Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2022 | May 02, 2022 | |
Cover page [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2022 | |
Document Transition Report | false | |
Entity File Number | 000-25001 | |
Entity Registrant Name | FedNat Holding Company | |
Entity Incorporation, State or Country Code | FL | |
Entity Tax Identification Number | 65-0248866 | |
Entity Address, Address Line One | 14050 N.W. 14th Street | |
Entity Address, Address Line Two | Suite 180 | |
Entity Address, City or Town | Sunrise | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 33323 | |
City Area Code | 800 | |
Local Phone Number | 293-2532 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | FNHC | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 17,519,237 | |
Entity Central Index Key | 0001069996 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2022 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Investments: | ||
Debt securities, available-for-sale, at fair value (amortized cost of $269,100 and $324,861, respectively) | $ 270,217 | $ 327,532 |
Equity securities, at fair value | 5,348 | 5,905 |
Total investments | 275,565 | 333,437 |
Cash and cash equivalents | 87,358 | 83,526 |
Prepaid reinsurance premiums | 162,463 | 242,537 |
Premiums receivable, net of allowance of $133 and $125, respectively | 33,089 | 41,174 |
Reinsurance recoverable, net of allowance of $109 and $249, respectively | 581,921 | 613,203 |
Deferred acquisition costs, net | 16,438 | 18,829 |
Current and deferred income taxes, net | 13,446 | 30,014 |
Other assets | 31,681 | 49,950 |
Total assets | 1,201,961 | 1,412,670 |
Liabilities | ||
Loss and loss adjustment expense reserves | 661,595 | 738,794 |
Unearned premiums | 316,312 | 342,747 |
Reinsurance payable and funds withheld liabilities | 46,535 | 102,748 |
Long-term debt, net of deferred financing costs of $2,094 and $2,195, respectively | 118,906 | 118,805 |
Deferred revenue | 4,162 | 5,240 |
Other liabilities | 40,312 | 44,950 |
Total liabilities | 1,187,822 | 1,353,284 |
Commitments and contingencies (see Note 10) | ||
Shareholders' Equity | ||
Preferred stock, $0.01 par value: 1,000,000 shares authorized | 0 | 0 |
Common stock, $0.01 par value: 50,000,000 shares authorized; 17,519,237 and 17,446,930 issued and outstanding, respectively | 175 | 174 |
Additional paid-in capital | 186,202 | 186,007 |
Accumulated other comprehensive income (loss) | (2,563) | (1,034) |
Retained earnings (deficit) | (169,675) | (125,761) |
Total shareholders’ equity | 14,139 | 59,386 |
Total liabilities and shareholders' equity | $ 1,201,961 | $ 1,412,670 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Investments: | ||
Debt securities, available-for-sale, at amortized cost | $ 269,100 | $ 324,861 |
Premium receivable, allowance for credit loss | 133 | 125 |
Reinsurance recoverable, allowance for credit loss | 109 | 249 |
Liabilities | ||
Deferred financing costs | $ 2,094 | $ 2,195 |
Shareholders' Equity | ||
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized (in shares) | 1,000,000 | 1,000,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 17,519,237 | 17,446,930 |
Common stock, shares outstanding (in shares) | 17,519,237 | 17,446,930 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Revenues: | ||
Net premiums earned | $ 45,985 | $ 39,745 |
Net investment income | 1,264 | 1,674 |
Net realized and unrealized gains (losses) | (15,053) | 92 |
Direct written policy fees | 2,613 | 3,315 |
Other income | 7,426 | 7,922 |
Total revenues | 42,235 | 52,748 |
Costs and expenses: | ||
Losses and loss adjustment expenses | 58,783 | 48,016 |
Commissions and other underwriting expenses | 19,107 | 21,031 |
General and administrative expenses | 6,997 | 6,066 |
Interest expense | 2,300 | 1,926 |
Total costs and expenses | 87,187 | 77,039 |
Income (loss) before income taxes | (44,952) | (24,291) |
Income tax expense (benefit) | (1,038) | (4,910) |
Net income (loss) | $ (43,914) | $ (19,381) |
Net Income (Loss) Per Common Share | ||
Basic (in dollars per share) | $ (2.51) | $ (1.35) |
Diluted (in dollars per share) | $ (2.51) | $ (1.35) |
Weighted Average Number of Shares of Common Stock Outstanding | ||
Basic (in shares) | 17,462 | 14,395 |
Diluted (in shares) | 17,462 | 14,395 |
Dividends declared per common share (in dollars per share) | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ (43,914) | $ (19,381) |
Change in net unrealized gains (losses) on investments, available-for-sale, net of tax | (1,529) | (7,200) |
Comprehensive income (loss) | $ (45,443) | $ (26,581) |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Deficit) |
Balance (in shares) at Dec. 31, 2020 | 13,717,908 | |||||
Balance at the beginning of the period at Dec. 31, 2020 | $ 158,160 | $ 0 | $ 137 | $ 169,298 | $ 11,386 | $ (22,661) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | (19,381) | (19,381) | ||||
Other comprehensive income (loss) | (7,200) | (7,200) | ||||
Issuance of common stock (in shares) | 3,500,000 | |||||
Issuance of common stock | 15,122 | $ 35 | 15,087 | |||
Shares issued under share-based compensation plans (in shares) | 95,553 | |||||
Shares issued under share-based compensation plans | 1 | $ 1 | 0 | |||
Share-based compensation | 407 | 407 | ||||
Balance (in shares) at Mar. 31, 2021 | 17,313,461 | |||||
Balance at the end of the period at Mar. 31, 2021 | 147,109 | 0 | $ 173 | 184,792 | 4,186 | (42,042) |
Balance (in shares) at Dec. 31, 2021 | 17,446,930 | |||||
Balance at the beginning of the period at Dec. 31, 2021 | 59,386 | 0 | $ 174 | 186,007 | (1,034) | (125,761) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | (43,914) | (43,914) | ||||
Other comprehensive income (loss) | (1,529) | (1,529) | ||||
Shares issued under share-based compensation plans (in shares) | 72,307 | |||||
Shares issued under share-based compensation plans | 0 | $ 1 | (1) | |||
Share-based compensation | 196 | 196 | ||||
Balance (in shares) at Mar. 31, 2022 | 17,519,237 | |||||
Balance at the end of the period at Mar. 31, 2022 | $ 14,139 | $ 0 | $ 175 | $ 186,202 | $ (2,563) | $ (169,675) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash flow from operating activities: | ||
Net income (loss) | $ (43,914) | $ (19,381) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Net realized and unrealized (gains) losses | 15,053 | (92) |
Amortization of investment premium or discount, net | 510 | 1,256 |
Depreciation and amortization | 413 | 460 |
Share-based compensation | 196 | 407 |
Changes in operating assets and liabilities: | ||
Prepaid reinsurance premiums | 80,074 | 61,204 |
Premiums receivable, net | 8,085 | 10,041 |
Reinsurance recoverable, net | 31,282 | (51,038) |
Deferred acquisition costs, net | 2,391 | 1,429 |
Current and deferred income taxes, net | 16,592 | (1,291) |
Deferred revenue | (1,078) | (278) |
Loss and loss adjustment expense reserves | (77,199) | (53,654) |
Unearned premiums | (26,435) | (4,794) |
Reinsurance payable and funds withheld liabilities | (56,213) | (50,561) |
Other | 13,219 | (3,853) |
Net cash provided by (used in) operating activities | (37,024) | (110,145) |
Cash flow from investing activities: | ||
Proceeds from sales of debt securities | 56,161 | 87,007 |
Purchases of debt securities | (27,385) | (56,148) |
Maturities and redemptions of debt securities | 12,130 | 31,383 |
Purchases of property and equipment | (50) | (174) |
Net cash provided by (used in) investing activities | 40,856 | 62,068 |
Cash flow from financing activities: | ||
Issuance of common stock | 0 | 15,403 |
Issuance of common stock for share-based awards | 0 | 1 |
Net cash provided by (used in) financing activities | 0 | 15,404 |
Net increase (decrease) in cash and cash equivalents | 3,832 | (32,673) |
Cash and cash equivalents at beginning-of-period | 83,526 | 102,367 |
Cash and cash equivalents at end-of-period | 87,358 | 69,694 |
Supplemental disclosure of cash flow information: | ||
Cash paid (received) during the period for interest | 3,875 | 3,750 |
Cash paid (received) during the period for income taxes | (17,782) | (3,618) |
Significant non-cash investing and financing transactions: | ||
Right-of-use asset | (6,497) | (7,250) |
Lease liability | $ 6,497 | $ 7,250 |
ORGANIZATION, CONSOLIDATION AND
ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION | 1. ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION Organization FedNat Holding Company (“FNHC,” the “Company,” “we,” “us,” or “our”) is a regional insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through our subsidiaries and contractual relationships with independent agents and general agents. We, through our wholly owned subsidiaries, are authorized to underwrite and/or place homeowners multi-peril (“homeowners”), federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers’ products and other services through a network of independent and general agents. FedNat Insurance Company (“FNIC”), our largest wholly owned insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance by the state insurance departments in Florida, Louisiana, Texas, Georgia, South Carolina, Alabama and Mississippi. Maison Insurance Company ("MIC"), an insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance as well as wind/hail-only exposures by the state's insurance departments in Louisiana, Texas and Florida. In November 2021, the Company made the decision to commence an orderly runoff of MIC’s insurance operations. Monarch National Insurance Company (“MNIC”), an insurance subsidiary, is licensed as an admitted carrier to write homeowners property and casualty insurance in Florida. Material Distribution Relationships Ivantage Select Agency, Inc. The Company is a party to an insurance agency master agreement with Ivantage Select Agency, Inc. (“ISA”), an affiliate of Allstate Insurance Company (“Allstate”), pursuant to which the Company has been authorized by ISA to appoint Allstate agents to offer our FNIC homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 17.4% and 19.6% were from Allstate’s network of Florida agents, for the three months ended March 31, 2022 and 2021, respectively. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (“SageSure”) to facilitate our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 11.7% and 24.5% of the Company’s premiums were underwritten by SageSure, for the three months ended March 31, 2022 and 2021, respectively. As part of our partnership with SageSure, previously we entered into a profit share agreement, whereby we shared 50% of net profits of this line of business through June 30, 2020, as calculated per the terms of the agreement, subject to certain limitations, which included limits on the net losses that SageSure could realize. The limit was based on the amount of inception to date profits within the profit share agreement. In addition, refer to Note 5 for information regarding a fully collateralized quota-share treaty on this book of business that became effective July 1, 2020. