UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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For the Quarterly Period ended SeptemberJune 30, 2021.2022.
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For the transition period from _______________ to ________________..
Commission file number 000-28249
AMERINST INSURANCE GROUP, LTD.
(Exact Name of Registrant as Specified in its Charter)
Bermuda | 98-0207447 |
(State or other jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
c/o Davies Captive Management Limited 25 Church Street, Continental Building P.O. Box HM 1601,
| HMGX |
(Address of Principal Executive Offices) | (Zip Code) |
(441) 295-2185
(Telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “accelerated filer,” “large accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of The Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒.
Securities registered pursuant to Section 12(b) of the Act: None.
As of NovemberAugust 1, 2021,2022, the Registrant had 995,253 common shares, $1.00 par value per share, outstanding.
Introductory Note
Caution Concerning Forward-Looking Statements
Certain statements contained in this Form 10-Q, or otherwise made by our officers, including statements related to our future performance, our outlook for our businesses and respective markets, projections, statements of our management’s plans or objectives, forecasts of market trends and other matters, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and contain information relating to us that is based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. The words “expect,” “believe,” “may,” “could,” “should,” “would,” “estimate,” “anticipate,” “intend,” “plan,” “target,” “goal” and similar expressions as they relate to us or our management are intended to identify forward-looking statements. Such statements reflect our management’s current views with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause actual results to differ materially from those reflected in any forward-looking statements. Our actual future results may differ materially from those set forth in our forward-looking statements. Factors that might cause such actual results to differ materially from those reflected in any forward-looking statements include, but are not limited to the factors discussed in detail in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q, as well as:
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• | our continuing ability to enter into new agency agreements with other carriers; |
• | changes in the amount of professional liability business accepted by our insurance company partners; |
• | our ability to generate increased revenues and positive earnings in future periods; |
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• | subjection of our non-U.S. companies to regulation and/or taxation in the United States; |
• | a decrease in the level of demand for professional liability insurance or an increase in the supply of professional liability insurance capacity; |
• | our ability to meet the performance goals and metrics set forth in our business plan without a significant depletion of our cash resources while maintaining sufficient capital levels and liquidity levels; |
• | the effects of security breaches, cyber-attacks or computer viruses that may affect our computer systems or those of our customers, third-party managers, and service providers; |
• | increased competitive pressures, including the consolidation and increased globalization of insurance providers; |
• | increased or decreased rate pressure on premiums; |
• | the successful integration of businesses we may acquire or new business ventures we may start; |
• | the magnitude and duration of the ongoing COVID-19 pandemic and its impact on the global economy and financial market conditions and our business; |
• | the effects of natural disasters, harsh weather conditions, widespread health emergencies, military conflict, terrorism, civil unrest or other geopolitical and unpredictable events; |
• | climate change and related legislative and regulatory initiatives may result in operational changes and expenditures that could significantly impact our business; |
• | changes in Bermuda law or regulation or the political stability of Bermuda; |
• | compliance with and changes in the legal or regulatory environments in which we operate; and |
• | other risks, including those risks identified in any of our other filings with the Securities and Exchange Commission. |
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s analysis only as of the date they are made. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Part I—FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERINST INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, expressed in U.S. dollars)
As of | As of | |||||||
ASSETS | ||||||||
Investments: | ||||||||
Fixed maturity investments, at fair value (amortized cost $0 and $19,761,231) | $ | 0 | $ | 20,344,127 | ||||
TOTAL INVESTMENTS | 0 | 20,344,127 | ||||||
Cash and cash equivalents | 3,982,010 | 5,732,110 | ||||||
Restricted cash and cash equivalents | 25,552,236 | 4,964,126 | ||||||
Assumed reinsurance premiums receivable | 0 | 2,221,664 | ||||||
Accrued investment income | 0 | 147,975 | ||||||
Property and equipment | 950,251 | 1,098,420 | ||||||
Deferred income taxes | 1,654,000 | 1,614,000 | ||||||
Deferred policy acquisition costs | 0 | 724,509 | ||||||
Prepaid expenses and other assets | 1,078,604 | 1,476,187 | ||||||
TOTAL ASSETS | $ | 33,217,101 | $ | 38,323,118 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
LIABILITIES | ||||||||
Unpaid losses and loss adjustment expenses | $ | 41,284 | $ | 20,936,677 | ||||
Unearned premiums | 0 | 4,622,666 | ||||||
Assumed reinsurance payable | 26,076,114 | 3,175,098 | ||||||
Accrued expenses and other liabilities | 2,543,502 | 3,689,620 | ||||||
TOTAL LIABILITIES | $ | 28,660,900 | $ | 32,424,061 | ||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common shares, $1 par value, 2021 and 2020: 2,000,000 shares authorized, 995,253 issued and outstanding | $ | 995,253 | $ | 995,253 | ||||
Additional paid-in-capital | 6,287,293 | 6,287,293 | ||||||
Retained earnings | 6,546,151 | 7,250,194 | ||||||
Accumulated other comprehensive income | 0 | 582,896 | ||||||
Shares held by Subsidiary (375,861 and 374,141 shares) at cost | (9,272,496 | ) | (9,216,579 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 4,556,201 | 5,899,057 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 33,217,101 | $ | 38,323,118 | ||||
As of June 30, 2022 | As of December 31, 2021 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 2,152,653 | $ | 3,477,714 | ||||
Property and equipment (Note 2) | 785,680 | 898,560 | ||||||
Deferred income taxes | 1,140,000 | 1,059,000 | ||||||
Prepaid expenses and other assets (Note 3) | 939,333 | 1,091,815 | ||||||
TOTAL ASSETS | $ | 5,017,666 | $ | 6,527,089 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
LIABILITIES | ||||||||
Accrued expenses and other liabilities (Note 4) | $ | 1,962,368 | $ | 2,860,876 | ||||
TOTAL LIABILITIES | $ | 1,962,368 | $ | 2,860,876 | ||||
COMMITMENTS AND CONTINGENCIES | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common shares, $1 par value, 2022 and 2021: 2,000,000 shares authorized, 995,253 issued and outstanding | $ | 995,253 | $ | 995,253 | ||||
Additional paid-in-capital | 6,287,293 | 6,287,293 | ||||||
Retained earnings | 5,045,248 | 5,656,163 | ||||||
Shares held by Subsidiary (375,861 shares) at cost | (9,272,496 | ) | (9,272,496 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 3,055,298 | 3,666,213 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 5,017,666 | $ | 6,527,089 | ||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
AMERINST INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS, COMPREHENSIVE LOSS(LOSS) INCOME
AND RETAINED EARNINGS
(Unaudited, expressed in U.S. dollars)
Nine Months | Nine Months | Three Months | Three Months | Six Months | Six Months | Three Months | Three Months | |||||||||||||||||||||||||
REVENUE | ||||||||||||||||||||||||||||||||
Net premiums earned | $ | 2,581,408 | $ | 8,947,710 | $ | (1,737,803 | ) | $ | 3,437,196 | $ | 0 | $ | 4,319,211 | $ | 0 | $ | 2,248,830 | |||||||||||||||
Commission income | 2,656,532 | 4,542,478 | 808,896 | 1,437,181 | 1,253,344 | 1,847,636 | 475,838 | 814,161 | ||||||||||||||||||||||||
Net investment income | 204,624 | 308,279 | 57,893 | 99,444 | 52 | 146,731 | 21 | 75,742 | ||||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 426,933 | (1,764,300 | ) | 344,852 | 988,562 | |||||||||||||||||||||||||||
Net realized and unrealized gains on investments | 0 | 82,081 | 0 | 51,523 | ||||||||||||||||||||||||||||
TOTAL REVENUE | 5,869,497 | 12,034,167 | (526,162 | ) | 5,962,383 | 1,253,396 | 6,395,659 | 475,859 | 3,190,256 | |||||||||||||||||||||||
LOSSES AND EXPENSES | ||||||||||||||||||||||||||||||||
Losses and loss adjustment expenses | 1,504,764 | 14,078,405 | (1,259,530 | ) | 10,551,676 | 0 | 2,764,294 | 0 | 1,439,250 | |||||||||||||||||||||||
Policy acquisition costs | 1,405,774 | 4,097,754 | 579,317 | 2,058,923 | 0 | 826,457 | 0 | 568,870 | ||||||||||||||||||||||||
Operating and management expenses | 3,699,146 | 5,019,124 | 1,135,526 | 1,592,813 | 1,944,631 | 2,563,620 | 938,833 | 1,302,995 | ||||||||||||||||||||||||
TOTAL LOSSES AND EXPENSES | 6,609,684 | 23,195,283 | 455,313 | 14,203,412 | 1,944,631 | 6,154,371 | 938,833 | 3,311,115 | ||||||||||||||||||||||||
NET LOSS BEFORE TAX | (740,187 | ) | (11,161,116 | ) | (981,475 | ) | (8,241,029 | ) | ||||||||||||||||||||||||
Income tax (benefit) expense | (36,144 | ) | 129,218 | (26,363 | ) | 36,963 | ||||||||||||||||||||||||||
NET LOSS AFTER TAX | $ | (704,043 | ) | $ | (11,290,334 | ) | $ | (955,112 | ) | $ | (8,277,992 | ) | ||||||||||||||||||||
OTHER COMPREHENSIVE (LOSS) INCOME | ||||||||||||||||||||||||||||||||
Net unrealized holding (losses) gains arising during the period | (239,546 | ) | 565,531 | (39,164 | ) | 47,914 | ||||||||||||||||||||||||||
Reclassification adjustment for gains included in net income | (343,350 | ) | (82,461 | ) | (343,350 | ) | 0 | |||||||||||||||||||||||||
OTHER COMPREHENSIVE (LOSS) INCOME | (582,896 | ) | 483,070 | (382,514 | ) | 47,914 | ||||||||||||||||||||||||||
COMPREHENSIVE LOSS | $ | (1,286,939 | ) | $ | (10,807,264 | ) | $ | (1,337,626 | ) | $ | (8,230,078 | ) | ||||||||||||||||||||
NET (LOSS) INCOME BEFORE TAX | (691,235 | ) | 241,288 | (462,974 | ) | (120,859 | ) | |||||||||||||||||||||||||
Income tax benefit | (80,320 | ) | (9,781 | ) | (62,320 | ) | (27,781 | ) | ||||||||||||||||||||||||
NET (LOSS) INCOME AFTER TAX | $ | (610,915 | ) | $ | 251,069 | $ | (400,654 | ) | $ | (93,078 | ) | |||||||||||||||||||||
OTHER COMPREHENSIVE LOSS | ||||||||||||||||||||||||||||||||
