For the quarterly period ended: | COMMISSION FILE NUMBER: | |
September 30, 2016 | 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) |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | ||
SIGNATURE |
September 30, 2016 (unaudited) | December 31, 2015 | |||||
Assets | ||||||
Investments, available for sale | ||||||
Fixed income securities, at fair value (amortized cost $165,016 and $185,455) | $ | 167,629 | $ | 183,773 | ||
Equity securities, at fair value (cost $6,147 and $4,147) | 6,391 | 4,240 | ||||
Other investments | 30,880 | 22,937 | ||||
Total Investments | 204,900 | 210,950 | ||||
Cash and cash equivalents | 28,508 | 22,354 | ||||
Accrued investment income | 772 | 1,036 | ||||
Premiums receivable (net of allowance of $872 and $846) | 81,814 | 82,529 | ||||
Reinsurance recoverables on amounts paid | 6,107 | 3,277 | ||||
Reinsurance recoverables on amounts unpaid | 22,412 | 29,399 | ||||
Prepaid reinsurance premiums | 16,299 | 17,412 | ||||
Deferred policy acquisition costs | 12,705 | 10,235 | ||||
Deferred tax asset, net | 16,608 | 17,166 | ||||
Goodwill | 2,726 | 2,726 | ||||
Intangible assets, net | 4,633 | 4,925 | ||||
Internal use software and office equipment, net | 2,593 | 2,589 | ||||
Other assets | 6,987 | 6,694 | ||||
Total Assets | $ | 407,064 | $ | 411,292 | ||
Liabilities | ||||||
Claims liabilities | $ | 100,319 | $ | 127,011 | ||
Unearned premiums | 117,809 | 108,202 | ||||
Due to reinsurers | 6,369 | 10,781 | ||||
Note payable, net | 19,170 | 17,219 | ||||
Other liabilities and accrued expenses | 16,805 | 18,457 | ||||
Total Liabilities | $ | 260,472 | $ | 281,670 | ||
Commitments and contingencies (see Note 8) | ||||||
Shareholders’ Equity | ||||||
Preferred shares, $0.001 par value, 100,000,000 shares authorized, shares issued and outstanding: September 30, 2016 - 4,000,000 and December 31, 2015 - 6,940,500. Liquidation value $1.00 per share | $ | 4,000 | $ | 6,941 | ||
Ordinary voting common shares, $0.003 par value, 266,666,667 shares authorized, shares issued and outstanding: September 30, 2016 - 11,895,104 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: September 30, 2016 - 128,191 and December 31, 2015 - 132,863 | — | — | ||||
Additional paid-in capital | 198,856 | 198,041 | ||||
Retained deficit | (58,157 | ) | (74,364 | ) | ||
Accumulated other comprehensive income (loss), net of tax | 1,857 | (1,032 | ) | |||
Total Shareholders' Equity | 146,592 | 129,622 | ||||
Total Liabilities and Shareholders’ Equity | $ | 407,064 | $ | 411,292 |
Condensed Consolidated Statements of Income | Three Month Periods Ended | Nine Month Periods Ended | ||||||||||
September 30, 2016 (unaudited) | September 30, 2015 (unaudited) | September 30, 2016 (unaudited) | September 30, 2015 (unaudited) | |||||||||
Net premiums earned | $ | 43,251 | $ | 41,666 | $ | 126,806 | $ | 110,137 | ||||
Net investment income | 1,403 | 1,180 | 3,168 | 2,891 | ||||||||
Net realized investment gains | 630 | 91 | 1,024 | 272 | ||||||||
Other income | 51 | 144 | 280 | 301 | ||||||||
Total revenue | 45,335 | 43,081 | 131,278 | 113,601 | ||||||||
Net claims incurred | 25,161 | 24,988 | 74,675 | 64,449 | ||||||||
Acquisition costs | 5,013 | 4,988 | 13,036 | 13,983 | ||||||||
Other underwriting expenses | 7,730 | 6,747 | 21,084 | 16,782 | ||||||||
Amortization of intangible assets, net | 97 | — | 292 | — | ||||||||
Interest expense | 257 | 266 | 756 | 447 | ||||||||
Expenses (recovered) incurred pursuant to Gateway stock purchase agreement | (1,895 | ) | — | (2,297 | ) | 942 | ||||||
Expenses incurred related to acquisition of subsidiaries | — | — | — | 978 | ||||||||
Total expenses | 36,363 | 36,989 | 107,546 | 97,581 | ||||||||
Income from operations before income tax expense | 8,972 | 6,092 | 23,732 | 16,020 | ||||||||
Income tax expense | 2,476 | 2,068 | 7,525 | 5,923 | ||||||||
Net income | 6,496 | 4,024 | 16,207 | 10,097 | ||||||||
Less: Preferred share dividends | 73 | 81 | 234 | 196 | ||||||||
Net income attributable to common shareholders | $ | 6,423 | $ | 3,943 | $ | 15,973 | $ | 9,901 | ||||
Basic weighted average common shares outstanding | 12,045,519 | 12,008,624 | 12,045,519 | 11,956,611 | ||||||||
Earnings per common share basic | $ | 0.53 | $ | 0.33 | $ | 1.33 | $ | 0.83 | ||||
Diluted weighted average common shares outstanding | 12,740,004 | 12,793,774 | 12,746,102 | 12,741,165 | ||||||||
Earnings per common share diluted | $ | 0.51 | $ | 0.32 | $ | 1.27 | $ | 0.80 | ||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||||||
Net income | $ | 6,496 | $ | 4,024 | $ | 16,207 | $ | 10,097 | ||||
Other comprehensive income (loss): | ||||||||||||
Changes in net unrealized investment (losses) gains | (569 | ) | 555 | 4,092 | 165 | |||||||
Reclassification to income of net realized investment gains | 105 | 4 | 353 | 199 | ||||||||
Effect of income tax | 162 | (190 | ) | (1,556 | ) | (124 | ) | |||||
Other comprehensive (loss) income | (302 | ) | 369 | 2,889 | 240 | |||||||
Total comprehensive income | $ | 6,194 | $ | 4,393 | $ | 19,096 | $ | 10,337 |
Preferred Shares | Ordinary Voting Common Shares | Restricted Voting Common Shares | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Income/(Loss) | Total Share-holders' Equity | |||||||||||||||
Balance December 31, 2014 | $ | 2,000 | $ | 34 | $ | — | $ | 196,079 | $ | (88,794 | ) | $ | 80 | $ | 109,399 | ||||||
Net income | — | — | — | — | 10,097 | — | 10,097 | ||||||||||||||
Issuance of preferred shares | 4,941 | — | — | — | — | — | 4,941 | ||||||||||||||
Other comprehensive income | — | — | — | — | — | 240 | 240 | ||||||||||||||
Share-based compensation | — | 2 | — | 1,246 | — | — | 1,248 | ||||||||||||||
Balance September 30, 2015 (unaudited) | $ | 6,941 | $ | 36 | $ | — | $ | 197,325 | $ | (78,697 | ) | $ | 320 | $ | 125,925 | ||||||
Balance December 31, 2015 | $ | 6,941 | $ | 36 | $ | — | $ | 198,041 | $ | (74,364 | ) | $ | (1,032 | ) | $ | 129,622 | |||||
Net income | — | — | — | — | 16,207 | — | 16,207 | ||||||||||||||
Preferred dividends paid | — | — | — | (409 | ) | — | — | (409 | ) | ||||||||||||
Retirement of preferred shares | (2,941 | ) | — | — | — | — | — | (2,941 | ) | ||||||||||||
Other comprehensive income | — | — | — | — | — | 2,889 | 2,889 | ||||||||||||||
Share-based compensation | — | — | — | 1,224 | — | — | 1,224 | ||||||||||||||
Balance September 30, 2016 (unaudited) | $ | 4,000 | $ | 36 | $ | — | $ | 198,856 | $ | (58,157 | ) | $ | 1,857 | $ | 146,592 |
(in '000s of US dollars, except for share and per share data) | Nine Month Periods Ended | |||||
September 30, 2016 (unaudited) | September 30, 2015 (unaudited) | |||||
Operating activities: | ||||||
Net income | $ | 16,207 | $ | 10,097 | ||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||
Depreciation and amortization of fixed assets | 747 | 684 | ||||
Share-based compensation expense | 1,224 | 1,248 | ||||
Amortization of deferred gain on sale of headquarters building | (32 | ) | (32 | ) | ||
Amortization of intangible assets | 292 | — | ||||
Deferred income taxes | 1,223 | (383 | ) | |||
Net realized gains | (1,024 | ) | (272 | ) | ||
Gain in equity of investees | (722 | ) | (892 | ) | ||
Amortization of bond premiums and discounts | 976 | 1,129 | ||||
Amortization of financing costs | 51 | 39 | ||||
Expenses (recovered) incurred pursuant to Gateway stock purchase agreement | (2,623 | ) | 941 | |||
Net changes in operating assets and liabilities (net of acquisition): | ||||||
Premiums receivable and other assets, net | 422 | (24,710 | ) | |||
Due from reinsurers and other insurers | 5,270 | (1,610 | ) | |||
Deferred policy acquisition costs | (2,470 | ) | (706 | ) | ||
Accrued investment income | 265 | (27 | ) | |||
Claims liabilities | (26,692 | ) | (9,421 | ) | ||
Unearned premiums | 9,607 | 26,153 | ||||
Due to reinsurers and other insurers | (4,412 | ) | 3,826 | |||
Other liabilities and accrued expenses | (1,621 | ) | (653 | ) | ||
Net cash flows (used in) provided by operating activities | (3,312 | ) | 5,411 | |||
Investing activities: | ||||||
Purchase of subsidiary (net of cash acquired) | — | (10,956 | ) | |||
Purchases of: | ||||||
Fixed income securities | (46,064 | ) | (62,039 | ) | ||
Equity securities | (2,000 | ) | (1,340 | ) | ||
Other investments | (10,652 | ) | (4,217 | ) | ||
Property, equipment and other | (751 | ) | (535 | ) | ||
Proceeds from sale and maturity of: | ||||||
Fixed income securities | 66,551 | 39,273 | ||||
Equity securities | — | 1,402 | ||||
Other investments | 3,430 | — | ||||
Net cash flows provided by (used in) investing activities | 10,514 | (38,412 | ) | |||
Financing activities: | ||||||
Preferred share buyback | (2,539 | ) | — | |||
Proceeds from notes payable, net of financing costs | 2,000 | 17,663 | ||||
Repayment of note | (100 | ) | (500 | ) | ||
Dividends paid | (409 | ) | — | |||
Net cash flows (used in) provided by financing activities | (1,048 | ) | 17,163 | |||
Net change in cash and cash equivalents | 6,154 | (15,838 | ) | |||
Cash and cash equivalents, beginning of period | 22,354 | 36,586 | ||||
Cash and cash equivalents, end of period | $ | 28,508 | $ | 20,748 | ||
Supplemental disclosure of cash information (in '000s): | ||||||
Cash paid for: | ||||||
Income taxes | $ | 4,610 | $ | 6,224 | ||
Interest | 650 | 361 | ||||
Supplemental disclosure of noncash investing and financing activities (in '000's): | ||||||
Issuance of preferred shares related to purchase of subsidiary | $ | — | $ | 4,000 | ||
Issuance of preferred shares related to Gateway stock purchase agreement | — | 941 | ||||
Redemption of preferred shares related to Gateway stock purchase agreement | (2,297 | ) | — | |||
1. | NATURE OF OPERATIONS AND BASIS OF PRESENTATION |
(in '000s, except per share data) | Three Month Period Ended | Nine Month Period Ended | ||||
September 30, 2015 | September 30, 2015 | |||||
Revenue | $ | 43,081 | $ | 119,061 | ||
Income from operations before income tax expense 1 | $ | 6,092 | $ | 17,554 | ||
Net income 1 | $ | 4,024 | $ | 11,086 | ||
Earnings per common share basic1 | $ | 0.33 | $ | 0.91 | ||
Earnings per common share diluted 1 | $ | 0.32 | $ | 0.85 |
(in '000s) | |||
Purchase Consideration | |||
Cash | $ | 19,199 | |
Preferred stock | 4,000 | ||
Total | $ | 23,199 | |
Allocation of Purchase Price | |||
Cash and investments | $ | 48,508 | |
Other current assets | 33,303 | ||
Property and equipment | 22 | ||
Goodwill | 2,726 | ||
Intangible assets | 4,500 | ||
Total Assets | $ | 89,059 | |
Claims liabilities | $ | 30,731 | |
Unearned premiums | 22,976 | ||
Accounts payable and other liabilities | 11,231 | ||
Deferred tax liabilities, net | 922 | ||
Total Liabilities | $ | 65,860 | |
Net assets acquired | $ | 23,199 |
(in '000s) | |||||||||||
At September 30, 2016 | Economic Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | |||||||
Trade name and trademark | 15 years | $ | 1,800 | $ | 187 | $ | 1,613 | ||||
Customer relationship | 10 years | 2,700 | 420 | 2,280 | |||||||
State insurance licenses | Indefinite | 740 | — | 740 | |||||||
$ | 5,240 | $ | 607 | $ | 4,633 | ||||||
At December 31, 2015 | Economic Useful Life | Gross Carrying Amount | Accumulated Amortization | Net | |||||||
Trade name and trademark | 15 years | $ | 1,800 | $ | 97 | $ | 1,703 | ||||
Customer relationship | 10 years | 2,700 | 218 | 2,482 | |||||||
State insurance licenses | Indefinite | 740 | — | 740 | |||||||
$ | 5,240 | $ | 315 | $ | 4,925 |
Three Month Periods Ended | Nine Month Periods Ended | ||||||||||||
(in '000s, except share and per share data) | September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Basic: | |||||||||||||
Income from operations before income tax expense | $ | 8,972 | $ | 6,092 | $ | 23,732 | $ | 16,020 | |||||
Income tax expense | 2,476 | 2,068 | 7,525 | 5,923 | |||||||||
Net income | $ | 6,496 | $ | 4,024 | $ | 16,207 | $ | 10,097 | |||||
Less: Preferred share dividends | 73 | 81 | 234 | 196 | |||||||||
Net income attributable to common shareholders | $ | 6,423 | $ | 3,943 | $ | 15,973 | $ | 9,901 | |||||
Basic weighted average common shares outstanding | 12,045,519 | 12,008,624 | 12,045,519 | 11,956,611 | |||||||||
Earnings per common share basic | $ | 0.53 | $ | 0.33 | $ | 1.33 | $ | 0.83 | |||||
Diluted: | |||||||||||||
Basic weighted average common shares outstanding | 12,045,519 | 12,008,624 | 12,045,519 | 11,956,611 | |||||||||
Add: | |||||||||||||
Dilutive stock options outstanding | 172,088 | 211,706 | 178,186 | 211,110 | |||||||||
Dilutive shares upon preferred share conversion | 522,397 | 573,444 | 522,397 | 573,444 | |||||||||
Diluted weighted average common shares outstanding | 12,740,004 | 12,793,774 | 12,746,102 | 12,741,165 | |||||||||
Earnings per common share diluted | $ | 0.51 | $ | 0.32 | $ | 1.27 | $ | 0.80 |
As of September 30, 2016 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
Fixed Income Securities: | |||||||||||||
U.S. Treasury and other U.S. government obligations | $ | 22,860 | $ | 272 | $ | (3 | ) | $ | 23,129 | ||||
States, municipalities and political subdivisions | 11,401 | 216 | (4 | ) | 11,613 | ||||||||
Corporate | |||||||||||||
Banking/financial services | 22,075 | 505 | (8 | ) | 22,572 | ||||||||
Consumer goods | 8,715 | 152 | (11 | ) | 8,856 | ||||||||
Capital goods | 8,593 | 265 | (43 | ) | 8,815 | ||||||||
Energy | 3,943 | 139 | (59 | ) | 4,023 | ||||||||
Telecommunications/utilities | 7,608 | 128 | (43 | ) | 7,693 | ||||||||
Health care | 2,386 | 21 | — | 2,407 | |||||||||
Total Corporate | 53,320 | 1,210 | (164 | ) | 54,366 | ||||||||
Mortgage backed - agency | 37,827 | 659 | (37 | ) | 38,449 | ||||||||
Mortgage backed - commercial | 18,914 | 376 | (44 | ) | 19,246 | ||||||||
Total Mortgage Backed | 56,741 | 1,035 | (81 | ) | 57,695 | ||||||||
Other asset backed | 20,694 | 150 | (18 | ) | 20,826 | ||||||||
Total Fixed Income Securities | 165,016 | 2,883 | (270 | ) | 167,629 | ||||||||
Equities | 6,147 | 259 | (15 | ) | 6,391 | ||||||||
Totals | $ | 171,163 | $ | 3,142 | $ | (285 | ) | $ | 174,020 |
As of December 31, 2015 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||
Fixed Income Securities: | |||||||||||||
U.S. Treasury and other U.S. government obligations | $ | 23,555 | $ | 12 | $ | (84 | ) | $ | 23,483 | ||||
States, municipalities and political subdivisions | 21,974 | 232 | (52 | ) | 22,154 | ||||||||
Corporate | |||||||||||||
Banking/financial services | 21,963 | 117 | (166 | ) | 21,914 | ||||||||
Consumer goods | 7,813 | 43 | (121 | ) | 7,735 | ||||||||
Capital goods | 15,524 | 127 | (556 | ) | 15,095 | ||||||||
Energy | 4,807 | — | (401 | ) | 4,406 | ||||||||
Telecommunications/utilities | 12,298 | 27 | (450 | ) | 11,875 | ||||||||
Health care | 3,038 | — | (17 | ) | 3,021 | ||||||||
Total Corporate | 65,443 | 314 | (1,711 | ) | 64,046 | ||||||||
Mortgage backed - agency | 34,874 | 112 | (313 | ) | 34,673 | ||||||||
Mortgage backed - commercial | 19,961 | 158 | (244 | ) | 19,875 | ||||||||
Total Mortgage Backed | 54,835 | 270 | (557 | ) | 54,548 | ||||||||
Other asset backed | 19,648 | 14 | (120 | ) | 19,542 | ||||||||
Total Fixed Income Securities | 185,455 | 842 | (2,524 | ) | 183,773 | ||||||||
Equities | 4,147 | 139 | (46 | ) | 4,240 | ||||||||
Totals | $ | 189,602 | $ | 981 | $ | (2,570 | ) | $ | 188,013 |
One year or less | One to five years | Five to ten years | More than ten years | Total contractual maturity | Total mortgage and asset backed | ||||||||||||||||
As of September 30, 2016 | Total | ||||||||||||||||||||
Amortized Cost | $ | 10,845 | $ | 48,632 | $ | 22,751 | $ | 5,353 | $ | 87,581 | $ | 77,435 | $ | 165,016 | |||||||
Fair Value | 10,876 | 49,266 | 23,566 | 5,400 | 89,108 | 78,521 | 167,629 |
One year or less | One to five years | Five to ten years | More than ten years | Total contractual maturity | Total mortgage and asset backed | ||||||||||||||||
As of December 31, 2015 | Total | ||||||||||||||||||||
Amortized Cost | $ | 11,494 | $ | 55,371 | $ | 35,462 | $ | 8,645 | $ | 110,972 | $ | 74,483 | $ | 185,455 | |||||||
Fair Value | 11,518 | 54,752 | 35,148 | 8,265 | 109,683 | 74,090 | 183,773 |
◦ | identifying all security holdings in unrealized loss positions that have existed for at least six months or other circumstances that management believes may impact the recoverability of the security; |
◦ | obtaining a valuation analysis from third party investment managers regarding these holdings based on their knowledge, experience and other market-based valuation techniques; |
◦ | reviewing the trading range of certain securities over the preceding calendar period; |
◦ | assessing whether declines in market value are other than temporary for debt security holdings based on credit ratings from third party security rating agencies; and |
◦ | determining the necessary provision for declines in market value that are considered other than temporary based on the analyses performed. |
◦ | the opinion of professional investment managers could prove to be incorrect; |
◦ | the past trading patterns of individual securities may not reflect future valuation trends; |
◦ | the credit ratings assigned by independent credit rating agencies may prove to be incorrect due to unforeseen or unknown facts related to a company’s financial situation; and |
◦ | the debt service pattern of non-investment grade securities may not reflect future debt service capabilities and may not reflect a company’s unknown underlying financial problems. |
Less Than 12 Months | More Than 12 Months | Total | |||||||||||||||||||
As of September 30, 2016 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||