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (“VIE”) of which the Company is the primary beneficiary. The Company’s management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Company’s interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES Our significant accounting policies were described in Note 2 of our 2021 Form 10-K. There have been no significant changes in our significant accounting policies for the three months ended March 31, 2022. Going Concern The Company recently received notification from Demotech that FNIC’s “A” (“Exceptional”) rating has been downgraded to “S” (“Substantial”). MNIC’s “A” rating was reaffirmed. The Company believes that the downgrade of FNIC’s Demotech rating will adversely impact the Company's ability to obtain excess-of-loss reinsurance for coverage beginning July 1, 2022. Absent such coverage, the Company will not be in compliance with requirements communicated by the Office of Insurance Regulation of the state of Florida regarding such coverage, which could ultimately result in the Company being placed into receivership. Additionally, being placed into receivership and/or failing to obtain excess-of-loss reinsurance each represent potential defaults under our debt indentures that could result in acceleration of repayment of our debt. In addition, in May 2022, Egan Jones’ rating on the Company’s outstanding senior notes expired such that our notes are not currently rated. The lack of a rating, if not remediated within 30 days from receipt of notice as provided in the note indentures, has the potential to result in an Event of Default under the note indentures. Such conditions raise substantial doubt regarding the Company’s ability to continue as a going concern. After exploring strategic alternatives in an effort to increase its capital resources to support its insurance carriers and preserve value for the Company’s stakeholders, the Company developed an action plan, which has been submitted to the Office of Insurance Regulation of the state of Florida (“OIR”). A portion of the action plan has been approved by the OIR, and consists of the mid-term cancellation, effective June 29, 2022, of approximately 68,200 Florida policies currently in force on FNIC, MNIC and MIC, as requested by the Company. Furthermore, the Company has ceased writing new business from May 16, 2022 through June 30, 2022. Additional portions of the plan continue to be subject to approval by the OIR and regulatory authorities in other states, including mid-term cancellations in non-Florida states, as well as reinsurance and capital raising options; however, there can be no assurance that we will be able to execute on all or any of the strategic alternatives, successfully raise additional capital or obtain excess-of-loss reinsurance. These financial statements do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and classification of liabilities that may be required should the Company be unable to continue as a going concern. However, due to the need to refund approximately $126.0 million of unearned premiums to policyholders impacted by the mid-term cancellations, the Company will need to liquidate a substantial portion of its portfolio of fixed income securities. Because management can no longer assert that it has the intent and ability to hold such securities to a forecasted recovery of their fair value, the Company recognized an impairment loss of $12.6 million. Total shareholders’ equity was not impacted by such charge; however, the Company’s net loss for three months ended March 31, 2022 worsened and other comprehensive income improved by $12.6 million in offsetting amounts. Aside from the impacts previously discussed, the Company has not yet completed an analysis to determine the impact of the action plan on the financial statements including assessing the recoverability of deferred acquisition costs, as a result of the aforementioned refund of unearned premiums to policyholders. Accounting Estimates and Assumptions The Company prepares the accompanying consolidated financial statements in accordance with GAAP, which requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may materially differ from those estimates. Similar to other property and casualty insurers, the Company’s liability for loss and loss adjustment expenses ("LAE") reserves, although supported by actuarial projections and other data, is ultimately based on management’s reasoned expectations of future events. Although considerable variability is inherent in these estimates, the Company believes that the liability and LAE reserve is adequate. The Company reviews and evaluates its estimates and assumptions regularly and makes adjustments, reflected in current operations, as necessary, on an ongoing basis. Recently Issued Accounting Pronouncements, Adopted In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2020-1, Accounting for Equity Securities and Equity Investments, which clarifies the interaction between accounting standards related to equity securities (Topic 321), equity method investments (Topic 323), and certain derivatives (Topic 815). The update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The Company adopted the guidance effective January 1, 2022, which did not have any impact on the Company’s consolidated financial condition, results of operations, or disclosures. In August 2020, the FASB issued ASU 2020-6, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-6"), which simplifies an issuer's accounting for convertible instruments by eliminating two of the three models in the current guidance that requires separate accounting for certain embedded conversion features. The new guidance simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. ASU 2020-6 requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This new guidance requires disclosures about events that occur during the reporting period and cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things. The Company adopted the guidance effective January 1, 2022, which did not have any impact on the Company’s consolidated financial condition or results of operations. |
FAIR VALUE
FAIR VALUE | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | 3. FAIR VALUE Fair Value Disclosures of Financial Instruments The Company accounts for financial instruments at fair value or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs are based on market data from independent sources, while unobservable inputs reflect the Company’s view of market assumptions in the absence of observable market information. All assets and liabilities that are recorded at fair value are classified and disclosed in one of the following three categories: • Level 1 - Quoted market prices (unadjusted) for identical assets or liabilities in active markets is defined as a market where transactions for the financial statement occur with sufficient frequency and volume to provide pricing information on an ongoing basis, or observable inputs; • Level 2 - Quoted market prices for similar assets or liabilities and valuations, using models or other valuation techniques using observable market data. Significant other observable that can be corroborated by observable market data; and • Level 3 - Instruments that use non-binding broker quotes or model driven valuations that do not have observable market data or those that are estimated based on an ownership interest to which a proportionate share of net assets is attributed. If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. The Company’s financial instruments measured at fair value on a recurring basis and the level of the fair value hierarchy of inputs used consisted of the following: March 31, 2022 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 41,125 $ 41,304 $ — $ 82,429 Obligations of states and political subdivisions (1) 15,579 — 15,578 Corporate securities — 149,608 — 149,608 International securities — 22,602 — 22,602 Debt securities, at fair value 41,124 229,093 — 270,217 Equity securities, at fair value 1,652 3,696 — 5,348 Total investments, at fair value $ 42,776 $ 232,789 $ — $ 275,565 Other assets - embedded derivative, at fair value $ — $ — $ 10,448 $ 10,448 December 31, 2021 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 41,125 $ 49,567 $ — $ 90,692 Obligations of states and political subdivisions — 19,278 — 19,278 Corporate securities — 188,980 — 188,980 International securities 901 27,681 — 28,582 Debt securities, at fair value 42,026 285,506 — 327,532 Equity securities, at fair value 1,879 4,026 — 5,905 Total investments, at fair value $ 43,905 $ 289,532 $ — $ 333,437 Other assets - embedded derivative, at fair value $ — $ — $ 10,725 $ 10,725 We measure the fair value of our securities based on assumptions used by market participants in pricing the security. The most appropriate valuation methodology is selected based on the specific characteristics of the security, and we consistently apply the valuation methodology to measure the security’s fair value. Our fair value measurement is based on a market approach that utilizes prices and other relevant information generated by market transactions involving identical or comparable securities. We review the third party pricing methodologies on a quarterly basis and validate the fair value prices to a separate independent data service and ensure there are no material differences. Additionally, market indicators, industry and economic events are monitored. As of March 31, 2022, we have an embedded derivative, associated with a reinsurance limit for our 2020-2021 excess of loss catastrophe reinsurance program, carried at $10.4 million included in other assets on our consolidated balance sheets. There is no contractual maturity date and no collateral posted for this embedded derivative; however, the related contract is with excess-of-loss reinsurers that have an S&P A rating or are collateralized. A summary of the significant valuation techniques and market inputs for each financial instrument carried at fair value includes the following: • United States Government Obligations and Authorities - In determining the fair value for United States government securities in Level 1, the Company uses quoted prices (unadjusted) in active markets for identical or similar assets. In determining the fair value for United States government securities in Level 2, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events. • Obligations of States and Political Subdivisions - In determining the fair value for state and municipal securities, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events. • Corporate and International Securities - In determining the fair value for corporate securities the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads (for investment grade securities), observations of equity and credit default swap curves (for high-yield corporates), reference data and industry and economic events. • Equity Securities - In determining the fair value for equity securities in Level 1, the Company uses quoted prices (unadjusted) in active markets for identical or similar assets. In determining the fair value for equity securities in Level 2, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events. • Other Assets Embedded Derivative – In determining the fair value of the embedded derivative in Level 3, the Company uses the best estimates of current settlement values, using present value of projected cash flows. The assumptions, at each valuation date, are those we view to be appropriate for a hypothetical market participant and include assumptions for the non-performance risk, which is added to the discount rates used in determining the fair value from the net cash flows and reflects the credit risk of either our counter-party for our assets or us for our liabilities of not fulfilling the obligations of an underlying amounts due to us or amounts we owe. Changes in the fair value of this embedded derivative results primarily from changes in market conditions or the credit risk associated with our counterparties. We did not have securities trading in less liquid or illiquid markets with limited or no pricing information, therefore we did not use unobservable inputs to measure fair value as of March 31, 2022 and December 31, 2021. Additionally, we did not have any assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2022 or December 31, 2021, and we noted no significant changes in our valuation methodologies between those periods. Our long-term debt is a financial instrument and we disclose its fair value in Note 8. The fair value of long-term debt is based on quoted market prices. The inputs used to measure the fair value of long-term debt are classified as Level 2 within the fair value hierarchy. There were no changes to the Company’s valuation methodology and the Company is not aware of any events or circumstances that would have a significant adverse effect on the carrying value of its assets and liabilities measured at fair value as of March 31, 2022 and December 31, 2021. There were no transfers between the fair value hierarchy levels during the three months ended March 31, 2022 and 2021. |