Net unrealized holding losses arising during the period | 0 | (200,382 | ) | 0 | (13,600 | ) | ||||||||||||||||||||||||||
OTHER COMPREHENSIVE LOSS | 0 | (200,382 | ) | 0 | (13,600 | ) | ||||||||||||||||||||||||||
COMPREHENSIVE (LOSS) INCOME | $ | (610,915 | ) | $ | 50,687 | $ | (400,654 | ) | $ | (106,678 | ) | |||||||||||||||||||||
RETAINED EARNINGS, BEGINNING OF PERIOD | $ | 7,250,194 | $ | 21,842,409 | $ | 7,501,263 | $ | 18,830,067 | $ | 5,656,163 | $ | 7,250,194 | $ | 5,445,902 | $ | 7,594,341 | ||||||||||||||||
Net loss | (704,043 | ) | (11,290,334 | ) | (955,112 | ) | (8,277,992 | ) | ||||||||||||||||||||||||
Net (loss) income | (610,915 | ) | 251,069 | (400,654 | ) | (93,078 | ) | |||||||||||||||||||||||||
Dividends | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||
RETAINED EARNINGS, END OF PERIOD | $ | 6,546,151 | $ | 10,552,075 | $ | 6,546,151 | $ | 10,552,075 | $ | 5,045,248 | $ | 7,501,263 | $ | 5,045,248 | $ | 7,501,263 | ||||||||||||||||
Per share amounts | ||||||||||||||||||||||||||||||||
Net loss per share | ||||||||||||||||||||||||||||||||
Basic | $ | (1.14 | ) | $ | (18.04 | ) | $ | (1.54 | ) | $ | (13.23 | ) | $ | (0.99 | ) | $ | 0.40 | $ | (0.65 | ) | $ | (0.15 | ) | |||||||||
Diluted | $ | (1.14 | ) | $ | (18.04 | ) | $ | (1.54 | ) | $ | (13.23 | ) | $ | (0.99 | ) | $ | 0.40 | $ | (0.65 | ) | $ | (0.15 | ) | |||||||||
Dividends | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||||||
Weighted average number of shares outstanding for the entire period | ||||||||||||||||||||||||||||||||
Basic | 620,252 | 625,677 | 619,392 | 625,677 | 619,392 | 620,252 | 619,392 | 625,677 | ||||||||||||||||||||||||
Diluted | 620,252 | 625,677 | 619,392 | 625,677 | 619,392 | 620,252 | 619,392 | 625,677 | ||||||||||||||||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
AMERINST INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited, expressed in U.S. dollars)
As of SeptemberJune 30, 2022
Common | Additional | Retained | Accumulated | Shares | Total | |||||||||||||||||||
BALANCE AT JANUARY 1, 2022 | $ | 995,253 | $ | 6,287,293 | $ | 5,656,163 | $ | 0 | $ | (9,272,496 | ) | $ | 3,666,213 | |||||||||||
Net loss | — | 0 | (210,261 | ) | 0 | 0 | (210,261 | ) | ||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||
Unrealized gain on securities, net of reclassification adjustment | — | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
BALANCE AT MARCH 31, 2022 | $ | 995,253 | $ | 6,287,293 | $ | 5,445,902 | $ | 0 | $ | (9,272,496 | ) | $ | 3,455,952 | |||||||||||
Net loss | — | 0 | (400,654 | ) | 0 | 0 | (400,654 | ) | ||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||
Unrealized gain on securities, net of reclassification adjustment | — | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Purchase of shares by subsidiary, net | — | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
BALANCE AT JUNE 30, 2022 | $ | 995,253 | $ | 6,287,293 | $ | 5,045,248 | $ | 0 | $ | (9,272,496 | ) | $ | 3,055,298 | |||||||||||
As of June 30, 2021
Common | Additional | Retained | Accumulated | Shares | Total | Common | Additional | Retained | Accumulated | Shares | Total | |||||||||||||||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2021 | $ | 995,253 | $ | 6,287,293 | $ | 7,250,194 | $ | 582,896 | $ | (9,216,579 | ) | $ | 5,899,057 | $ | 995,253 | $ | 6,287,293 | $ | 7,250,194 | $ | 582,896 | $ | (9,216,579 | ) | $ | 5,899,057 | ||||||||||||||||||||||
Net income | — | 0 | 344,147 | 0 | 0 | 344,147 | — | 0 | 344,147 | 0 | 0 | 344,147 | ||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized (loss) on securities, net of reclassification adjustment | — | 0 | 0 | (186,782 | ) | 0 | (186,782 | ) | — | 0 | 0 | (186,782 | ) | 0 | (186,782 | ) | ||||||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2021 | $ | 995,253 | $ | 6,287,293 | $ | 7,594,341 | $ | 396,114 | $ | (9,216,579 | ) | $ | 6,056,422 | $ | 995,253 | $ | 6,287,293 | $ | 7,594,341 | $ | 396,114 | $ | (9,216,579 | ) | $ | 6,056,422 | ||||||||||||||||||||||
Net loss | — | 0 | (93,078 | ) | 0 | 0 | (93,078 | ) | — | 0 | (93,078 | ) | 0 | 0 | (93,078 | ) | ||||||||||||||||||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized (loss) on securities, net of reclassification adjustment | — | 0 | 0 | (13,600 | ) | 0 | (13,600 | ) | — | 0 | 0 | (13,600 | ) | 0 | (13,600 | ) | ||||||||||||||||||||||||||||||||
Purchase of shares by subsidiary, net | — | 0 | 0 | 0 | (55,917 | ) | (55,917 | ) | — | 0 | 0 | 0 | (55,917 | ) | (55,917 | ) | ||||||||||||||||||||||||||||||||
BALANCE AT JUNE 30, 2021 | $ | 995,253 | $ | 6,287,293 | $ | 7,501,263 | $ | 382,514 | $ | (9,272,496 | ) | $ | 5,893,827 | $ | 995,253 | $ | 6,287,293 | $ | 7,501,263 | $ | 382,514 | $ | (9,272,496 | ) | $ | 5,893,827 | ||||||||||||||||||||||
Net loss | — | 0 | (955,112 | ) | 0 | 0 | (955,112 | ) | ||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized (loss) on securities, net of reclassification adjustment | — | 0 | 0 | (382,514 | ) | 0 | (382,514 | ) | ||||||||||||||||||||||||||||||||||||||||
BALANCE AT SEPTEMBER 30, 2021 | $ | 995,253 | $ | 6,287,293 | $ | 6,546,151 | $ | 0 | $ | (9,272,496 | ) | $ | 4,556,201 | |||||||||||||||||||||||||||||||||||
As of September30, 2020
Common | Additional | Retained | Accumulated | Shares | Total | |||||||||||||||||||
BALANCE AT JANUARY 1, 2020 | $ | 995,253 | $ | 6,465,776 | $ | 21,842,409 | $ | 103,630 | $ | (9,063,617 | ) | $ | 20,343,451 | |||||||||||
Net loss | — | 0 | (4,477,597 | ) | 0 | 0 | (4,477,597 | ) | ||||||||||||||||
Stock option awards expense | — | (11,955 | ) | 0 | 0 | 0 | (11,955 | ) | ||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||
Unrealized gain on securities, net of reclassification adjustment | — | 0 | 0 | 228,774 | 0 | 228,774 | ||||||||||||||||||
Purchase of shares by subsidiary, net | — | 0 | 0 | 0 | 5,170 | 5,170 | ||||||||||||||||||
BALANCE AT MARCH 31, 2020 | $ | 995,253 | $ | 6,453,821 | $ | 17,364,812 | $ | 332,404 | $ | (9,058,447 | ) | $ | 16,087,843 | |||||||||||
Net income | — | 0 | 1,465,255 | 0 | 0 | 1,465,255 | ||||||||||||||||||
Stock option awards expense | — | 805 | 0 | 0 | 0 | 805 | ||||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||
Unrealized gain on securities, net of reclassification adjustment | — | 0 | 0 | 206,382 | 0 | 206,382 | ||||||||||||||||||
BALANCE AT JUNE 30, 2020 | $ | 995,253 | $ | 6,454,626 | $ | 18,830,067 | $ | 538,786 | $ | (9,058,447 | ) | $ | 17,760,285 | |||||||||||
Net income | — | 0 | (8,277,992 | ) | 0 | 0 | (8,277,992 | ) | ||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||
Unrealized gain on securities, net of reclassification adjustment | — | 0 | 0 | 47,914 | 0 | 47,914 | ||||||||||||||||||
BALANCE AT SEPTEMBER 30, 2020 | $ | 995,253 | $ | 6,454,626 | $ | 10,552,075 | $ | 586,700 | $ | (9,058,447 | ) | $ | 9,580,207 | |||||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
AMERINST INSURANCE GROUP, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, expressed in U.S. dollars)
Nine Months | Nine Months | Six Months | Six Months | |||||||||||||
OPERATING ACTIVITIES | ||||||||||||||||
Net Cash used in Operating Activities | $ | (1,123,906 | ) | $ | (5,225,829 | ) | $ | (1,257,089 | ) | $ | (1,064,717 | ) | ||||
INVESTING ACTIVITIES | ||||||||||||||||
Purchases of property and equipment | (107,520 | ) | (199,728 | ) | (67,972 | ) | (66,595 | ) | ||||||||
Purchases of available-for-sale securities | (5,545,313 | ) | (6,943,373 | ) | 0 | (4,770,313 | ) | |||||||||
Proceeds from sales of available-for-sale securities | 1,684,014 | 14,941,147 | 0 | 0 | ||||||||||||
Proceeds from redemptions of fixed maturity investments | 21,650,652 | 3,082,081 | 0 | 603,125 | ||||||||||||
Proceeds from maturities of fixed maturity investments | 2,336,000 | 1,705,000 | 0 | 2,336,000 | ||||||||||||
Net Cash provided by Investing Activities | 20,017,833 | 12,585,127 | ||||||||||||||
Net Cash (used in) provided by Investing Activities | (67,972 | ) | (1,897,783 | ) | ||||||||||||
FINANCING ACTIVITIES | ||||||||||||||||
Purchase of shares by subsidiary, net | (55,917 | ) | 5,170 | 0 | (55,917 | ) | ||||||||||
Net Cash (used in) provided by Financing Activities | (55,917 | ) | 5,170 | 0 | (55,917 | ) | ||||||||||
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 18,838,010 | 7,364,468 | ||||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | $ | 10,696,236 | $ | 7,759,615 | ||||||||||||
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,325,061 | ) | (3,018,417 | ) | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRCITED CASH AT BEGINNING OF PERIOD | $ | 3,477,714 | $ | 10,696,236 | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 29,534,246 | $ | 15,124,083 | $ | 2,152,653 | $ | 7,677,819 | ||||||||
See the accompanying notes to the unaudited condensed consolidated financial statements.
AMERINST INSURANCE GROUP, LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September June 30, 2021
2022
1. BASIS OF PREPARATION AND CONSOLIDATION
The condensed consolidated financial statements included herein have been prepared by AmerInst Insurance Group, Ltd. (“AmerInst”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “Commission”). These financial statements reflect all adjustments consisting of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations as of the end of and for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany transactions and balances have been eliminated on consolidation. These statements are condensed and do not incorporate all the information required under U.S. GAAP to be included in a full set of financial statements. In these notes, the terms “we”, “us”, “our” or the “Company” refer to AmerInst and its subsidiaries. These condensed statements should be read in conjunction with the audited consolidated financial statements at and for the year ended December 31, 20202021 and notes thereto, included in AmerInst’s Annual Report on Form 10-K for the year then ended.
Commutation and Release Activities
During the third quarter of 2021, AmerInst Insurance Company, Ltd. (“AMIC, Ltd.”), our subsidiary that conducts reinsurance business, entered into a Commutation and Release Agreement (“Commutation Agreement”), effective as of March 31, 2021, with The North River Insurance Company, United States Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (collectively, “C&F”), whereby C&F and AMIC, Ltd. agreed to fully and finally settle and commute all their respective past, present and future obligations and liabilities, known and unknown, under the Reinsurance Agreement (as defined below). In accordance with the Commutation Agreement, in full satisfaction of AMIC Ltd.’s past, present and future obligations and liabilities under the Reinsurance Agreement, an aggregate sum of $26,076,000 was paid by AMIC Ltd. to C&F in October 2021. The entry into the Commutation Agreement by AMIC Ltd. resulted in a net gain of $147,333.