Fixed Income Securities: | |||||||||||||||||||||
U.S. Treasury and other U.S. government obligations | $ | 1,879 | $ | (3 | ) | $ | — | $ | — | $ | 1,879 | $ | (3 | ) | |||||||
States, municipalities and political subdivisions | 1,446 | (4 | ) | — | — | 1,446 | (4 | ) | |||||||||||||
Corporate | |||||||||||||||||||||
Banking/financial services | 1,323 | (8 | ) | 434 | — | 1,757 | (8 | ) | |||||||||||||
Consumer goods | 515 | (11 | ) | — | — | 515 | (11 | ) | |||||||||||||
Capital goods | 731 | (34 | ) | 98 | (9 | ) | 829 | (43 | ) | ||||||||||||
Energy | 253 | (2 | ) | 795 | (57 | ) | 1,048 | (59 | ) | ||||||||||||
Telecommunications/utilities | 694 | (8 | ) | 1,007 | (35 | ) | 1,701 | (43 | ) | ||||||||||||
Health care | — | — | — | — | — | — | |||||||||||||||
Total Corporate | 3,516 | (63 | ) | 2,334 | (101 | ) | 5,850 | (164 | ) | ||||||||||||
Mortgage backed - agency | 5,979 | (28 | ) | 1,261 | (9 | ) | 7,240 | (37 | ) | ||||||||||||
Mortgage backed - commercial | 3,455 | (31 | ) | 1,613 | (13 | ) | 5,068 | (44 | ) | ||||||||||||
Total Mortgage Backed | 9,434 | (59 | ) | 2,874 | (22 | ) | 12,308 | (81 | ) | ||||||||||||
Other asset backed | 5,272 | (18 | ) | 261 | — | 5,533 | (18 | ) | |||||||||||||
Total Fixed Income Securities | 21,547 | (147 | ) | 5,469 | (123 | ) | 27,016 | (270 | ) | ||||||||||||
Equities | 985 | (15 | ) | — | — | 985 | (15 | ) | |||||||||||||
Totals | $ | 22,532 | $ | (162 | ) | $ | 5,469 | $ | (123 | ) | $ | 28,001 | $ | (285 | ) |
Less Than 12 Months | More Than 12 Months | Total | |||||||||||||||||||
As of December 31, 2015 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||
Fixed Income Securities: | |||||||||||||||||||||
U.S. Treasury and other U.S. government obligations | $ | 9,712 | $ | (49 | ) | $ | 3,256 | $ | (35 | ) | $ | 12,968 | $ | (84 | ) | ||||||
States, municipalities and political subdivisions | 5,870 | (46 | ) | 553 | (6 | ) | 6,423 | (52 | ) | ||||||||||||
Corporate | |||||||||||||||||||||
Banking/financial services | 12,216 | (161 | ) | 595 | (5 | ) | 12,811 | (166 | ) | ||||||||||||
Consumer goods | 6,044 | (121 | ) | — | — | 6,044 | (121 | ) | |||||||||||||
Capital goods | 9,425 | (428 | ) | 755 | (128 | ) | 10,180 | (556 | ) | ||||||||||||
Energy | 3,862 | (337 | ) | 544 | (64 | ) | 4,406 | (401 | ) | ||||||||||||
Telecommunications/utilities | 8,811 | (450 | ) | — | — | 8,811 | (450 | ) | |||||||||||||
Health care | 3,021 | (17 | ) | — | — | 3,021 | (17 | ) | |||||||||||||
Total Corporate | 43,379 | (1,514 | ) | 1,894 | (197 | ) | 45,273 | (1,711 | ) | ||||||||||||
Mortgage backed - agency | 25,168 | (255 | ) | 1,921 | (58 | ) | 27,089 | (313 | ) | ||||||||||||
Mortgage backed - commercial | 10,022 | (129 | ) | 3,445 | (115 | ) | 13,467 | (244 | ) | ||||||||||||
Total Mortgage Backed | 35,190 | (384 | ) | 5,366 | (173 | ) | 40,556 | (557 | ) | ||||||||||||
Other asset backed | 16,203 | (113 | ) | 1,084 | (7 | ) | 17,287 | (120 | ) | ||||||||||||
Total Fixed Income Securities | 110,354 | (2,106 | ) | 12,153 | (418 | ) | 122,507 | (2,524 | ) | ||||||||||||
Equities | 1,062 | (46 | ) | — | — | 1,062 | (46 | ) | |||||||||||||
Totals | $ | 111,416 | $ | (2,152 | ) | $ | 12,153 | $ | (418 | ) | $ | 123,569 | $ | (2,570 | ) |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Total investment income | ||||||||||||
Interest income | $ | 939 | $ | 933 | $ | 2,858 | $ | 2,427 | ||||
Dividends | — | — | — | 42 | ||||||||
Income from other investments | 676 | 467 | 972 | 969 | ||||||||
Investment expenses | (212 | ) | (220 | ) | (662 | ) | (547 | ) | ||||
Net investment income | $ | 1,403 | $ | 1,180 | $ | 3,168 | $ | 2,891 |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Fixed income securities: | ||||||||||||
Gains on sales | $ | 633 | $ | 135 | $ | 1,139 | $ | 343 | ||||
Losses on sales | (3 | ) | (45 | ) | (115 | ) | (59 | ) | ||||
Equities: | ||||||||||||
Gains on sales | $ | — | $ | 1 | $ | — | $ | 70 | ||||
Losses on sales | — | — | — | (82 | ) | |||||||
Total: | ||||||||||||
Gains on sales | $ | 633 | $ | 136 | $ | 1,139 | $ | 413 | ||||
Losses on sales | (3 | ) | (45 | ) | (115 | ) | (141 | ) |
Three Month Periods Ended | Nine Month Periods Ended | ||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | ||||||||||
Fixed income securities | $ | 630 | $ | 90 | $ | 1,024 | $ | 284 | |||||
Equities | — | 1 | — | (12 | ) | ||||||||
Net investment realized gains | $ | 630 | $ | 91 | $ | 1,024 | $ | 272 |
As of September 30, 2016 | Level 1 | Level 2 | Level 3 | Total | ||||||||
Fixed Income Securities: | ||||||||||||
U.S. Treasury and other U.S. government obligations | $ | 23,129 | $ | — | $ | — | $ | 23,129 | ||||
States, municipalities and political subdivisions | — | 11,613 | — | 11,613 | ||||||||
Corporate | ||||||||||||
Banking/financial services | — | 22,572 | — | 22,572 | ||||||||
Consumer goods | — | 8,856 | — | 8,856 | ||||||||
Capital goods | — | 8,815 | — | 8,815 | ||||||||
Energy | — | 4,023 | — | 4,023 | ||||||||
Telecommunications/utilities | — | 7,693 | — | 7,693 | ||||||||
Health care | — | 2,407 | — | 2,407 | ||||||||
Total Corporate | — | 54,366 | — | 54,366 | ||||||||
Mortgage backed - agency | — | 38,449 | — | 38,449 | ||||||||
Mortgage backed - commercial | — | 19,246 | — | 19,246 | ||||||||
Total Mortgage Backed | — | 57,695 | — | 57,695 | ||||||||
Other asset backed | — | 20,826 | — | 20,826 | ||||||||
Total Fixed Income Securities | 23,129 | 144,500 | — | 167,629 | ||||||||
Equities | 6,391 | — | — | 6,391 | ||||||||
Totals | $ | 29,520 | $ | 144,500 | $ | — | $ | 174,020 |
As of December 31, 2015 | Level 1 | Level 2 | Level 3 | Total | ||||||||
Fixed Income Securities: | ||||||||||||
U.S. Treasury and other U.S. government obligations | $ | 23,483 | $ | — | $ | — | $ | 23,483 | ||||
States, municipalities and political subdivisions | — | 22,154 | — | 22,154 | ||||||||
Corporate | ||||||||||||
Banking/financial services | — | 21,914 | — | 21,914 | ||||||||
Consumer goods | — | 7,735 | — | 7,735 | ||||||||
Capital goods | — | 15,095 | — | 15,095 | ||||||||
Energy | — | 4,406 | — | 4,406 | ||||||||
Telecommunications/utilities | — | 11,875 | — | 11,875 | ||||||||
Health care | — | 3,021 | — | 3,021 | ||||||||
Total Corporate | — | 64,046 | — | 64,046 | ||||||||
Mortgage backed - agency | — | 34,673 | — | 34,673 | ||||||||
Mortgage backed - commercial | — | 19,875 | — | 19,875 | ||||||||
Total Mortgage Backed | — | 54,548 | — | 54,548 | ||||||||
Other asset backed | — | 19,542 | — | 19,542 | ||||||||
Total Fixed Income Securities | 23,483 | 160,290 | — | 183,773 | ||||||||
Equities | 4,240 | — | — | 4,240 | ||||||||
Totals | $ | 27,723 | $ | 160,290 | $ | — | $ | 188,013 |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||||||
Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||
Provision for taxes at U.S. statutory marginal income tax rate | $ | 3,140 | 35.0 | % | $ | 2,071 | 34.0 | % | $ | 8,306 | 35.0 | % | $ | 5,447 | 34.0 | % | ||||
Nondeductible expenses | 6 | 0.1 | % | 65 | 1.1 | % | 15 | 0.1 | % | 111 | 0.7 | % | ||||||||
Tax-exempt income | (9 | ) | (0.1 | )% | — | — | % | (33 | ) | (0.1 | )% | — | — | % | ||||||
State tax (net of federal benefit) | 2 | — | % | (40 | ) | (0.7 | )% | 41 | 0.2 | % | 105 | 0.7 | % | |||||||
Nondeductible acquisition accounting adjustment | (663 | ) | (7.4 | )% | — | — | % | (804 | ) | (3.4 | )% | 319 | 2.0 | % | ||||||
Other | — | — | % | (28 | ) | (0.5 | )% | — | — | % | (59 | ) | (0.4 | )% | ||||||
Provision for income taxes for continuing operations | $ | 2,476 | 27.6 | % | $ | 2,068 | 33.9 | % | $ | 7,525 | 31.8 | % | $ | 5,923 | 37.0 | % |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Current tax expense | $ | 2,613 | $ | 2,616 | $ | 6,302 | $ | 6,306 | ||||
Deferred tax (benefit) expense | (137 | ) | (548 | ) | 1,223 | (383 | ) | |||||
Total | $ | 2,476 | $ | 2,068 | $ | 7,525 | $ | 5,923 |
September 30, 2016 | December 31, 2015 | |||||
Gross deferred tax assets: | ||||||
Losses carried forward | $ | 13,751 | $ | 12,656 | ||
Unpaid claims and unearned premiums | 8,513 | 8,122 | ||||
Tax credits | 662 | 662 | ||||
Investments | — | 36 | ||||
Commissions | 1,326 | 1,306 | ||||
Other | 1,660 | 1,457 | ||||
Total gross deferred tax assets | 25,912 | 24,239 | ||||
Gross deferred tax liabilities: | ||||||
Deferred policy acquisition costs | 4,447 | 3,582 | ||||
Investments | 1,363 | — | ||||
Fixed assets | 401 | 401 | ||||
Intangible assets | 1,363 | 1,465 | ||||
Other | 1,730 | 1,625 | ||||
Total gross deferred tax liabilities | 9,304 | 7,073 | ||||
Net deferred tax assets | $ | 16,608 | $ | 17,166 |
Year of Occurrence | Year of Expiration | Amount | ||
2001 | 2021 | $ | 4,019 | |
2002 | 2022 | 4,317 | ||
2006 | 2026 | 7,825 | ||
2007 | 2027 | 5,131 | ||
2008 | 2028 | 1,949 | ||
2009 | 2029 | 1,949 | ||
2010 | 2030 | 1,949 | ||
2011 | 2031 | 2,914 | ||
2012 | 2032 | 9,236 | ||
Total | $ | 39,289 |
Year | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 & Beyond | Total | ||||||||||||||
Amount | $ | 445 | $ | 1,283 | $ | 962 | $ | 961 | $ | 955 | $ | 1,057 | $ | 5,663 |
September 30, 2016 | December 31, 2015 | |||||
Leasehold improvements | $ | 520 | $ | 507 | ||
Internal use software | 8,078 | 7,611 | ||||
Computer equipment | 2,470 | 2,225 | ||||
Furniture and other office equipment | 619 | 593 | ||||
Total | 11,687 | 10,936 | ||||
Accumulated depreciation | (9,094 | ) | (8,347 | ) | ||
Balance, end of period | $ | 2,593 | $ | 2,589 |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Direct premiums written | $ | 60,721 | $ | 65,185 | $ | 170,101 | $ | 156,506 | ||||
Assumed premiums written | 12 | 130 | 3,010 | 357 | ||||||||
Ceded premiums written | (8,535 | ) | (13,345 | ) | (35,585 | ) | (27,962 | ) | ||||
Net premiums written | $ | 52,198 | $ | 51,970 | $ | 137,526 | $ | 128,901 | ||||
Direct premiums earned | $ | 54,634 | $ | 50,700 | $ | 161,295 | $ | 130,299 | ||||
Assumed premiums earned | 728 | 129 | 2,210 | 410 | ||||||||
Ceded premiums earned | (12,111 | ) | (9,163 | ) | (36,699 | ) | (20,572 | ) | ||||
Net premiums earned | $ | 43,251 | $ | 41,666 | $ | 126,806 | $ | 110,137 | ||||
Ceded losses and loss adjustment expenses | $ | 4,321 | $ | 4,859 | $ | 13,443 | $ | 8,691 | ||||
Ceding commissions | 3,052 | 2,368 | 9,284 | 4,888 |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Unpaid claims, beginning of period | $ | 112,457 | $ | 126,458 | $ | 127,011 | $ | 102,430 | ||||
Less: reinsurance recoverable | 25,691 | 26,844 | 29,399 | 18,421 | ||||||||
Net unpaid claims, beginning of period | 86,766 | 99,614 | 97,612 | 84,009 | ||||||||
Net reserves acquired | — | — | — | 19,396 | ||||||||
Change in retroactive reinsurance ceded | 417 | 937 | 691 | 1,824 | ||||||||
Incurred related to: | ||||||||||||
Current year | 25,176 | 25,632 | 74,326 | 66,371 | ||||||||
Prior years | (15 | ) | (644 | ) | 349 | (1,922 | ) | |||||
25,161 | 24,988 | 74,675 | 64,449 | |||||||||
Paid related to: | ||||||||||||
Current year | 12,099 | 9,373 | 25,839 | 19,830 | ||||||||
Prior years | 22,338 | 15,980 | 69,232 | 49,662 | ||||||||
34,437 | 25,353 | 95,071 | 69,492 | |||||||||
Net unpaid claims, end of period | 77,907 | 100,186 | 77,907 | 100,186 | ||||||||
Add: reinsurance recoverable | 22,412 | 23,554 | 22,412 | 23,554 | ||||||||
Unpaid claims, end of period | $ | 100,319 | $ | 123,740 | $ | 100,319 | $ | 123,740 |
Nine Month Periods Ended | ||||||||
September 30, 2016 | September 30, 2015 | |||||||
C$ Denominated: | Number of Shares | Average Exercise Price | Number of Shares | Average Exercise Price | ||||
Outstanding, beginning of period | 187,728 | C$6.22 | 224,623 | C$6.05 | ||||
Granted | — | — | — | — | ||||
Exercised | — | — | — | — | ||||
Outstanding, end of period | 187,728 | C$6.22 | 224,623 | C$6.05 | ||||
Nine Month Periods Ended | ||||||||
September 30, 2016 | September 30, 2015 | |||||||
US$ Denominated: | Number of Shares | Average Exercise Price | Number of Shares | Average Exercise Price | ||||
Outstanding, beginning of period | 375,000 | US$17.01 | 175,000 | US$13.26 | ||||
Granted | — | — | 200,000 | US$20.29 | ||||
Exercised | — | — | — | — | ||||
Outstanding, end of period | 375,000 | US$17.01 | 375,000 | US$17.01 |
Nine Month Periods Ended | ||||||||||
September 30, 2016 | September 30, 2015 | |||||||||
Number of Shares | Weighted Average Fair Value at Grant Date | Number of Shares | Weighted Average Fair Value at Grant Date | |||||||
Non-vested, beginning of period | 348,155 | $ | 15.53 | 185,190 | $ | 12.20 | ||||
Granted | — | — | 200,000 | 17.99 | ||||||
Vested | (37,035 | ) | 12.20 | (37,035 | ) | 12.20 | ||||
Non-vested, end of period | 311,120 | $ | 15.92 | 348,155 | $ | 15.53 |
September 30, 2016 | December 31, 2015 | |||||||||||
Shares Authorized | Shares Issued and Outstanding | Amount (in '000s) | Shares Issued and Outstanding | Amount (in '000s) | ||||||||
Preferred shares | 100,000,000 | 4,000,000 | $ | 4,000 | 6,940,500 | $ | 6,941 | |||||
Ordinary voting common shares | 266,666,667 | 11,895,104 | $ | 36 | 11,883,025 | $ | 36 | |||||
Restricted voting common shares | 33,333,334 | 128,191 | — | 132,863 | — | |||||||
Total common shares | 300,000,001 | 12,023,295 | $ | 36 | 12,015,888 | $ | 36 |
Nine Month Periods Ended | ||||||
September 30, 2016 | September 30, 2015 | |||||
Balance, beginning of period | $ | 10,235 | $ | 8,166 | ||
Acquisition costs deferred | 15,506 | 16,517 | ||||
Amortization charged to income | 13,036 | 13,983 | ||||
Balance, end of period | $ | 12,705 | $ | 10,700 |
September 30, 2016 | December 31, 2015 | |||||
Revolver | $ | 2,400 | $ | 2,000 | ||
Draw Amount | 17,000 | 15,500 | ||||
Total outstanding borrowings | 19,400 | 17,500 | ||||
Unamortized issuance costs | (230 | ) | (281 | ) | ||
Total note payable | $ | 19,170 | $ | 17,219 |
(in '000s) | As Originally Reported | As Adjusted | Effect of Change | ||||||
Impact on Assets as of December 31, 2015: | |||||||||
Other assets1 | $ | 6,975 | $ | 6,694 | $ | (281 | ) | ||
Total Assets | 411,573 | 411,292 | (281 | ) | |||||
Impact on Liabilities and Shareholders' Equity at December 31, 2015: | |||||||||
Notes payable | 17,500 | 17,219 | (281 | ) | |||||
Total Liabilities | 281,951 | 281,670 | (281 | ) | |||||
Total Liabilities and Shareholders' Equity | 411,573 | 411,292 | (281 | ) |
Section | Description | Page |
I. | ||
II. | ||
III. |
• | Gross premium written decreased by 7.0% to $60.7 million, which included a decrease of 7.2% in our core commercial auto business |
• | In-force premium at September 30, 2016 was $220.4 million, compared to $210.6 million at December 31, 2015 and $199.1 million at September 30, 2015 |
• | The combined ratio for the third quarter of 2016 improved by 4.7 percentage points to 83.5% |
• | Underwriting income for the third quarter of 2016 improved to $7.1 million, compared to $4.9 million |
• | Net income for the third quarter of 2016 was $6.5 million, or $0.51 per common share diluted, compared to $4.0 million, or $0.32 per common share diluted, representing a $0.19 or 59.4% increase from third quarter 2015 |
• | Book value per common share on September 30, 2016 was $11.81, compared to $10.15 at December 31, 2015 and $9.88 at September 30, 2015 |
• | Annualized return on equity was 17.9% as compared to 13.0% in the prior year same quarter |
Selected financial information (in '000s, except per share data) | ||||||||||||
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Gross premium written | $ | 60,733 | $ | 65,315 | $ | 173,111 | $ | 156,863 | ||||
Net premium earned | 43,251 | 41,666 | 126,806 | 110,137 | ||||||||
Net claims incurred | 25,161 | 24,988 | 74,675 | 64,449 | ||||||||
Underwriting expense: | ||||||||||||
Acquisition costs | 5,013 | 4,988 | 13,036 | 13,983 | ||||||||
Share based compensation | 388 | 422 | 1,164 | 1,187 | ||||||||
Expenses (recovered) incurred related to acquisitions and stock purchase agreements | (1,895 | ) | — | (2,297 | ) | 1,920 | ||||||
Other underwriting expenses | 7,439 | 6,325 | 20,212 | 15,595 | ||||||||
Total underwriting expenses | 10,945 | 11,735 | 32,115 | 32,685 | ||||||||
Underwriting income | 7,145 | 4,943 | 20,016 | 13,003 | ||||||||
Net investment income | 1,403 | 1,180 | 3,168 | 2,891 | ||||||||
Income from operating activities, before tax | 8,548 | 6,123 | 23,184 | 15,894 | ||||||||
Interest expense | (257 | ) | (266 | ) | (756 | ) | (447 | ) | ||||
Realized gains and other income | 681 | 235 | 1,304 | 573 | ||||||||
Net income before tax | 8,972 | 6,092 | 23,732 | 16,020 | ||||||||
Income tax expense | 2,476 | 2,068 | 7,525 | 5,923 | ||||||||
Net income | $ | 6,496 | $ | 4,024 | $ | 16,207 | $ | 10,097 | ||||
Key Financial Ratios: | ||||||||||||
Loss ratio | 58.2 | % | 60.0 | % | 58.9 | % | 58.6 | % | ||||
Underwriting expense ratio: | ||||||||||||
Acquisition cost ratio | 11.6 | % | 12.0 | % | 10.3 | % | 12.7 | % | ||||
Share based compensation | 0.9 | % | 1.0 | % | 0.9 | % | 1.1 | % | ||||
Expenses (recovered) incurred related to acquisitions and stock purchase agreements ratio | (4.4 | )% | — | % | (1.8 | )% | 1.7 | % | ||||
Other underwriting expense ratio | 17.2 | % | 15.2 | % | 15.9 | % | 14.2 | % | ||||
Total underwriting expense ratio | 25.3 | % | 28.2 | % | 25.3 | % | 29.7 | % | ||||
Combined ratio | 83.5 | % | 88.2 | % | 84.2 | % | 88.3 | % | ||||
Earnings per common share diluted | $ | 0.51 | $ | 0.32 | $ | 1.27 | $ | 0.80 | ||||
Book value per common share | $ | 11.81 | $ | 9.88 | $ | 11.81 | $ | 9.88 | ||||
Return on equity (annualized) | 17.9 | % | 13.0 | % | 15.6 | % | 11.4 | % |