INVESTMENTS
INVESTMENTS | 3 Months Ended |
Mar. 31, 2022 | |
Investments, Debt and Equity Securities [Abstract] | |
INVESTMENTS | 4. INVESTMENTS Unrealized Gains and Losses The difference between amortized cost or cost and estimated fair value and gross unrealized gains and losses, by major investment category, consisted of the following: Amortized Gross Gross Cost Unrealized Unrealized or Cost Gains Losses Fair Value (In thousands) March 31, 2022 Debt securities - available-for-sale: United States government obligations and authorities $ 82,328 $ 101 $ — $ 82,429 Obligations of states and political subdivisions 15,547 31 — 15,578 Corporate 148,648 960 — 149,608 International 22,577 25 — 22,602 $ 269,100 $ 1,117 $ — $ 270,217 Amortized Gross Gross Cost Unrealized Unrealized or Cost Gains Losses Fair Value (In thousands) December 31, 2021 Debt securities - available-for-sale: United States government obligations and authorities $ 90,750 $ 625 $ 683 $ 90,692 Obligations of states and political subdivisions 19,031 391 144 19,278 Corporate 186,489 4,413 1,922 188,980 International 28,591 212 221 28,582 $ 324,861 $ 5,641 $ 2,970 $ 327,532 Net Realized and Unrealized Gains and Losses The Company calculates the gain or loss realized on the sale of investments by comparing the sales price (fair value) to the cost or amortized cost of the security sold. Net realized gains and losses on investments are determined in accordance with the specific identification method. Net realized and unrealized gains (losses) recognized in earnings, by major investment category, consisted of the following: Three Months Ended March 31, 2022 2021 (In thousands) Gross realized and unrealized gains: Debt securities $ 185 $ 864 Equity securities — 1 Total gross realized and unrealized gains 185 865 Gross realized and unrealized losses: Debt securities (14,681) (720) Equity securities (557) (53) Total gross realized and unrealized losses (15,238) (773) Net realized and unrealized gains (losses) on investments $ (15,053) $ 92 The above line item, net realized and unrealized gains (losses) on investments, includes the following equity securities gains (losses) recognized in earnings: Three Months Ended March 31, 2022 2021 (In thousands) Net gains (losses) on equity securities: Realized $ — $ — Unrealized (557) (52) (557) (52) Less: Net realized and unrealized gains (losses) on securities sold — — Net unrealized gains (losses) still held as of the end-of-period $ (557) $ (52) Contractual Maturity Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations. Amortized cost and estimated fair value of debt securities, by contractual maturity, consisted of the following: March 31, 2022 Amortized Cost Fair Value Securities with Maturity Dates (In thousands) Debt securities, available-for-sale: One year or less $ 21,657 $ 21,720 Over one through five years 63,760 63,966 Over five through ten years 104,947 105,536 Over ten years 78,737 78,995 Total $ 269,100 $ 270,217 Net Investment Income Net investment income consisted of the following: Three Months Ended March 31, 2022 2021 (In thousands) Interest income $ 1,214 $ 1,650 Dividends income 50 24 Net investment income $ 1,264 $ 1,674 Aging of Gross Unrealized Losses Gross unrealized losses and related fair values for debt securities, grouped by duration of time in a continuous unrealized loss position, consisted of the following: Less than 12 months 12 months or longer Total Gross Gross Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (In thousands) December 31, 2021 Debt securities - available-for-sale: United States government obligations and authorities $ 46,038 $ 672 $ 881 $ 11 $ 46,919 $ 683 Obligations of states and political subdivisions 7,322 144 — — 7,322 144 Corporate 86,423 1,875 860 47 87,283 1,922 International 15,345 221 — — 15,345 221 $ 155,128 $ 2,912 $ 1,741 $ 58 $ 156,869 $ 2,970 As of December 31, 2021, the Company held a total of 351 debt securities that were in an unrealized loss position, of which 5 securities were in an unrealized loss position continuously for 12 months or more. The unrealized losses associated with these securities consisted primarily of losses related to corporate securities. Refer to Note 6 below for information regarding the assessment of allowances for credit losses. Collateral Deposits Cash and cash equivalents and investments, the majority of which were debt securities, with fair values of $11.4 million and $9.3 million, were deposited with governmental authorities and into custodial bank accounts as required by law or contractual obligations, as of March 31, 2022 and December 31, 2021, respectively. |
REINSURANCE
REINSURANCE | 3 Months Ended |
Mar. 31, 2022 | |
Reinsurance Disclosures [Abstract] | |
REINSURANCE | 5. REINSURANCE Overview Reinsurance is used to mitigate the exposure to losses, manage capacity and protect capital resources. The Company reinsures (cedes) a portion of written premiums on an excess of loss or a quota-share basis in order to limit the Company’s loss exposure. To the extent that reinsuring companies are unable to meet their obligations assumed under these reinsurance agreements, the Company remains primarily liable to its policyholders. The Company is selective in choosing reinsurers and considers numerous factors, the most important of which is the financial stability of the reinsurer or capital specifically pledged to uphold the contract, its history of responding to claims and its overall reputation. In an effort to minimize the Company’s exposure to the insolvency of a reinsurer, the Company evaluates the acceptability and review the financial condition of the reinsurer at least annually with the assistance of the Company’s reinsurance broker. Significant Reinsurance Contracts 2020-2021 Catastrophe Excess of Loss Reinsurance Program The Company’s excess of loss catastrophe reinsurance program for 2020-2021 (the “2020-2021 Program”), which covers the Company and its wholly-owned insurance subsidiaries, FNIC, MIC and MNIC became effective July 1, 2020 through June 30, 2021. FNIC, MIC, and MNIC are collectively referred to herein as the “carriers”. The 2020-2021 Program provides up to approximately $1.3 billion of single-event reinsurance coverage in excess of up to a $31 million retention for catastrophic losses, including hurricanes, and aggregate coverage up to $1.9 billion, at an approximate total cost of $305.9 million, subject to adjustments based on actual exposure or premium of policies at different points in time in the coming months. The Company will retain 100% of the first $25 million retention on each event plus up to an additional $6 million in retention on the first event by retaining an approximate 9.1% co-participation of the next $70 million of limit after the first $25 million. More specifically, the 2020-2021 Program includes up to approximately $1.3 billion in aggregate private reinsurance for coverage in all states in which the Company operates, of which up to approximately $650 million is limited to any one event, plus an additional $650 million of reinsurance provided by the Florida Hurricane Catastrophe Fund (“FHCF”), that responds on both a per occurrence and in the aggregate basis, and which coverage is exclusive to the state of Florida. The private layers of the 2020-2021 Program, covering both Florida and non-Florida exposures have prepaid automatic reinstatement protection, which affords the carriers additional coverage for subsequent events. The private reinsurance market continued to harden this year due to a number of factors, including issues unique to the U.S. coastal catastrophe reinsurance marketplace generally and the Florida market specifically. These factors resulted in more restrictive terms by some of our individual reinsurers. The change in terms from the prior year’s program includes some portion of the program having a single aggregate retention for our carriers taken as a whole, versus each carrier’s own individual retention, plus some portions of the program not “cascading”, which provides less broad coverage for multiple event scenarios generating gaps in coverage that need to be filled with additional post renewal reinsurance protection or be retained net by the Company. As of March 31, 2022, the 2020-2021 Program was placed with reinsurers with an A.M. Best Company or Standard & Poor’s rating of “A-” or better, or that have fully collateralized their maximum potential obligations in dedicated trusts. For the purpose of debt covenant compliance, if any reinsurer on the 2020-2021 Program is not collateralized or has a rating lower than “A-” by A.M. Best Company or Standard & Poor’s then the Company treats that reinsurer’s participation as if it was part of the Company’s net retention. Refer to "Part I, Item 1A., Risk Factors” of our 2021 Form 10-K for more information. The total 2020-2021 Program cost includes approximately $258.3 million for private reinsurance for the carriers’ exposure described above, including prepaid automatic reinstatement premium protection, along with approximately $47.6 million payable to the FHCF. The combination of private and FHCF reinsurance treaties affords the carriers up to approximately $1.9 billion of aggregate coverage within Florida and $1.3 billion in states outside Florida with a maximum single event coverage totaling up to approximately $1.3 billion within Florida and approximately $650 million outside Florida, exclusive of retentions. Each carrier shares the combined program cost in proportion to its contribution to the total expected loss in each reinsurance layer. Each carrier’s reinsurance recoveries will be based on that carrier’s contributing share of a given event’s total loss and each carrier will be responsible for its portion of the 2020-2021 Program’s $25 million per event retention ($31 million for the first event only) based on a specific allocation formula. Both FNIC and MNIC increased their FHCF participation to 90% for the 2020 hurricane season, and MIC maintained its FHCF participation at 90%. In addition, the Company purchased subsequent event reinsurance coverage that has a lower retention than the first event. Under the 2020-2021 Program, FNIC’s non-Florida book of business as written by SageSure has excess of loss reinsurance treaties which afford this specific book of business additional protection through an additional $16 million of coverage for a second event, which applies to hurricane losses only. This additional reinsurance coverage is specific to FNIC's non-Florida business and does not afford coverage to MIC's non-Florida business. The result is a retention of approximately $18 million for FNIC's book with SageSure for the first event and approximately $2 million for the