New Accounting Pronouncements
New Accounting Standards Adopted in 20212022
No new accounting standards adopted in 2021.2022.
Accounting Standards Not Yet Adopted
Financial Instruments Credit Losses-Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13, which amends the guidance on impairment of financial instruments and significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The ASU will replace the existing “incurred loss” approach, with an “expected loss” model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount under the existing other than temporary impairment model. The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans. The Company’s insurance premium balances receivables are also more significant financial assets within the scope of ASU 2016-13. The guidance requires financial assets to be presented at the net amount expected to be collected. The tentative effective date for the ASU is January 1, 2023. We do not expect the adoption of this ASU to have a material impact on our consolidated financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment, all associated with Protexure, at June 30, 2022 and December 31,2021 at cost, less accumulated depreciation and amortization, totaled $785,680 and $898,560 respectively as follows:
Cost | Accumulated | Total | ||||||||||
June 30, 2022 | ||||||||||||
Furniture and fixtures | $ | 36,705 | $ | 34,811 | $ | 1,894 | ||||||
Office equipment | 107,392 | 92,510 | 14,822 | |||||||||
Computer equipment | 24,129 | 21,531 | 2,598 | |||||||||
Internal use software | 1,825,397 | 1,059,091 | 766,306 | |||||||||
Total | $ | 1,993,623 | $ | 1,207,943 | $ | 785,680 | ||||||
Cost | Accumulated | Total | ||||||||||
December 31, 2021 | ||||||||||||
Furniture and fixtures | $ | 36,705 | $ | 34,337 | $ | 2,368 | ||||||
Office equipment | 107,392 | 84,992 | 22,400 | |||||||||
Computer equipment | 24,129 | 20,529 | 3,600 | |||||||||
Internal use software | 1,757,425 | 887,233 | 870,192 | |||||||||
Total | $ | 1,925,651 | $ | 1,027,091 | $ | 898,560 | ||||||
2.3. PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets as at June 30, 2022 and December 31,2021 comprise the following:
2022 | 2021 | |||||||
Prepaid expenses and other assets | 138,123 | 171,342 | ||||||
Accounts receivable | 470,606 | 520,117 | ||||||
Policy acquisition costs | 236,364 | 258,996 | ||||||
Building right of use asset | 94,240 | 141,360 | ||||||
| $ | 939,333 | $ | 1,091,815 | |||||
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities as at June 30, 2022 and December 31,2021 comprise the following:
2022 | 2021 | |||||||
Premiums payable | 1,394,941 | 2,143,468 | ||||||
Accounts payable and accrued liabilities | 274,915 | 293,169 | ||||||
Unearned commission income | 84,305 | 176,693 | ||||||
Building lease liability | 98,688 | 136,816 | ||||||
Other liabilities | 109,519 | 110,730 | ||||||
| $ | 1,962,368 | $ | 2,860,876 | |||||
5. INVESTMENTS
DuringIn September 2021, the Company liquidated its entire investment in fixed income securities and equity securities in order to fund its commitment under the C&F Commutation Agreement as discussed further in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The cost or amortized cost, gross unrealized holding gains and losses, and estimated fair value of the Company’s fixed maturity investments, by major security type, and equity securities as of September 30,2021 and December 31,2020 are as follows:
Cost or | Gross | Gross | Estimated | |||||||||||||
September 30, 2021 | ||||||||||||||||
Fixed maturity investments: | ||||||||||||||||
U.S. government agency securities | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Obligations of U.S. states and political subdivisions | 0 | 0 | 0 | 0 | ||||||||||||
Corporate debt securities | 0 | 0 | 0 | 0 | ||||||||||||
Total fixed maturity investments | 0 | 0 | 0 | 0 | ||||||||||||
Equity securities | 0 | 0 | 0 | 0 | ||||||||||||
Total equity securities | 0 | 0 | 0 | 0 | ||||||||||||
Total investments | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
Cost or | Gross | Gross | Estimated | |||||||||||||
December 31, 2020 | ||||||||||||||||
Fixed maturity investments: | ||||||||||||||||
U.S. government agency securities | $ | 2,551,741 | $ | 39,421 | $ | 0 | $ | 2,591,162 | ||||||||
Obligations of U.S. states and political subdivisions | 10,157,542 | 337,695 | 0 | 10,495,237 | ||||||||||||
Corporate debt securities | 7,051,948 | 207,833 | (2,053 | ) | 7,257,728 | |||||||||||
Total fixed maturity investments | 19,761,231 | 584,949 | (2,053 | ) | 20,344,127 | |||||||||||
Total equity securities | 0 | 0 | 0 | 0 | ||||||||||||
Total investments | $ | 19,761,231 | $ | 584,949 | $ | (2,053 | ) | $ | 20,344,127 | |||||||
The following tables summarize the Company’s fixed maturity and equity securities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
12 months or greater | Less than 12 months | Total | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
September 30, 2021 | ||||||||||||||||||||||||
Fixed maturity investments: | ||||||||||||||||||||||||
U.S. government agency securities | $ | 0 | $ | 0 | $ | 0 | $ | — | $ | 0 | $ | 0 | ||||||||||||
Obligations of states and political subdivisions | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Corporate debt securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Total fixed maturity investments | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Equity securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Total equity securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Total investments | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
12 months or greater | Less than 12 months | Total | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized Losses | Estimated | Unrealized Losses | |||||||||||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Fixed maturity investments: | ||||||||||||||||||||||||
U.S. government agency securities | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||||
Obligations of states and political subdivisions | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Corporate debt securities | 0 | 0 | 789,106 | (2,053 | ) | 789,106 | (2,053 | ) | ||||||||||||||||
Total fixed maturity investments | 0 | 0 | 789,106 | (2,053 | ) | 789,106 | (2,053 | ) | ||||||||||||||||
Equity securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Total equity securities | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Total investments | $ | 0 | $ | 0 | $ | 789,106 | $ | (2,053 | ) | $ | 789,106 | $ | (2,053 | ) | ||||||||||
As of September 30, 2021 and December 31,2020, there were NaN and 3 fixed income securities in an unrealized loss position with an estimated fair value of $0 and $789,106, respectively. As of September 30,2021 and December 31,2020, NaN of these fixed income securities had been in an unrealized loss position for 12 months or greater, respectively. As of September 30, 2021 and December 31,2020, NaN of the fixed income securities were considered to be other than temporarily impaired. The Company had the intent to hold these fixed income securities and it was not more likely than not that the Company would have been required to sell these fixed income securities before their fair values recovered above the adjusted cost. The unrealized losses from these fixed income securities were not a result of credit, collateral or structural issues.
Other-Than-Temporary Impairment Process
The Company assessed whether declines in the fair value of its fixed maturity investments classified as available-for-sale represent impairments that are other-than-temporary by reviewing each fixed maturity investment that is impaired and (1) determined if the Company had the intent to sell the fixed maturity investment or if it was more likely than not that the Company will be required to sell the fixed maturity investment before its anticipated recovery; and (2) assessed whether a credit loss existed, that is, where the Company expected that the present value of the cash flows expected to be collected from the fixed maturity investment are less than the amortized cost basis of the investment.
In evaluating credit losses, the Company considered a variety of factors in the assessment of a fixed maturity investment including: (1) the time period during which there has been a significant decline below cost; (2) the extent of the decline below cost and par; (3) the potential for the fixed maturity investment to recover in value; (4) an analysis of the financial condition of the issuer; (5) the rating of the issuer; and (6) failure of the issuer of the fixed maturity investment to make scheduled interest or principal payments.
If we concluded a fixed income investment was other-than-temporarily impaired, we wrote down the amortized cost of the security to fair value, with a charge to net realized investment gains (losses) in the Consolidated Statement of Operations. Gross unrealized losses on the investment portfolio as of September 30,2021 and December 31,2020, relating to none and three fixed maturity securities, amounted to $0 and $2,053, respectively. The unrealized losses on these available for sale fixed maturity securities were not as a result of credit, collateral or structural issues. During the nine months and three months ended September 30,2021,no other-than-temporary impairment charges were recorded.
Fair Value of Investments
Under existing U.S. GAAP, we were required to recognize certain assets at their fair value in our consolidated balance sheets. This included our fixed maturity investments and equity securities. In accordance with the Fair Value Measurements and Disclosures Topic of Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) 820, fair value is(as defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon whether the inputs to the valuation of an asset or liability are observable or unobservable in the market at the measurement date, with quoted market prices being the highest level (Level 1) and unobservable inputs being the lowest level (Level 3)below). A fair value measurement will fall within the level of the hierarchy based on the inputs that are significant to determining such measurement. The three levels are defined as follows:
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At each measurement date, we estimated the fair value of the security using various valuation techniques. We utilized, to the extent available, quoted market prices in active markets or observable market inputs in estimating the fair value of our investments. When quoted market prices or observable market inputs are not available, we utilized valuation techniques that rely on unobservable inputs to estimate the fair value of investments. The following describes the valuation techniques we used to determine the fair value of investments held as of September 30,2021 and December 31,2020 and what level within the fair value hierarchy each valuation technique resides:
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While we obtained pricing from independent pricing services, management was ultimately responsible for determining the fair value measurements for all securities. To ensure fair value measurement was applied consistently and in accordance with U.S. GAAP, we periodically updated our understanding of the pricing methodologies used by the independent pricing services. We also undertook further analysis with respect to prices we believe may not be representative of fair value under current market conditions. Our review process includer, but is not limited to: (i) initial and ongoing evaluation of the pricing methodologies and valuation models used by outside parties to calculate fair value; (ii) quantitative analysis; (iii) a review of multiple quotes obtained in the pricing process and the range of resulting fair values for each security, if available; and (iv) randomly selecting purchased or sold securities and comparing the executed prices to the fair value estimates provided by the independent pricing sources.
There have been no material changes to our valuation techniques from what was used as of December 31,2020. Since the fair value of a security was an estimate of what a willing buyer would pay for such security if we had sold it, we did not know the ultimate value of our securities until they were sold. We believe the valuation techniques utilized provided us with a reasonable estimate of the price that would be received if we were to sell our assets or transfer our liabilities in an orderly market transaction between participants at the measurement date. The following tables show the fair value of the Company’s investments in accordance with ASC 820 as of September 30, 2021 and December 31,2020:
Fair value measurement using: | ||||||||||||||||||||
Carrying | Total fair | Quoted prices | Significant other | Significant | ||||||||||||||||
September 30, 2021 | ||||||||||||||||||||
U.S. government agency securities | $ | 0 | $ | 0 | $ | — | $ | 0 | $ | — | ||||||||||
Obligations of U.S. state and political subdivisions | 0 | 0 | 0 | |||||||||||||||||
Corporate debt securities | 0 | 0 | 0 | |||||||||||||||||
Total fixed maturity investments | 0 | 0 | ||||||||||||||||||
Equity securities | 0 | 0 | 0 | |||||||||||||||||
Total equity securities | 0 | 0 | ||||||||||||||||||
Total investments | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | — | ||||||||||
Fair value measurement using: | ||||||||||||||||||||
Carrying | Total fair | Quoted prices | Significant other | Significant | ||||||||||||||||
December 31, 2020 | ||||||||||||||||||||
U.S. government agency securities | $ | 2,591,162 | $ | 2,591,162 | $ | — | $ | 2,591,162 | $ | — | ||||||||||
Obligations of U.S. state and political subdivisions | 10,495,237 | 10,495,237 | 10,495,237 | |||||||||||||||||
Corporate debt securities | 7,257,728 | 7,257,728 | 7,257,728 | |||||||||||||||||
Total fixed maturity investments | 20,344,127 | 20,344,127 | ||||||||||||||||||
Equity securities | — | — | ||||||||||||||||||
Total equity securities | — | 0 | ||||||||||||||||||
Total investments | $ | 20,344,127 | $ | 20,344,127 | $ | — | $ | 20,344,127 | $ | — | ||||||||||
There were no transfers between Levels 1 and 2 during the nine months ended September 30,2021 and the year ended December 31,2020.