Gross premium written by line of business (in '000s) | ||||||||||||||||
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||||||
September 30, 2016 | September 30, 2015 | % Change | September 30, 2016 | September 30, 2015 | % Change | |||||||||||
Commercial automobile | $ | 60,356 | $ | 65,070 | (7.2 | )% | $ | 171,988 | $ | 155,930 | 10.3 | % | ||||
Surety | 1 | (32 | ) | (103.1 | )% | (3 | ) | 175 | (101.7 | )% | ||||||
Other | 376 | 277 | 35.7 | % | 1,126 | 758 | 48.5 | % | ||||||||
$ | 60,733 | $ | 65,315 | (7.0 | )% | $ | 173,111 | $ | 156,863 | 10.4 | % |
Gross premium written by state (in '000s) | ||||||||||||||||||||
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||||||
New York | $ | 21,340 | 35.1 | % | $ | 25,922 | 39.7 | % | $ | 53,680 | 31.0 | % | $ | 46,888 | 29.9 | % | ||||
California | 8,761 | 14.4 | % | 7,870 | 12.0 | % | 22,064 | 12.7 | % | 15,667 | 10.0 | % | ||||||||
Louisiana | 4,280 | 7.1 | % | 4,498 | 6.9 | % | 8,289 | 4.8 | % | 9,626 | 6.1 | % | ||||||||
Pennsylvania | 2,068 | 3.4 | % | 1,126 | 1.7 | % | 2,629 | 1.5 | % | 2,369 | 1.5 | % | ||||||||
Virginia | 1,913 | 3.2 | % | 2,328 | 3.6 | % | 5,580 | 3.2 | % | 4,987 | 3.2 | % | ||||||||
Colorado | 1,843 | 3.0 | % | 1,732 | 2.7 | % | 2,491 | 1.4 | % | 2,055 | 1.3 | % | ||||||||
Ohio | 1,838 | 3.0 | % | 1,403 | 2.1 | % | 4,459 | 2.6 | % | 4,079 | 2.6 | % | ||||||||
Texas | 1,652 | 2.7 | % | 1,389 | 2.1 | % | 5,805 | 3.4 | % | 6,522 | 4.2 | % | ||||||||
Michigan | 1,293 | 2.1 | % | 2,976 | 4.6 | % | 7,235 | 4.2 | % | 10,088 | 6.4 | % | ||||||||
Washington | 1,206 | 2.0 | % | 894 | 1.4 | % | 3,658 | 2.1 | % | 2,789 | 1.8 | % | ||||||||
Other | 14,539 | 24.0 | % | 15,177 | 23.2 | % | 57,221 | 33.1 | % | 51,793 | 33.0 | % | ||||||||
Total | $ | 60,733 | 100.0 | % | $ | 65,315 | 100.0 | % | $ | 173,111 | 100.0 | % | $ | 156,863 | 100.0 | % |
(in '000s, percentages to net earned premiums) | Three Month Periods Ended | Nine Month Periods Ended | ||||||||||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||||||||||
Gross of Quota Share: | Amount | % | Amount | % | Amount | % | Amount | % | ||||||||||||
Net premiums earned | $ | 51,748 | 100.0 | % | $ | 47,636 | 100.0 | % | $ | 152,191 | 100.0 | % | $ | 121,423 | 100.0 | % | ||||
Net claims incurred | 29,616 | 57.2 | % | 28,213 | 59.2 | % | 87,858 | 57.7 | % | 69,448 | 57.2 | % | ||||||||
Acquisition costs | 8,053 | 15.6 | % | 7,117 | 14.9 | % | 22,061 | 14.5 | % | 18,213 | 15.0 | % | ||||||||
Other insurance general and administrative expenses | 7,440 | 14.5 | % | 6,325 | 13.3 | % | 20,213 | 13.2 | % | 15,595 | 12.8 | % | ||||||||
Expenses (recovered) incurred related to acquisitions and stock purchase agreements | (1,895 | ) | (3.7 | )% | — | —% | (2,297 | ) | (1.5 | )% | 1,920 | 1.6 | % | |||||||
Share based compensation expense | 388 | 0.7 | % | 422 | 0.9 | % | 1,164 | 0.8 | % | 1,187 | 1.0 | % | ||||||||
Total underwriting profit and combined ratio | $ | 8,146 | 84.3 | % | $ | 5,559 | 88.3 | % | $ | 23,192 | 84.7 | % | $ | 15,060 | 87.6 | % | ||||
Net of Quota Share: | ||||||||||||||||||||
Net premiums earned | $ | 43,251 | 100.0 | % | $ | 41,666 | 100.0 | % | $ | 126,806 | 100.0 | % | $ | 110,137 | 100.0 | % | ||||
Net claims incurred | 25,161 | 58.2 | % | 24,988 | 60.0 | % | 74,675 | 58.9 | % | 64,449 | 58.6 | % | ||||||||
Acquisition costs | 5,013 | 11.6 | % | 4,988 | 12.0 | % | 13,036 | 10.3 | % | 13,983 | 12.7 | % | ||||||||
Other insurance general and administrative expenses | 7,440 | 17.2 | % | 6,325 | 15.2 | % | 20,213 | 15.9 | % | 15,595 | 14.2 | % | ||||||||
Expenses (recovered) incurred related to acquisitions and stock purchase agreements | (1,895 | ) | (4.4 | )% | — | —% | (2,297 | ) | (1.8 | )% | 1,920 | 1.7 | % | |||||||
Share based compensation expense | 388 | 0.9 | % | 422 | 1.0 | % | 1,164 | 0.9 | % | 1,187 | 1.1 | % | ||||||||
Total underwriting profit and combined ratio | $ | 7,144 | 83.5 | % | $ | 4,943 | 88.2 | % | $ | 20,015 | 84.2 | % | $ | 13,003 | 88.3 | % |
Three Month Periods Ended | Nine Month Periods Ended | |||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||
Basic weighted average common shares outstanding | 12,045,519 | 12,008,624 | 12,045,519 | 11,956,611 | ||||
Dilutive potential ordinary shares: | ||||||||
Dilutive stock options | 172,088 | 211,706 | 178,186 | 211,110 | ||||
Dilutive shares upon preferred share conversion | 522,397 | 573,444 | 522,397 | 573,444 | ||||
Diluted weighted average common shares outstanding | 12,740,004 | 12,793,774 | 12,746,102 | 12,741,165 |
Fair value of securities portfolio (in '000s) | |||||||
As of: | September 30, 2016 | December 31, 2015 | |||||
Fixed Income Securities: | |||||||
U.S. Treasury and other U.S. government obligations | $ | 23,129 | $ | 23,483 | |||
States, municipalities and political subdivisions | 11,613 | 22,154 | |||||
Corporate | |||||||
Banking/financial services | 22,572 | 21,914 | |||||
Consumer goods | 8,856 | 7,735 | |||||
Capital goods | 8,815 | 15,095 | |||||
Energy | 4,023 | 4,406 | |||||
Telecommunications/utilities | 7,693 | 11,875 | |||||
Health care | 2,407 | 3,021 | |||||
Total Corporate | 54,366 | 64,046 | |||||
Mortgage backed - agency | 38,449 | 34,673 | |||||
Mortgage backed - commercial | 19,246 | 19,875 | |||||
Total Mortgage Backed | 57,695 | 54,548 | |||||
Other asset backed | 20,826 | 19,542 | |||||
Total Fixed Income Securities | 167,629 | 183,773 | |||||
Equities | 6,391 | 4,240 | |||||
Totals | $ | 174,020 | $ | 188,013 |
Unfunded Commitments | Carrying Value | ||||||||
September 30, 2016 | September 30, 2016 | December 31, 2015 | |||||||
Real estate | $ | 3,100 | $ | 9,868 | $ | 10,202 | |||
Insurance linked securities | — | 9,090 | 8,747 | ||||||
Activist hedge funds | — | 3,939 | 3,685 | ||||||
Venture capital | 450 | 736 | 205 | ||||||
Total Equity Method Investments | $ | 3,550 | $ | 23,633 | $ | 22,839 |
Credit ratings of fixed income securities portfolio (in '000s) | ||||||||||
As of: | September 30, 2016 | December 31, 2015 | ||||||||
Amount | % of Total | Amount1 | % of Total | |||||||
AAA/Aaa1 | $ | 48,506 | 28.9 | % | $ | 44,110 | 24.0 | % | ||
AA/Aa1 | 69,622 | 41.5 | % | 83,116 | 45.2 | % | ||||
A/A | 24,089 | 14.4 | % | 28,765 | 15.7 | % | ||||
BBB/Baa | 24,576 | 14.7 | % | 26,512 | 14.4 | % | ||||
BB | 738 | 0.4 | % | 1,270 | 0.7 | % | ||||
B | 98 | 0.1 | % | — | — | % | ||||
Total Fixed Income Securities | $ | 167,629 | 100.0 | % | $ | 183,773 | 100.0 | % |
Provision for unpaid claims by type - gross of reinsurance ($ in '000s) | ||||||||
As of: | September 30, 2016 | December 31, 2015 | YTD% Change | |||||
Case reserves | $ | 50,438 | $ | 49,441 | 2.0 | % | ||
IBNR | 49,881 | 77,570 | (35.7 | )% | ||||
Total | $ | 100,319 | $ | 127,011 | (21.0 | )% |
Provision for unpaid claims by line of business – gross of reinsurance ($ in '000s) | ||||||||
As of: | September 30, 2016 | December 31, 2015 | YTD% Change | |||||
Commercial automobile | $ | 95,398 | $ | 116,377 | (18.0 | )% | ||
Other | 4,921 | 10,634 | (53.7 | )% | ||||
Total | $ | 100,319 | $ | 127,011 | (21.0 | )% |
Provision for unpaid claims by line of business - net of reinsurance recoverables ($ in '000s) | ||||||||
As of: | September 30, 2016 | December 31, 2015 | YTD% Change | |||||
Commercial automobile | $ | 74,934 | $ | 95,043 | (21.2 | )% | ||
Other | 2,973 | 2,569 | 15.7 | % | ||||
Total | $ | 77,907 | $ | 97,612 | (20.2 | )% |
Three Month Periods Ended | Nine Month Periods Ended | |||||||||||
September 30, 2016 | September 30, 2015 | September 30, 2016 | September 30, 2015 | |||||||||
Unpaid claims, beginning of period | $ | 112,457 | $ | 126,458 | $ | 127,011 | $ | 102,430 | ||||
Less: reinsurance recoverable | 25,691 | 26,844 | 29,399 | 18,421 | ||||||||
Net unpaid claims, beginning of period | 86,766 | 99,614 | 97,612 | 84,009 | ||||||||
Net reserves acquired | — | — | — | 19,396 | ||||||||
Change in retroactive reinsurance ceded | 417 | 937 | 691 | 1,824 | ||||||||
Incurred related to: | ||||||||||||
Current year | 25,176 | 25,632 | 74,326 | 66,371 | ||||||||
Prior years | (15 | ) | (644 | ) | 349 | (1,922 | ) | |||||
25,161 | 24,988 | 74,675 | 64,449 | |||||||||
Paid related to: | ||||||||||||
Current year | 12,099 | 9,373 | 25,839 | 19,830 | ||||||||
Prior years | 22,338 | 15,980 | 69,232 | 49,662 | ||||||||
34,437 | 25,353 | 95,071 | 69,492 | |||||||||
Net unpaid claims, end of period | 77,907 | 100,186 | 77,907 | 100,186 | ||||||||
Add: reinsurance recoverable | 22,412 | 23,554 | 22,412 | 23,554 | ||||||||
Unpaid claims, end of period | $ | 100,319 | $ | 123,740 | $ | 100,319 | $ | 123,740 |
As of: (in '000s, except share and per share data) | September 30, 2016 | December 31, 2015 | |||||
Shareholders' equity | $ | 146,592 | $ | 129,622 | |||
Less: Preferred stock in equity | 4,000 | 6,941 | |||||
Less: Accumulated dividends on preferred stock | 286 | 460 | |||||
Common equity | $ | 142,306 | $ | 122,221 | |||
Participative shares: | |||||||
Common shares outstanding | 12,023,295 | 12,015,888 | |||||
Restricted stock units (RSUs) | 22,224 | 29,631 | |||||
Total participative shares | 12,045,519 | 12,045,519 | |||||
Book value per participative share outstanding | $ | 11.81 | $ | 10.15 |
Summary of Cash Flows (in ‘000s) | ||||||
Nine Month Period Ended | Twelve Month Period Ended | |||||
September 30, 2016 | December 31, 2015 | |||||
Net cash flows (used in) provided by operating activities | $ | (3,312 | ) | $ | 8,477 | |
Net cash flows (used in) provided by financing activities | (1,048 | ) | 17,645 | |||
Net cash flows provided by (used in) investing activities | 10,514 | (40,354 | ) | |||
Net increase (decrease) in cash | $ | 6,154 | $ | (14,232 | ) |
Item 4. | Controls and Procedures. |
Item 1. | Legal Proceedings. |
Item 1A. | Risk Factors. |
Item 2. | Unregistered Sales of Equity Securities And Use of Proceeds. |
Item 4. | Mine Safety Disclosures. |
31.1 | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS | XBRL Instance Document |
101.SCH | XBRL Taxonomy Extension Schema Document |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
Date: | October 31, 2016 | Atlas Financial Holdings, Inc. | ||
(Registrant) | ||||
By: | /s/ Paul A. Romano | |||
Paul A. Romano | ||||
Vice President and Chief Financial Officer |
1 | I have reviewed this quarterly report on Form 10-Q of Atlas Financial Holdings, Inc.; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5 | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Scott D. Wollney | ||
Scott D. Wollney | ||
President and Chief Executive Officer |
1 | I have reviewed this quarterly report on Form 10-Q of Atlas Financial Holdings, Inc.; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5 | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/S/ Paul A. Romano |
Paul A. Romano Chief Financial Officer |
(i) | the Report of the Company fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/S/ Scott D. Wollney |
Scott D. Wollney Chief Executive Officer |
(i) | the Report of the Company fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company |
/S/ Paul A. Romano |
Paul A. Romano Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 28, 2016 |
|
Document and Entity Information [Line Items] | ||
Entity registrant name | Atlas Financial Holdings, Inc. | |
Entity central index key | 0001539894 | |
Current fiscal year end date | --12-31 | |
Entity filer category | Accelerated Filer | |
Document type | 10-Q | |
Document period end date | Sep. 30, 2016 | |
Document fiscal year focus | 2016 | |
Document fiscal period focus | Q3 | |
Amendment flag | false | |
Ordinary Shares | ||
Document and Entity Information [Line Items] | ||
Common stock, shares outstanding (in shares) | 11,895,104 | |
Restricted Voting Common Stock | ||
Document and Entity Information [Line Items] | ||
Common stock, shares outstanding (in shares) | 128,191 |
Condensed Consolidated Statements of Income and Comprehensive Income - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Net premiums earned | $ 43,251,000 | $ 41,666,000 | $ 126,806,000 | $ 110,137,000 |
Net investment income | 1,403,000 | 1,180,000 | 3,168,000 | 2,891,000 |
Net realized investment gains | 630,000 | 91,000 | 1,024,000 | 272,000 |
Other income | 51,000 | 144,000 | 280,000 | 301,000 |
Total revenue | 45,335,000 | 43,081,000 | 131,278,000 | 113,601,000 |
Net claims incurred | 25,161,000 | 24,988,000 | 74,675,000 | 64,449,000 |
Acquisition costs | 5,013,000 | 4,988,000 | 13,036,000 | 13,983,000 |
Other underwriting expenses | 7,730,000 | 6,747,000 | 21,084,000 | 16,782,000 |
Amortization of intangible assets, net | 97,000 | 0 | 292,000 | 0 |
Interest expense | 257,000 | 266,000 | 756,000 | 447,000 |
Expenses (recovered) incurred pursuant to Gateway stock purchase agreement | (1,895,000) | 0 | (2,297,000) | 942,000 |
Expenses incurred related to acquisition of subsidiaries | 0 | 0 | 0 | 978,000 |
Total expenses | 36,363,000 | 36,989,000 | 107,546,000 | 97,581,000 |
Income from operations before income tax expense | 8,972,000 | 6,092,000 | 23,732,000 | 16,020,000 |
Income tax expense | 2,476,000 | 2,068,000 | 7,525,000 | 5,923,000 |
Net income | 6,496,000 | 4,024,000 | 16,207,000 | 10,097,000 |
Less: Preferred share dividends | 73,000 | 81,000 | 234,000 | 196,000 |
Net income attributable to common shareholders | $ 6,423,000 | $ 3,943,000 | $ 15,973,000 | $ 9,901,000 |
Basic weighted average common shares outstanding (in shares) | 12,045,519 | 12,008,624 | 12,045,519 | 11,956,611 |
Earnings per common share basic (in dollars per share) | $ 0.53 | $ 0.33 | $ 1.33 | $ 0.83 |
Diluted weighted average common shares outstanding (in shares) | 12,740,004 | 12,793,774 | 12,746,102 | 12,741,165 |
Earnings per common share diluted (in dollars per share) | $ 0.51 | $ 0.32 | $ 1.27 | $ 0.80 |
Condensed Consolidated Statements of Comprehensive Income | ||||
Net income | $ 6,496,000 | $ 4,024,000 | $ 16,207,000 | $ 10,097,000 |
Other comprehensive income (loss): | ||||
Changes in net unrealized investment (losses) gains | (569,000) | 555,000 | 4,092,000 | 165,000 |
Reclassification to income of net realized investment gains | 105,000 | 4,000 | 353,000 | 199,000 |
Effect of income tax | 162,000 | (190,000) | (1,556,000) | (124,000) |
Other comprehensive (loss) income | (302,000) | 369,000 | 2,889,000 | 240,000 |
Total comprehensive income | $ 6,194,000 | $ 4,393,000 | $ 19,096,000 | $ 10,337,000 |
Condensed Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands |
Total |
Preferred Shares |
Ordinary Voting Common Shares |
Restricted Voting Common Shares |
Additional Paid-in Capital |
Retained Deficit |
Accumulated Other Comprehensive Income/(Loss) |
---|---|---|---|---|---|---|---|
Beginning Balance at Dec. 31, 2014 | $ 109,399 | $ 2,000 | $ 34 | $ 0 | $ 196,079 | $ (88,794) | $ 80 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 10,097 | 10,097 | |||||
Issuance of preferred shares | 4,941 | 4,941 | |||||
Other comprehensive income | 240 | 240 | |||||
Share-based compensation | 1,248 | 2 | 1,246 | ||||
Ending Balance at Sep. 30, 2015 | 125,925 | 6,941 | 36 | 0 | 197,325 | (78,697) | 320 |
Beginning Balance at Dec. 31, 2015 | 129,622 | 6,941 | 36 | 0 | 198,041 | (74,364) | (1,032) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Net income | 16,207 | 16,207 | |||||
Preferred dividends paid | (409) | (409) | |||||
Retirement of preferred shares | (2,941) | (2,941) | |||||
Other comprehensive income | 2,889 | 2,889 | |||||
Share-based compensation | 1,224 | 1,224 | |||||
Ending Balance at Sep. 30, 2016 | $ 146,592 | $ 4,000 | $ 36 | $ 0 | $ 198,856 | $ (58,157) | $ 1,857 |