second event, although these retentions may be reduced after taking into account the quota-share reinsurance agreement that FNIC has with Anchor Re, Inc. ("Anchor Re"). Furthermore, for Florida only losses, the carriers purchased second and third event coverage of 71.5% of $15 million excess of $10 million that reduces the second and third event retention for the carriers, from $25 million to $14.3 million per event, on a combined basis, which could be reduced further by an additional 28.5% placed on a parametric basis with an Excess and Surplus lines carrier that will provide coverage for the second and third Florida hurricane loss, if the first event loss criteria has been satisfied to the carriers after the inception of treaty. The amount of recovery with the parametric product is based on the magnitude of the hurricane and the proximity of the individual insured risk to the hurricane path. This coverage terminated on May 31, 2021. Furthermore, on September 3, 2020, the Company secured $39.2 million of reinsurance limit at an approximate cost of $11.2 million. This limit is available for Hurricane Delta and all subsequent events that occur during the remainder of the current treaty year. In addition, on October 13, 2020, the Company secured 50% of $10 million excess of $8 million of reinsurance limit at an approximate cost of $875 thousand to lower its retention and further protect FNIC’s non-Florida book of business written by SageSure. This limit was available for any named storm event during the remainder of 2020. On November 4, 2020, the Company secured an additional $13.5 million of reinsurance limit at an approximate cost of $2.0 million. This limit was available for any subsequent events that occurred for the remainder of 2020, except for Hurricane Eta. Effective January 1, 2021, the Company entered into an aggregate excess of loss agreement on its MIC book of business through the end of the calendar year. This new agreement provides reinsurance coverage on non-named storms, of 65% of $15 million excess of $10 million with a $0.85 million occurrence deductible and a $4.15 million occurrence limit at an approximate cost of $2.3 million. Subsequent to a significant loss event in February 2021, the Company purchased $50 million of additional reinsurance limit to provide further protection for any future events through May 31, 2021. The additional protection was secured in two layers for an approximate cost of $13 million with the lowest layer responding at a retention level of $10 million. This additional limit contained overlapping coverage on certain portions of this purchase, resulting in the determination that the additional coverage contained an embedded derivative. While the economic substance is similar to as a typical reinsurance recovery, the embedded derivative is carried at fair value on our consolidated balance sheets and changes in fair value are recognized in net realized and unrealized gain (loss) on our consolidated statements of operations as they occur. Refer to Notes 2 and 3 for further information. Lastly, the Company secured additional reinsurance limit of 50% of $70 million excess of $25 million, at an approximate cost of $2.8 million, which were recognized as ceded premium over the period from June 1, 2021 through June 30, 2021. This limit is available for events occurring during this period for all carriers and all states. The carriers’ cost and amounts of reinsurance are based on current analysis of exposure to catastrophic risk. Most of the data is subjected to exposure level analysis at various dates through December 31, 2020. This analysis of the carriers’ exposure levels in relation to the total exposures to the FHCF and excess of loss treaties may produce changes in retentions, limits and reinsurance premiums in total, and by carrier, as a result of increases or decreases in the carriers’ exposure levels. 2021-2022 Catastrophe Excess of Loss Reinsurance Program The Company’s excess of loss catastrophe reinsurance program for 2021-2022 (the “2021-2022 Program”), which covers the Company and its wholly-owned insurance subsidiaries, FNIC, MIC and MNIC became effective July 1, 2021. The 2021-2022 Program provides the carriers up to approximately $1.4 billion of single event reinsurance coverage in excess of up to a $18.25 million pre-tax retention for certain catastrophic losses, including hurricanes, and aggregate coverage up to $2.25 billion, at an approximate total cost of $274.1 million, subject to adjustments based on actual exposure or premium of policies at different points in time in the coming months. Due to non-Florida exposures becoming a larger portion of the overall book of business, the Company broadened its approach to its reinsurance purchases for this treaty year by separating the program into two reinsurance towers. The first tower includes all exposures for FNIC Florida, MIC in all states and MNIC and includes ground up first event limit protection up to approximately $982 million (“Primary Tower”), subject to a maximum first-event retention of $10 million. The second tower provides ground up first event limit up to $450 million for all FNIC’s non-Florida business produced by its managing general underwriter partner (“FNIC SageSure Tower”), subject to a first-event retention of $8.25 million. The $18.25 million combined towers maximum retention is a reduction in the first event retention of approximately 41% compared to up to $31 million in last year’s program. The combination of these separate towers provides the Company with an increase in aggregate catastrophe reinsurance protection of approximately $345 million compared to the previous treaty year original purchase. More specifically, the 2021-2022 Program includes up to approximately $2.25 billion in aggregate reinsurance across all states in which the Company operates, including $504 million of reinsurance provided by the Florida Hurricane Catastrophe Fund (“FHCF”). Up to approximately $972 million is available for a first event within Florida, including $468 million of private coverage plus the FHCF coverage. Up to approximately $910 million of coverage is available for a first event outside of Florida, including the $468 million of private coverage from the Primary Tower, which is available to cover catastrophe losses in MIC’s book of business located in Louisiana and Texas. FHCF coverage responds on both a per occurrence and aggregate basis, and is exclusive to the state of Florida. Additionally, the 2021-2022 Program provides $831 million of private reinsurance across the combined towers for second and subsequent events, subject to individual retentions within each tower and the aggregate limit. All layers above a $30 million attachment point have prepaid automatic reinstatement protection, which affords the carriers additional coverage for subsequent events without additional cost. Most of the privately placed layers of the 2021-2022 Program are effective July 1, 2021, with certain agreements effective for June 2021. The portion of the 2021-2022 Program placed with private reinsurers is with partners that as of March 31, 2022 had an A.M. Best Company or Standard & Poor’s rating of “A-” or better, or that have fully collateralized their maximum potential obligations in dedicated trusts. For the purpose of debt covenant compliance, if any reinsurer on the 2021-2022 Program is not collateralized or has a rating lower than “A-” by A.M. Best Company or Standard & Poor’s then the Company treats that reinsurer’s participation as if it was part of the Company’s net retention. Refer to "Part I, Item 1A., Risk Factors” of our 2021 Form 10-K for more information. The private reinsurance market continued to harden this year due to a number of factors, including the elevated number of catastrophic events impacting U.S. coastal areas in recent years. These factors have resulted in more restrictive terms for the current and upcoming reinsurance treaty year. The change in terms includes a further reduction in the availability of cascading coverage, which automatically “drops-down” coverage for subsequent events and prevents gaps in reinsurance protection when multiple events occur during the same treaty year. In addition, there was limited open market capacity available for lower layer attachment points on an “all perils” basis. As a result, a vast majority of the first layer for the Primary Tower ($20 million excess of $10 million), which includes one automatic reinstatement, covers “all perils” only through November 30, 2021, after which coverage includes only named storms such as tropical depressions, tropical storms and hurricanes, and excludes tornado or hail events. The first layer in the FNIC SageSure Tower ($22 million excess of $8 million) provides both per occurrence and aggregate protection and was placed with Anchor Re, an affiliate of SageSure (the non-affiliated managing general underwriter that writes FNIC’s non-Florida property business) on a fully-collateralized basis. In addition, 66% of the reinstatement premium protection ($12 million) for the layer that attaches above $30 million of the FNIC SageSure Tower provides protection on an “all perils” basis whereas the remaining 34% ($6 million) provides protection following only a hurricane. As indicated above, the carriers’ combined 2021-2022 Program is estimated to cost $274.1 million, consisting of $204.8 million for the Primary Tower and $69.4 million for FNIC SageSure Tower after consideration of 19% downward premium adjustment resulting from the September 30, 2021 exposure adjustment, driven by our exposure management initiatives. This amount includes approximately $237.9 million for private reinsurance for the carriers’ exposure described above, including prepaid automatic premium reinstatement protection, along with approximately $36.2 million, within the Primary Tower, payable to the FHCF. All carriers maintained their 90% FHCF participation for the wind season. In the Primary Tower, each carrier will share the combined cost in proportion to its contribution to the total expected loss in each reinsurance layer. Each carrier’s reinsurance recoveries will be based on that carrier’s contributing share of a given event’s total loss and each carrier will be responsible for its portion of the 2021-2022 Program’s per event retention based on a specific allocation formula. In addition to the coverage stated above, under the FNIC SageSure Tower, the Company purchased additional protection that lowers the second event named-storm retention, inclusive of co-participation, to approximately $9.75 million, with certain limitations as described below. For a third event, the named storm retention would be approximately $17.3 million. More specifically, this additional coverage consists of 75% of $27 million of coverage for a second event and 47% of $27 million of coverage for a third event, which applies to named storm losses only. These retentions may be reduced after taking into account the 80% quota-share agreement that was in place with Anchor Re up through December 31, 2021, which is discussed further below in " FNIC Homeowners non-Florida ". As discussed above, the lower layers of each tower of the 2021-2022 reinsurance program exclude severe convective storm coverage (tornado and hail) after December 1, 2021, resulting in approximately $30 million of single event exposure to the Company under each tower, subject to potential coverage under certain quota-share reinsurance treaties. The carriers’ cost and amounts of reinsurance are based on current analysis of exposure to catastrophic