Delaware
|
001-39392
|
84-4512647
|
(State or other jurisdiction of incorporation)
|
(Commission File Number)
|
(IRS Employer Identification No.)
|
150 Lake Street West
Wayzata, MN
(Address of principal executive offices)
|
55391
(Zip code)
|
☐ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
☐ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
|
Title of each class
|
Trading
Symbol(s)
|
Name of each exchange
on which registered
|
Common stock, par value $0.01 per share
|
TIG
|
The Nasdaq Global Select Market
|
Item 2.02 |
Results of Operations and Financial Condition.
|
Item 5.02
|
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
|
Item 9.01 |
Financial Statements and Exhibits.
|
Exhibit No.
|
Description
|
|
Press release dated August 27, 2020
|
TREAN INSURANCE GROUP, INC.
|
|||
Dated: August 27, 2020
|
By:
|
/s/ Joy N. Edler
|
|
Name:
|
Joy N. Edler | ||
Title:
|
Chief Operating Officer |
• |
Gross written premiums increased by 5.0% to $109.6 million, compared to $104.4 million in the second quarter of 2019
|
• |
Loss ratio of 57.0%, compared to 55.7% in the second quarter of 2019
|
• |
Expense ratio of 38.9% compared to 26.5% in the second quarter of 2019, primarily driven by $1.8 million of additional professional service expenses related to legal, consulting and other IPO and public company readiness efforts, as well
as expenses associated with an increased workforce
|
• |
Combined ratio of 95.9%, primarily driven by the increased expense ratio
|
• |
Net income was $3.7 million; Adjusted net income(1) was $4.8 million
|
• |
Return on equity of 10.3%; Adjusted return on equity(1) of 13.2%
|
• |
Upon completion of the reorganization transactions in connection with the IPO, acquired the remaining 55% interest in Compstar Holding Company LLC (“Compstar”) and now owns 100% of Compstar, the parent of a general agent underwriting
workers’ compensation insurance coverage for California contractors
|
• |
Subsequent to the second quarter, entered into agreement to acquire 7710 Insurance Company and its associated program manager and agency
|
(1) |
Adjusted net income, adjusted return on equity and underwriting income are non-GAAP financial measures. See discussion of “Key Metrics” below.
|
Three Months Ended June 30,
|
Change
|
Percentage
Change
|
Six Months Ended June 30,
|
Change
|
Percentage
Change
|
|||||||||||||||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||||||||||||||||||
Revenues
|
||||||||||||||||||||||||||||||||
Gross written premiums
|
$
|
109,612
|
$
|
104,420
|
$
|
5,192
|
5.0
|
%
|
$
|
217,471
|
$
|
205,954
|
$
|
11,517
|
5.6
|
%
|
||||||||||||||||
Increase in gross unearned premiums
|
(9,265
|
)
|
(1,535
|
)
|
(7,730
|
) |
503.6
|
%
|
(16,638
|
)
|
(12,487
|
)
|
(4,151
|
) |
33.2
|
%
|
||||||||||||||||
Gross earned premiums
|
100,347
|
102,885
|
(2,538
|
)
|
(2.5
|
)%
|
200,833
|
193,467
|
7,366
|
3.8
|
%
|
|||||||||||||||||||||
Ceded earned premiums
|
(78,968
|
)
|
(79,508
|
)
|
540
|
|
(0.7
|
)%
|
(156,995
|
)
|
(150,466
|
)
|
(6,529
|
) |
4.3
|
%
|
||||||||||||||||
Net earned premiums
|
21,379
|
23,377
|
(1,998
|
)
|
