 on a cut-off basis, meaning that the reinsurer will not be liable (under this agreement) for losses as a result of occurrences taking place after the date of termination, and the unearned premium previously ceded was returned to FNIC. On July 1, 2020, FNIC renewed the quota-share treaty on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms, which was set at a 10% cession and is subject to certain limitations. In addition, this quota-share allows FNIC the flexibility to prospectively increase or decrease the cession percentage up to three times during the term of the agreement. In addition, effective July 1, 2020, FNIC entered into a new quota-share treaty with Anchor Re, Inc., which is an Arizona captive reinsurance entity that is under the same ownership umbrella as SageSure. The treaty provides 50% quota-share reinsurance protection on in-force, new and renewal business through June 30, 2021, subject to certain limitations. The treaty arrangement is fully collateralized through Anchor Re, Inc. The financial economics of this treaty essentially supplement the 50% profit-sharing agreement that has been and will continue to be in place with SageSure. Thus, this treaty is not expected to have any impact on the pre-tax operating results of the Company, though the components of the combined ratio will be affected by the ceding of premiums, claims and commissions. The Company expects FNIC will receive statutory surplus relief from this new quota-share treaty. Associated Trust Agreements Certain reinsurance agreements require FNIC to secure the credit, regulatory and business risk. Fully funded trust agreements securing these risks totaled less than $0.1 million as of June 30, 2020 and December 31, 2019. Reinsurance Recoverable, Net Amounts recoverable from reinsurers are recognized in a manner consistent with the claims liabilities associated with the reinsurance placement and presented on the consolidated balance sheet as reinsurance recoverable. Reinsurance recoverable, net consisted of the following:
As of June 30, 2020, and December 31, 2019, the Company had reinsurance recoverable of $143.9 million and $163.7 million, respectively as a result of Hurricanes Michael and Irma. Net Premiums Written and Net Premiums Earned Net premiums written and net premiums earned consisted of the following:
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ALLOWANCE FOR CREDIT LOSS |
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Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ALLOWANCES FOR CREDIT LOSS | 7. ALLOWANCES FOR CREDIT LOSS Overview There is significant risk and judgment involved in determining estimates of our allowances for credit loss, which reduce the amortized cost of an asset to produce an estimate of the net amount that will be collected over the asset's contractual life. Longer time horizons generally present more uncertainty in expected cash flow. We evaluate the expected credit loss of assets on an individual basis, except in cases where assets collectively share similar risk characteristics where we pool them together. We evaluate and estimate our allowances for credit loss by considering reasonable, relevant and supportable available information. Activity in the allowances for credit loss, by asset line item on the consolidated balance sheet, is summarized as follows:
(1)Refer to Note 2 above for information about our adoption of ASU 2016-13 on January 1, 2020. (2)Reflected in commissions and other underwriting expenses on the consolidated statements of comprehensive income (loss). Accrued investment income is included in other assets on the consolidated balance sheet. We immediately write-off accrued investment income if it becomes uncollectible, therefore we do not measure or record an allowance for credit losses. Investments Our investment policy is established by the Board of Directors’ Investment Committee and is reviewed on a regular basis. This policy currently limits investment in non-investment-grade debt securities (including high-yield bonds), and limits total investments in preferred stock, common stock and mortgage notes receivable. We also comply with applicable laws and regulations that further restrict the type, quality and concentration of our investments. We do not use any swaps, options, futures or forward contracts to hedge or enhance our investment portfolio. Our investment portfolio has inherent risks because it contains volatility associated with market pricing and interest rate sensitive instruments, such as bonds, which may be adversely affected by changes in interest rates or credit worthiness. The effects of market volatility, declining economic conditions, such as a U.S. or global economic slowdown, whether due to COVID-19, or other factors, could adversely impact the credit quality of securities in our portfolio and may have unforeseen consequences on the liquidity and financial stability of the issuers of securities we hold. Our debt securities portfolio includes securities that: •Are explicitly guaranteed by a sovereign entity that can print its own currency; •The currency is routinely held by central banks, used in international commerce and commonly viewed as a reserve currency; and •Have experienced a consistent high credit rating by rating agencies and a long history with no credit losses. We believe if these governments were to technically default it is reasonable to assume an expectation of immaterial losses, even in the current strained market conditions. Refer to Note 5 above for the balances of these sovereign debt securities, which are reported in the following investment categories: •United States government obligations and authorities; •Obligations of states and political subdivisions; and •International. For our debt securities, available-for-sale, the fact that a security’s fair