Contractual Maturities
The cost or amortized cost and estimated fair value of fixed maturity investments as of September 30, 2021 and December 31,2020 by contractual maturity are shown below. Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations without penalties.
Amortized | Estimated | |||||||
September 30, 2021 | ||||||||
Due in one year or less | $ | 0 | $ | 0 | ||||
Due after one year through five years | 0 | 0 | ||||||
Due after five years through ten years | 0 | 0 | ||||||
Due after ten years | 0 | 0 | ||||||
Total | $ | 0 | $ | 0 | ||||
Amortized | Estimated | |||||||
December 31, 2020 | ||||||||
Due in one year or less | $ | 2,623,260 | $ | 2,637,533 | ||||
Due after one year through five years | 12,982,049 | 13,388,495 | ||||||
Due after five years through ten years | 3,700,157 | 3,843,880 | ||||||
Due after ten years | 455,765 | 474,219 | ||||||
Total | $ | 19,761,231 | $ | 20,344,127 | ||||
Information on sales and maturity of investments and net unrealized gains (losses) on equity investments during the ninesix months ended SeptemberJune 30, 2022 30,2021and 20202021 are as follows:
September 30, | September 30, | |||||||
Total proceeds on sales of available-for-sale securities | $ | 1,684,014 | $ | 14,941,147 | ||||
Proceeds from redemptions of fixed maturity investments | 21,650,652 | 3,082,081 | ||||||
Total proceeds from maturities of fixed maturity investments | 2,336,000 | 1,705,000 | ||||||
Gross gains on sales | 499,859 | 4,346,483 | ||||||
Gross losses on sales | (72,926 | ) | (1,635,113 | ) | ||||
Net unrealized (losses) gains on equity investments | 0 | (4,475,670 | ) | |||||
Total | $ | 426,933 | $ | (1,764,300 | ) | |||
June 30, | June 30, | |||||||
Total proceeds on sales of available-for-sale securities | $ | 0 | $ | 0 | ||||
Proceeds from redemptions of fixed maturity investments | 0 | 603,125 | ||||||
Total proceeds from maturities of fixed maturity investments | 0 | 2,336,000 | ||||||
Gross gains on sales | 0 | 0 | ||||||
Gross losses on sales | 0 | 0 | ||||||
Net unrealized gains on equity investments | 0 | 82,081 | ||||||
Total | $ | 0 | $ | 82,081 | ||||
Information on sales and maturity of investments and net unrealized gains (losses) on equity investments during the three months ended SeptemberJune 30, 2022 30,2021and 20202021 are as follows:
September 30, | September 30, | |||||||
Total proceeds on sales of available-for-sale securities | $ | 1,684,014 | $ | 12.856,984 | ||||
Proceeds from redemptions of fixed maturity investments | 21,047,547 | (17,931 | ) | |||||
Total proceeds from maturities of fixed maturity investments | 0 | 500,000 | ||||||
Gross gains on sales | 499,859 | 3,516,795 | ||||||
Gross losses on sales | (72,926 | ) | (1,250,195 | ) | ||||
Net unrealized (losses) gains on equity investments | (82,081 | ) | (1,278,038 | ) | ||||
Total | $ | 344,852 | $ | 988,562 | ||||
June 30, | June 30, | |||||||
Total proceeds on sales of available-for-sale securities | $ | 0 | $ | 0 | ||||
Proceeds from redemptions of fixed maturity investments | 0 | 3,125 | ||||||
Total proceeds from maturities of fixed maturity investments | 0 | 1,346,000 | ||||||
Gross gains on sales | 0 | 0 | ||||||
Gross losses on sales | 0 | 0 | ||||||
Net unrealized gains on equity investments | 0 | 51,533 | ||||||
Total | $ | 0 | $ | 51,523 | ||||
Net Investment Income
Major categories of net investment income during the ninesix months ended SeptemberJune 30, 20212022 and 20202021 are summarized as follows:
September 30, 2021 | September 30, | June 30, | June 30, | |||||||||||||
Interest earned: | ||||||||||||||||
Fixed maturity investments | $ | 234,601 | $ | 262,200 | $ | 0 | $ | 168,189 | ||||||||
Short term investments and cash and cash equivalents | 7,237 | 10,859 | 52 | 4,272 | ||||||||||||
Dividends earned | 13,170 | 131,045 | 0 | 6,789 | ||||||||||||
Investment expenses | (50,384 | ) | (95,825 | ) | 0 | (32,519 | ) | |||||||||
Net investment income | $ | 204,624 | $ | 308,279 | $ | 52 | $ | 146,731 | ||||||||
Major categories of net investment income during the three months ended SeptemberJune 30, 2022 30,2021and 20202021 are summarized as follows:
September 30, | September 30, | |||||||
Interest earned: | ||||||||
Fixed maturity investments | $ | 66,412 | $ | 85,634 | ||||
Short term investments and cash and cash equivalents | 2,965 | 578 | ||||||
Dividends earned | 6,381 | 43,060 | ||||||
Investment expenses | (17,865 | ) | (29,828 | ) | ||||
Net investment income | $ | 57,893 | $ | 99,444 | ||||
June 30, | June 30, | |||||||
Interest earned: | ||||||||
Fixed maturity investments | $ | 0 | $ | 83,151 | ||||
Short term investments and cash and cash equivalents | 21 | 3,383 | ||||||
Dividends earned | 0 | 7,008 | ||||||
Investment expenses | 0 | (17,800 | ) | |||||
Net investment income | $ | 21 | $ | 75,742 | ||||
3.6. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
The following table presents a reconciliation of the beginning and ending balances for the liability for unpaid losses and loss adjustment expenses for the ninesix months ended SeptemberJune 30, 2022 and 30,2021:
June 30, | June 30, | |||||||
Liability—beginning of year | $ | 0 | $ | 20,936,677 | ||||
Incurred related to: | ||||||||
Current year | 0 | 2,764,294 | ||||||
Prior years | 0 | 0 | ||||||
Total incurred | 0 | 2,764,294 | ||||||
Paid related to: | ||||||||
Current year | 0 | (210,367 | ) | |||||
Prior years | 0 | (4,891,553 | ) | |||||
Total paid | 0 | (5,101,920 | ) | |||||
Liability—end of period | $ | 0 | $ | 18,599,051 | ||||
During the third quarter of 2021, and 2020:
September 30, | September 30, | |||||||
Liability—beginning of year | $ | 20,936,677 | $ | 13,966,044 | ||||
Incurred related to: | ||||||||
Current year | 1,652,101 | 4,989,087 | ||||||
Prior years | (147,337 | ) | 9,089,318 | |||||
Total incurred | 1,504,764 | 14,078,405 | ||||||
Paid related to: | ||||||||
Current year | (4,267 | ) | (1,392,687 | ) | ||||
Prior years | (22,395,890 | ) | (7,698,845 | ) | ||||
Total paid | (22,400,157 | ) | (9,091,532 | ) | ||||
Liability—end of period | $ | 41,284 | $ | 18,952,917 | ||||
Current year incurred losses for the nine months ended September 30,2021 are derived by multiplying our estimated loss ratioa commutation agreement, effective as of 64.0% and the net premiums earned as at March 31, 2021 (which is the effective date of the“C&F Commutation Agreement,Agreement”), was entered into by and between C&F and AMIC Ltd. (each as discussed furtherdefined in Management’s Discussion and Analysis, of Financial Conditionbelow), whereby C&F and Results of Operations. Prior year incurred losses representAMIC Ltd. agreed to fully and finally settle and commute all their respective past, present and future obligations and liabilities, known and unknown, under the net gain that resulted from AMIC Ltd.’s entry into CommutationReinsurance Agreement as also discussed further(as defined in Management’s Discussion and Analysis, below). In accordance with the C&F Commutation Agreement, in full satisfaction of Financial ConditionAMIC Ltd.’s past, present and Resultsfuture obligations and liabilities under the Reinsurance Agreement, an aggregate sum of Operations.$26,076,000 was paid by AMIC Ltd. to C&F in October 2021.
During the first quarter of 2022, a commutation agreement, effective December 31, 2021 (the “CAMICO Commutation Agreement”), was entered into between CAMICO Mutual Insurance Company (“CAMICO”) and AMIC Ltd., whereby CAMICO and AMIC Ltd. agreed to fully and finally settle and commute all their respective past, present and future obligations and liabilities, known and unknown, under the reinsurance contract between CAMICO and AMIC Ltd. In accordance with the CAMICO Commutation Agreement, in full satisfaction of AMIC Ltd.’s past present and future obligations and liabilities under the reinsurance contract between CAMICO and AMIC Ltd., an aggregate sum of $15,000 was paid by CAMICO to AMIC Ltd. in March 2022.
4.7. SEGMENT INFORMATION
AmerInst has two reportable segments: (1) reinsurance activity,and corporate, previously called the reinsurance segment, through which also includes investmentsthe company provided reinsurance under the now commuted reinsurance agreements, conducted investment operations and conducts other corporate activities and (2) insurance activity, through which the Company offers professional liability solutions to professional service firms under the Agency Agreement with C&F,Agreements, as defined in the “Overview” section below.
The tables below summarize the results of our reportable segments as of and for the ninesix months ended SeptemberJune 30, 2022 30,2021and 2020.2021.
As of and for the Nine Months Ended September 30, 2021 | As of and for the Six Months Ended June 30, 2022 | |||||||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | Insurance | Total | |||||||||||||||||||
Revenues | $ | 3,212,581 | $ | 2,656,916 | $ | 5,869,497 | $ | 52 | $ | 1,253,346 | $ | 1,253,396 | ||||||||||||
Total losses and expenses | 3,814,799 | 2,758,741 | 6,573,540 | |||||||||||||||||||||
Segment income (loss) | (602,218 | ) | (101,825 | ) | (704,043 | ) | ||||||||||||||||||
Total expenses | 322,149 | 1,542,162 | 1,864,311 | |||||||||||||||||||||
Segment loss | (322,099 | ) | (288,816 | ) | (610,915 | ) | ||||||||||||||||||
Identifiable assets | 0 | 950,251 | 950,251 | 0 | 785,680 | 785,680 | ||||||||||||||||||
As of and for the Nine Months Ended September 30, 2020 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
Revenues | $ | 7,487,683 | $ | 4,546,484 | $ | 12,034,167 | ||||||
Total losses and expenses | 19,062,602 | 4,261,899 | 23,324,501 | |||||||||
Segment (loss) income | (11,574,919 | ) | 284,585 | (11,290,334 | ) | |||||||
Identifiable assets | — | 1,107,040 | 1,107,040 | |||||||||
As of and for the Six Months Ended June 30, 2021 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
Revenues | $ | 4,547,677 | $ | 1,847,982 | $ | 6,395,659 | ||||||
Total losses and expenses | 4,257,668 | 1,885,922 | 6,144,590 | |||||||||
Segment income (loss) | 289,009 | (37,940 | ) | 251,069 | ||||||||
Identifiable assets | 0 | 999,337 | 999,337 | |||||||||
The tables below summarize the results of our reportable segments as of and for the three months ended SeptemberJune 30, 2022 30,2021and 2020.2021.
