Commission File Number | ||
000-54627 | ||
CAYMAN ISLANDS | 27-5466079 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
150 NW POINT BOULEVARD | 60007 | |
Elk Grove Village, IL | (Zip Code) | |
(Address of principal executive offices) |
ATLAS FINANCIAL HOLDINGS, INC. (Registrant) | ||||
/s/ Paul A. Romano By: Paul A. Romano (Vice President and Chief Financial Officer) | ||||
May 9, 2016 |
• | Gross premium written increased by 42.4% to $64.0 million, which included an increase of 42.9% in its core commercial auto business |
• | In-force premium at March 31, 2016 was $220.6 million, compared to $211.3 million at December 31, 2015 |
• | Combined ratio improved by 5.4 percentage points to 84.4% |
• | Underwriting income improved to $6.5 million as compared to $3.1 million |
• | For the three month period ended March 31, 2016, net income was $4.8 million compared to $2.1 million |
• | Earnings per common share diluted were $0.38 for the three month period ended March 31, 2016 compared to $0.17 for the three month period ended March 31, 2015 |
• | Book value per common share on March 31, 2016 was $10.73, compared to $10.15 at December 31, 2015 and $9.23 at March 31, 2015 |
• | Adjusted operating income, before tax, was $6.7 million, or $0.53 per common share diluted, compared to $5.3 million, or $0.42 per common share diluted1 |
• | Adjusted operating income, after tax, was $4.4 million, or $0.34 per common share diluted, compared to $3.5 million, or $0.27 per common share diluted1 |
• | Annualized return on common equity ("ROCE") was 15.0% in the first quarter 2016 compared to 7.7% in 20151 |
• | Loss Ratio: The loss ratio relating to claims incurred for the three month period ended March 31, 2016 was 59.7% compared to 56.1% for the three month period ended March 31, 2015. The loss ratio increase relative to prior periods was primarily due to the fact that there was favorable development on Gateway's commercial auto program during the three month period ended March 31, 2015. Excluding the favorable development in 2015, the first quarter 2015 loss ratio would have been 62.4% or 2.7 percentage points higher than first quarter 2016. The Company continues to see incremental opportunities to leverage decades of experience in the claims area coupled with underwriting opportunities to increase expected margin in subsequent quarters. As previously announced, the Company is also leveraging predictive analytics in the claim area to further build on the experience and expertise within its organization. On a year over year basis, the Company expects its loss ratio to trend in a positive direction based on prior year and potential future underwriting and claims activities. To achieve this, Atlas utilizes data and experience accumulated over its operating subsidiaries’ many years spent focusing on niche target markets to model potential risk and deliver value in terms of claims and other areas of support. |
• | Underwriting Expense Ratio: The underwriting expense ratio for the three month period ended March 31, 2016 was 24.7% compared to 33.7% for the three month period ended March 31, 2015. The ratio for the combination of acquisition costs and other underwriting expenses, excluding share based compensation expense and expenses related to acquisitions and stock purchase agreements, of 24.7% compares favorably to 26.9% for the three month period ended March 31, 2015. Year over year organic premium growth in the quarter was at the high end of the Company’s previously provided overall range of 30% - 50%. Expenses in |
Three Month Periods Ended | ||||||
March 31, 2016 | March 31, 2015 | |||||
Loss Ratio | 59.7 | % | 56.1 | % | ||
Underwriting Expense Ratio: | ||||||
Acquisition cost ratio | 9.7 | % | 13.0 | % | ||
Other underwriting expense ratio | 15.0 | % | 13.9 | % | ||
Underwriting expense ratio before expenses related to acquisitions and stock purchase agreements and stock based compensation expenses | 24.7 | % | 26.9 | % | ||