value is below its amortized cost is not a decisive indicator of credit loss. In many cases, a security’s fair value may decline due to factors that are unrelated to the issuer’s ability to pay. For this reason, we consider the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost. If the present value of future expected cash flows is less than amortized cost, a credit loss is presumed to exist and an allowance for credit losses is established. Management may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. As a result of this review, management concluded that there were no credit-related impairments of our available-for-sale securities as of January 1, 2020, and June 30, 2020. Management does not intend to sell available-for-sale securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs. Our equity investments are measured at fair value through net income (loss), therefore they do not require an allowance for credit loss. We measure and record our valuation allowances for credit losses on our held-to-maturity corporate securities assets by multiplying the probability the asset would default within a given timeframe (“PD”) by the percentage of the asset not expected to be collected upon default, or loss given default (“LGD”), and multiplying that percentage by the amortized cost of the asset. We use market observable data for our PD and LGD assumptions. Premiums Receivable We do have collectability risk, but our homeowners policy terms are one year or less and our policyholders are dispersed throughout the southeast United States, although the majority of our policyholders are located in Florida. We write-off premiums receivable if the individual policy becomes uncollectible. Because collectively our premiums receivable share similar risk characteristics, we pool them to measure our valuation allowance for credit losses using an aging method approach. This method applies historical loss rates to levels of delinquency for our policy terms that are one year or less. Based upon historical collectability, adjusted for current and future economic conditions, we have measured and recorded our valuation allowances for premiums receivable. The aging of our premiums receivable and associated allowance for credit loss as of June 30, 2020 was as follows:
Reinsurance Recoverable Refer to Note 6 above for details of our efforts to minimize our exposure to losses from a reinsurer’s inability to pay. We measure and record our valuation allowances for credit losses on our reinsurance recoverables asset by multiplying the PD by the LGD and multiplying the result by the amortized cost of the asset. We use market observable data for our PD and LGD assumptions, and in cases where we are unable to observe LGD, we assume it is 100%.
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LOSS AND LOSS ADJUSTMENT RESERVES |
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LOSS AND LOSS ADJUSTMENT RESERVES | 8. LOSS AND LOSS ADJUSTMENT RESERVES The liability for loss and LAE reserves is determined on an individual-case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and incurred but not reported ("IBNR"). Activity in the liability for loss and LAE reserves is summarized as follows:
(1)Reinsurance recoverable in this table includes only ceded loss and LAE reserves. (2)Reflects loss development from prior accident years impacting pre-tax net income. Excludes losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment. (3)Reflects losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment, such that there is no impact on pre-tax net income (loss). The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as such estimates are subject to the outcome of future events. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple interpretations. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made. During the six months ended June 30, 2020, the Company experienced $7.3 million of unfavorable loss and LAE reserve development on prior accident years in its Florida homeowners and commercial general liability lines of business. During the six months ended June 30, 2019, the Company experienced $1.5 million of unfavorable loss and LAE reserve development on prior accident years in its commercial general liability and personal automobile lines of business, offset by redundancy in the homeowners line of business as a result of lower LAE associated primarily with Hurricane Irma. As previously disclosed, the Company entered into 30% and 10% retrospectively-rated Florida-only property quota-share treaties, which ended on July 1, 2016 and 2017, respectively. These agreements included a profit share (experience account) provision, under which the Company will receive ceded premium adjustments at the end of the treaty to the extent there is a positive balance in the experience account. This experience account is based on paid losses rather than incurred losses. Due to the retrospectively-rated nature of this treaty, when the experience account is positive we cede losses under these treaties as the claims are paid with an equal and offsetting adjustment to ceded premiums (in recognition of the related change to the experience account receivable), with no impact on net income. Conversely, when the experience account is negative, the Company cedes losses on an incurred basis with no offsetting adjustment to ceded premiums, which impacts net income. Loss development can be either favorable or unfavorable regardless of whether the experience account is in a positive or negative position.
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LONG-TERM DEBT |
6 Months Ended |
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Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | 9. LONG-TERM DEBT Refer to Note 8 of our 2019 Form 10-K for information regarding our long-term debt.