Nature of Operations and Basis of Presentation |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations and Basis of Presentation | NATURE OF OPERATIONS AND BASIS OF PRESENTATION Atlas Financial Holdings, Inc. ("Atlas" or "We" or the "Company") commenced operations on December 31, 2010. The primary business of Atlas is underwriting commercial automobile insurance in the United States, with a niche market orientation and focus on insurance for the “light” commercial automobile sector. This sector includes taxi cabs, non-emergency para-transit, limousine, livery and business autos. Automobile insurance products provide insurance coverage in three major areas: liability, accident benefits and physical damage. Liability insurance provides coverage, subject to policy terms and conditions where the insured is determined to be responsible and/or liable for an automobile accident, for the payment for injuries and property damage to third parties. Accident benefit policies or personal injury protection policies provide coverage for loss of income, medical and rehabilitation expenses for insured persons who are injured in an automobile accident, regardless of fault. Physical damage coverage subject to policy terms and conditions provides for the payment of damages to an insured automobile arising from a collision with another object or from other risks such as fire or theft. In the short run, automobile physical damage and liability coverage generally provides more predictable results than automobile accident benefit or personal injury insurance. Atlas' business is carried out through its "Insurance Subsidiaries": American Country Insurance Company (“American Country”), American Service Insurance Company, Inc. (“American Service”), Gateway Insurance Company ("Gateway"), and as of March 11, 2015, Global Liberty Insurance Company of New York ("Global Liberty"); and other non-insurance company subsidiaries: Anchor Group Management, Inc. ("Anchor Management"), Plainview Premium Finance Company, Inc. ("Plainview Delaware") and Plainview Delaware’s wholly-owned subsidiary, Plainview Premium Finance Company of California, Inc. ("Plainview California" and together with Plainview Delaware, "Plainview"). The Insurance Subsidiaries distribute their insurance products through a network of retail independent agents. Together, the Insurance Subsidiaries are licensed to write property and casualty insurance in 49 states and the District of Columbia in the United States. Atlas' core products are actively distributed in 41 of those states plus the District of Columbia. The Insurance Subsidiaries share common management and operating infrastructure. Atlas' ordinary voting common shares are listed on the NASDAQ stock exchange under the symbol "AFH." Basis of presentation - These statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The consolidated financial statements include the accounts of Atlas and the entities it controls. Equity investments in entities that we do not consolidate, including corporate entities in which we have significant influence and partnership and partnership-like entities in which we have more than minor influence over operating and financial policies, are accounted for under the equity method unless we have elected the fair value option. All significant intercompany accounts and transactions have been eliminated. It is the opinion of management that these financial statements reflect all adjustments necessary for a fair statement of the interim results. The results for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results expected for the full calendar year. The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Atlas' Annual Report on Form 10-K for the year ended December 31, 2015, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. Atlas has consistently applied the same accounting policies throughout all periods presented. Principles of consolidation - We filed our Quarterly Report on Form 10-Q for the period ended September 30, 2015, under the assumption that certain variable interest entities (“VIEs”), were controlled by Atlas. Based on new information obtained after the filing of our Quarterly Report on Form 10-Q for the period ended September 30, 2015, we have determined that these VIEs are not controlled by Atlas. As a result, the Company no longer consolidates these VIEs. All amounts for the period ended September 30, 2015 presented herein have been been restated for comparative purposes. The difference in amounts included within the September 30, 2015 Quarterly Report on Form 10-Q with respect to VIEs is not material. Estimates and assumptions - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and changes in estimates are recorded in the accounting period in which they are determined. The liability for unpaid loss and loss adjustment expenses and related amounts recoverable from reinsurers represents the most significant estimate in the accompanying financial statements. Significant estimates in the accompanying financial statements also include the fair values of investments, deferred tax asset valuation, premium receivable bad debt allowance and deferred policy acquisition cost recoverability. Seasonality - The property and casualty ("P&C") insurance business is seasonal in nature. While Atlas' net premiums earned are generally stable from quarter to quarter, Atlas' gross premiums written follow the common renewal dates for the "light" commercial risks that represent its core lines of business. For example, January 1 and March 1 are common taxi cab renewal dates in Illinois and New York, respectively. Additionally, our New York “excess taxi program” has an annual renewal date in the third quarter. Net underwriting income is driven mainly by the timing and nature of claims, which can vary widely. Segmentation - The Company has one reportable business segment. Resources are allocated and management assesses financial performance based on this reportable segment. |
New Accounting Standards |
9 Months Ended |
---|---|
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
New Accounting Standards | NEW ACCOUNTING STANDARDS With the exception of the accounting and disclosure pronouncements discussed below, there have been no recent pronouncements or changes in pronouncements during the nine month period ended September 30, 2016, as compared to those described in our Annual Report on Form 10-K for the twelve months ended December 31, 2015, that are of significance or potential significance to Atlas. Pertinent Accounting Standard Updates ("ASUs") are issued from time to time by the Financial Accounting Standards Board ("FASB") and are adopted by the Company as they become effective. All recently issued accounting pronouncements with effective dates prior to October 1, 2016 have been adopted by the company. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The provisions of this update address the diversity in practice of eight issues on the cash flow statement. For public entities, this guidance is effective for years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date and is currently evaluating its accounting policies to determine the potential impact of its adoption on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The provisions of this update require an entity to broaden the information that it considers in developing its allowance for credit losses for assets. For public entities, this guidance is effective for years beginning after December 15, 2019, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date and is currently evaluating the potential impact of its adoption on its consolidated financial statements. In May 2016 and April 2016, the FASB issued ASU 2016-12 and ASU 2016-10, Revenue from Contracts with Customers (Topic 606), respectively, which is associated with the updates in ASU 2014-09 and ASU 2015-14. The provisions of this update enhance the guidance on identifying performance obligations and licensing implementation. The effective date of this ASU follows the guidance in ASU 2015-14 discussed below. Along with ASU 2014-09, the Company plans to adopt these standards on the required effective date and is currently evaluating the guidance to determine the potential impact, if any, of its adoption on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). The provisions of this update simplify certain areas around share-based compensation transactions including income taxes and cash flow classifications. Each amendment within this update has specific guidance on the method of application, which includes prospective, retrospective, and modified retrospective applications. For public entities, this guidance is effective for years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date and is currently evaluating the potential impact of its adoption on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The provisions of this update impact the classification criteria, disclosure requirements, and other specific transactions in lease accounting. The update requires the use of a modified retrospective approach, which requires leases to be measured at the beginning of the earliest period presented. For public entities, this guidance is effective for years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date. The Company is currently evaluating the potential impact of its adoption on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. One provision of this update requires that equity investments, except those accounted for under the equity method, be measured at fair value and changes in fair value recognized in net income. The provisions of this update are recognized as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. For public entities, this guidance is effective for years beginning after December 15, 2017, including interim periods within those years. Early adoption is not permitted, except for certain provisions. The Company plans on adopting the update on the required effective date. The Company is currently evaluating the potential impact of its adoption on its consolidated financial statements. In May 2015, the FASB issued ASU 2015-09, Financial Services - Insurance (Topic 944): Disclosures about Short-Duration Contracts. The new disclosures, which are required for annual periods beginning after December 31, 2015 and for interim periods beginning after December 31, 2016, are intended to provide additional information about insurance liabilities including the nature, amount, timing, and uncertainty of future cash flows related to those liabilities. Early adoption is permitted. Except for the retrospective application of additional disclosure requirements, the new guidance will not impact the Company's consolidated financial statements. The Company plans on adopting the update on the required effective date. In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs. The new disclosures require debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The amendments in this disclosure are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company adopted this new disclosure in the first quarter of 2016. See Note 19 regarding this change in accounting principle. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is a comprehensive revenue recognition standard that applies to all entities that have contracts with customers, except for those that fall within the scope of other standards, such as insurance contracts. Updates may be applied retrospectively to each period presented or retrospectively with the cumulative effect recognized at the date of initial application. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year. The update is now effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but only for interim and annual periods beginning after December 15, 2016. The Company plans to adopt the update on the required effective date and is currently evaluating the guidance to determine the potential impact, if any, of its adoption on its consolidated financial statements. All other recently issued pronouncements with effective dates after September 30, 2016 are not expected to have a material impact on the Consolidated Financial Statements. |
Acquisitions |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | ACQUISITIONS Acquisition of Anchor Holdings Group, Inc. et. al. On March 11, 2015, Atlas acquired Anchor Holdings Group, Inc., a privately owned insurance holding company, and its wholly owned subsidiary, Global Liberty, along with its affiliated entities, Anchor Management, and Plainview (collectively, "Anchor"), from an unaffiliated third party. Anchor provides specialized commercial insurance products, including commercial automobile insurance to niche markets such as taxi, black car and sedan service owners and operators primarily in the New York market. Atlas' acquisition of Anchor expanded our distribution channel for core commercial automobile lines and provided incremental licensure as well as important infrastructure in the large New York market. Global Liberty also wrote homeowners insurance in the northeast, which was put into runoff, subject to applicable regulatory requirements, prior to the transaction. Under the terms of the stock purchase agreement, the purchase price was based on the combined U.S. GAAP book value of Anchor at December 31, 2014. Additional consideration, principally in the form of preferred shares, may be paid to the seller, or returned to us by the seller, depending upon the future development of Global Liberty’s actual loss reserves for certain lines of business over time. The total purchase price for the combined entities of Anchor was $23.2 million, consisting of a combination of cash and Atlas preferred shares, and was estimated at approximately 1.3 times combined U.S. GAAP book value. Consideration consisted of approximately $19.2 million in cash and $4.0 million of Atlas preferred shares (consisting of a total of 4,000,000 preferred shares at $1.00 per preferred share), subject to future price adjustments, as noted above. We have contractual protections to offset up to $4.0 million of future adverse reserve development during the five year period after the acquisition. The Anchor acquisition was accounted for using the acquisition method. Atlas began consolidating Anchor on March 11, 2015, therefore their financial results are included in Atlas' consolidated financial results starting with the three month period ended March 31, 2015. However, the following unaudited pro forma summary presents Atlas' consolidated financial information for the three and nine month periods ended September 30, 2015 as if Anchor had been acquired on January 1, 2015. These amounts have been calculated after applying the Company's accounting policies had the acquisition been completed on January 1, 2015. These results were prepared for comparative purposes only and do not purport to be indicative of the results of operations that may have actually resulted had the acquisition occurred on the indicated dates, nor are they indicative of potential future operating results of the Company.
1 - Excludes expenses incurred in connection with the Anchor acquisition From the date of acquisition through September 30, 2015, Anchor earned revenue of $18.3 million and net income of $1.8 million. The value of certain assets and liabilities acquired are subject to adjustment as additional information is obtained, including, but not limited to, valuation of separately identifiable intangibles, the preferred stock issued to the seller, and deferred taxes. The valuations were finalized during the year ended December 31, 2015 (not including loss reserve development consideration). The changes upon finalization to the preliminary valuation of assets and liabilities resulted in an adjustment to identifiable intangible assets, goodwill, deferred tax, and other liabilities. The following table presents the adjusted values of assets acquired and liabilities assumed for the Anchor acquisition based on its estimated fair value on March 11, 2015.
The acquisition of Anchor resulted in the recognition of intangible assets and goodwill valued at $4.5 million and $2.7 million, respectively. The Company recorded an adjustment to the purchase price allocation and amortization related to the identified intangible assets during the fourth quarter of 2015. Atlas recognized amortization expense of $97,000 and $292,000 for the three and nine month periods ended September 30, 2016, respectively, related to intangible assets acquired in the Anchor transaction. Atlas recognized no amortization expense for the three and nine month periods ended September 30, 2015. Atlas incurred no transaction expenses related to the Anchor acquisition for the three and nine month periods ended September 30, 2016 and $0 and $978,000 in expenses for the three and nine month periods ended September 30, 2015, respectively. Intangible Assets The following table presents a summary of intangible assets by major asset class at September 30, 2016 and December 31, 2015:
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Earnings Per Share | EARNINGS PER SHARE Earnings per ordinary voting common shares, restricted voting common shares and participative restricted stock units ("RSUs") (collectively, the "common shares") for the three and nine month periods ended September 30, 2016 and 2015 are as follows:
Earnings per common share diluted is computed by dividing net income by the weighted average number of common shares outstanding for each period plus the incremental number of shares added as a result of converting dilutive potential ordinary voting common shares, calculated using the treasury stock method (or, in the case of the convertible preferred shares, using the "if-converted" method). Atlas’ dilutive potential ordinary voting common shares consist of stock options to purchase ordinary voting common shares and preferred shares potentially convertible to ordinary voting common shares at the option of the holders at any date after December 31, 2018 (2,538,560 preferred shares at the rate of 0.127 ordinary voting common shares for each preferred share related to the Gateway acquisition, all of which were redeemed during the third quarter of 2016 as further described in Note 14, are included for the entire period and considered to have been redeemed at the end of the day on September 30, 2016) and after March 11, 2020 (4,000,000 preferred shares at the rate of 0.05 ordinary voting common shares for each preferred share). The effects of these convertible instruments are excluded from the computation of earnings per common share diluted in periods in which the effect would be anti-dilutive. Convertible preferred shares are anti-dilutive when the amount of dividend declared or accumulated in the current period per common share obtainable upon conversion exceeds earnings per common share basic. In the three and nine month periods ended September 30, 2016 and 2015, all exercisable stock options and all of the convertible preferred shares were deemed to be dilutive. |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value for Atlas’ investments in fixed income securities and equities are as follows ($ in '000s):
The following tables summarize the amortized cost and fair value of fixed income securities by contractual maturity ($ in '000s). As certain securities and debentures have the right to call or prepay obligations, the actual settlement dates may differ from contractual maturity.