As of and for the Three Months Ended September 30, 2021 | As of and for the Three Months Ended June 30, 2022 | |||||||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | Insurance | Total | |||||||||||||||||||
Revenues | $ | (1,335,096 | ) | $ | 808,934 | $ | (526,162 | ) | $ | 21 | $ | 475,838 | $ | 475,859 | ||||||||||
Total losses and expenses | (443,869 | ) | 872,819 | 428,950 | ||||||||||||||||||||
Segment (loss) income | (891,227 | ) | (63,885 | ) | (955,112 | ) | ||||||||||||||||||
Total expenses | 150,747 | 725,766 | 876,513 | |||||||||||||||||||||
Segment loss | (150,726 | ) | (249,928 | ) | (400,654 | ) | ||||||||||||||||||
Identifiable assets | 0 | 950,251 | 950,251 | 0 | 785,680 | 785,680 | ||||||||||||||||||
As of and for the Three Months Ended September 30, 2020 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
Revenues | $ | 4,524,821 | $ | 1,437,562 | $ | 5,962,383 | ||||||
Total losses and expenses | 12,872,084 | 1,368,291 | 14,240,375 | |||||||||
Segment income | (8,347,263 | ) | 69,271 | (8,277,992 | ) | |||||||
Identifiable assets | 0 | 1,107,040 | 1,107,040 | |||||||||
As of and for the Three Months Ended June 30, 2021 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
Revenues | $ | 2,376,009 | $ | 814,247 | $ | 3,190,256 | ||||||
Total expenses | 2,387,385 | 895,949 | 3,283,334 | |||||||||
Segment loss | (11,376 | ) | (81,702 | ) | (93,078 | ) | ||||||
Identifiable assets | 0 | 999,337 | 999,337 | |||||||||
5.8. STOCK COMPENSATION
Phantom Shares:
Protexure Insurance Agency, Inc. (“Protexure”), a subsidiary of AmerInst, has employment agreements with two key members of senior management, which grant them phantom shares of the Company. Under these agreements, these employees were initially granted an aggregate of 48,762 phantom shares of the Company on the date of their employment, subject to certain vesting requirements. The phantom shares are eligible for phantom dividends payable at the same rate as regular dividends on the Company’s common shares. The phantom dividends may be used only to purchase additional phantom shares with the purchase price of such phantom shares being the net book value of the Company’s actual common shares as of the end of the previous quarter. During the nine months and three months ended September 30,2021,year, 0 phantom shares were granted.
For these two employees, the phantom shares initially granted, as well as any additional shares granted from dividends declared, vested on January 1, 2015. The liability payable to each of these employees under the phantom share agreements is equal to the value of the phantom shares based on the net book value of the Company’s actual common shares at the end of the previous quarter less the value of phantom shares initially granted and is payable in cash upon (i) the participant’s death, termination of employment due to disability, retirement at or after age 65 or resignation for good reason, (ii) termination of the participant by the Company without cause, (iii) termination by Participantthe participant without good reason or (iv) change in control.
During the third quarter of 2021, the death occurred of one former key member of Protexure’s senior management, who had been granted phantom shares. At the date of his death, this former employee held 17,977 phantom shares, which vested on January 1, 2015. Due to the overall decrease in the net book valuecontrol of the Company’s common shares since the grant date of his phantom shares, there is 0 liability payable by the Company to this former employee relating to these phantom shares. The following table provides a reconciliation of the beginning and ending balance of vested phantom shares for the nine months year ended September 30, 2021:Company.
58,426 and 76,403 phantom shares were outstanding at September 30,2021 and December 31,2020, respectively. The following table provides a reconciliation of the beginning and ending balance of vested phantom shares for the nine months year ended September 30, 2021:
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The liability relating to these phantom shares is recalculated quarterly based on the net book value of our common shares at the end of each quarter. As a result of the overall decrease in the net book value of our common shares since the grant dates, we have not recorded any liability relating to these phantom shares at September June 30, 2021.
2022.
Stock Option Plan:
The Company has a nonqualified stock option plan to advance the development, growth and financial condition of the Company. This plan provides incentives through participation in the appreciation of its common stock in order to secure, retain and motivate directors and employees and align such person’s interests with those of its shareholders. A total of 100,000 shares are authorized under the stock option plan.
A summary of the status of the stock option plan as of SeptemberJune 30, 2022 30,2021is as follows:
Vested | Weighted | Non-vested | Weighted | Total | Weighted | Vested | Weighted | Non-vested | Weighted | Total | Weighted | |||||||||||||||||||||||||||||||||||||
Outstanding—January 1, 2021 | 25,300 | $ | 28.40 | 19,700 | $ | 28.71 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Outstanding—January 1, 2022 | 34,200 | $ | 28.43 | 10,800 | $ | 28.86 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Granted | — | — | 0 | 0 | — | — | — | — | 0 | 0 | — | — | ||||||||||||||||||||||||||||||||||||
Forfeited | — | — | 0 | 0 | — | — | — | — | 0 | 0 | — | — | ||||||||||||||||||||||||||||||||||||
Exercised | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Vested | 8,400 | 28.42 | (8,400 | ) | 28.42 | — | — | 8,400 | 28.42 | (8,400 | ) | 28.42 | — | — | ||||||||||||||||||||||||||||||||||
Outstanding—September 30, 2021 | 33,700 | $ | 28.41 | 11,300 | $ | 28.92 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Outstanding—June 30, 2022 | 42,600 | $ | 28.43 | 2,400 | $ | 30.40 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Options exercisable at year end | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Weighted average fair value of options per share granted during the year | — | — | $ | — | — | $ | — | — | — | — | $ | — | — | $ | — | — | ||||||||||||||||||||||||||||||||
Remaining contractual life (years) | 1.5 | 1.7 | 1.5 | 0.7 | 1.8 | 0.8 | ||||||||||||||||||||||||||||||||||||||||||
A summary of the status of the stock option plan as of December 31, 20202021 is as follows:
Vested | Weighted | Non-vested | Weighted | Total | Weighted | Vested | Weighted | Non-vested | Weighted | Total | Weighted | |||||||||||||||||||||||||||||||||||||
Outstanding—January 1, 2020 | 16,400 | $ | 28.34 | 28,600 | $ | 28.65 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Outstanding—January 1, 2021 | 25,300 | $ | 28.40 | 19,700 | $ | 28.71 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Granted | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Forfeited | — | — | 0 | 0 | — | — | — | — | 0 | 0 | — | — | ||||||||||||||||||||||||||||||||||||
Exercised | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Vested | 8,900 | 28.52 | (8,900 | ) | 28.52 | — | — | 8,900 | 28.52 | (8,900 | ) | 28.52 | — | — | ||||||||||||||||||||||||||||||||||
Outstanding—December 31, 2020 | 25,300 | $ | 28.40 | 19,700 | $ | 28.71 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Outstanding—December 31, 2021 | 34,200 | $ | 28.43 | 10,800 | $ | 28.86 | 45,000 | $ | 28.54 | |||||||||||||||||||||||||||||||||||||||
Options exercisable at year end | — | 0 | — | — | — | — | — | 0 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Weighted average fair value of options per share granted during the year | — | — | $ | — | — | $ | — | — | — | — | $ | — | — | $ | — | — | ||||||||||||||||||||||||||||||||
Remaining contractual life (years) | 2.2 | 2.3 | 2.3 | 1.2 | 1.4 | 1.3 | ||||||||||||||||||||||||||||||||||||||||||
The Company accounts for these options in accordance with U.S. GAAP, which requires that the fair value of the equity awards be recognized as compensation expense over the period during which the employee is required to provide service in exchange for such an award. The Company is amortizing compensation expense over the vesting period, or five years. The Company recognized $0 and $(11,150) of compensation expense for stock options for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively.
6. SUBSEQUENT EVENT
Subsequent to September 30, 2021, Protexure and C&F signed an addendum terminating the Agency Agreement effective March 31, 2022. Under the terms of the addendum, Protexure will be permitted to issue new and renewal professional liability policies on C&F paper with effective dates no later than March 31, 2022. The Company is currently in discussions with other carriers with a view to entering into other agency arrangements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s discussion and analysis (“MD&A”) provides supplemental information, which sets forth the major factors that have affected our financial condition and results of operation and should be read in conjunction with our condensed consolidated financial statements and notes thereto included in this Form 10-Q.
Certain statements contained in this Form 10-Q, including this MD&A section, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, and contain information relating to us that is based on the beliefs of our management as well as assumptions made by, and information currently available to, our management. The words “expect,” “believe,” “may,” “could,” “should,” “would,” “estimate,” “anticipate,” “intend,” “plan,” “target,” “goal” and similar expressions as they relate to us or our management are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and uncertainties. Our actual future results may differ materially from those set forth in our forward-looking statements. Please see the Introductory Note and Item 1A “Risk Factors” of our 20202021 Annual Report on Form 10-K, as updated in our subsequent quarterly reports filed on Form 10-Q, and in our other filings made from time to time with the Commission after the date of this report for a discussion of factors that could cause our actual results to differ materially from those in the forward-looking statements. However, the risk factors listed in Item 1A “Risk Factors” of our 20202021 Annual Report on Form 10-K or discussed in this Quarterly Report on Form 10-Q should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect our management’s analysis only as of the date they are made. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
The following discussion addresses our financial condition and results of operations for the periods and as of the dates indicated.
OVERVIEW
Unless otherwise indicated by the context in this quarterly report, we refer to AmerInst Insurance Group, Ltd. and its subsidiaries as the “Company,” “AmerInst,” “we” or “us.” “AMIC Ltd.” means AmerInst’s wholly owned subsidiary, AmerInst Insurance Company, Ltd. “Protexure” means Protexure Insurance Agency, Inc., a Delaware corporation and wholly owned subsidiary of AmerInst Mezco, Ltd. which is a wholly owned subsidiary of AmerInst. Our principal offices are c/o Davies Captive Management Limited, 25 Church Street, Continental Building, P.O. Box HM 1601, Hamilton, Bermuda, HM GX.
AmerInst Insurance Group, Ltd. is a Bermuda holding company formed in 1998 that provides insurance protection for professional service firms and engages in investment activities.firms. AmerInst has two reportable segments: (1) reinsurance activity,and corporate, previously called the reinsurance segment, through which includes investmentsthe company provided reinsurance under the now commuted reinsurance agreements, conducted investment operations and conducts other corporate activities and (2) insurance activity, through which the Company offers professional liability solutions to professional service firms.firms under the Agency Agreements. The revenues of the reinsurance and corporate activity reportable segment and the insurance activity reportable segment were $3,212,581$50 and $2,656,916,$1,253,346, respectively, for the ninesix months ended SeptemberJune 30, 20212022 compared to $7,487,683$4,547,677 and $4,546,484,$1,847,982, respectively, for the ninesix months ended SeptemberJune 30, 2020.2021. The revenues for both reportable segments were derived from business operations in the United States other than interest income on bank accounts maintained in Bermuda.