risk. The data was subjected to exposure level analysis at various dates through December 31, 2021. This analysis of the carriers’ exposure levels in relation to the total exposures to the FHCF and excess of loss treaties may produce changes in retentions, limits and reinsurance premiums in total, and by carrier, as a result of increases or decreases in the carriers’ exposure levels. Quota-Share Reinsurance Programs FNIC Homeowners Florida On July 1, 2020, FNIC renewed its quota-share treaty with Swiss Re, which was initially set at 10%, on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms and subject to certain limitations. Effective October 1, 2020, this treaty increased the cession percentage from 10% to 20% on an in-force, new and renewal basis. On November 15, 2020, FNIC entered into a 10% quota-share reinsurance treaty through November 15, 2021 on its Florida homeowners book of business on an in-force, new and renewal basis. This treaty excludes all catastrophe losses and provides coverage only on attritional losses and is subject to certain limitations. On December 31, 2020, FNIC entered into a 10% quota-share reinsurance treaty through December 31, 2021 on its Florida homeowners book of business on an in-force, new and renewal basis. This treaty excludes named storms and is subject to certain limitations. On July 1, 2021, FNIC renewed its 20% quota-share treaty on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms and subject to certain limitations. In addition, this quota-share allows FNIC the flexibility to prospectively increase (we are currently at the maximum) or decrease the cession percentage up to three times during the term of the agreement. On November 15, 2021, FNIC renewed its 10% quota-share treaty through November 15, 2022 on its Florida homeowners book of business on an in-force, new and renewal basis. This treaty excludes all catastrophe losses and provides coverage only on attritional losses and is subject to certain limitations. On December 31, 2021, FNIC entered into a new 7.5% quota-share reinsurance treaty through December 31, 2022 on its Florida homeowners book of business on a new and renewal basis. This treaty excludes named storms and is subject to certain limitations. FNIC elected to runoff the expiring 10% participation through the policies natural expirations. FNIC Homeowners non-Florida On July 1, 2020, FNIC entered into a quota-share treaty on its non-Florida homeowners book of business with Anchor Re, an Arizona captive reinsurance entity that is an affiliate of SageSure. The treaty provided 50% quota-share reinsurance protection on claims incurred subsequent to July 1, 2020 on in-force, new and renewal business through June 30, 2021, subject to certain limitations, which include limits on the net losses that Anchor Re can realize during the treaty year. The treaty arrangement was fully collateralized through Anchor Re. The financial economics of this treaty substantially mirror the 50% profit-sharing arrangement that was previously in place. Thus, this treaty was not expected to have any impact on the pre-tax operating results of the Company, though the components of the combined ratio will be affected by the ceding of premiums, claims and commissions. On November 3, 2020, FNIC and Anchor Re agreed to increase the cession percentage in this treaty from 50% to 80%, effective December 1, 2020 on in-force, new and renewal basis. Effective January 31, 2021, the Company terminated its existing 80% quota-share reinsurance treaty with Anchor Re and commuted the agreement. In April 2021, the Company received $7.2 million from Anchor Re as settlement of the commutation. Immediately after the commutation, the Company entered into an 80% quota-share treaty with Anchor Re on February 1, 2021 on an in-force, new and renewal basis, which covers the thirteen month period through February 28, 2022, subject to certain limitations, which include limits on the net losses that Anchor Re can realize during the treaty year. Effective December 31, 2021, the Company terminated its existing 80% quota-share reinsurance treaty with Anchor Re and commuted the agreement. Immediately after the commutation, the Company entered into a 100% quota-share treaty with Anchor Re on December 31, 2021 on an in-force, new and renewal basis, which covers the six month period through June 30, 2022, subject to certain limitations which include limits on the net losses that Anchor Re can realize during the treaty year. The new treaty excludes catastrophe losses, involves a funded trust and is fully collateralized through Anchor Re. The Company recorded a pre-tax loss of $2.5 million in the fourth quarter of 2021 related to the settlement of the managing general underwriting and profit share agreements with SageSure through December 31, 2021. Associated Trust Agreements Certain reinsurance agreements require FNIC to secure the credit, regulatory and business risk. Fully funded trust agreements securing these risks totaled less than $0.1 million as of March 31, 2022 and December 31, 2021. Reinsurance Recoverable, Net Amounts recoverable from reinsurers are recognized in a manner consistent with the claims liabilities associated with the reinsurance placement and presented on the consolidated balance sheet as reinsurance recoverable. Reinsurance recoverable, net consisted of the following: March 31, December 31, 2022 2021 (In thousands) Reinsurance recoverable on paid losses $ 100,499 $ 59,096 Reinsurance recoverable on unpaid losses 481,531 554,356 Allowance for credit loss (109) (249) Reinsurance recoverable, net $ 581,921 $ 613,203 As of March 31, 2022, and December 31, 2021, the Company had reinsurance recoverable of $480.0 million (as a result of Hurricanes Ida, Laura, Irma, Sally as well as April 2021 Storms) and $504.8 million (as a result of Hurricanes Ida, Irma, Laura, April 2021 Storms and Hurricane Sally), respectively. April 2021 Storms were a collection of severe weather events impacting Texas, Florida, Louisiana and other states over a six-day period starting approximately April 10, 2021. Refer to Note 6 below for information regarding the assessment and amounts of allowances for credit losses. Net Premiums Written and Net Premiums Earned Net premiums written and net premiums earned consisted of the following: Three Months Ended March 31, 2022 2021 (In thousands) Net Premiums Written Direct $ 137,892 $ 174,207 Ceded (38,269) (78,149) $ 99,623 $ 96,058 Net Premiums Earned Direct $ 164,328 $ 179,002 Ceded (118,343) (139,257) $ 45,985 $ 39,745 |
ALLOWANCE FOR CREDIT LOSS
ALLOWANCE FOR CREDIT LOSS | 3 Months Ended |
Mar. 31, 2022 | |
Receivables [Abstract] | |
ALLOWANCES FOR CREDIT LOSS | 6. ALLOWANCES FOR CREDIT LOSS Overview There is significant risk and judgment involved in determining estimates of our allowances for credit loss, which reduce the amortized cost of an asset to produce an estimate of the net amount that will be collected over the asset's contractual life. Longer time horizons generally present more uncertainty in expected cash flow. We evaluate the expected credit loss of assets on an individual basis, except in cases where assets collectively share similar risk characteristics where we pool them together. We evaluate and estimate our allowances for credit loss by considering reasonable, relevant and supportable available information. Activity in the allowances for credit loss, by asset line item on the consolidated balance sheet, is summarized as follows: Reinsurance Premiums Recoverable, Receivable Net Total (In thousands) Balance as of December 31, 2021 $ 125 $ 249 $ 374 Credit loss expense (recovery) (1) 8 (140) (132) Balance as of March 31, 2022 $ 133 $ 109 $ 242 (1) Reflected in commissions and other underwriting expenses on the consolidated statements of comprehensive income (loss). Accrued investment income is included in other assets on the consolidated balance sheet. We immediately write-off accrued investment income if it becomes uncollectible, therefore we do not measure or record an allowance for credit losses. Investments Our investment policy is established by the Board of Directors’ Investment Committee and is reviewed on a regular basis. This policy currently limits investment in non-investment-grade debt securities (including high-yield bonds), and limits total investments in preferred stock, common stock and mortgage notes receivable. We also comply with applicable laws and regulations that further restrict the type, quality and concentration of our investments. We do not use any swaps, options, futures or forward contracts to hedge or enhance our investment portfolio. Our investment portfolio has inherent risks because it contains volatility associated with market pricing and interest rate sensitive instruments, such as bonds, which may be adversely affected by changes in interest rates or credit worthiness. The effects of market volatility, declining economic conditions, such as a U.S. or global economic slowdown, whether due to COVID-19, or other factors, could adversely impact the credit quality of securities in our portfolio and may have unforeseen consequences on the liquidity and financial stability of the issuers of securities we hold. Our debt securities portfolio includes securities that: • Are explicitly guaranteed by a sovereign entity that can print its own currency; • The currency is routinely held by central banks, used in international commerce and commonly viewed as a reserve currency; and • Have experienced a consistent high credit rating by rating agencies and a long history with no credit losses. We believe if these governments were to technically default it is reasonable to assume an expectation of immaterial losses. Refer to Note 4 above for the balances of these sovereign debt securities, which are reported in the following investment categories: • United States government obligations and authorities; • Obligations of states and political subdivisions; and • International. For our debt securities, available-for-sale, the fact that a security’s fair value is below its amortized cost is not a decisive indicator of credit loss. In many cases, a security’s fair value may decline due to factors that are unrelated to the issuer’s ability to pay. For this reason, we consider the extent to which fair value is below amortized cost in determining whether a credit-related loss exists. The Company also considers the credit quality rating of the security, with a special emphasis on securities downgraded below investment grade. A comparison is made between the present value of expected future cash flows for a security and its amortized cost. If the present value of future expected cash flows is less than amortized cost, a credit loss is presumed to exist and an allowance for credit loss is established. Management may conclude that a qualitative analysis is sufficient to support its conclusion that the present value of the expected cash flows equals or exceeds a security’s amortized cost. As a result of this review, management concluded that there were no credit-related impairments of our available-for-sale securities as of March 31, 2022 and December 31, 2021. Management does not have any current intent to sell available-for-sale securities in an unrealized loss position, and it is not “more likely than not” that the Company will be required to sell these securities before a recovery in their value to their amortized cost basis occurs. Our equity investments are measured at fair value through net income (loss), therefore they do not require an allowance for credit loss. Premiums