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INCOME TAXES |
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Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 10. INCOME TAXES In response to COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act contains several relief provisions for corporations and lifts certain deduction limitations originally imposed by the Tax Cut and Jobs Act. The CARES Act, among other things, includes temporary changes regarding the prior and future utilization of net operating losses (“NOL”), temporary changes to the prior and future limitations on interest deductions, temporary suspension of certain payment requirements for the employer portion of Social Security taxes and the creation of certain refundable employee retention credits. The Company has been evaluating the various provisions of the CARES Act. As described below, the Company did utilize the NOL provision in the current year. Our effective income tax rate is the ratio of income tax expense (benefit) over our income (loss) before income taxes. The effective income tax rate was 34.4% and 26.7% for the three months ended June 30, 2020 and 2019, respectively. The effective income tax rate was 36.6% and 27.4% for the six months ended June 30, 2020 and 2019, respectively. Differences in the effective tax and the statutory Federal income tax rate of 21% are driven by state income taxes and anticipated annual permanent differences, including estimates for tax-exempt interest, dividends received deduction, and executive compensation as well as NOL carrybacks from the impact of the CARES Act. The Company had an uncertain tax position of $0.4 million as of June 30, 2020 and December 31, 2019. The Company does not have a valuation allowance on its deferred income tax asset as of June 30, 2020 and December 31, 2019. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense (benefit) in the consolidated statements of operations and statements of comprehensive income (loss). For the three months ended June 30, 2020 and 2019, the Company recognized no benefit related to an uncertain tax position and our associated accrued interest and penalties was less than $0.1 million.
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COMMITMENTS AND CONTINGENCIES |
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COMMITMENTS AND CONTINGENCIES | 11. COMMITMENTS AND CONTINGENCIES Litigation and Legal Proceedings In the ordinary course of business, the Company is involved in various legal proceedings, specifically claims litigation. The Company’s insurance subsidiaries participate in most of these proceedings by either defending third-party claims brought against insureds or litigating first-party coverage claims. The Company accounts for such activity through the establishment of loss and LAE reserves. The Company’s management believes that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, is immaterial to the Company’s consolidated financial statements. The Company is also occasionally involved in other legal and regulatory proceedings, some of which may assert claims for substantial amounts, making the Company party to individual actions in which extra contractual damages, punitive damages or penalties, such as claims alleging bad faith in the handling of insurance claims, are sought. The Company reviews the outstanding matters, if any, on a quarterly basis. The Company accrues for estimated losses and contingent obligations in the consolidated financial statements if and when the obligation or potential loss from any litigation, legal proceeding or claim is considered probable and the amount of the potential exposure is reasonably estimable. The Company records such probable and estimable losses through the establishment of legal expense reserves. As events evolve, facts concerning litigation and contingencies become known and as additional information becomes available, the Company’s management reassesses its potential liabilities related to pending claims and litigation and may revise its previous estimates and make appropriate adjustment to the financial statements. Estimates that require judgment are subject to change and are based on management’s assessment, including the advice of legal counsel, the expected outcome of litigation and legal proceedings or other dispute resolution proceedings or the expected resolution of contingencies. The Company’s management believes that the Company’s accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on the Company’s consolidated financial statements. Assessment Related Activity The Company operates in a regulatory environment where certain entities and organizations have the authority to require us to participate in assessments. Currently these entities and organizations include: Florida Insurance Guaranty Association (“FIGA”), Citizens Property Insurance Corporation (“Citizens”), FHCF, Georgia Insurers Insolvency Pool (“GIIP”), Special Insurance Fraud Fund (“SIIF”), Fair Access to Insurance Requirements Plan (“FAIRP”), Property Insurance Association of Louisiana (“PIAL”), South Carolina Property & Casualty Insurance Guaranty Association (“SCPCIGA”), Texas Property and Casualty Insurance Guaranty Association (“TPCIGA”), Texas Windstorm Insurance Association (“TWIA”), Alabama Insurance Guaranty Association (“AIGA”), and Alabama Insurance Underwriters Association (“AIUA”). As a direct premium writer, we are required to participate in certain insurer solvency associations under the applicable laws in the states in which we do business. One form of assessment requires us to collect the assessment from our policyholders and then remit the collected amounts on to the assessing entity, which does not have any impact on our financial results. We are also subject to assessments that require us to pay the full amount of the assessment to the assessing entity and then we are permitted to make rate filings to allow us to recoup the amount of the assessment from our policyholders over time. In connection with its automobile line of business, which is currently winding down, FNIC is also required to participate in an insurance apportionment plan under Florida law, which is referred to as a JUA Plan. The JUA Plan provides for the equitable apportionment of any profits realized, or losses and expenses incurred, among participating automobile insurers. In the event of an underwriting deficit incurred by the JUA Plan, which is not recovered through the policyholders in the JUA Plan, such deficit shall be recovered from the companies participating in the JUA Plan in the proportion that the net direct written premiums of each such member during the preceding calendar year bear to the aggregate net direct premiums written in this state by all members of the JUA Plan. There were no material assessments by the JUA Plan as of December 31, 2019. Future assessments by the JUA and the JUA Plan are indeterminable at this time. Leases The Company is committed under various operating lease agreements for office space. The right-of-use asset is reflected in other assets and the lease liability is reflected in other liabilities on our consolidated balance sheets. Lease expense, net of sublease income is reflected in general and administrative expenses on our consolidated statements of operations. Additional information related to our operating lease agreement for office space consisted of the following:
The interest rates implicit in our leases were not known, therefore the weighted-average discount rate above was determined by what FedNat would have had to pay to borrow the lease payments in a similar economic environment that existed at inception of our leases while considering our general credit and the theoretical collateral of the office space. In the event of a change to lease term, the Company would re-evaluate all inputs and assumptions, including the discount rate.