Agency AgreementAgreements with C&F and ISMIE
On September 25, 2009, Protexure entered into an agency agreement (the “Agency“C&F Agency Agreement”) with The North River Insurance Company, United States Fire Insurance Company, Crum & Forster Indemnity Company, Crum and Forster Insurance Company, and Crum & Forster Specialty Insurance Company (collectively, “C&F”) pursuant to which C&F appointed Protexure as its exclusive agent for the purposes of soliciting, underwriting, quoting, binding, issuing, cancelling, non-renewing and endorsing accountants’ professional liability and lawyers’ professional liability insurance coverage in all 50 states of the United States and the District of Columbia. The initial term of the C&F Agency Agreement was for four years with automatic one-year renewals thereafter. The C&F Agency Agreement automatically renewed on September 25, 2021.
In October 2020, C&F advised us to cease writing business in eight states under the Agency Agreement. We are currently brokering business with alternative carriers to write policies impacted by this directive.
In October 2021, C&F and Protexure signed an addendum to the C&F Agency Agreement which terminates the C&F Agency Agreement effective March 31, 2022. Under the terms of the signed addendum, Protexure will bewas permitted to issue new and renewal professional liability policies on behalf of C&F paper with effective dates no later than March 31, 2022. We
Effective January 1, 2022, Protexure entered into a Managing General Agency Agreement (the “ISMIE Agency Agreement”) with Amwins Specialty Casualty Solutions, LLC. for policies written by ISMIE Mutual Insurance Company (“ISMIE”). Protexure will transition the lawyers and accountants’ professional liability policies previously written with C&F to ISMIE. Certain policies will also be written by the Hanover Insurance Company. The C&F Agency Agreement and the ISMIE Agency Agreement are currently in discussions with other carriers with a viewreferred to entering into other agency arrangements. herein as, collectively, the “Agency Agreements.”
Reinsurance Agreement
We conduct ourpreviously conducted reinsurance business through AMIC Ltd., our subsidiary, which iswas a registered insurer in Bermuda. On September 25, 2009, AMIC Ltd. entered into a professional liability quota share agreement with C&F (the “Reinsurance Agreement”) pursuant to which C&F agreed to cede, and AMIC Ltd. agreed to accept as reinsurance, a 50% quota share of C&F’s liability under insurance written by Protexure on behalf of C&F and classified by C&F as accountants’ professional liability and lawyers’ professional liability, subject to AMIC Ltd.’s surplus limitations. Policies written by insurers other than C&F arewere not subject to the 50% quota share reinsurance to AMIC Ltd. The term of the Reinsurance Agreement iswas continuous and maycould be terminated by either party upon at least 120 days’ prior written notice to the other party. Following the commutation of all of AMIC’s reinsurance business and the decision by the Company’s board of directors not to resume reinsurance operations through AMIC, the Company made an application to the BMA to cancel AMIC’s insurance license. Effective May 17, 2022 AMIC Ltd.’s Class 3A insurance license was cancelled by the Bermuda Monetary Authority.
During the third quarter of 2021, C&F and AMIC Ltd. entered into the C&F Commutation Agreement, which became effective as of March 31, 2021, was entered into by and between C&F and AMIC, Ltd., whereby C&F and AMIC Ltd. agreed to fully and finally settle and commute all their respective past, present and future obligations and liabilities, known and unknown, under the Reinsurance Agreement. In accordance with the C&F Commutation Agreement, in full satisfaction of AMIC Ltd.’s past, present and future obligations and liabilities under the Reinsurance Agreement, an aggregate sum of $26,076,000 was paid by AMIC Ltd. to C&F in October 2021.
Historical Relationship with CAMICO
The entryFrom June 1, 2005 through May 31, 2009, we were a party to a reinsurance contract with CAMICO Mutual Insurance Company (“CAMICO”), a California-based writer of accountants’ professional liability business.
We decided not to renew the CAMICO contract and permitted the contract to expire pursuant to its terms on May 31, 2009. We remained potentially liable for claims related to coverage through May 31, 2009.
During the first quarter of 2022, CAMICO and AMIC Ltd. entered into the CAMICO Commutation Agreement, resultedwhich became effective December 31, 2021, whereby CAMICO and AMIC Ltd. agreed to fully and finally settle and commute all their respective past, present and future obligations and liabilities, known and unknown under the reinsurance contract between CAMICO and AMIC Ltd. In accordance with the CAMICO Commutation Agreement, in a net gainfull satisfaction of $147,333. This amount is includedAMIC Ltd.’s past present and future obligations and liabilities under the reinsurance contract between CAMICO and AMIC Ltd., an aggregate sum of $15,000 was paid by CAMICO to AMIC Ltd. in losses and loss adjustment expenses in the Condensed Consolidated Statement of Operations.March 2022.
Third-party Managers and Service Providers
Davies Captive Management Limited provides the day-to-day services necessary for the administration of our business. Our agreement with Davies Captive Management Limited renewed for one year beginning January 1, 20212022 and ending December 31, 2021.2022. Mr. Thomas R. McMahon, our Treasurer and Chief Financial Officer, is an officer, director, and employee of Davies Captive Management Limited.
Tower Wealth Managers, Inc. of Kansas City, Missouri, provided portfolio management of fixed income and equity securities and directs our investments pursuant to guidelines approved by us. We have retained Oliver Wyman, an independent casualty actuarial consulting firm, to render advice regarding actuarial matters.
RESULTS OF OPERATIONS
NineSix months ended SeptemberJune 30, 20212022 compared to ninesix months ended SeptemberJune 30, 20202021
We recorded a net loss of $704,043$610,915 for the ninesix months ended SeptemberJune 30, 20212022 compared to a net lossincome of $11,290,334$50,687 for the same period in 2020.2021. The decrease in net loss was mainly attributableincome is due primarily to (i) the decreasea reduction in lossearned premium, partially offset by reductions in losses and loss adjustment expenses of $12,573,641 – from $14,078,405 for the nine months ended September 30, 2020 to $1,504,764 for the nine months ended September 30, 2021. (ii) the increaseand policy acquisition costs; a reduction in commission income; and reductions in net investment income and net realized and unrealized gains on investments, of $2,191,233 – frompartially offset by a $1,764,300 loss for the nine months ended September 30, 2020 to a $426,933 gain for the nine months ended September 30, 2021 and (iii) the decreasereduction in operating and management expenses of $1,319,978 – from $5,019,124 for the nine months ended September 30, 2020 to $3,699,146 for the nine months ended September 30, 2021, as discussed below. The increase in net income was partially offset by a decrease in commission income of $1,885,946 – from $4,542,478 for the nine months ended September 30, 2020 to $2,656.532 for the nine months ended September 30, 2021, as also discussed below.
Our net premiums earned for the ninesix months ended SeptemberJune 30, 20212022, were $2,581,408$0 compared to $8,947,710$4,319,211 for the nine months ended September 30, 2020,same period in 2021, a decrease of $6,366,302$4,319,211 or 71.2%100%. OurThe net premiums earned during the quarter ended June 30, 2021, were attributable to cessions from C&F under the Reinsurance Agreement. As noted above, theThe Company entered into the C&F Commutation Agreement with C&F effective March 31, 2021. No2021, and no premiums subsequent to that date were ceded pursuant to the Reinsurance Agreement. Our net premium earned for the nine months ended September 30, 2021 represents our net premiums earned during the three months ended March 31, 2021. Our net premium earned for the nine months ended September 30, 2020 represents our net premiums earned during that nine month period.
During the nine monthssix-month period ended SeptemberJune 30, 20212022 and 2020,2021, we recorded commission income under the Agency AgreementAgreements of $2,656,532$1,253,344 and $4,542,478,$1,847,636, respectively, a decrease of $1,885,946$594,292 or 41.5%32.2%. This decrease resulted from the lower volume of premiums written under the Agency AgreementAgreements during the nine months ended Septembersix-month period June 30, 20212022 compared to the nine months ended September 30, 2020,same period in 2021, which is primarily attributableattributed to the October 2020 notice fromdecrease in premiums written under the C&F to cease writing business in eight states under the Agency Agreement. We are currently brokering business with alternative carriers to write policies impacted by this directive.agency agreement.
We recorded net investment income of $204,624$52 during the nine months ended Septembersix-month period June 30, 20212022 compared to $308,279$146,731, for the nine monthssix-months ended SeptemberJune 30, 2020.2021. The decrease in net investment income was mainly attributable toprimarily as the result of the September 2021 liquidation of the Company’s entire investment in fixed income securities and equity securities and also a decrease in dividend income attributable to the decrease in equityinterest earned on short term investments held in our investment portfolio during the nine months ended September 30, 2021 compared to the same period in 2020. The decrease in net investment income was partially offset by a decrease in investment expenses during the nine months ended September 30, 2021 compared to the same period in 2020 as a result of a decrease in investment management fees, which is attributable to the aforementioned decrease in equity investments held in our investment portfolio.and cash and cash equivalents. The annualized investment yield, calculated as total interest and dividends divided by the net average amount of total investments and cash and cash equivalents, was .9%0% for the nine monthssix-months ended September 30, 2021,June 30,2022, compared to the 1.2%1% yield earned for the nine months ended September 30, 2020.same period in 2021.
We recorded net realized and unrealized gains on investments of $426,933$0 during the nine monthssix-month period ended SeptemberJune 30, 20212022 compared to net realized and unrealized losses on investmentsgains of $1,764,300$82,081 during the nine monthssix-month period ended SeptemberJune 30, 2020, an increase2021, a decrease of $2,191,233$82,081 or 124.2%100%. InThe decrease is attributed to the September 2021 liquidation of the Company liquidated itsCompany’s entire investment in fixed income securities to fundand equity securities.
For the commitment to C&F under the Commutation Agreement. A $343,350 net gain was realized on the sale of these investments. The ninesix months ended SeptemberJune 30, 2020 was significantly impacted by the unfavorable market conditions experienced during the period, which was attributable to the impact of the COVID-19 coronavirus pandemic on the worldwide economy.
Our losses and loss adjustment expenses for the nine months ended September 30, 2021 were $1,504,764 compared to $14,078,405 for the nine months ended September 30, 2020, a decrease of $12,573,641 or 89.3%. For the nine months ended September 30, 2021,2022, we derived ourrecorded loss and loss adjustment expenses (i)of $0. For the same period in 2021, we recorded loss and loss adjustment expenses of $2,764,294 derived by multiplying our estimated loss ratio of 64.0% and the net premiums earned under the Reinsurance Agreement through March 31, 2021 of $2,581,408, which is the effective date of the Commutation Agreement and (ii) the recording of a $147,377 gain under the Commutation Agreement.$4,319,211. The significant amount ofdecrease in loss and loss adjustment expenses recorded forexpense was due to the nine months ended September 30, 2020 was attributable to higher than expected loss emergence on the Company’s lawyers’ bookcommutation of business in accident years 2017, 2018 and 2019.under the reinsurance agreements.