Receivable We do have collectability risk, but our homeowners policy terms are one year or less and our policyholders are dispersed throughout the southeast United States, although the majority of our policyholders are located in Florida. We write-off premiums receivable if the individual policy becomes uncollectible. Because collectively our premiums receivable share similar risk characteristics, we pool them to measure our valuation allowance for credit losses using an aging method approach. This method applies historical loss rates to levels of delinquency for our policy terms that are one year or less. Based upon historical collectability, adjusted for current and future economic conditions, we have measured and recorded our valuation allowances for premiums receivable. The aging of our premiums receivable and associated allowance for credit loss was as follows: Days Past Due Current 1-29 30-59 60-89 90 plus Total March 31, 2022 (In thousands) Amortized cost $ 31,001 $ 1,914 $ 168 $ 63 $ 76 $ 33,222 Allowance for credit loss — (21) (15) (21) (76) (133) Net $ 31,001 $ 1,893 $ 153 $ 42 $ — $ 33,089 Days Past Due Current 1-29 30-59 60-89 90 plus Total December 31, 2021 (In thousands) Amortized cost $ 39,287 $ 1,670 $ 233 $ 16 $ 93 $ 41,299 Allowance for credit loss — (15) (12) (5) (93) (125) Net $ 39,287 $ 1,655 $ 221 $ 11 $ — $ 41,174 Reinsurance Recoverable Refer to Note 5 above for details of our efforts to minimize our exposure to losses from a reinsurer’s inability to pay. We measure and record our valuation allowances for credit losses on our reinsurance recoverables asset by multiplying the probability the asset would default within a given timeframe ("PD") by the percentage of the asset not expected to be collected upon default, or loss given default ("LGD") and multiplying the result by the amortized cost of the asset. We use market observable data for our PD and LGD assumptions, and in cases where we are unable to observe LGD, we assume it is 100%. |
LOSS AND LOSS ADJUSTMENT RESERV
LOSS AND LOSS ADJUSTMENT RESERVES | 3 Months Ended |
Mar. 31, 2022 | |
Liability for Future Policy Benefit, before Reinsurance [Abstract] | |
LOSS AND LOSS ADJUSTMENT RESERVES | 7. LOSS AND LOSS ADJUSTMENT RESERVES The liability for loss and LAE reserves is determined on an individual-case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claim development and incurred but not reported ("IBNR"). Activity in the liability for loss and LAE reserves is summarized as follows: Three Months Ended March 31, 2022 2021 (In thousands) Gross reserves, beginning-of-period $ 738,794 $ 540,367 Less: reinsurance recoverable (1) (554,107) (358,128) Net reserves, beginning-of-period 184,687 182,239 Incurred loss, net of reinsurance, related to: Current year 55,312 47,493 Prior year loss development (redundancy) (2) 3,472 624 Ceded losses subject to offsetting experience account adjustments (3) — (96) Prior years 3,472 528 Amortization of acquisition fair value adjustment (1) (5) Total incurred loss and LAE, net of reinsurance 58,783 48,016 Paid loss, net of reinsurance, related to: Current year 4,407 24,669 Prior years 58,890 46,813 Total paid loss and LAE, net of reinsurance 63,297 71,482 Net reserves, end-of-period 180,173 158,773 Plus: reinsurance recoverable (1) 481,422 327,940 Gross reserves, end-of-period $ 661,595 $ 486,713 (1) Reinsurance recoverable in this table includes only ceded loss and LAE reserves. (2) Reflects loss development from prior accident years impacting pre-tax net income. Excludes losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment. (3) Reflects losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment, such that there is no impact on pre-tax net income (loss). The establishment of loss reserves is an inherently uncertain process and changes in loss reserve estimates are expected as such estimates are subject to the outcome of future events. The factors influencing changes in claim costs are often difficult to isolate or quantify and developments in paid and incurred losses from historical trends are frequently subject to multiple interpretations. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such adjustments are made. During the three months ended March 31, 2022, the Company experienced $3.5 million of net unfavorable loss and LAE reserve development from its homeowners line of business primarily driven by increased losses from Hurricane Laura. During the three months ended March 31, 2021, the Company experienced $0.6 million of unfavorable loss and LAE reserve development on prior accident years, primarily in its non-Florida homeowners line of business as a result of higher than expected development from accident year 2020. |
LONG-TERM DEBT
LONG-TERM DEBT | 3 Months Ended |
Mar. 31, 2022 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | 8. LONG-TERM DEBT In May 2022, Egan Jones’ rating on the Company’s outstanding senior notes expired such that our notes are not currently rated. The lack of a rating, if not remediated within 30 days from receipt of notice as provided in the note indentures, has the potential to result in an Event of Default under the note indentures. The Company intends to use its best efforts to secure such a rating as soon as reasonably practicable. If the Company fails to secure such a rating, such condition, represents a potential default under our debt indentures that could result in acceleration of repayment of our debt. If the Company fails to secure such a rating, is placed into receivership or fails to obtain excess-of-loss reinsurance, such conditions, if not timely cured, could result in acceleration of repayment of our debt. The Company does not have adequate liquidity to repay this debt without replacement borrowings, which may not be available. The fair values of the Convertible Senior Unsecured Notes due 2026 were $22.5 million and $22.1 million as of March 31, 2022 and December 31, 2021, respectively. The fair values of the Senior Unsecured Fixed Rate Notes due 2029 were $102.8 million and $106.5 million as of March 31, 2022 and December 31, 2021, respectively. Refer to Note 3 for additional information. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | 9. INCOME TAXES Our effective income tax rate is the ratio of income tax expense (benefit) over our income (loss) before income taxes. The effective income tax rate was 2.3% and 20.2% for the three months ended March 31, 2022 and 2021, respectively. Differences in the effective tax and the statutory Federal income tax rate of 21% are driven by state income taxes and anticipated annual permanent differences, including estimates for tax-exempt interest, dividends received deduction, executive compensation as well as the net operating loss ("NOL") provision and change in the valuation allowance in the current year. The application of GAAP requires us to evaluate the recoverability of our net deferred income tax assets, including those associated with NOL carryforwards, and establish a valuation allowance, if necessary, to reduce our deferred income tax asset to an amount that is more likely than not to be realizable. Considerable judgment and the use of estimates are required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, we consider many factors, including: the nature and character of the deferred income tax assets and liabilities; taxable income in prior carryback years, if any; future reversals of existing temporary differences; the length of time carryovers can be utilized; and any tax planning strategies we would employ to avoid a tax benefit from expiring unused. Realization is never assured and based on available information, including the financial performance of the Company, and determined that it was more likely than not that the net deferred income tax asset would not be realized. Therefore, as of March 31, 2022 and December 31, 2021, we have established a full valuation allowance and no deferred income tax were reflected in net income (loss) for the three months ended March 31, 2022. For additional information, refer to Note 11 of our 2021 Form 10-K. The Company had an uncertain tax position of $0.2 million and $0.2 million as of March 31, 2022 and December 31, 2021, respectively. The Company has a valuation allowance of $26.0 million and $30.5 million on its deferred income tax asset as of March 31, 2022 and December 31, 2021, respectively. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense (benefit) in the consolidated statements of operations and statements of comprehensive income (loss). For the three |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 10. COMMITMENTS AND CONTINGENCIES Litigation and Legal Proceedings In the ordinary course of business, the Company is involved in various legal proceedings, specifically claims litigation. The Company’s insurance subsidiaries participate in most of these proceedings by either defending third-party claims brought against insureds or litigating first-party coverage claims. The Company accounts for such activity through the establishment of loss and LAE reserves. The Company’s management believes that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, is immaterial to the Company’s consolidated financial statements. The Company is also occasionally involved in other legal and regulatory proceedings, some of which may assert claims for substantial amounts, making the Company party to individual actions in which extra-contractual damages, punitive damages or penalties, such as claims alleging bad faith in the handling of insurance claims, are sought. The Company reviews the outstanding matters, if any, on a quarterly basis. The Company accrues for estimated losses and contingent obligations in the consolidated financial statements if and when the obligation or potential loss from any litigation, legal proceeding or claim is considered probable and the amount of the potential exposure is reasonably estimable. The Company records such probable and estimable losses through the establishment of legal expense reserves. As events evolve, facts concerning litigation and contingencies become known and as additional information becomes available, the Company’s management reassesses its potential liabilities related to pending claims and litigation and may revise its previous estimates and make appropriate adjustment to the financial statements. Estimates that require judgment are subject to change and are based on management’s assessment, including the advice of legal counsel, the expected outcome of litigation and legal proceedings or other dispute resolution proceedings or the expected resolution of contingencies. The Company’s management believes that the Company’s accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on the Company’s consolidated financial statements. In April 2022, the Company received a written demand for arbitration from one of the reinsurers (“the reinsurer”) included in the Company’s excess-of-loss reinsurance program. The reinsurer asserts that the Company has misapplied certain provisions of the treaty for purposes of determining catastrophe weather losses in excess of the Company’s single-event retention. The Company strongly believes its ceded losses have been determined in accordance with the provisions of the treaties; however, the ultimate resolution of this matter could result in the Company retaining up to $14.5 million of additional net catastrophe losses related to the reinsurer in question. Because the Company does not deem any loss as probable or estimable, no amount has been accrued related to the matter as of the date of this