(8.5
|
)%
|
43,838
|
43,001
|
837
|
1.9
|
%
|
|||||||||||||||||||||
Net investment income
|
1,524
|
1,570
|
(46
|
)
|
(2.9
|
)%
|
4,796
|
2,857
|
1,939
|
67.9
|
%
|
|||||||||||||||||||||
Net realized capital gains (losses)
|
(4
|
)
|
111
|
(115
|
)
|
(103.6
|
)%
|
3,230
|
723
|
2,507
|
346.7
|
%
|
||||||||||||||||||||
Other revenue
|
1,530
|
1,893
|
(363
|
)
|
(19.2
|
)%
|
5,922
|
5,488
|
434
|
7.9
|
%
|
|||||||||||||||||||||
Total revenue
|
24,429
|
26,951
|
(2,522
|
)
|
(9.4
|
)%
|
57,786
|
52,069
|
5,717
|
11.0
|
%
|
|||||||||||||||||||||
Expenses
|
||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses
|
12,183
|
13,014
|
(831
|
)
|
(6.4
|
)%
|
25,117
|
24,470
|
647
|
2.6
|
%
|
|||||||||||||||||||||
General and administrative expenses
|
8,316
|
6,193
|
2,123
|
34.3
|
%
|
16,476
|
10,162
|
6,314
|
62.1
|
%
|
||||||||||||||||||||||
Interest expense
|
501
|
561
|
(60
|
)
|
(10.7
|
)%
|
962
|
1,185
|
(223
|
)
|
(18.8
|
)%
|
||||||||||||||||||||
Total expenses
|
21,000
|
19,768
|
1,232
|
6.2
|
%
|
42,555
|
35,817
|
6,738
|
18.8
|
%
|
||||||||||||||||||||||
Other income
|
40
|
33
|
7
|
21.2
|
%
|
54
|
126
|
(72
|
)
|
(57.1
|
)%
|
|||||||||||||||||||||
Income before taxes
|
3,469
|
7,216
|
(3,747
|
)
|
(51.9
|
)%
|
15,285
|
16,378
|
(1,093
|
)
|
(6.7
|
)%
|
||||||||||||||||||||
Income tax expense
|
979
|
1,690
|
(711
|
)
|
(42.1
|
)%
|
3,891
|
3,009
|
882
|
29.3
|
%
|
|||||||||||||||||||||
Equity earnings in affiliates, net of tax
|
1,230
|
865
|
365
|
42.2
|
%
|
1,932
|
1,473
|
459
|
31.2
|
%
|
||||||||||||||||||||||
Net income
|
$
|
3,720
|
$
|
6,391
|
$
|
(2,671
|
)
|
(41.8
|
)%
|
$
|
13,326
|
$
|
14,842
|
$
|
(1,516
|
)
|
(10.2
|
)%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(in thousands, except for percentages)
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Key metrics:
|
||||||||||||||||
Underwriting income(1)
|
$
|
880
|
$
|
4,170
|
$
|
2,245
|
$
|
8,369
|
||||||||
Adjusted net income(1)
|
$
|
4,771
|
$
|
6,934
|
$
|
11,095
|
$
|
15,303
|
||||||||
Loss ratio
|
57.0
|
%
|
55.7
|
%
|
57.3
|
%
|
56.9
|
%
|
||||||||
Expense ratio
|
38.9
|
%
|
26.5
|
%
|
37.6
|
%
|
23.6
|
%
|
||||||||
Combined ratio
|
95.9
|
%
|
82.2
|
%
|
94.9
|
%
|
80.5
|
%
|
||||||||
Return on equity
|
10.3
|
%
|
21.1
|
%
|
19.0
|
%
|
25.9
|
%
|
||||||||
Adjusted return on equity(1)
|
13.2
|
%
|
22.9
|
%
|
15.8
|
%
|
26.7
|
%
|
||||||||
Return on tangible equity(1)
|
10.5
|
%
|
21.6
|
%
|
19.5
|
%
|
26.6
|
%
|
||||||||
Adjusted return on tangible equity(1)
|
13.5
|
%
|
23.4
|
%
|
16.2
|
%
|
27.4
|
%
|
June 30, 2020
|
December 31, 2019
|
|||||||
Assets
|
||||||||
Fixed maturities, available for sale
|
$
|
375,705
|
$
|
337,865
|
||||
Preferred stock, available for sale
|
325
|
343
|
||||||
Common stock, available for sale
|
3,428
|
492
|
||||||
Equity method investments
|
11,693
|
12,173
|
||||||
Total investments
|
391,151
|
350,873
|
||||||
Cash and cash equivalents
|
97,326
|
74,268
|
||||||
Restricted cash
|
7,746
|
1,800
|
||||||
Accrued investment income
|
2,605
|
2,468
|
||||||
Premiums and other receivables
|
75,017
|
62,460
|
||||||
Related party receivables