Management performs a quarterly analysis of Atlas’ investment holdings to determine if declines in fair value are other than temporary (equities may require more timely review in some cases). The analysis includes some or all of the following procedures as deemed appropriate by management:
The risks and uncertainties inherent in the assessment methodology utilized to determine declines in market value that are other than temporary include, but may not be limited to, the following:
There were no other than temporary impairments recorded for the three and nine month periods ended September 30, 2016 and 2015 as a result of the above analysis performed by management. The aging of unrealized losses on the Company's investments in fixed income securities and equities is presented as follows ($ in '000s):
As of September 30, 2016, we held 86 and 1 individual fixed income and equity securities, respectively, that were in an unrealized loss position, of which 26 individual fixed income securities were in a continuous loss position for longer than 12 months. As of December 31, 2015, we held 435 and 1 individual fixed income and equity securities, respectively, that were in an unrealized loss position, of which 35 individual fixed income securities were in a continuous loss position for longer than 12 months. We did not recognize the unrealized losses in earnings on these fixed income securities for the three and nine month periods ended September 30, 2016 or for the year ended December 31, 2015, because we neither intend to sell the securities nor do we believe that it is more likely than not that we will be required to sell these securities before recovery of their amortized costs. The following table summarizes the components of net investment income for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
The following table presents the gross realized gains and gross realized losses from sales of fixed income securities and equities for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
The aggregate proceeds from sales of fixed income securities and equities included in the table above for the three and nine month periods ended September 30, 2016 are $19.4 million and $48.6 million, respectively, and $11.2 million and $19.2 million for the three and nine month periods ended September 30, 2015, respectively. The following table summarizes the components of net investment realized gains (losses) for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
Other Investments: Atlas' other investments are comprised of collateral loans and various limited partnerships that invest in income-producing real estate, equities, or catastrophe bonds. Atlas' interests in these limited partnership investments are not deemed minor, and as a result, the Company uses the equity method of accounting. As of September 30, 2016, the carrying values of these other investments were approximately $30.9 million versus approximately $22.9 million as of December 31, 2015. The carrying values of the equity method limited partnerships were $23.6 million and $22.8 million as of September 30, 2016 and December 31, 2015, respectively. The carrying value of these investments is Atlas' share of the net book value for each limited partnership, an amount that approximates fair value. Atlas receives payments on a routine basis that approximate the income earned on one of the limited partnerships that invest in income-producing real estate. The carrying values of the collateral loans were $7.3 million and $98,000 as of September 30, 2016 and December 31, 2015, respectively. The Company recognizes an impairment loss for equity method limited partnerships when evidence demonstrates that the loss is other-than temporary. To determine if an other-than temporary impairment has occurred, the Company evaluates whether or not the investee could sustain a level of earnings that would justify the carrying amount of the investment. Collateral loans are considered impaired when it is probable that the Company will not collect the contractual principal and interest. Valuation allowances are established for impaired loans equal to the fair value of the collateral less costs to sell or the present value of the loan's expected future repayment cash flows discounted at the loan's original effective interest rate. Valuation allowances are adjusted for subsequent changes in the fair value of the collateral less costs to sell or the present value of the loan's expected future repayment cash flows. As of September 30, 2016 and as of December 31, 2015, the Company had no valuation allowances established for impaired loans. Collateral pledged: As of September 30, 2016 and as of December 31, 2015, bonds and term deposits with a fair value of $15.3 million and $15.8 million, respectively, were on deposit with state and provincial regulatory authorities. Also, from time to time, the Company pledges securities to and deposits cash with third parties to collateralize liabilities incurred under its policies of reinsurance assumed and other commitments made by the Company. As of September 30, 2016 and as of December 31, 2015, the amounts of such pledged securities were $5.6 million and $3.6 million, respectively. Collateral pledging transactions are conducted under terms that are common and customary to standard collateral pledging and are subject to the Company’s standard risk management controls. These assets and investment income related thereto remain the property of the Company while pledged. Neither the state, provincial regulatory authorities nor any other third party has the right to re-pledge or sell said securities held on deposit. |
Fair Value of Financial Instruments |
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Financial and Credit Risk Management [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | FAIR VALUE OF FINANCIAL INSTRUMENTS U.S. GAAP requires certain assets and liabilities to be reported at fair value in the financial statements and provides a framework for establishing that fair value. Level 1 inputs are given the highest priority in the hierarchy while Level 3 inputs are given the lowest priority. Assets and liabilities carried at fair value are classified in one of the following three categories based on the nature of the inputs to the valuation technique used: Level 1 - Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 - Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3 - Unobservable inputs that are not corroborated by market data. These inputs reflect management's best estimate of fair value using its own assumptions about the assumptions a market participant would use in pricing the asset or liability. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Atlas' assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the placement of the asset or liability within the fair value hierarchy levels. The following is a summary of significant valuation techniques for assets measured at fair value on a recurring basis: Level 1 Equities: Comprised of publicly-traded common stocks. Valuation is based on unadjusted quoted prices for identical assets in active markets that Atlas can access. Fixed Income: Comprised of certain U.S. Treasury fixed income securities. Valuation is based on unadjusted quoted prices for identical assets in active markets that Atlas can access. Level 2 States, Municipalities and Political Subdivisions: Comprised of U.S. States, Territories and Possessions, U.S. Political Subdivisions of States, Territories and Possessions, U.S. Special Revenue and Special Assessment Obligations. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads. Corporate Bonds: Comprised of investment-grade fixed income securities. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields and credit spreads. Mortgage-backed and Other asset-backed: Comprised of securities that are collateralized by mortgage obligations and other assets. The primary inputs to the valuation include quoted prices for identical assets in inactive markets or similar assets in active or inactive markets, contractual cash flows, benchmark yields, collateral performance and credit spreads. The following table summarizes Atlas' investments at fair value as of September 30, 2016 and as of December 31, 2015 ($ in '000s):
Atlas primarily uses the services of external securities pricing vendors to obtain these values. Atlas then reviews these valuations to ensure that the values are accurately recorded and that the data inputs and valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. Though Atlas believes the valuation methods used in determining fair value are appropriate, different methodologies or assumptions could result in a different fair value as of September 30, 2016. Management does not believe that reasonable changes to the inputs to its valuation methodology would result in a significantly higher or lower fair value measurement. There were no transfers in or out of Level 2 or Level 3 during the three and nine month periods ended September 30, 2016 and 2015. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | INCOME TAXES Atlas' effective tax rate was 27.6% and 31.8% for the three and nine month periods ended September 30, 2016, respectively, and 33.9% and 37.0% for the three and nine month periods ended September 30, 2015, respectively. The below table reconciles the U.S. statutory marginal income tax rate to the effective tax rate ($ in '000s):
Income tax expense consists of the following for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
Upon the transaction forming Atlas on December 31, 2010, a yearly limitation as required by U.S. Internal Revenue Code of 1986 (as amended, "IRC") Section 382 that applies to changes in ownership on the future utilization of Atlas’ net operating loss carryforwards was calculated. The Insurance Subsidiaries’ prior parent retained those tax assets previously attributed to the Insurance Subsidiaries, which could not be utilized by Atlas as a result of this limitation. As a result, Atlas’ ability to recognize future tax benefits associated with a portion of its deferred tax assets generated during prior years has been permanently limited to the amount determined under IRC Section 382. The result is a maximum expected net deferred tax asset that Atlas has available after the merger, which is believed more likely than not to be utilized in the future, after consideration of the valuation allowance. On July 22, 2013, as a result of shareholder activity, a "triggering event" as determined under IRC Section 382 occurred. As a result, under IRC Section 382, the use of the Company's net operating loss and other carryforwards will be limited as a result of this "ownership change” for tax purposes, which is defined as a cumulative change of more than 50% during any three-year period by shareholders owning 5% or greater portions of the Company's shares. Due to this triggering event, the Company estimates that it will retain total tax effected federal net operating loss carryforwards of approximately $13.8 million as of September 30, 2016. The components of net deferred income tax assets and liabilities as of September 30, 2016 and December 31, 2015 are as follows ($ in '000s):
Amounts and expiration dates of the operating loss carryforwards as of September 30, 2016 are as follows ($ in '000s):
Atlas has not established a valuation allowance for its gross future deferred tax assets as of September 30, 2016 or as of December 31, 2015. Based on Atlas’ expectations of future taxable income, its ability to change its investment strategy, as well as reversing gross future tax liabilities, management believes it is more likely than not that Atlas will fully realize the net future tax assets. Atlas accounts for uncertain tax positions in accordance with the income taxes accounting guidance. Atlas has analyzed filing positions in the federal and state jurisdiction where it is required to file tax returns, as well as the open tax years in these jurisdictions. Atlas believes that its federal and state income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain federal and state income tax positions have been recorded. Atlas would recognize interest and penalties related to unrecognized tax benefits as a component of the provision for federal income taxes. Atlas did not incur any federal income tax related interest income, interest expense or penalties for the three and nine month periods ended September 30, 2016 and 2015. Tax years 2012 through 2016 are subject to examination by the Internal Revenue Service ("IRS"). The IRS completed its audit of tax year 2012 during the three month period ended March 31, 2016. No changes to tax year 2012 were made to our reported tax. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES On May 22, 2012, Atlas closed the sale and leaseback of its headquarters building to 150 Northwest Point, LLC, a Delaware limited liability company. Atlas recognized a gain on the sale of this property of $213,000, which will be deferred and recognized over the five year lease term, which ends in May 2017. Atlas recognized $11,000 as an offset to rent expense for each of the three month periods ended September 30, 2016 and 2015. Total rental expense recognized on the headquarters building was $202,000 and $178,000 for the three month periods ended September 30, 2016 and 2015, respectively. Atlas recognized $32,000 as an offset to rent expense for each of the nine month periods ended September 30, 2016 and 2015. Total rental expense recognized on the headquarters building was $560,000 and $533,000 for the nine month periods ended September 30, 2016 and 2015, respectively. As of September 30, 2016, Atlas has the following future minimum rentals, related principally to office space, required under operating leases ($ in '000s):
The Company has entered into subscription agreements to commit up to $8.5 million of capital to allow for participation by the Company in limited liability investments, which invest in income-producing real estate, small business loans and equity securities. As of September 30, 2016, the unfunded commitment was $3.5 million. In the ordinary course of its business, Atlas is involved in legal proceedings, including lawsuits, regulatory examinations and inquiries. Based on currently available information, the Company does not believe that it is reasonably possible that any of its pending legal proceedings will have a material effect on the Company's Consolidated Financial Statements. Atlas is exposed to credit risk on balances receivable from policyholders, agents and reinsurers. Credit exposure to any one individual policyholder is not material. The Company's policies, however, are distributed by agents who may manage cash collection on its behalf pursuant to the terms of their agency agreement. Atlas has procedures to monitor and minimize its exposure to delinquent agent balances, including, but not limited to, reviewing account current statements, processing policy cancellations for non-payment and other collection efforts deemed appropriate. Atlas also has procedures to evaluate the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurers’ insolvency. Virtually all states require insurers licensed to do business therein to bear a portion of contingent and incurred claim handling expenses and the unfunded amount of “covered” claim and unearned premium obligations of impaired or insolvent insurance companies, either up to the policy's limit, the applicable guaranty fund covered claim obligation cap, or 100% of statutorily defined workers' compensation benefits, subject to applicable deductibles. These obligations are funded by assessments, made on a retrospective, prospective or pre-funded basis, which are levied by guaranty associations within the state, up to prescribed limits (typically 2% of “net direct written premium”), on all member insurers in the state on the basis of the proportionate share of the premiums written by member insurers in certain covered lines of business in which the impaired, insolvent or failed insurer was engaged. In addition, as a condition to the ability to conduct business in certain states (and within the jurisdiction of some local governments), insurance companies are subject to or required to participate in various premium or loss based insurance-related assessments, including non-voluntary assigned risk pools, underwriting associations, workers' compensation second-injury funds, reinsurance funds and other state insurance facilities. Atlas' proportionate share of these various premium or loss based insurance-related assessments, including non-voluntary assigned risk pools, underwriting associations, workers' compensation second-injury funds, reinsurance funds and other state insurance facilities is not material. |
Internal Use Software and Office Equipment |
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Software and Office Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Internal Use Software and Office Equipment | INTERNAL USE SOFTWARE AND OFFICE EQUIPMENT Atlas held the following internal use software and office equipment as of September 30, 2016 and as of December 31, 2015 (excluding assets held for sale) ($ in '000s):