We recorded policy acquisition costs of $1,405,774 during$0 in the nine months ended September 30, 2021first two quarters of 2022 compared to $4,097,754$826,457 for the same period in 2020.2021. Policy acquisition costs, which are primarily ceding commissions paid to the ceding insurer, are established as a percentage of premiums earned; therefore, any increase or decrease in premiums earned will result in a similar increase or decrease in policy acquisition costs, subject to any premium deficiency.earned. The policy acquisition costs recorded during the nine months ended Septembersix-month period June 30, 2022 and 2021 represents the net of (i) $955,122, being 37%were 0% and 19% of the net premiums earned under the Reinsurance Agreement as at March 31, 2021 of $2,581,408, which is the effective date of the Commutation Agreement$0 and (ii) the reversal of the established premium deficiency reserve as at December 31, 2020 of $985,876 and the reversal of the remaining deferred policy acquisition cost balance of $1,436,528, with both reversals being attributed to the Commutation Agreement.$4,319,211, respectively. The decrease in policy acquisition costs recorded duringwas attributable to the nine months ended September 30, 2020 represented of (i) $3,310,595, being 37% of the netdecrease in premiums earned, which was due to the commutation of business under the Reinsurance Agreement as at September 30, 2021 of $8,947,710 and (ii) a premium deficiency reserve established at September 30, 2020 in the amount of $787,159.reinsurance agreements.
We incurred operating and management expenses of $3,699,146 during$1,944,631 in the nine months ended Septembersix-month period June 30, 20212022 compared to $5,019,124$2,563,620 for the same period in 2020,2021, a decrease of $1,319,978$618,989 or 26.3%24.1%. The decrease was primarily attributable to (i) decreased board and committee meetings relateddirector’s expenses due to the reduction in physical meetings held during the nine months ended September 30, 2021elimination of retainers paid to directors as the resulta part of travel restrictions imposed in relation to COVID-19,compensation (ii) decreased salaries and related costs associated with Protexure’s reduction in personnel during 20212022 and 2020 in2021in its effort to reduce overall costs and (iii) decreased net commissions paidsub commission expenses resulting from a decrease in sub produced premiums and (iv) reduction in fees to outside brokers in association with the Agency Agreement as a result lower volume of premiums obtained from outside brokers during the nine months ended September 30, 2021 compared to the same period in 2020.third-party managers and service providers.
The tables below summarize the results of the following AmerInst reportable segments: (1) reinsurance activity,and corporate, previously called the reinsurance segment, through which also includes investmentsthe company provided reinsurance under the now commuted reinsurance agreements, conducted investment operations and conducts other corporate activities and (2) insurance activity, through which the Company offers professional liability solutions to professional service firms under the Agency Agreement with C&F.Agreements.
As of and for the Nine Months Ended September 30, 2021 | As of and for the Six Months Ended June 30, 2022 | |||||||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | Insurance | Total | |||||||||||||||||||
Revenues | $ | 3,212,581 | $ | 2,656,916 | $ | 5,869,497 | $ | 50 | $ | 1,253,346 | $ | 1,253,396 | ||||||||||||
Total losses and expenses | 3,814,799 | 2,758,741 | 6,573,540 | |||||||||||||||||||||
Segment income (loss) | (602,218 | ) | (101,825 | ) | (704,043 | ) | ||||||||||||||||||
Total expenses | 322,149 | 1,542,162 | 1,864,311 | |||||||||||||||||||||
Segment loss | (322,099 | ) | (288,816 | ) | (610,915 | ) | ||||||||||||||||||
Identifiable assets | — | 950,251 | 950,251 | — | 785,680 | 785,680 | ||||||||||||||||||
As of and for the Nine Months Ended September 30, 2020 | As of and for the Six Months Ended June 30, 2021 | |||||||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | Insurance | Total | |||||||||||||||||||
Revenues | $ | 7,487,683 | $ | 4,546,484 | $ | 12,034,167 | $ | 4,547,677 | $ | 1,847,982 | $ | 6,395,659 | ||||||||||||
Total losses and expenses | 19,062,602 | 4,261,899 | 23,324,501 | 4,257,668 | 1,885,922 | 6,144,590 | ||||||||||||||||||
Segment (loss) income | (11,574,919 | ) | 284,585 | (11,290,334 | ) | |||||||||||||||||||
Segment income (loss) | 289,009 | (37,940 | ) | 251,069 | ||||||||||||||||||||
Identifiable assets | — | 1,107,040 | 1,107,040 | — | 999,337 | 999,337 | ||||||||||||||||||
Three months ended SeptemberJune 30, 20212022 compared to three months ended SeptemberJune 30, 20202021
We recorded a net loss of $955,112$400,654 for the three months ended September30, 2021June 30, 2022 compared to a net loss of $8,277,992$93,078 for the same period in 2020.three-months ended June 30, 2021. The decrease in the net loss was mainly attributableincome is due primarily to (i) the decreasea reduction in lossearned premium, partially offset by reductions in losses and loss adjustment expenses of $11,811,206 – from $10,551,676 for the three months ended September 30, 2020 to $(1,259,530) for the three months ended September 30, 2021, (ii) the decreaseand policy acquisition costs; a reduction in commission income; and reductions in net investment income and net realized and unrealized gains on investments, partially offset by a reduction in operating and management expenses of $457,287 – from $1,592,813 for the three months ended September 30, 2020 to $1,135,526 for the three months ended September 30, 2021, as discussed below. The decrease in net loss was partially offset by a decrease in commission income of $628,285 – from $1,437,181 for the three months ended September 30, 2020 to $808,896 for the three months ended September 30, 2021, as also discussed below.
Our net premiums earned for the third quarter of 2021three months ended June 30, 2022, were $(1,737,803)$0 compared to $3,437,196$2,248,830 for the third quarter of 2020,same period in 2021, a decrease of $5,174,999$2,248,830 or 150.6%100%. The net premiums earned during the quartersquarter ended SeptemberJune 30, 2021, and 2020 were attributable to cessions from C&F under the Reinsurance Agreement. Our premiums earned forThe Company entered into the third quarter of 2021 represents the reversal of the second quarter cession as the result of theC&F Commutation Agreement which has anwith C&F effective date of March 31, 2021. Our net premium earned for2021, and no premiums subsequent to that date were ceded pursuant to the third quarter of 2020 represents our net premiums earned during that three month period.Reinsurance Agreement.
For
During the quartersthree-month period ended SeptemberJune 30, 20212022 and 2020,2021, we recorded commission income under the Agency AgreementAgreements of $808,896$475,838 and $1,437,181$814,161, respectively, a decrease of $628,285$338,323 or 43.7%41.6%. This decrease resulted from the lower volume of premiums written under the Agency AgreementAgreements during the quarter ended Septemberthree-month period June 30, 20212022 compared to the quarter ended September 30, 2020,same period in 2021, which is primarily attributableattributed to the October 2020 notice fromdecrease in premiums as a result of the termination of the C&F to cease writing business in eight states under the Agency Agreement. We are currently brokering business with alternative carriers to write policies impacted by this directive.agency agreement.
We recorded net investment income of $57,893$21 during the three-month period June 30, 2022, compared to $75,742, for the quarterthree-months ended SeptemberJune 30, 2021 compared to $99,444 for the quarter ended September 30, 2020.2021. The decrease in net investment income was attributable toprimarily as the result of the September 2021 liquidation of the Company’s entire investment in fixed income securities and equity securities and also a decrease in dividend income attributable to the decrease in equityinterest earned on short term investments held in our investment portfolio during the quarter ending September 30, 2021 compared to the same period in 2020. The decrease in net investment income was partially offset by a decrease in investment expenses during the quarter ended September 30, 2021 compared to the same period in 2020 as a result of a decrease in investment management fees, which is attributable to the aforementioned decrease in equity investments held in our investment portfolio.and cash and cash equivalents. The annualized investment yield, calculated as total interest and dividends divided by the net average amount of total investments and cash and cash equivalents, was .8%0% for the quarterthree-months ended September 30, 2021,June 30,2022, compared to the 1.2%1% yield earned for the quarter ended September 30, 2020.same period in 2021.
We recorded net realized and unrealized gains on investments of $344,852$0 during the quarterthree-month period ended SeptemberJune 30, 20212022 compared to net realized and unrealized gains of $988,562$51,523 during the quarterthree-month period ended SeptemberJune 30, 2020,2021, a decrease of $643,710$51,523 or 65.1%100%. The net realized and unrealized gains on investments duringdecrease is attributed to the three months ended September 30, 2021 was primarily attributable to the liquidation of the Company’s entire investment in fixed income securities to fund the commitment to C&F under the Commutation Agreement. A $343,768 gain was realized on the sale of these investments. The net realized and unrealized gains on investments duringequity securities.
For the three months ended SeptemberJune 30, 2020 was primarily related to the increase in the fair value of our equity investments due to favorable market conditions attributable to the unprecedented monetary and fiscal stimulus in the U.S. and around the world to counter the negative impact of the COVID-19 coronavirus pandemic on the worldwide economy.
Our losses2022, we recorded loss and loss adjustment expenses forof $0. For the quarter ended September 30,same period in 2021, were $(1,259,530) compared to $10,551,676 for the quarter ended September 30, 2020, a decrease of $11,811,206 or 111.9%. Our losseswe recorded loss and loss adjustment expenses forof $1,439,250 derived by multiplying our estimated loss ratio of 64.0% and the third quarter of 2021 represents (i) the reversal of the second quarter cessionnet premiums earned under the Reinsurance Agreement as the result of the Commutation Agreement, which has an effective date of March 31, 2021 and (ii) the recording of a $147,377 gain under the Commutation Agreement.$2,248,830. The significant amount of lossesdecrease in loss and loss adjustment expenses recorded duringexpense was due to the quarter ended September 2020 was attributable to higher than expected loss emergence on the Company’s lawyers’ bookcommutation of business in accident years 2017, 2018 and 2019.under the reinsurance agreements.
We recorded policy acquisition costs of $579,317 in$0 during the third quarter of 2021three-months ended June 30, 2022 compared to $2,058,923$568,870 for the same period in 2020.2021. Policy acquisition costs, which are primarily ceding commissions paid to the ceding insurer, are established as a percentage of premiums earned; therefore, any increase or decrease in premiums earned will result in a similar increase or decrease in policy acquisition costs, subject to any premium deficiency.earned. The policy acquisition costs recorded during the third quarter ofthree-month period June 30, 2022 and 2021 represents the reversals of (i) $642,987, being 37%were 0% and 25% of the net premiums earned under the Reinsurance Agreement during the second quarter of 2021 of $1,737,802 (ii) the reversal of the established premium deficiency reserve as at June 30, 2021 of $214,224$0 and (iii) the reversal of the remaining deferred$2,248,830, respectively. The decrease in policy acquisition balance of $1,436,528. The aforementioned reversals arecosts was attributable to the Commutation Agreement. The policy acquisition costs recorded during the quarter ended September 30, 2020 represented of (i) $1,271,764, being 37% of the netdecrease in premiums earned, which was due to the commutation of business under the Reinsurance Agreement as at September 30, 2020 of $3,437,196 and (ii) a premium deficiency reserve established during the third quarter of 2020 in the amount of $787,159.reinsurance agreements.
We incurred operating and management expenses of $1,135,526$938,833 in the third quarter of 2021three-month period June 30, 2022 compared to $1,592,813$1,302,995 for the same period in 2020,2021, a decrease of $457,287$364,162 or 28.7%27.9%. The decrease was primarily attributable to (i) decreased director’s expenses due to the elimination of retainers paid to directors as a part of compensation (ii) decreased salaries and related costs associated with Protexure’s reduction in personnel during 20212022 and 2020 in2021in its effort to reduce overall costs (iii) decreased sub commission expenses resulting from a decrease in sub produced premiums and (ii) decreased net commissions paid(iv) reduction in fees to outside brokers in association with the Agency Agreement as a result lower volume of premiums obtained from outside brokers during the third quarter of 2021 compared to the same period in 2020.third-party managers and service providers.