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SHAREHOLDERS' EQUITY |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SHAREHOLDERS' EQUITY | 12. SHAREHOLDERS' EQUITY Common Stock Repurchases The Company may repurchase shares in open market transactions in accordance with Rule 10b-18 or under Rule 10b5-1 of the Exchange Act from time to time in its discretion, based on ongoing assessments of the Company’s capital needs, the market price of its common stock and general market conditions. The amount and timing of all repurchase transactions are contingent upon market conditions, applicable legal requirements and other factors. In December 2019, the Company’s Board of Directors authorized a share repurchase program under which the Company may repurchase up to $10.0 million of its outstanding shares of common stock from January 1, 2020 through December 31, 2020. In March 2020, the Company’s Board of Directors authorized an additional $10.0 million increase to the share repurchase program. This increased authorization will allow the Company to purchase up to $20 million of shares outstanding through December 31, 2020. During the six months ended June 30, 2020, the Company repurchased 800,235 shares of its common stock at a total cost of $10.0 million, which is an average price per share of $12.50. As of June 30, 2020 and as of the filing of this report, the remaining availability for future repurchases of our common stock under this program was $10.0 million. Securities Offerings In June 2018, the Company filed with the Securities and Exchange Commission (“SEC”) on Form S-3, a shelf registration statement enabling the Company to offer and sell, from time to time, up to an aggregate of $150.0 million of securities. No securities have been offered or sold under this registration statement. Share-Based Compensation Expense Share-based compensation arrangements include the following:
The intrinsic value of options exercised represents the difference between the stock option exercise price and the weighted average closing stock price of FNHC common stock on the exercise dates, as reported on the NASDAQ Global Market. Stock Option Awards A summary of the Company’s stock option activity includes the following:
Restricted Stock Awards The Company recognizes share-based compensation expense for all restricted stock awards (“RSAs”) held by the Company’s directors, executives and other key employees. For all RSA awards, excluding grants based on total relative shareholder return ("TSR"), the accounting charge is measured at the grant date as the fair value of FNHC common stock and expensed as non-cash compensation over the vesting term using the straight-line basis for service awards and over successive -year requisite service periods for performance-based awards. Our expense for our performance awards depends on achievement of specified results; therefore, the ultimate expense can range from 0% to 250% of target. Our TSR-based cliff vesting awards contain performance criteria which are tied to the achievement of certain market conditions. The TSR grant date fair value was determined using a Monte Carlo simulation and, unlike the performance condition awards, the expense is not reversed if the performance condition is not met. This value is recognized as expense over the requisite service period using the straight-line recognition method. During the six months ended June 30, 2020 and 2019, the Board of Directors granted 210,272 and 140,156 RSAs, respectively, vesting over or five years, to the Company’s directors, executives and other key employees. RSA activity includes the following:
The weighted average grant date fair value is measured using the closing price of FNHC common stock on the grant date, as reported on the NASDAQ Global Market. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) associated with debt securities - available-for-sale consisted of the following:
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EARNINGS PER SHARE |
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EARNINGS PER SHARE | 13. EARNINGS PER SHARE Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the period, including vested restricted stock awards during the period. Diluted EPS is computed by dividing net income by the weighted average number of shares outstanding, noted above, adjusted for the dilutive effect of stock options and unvested restricted stock awards. Dilutive securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the assumed exercise of common stock options and the vesting of RSAs using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is antidilutive. The following table presents the calculation of basic and diluted EPS:
Dividends Declared In February 2020, our Board of Directors declared a $0.09 per common share dividend, payable in March 2020, to shareholders of record on February 14, 2020, amounting to $1.3 million.
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 14. SUBSEQUENT EVENTS Dividends Declared Refer to Note 13 above for information related to our dividend declared in July 2020. Reinsurance Refer to Note 6 above for information related to the following reinsurance treaties, which became effective July 1, 2020: •Our Florida and non-Florida excess of loss catastrophe reinsurance program, which covers the Company and its carriers; •FNIC's renewal of the quota-share Florida homeowners business reinsurance program on an in-force, new and renewal basis; and •FNIC's new quota-share treaty covering non-Florida homeowners business.