Depreciation expense and amortization was $267,000 and $290,000 for the three month periods ended September 30, 2016 and 2015, respectively. Depreciation expense and amortization was $747,000 and $684,000 for the nine month periods ended September 30, 2016 and 2015, respectively. For the year ended December 31, 2015, depreciation expense and amortization was $966,000. Effective July 1, 2015, the Company implemented a new policy management software and began amortizing the cost of the software. Total capitalized cost of the software was approximately $2.1 million. Amortization expense for the new software for the three and nine month periods ended September 30, 2016 was $113,000 and $309,000, respectively. Amortization expense for the policy management software for each of the three and nine month periods ended September 30, 2015 was $92,000. Amortization expense for the year ended December 31, 2015 was $186,000. |
Reinsurance Ceded |
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Underwriting Policy and Reinsurance Ceded [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reinsurance Ceded | REINSURANCE CEDED As is customary in the insurance industry, Atlas reinsures portions of certain insurance policies it writes, thereby providing a greater diversification of risk and minimizing exposure on larger risks. Atlas remains contingently at risk with respect to any reinsurance ceded and would incur an additional loss if an assuming company were unable to meet its obligation under the reinsurance treaty. Atlas monitors the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Letters of credit are maintained for any unauthorized reinsurer to cover ceded unearned premium, ceded loss reserve balances and ceded paid losses. These policies mitigate the risk of credit quality or dispute from becoming a danger to financial strength. To date, the Company has not experienced any material difficulties in collecting reinsurance recoverables. Gross premiums written and ceded premiums, losses and commissions as of and for the three and nine month periods ended September 30, 2016 and 2015 are as follows ($ in '000s):
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Unpaid Claims |
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Unpaid Claims [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Claims | UNPAID CLAIMS Claims liabilities - The changes in the provision for unpaid claims, net of amounts recoverable from reinsurers, for the three and nine month periods ended September 30, 2016 and 2015 were as follows ($ in '000s):
The process of establishing the estimated provision for unpaid claims is complex and imprecise, as it relies on the judgment and opinions of a large number of individuals, on historical precedent and trends, on prevailing legal, economic, social and regulatory trends and on expectations as to future developments. The process of determining the provision necessarily involves risks that the actual results will deviate, perhaps substantially, from the best estimates made. The establishment of reserves is an inherently uncertain process involving estimates; and current provisions may not be sufficient. Adjustments to reserves, both positive and negative, are reflected in the statement of income and comprehensive income as estimates are updated. The decrease in the estimated liability for claims incurred in prior reporting periods and related claims settlement costs ("favorable development") for the three month period ended September 30, 2016 primarily resulted from Atlas' participation in non-voluntary assigned risk pools offset by an increase ("unfavorable development") on the run-off surety program. Assigned risk pools are established by state governments to cover high-risk insureds who cannot purchase insurance through conventional means. For the three month period ended September 30, 2015, the favorable development was related to a reserve study on the run-off workers' compensation program and a recovery on a surety claim from a prior accident year. The unfavorable development for the nine month period ended September 30, 2016 primarily resulted from Atlas' participation in non-voluntary assigned risk pools. For the nine month period ended September 30, 2015, the favorable development was primarily due to a redundancy in Gateway's commercial auto and other run-off programs' reserves offset by Atlas' participation in non-voluntary assigned risk pools. |
Share Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Based Compensation | SHARE BASED COMPENSATION On January 6, 2011, Atlas adopted a stock option plan (the “Stock Option Plan”) in order to advance the interests of Atlas by providing incentives to eligible persons defined in the plan. In the second quarter of 2013, a new equity incentive plan (the “Equity Incentive Plan”) was approved by the Company's common shareholders at the Annual General Meeting, and Atlas ceased to grant new stock options under the preceding Stock Option Plan. The Equity Incentive Plan is a securities based compensation plan, pursuant to which Atlas may issue restricted stock grants for ordinary voting common shares, restricted units, stock grants for ordinary voting common shares, stock options and other forms of equity incentives to eligible persons as part of their compensation. The Equity Incentive Plan is considered an amendment and restatement of the Stock Option Plan, although outstanding stock options issued pursuant to the Stock Option Plan will continue to be governed by the terms of the Stock Option Plan. Stock options - Stock option activity for the nine month periods ended September 30, 2016 and 2015 follows (prices in Canadian dollars designated with "C$" and United States dollars designated with "US$" ):
There are 304,395 stock options that are exercisable as of September 30, 2016. The stock option grants outstanding have a weighted average remaining life of 7.07 years and have an intrinsic value of $2.5 million as of September 30, 2016. On March 12, 2015, the Board of Directors of Atlas granted equity awards of (i) 200,000 restricted voting common shares of the Company and (ii) 200,000 options to acquire ordinary voting common shares to the executive officers of the Company as part of the Company’s annual compensation process. The awards were made under the Company’s Equity Incentive Plan. The awards vest in five equal annual installments of 20%, provided that an installment shall not vest unless an annual performance target based on specific book value growth rates linked to return on equity goals is met. In the event the performance target is not met in any year, the 20% installment for such year shall not vest, but such non-vested installment shall carry forward and can become vested in future years (up to the fifth year from the date of grant), subject to achievement in a future year of the applicable performance target for such year. The Monte-Carlo simulation model was used, for both the options and restricted voting common share grants, to estimate the fair value of compensation expense as a result of the performance based component of these grants. Utilizing the Monte-Carlo simulation model, the fair values were $1.5 million and $1.9 million for the options and restricted voting common share grants, respectively. This expense will be amortized over the anticipated vesting period. Restricted shares - The activity for the restricted voting common shares and restricted share units for the nine month periods ended September 30, 2016 and 2015 are as follows:
In accordance with ASC 718 (Stock-Based Compensation), Atlas has recognized share-based compensation expense on a straight-line basis over the requisite service period of the last separately vesting portion of the award. Share-based compensation expense is a component of other underwriting expenses on the income statement. Atlas recognized $388,000 and $1.2 million in share-based compensation expense, including income tax expense, for the three and nine month periods ended September 30, 2016, respectively. For the three and nine month periods ended September 30, 2015, we incurred $423,000 and $1.2 million, respectively, of share-based compensation expense, including income tax expense. Total unearned share-based compensation expense was $1.2 million related to all stock option grants and $2.4 million related to restricted voting common shares and restricted share units as of September 30, 2016. This unearned share-based compensation expense will be amortized over the next 41 months. |
Other Employee Benefit Plans |
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Other Employee Benefit Plans [Abstract] | |
Other Employee Benefit Plans | OTHER EMPLOYEE BENEFIT PLANS Defined Contribution Plan - Atlas has a defined contribution 401(k) plan covering all qualified employees of Atlas and its subsidiaries. Contributions to this plan are limited based on IRS guidelines. Atlas matches 100% of the employee contribution up to 2.5% of annual earnings, plus 50% of additional contributions up to 2.5% of annual earnings, for a total maximum expense of 3.75% of annual earnings per participant. Atlas' matching contributions are discretionary. Employees are 100% vested in their own contributions and vest in Atlas contributions based on years of service equally over 5 years with 100% vested after 5 years. Company contributions were $111,000 and $74,000 for the three month periods ended September 30, 2016 and 2015, respectively. Company contributions were $328,000 and $225,000 for the nine month periods ended September 30, 2016 and 2015, respectively. Employee Stock Purchase Plan - The Atlas Employee Stock Purchase Plan (the “ESPP”) encourages employee interest in the operation, growth and development of Atlas and provides an additional investment opportunity to employees. Full time and permanent part time employees working more than 30 hours per week were allowed to invest up to 7.5% of adjusted salary in Atlas ordinary voting common shares. Atlas matches 100% of the employee contribution up to 2.5% of annual earnings, plus 50% of additional contributions up to 5% of annual earnings, for a total maximum expense of 5% of annual earnings per participant. Atlas also pays all administrative costs related to this plan. Atlas' costs incurred related to the matching portion of the ESPP were $56,000 and $36,000 for the three month periods ended September 30, 2016 and 2015, respectively, and $152,000 and $109,000 for the nine month periods ended September 30, 2016 and 2015, respectively. Share purchases pursuant to this plan are made in the open market. |
Share Capital |
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Share Capital [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Capital | SHARE CAPITAL The share capital is as follows:
All of the issued and outstanding restricted voting common shares are beneficially owned or controlled by Kingsway Financial Services, Inc. (including its subsidiaries and affiliated companies, "Kingsway"). The restricted voting common shares are entitled to vote at all meetings of shareholders, except at meetings of holders of a specific class that are entitled to vote separately as a class. The restricted voting common shares as a class shall not carry more than 30% of the aggregate votes eligible to be voted at a general meeting of common shareholders. The restricted voting common shares will convert to ordinary voting common shares in the event that these Kingsway-owned shares are sold to non-affiliates of Kingsway. There were 22,224 and 29,631 non-vested restricted stock units ("RSUs") as of September 30, 2016 and December 31, 2015, respectively. These RSUs are participative and are included in the computations of earnings per share and book value per share for these periods. During the nine month period ended September 30, 2016, the Company issued 7,407 ordinary voting common shares as a result of the vesting of RSUs. The Company issued 7,407 ordinary voting common shares as a result of the vesting of RSUs and 200,000 non-vested restricted voting common shares during the nine month period ended September 30, 2015 to a director and the officers, respectively. These shares were granted and issued under the Company's Equity Incentive Plan. During the first quarter of 2015, the Company issued 4,000,000 preferred shares as a portion of the consideration related to the Anchor acquisition and an additional 940,500 preferred shares pursuant to the Gateway stock purchase agreement. During the first quarter of 2016, the Company retired 401,940 preferred shares pursuant to the Gateway stock purchase agreement. During the third quarter of 2016, the Company redeemed all 2,538,560 of the remaining preferred shares issued to the former owner of Gateway. At September 30, 2016, there were 4,000,000 preferred shares outstanding and all are beneficially owned or controlled by the former owner of Anchor. The Gateway preferred shares redeemed and retired during 2016 and the preferred shares issued during the first quarter of 2015 have been recorded as a recovery of acquisition expense and additional acquisition expense, respectively, and not as an adjustment to goodwill, because the fair value of the contingent consideration was determined to be zero at the date of the Gateway acquisition. In accordance with U.S. GAAP, such adjustments are reflected in the income statement in the period that the contingency is re-estimated. The estimate of the Anchor acquisition contingency could change in the future until all remaining claims are settled. Preferred shareholders are entitled to dividends on a cumulative basis, whether or not declared by the Board of Directors, at the rate of $0.045 per share per year (4.5%) and may be paid in cash or in additional preferred shares at the option of Atlas. In liquidation, dissolution or winding-up of Atlas, preferred shareholders receive the greater of $1.00 per share plus all declared and unpaid dividends or the amount they would receive in liquidation if the preferred shares had been converted to restricted voting common shares or ordinary voting common shares immediately prior to liquidation. The preferred shares are redeemable at the option of Atlas at a price of $1.00 per share plus accrued and unpaid dividends, subject to certain conditions, prior to the conversion date. Preferred shareholders are not entitled to vote. Preferred shares are convertible into ordinary voting common shares at the option of the former owner Anchor at any date after the fifth year of issuance at the rate of 0.05 ordinary voting common shares for each preferred share. The conversion rate is subject to change if the number of ordinary voting common shares or restricted voting common shares changes by way of an anti-dilution event. The former owners of Gateway and Anchor earned $94,000 and $140,000, respectively, in dividends on the preferred shares during the nine month period ended September 30, 2016. On September 30, 2016, Atlas paid $409,000 in dividends earned on the preferred shares to the former owner of Gateway, the cumulative amount to which they were entitled through September 15, 2016, leaving no accrued and unpaid dividends owed to the former owner of Gateway. Through September 30, 2016, Atlas has accrued $286,000 in dividends on the preferred shares for the former owner of Anchor, which remain unpaid. |
Deferred Policy Acquisition Costs |
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Deferred Policy Acquisition Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Policy Acquisition Costs | DEFERRED POLICY ACQUISITION COSTS Deferred policy acquisition costs for the nine month periods ended September 30, 2016 and 2015 consisted of the following ($ in '000s):
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Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions | RELATED PARTY TRANSACTIONS During the periods presented, a small percentage of the Company’s investment portfolio was allocated to investment vehicles, primarily focused on income generating real estate, that are considered related-party transactions. In these cases, one or more of the Company’s directors may be deemed to control unrelated entities that may invest in these vehicles and may also manage these vehicles. |