Expenses (recovered) incurred related to acquisitions and stock purchase agreement ratio | (1.0 | ) | % | 5.6 | % | |
Share based compensation expense ratio | 1.0 | % | 1.2 | % | ||
Underwriting expense ratio | 24.7 | % | 33.7 | % | ||
Total combined ratio | 84.4 | % | 89.8 | % |
Three Month Periods Ended | ||
March 31, 2016 | March 31, 2015 | |
Acquisition costs | 13.8% | 14.1% |
Other insurance general and administrative expenses | 12.6% | 13.2% |
Expenses (recovered) incurred related to acquisitions and stock purchase agreements | (0.8)% | 5.3% |
Share based compensation expense | 0.8% | 1.2% |
(after tax effects) | Three Month Periods Ended | |||||||||||
March 31, 2016 | March 31, 2015 | |||||||||||
U.S. GAAP net income | $4,811 | $0.38 | $2,137 | $0.17 | ||||||||
Less: other income | 66 | 0.01 | 21 | — | ||||||||
Less: net investment gains | 155 | 0.01 | 90 | 0.01 | ||||||||
Add: expenses incurred related to acquisition of subsidiaries | — | — | 495 | 0.04 | ||||||||
Add: expenses (recovered) incurred pursuant to Gateway stock purchase agreement | (402 | ) | (0.03 | ) | 942 | 0.07 | ||||||
Add: interest expense | 152 | 0.01 | 6 | — | ||||||||
Add: deferred income taxes | 45 | — | 24 | — | ||||||||
Adjusted operating income, after tax | $4,385 | $0.34 | $3,493 | $0.27 |
Three Month Periods Ended | ||||
March 31, 2016 | March 31, 2015 | |||
Weighted average common shares outstanding | 12,045,519 | 11,850,848 | ||
Dilutive potential ordinary shares: | ||||
Dilutive stock options | 182,541 | 200,497 | ||
Dilutive shares upon preferred share conversion | 522,397 | 573,444 | ||
Dilutive average common shares outstanding | 12,750,457 | 12,624,789 |
Reconciliation of U.S. GAAP Net Income to Adjusted Operating Income Before Tax (in '000s, except per share values) | ||||||||||||
Three Month Periods Ended | ||||||||||||
March 31, 2016 | March 31, 2015 | |||||||||||
Net income | $ | 4,811 | $ | 0.38 | $ | 2,137 | $ | 0.17 | ||||
Add: income tax expense | 2,444 | 0.19 | 1,623 | 0.13 | ||||||||
Add: expenses incurred related to acquisition of subsidiaries | — | — | 750 | 0.06 | ||||||||
Add: expenses (recovered) incurred pursuant to Gateway stock purchase agreement | (402 | ) | (0.03 | ) | 942 | 0.07 | ||||||
Add: interest expense | 233 | 0.02 | 9 | — | ||||||||
Less: net realized investment gains | 239 | 0.02 | 137 | 0.01 | ||||||||
Less: other income | 102 | 0.01 | 32 | — | ||||||||
Adjusted operating income before tax | $ | 6,745 | $ | 0.53 | $ | 5,292 | $ | 0.42 |
Reconciliation of U.S. GAAP Shareholders' Equity to Common Equity (in '000s) | ||||||||||||
As of: | March 31, 2016 | December 31, 2015 | March 31, 2015 | December 31, 2014 | ||||||||
Total shareholders' equity | $ | 136,341 | $ | 129,622 | $ | 117,963 | $ | 109,399 | ||||
Less: preferred shares | (6,539 | ) | (6,941 | ) | (6,941 | ) | (2,000 | ) | ||||
Less: accrued dividends on preferred shares | (543 | ) | (460 | ) | (219 | ) | (184 | ) | ||||
Total common equity | $ | 129,259 | $ | 122,221 | $ | 110,803 | $ | 107,215 | ||||
Average common equity | $ | 125,739 | $ | 109,010 |
Reconciliation of U.S. GAAP Return on Equity to Return on Common Equity (in '000s) | ||||||
Three Month Periods Ended | ||||||
March 31, 2016 | March 31, 2015 | |||||
Net income | $ | 4,811 | $ | 2,137 | ||
Average equity | 132,981 | 113,682 | ||||
Return on equity | 14.5 | % | 7.5 | % | ||
Net income | $ | 4,811 | $ | 2,137 | ||
Less: preferred share dividends accrued | (83 | ) | (35 | ) | ||
Net income attributable to common shareholders | $ | 4,728 | $ | 2,102 | ||
Average common equity | 125,739 | 109,010 | ||||
Return on average common equity | 15.0 | % | 7.7 | % |
Three Month Period Ended | ||||||||
March 31, 2016 | March 31, 2015 | |||||||
Net premiums earned | $ | 41,753 | $ | 30,167 | ||||
Net investment income | 653 | 520 | ||||||
Net realized investment gains | 239 | 137 | ||||||
Other income | 102 | 32 | ||||||
Total revenue | 42,747 | 30,856 | ||||||
Net claims incurred | 24,940 | 16,932 | ||||||