|
20,385
|
22,221
|
||||||
Reinsurance recoverable
|
334,124
|
307,338
|
||||||
Prepaid reinsurance premiums
|
91,311
|
80,088
|
||||||
Deferred policy acquisition cost, net
|
2,951
|
2,115
|
||||||
Property and equipment, net
|
8,130
|
7,937
|
||||||
Right of use asset
|
5,958
|
—
|
||||||
Deferred tax asset
|
—
|
1,367
|
||||||
Goodwill
|
3,339
|
2,822
|
||||||
Other assets
|
9,889
|
3,277
|
||||||
Total assets
|
$
|
1,049,932
|
$
|
919,034
|
||||
|
||||||||
Liabilities
|
||||||||
Unpaid loss and loss adjustment expenses
|
$
|
442,500
|
$
|
406,716
|
||||
Unearned premiums
|
120,427
|
103,789
|
||||||
Funds held under reinsurance agreements
|
165,371
|
163,445
|
||||||
Reinsurance premiums payable
|
54,030
|
53,620
|
||||||
Accounts payable and accrued expenses
|
73,325
|
14,995
|
||||||
Lease liability
|
6,186
|
—
|
||||||
Income taxes payable
|
3,999
|
714
|
||||||
Deferred tax liability
|
12
|
—
|
||||||
Long-term debt
|
39,698
|
29,040
|
||||||
Total liabilities
|
905,548
|
772,319
|
||||||
Redeemable preferred stock
|
5,100
|
5,100
|
||||||
Members' equity
|
||||||||
Members' equity
|
78,478
|
78,438
|
||||||
Additional paid-in capital
|
16,542
|
17,995
|
||||||
Retained earnings
|
35,561
|
40,361
|
||||||
Accumulated other comprehensive income
|
8,703
|
4,821
|
||||||
Total members' equity
|
139,284
|
141,615
|
||||||
Total liabilities and members' equity
|
$
|
1,049,932
|
$
|
919,034
|
(in thousands, except percentages)
|
Three Months Ended June 30,
|
Percentage
Change
|
||||||||||
2020
|
2019
|
|||||||||||
Net income
|
$
|
3,720
|
$
|
6,391
|
(41.8
|
)%
|
||||||
Income tax expense
|
979
|
1,690
|
(42.1
|
)%
|
||||||||
Equity earnings in affiliates, net of tax
|
(1,230
|
)
|
(865
|
)
|
42.2
|
%
|
||||||
Income before taxes
|
3,469
|
7,216
|
(51.9
|
)%
|
||||||||
Other revenue
|
(1,530
|
)
|
(1,893
|
)
|
(19.2
|
)%
|
||||||
Net investment income
|
(1,524
|
)
|
(1,570
|
)
|
(2.9
|
)%
|
||||||
Net realized capital (gains) losses
|
4
|
(111
|
)
|
(103.6
|
)%
|
|||||||
Interest expense
|
501
|
561
|
(10.7
|
)%
|
||||||||
Other income
|
(40
|
)
|
(33
|
)
|
21.2
|
%
|
||||||
Underwriting income
|
$
|
880
|
$
|
4,170
|
(78.9
|
)%
|
(in thousands, except percentages)
|
Six Months Ended June 30, |
Percentage
Change
|
||||||||||
2020
|
2019
|
|||||||||||
Net income
|
$
|
13,326
|
$
|
14,842
|
(10.2
|
)%
|
||||||
Income tax expense
|
3,891
|
3,009
|
29.3
|
%
|
||||||||
Equity earnings in affiliates, net of tax
|
(1,932
|
)
|
(1,473
|
)
|
31.2
|
%
|
||||||
Income before taxes
|
15,285
|
16,378
|
(6.7
|
)%
|
||||||||
Other revenue
|
(5,922
|
)
|
(5,488
|
)
|
7.9
|
%
|
||||||
Net investment income
|
(4,796
|
)
|
(2,857
|
)
|
67.9
|
%
|
||||||
Net realized capital gains
|
(3,230
|
)
|
(723
|
)
|
346.7
|
%
|
||||||
Interest expense
|
962
|
1,185
|
(18.8
|
)%
|
||||||||
Other income
|
(54
|
)
|
(126
|
)
|
(57.1
|
)%
|
||||||
Underwriting income
|
$
|
2,245
|
$
|
8,369
|
(73.2
|
)%
|
(in thousands, except percentages)
|
Three Months Ended June 30,
|
Percentage
Change
|
||||||||||
2020
|
2019
|
|||||||||||
Net income
|
$
|
3,720
|
$
|
6,391
|
(41.8
|
)%
|
||||||