Note Payable |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note Payable | NOTE PAYABLE On March 9, 2015, American Insurance Acquisition, Inc. ("American Acquisition"), a wholly-owned direct subsidiary of Atlas Financial Holdings, Inc., and parent of the ASI Pool Subsidiaries (defined below), entered into a loan and security agreement (“Loan Agreement”) for a $35.0 million loan facility with Fifth Third Bank. On May 7, 2016, American Acquisition entered into a Modification of Loan Documents with Fifth Third Bank to amend its Loan Agreement. The Loan Agreement, as modified, includes a $30.0 million line of credit ("Draw Amount"), which can be drawn in increments at any time until December 31, 2016. The $30.0 million line of credit has a five year term and bears interest at one-month LIBOR plus 4.5%, effectively 5.03% at September 30, 2016. The Loan Agreement also includes a $5.0 million revolving line of credit ("Revolver") that bears interest at one month LIBOR plus 2.75%, effectively 3.28% at September 30, 2016. The Loan Agreement also provides for the issuance of letters of credit in an amount up to $2.0 million outstanding at any time. In addition, there is a non-utilization fee for each of the $30.0 million line of credit and $5.0 million revolving line of credit equal to 0.50% per annum of an amount equal to $30.0 million and $5.0 million, respectively, less the daily average of the aggregate principal amount outstanding under such credit lines (plus, in the case of the $30.0 million line of credit, the aggregate amount of the letter of credit obligations outstanding). The Loan Agreement requires American Acquisition to comply with customary affirmative and negative covenants, including those governing indebtedness, liens, investments, sales of assets, issuance of securities, and distributions. The Loan Agreement also requires American Acquisition to make mandatory prepayments under certain conditions and to comply with certain financial covenants, including the ASI Pool Subsidiaries (defined below) maintaining a combined statutory net worth in an amount not less than $60.0 million (subject to adjustment) and maintaining a minimum funded debt to Earnings Before Interest, Taxes, Depreciation and Amortization ratio. The Loan Agreement is secured by substantially all of the property of American Acquisition, including all of the outstanding shares of American Country, American Service and Gateway, which are wholly-owned direct subsidiaries of American Acquisition (the “ASI Pool Subsidiaries”). As of September 30, 2016, American Acquisition was in compliance with the covenants of the Loan Agreement. As of September 30, 2016, $2.4 million in funds were accessed from the Revolver and used to support Anchor's operations, of which $500,000 was accessed during 2016 while $100,000 was repaid during 2016. $17.0 million in funds were accessed against the Draw Amount as of September 30, 2016, of which $1.5 million was accessed during the third quarter of 2016, and a portion was used to repurchase preferred shares from the former owner of Gateway. $15.5 million of the Draw Amount was accessed in 2015 and contributed to the ASI Pool Subsidiaries in exchange for surplus notes that carry a variable interest rate of prime plus 2% with a maturity date of April 30, 2020. No letters of credit were issued under the terms of this Loan Agreement as of September 30, 2016. As of September 30, 2016, the unused funds for the Revolver and the Draw Amount were $2.6 million and $13.0 million, respectively. For the three month period ended September 30, 2016, American Acquisition incurred interest expense, including amortized loan costs, of $257,000 in connection with the Loan Agreement. For the three month period ended September 30, 2015, interest expense, including amortized loan costs, was $266,000. For the nine month period ended September 30, 2016, American Acquisition incurred interest expense, including amortized loan costs, of $756,000 in connection with the Loan Agreement. For the nine month period ended September 30, 2015, interest expense, including amortized loan costs, was $447,000. As of September 30, 2016, unamortized bank fees associated with the Loan Agreement were $230,000. These bank fees will be amortized over the next 41 months. Note payable outstanding as of September 30, 2016 and as of December 31, 2015 ($ in '000s):
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Statutory Information |
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Statutory Information [Abstract] | |
Statutory Information | STATUTORY INFORMATION As a holding company, Atlas could derive cash from its Insurance Subsidiaries generally in the form of dividends to meet its obligations, which will primarily consist of operating expense payments and debt payments. Atlas’ Insurance Subsidiaries fund their obligations primarily through premium and investment income and maturities in the securities portfolio. The Insurance Subsidiaries require regulatory approval for the return of capital and, in certain circumstances, prior to the payment of dividends. In the event that dividends available to the holding company are inadequate to cover its operating expenses and debt payments, the holding company would need to raise capital, sell assets or incur future debt. The Insurance Subsidiaries must each maintain a minimum statutory capital and surplus of $1.5 million, $2.4 million and $3.5 million under the provisions of the Illinois Insurance Code, the Missouri Insurance Code and the New York Insurance Code, respectively. Dividends may only be paid from statutory unassigned surplus, and payments may not be made if such surplus is less than a stipulated amount. The dividend restriction is the greater of statutory net income or 10% of total statutory capital and surplus. At September 30, 2016, our Insurance Subsidiaries had a combined statutory surplus of $133.3 million and had combined net written premiums and combined statutory net income for the nine month period ended September 30, 2016 of $137.5 million and $13.1 million, respectively. At December 31, 2015, our Insurance Subsidiaries had a combined statutory surplus of $118.5 million and had combined net written premiums and combined statutory net income for the twelve months ended December 31, 2015 of $177.8 million and $12.7 million, respectively. Atlas did not declare or pay any dividends to its common shareholders during the nine month period ended September 30, 2016 or during the year ended December 31, 2015. |
Change in Accounting Principle |
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Change in Accounting Principle | CHANGE IN ACCOUNTING PRINCIPLE In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs. The Company adopted this new disclosure during the first quarter of 2016 and applied its provisions retrospectively. Under the new guidance, unamortized debt issuance costs are to be presented in the balance sheet as a direct deduction from the carrying amount of the debt liability. The adoption of this new disclosure reduced other assets and notes payable by $281,000. The following line items presented in the Consolidated Statements of Financial Position as of December 31, 2015 were affected by the adoption of the new disclosure:
1 - Other assets as of December 31, 2015 includes the balance previously reported as Assets held for sale under the column As Originally Reported |
Nature of Operations and Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of presentation - These statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The consolidated financial statements include the accounts of Atlas and the entities it controls. Equity investments in entities that we do not consolidate, including corporate entities in which we have significant influence and partnership and partnership-like entities in which we have more than minor influence over operating and financial policies, are accounted for under the equity method unless we have elected the fair value option. All significant intercompany accounts and transactions have been eliminated. It is the opinion of management that these financial statements reflect all adjustments necessary for a fair statement of the interim results. The results for the three and nine month periods ended September 30, 2016 are not necessarily indicative of the results expected for the full calendar year. The accompanying unaudited condensed consolidated financial statements, in accordance with Securities and Exchange Commission (“SEC”) rules for interim periods, do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements and should be read in conjunction with the Atlas' Annual Report on Form 10-K for the year ended December 31, 2015, which provides a more complete understanding of the Company’s accounting policies, financial position, operating results, business properties, and other matters. Atlas has consistently applied the same accounting policies throughout all periods presented. |
Principles of Consolidation | Principles of consolidation - We filed our Quarterly Report on Form 10-Q for the period ended September 30, 2015, under the assumption that certain variable interest entities (“VIEs”), were controlled by Atlas. Based on new information obtained after the filing of our Quarterly Report on Form 10-Q for the period ended September 30, 2015, we have determined that these VIEs are not controlled by Atlas. As a result, the Company no longer consolidates these VIEs. All amounts for the period ended September 30, 2015 presented herein have been been restated for comparative purposes. The difference in amounts included within the September 30, 2015 Quarterly Report on Form 10-Q with respect to VIEs is not material. |
Estimates and Assumptions | Estimates and assumptions - The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates and changes in estimates are recorded in the accounting period in which they are determined. The liability for unpaid loss and loss adjustment expenses and related amounts recoverable from reinsurers represents the most significant estimate in the accompanying financial statements. Significant estimates in the accompanying financial statements also include the fair values of investments, deferred tax asset valuation, premium receivable bad debt allowance and deferred policy acquisition cost recoverability. |
Segmentation | Segmentation - The Company has one reportable business segment. Resources are allocated and management assesses financial performance based on this reportable segment. |
New Accounting Standards | Pertinent Accounting Standard Updates ("ASUs") are issued from time to time by the Financial Accounting Standards Board ("FASB") and are adopted by the Company as they become effective. All recently issued accounting pronouncements with effective dates prior to October 1, 2016 have been adopted by the company. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). The provisions of this update address the diversity in practice of eight issues on the cash flow statement. For public entities, this guidance is effective for years beginning after December 15, 2017, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date and is currently evaluating its accounting policies to determine the potential impact of its adoption on its consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). The provisions of this update require an entity to broaden the information that it considers in developing its allowance for credit losses for assets. For public entities, this guidance is effective for years beginning after December 15, 2019, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date and is currently evaluating the potential impact of its adoption on its consolidated financial statements. In May 2016 and April 2016, the FASB issued ASU 2016-12 and ASU 2016-10, Revenue from Contracts with Customers (Topic 606), respectively, which is associated with the updates in ASU 2014-09 and ASU 2015-14. The provisions of this update enhance the guidance on identifying performance obligations and licensing implementation. The effective date of this ASU follows the guidance in ASU 2015-14 discussed below. Along with ASU 2014-09, the Company plans to adopt these standards on the required effective date and is currently evaluating the guidance to determine the potential impact, if any, of its adoption on its consolidated financial statements. In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). The provisions of this update simplify certain areas around share-based compensation transactions including income taxes and cash flow classifications. Each amendment within this update has specific guidance on the method of application, which includes prospective, retrospective, and modified retrospective applications. For public entities, this guidance is effective for years beginning after December 15, 2016, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date and is currently evaluating the potential impact of its adoption on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The provisions of this update impact the classification criteria, disclosure requirements, and other specific transactions in lease accounting. The update requires the use of a modified retrospective approach, which requires leases to be measured at the beginning of the earliest period presented. For public entities, this guidance is effective for years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted. The Company plans on adopting the update on the required effective date. The Company is currently evaluating the potential impact of its adoption on its consolidated financial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. One provision of this update requires that equity investments, except those accounted for under the equity method, be measured at fair value and changes in fair value recognized in net income. The provisions of this update are recognized as a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. For public entities, this guidance is effective for years beginning after December 15, 2017, including interim periods within those years. Early adoption is not permitted, except for certain provisions. The Company plans on adopting the update on the required effective date. The Company is currently evaluating the potential impact of its adoption on its consolidated financial statements. In May 2015, the FASB issued ASU 2015-09, Financial Services - Insurance (Topic 944): Disclosures about Short-Duration Contracts. The new disclosures, which are required for annual periods beginning after December 31, 2015 and for interim periods beginning after December 31, 2016, are intended to provide additional information about insurance liabilities including the nature, amount, timing, and uncertainty of future cash flows related to those liabilities. Early adoption is permitted. Except for the retrospective application of additional disclosure requirements, the new guidance will not impact the Company's consolidated financial statements. The Company plans on adopting the update on the required effective date. In April 2015, the FASB issued ASU 2015-03, Interest - Imputation of Interest (Topic 835-30): Simplifying the Presentation of Debt Issuance Costs. The new disclosures require debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The amendments in this disclosure are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company adopted this new disclosure in the first quarter of 2016. See Note 19 regarding this change in accounting principle. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This update is a comprehensive revenue recognition standard that applies to all entities that have contracts with customers, except for those that fall within the scope of other standards, such as insurance contracts. Updates may be applied retrospectively to each period presented or retrospectively with the cumulative effect recognized at the date of initial application. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date, which deferred the effective date of ASU 2014-09 by one year. The update is now effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, but only for interim and annual periods beginning after December 15, 2016. The Company plans to adopt the update on the required effective date and is currently evaluating the guidance to determine the potential impact, if any, of its adoption on its consolidated financial statements. All other recently issued pronouncements with effective dates after September 30, 2016 are not expected to have a material impact on the Consolidated Financial Statements. |
Acquisitions Acquisitions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Pro Forma Information | However, the following unaudited pro forma summary presents Atlas' consolidated financial information for the three and nine month periods ended September 30, 2015 as if Anchor had been acquired on January 1, 2015. These amounts have been calculated after applying the Company's accounting policies had the acquisition been completed on January 1, 2015. These results were prepared for comparative purposes only and do not purport to be indicative of the results of operations that may have actually resulted had the acquisition occurred on the indicated dates, nor are they indicative of potential future operating results of the Company.
1 - Excludes expenses incurred in connection with the Anchor acquisition |
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Schedule of Purchase Price Allocation | The following table presents the adjusted values of assets acquired and liabilities assumed for the Anchor acquisition based on its estimated fair value on March 11, 2015.
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Schedule of Intangible Assets, excluding Goodwill | The following table presents a summary of intangible assets by major asset class at September 30, 2016 and December 31, 2015:
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Earnings Per Share (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | Earnings per ordinary voting common shares, restricted voting common shares and participative restricted stock units ("RSUs") (collectively, the "common shares") for the three and nine month periods ended September 30, 2016 and 2015 are as follows:
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Investments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Available-for-sale Securities | The amortized cost, gross unrealized gains and losses and fair value for Atlas’ investments in fixed income securities and equities are as follows ($ in '000s):
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Summary of Carrying Amounts of Fixed Income Securities, by Contractual Maturity | The following tables summarize the amortized cost and fair value of fixed income securities by contractual maturity ($ in '000s). As certain securities and debentures have the right to call or prepay obligations, the actual settlement dates may differ from contractual maturity.