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Organization, Consolidation and Presentation of Financial Statements (Policies) |
6 Months Ended |
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Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Material Distribution Relationships | Material Distribution Relationships Ivantage Select Agency, Inc. The Company is a party to an insurance agency master agreement with Ivantage Select Agency, Inc. (“ISA”), an affiliate of Allstate Insurance Company (“Allstate”), pursuant to which the Company has been authorized by ISA to appoint Allstate agents to offer our FNIC homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 21.2% and 23.9% were from Allstate’s network of Florida agents, for the three months ended June 30, 2020 and 2019, respectively. As a percentage of the total homeowners premiums we underwrote, 20.9% and 23.4% were from Allstate’s network of Florida agents, for the six months ended June 30, 2020 and 2019, respectively. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (“SageSure”) to facilitate growth in our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 27.2% and 22.0% of the Company’s premiums were underwritten by SageSure, for the three months ended June 30, 2020 and 2019, respectively. As a percentage of the total homeowners premiums, 25.8% and 21.0% of the Company’s premiums were underwritten by SageSure, for the six months ended June 30, 2020 and 2019, respectively. As part of our partnership with SageSure, we entered into a profit share agreement, whereby we share 50% of net profits of this line of business, as calculated per the terms of the agreement, subject to certain limitations. In addition, refer to Note 6 for information regarding a fully collateralized quota-share treaty.
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Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (“VIE”) of which the Company is the primary beneficiary. The Company’s management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Company’s interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements.
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Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (“VIE”) of which the Company is the primary beneficiary. The Company’s management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Company’s interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Policies) |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Accounting Estimates and Assumptions | Accounting Estimates and Assumptions The Company prepares the accompanying consolidated financial statements in accordance with GAAP, which requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may materially differ from those estimates. Similar to other property and casualty insurers, the Company’s liability for loss and loss adjustment expenses ("LAE") reserves, although supported by actuarial projections and other data, is ultimately based on management’s reasoned expectations of future events. Although considerable variability is inherent in these estimates, the Company believes that the liability and LAE reserve is adequate. The Company reviews and evaluates its estimates and assumptions regularly and makes adjustments, reflected in current operations, as necessary, on an ongoing basis.
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Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements, Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The update requires entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as currently performed under the other-than-temporary impairment ("OTTI") model. The update also requires enhanced disclosures for financial assets measured at amortized cost and available-for-sale debt securities to help the financial statement users better understand significant judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The Company adopted the guidance effective January 1, 2020, by reflecting a cumulative effect adjustment of less than $0.1 million, after-tax, which decreased retained earnings, held-to-maturity debt securities and reinsurance recoverable. Refer to Note 7 for additional information regarding allowances for credit loss. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The Company adopted the guidance effective January 1, 2020, which did not have any impact on the Company’s consolidated financial condition or results of operations. Recently Issued Accounting Pronouncements, Not Yet Adopted In January 2020, the FASB issued ASU 2020-1, Accounting for Equity Securities and Equity Investments, which clarifies the interaction between accounting standards related to equity securities (Topic 321), equity method investments (Topic 323), and certain derivatives (Topic 815). The update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The update is effective for interim and annual reporting periods beginning after December 15, 2021, with early adoption permitted. The Company is in the early stage of evaluating the impact that the update will have on the Company’s consolidated financial position or results of operations.
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ACQUISITIONS (Tables) |
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Business Acquisition, Pro Forma Information | The following unaudited pro forma condensed consolidated statements of operations of the Company assume that the acquisition of the Maison Companies was completed on January 1, 2019:
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FAIR VALUE (Tables) |
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets Measured on Recurring Basis | The Company’s financial instruments measured at fair value on a recurring basis and the level of the fair value hierarchy of inputs used consisted of the following:
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Fair Value, Assets Measured on Recurring and Nonrecurring Basis | Held-to-maturity debt securities reported on the consolidated balance sheets at amortized cost and disclosed at fair value below (and in Note 5) and the level of fair value hierarchy of inputs used consisted of the following:
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INVESTMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized Gain (Loss) on Investments | The difference between amortized cost or cost and estimated fair value and gross unrealized gains and losses, by major investment category, consisted of the following:
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Net Realized Gains (Losses) by Major Investment Category | Net realized and unrealized gains (losses) recognized in earnings, by major investment category, consisted of the following:
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Gain (Loss) on Securities |
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Investments Classified by Contractual Maturity Date | Amortized cost and estimated fair value of debt securities, by contractual maturity, consisted of the following:
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Summary of Net Investment Income | Net investment income consisted of the following:
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Debt Securities, Available-for-sale | Gross unrealized losses and related fair values for debt securities, grouped by duration of time in a continuous unrealized loss position, consisted of the following:
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REINSURANCE (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Recoverables | Reinsurance recoverable, net consisted of the following:
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Premiums Written and Earned | Net premiums written and net premiums earned consisted of the following:
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ALLOWANCES FOR CREDIT LOSS (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities, Held-to-maturity, Allowance for Credit Loss | Activity in the allowances for credit loss, by asset line item on the consolidated balance sheet, is summarized as follows:
(1)Refer to Note 2 above for information about our adoption of ASU 2016-13 on January 1, 2020. (2)Reflected in commissions and other underwriting expenses on the consolidated statements of comprehensive income (loss).