Acquisition costs | 4,053 | 3,918 | ||||||
Other underwriting expenses1 | 6,571 | 4,545 | ||||||
Amortization of intangible assets | 97 | — | ||||||
Interest expense | 233 | 9 | ||||||
Expenses (recovered) incurred pursuant to Gateway stock purchase agreement | (402 | ) | 942 | |||||
Expenses incurred related to acquisition of subsidiaries | — | 750 | ||||||
Total expenses | 35,492 | 27,096 | ||||||
Income from operations before income tax expense | 7,255 | 3,760 | ||||||
Income tax expense | 2,444 | 1,623 | ||||||
Net income | 4,811 | 2,137 | ||||||
Less: Preferred share dividends | 83 | 35 | ||||||
Net income attributable to common shareholders | $ | 4,728 | $ | 2,102 | ||||
Basic weighted average common shares outstanding | 12,045,519 | 11,850,848 | ||||||
Earnings per common share, basic | $ | 0.39 | $ | 0.18 | ||||
Diluted weighted average common shares outstanding | 12,750,457 | 12,624,789 | ||||||
Earnings per common share, diluted | $ | 0.38 | $ | 0.17 | ||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||
Net income | $ | 4,811 | $ | 2,137 | ||||
Other comprehensive income (loss): | ||||||||
Changes in net unrealized investment gains | 2,905 | 1,590 | ||||||
Reclassification to income of net realized investment (losses) gains | (40 | ) | 6 | |||||
Effect of income tax | (1,003 | ) | (543 | ) | ||||
Other comprehensive income | 1,862 | 1,053 | ||||||
Total comprehensive income | $ | 6,673 | $ | 3,190 |
March 31, 2016 | December 31, 2015 | ||||||||
Assets | |||||||||
Investments, available for sale | |||||||||
Fixed income securities, at fair value (amortized cost $188,619 and $185,455) | $ | 189,782 | $ | 183,773 | |||||
Equity securities, at fair value (cost $6,147 and $4,147) | 6,261 | 4,240 | |||||||
Other investments | 25,064 | 22,937 | |||||||
Total Investments | 221,107 | 210,950 | |||||||
Cash and cash equivalents | 17,299 | 22,354 | |||||||
Accrued investment income | 929 | 1,036 | |||||||
Premiums receivable (net of allowance of $845 and $846) | 87,005 | 82,529 | |||||||
Reinsurance recoverables on amounts paid | 4,357 | 3,277 | |||||||
Reinsurance recoverables on amounts unpaid | 28,272 | 29,399 | |||||||
Prepaid reinsurance premiums | 19,718 | 17,412 | |||||||
Deferred policy acquisition costs | 11,317 | 10,235 | |||||||
Deferred tax asset, net | 15,383 | 17,166 | |||||||
Goodwill | 2,726 | 2,726 | |||||||
Intangible assets, net | 4,828 | — | 4,925 | ||||||
Internal use software and office equipment | 2,438 | 2,589 | |||||||
Other assets | 7,912 | 6,660 | |||||||
Assets held for sale | 34 | 34 | |||||||
Total Assets | $ | 423,325 | $ | 411,292 | |||||
Liabilities | |||||||||
Claims liabilities | $ | 121,379 | $ | 127,011 | |||||
Unearned premiums | 118,825 | 108,202 | |||||||
Due to reinsurers and other insurers | 12,995 | 10,781 | |||||||
Note payable | 17,636 | 17,219 | |||||||
Other liabilities and accrued expenses | 16,149 | 18,457 | |||||||
Total Liabilities | $ | 286,984 | $ | 281,670 | |||||
Shareholders’ Equity | |||||||||
Preferred shares, $0.001 par value, 100,000,000 shares authorized, shares issued and outstanding: March 31, 2016 - 6,538,560 and December 31, 2015 - 6,940,500. Liquidation value $1.00 per share | $ | 6,539 | $ | 6,941 | |||||
Ordinary voting common shares, $0.003 par value, 266,666,667 shares authorized, shares issued and outstanding: March 31, 2016 - 11,890,432 and December 31, 2015 - 11,883,025 | 36 | 36 | |||||||
Restricted voting common shares, $0.003 par value, 33,333,334 shares authorized, shares issued and outstanding: March 31, 2016 and December 31, 2015 - 132,863 | — | — | |||||||
Additional paid-in capital | 198,489 | 198,041 | |||||||
Retained deficit | (69,553 | ) | (74,364 | ) | |||||
Accumulated other comprehensive income (loss), net of tax | 830 | (1,032 | ) | ||||||
Total Shareholders’ Equity | 136,341 | 129,622 | |||||||
Total Liabilities and Shareholders’ Equity | $ | 423,325 | $ | 411,292 |
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