The tables below summarize the results of the following AmerInst reportable segments: (1) reinsurance activity,and corporate, previously called the reinsurance segment, through which also includes investmentsthe company provided reinsurance under the now commuted reinsurance agreements, conducted investment operations and conducts other corporate activities and (2) insurance activity, through which the Company offers professional liability solutions to professional service firms under the Agency Agreement with C&F.Agreements.
As of and for the Three Months Ended September 30, 2021 | As of and for the Three Months Ended June 30, 2022 | |||||||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | Insurance | Total | |||||||||||||||||||
Revenues | $ | (1,335,096 | ) | $ | 808,934 | $ | (526,162 | ) | $ | 21 | $ | 475,838 | $ | 475,859 | ||||||||||
Total losses and expenses | (443,869 | ) | 872,819 | 428,950 | ||||||||||||||||||||
Segment (loss) income | (891,227 | ) | (63,885 | ) | (955,112 | ) | ||||||||||||||||||
Total expenses | 150,747 | 725,766 | 876,513 | |||||||||||||||||||||
Segment loss | (150,726 | ) | (249,928 | ) | (400,654 | ) | ||||||||||||||||||
Identifiable assets | — | 950,251 | 950,251 | — | 785,680 | 785,680 | ||||||||||||||||||
As of and for the Three Months Ended September 30, 2020 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
Revenues | $ | 4,524,821 | $ | 1,437,562 | $ | 5,962,383 | ||||||
Total losses and expenses | 12,872,084 | 1,368,291 | 14,240,375 | |||||||||
Segment income | (8,347,263 | ) | 69,271 | (8,277,992 | ) | |||||||
Identifiable assets | — | 1,107,040 | 1,107,040 | |||||||||
As of and for the Three Months Ended June 30, 2021 | ||||||||||||
Reinsurance | Insurance | Total | ||||||||||
Revenues | $ | 2,376,009 | $ | 814,247 | $ | 3,190,256 | ||||||
Total expenses | 2,387,385 | 895,949 | 3,283,334 | |||||||||
Segment loss | (11,376 | ) | (81,702 | ) | (93,078 | ) | ||||||
Identifiable assets | — | 999,337 | 999,337 | |||||||||
FINANCIAL CONDITION
As of September 30, 2021, our total investments were $0 compared to $20,344,127 at December 31, 2020. During September 2021, the Company liquidated its entire investment in fixed income securities and equity securities as a measure to fund its commitment under the Commutation. The cash and cash equivalents balance decreased from $5,732,110$3,477,714 at December 31, 20202021 to $3,982,010$2,152,653 at SeptemberJune 30, 2021,2022, a decrease of $1,750,100$1,325,061 or 30.5%38.1%. ThisThe net decrease resulted primarily from cash outflows associated with the funding of our day-to-day operations. The restricted cashoperations and cash equivalents balance increased from $4,964,126 at December 31, 2020 to $25,552,236 at September 30, 2021, an increasesettlement of $20,588,110 or 414.7%. The increase was primarily due to the aforementioned liquidation of the Company’s entire investment in fixed income securities and equity securities.
The assumed reinsurance balances receivable represents the current assumed premiums receivable from the fronting carriers. As of September 30, 2021, the balance was $0 compared to $2,221,664 as of December 31, 2020. As at September 30, 2021, there is no premium is due to AMIC Ltd. under the Reinsurance Agreement as the result of the Commutation Agreement.
The assumed reinsurance payable represents current reinsurance losses payable and commissions payable to the fronting carriers. As of September 30, 2021, the balance was $26,076,114 compared to $3,175,098 as of December 31, 2020. The increase to this balance is the result of the Commutation Agreement, under which $26,076,000 is payable from AMIC Ltd. to C&F.
Deferred policy acquisition costs, which represent the deferral of ceding commission expense related to premiums not yet earned, increased from $724,509 at December 31, 2020 to $0 at September 30, 2021. As at September 30, 2021, this balance is $0 as of the result of the Commutation Agreement.accrued liabilities.
Prepaid expenses and other assets were $1,078,604$939,333 at SeptemberJune 30, 20212022 compared to $1,476,187 as of$1,091,815 at December 31, 2020.2021. The balance primarily relates to (1) prepaid directors’ and officers’ liability insurance costs, (2) the directors’ prepaid annual retainer, (3) prepaid professional fees and (4)(3) premiums due to Protexure under the Agency Agreement.Agreements. This balance fluctuates due to the timing of the prepayments and to the timingreceipt of the premium receiptspremiums by Protexure.
Accrued expenses and other liabilities primarily represent premiums payable by Protexure to C&Fcedants under the Agency AgreementAgreements and expenses accrued relating largely to professional fees. The balance decreased from $3,689,620$2,860,876 at December 31, 20202021 to $2,543,502$1,962,368 at SeptemberJune 30, 2021,2022, a decrease of $1,146,118$898,508 or 31.1%31.4%. This balance fluctuates due to the timing of the premium payments to C&F and payments of professional fees.
LIQUIDITY AND CAPITAL RESOURCES
Our cash needs consist of (i) funding of our commitment to C&F under the Commutation Agreementi) settling expenses and (ii) funding day-to-day operations. During the continued implementation of our business plan, ourOur management expects that our unrestricted cash balance will be sufficient to meet our cash needs toand fund our day-to-day operations over the next twelve-month time period.
Total cash, investments and other invested assets decreased from $31,040,363$3,477,714 at December 31, 20202021 to $29,534,246$2,152,653 at SeptemberJune 30, 2021,2022, a decrease of $1,506,117$1,325,061 or 4.9%38.1%. The net decrease resulted primarily from cash outflows associated with the funding of our day-to-day operations and settlement of accrued liabilities.
The Company continues to receive approval from ISMIE to write in additional states for lawyers and accountants and thus the decreaseCompany is confident it will be able to convert C&F expiring business and business expiring with other companies to ISMIE throughout the remainder of 2022. In addition, the Company has appointed four new brokers during the second quarter of 2022 to expand their distribution in the fair value of our fixed income security portfolio priorISMIE approved states to the aforementioned liquidation of this portfolio, due to the widening of credit spreads, partially offset by cash inflows derived from net investment activities.increase new business opportunities.
The Bermuda Monetary Authority has authorized AMIC Ltd. to purchase our common shares, on a negotiated basis, from shareholders who have died or retired from the practice of public accounting. During the nine months ended September 30, 2021, AMIC Ltd. purchased 1,720 common shares from these shareholders who had died or retired for a total purchase price of $55,917. From its inception through SeptemberJune 30, 2021,2022, AMIC Ltd. had repurchased 232,979 common shares from shareholders who had died or retired for a totalat an aggregate purchase price of $6,653,703. During the six months ended June 30, 2022, no such transactions occurred. From time to time, AMIC Ltd. has also purchased shares in privately negotiated transactions. From its inception through SeptemberJune 30, 2021,2022, AMIC Ltd. hadhas purchased an additional 75,069 common shares in such privately negotiated transactions for a totalat an aggregate purchase price of $1,109,025. During the ninesix months ended SeptemberJune 30, 2021,2022, no such transactions occurred.
Cash Dividends
We paid no dividends during the nine months ended Septembersix-month period June 30, 2021.2022. Since we began paying dividends in 1995, our original shareholders have received $22.87 in cumulative dividends per share. Although we have paid cash dividends on a regular basis in the past, the declaration and payment of cash dividends in the future will be at the discretion of our board of directors, subject to the requirements of applicable law, and will depend on, among other things, our financial condition, results of operations, current and anticipated cash needs and other factors that our board of directors considers relevant.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is not a party to any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 20202021 and is incorporated herein by reference.
We have identified accounting for Due to the liability for lossescommutation agreements “Unpaid Losses and loss adjustment expenses as our mostLoss Adjustment Expense Reserves” and “Other than Temporary Impairment of Investments” are no longer considered critical accounting policy and estimate in that it is important to the portrayal of our financial condition and results, and it requires our subjective and complex judgment as a result of the need to make estimates about the effects of matters that are inherently uncertain. This accounting policy, including the nature of the estimates and types of assumptions used, are described throughout this Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.
policies.
Available Information
We file annual, quarterly, and current reports, proxy statements and other information with the Commission. You may read any public document we file with the Commission at the Commission’s public reference room at 100 F Street, NE, Washington, DC 20549. Please call the Commission at 1-800-SEC-0330 for information on the public reference room. The Commission maintains an internet site that contains annual, quarterly, and current reports, proxy and information statements and other information that issuers (including AmerInst) file electronically with the Commission. The Commission’s internet site is www.sec.gov.
Our internet site is www.amerinst.bm. We make available free of charge through our internet site our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to the Securities Exchange Act of 1934, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Commission. We also make available, through our internet site, via links to the Commission’s internet site, statements of beneficial ownership of our equity securities filed by our directors, officers, 10% or greater shareholders and others under Section 16 of the Securities Exchange Act. In addition, we post on www.amerinst.bm our Memorandum of Association, our Bye-Laws, our Statement of Share Ownership Policy, Charters for our Audit Committee and Governance and Nominations Committee, as well as our Code of Business Conduct and Ethics. You can request a copy of these documents, excluding exhibits, at no cost, by writing or telephoning us c/o Davies Captive Management Limited, 25 Church Street, Continental Building, P.O. Box HM 1601 Hamilton, Bermuda HM GX, Attention: Investor Relations (441) 295-2185. The information on our internet site is not incorporated by reference into this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.ItemQuantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and ProceduresItemControls and Procedures
Evaluation of Disclosure Controls and Procedures
As of SeptemberJune 30, 2021,2022, the end of the period covered by this Form 10-Q, our management, including our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer each concluded that as of SeptemberJune 30, 2021,2022, the end of the period covered by this Form 10-Q, we maintained effective disclosure controls and procedures.
Changes in Internal Control over Financial Reporting
Our management, including our Principal Executive Officer and Principal Financial Officer, has reviewed our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II—OTHER INFORMATION
Item 1. Legal ProceedingsItemLegal Proceedings
We are party to various legal proceedings generally arising in the normal course of our business. While any proceeding contains an element of uncertainty, we do not believe that the eventual outcome of any litigation or arbitration proceeding to which we are presently a party will have a material adverse effect on our financial condition or business. Pursuant to our insurance and reinsurance agreements, disputes are generally required to be finally settled by arbitration.
Item 1A. Risk FactorsItemRisk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 20202021 Annual Report on Form 10-K, as updated in our subsequent quarterly reports. The risks described in our 20202021 Annual Report on Form 10-K and our subsequent quarterly reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of ProceedsItemUnregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.ItemDefaults Upon Senior Securities.
None.
Item 4. Mine Safety DisclosuresItemMine Safety Disclosures
Not applicable.
Item 5. Other InformationItemOther Information
None.
Item 6. ExhibitsItemExhibits
(a) Exhibits
Exhibit Number | Description | |
31.1 | ||
31.2 | Certification of Thomas R. McMahon pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | ||
32.2 | ||
| ||
| ||
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
104 | Cover | |
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SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: | AMERINST INSURANCE GROUP, LTD. | |
(Registrant) | ||
By: | /s/ | |
| ||
President (Principal Executive Officer, duly authorized to sign this Report in such capacity and on behalf of the Registrant) | ||
By: | /s/ THOMAS R. MCMAHON | |
Thomas R. McMahon | ||
Chief Financial Officer (Principal Financial Officer, duly authorized to sign this Report in such capacity and on behalf of the Registrant) | ||