Expenses associated with Altaris management fee, including cashbonuses paid to unit holders
|
442
|
441
|
0.2
|
%
|
||||||||
Expenses associated with IPO and other one-time legal and consulting expenses
|
788
|
215
|
266.5
|
%
|
||||||||
Expenses related to debt issuance costs
|
135
|
25
|
440.0
|
%
|
||||||||
Total adjustments
|
1,365
|
681
|
100.4
|
%
|
||||||||
Tax impact of adjustments
|
(314
|
)
|
(138
|
)
|
127.5
|
%
|
||||||
Adjusted net income
|
$
|
4,771
|
$
|
6,934
|
(31.2
|
)%
|
(in thousands, except percentages)
|
Six Months Ended June 30,
|
Percentage
Change
|
||||||||||
2020
|
2019
|
|||||||||||
Net income
|
$
|
13,326
|
$
|
14,842
|
(10.2
|
)%
|
||||||
Expenses associated with Altaris management fee, including cash bonuses paid to unit holders
|
883
|
882
|
0.1
|
%
|
||||||||
Expenses associated with IPO and other one-time legal and consulting expenses
|
1,200
|
442
|
171.5
|
%
|
||||||||
Expenses related to debt issuance costs
|
135
|
50
|
170.0
|
%
|
||||||||
FMV adjustment of remaining investment in subsidiary
|
(2,000
|
)
|
—
|
100.0
|
%
|
|||||||
Net gain on purchase & disposal of affiliates
|
(3,115
|
)
|
(634
|
)
|
391.3
|
%
|
||||||
Total adjustments
|
(2,897
|
)
|
740
|
(491.5
|
)%
|
|||||||
Tax impact of adjustments
|
666
|
(279
|
)
|
(338.7
|
)%
|
|||||||
Adjusted net income
|
$
|
11,095
|
$
|
15,303
|
(27.5
|
)%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(in thousands, except percentages)
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Adjusted return on equity calculation:
|
||||||||||||||||
Numerator: adjusted net income
|
$
|
4,771
|
$
|
6,934
|
$
|
11,095
|
$
|
15,303
|
||||||||
Denominator: average members' equity
|
144,733
|
121,292
|
140,450
|
114,742
|
||||||||||||
Adjusted return on equity
|
13.2
|
%
|
22.9
|
%
|
15.8
|
%
|
26.7
|
%
|
||||||||
Return on equity
|
10.3
|
%
|
21.1
|
%
|
19.0
|
%
|
25.9
|
%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(in thousands, except percentages)
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Return on tangible equity calculation:
|
||||||||||||||||
Numerator: net income
|
$
|
3,720
|
$
|
6,391
|
$
|
13,326
|
$
|
14,842
|
||||||||
Denominator:
|
||||||||||||||||
Average members' equity
|
144,733
|
121,292
|
140,450
|
114,742
|
||||||||||||
Less: average goodwill and other intangible assets
|
3,453
|
3,006
|
3,459
|
3,012
|
||||||||||||
Average tangible members' equity
|
141,280
|
118,286
|
136,991
|
111,730
|
||||||||||||
Return on tangible equity
|
10.5
|
%
|
21.6
|
%
|
19.5
|
%
|
26.6
|
%
|
||||||||
Return on equity
|
10.3
|
%
|
21.1
|
%
|
19.0
|
%
|
25.9
|
%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2020
|
2019
|
2020
|
2019
|
|||||||||||||
Adjusted return on tangible equity calculation:
|
||||||||||||||||
Numerator: adjusted net income
|
$
|
4,771
|
$
|
6,934
|
$
|
11,095
|
$
|
15,303
|
||||||||
Denominator: average tangible members' equity
|
141,280
|
118,286
|
136,991
|
111,730
|
||||||||||||
Adjusted return on tangible equity
|
13.5
|
%
|
23.4
|
%
|
16.2
|
%
|
27.4
|
%
|
||||||||
Return on equity
|
10.3
|
%
|
21.1
|
%
|
19.0
|
%
|
25.9
|
%
|