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Schedule of Unrealized Loss on Investments | The aging of unrealized losses on the Company's investments in fixed income securities and equities is presented as follows ($ in '000s):
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Summary of Components of Net Investment Income | The following table summarizes the components of net investment income for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
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Schedule of Realized Gain (Loss) | The following table presents the gross realized gains and gross realized losses from sales of fixed income securities and equities for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
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Summary of Components of Net Investment Realized Gains | The following table summarizes the components of net investment realized gains (losses) for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
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Fair Value of Financial Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial and Credit Risk Management [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Investments at Fair Value | The following table summarizes Atlas' investments at fair value as of September 30, 2016 and as of December 31, 2015 ($ in '000s):
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Income Taxes (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | The below table reconciles the U.S. statutory marginal income tax rate to the effective tax rate ($ in '000s):
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Schedule of Components of Income Tax Expense (Benefit) | Income tax expense consists of the following for the three and nine month periods ended September 30, 2016 and 2015 ($ in '000s):
|
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Schedule of Deferred Tax Assets and Liabilities | The components of net deferred income tax assets and liabilities as of September 30, 2016 and December 31, 2015 are as follows ($ in '000s):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Operating Loss Carryforwards | Amounts and expiration dates of the operating loss carryforwards as of September 30, 2016 are as follows ($ in '000s):
|
Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | As of September 30, 2016, Atlas has the following future minimum rentals, related principally to office space, required under operating leases ($ in '000s):
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Internal Use Software and Office Equipment (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Software and Office Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property, Plant and Equipment | Atlas held the following internal use software and office equipment as of September 30, 2016 and as of December 31, 2015 (excluding assets held for sale) ($ in '000s):
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Reinsurance Ceded (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underwriting Policy and Reinsurance Ceded [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effects of Reinsurance Premiums for Insurance Companies | Gross premiums written and ceded premiums, losses and commissions as of and for the three and nine month periods ended September 30, 2016 and 2015 are as follows ($ in '000s):
|
Unpaid Claims (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unpaid Claims [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liability for Unpaid Claims and Claims Adjustment Expense | The changes in the provision for unpaid claims, net of amounts recoverable from reinsurers, for the three and nine month periods ended September 30, 2016 and 2015 were as follows ($ in '000s):
|
Share Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Option Activity | Stock option activity for the nine month periods ended September 30, 2016 and 2015 follows (prices in Canadian dollars designated with "C$" and United States dollars designated with "US$" ):
The activity for the restricted voting common shares and restricted share units for the nine month periods ended September 30, 2016 and 2015 are as follows:
|
Share Capital (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share Capital [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share Capital for Common Shares | The share capital is as follows:
|
Deferred Policy Acquisition Costs (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Policy Acquisition Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Policy Acquisition Costs and Present Value of Future Profits | Deferred policy acquisition costs for the nine month periods ended September 30, 2016 and 2015 consisted of the following ($ in '000s):
|
Note Payable (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Outstanding Debt | Note payable outstanding as of September 30, 2016 and as of December 31, 2015 ($ in '000s):
|
Change in Accounting Principle (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Standards Update 2015-03 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Accounting Pronouncements and Changes in Accounting Principles | The following line items presented in the Consolidated Statements of Financial Position as of December 31, 2015 were affected by the adoption of the new disclosure:
1 - Other assets as of December 31, 2015 includes the balance previously reported as Assets held for sale under the column As Originally Reported |
Nature of Operations and Basis of Presentation (Details) |
9 Months Ended |
---|---|
Sep. 30, 2016
state
segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of states licensed to write property and casualty insurance (state) | 49 |
Number of states, core products actively distributed (state) | 41 |
Number of business segments (segment) | segment | 1 |
Acquisitions Pro Forma (Details) - Anchor Holdings Group, Inc. et. al. - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2015 |
Sep. 30, 2015 |
|
Business Acquisition [Line Items] | ||
Revenue | $ 43,081 | $ 119,061 |
Income from operations before income tax expense | 6,092 | 17,554 |
Net income | $ 4,024 | $ 11,086 |
Earnings per common share basic (USD per share) | $ 0.33 | $ 0.91 |
Earnings per common share diluted (USD per share) | $ 0.32 | $ 0.85 |
Acquisitions Purchase Price Allocation (Details) - USD ($) $ in Thousands |
Mar. 11, 2015 |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|---|
Allocation of Purchase Price | |||
Goodwill | $ 2,726 | $ 2,726 | |
Anchor Holdings Group, Inc. et. al. | |||
Purchase Consideration | |||
Cash | $ 19,199 | ||
Preferred stock | 4,000 | ||
Total | 23,199 | ||
Allocation of Purchase Price | |||
Cash and investments | 48,508 | ||
Other current assets | 33,303 | ||
Property and equipment | 22 | ||
Goodwill | 2,726 | ||
Intangible assets | 4,500 | ||
Total Assets | 89,059 | ||
Claims liabilities | 30,731 | ||
Unearned premiums | 22,976 | ||
Accounts payable and other liabilities | 11,231 | ||
Deferred tax liabilities, net | 922 | ||
Total Liabilities | 65,860 | ||
Net assets acquired | $ 23,199 |
Investments Schedule of Investment Income (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Investments [Abstract] | ||||
Interest income | $ 939 | $ 933 | $ 2,858 | $ 2,427 |
Dividends | 0 | 0 | 0 | 42 |
Income from other investments | 676 | 467 | 972 | 969 |
Investment expenses | (212) | (220) | (662) | (547) |
Net investment income | $ 1,403 | $ 1,180 | $ 3,168 | $ 2,891 |
Investments Schedule of Gross Realized Gains (Losses) on Sales (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Schedule of Available-for-sale Securities [Line Items] | ||||
Available-for-sale securities, gross realized gains | $ 633 | $ 136 | $ 1,139 | $ 413 |
Available-for-sale securities, gross realized losses | (3) | (45) | (115) | (141) |
Available-for-sale securities, proceeds from sales | 19,400 | 11,200 | 48,600 | 19,200 |
Fixed income securities | ||||
Schedule of Available-for-sale Securities [Line Items] | ||||
Available-for-sale securities, gross realized gains | 633 | 135 | 1,139 | 343 |
Available-for-sale securities, gross realized losses | (3) | (45) | (115) | (59) |
Equities | ||||
Schedule of Available-for-sale Securities [Line Items] | ||||
Available-for-sale securities, gross realized gains | 0 | 1 | 0 | 70 |
Available-for-sale securities, gross realized losses | $ 0 | $ 0 | $ 0 | $ (82) |
Investments Schedule of Investment Gains (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Gain (Loss) on Investments [Line Items] | ||||
Realized investment gains (losses) | $ 630 | $ 91 | $ 1,024 | $ 272 |
Fixed income securities | ||||
Gain (Loss) on Investments [Line Items] | ||||
Realized investment gains (losses) | 630 | 90 | 1,024 | 284 |
Equities | ||||
Gain (Loss) on Investments [Line Items] | ||||
Realized investment gains (losses) | $ 0 | $ 1 | $ 0 | $ (12) |
Investments Other Investments (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Investments [Abstract] | ||
Other Investments | $ 30,880 | $ 22,937 |
Equity method limited partnership | 23,600 | 22,800 |
Collateral Loans | $ 7,300 | $ 98 |
Investments Collateral (Details) - USD ($) $ in Millions |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Investments [Abstract] | ||
Deposit assets | $ 15.3 | $ 15.8 |
Available-for-sale securities pledged as collateral | $ 5.6 | $ 3.6 |
Income Taxes Components of Income Tax Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||||
Current tax expense | $ 2,613 | $ 2,616 | $ 6,302 | $ 6,306 |
Deferred tax (benefit) expense | (137) | (548) | 1,223 | (383) |
Provision for income taxes for continuing operations | $ 2,476 | $ 2,068 | $ 7,525 | $ 5,923 |
Income Taxes Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Gross deferred tax assets: | ||
Losses carried forward | $ 13,751 | $ 12,656 |
Unpaid claims and unearned premiums | 8,513 | 8,122 |
Tax credits | 662 | 662 |
Investments | 0 | 36 |
Commissions | 1,326 | 1,306 |
Other | 1,660 | 1,457 |
Total gross deferred tax assets | 25,912 | 24,239 |
Gross deferred tax liabilities: | ||
Deferred policy acquisition costs | 4,447 | 3,582 |
Investments | 1,363 | 0 |
Fixed assets | 401 | 401 |
Intangible assets | 1,363 | 1,465 |
Other | 1,730 | 1,625 |
Total gross deferred tax liabilities | 9,304 | 7,073 |
Net deferred tax assets | $ 16,608 | $ 17,166 |
Commitments and Contingencies Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
May 22, 2012 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Commitments and Contingencies Disclosure [Abstract] | |||||
Deferred gain | $ 213 | ||||
Lease term | 5 years | ||||
Gain recognized in period | $ 11 | $ 11 | $ 32 | $ 32 | |
Rent expense | 202 | $ 178 | 560 | $ 533 | |
Subscription agreements for limited liability investments | 8,500 | ||||
Unfunded commitments | $ 3,500 | $ 3,500 |
Commitments and Contingencies Future Minimum Lease Payments (Details) $ in Thousands |
Sep. 30, 2016
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2016 | $ 445 |
2017 | 1,283 |
2018 | 962 |
2019 | 961 |
2020 | 955 |
2021 & Beyond | 1,057 |
Total | $ 5,663 |
Internal Use Software and Office Equipment (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
Dec. 31, 2015 |
Jul. 01, 2015 |
|
Software and Office Equipment [Abstract] | ||||||
Leasehold improvements | $ 520 | $ 520 | $ 507 | |||
Computer equipment | 2,470 | 2,470 | 2,225 | |||
Furniture and other office equipment | 619 | 619 | 593 | |||
Total | 11,687 | 11,687 | 10,936 | |||
Accumulated depreciation | (9,094) | (9,094) | (8,347) | |||
Balance, end of period | 2,593 | 2,593 | 2,589 | |||
Depreciation and amortization expense | 267 | $ 290 | 747 | $ 684 | 966 | |
Property, Plant and Equipment [Line Items] | ||||||
Internal use software | 8,078 | 8,078 | 7,611 | |||
Policy Management Software | ||||||
Property, Plant and Equipment [Line Items] | ||||||
Internal use software | $ 2,100 | |||||
Software amortization | $ 113 | $ 92 | $ 309 | $ 92 | $ 186 |
Reinsurance Ceded (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Underwriting Policy and Reinsurance Ceded [Abstract] | ||||
Direct premiums written | $ 60,721 | $ 65,185 | $ 170,101 | $ 156,506 |
Assumed premiums written | 12 | 130 | 3,010 | 357 |
Ceded premiums written | (8,535) | (13,345) | (35,585) | (27,962) |
Net premiums written | 52,198 | 51,970 | 137,526 | 128,901 |
Direct premiums earned | 54,634 | 50,700 | 161,295 | 130,299 |
Assumed premiums earned | 728 | 129 | 2,210 | 410 |
Ceded premiums earned | (12,111) | (9,163) | (36,699) | (20,572) |
Net premiums earned | 43,251 | 41,666 | 126,806 | 110,137 |
Ceded losses and loss adjustment expenses | 4,321 | 4,859 | 13,443 | 8,691 |
Ceding commissions | $ 3,052 | $ 2,368 | $ 9,284 | $ 4,888 |
Unpaid Claims (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||||
Unpaid claims, beginning of period | $ 112,457 | $ 126,458 | $ 127,011 | $ 102,430 |
Less: reinsurance recoverable | 25,691 | 26,844 | 29,399 | 18,421 |
Net unpaid claims, beginning of period | 86,766 | 99,614 | 97,612 | 84,009 |
Net reserves acquired | 0 | 0 | 0 | 19,396 |
Change in retroactive reinsurance ceded | 417 | 937 | 691 | 1,824 |
Incurred related to: | ||||
Current year | 25,176 | 25,632 | 74,326 | 66,371 |
Prior years | (15) | (644) | 349 | (1,922) |
Incurred total | 25,161 | 24,988 | 74,675 | 64,449 |
Paid related to: | ||||
Current year | 12,099 | 9,373 | 25,839 | 19,830 |
Prior years | 22,338 | 15,980 | 69,232 | 49,662 |
Paid total | 34,437 | 25,353 | 95,071 | 69,492 |
Net unpaid claims, end of period | 77,907 | 100,186 | 77,907 | 100,186 |
Add: reinsurance recoverable | 22,412 | 23,554 | 22,412 | 23,554 |
Unpaid claims, end of period | $ 100,319 | $ 123,740 | $ 100,319 | $ 123,740 |
Other Employee Benefit Plans Defined Contribution Plan (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Other Employee Benefit Plans [Abstract] | ||||
Percentage of employee contribution, matched by employer | 100.00% | |||
Percent of an employees annual earnings employer will match | 2.50% | |||
Percent of additional contributions made by employees that employer will match | 50.00% | |||
Defined contribution plan employer additional contribution matching percent of employees gross pay | 2.50% | |||
Maximum percentage of annual earnings per participant, employer will match | 3.75% | |||
Employee contribution vesting percentage | 100.00% | |||
Employers contribution vesting period | 5 years | |||
Company contributions | $ 111 | $ 74 | $ 328 | $ 225 |
Deferred Policy Acquisition Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Movement Analysis of Deferred Policy Acquisition Costs [Roll Forward] | ||||
Balance, beginning of period | $ 10,235 | $ 8,166 | ||
Acquisition costs deferred | 15,506 | 16,517 | ||
Amortization charged to income | $ 5,013 | $ 4,988 | 13,036 | 13,983 |
Balance, end of period | $ 12,705 | $ 10,700 | $ 12,705 | $ 10,700 |
Note Payable - Debt Outstanding (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Note payable outstanding gross of unamortized issuance costs | $ 19,400 | $ 17,500 |
Unamortized issuance costs | (230) | (281) |
Note payable | 19,170 | 17,219 |
Loan Agreement | American Insurance Acquisition | ||
Line of Credit Facility [Line Items] | ||
Note payable | 17,000 | |
Loan Agreement | American Insurance Acquisition | Revolver | ||
Line of Credit Facility [Line Items] | ||
Note payable outstanding gross of unamortized issuance costs | 2,400 | 2,000 |
Note payable | 2,400 | |
Loan Agreement | American Insurance Acquisition | Draw Amount | ||
Line of Credit Facility [Line Items] | ||
Note payable outstanding gross of unamortized issuance costs | $ 17,000 | $ 15,500 |
Statutory Information (Details) - USD ($) $ in Millions |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Statutory Accounting Practices [Line Items] | ||
Statutory capital and surplus, balance | $ 133.3 | $ 118.5 |
Statutory net written premium amount | 137.5 | 177.8 |
Statutory net income amount | 13.1 | $ 12.7 |
Illinois | ||
Statutory Accounting Practices [Line Items] | ||
Statutory capital and surplus required, minimum | 1.5 | |
Missouri | ||
Statutory Accounting Practices [Line Items] | ||
Statutory capital and surplus required, minimum | 2.4 | |
New York | ||
Statutory Accounting Practices [Line Items] | ||
Statutory capital and surplus required, minimum | $ 3.5 |
Change in Accounting Principle (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets | $ 6,987 | $ 6,694 |
Assets | 407,064 | 411,292 |
Note payable, net | 19,170 | 17,219 |
Liabilities | 260,472 | 281,670 |
Total Liabilities and Shareholders' Equity | $ 407,064 | 411,292 |
Accounting Standards Update 2015-03 | Amounts before ASU 2015-03 application | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets | 6,975 | |
Assets | 411,573 | |
Note payable, net | 17,500 | |
Liabilities | 281,951 | |
Total Liabilities and Shareholders' Equity | 411,573 | |
Accounting Standards Update 2015-03 | Effect of ASU 2015-03 application | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Other assets | (281) | |
Assets | (281) | |
Note payable, net | (281) | |
Liabilities | (281) | |
Total Liabilities and Shareholders' Equity | $ (281) |
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