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Premium Receivable, Allowance for Credit Loss | The aging of our premiums receivable and associated allowance for credit loss as of June 30, 2020 was as follows:
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LOSS AND LOSS ADJUSTMENT RESERVES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability for Future Policy Benefit, before Reinsurance [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Activity in Liability for Loss and LAE Reserves | Activity in the liability for loss and LAE reserves is summarized as follows:
(1)Reinsurance recoverable in this table includes only ceded loss and LAE reserves. (2)Reflects loss development from prior accident years impacting pre-tax net income. Excludes losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment. (3)Reflects losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment, such that there is no impact on pre-tax net income (loss).
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COMMITMENTS AND CONTINGENCIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets And Liabilities, Lessee | Additional information related to our operating lease agreement for office space consisted of the following:
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Additional Lease Cost Information |
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SHAREHOLDERS' EQUITY (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Share-based compensation arrangements include the following:
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Schedule of Stock Options Roll Forward | A summary of the Company’s stock option activity includes the following:
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | RSA activity includes the following:
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Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive income (loss) associated with debt securities - available-for-sale consisted of the following:
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table presents the calculation of basic and diluted EPS:
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ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION (Narrative) (Details) - Premiums Written Net - Homeowners Multiperil Insurance Product Line - Customer Concentration Risk |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Ivantage Select Agency Inc | ||||
Organization, Consolidation, And Basis of Preparation [Line Items] | ||||
Concentration risk, percentage | 21.20% | 23.90% | 20.90% | 23.40% |
SageSure Insurance Managers LLC | ||||
Organization, Consolidation, And Basis of Preparation [Line Items] | ||||
Concentration risk, percentage | 27.20% | 22.00% | 25.80% | 21.00% |
Profit sharing agreement, profit sharing percent | 50.00% |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Narrative) (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Jan. 01, 2020 |
Dec. 31, 2019 |
---|---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Retained earnings | $ (38,668) | $ (70,591) | |
Cumulative Effect, Period Of Adoption, Adjustment | Accounting Standards Update 2016-13 | |||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Retained earnings | $ 100 |
ACQUISITIONS (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
1347 Property Insurance Holdings, Inc | ||||
Business Acquisition [Line Items] | ||||
Revenue of business acquired | $ 16,800 | $ 32,300 | ||
Net income of business acquired | $ 6,800 | $ 5,100 | ||
Maison Companies | ||||
Business Acquisition [Line Items] | ||||
Revenue | $ 118,995 | 237,616 | ||
Net income (loss) | $ 2,848 | $ (547) |
INVESTMENTS (Narrative) (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2020
USD ($)
security
|
Jun. 30, 2020
USD ($)
security
|
Dec. 31, 2019
USD ($)
security
|
|
Investments, Debt and Equity Securities [Abstract] | |||
Debt securities, available-for-sale, unrealized loss position, number of positions | security | 83 | 83 | 203 |
Debt securities, available-for-sale, continuous unrealized loss position, 12 months or longer, number of positions | security | 3 | 3 | 24 |
Fair value of investments deposited with governmental authorities required by law | $ 9,400 | $ 9,400 | $ 11,200 |
Debt Securities, Held-to-maturity, Sold, Amount | 70 | ||
Debt Securities, Held-to-maturity, Sold, Realized Gain (Loss) | 1 | ||
Debt Securities, Held-to-maturity, Transfer, Amount | 4,200 | ||
Held-to-maturity securities, fair value | 4,300 | 4,300 | |
Debt Securities, Held-to-maturity, Transfer, Unrealized Gain (Loss) | $ 58 | $ 58 |
INVESTMENTS (Net Realized Gains (Losses) by Major Investment Category (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Gross realized and unrealized gains | ||||
Total gross realized and unrealized gains | $ 11,289 | $ 2,311 | $ 12,994 | $ 5,458 |
Gross Realized and Unrealized Lossses [Abstract] | ||||
Debt And Equity Securities, Realized And Unrealized Losses | (906) | (356) | (5,436) | (1,202) |
Net realized and unrealized gains (losses) on investments | 10,383 | 1,955 | 7,558 | 4,256 |
Debt Securities | ||||
Gross realized and unrealized gains | ||||
Debt securities | 9,403 | 834 | 10,789 | 1,151 |
Gross Realized and Unrealized Lossses [Abstract] | ||||
Debt Securities, Trading, Realized And Unrealized Losses | (2,339) | (120) | (2,487) | (520) |
Equity Securities | ||||
Gross realized and unrealized gains | ||||
Equity securities | 1,886 | 1,477 | 2,205 | 4,307 |
Gross Realized and Unrealized Lossses [Abstract] | ||||
Equity Securities, FV-NI, Realized And Unrealized Losses | $ 1,433 | $ (236) | $ (2,949) | $ (682) |
INVESTMENTS (Net Unrealized Gains (Losses) Still Held (Details) - Equity Securities - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Debt Securities, Available-for-sale [Line Items] | ||||
Equity Securities, FV-NI, Gain (Loss), Total | $ 3,319 | $ 1,241 | $ (744) | $ 3,625 |
Less: net realized and unrealized gains (losses) | 53 | (76) | (582) | 250 |
Net unrealized gains (losses) still held as of the end-of-period | $ 3,266 | $ 1,317 | $ (162) | $ 3,375 |
INVESTMENTS (Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity) (Details) $ in Thousands |
Jun. 30, 2020
USD ($)
|
---|---|
Debt Securities, Available-for-sale, Amortized Cost, Fiscal Year Maturity [Abstract] | |
One year or less | $ 36,092 |
Over one through five years | 186,332 |
Over five through ten years | 138,456 |
Over ten years | 176,016 |
Amortized Cost | 536,896 |
Available-for-sale Securities, Debt maturities, Fair value: | |
One year or less | 36,331 |
Over one through five years | 193,816 |
Over five through ten years | 145,727 |
Over ten years | 180,087 |
Fair Value | $ 555,961 |
INVESTMENTS (Summary of Net Investment Income) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Investment Income, Interest and Dividend [Abstract] | ||||
Interest income | $ 3,249 | $ 4,169 | $ 7,071 | $ 7,826 |
Dividends income | 92 | 90 | 162 | 143 |
Net investment income | $ 3,341 | $ 4,259 | $ 7,233 | $ 7,969 |
REINSURANCE (Reinsurance Recoverables) (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Reinsurance Disclosures [Abstract] | ||||
Reinsurance recoverable on paid losses | $ 45,678 | $ 45,186 | ||
Reinsurance recoverable on unpaid losses | 183,031 | 164,429 | $ 140,800 | $ 166,396 |
Reinsurance recoverable, net | $ 228,709 | $ 209,615 |
REINSURANCE (Premiums Written and Earned) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Net Premiums Written | ||||
Direct | $ 205,378 | $ 169,170 | $ 378,340 | $ 301,403 |
Ceded | (60,751) | (62,339) | (74,517) | (74,132) |
Total premiums written | 144,627 | 106,831 | 303,823 | 227,271 |
Net Premiums Earned | ||||
Direct | 179,896 | 141,220 | 355,470 | 279,587 |
Ceded | (68,418) | (48,914) | (138,082) | (98,497) |
Net premiums earned | $ 111,478 | $ 92,306 | $ 217,388 | $ 181,090 |
ALLOWANCES FOR CREDIT LOSS (Premium Receivable Past Due) (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | $ 49,782 | |
Allowance for credit loss | (150) | $ (159) |
Net | 49,632 | |
Current | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 48,722 | |
Allowance for credit loss | 0 | |
Net | 48,722 | |
Financial Asset, 1 to 29 Days Past Due | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 866 | |
Allowance for credit loss | (9) | |
Net | 857 | |
Financial Asset, 30 to 59 Days Past Due | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 41 | |
Allowance for credit loss | (2) | |
Net | 39 | |
Financial Asset, 60 to 89 Days Past Due | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 20 | |
Allowance for credit loss | (6) | |
Net | 14 | |
Financial Asset, Equal to or Greater than 90 Days Past Due | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 133 | |
Allowance for credit loss | (133) | |
Net | $ 0 |
LOSS AND LOSS ADJUSTMENT RESERVES (Narrative) (Details) - USD ($) $ in Thousands |
1 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jul. 01, 2017 |
Jul. 31, 2016 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Liability for Future Policy Benefit, by Product Segment [Line Items] | ||||
Claim and claim adjustment expenses incurred related to current year | $ (192,109) | $ (132,087) | ||
Claim and claim adjustment expenses incurred related to prior year | 6,812 | 92 | ||
Reinsurance Programs | Florida | ||||
Liability for Future Policy Benefit, by Product Segment [Line Items] | ||||
Claim and claim adjustment expenses incurred related to current year | $ (7,300) | $ 1,500 | ||
Quota Share Treaties | Florida | Property Insurance Product Line | ||||
Liability for Future Policy Benefit, by Product Segment [Line Items] | ||||
Percentage of property quota share reinsurance treaty | 10.00% | 30.00% |
INCOME TAXES (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate | 34.40% | 26.70% | 36.60% | 27.40% | |
Unrecognized Tax Benefits | $ 0.4 | $ 0.4 | $ 0.4 | ||
Recognized benefit related to uncertain tax positions | 0.0 | $ 0.0 | |||
Income tax expense from uncertain tax position (less than) | $ 0.1 | $ 0.1 |
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES (Leases) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Operating lease, term | 9 years 6 months | 9 years 6 months | ||
Balance Sheet Related Disclosures [Abstract] | ||||
Right-of-use asset | $ 7,772 | $ 7,772 | ||
Accrued rent | (238) | (238) | ||
Right-of-use asset, net | 7,534 | 7,534 | ||
Lease liability | $ 7,772 | $ 7,772 | ||
Weighted average discount rate | 4.70% | 4.70% | ||
Weighted average remaining years of lease term | 8 years 2 months 12 days | 8 years 2 months 12 days | ||
Income Statement Related Disclosures [Abstract] | ||||
Lease expense | $ 279 | $ 259 | $ 559 | $ 519 |
Sublease income | (114) | (78) | (269) | (78) |
Lease expense, net | 165 | 181 | 290 | 441 |
Net cash provided by (used in) operating activities | $ (144) | $ (115) | $ (233) | $ (252) |
SHAREHOLDERS' EQUITY (Schedule of Share-based Compensation Arrangements) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | $ 355 | $ 683 | $ 808 | $ 1,358 |
Recognized tax benefit | 87 | 173 | 198 | 344 |
Intrinsic value of options exercised | 2 | 0 | 4 | 0 |
Fair value of restricted stock vested | 608 | 306 | 1,640 | 1,233 |
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | 369 | 502 | 722 | 996 |
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | $ (14) | $ 181 | $ 86 | $ 362 |
SHAREHOLDERS' EQUITY (Summary of Restricted Stock Activity) (Details) - $ / shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Granted (in shares) | 210,272 | 140,156 |
Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding, beginning of period (in shares) | 255,345 | |
Granted (in shares) | 210,272 | |
Vested (in shares) | (88,289) | |
Cancelled (in shares) | 0 | |
Outstanding, end of period (in shares) | 377,328 | |
Restricted Shares, Weighted Average Option Exercise Price [Roll Forward] | ||
Outstanding, beginning of period (in dollars per share) | $ 17.82 | |
Granted (in dollars per share) | 11.82 | |
Vested (in dollars per share) | 18.58 | |
Cancelled (in dollars per share) | 0 | |
Outstanding, end of period (in dollars per share) | $ 14.31 |
EARNINGS PER SHARE (Schedule of Calculation of Basic and Diluted Net Income Per Common Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Apr. 30, 2020 |
Feb. 29, 2020 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share [Abstract] | ||||||
Net income (loss) attributable to FedNat Holding Company shareholders | $ (21,479) | $ 7,110 | $ (19,346) | $ 3,245 | ||
Weighted average number of common shares outstanding - basic | 13,714 | 12,844 | 13,981 | 12,820 | ||
Net (loss) income per share - basic (in dollars per share) | $ (1.57) | $ 0.55 | $ (1.38) | $ 0.25 | ||
Dilutive effect of stock compensation plans | 0 | 39 | 0 | 56 | ||
Weighted average number of common shares outstanding - diluted | 13,714 | 12,883 | 13,981 | 12,876 | ||
Net (loss) income per share - diluted (in dollars per share) | $ (1.57) | $ 0.55 | $ (1.38) | $ 0.25 | ||
Dividends declared per share (in dollars per share) | $ 0.09 | $ 0.09 | $ 0.09 | $ 0.08 | $ 0.18 | $ 0.16 |
EARNINGS PER SHARE (Dividends Declared) (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|---|
Jul. 31, 2020 |
Apr. 30, 2020 |
Feb. 29, 2020 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Dividends declared per share (in dollars per share) | $ 0.09 | $ 0.09 | $ 0.09 | $ 0.08 | $ 0.18 | $ 0.16 | |
Payments of ordinary dividends, amount | $ 1.3 | $ 1.3 | |||||
Subsequent Event | |||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Dividends declared per share (in dollars per share) | $ 0.09 | ||||||
Payments of ordinary dividends, amount | $ 1.3 |
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