filing. Assessment Related Activity The Company operates in a regulatory environment where certain entities and organizations have the authority to require us to participate in assessments. Currently these entities and organizations include: Florida Insurance Guaranty Association (“FIGA”), Citizens Property Insurance Corporation (“Citizens”), FHCF, Georgia Insurers Insolvency Pool (“GIIP”), Special Insurance Fraud Fund (“SIIF”), Fair Access to Insurance Requirements Plan (“FAIRP”), Property Insurance Association of Louisiana (“PIAL”), South Carolina Property & Casualty Insurance Guaranty Association (“SCPCIGA”), Texas Property and Casualty Insurance Guaranty Association (“TPCIGA”), Texas Windstorm Insurance Association (“TWIA”), Alabama Insurance Guaranty Association (“AIGA”), and Alabama Insurance Underwriters Association (“AIUA”). As a direct premium writer, we are required to participate in certain insurer solvency associations under the applicable laws in the states which we do business. One form of assessment requires us to collect the assessment from our policyholders and then remit the collected amounts to the assessing entity, which does not have any impact on our financial results. We are also subject to assessments that require us to pay the full amount of the assessment to the assessing entity and then we are permitted to make rate filings to allow us to recoup the amount of the assessment from our policyholders over time. In connection with its automobile line of business, which is currently winding down, FNIC is also required to participate in an insurance apportionment plan under Florida law, which is referred to as a JUA Plan. The JUA Plan provides for the equitable apportionment of any profits realized, or losses and expenses incurred, among participating automobile insurers. In the event of an underwriting deficit incurred by the JUA Plan, which is not recovered through the policyholders in the JUA Plan, such deficit shall be recovered from the companies participating in the JUA Plan in the proportion that the net direct written premiums of each such member during the preceding calendar year bear to the aggregate net direct premiums written in this state by all members of the JUA Plan. There were no material assessments by the JUA Plan as of December 31, 2021. Future assessments by the JUA and the JUA Plan are indeterminable at this time. Leases The Company is committed under various operating lease agreements for office space. The right-of-use asset is reflected in other assets and the lease liability is reflected in other liabilities on our consolidated balance sheets. Lease expense, net of sublease income is reflected in general and administrative expenses on our consolidated statements of operations. Additional information related to our operating lease agreement for office space consisted of the following: As of March 31, December 31, 2022 2021 (In thousands) Right-of-use asset $ 6,497 $ 6,693 Accrued rent (488) (482) Right-of-use asset, net $ 6,009 $ 6,211 Lease liability $ 6,497 $ 6,693 Weighted average discount rate 4.70 % 4.70 % Weighted average remaining years of lease term 6.5 6.7 Three Months Ended March 31, 2022 2021 (In thousands) Lease expense $ 280 $ 280 Sublease income (72) (109) Lease expense, net $ 208 $ 171 Net cash provided by (used in) operating activities $ (201) $ (156) The interest rates implicit in our leases were not known, therefore the weighted-average discount rate above was determined by what FedNat would have had to pay to borrow the lease payments in a similar economic environment that existed at inception of our leases while considering our general credit and the theoretical collateral of the office space. In the event of a change to lease term, the Company would re-evaluate all inputs and assumptions, including the discount rate. |
COMMITMENTS AND CONTINGENCIES | 10. COMMITMENTS AND CONTINGENCIES Litigation and Legal Proceedings In the ordinary course of business, the Company is involved in various legal proceedings, specifically claims litigation. The Company’s insurance subsidiaries participate in most of these proceedings by either defending third-party claims brought against insureds or litigating first-party coverage claims. The Company accounts for such activity through the establishment of loss and LAE reserves. The Company’s management believes that the ultimate liability, if any, with respect to such ordinary-course claims litigation, after consideration of provisions made for potential losses and costs of defense, is immaterial to the Company’s consolidated financial statements. The Company is also occasionally involved in other legal and regulatory proceedings, some of which may assert claims for substantial amounts, making the Company party to individual actions in which extra-contractual damages, punitive damages or penalties, such as claims alleging bad faith in the handling of insurance claims, are sought. The Company reviews the outstanding matters, if any, on a quarterly basis. The Company accrues for estimated losses and contingent obligations in the consolidated financial statements if and when the obligation or potential loss from any litigation, legal proceeding or claim is considered probable and the amount of the potential exposure is reasonably estimable. The Company records such probable and estimable losses through the establishment of legal expense reserves. As events evolve, facts concerning litigation and contingencies become known and as additional information becomes available, the Company’s management reassesses its potential liabilities related to pending claims and litigation and may revise its previous estimates and make appropriate adjustment to the financial statements. Estimates that require judgment are subject to change and are based on management’s assessment, including the advice of legal counsel, the expected outcome of litigation and legal proceedings or other dispute resolution proceedings or the expected resolution of contingencies. The Company’s management believes that the Company’s accruals for probable and estimable losses are reasonable and that the amounts accrued do not have a material effect on the Company’s consolidated financial statements. In April 2022, the Company received a written demand for arbitration from one of the reinsurers (“the reinsurer”) included in the Company’s excess-of-loss reinsurance program. The reinsurer asserts that the Company has misapplied certain provisions of the treaty for purposes of determining catastrophe weather losses in excess of the Company’s single-event retention. The Company strongly believes its ceded losses have been determined in accordance with the provisions of the treaties; however, the ultimate resolution of this matter could result in the Company retaining up to $14.5 million of additional net catastrophe losses related to the reinsurer in question. Because the Company does not deem any loss as probable or estimable, no amount has been accrued related to the matter as of the date of this filing. Assessment Related Activity The Company operates in a regulatory environment where certain entities and organizations have the authority to require us to participate in assessments. Currently these entities and organizations include: Florida Insurance Guaranty Association (“FIGA”), Citizens Property Insurance Corporation (“Citizens”), FHCF, Georgia Insurers Insolvency Pool (“GIIP”), Special Insurance Fraud Fund (“SIIF”), Fair Access to Insurance Requirements Plan (“FAIRP”), Property Insurance Association of Louisiana (“PIAL”), South Carolina Property & Casualty Insurance Guaranty Association (“SCPCIGA”), Texas Property and Casualty Insurance Guaranty Association (“TPCIGA”), Texas Windstorm Insurance Association (“TWIA”), Alabama Insurance Guaranty Association (“AIGA”), and Alabama Insurance Underwriters Association (“AIUA”). As a direct premium writer, we are required to participate in certain insurer solvency associations under the applicable laws in the states which we do business. One form of assessment requires us to collect the assessment from our policyholders and then remit the collected amounts to the assessing entity, which does not have any impact on our financial results. We are also subject to assessments that require us to pay the full amount of the assessment to the assessing entity and then we are permitted to make rate filings to allow us to recoup the amount of the assessment from our policyholders over time. In connection with its automobile line of business, which is currently winding down, FNIC is also required to participate in an insurance apportionment plan under Florida law, which is referred to as a JUA Plan. The JUA Plan provides for the equitable apportionment of any profits realized, or losses and expenses incurred, among participating automobile insurers. In the event of an underwriting deficit incurred by the JUA Plan, which is not recovered through the policyholders in the JUA Plan, such deficit shall be recovered from the companies participating in the JUA Plan in the proportion that the net direct written premiums of each such member during the preceding calendar year bear to the aggregate net direct premiums written in this state by all members of the JUA Plan. There were no material assessments by the JUA Plan as of December 31, 2021. Future assessments by the JUA and the JUA Plan are indeterminable at this time. Leases The Company is committed under various operating lease agreements for office space. The right-of-use asset is reflected in other assets and the lease liability is reflected in other liabilities on our consolidated balance sheets. Lease expense, net of sublease income is reflected in general and administrative expenses on our consolidated statements of operations. Additional information related to our operating lease agreement for office space consisted of the following: As of March 31, December 31, 2022 2021 (In thousands) Right-of-use asset $ 6,497 $ 6,693 Accrued rent (488) (482) Right-of-use asset, net $ 6,009 $ 6,211 Lease liability $ 6,497 $ 6,693 Weighted average discount rate 4.70 % 4.70 % Weighted average remaining years of lease term 6.5 6.7 Three Months Ended March 31, 2022 2021 (In thousands) Lease expense $ 280 $ 280 Sublease income (72) (109) Lease expense, net $ 208 $ 171 Net cash provided by (used in) operating activities $ (201) $ (156) The interest rates implicit in our leases were not known, therefore the weighted-average discount rate above was determined by what FedNat would have had to pay to borrow the lease payments in a similar economic environment that existed at inception of our leases while considering our general credit and the theoretical collateral of the office space. In the event of a change to lease term, the Company would re-evaluate all inputs and assumptions, including the discount rate. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2022 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | 11. SHAREHOLDERS' EQUITY Securities Offerings In June 2018, the Company filed with the Securities and Exchange Commission (“SEC”) on Form S-3, a shelf registration statement enabling the Company to offer and sell, from time to time, up to an aggregate of $150.0 million of securities. On March 15, 2021, the Company closed an underwritten public offering of 3,500,000 shares of its common stock at a price of $4.75 per share for gross proceeds of $16.6 million. The offering generated net proceeds to the Company of approximately $15.1 million, after deducting the underwriter’s discount and offering expenses payable by the Company. In April 2021, the Company sold an additional 100,650 shares upon partial exercise of the underwriter's overallotment option and received net proceeds of $0.4 million. Share-Based Compensation Expense Share-based compensation arrangements include the following: Three Months Ended March 31, 2022 2021 (In thousands) Restricted stock $ 196 $ 322 Performance stock — 85 Total share-based compensation expense $ 196 $ 407 Recognized tax benefit $ — $ 85 Intrinsic value of options exercised — — Fair value of restricted stock vested 837 1,442 The intrinsic value of options exercised represents the difference between the stock option exercise price and the weighted average closing stock price of FNHC common stock on the exercise dates, as reported on the NASDAQ Global Market. Stock Option Awards As of March 31, 2022, the Company had outstanding stock options exercisable for 19,832 shares of common stock at a weighted average exercise price of $4.40 per share. During the three months ended March 31, 2022 and 2021, no stock options were granted, exercised or canceled. Restricted Stock Awards The Company recognizes share-based compensation expense for all restricted stock awards (“RSAs”) held by the Company’s directors, executives and other key employees. For all RSA awards the accounting charge is measured at the grant date as the fair value of FNHC common stock and expensed as non-cash compensation over the vesting term using the straight-line basis for service awards and over successive one-year requisite service periods for performance-based awards. Our expense for our performance awards depends on achievement of specified results; therefore, the ultimate expense can range from 0% to 250% of target. During the three months ended March 31, 2022 and 2021, the Board of Directors granted 0 and 171,576 RSAs, respectively, vesting over three RSA activity includes the following: Number of Shares Weighted Average Grant Date Fair Value Outstanding at January 1, 2022 343,683 $ 9.98 Granted — — Vested (72,307) 11.57 Cancelled (54,647) 10.13 Outstanding at March 31, 2022 216,729 $ 9.41 The weighted average grant date fair value is measured using the closing price of FNHC common stock on the grant date, as reported on the NASDAQ Global Market. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income (loss) associated with debt securities - available-for-sale consisted of the following: Three Months Ended March 31, 2022 2021 Before Tax Income Tax Net Before Tax Income Tax Net (In thousands) Accumulated other comprehensive income (loss), beginning-of-period $ 2,671 $ (3,705) $ (1,034) $ 15,086 $ (3,700) $ 11,386 Other comprehensive income (loss) before reclassification (16,050) — (16,050) (9,397) 2,306 (7,091) Reclassification adjustment for realized losses (gains) included in net income 14,496 25 14,521 (144) 35 (109) (1,554) 25 (1,529) (9,541) 2,341 (7,200) Accumulated other comprehensive income (loss), end-of-period $ 1,117 $ (3,680) $ (2,563) $ 5,545 $ (1,359) $ 4,186 |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | 12. EARNINGS PER SHARE Basic earnings per share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including vested restricted stock awards during the period. Diluted EPS is computed by dividing net income (loss) by the weighted average number of shares outstanding, noted above, adjusted for the dilutive effect of stock options and unvested restricted stock awards. Dilutive securities are common stock equivalents that are freely exercisable into common stock at less than market prices or otherwise dilute earnings if converted. The net effect of common stock equivalents is based on the incremental common stock that would be issued upon the assumed conversion of convertible long-term debt (if not antidilutive, the associated interest expense reflected in net income (loss) available to common shareholders, would be excluded as well), exercise of common stock options and the vesting of RSAs using the treasury stock method. Common stock equivalents are not included in diluted earnings per share when their inclusion is antidilutive. The following presents the calculation of basic and diluted EPS: Three Months Ended March 31, 2022 2021 (In thousands, except per share data) Net income (loss) attributable to FedNat Holding Company shareholders $ (43,914) $ (19,381) Weighted average number of common shares outstanding - basic 17,462 14,395 Net income (loss) per common share - basic $ (2.51) $ (1.35) Weighted average number of common shares outstanding - basic 17,462 14,395 Dilutive effect of convertible debt — — Dilutive effect of stock compensation plans — — Weighted average number of common shares outstanding - diluted 17,462 14,395 Net income (loss) per common share - diluted $ (2.51) $ (1.35) Dividends per share $ — $ — |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | 13. SUBSEQUENT EVENTS Refer to Note 2 above for information related to a portion of the Company's action plan having been approved by the OIR, which consists of a substantial reduction to the size of the Company’s Florida books of business via the execution of mid-term cancellations effective June 29, 2022, of approximately 68,200 Florida policies currently in force on FNIC, MNIC and MIC, as requested by the Company. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Policies [Abstract] | |
Material Distribution Relationships | Material Distribution Relationships Ivantage Select Agency, Inc. The Company is a party to an insurance agency master agreement with Ivantage Select Agency, Inc. (“ISA”), an affiliate of Allstate Insurance Company (“Allstate”), pursuant to which the Company has been authorized by ISA to appoint Allstate agents to offer our FNIC homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 17.4% and 19.6% were from Allstate’s network of Florida agents, for the three months ended March 31, 2022 and 2021, respectively. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (“SageSure”) to facilitate our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 11.7% and 24.5% of the Company’s premiums were underwritten by SageSure, for the three months ended March 31, 2022 and 2021, respectively. As part of our partnership with SageSure, previously we entered into a profit share agreement, whereby we shared 50% of net profits of this line of business through June 30, 2020, as calculated per the terms of the agreement, subject to certain limitations, which included limits on the net losses that SageSure could realize. The limit was based on the amount of inception to date profits within the profit share agreement. In addition, refer to Note 5 for information regarding a fully collateralized quota-share treaty on this book of business that became effective July 1, 2020. |
Basis of Presentation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (“VIE”) of which the Company is the primary beneficiary. The Company’s management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Company’s interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its |
Principles of Consolidation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of FNHC and its wholly-owned subsidiaries and all entities in which the Company has a controlling financial interest and any variable interest entity (“VIE”) of which the Company is the primary beneficiary. The Company’s management believes the consolidated financial statements reflect all material adjustments, including normal recurring adjustments, necessary to fairly state the financial position, results of operations and cash flows of the Company for the periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company identifies a VIE as an entity that does not have sufficient equity to finance its own activities without additional financial support or where the equity investors lack certain characteristics of a controlling financial interest. The Company assesses its contractual, ownership or other interests in a VIE to determine if the Company’s interest participates in the variability the VIE was designed to absorb and pass onto variable interest holders. The Company performs an ongoing qualitative assessment of its |
Accounting Estimates and Assumptions | Accounting Estimates and Assumptions The Company prepares the accompanying consolidated financial statements in accordance with GAAP, which requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results may materially differ from those estimates. Similar to other property and casualty insurers, the Company’s liability for loss and loss adjustment expenses ("LAE") reserves, although supported by actuarial projections and other data, is ultimately based on management’s reasoned expectations of future events. Although considerable variability is inherent in these estimates, the Company believes that the liability and LAE reserve is adequate. The Company reviews and evaluates its estimates and assumptions regularly and makes adjustments, reflected in current operations, as necessary, on an ongoing basis. |
Recently Issued Accounting Pronouncements, Adopted | Recently Issued Accounting Pronouncements, Adopted In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2020-1, Accounting for Equity Securities and Equity Investments, which clarifies the interaction between accounting standards related to equity securities (Topic 321), equity method investments (Topic 323), and certain derivatives (Topic 815). The update clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method. The Company adopted the guidance effective January 1, 2022, which did not have any impact on the Company’s consolidated financial condition, results of operations, or disclosures. In August 2020, the FASB issued ASU 2020-6, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-6"), which simplifies an issuer's accounting for convertible instruments by eliminating two of the three models in the current guidance that requires separate accounting for certain embedded conversion features. The new guidance simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. ASU 2020-6 requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This new guidance requires disclosures about events that occur during the reporting period and cause conversion contingencies to be met and about the fair value of convertible debt at the instrument level, among other things. The Company adopted the guidance effective January 1, 2022, which did not have any impact on the Company’s consolidated financial condition or results of operations. |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets Measured on Recurring Basis | The Company’s financial instruments measured at fair value on a recurring basis and the level of the fair value hierarchy of inputs used consisted of the following: March 31, 2022 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 41,125 $ 41,304 $ — $ 82,429 Obligations of states and political subdivisions (1) 15,579 — 15,578 Corporate securities — 149,608 — 149,608 International securities — 22,602 — 22,602 Debt securities, at fair value 41,124 229,093 — 270,217 Equity securities, at fair value 1,652 3,696 — 5,348 Total investments, at fair value $ 42,776 $ 232,789 $ — $ 275,565 Other assets - embedded derivative, at fair value $ — $ — $ 10,448 $ 10,448 December 31, 2021 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 41,125 $ 49,567 $ — $ 90,692 Obligations of states and political subdivisions — 19,278 — 19,278 Corporate securities — 188,980 — 188,980 International securities 901 27,681 — 28,582 Debt securities, at fair value 42,026 285,506 — 327,532 Equity securities, at fair value 1,879 4,026 — 5,905 Total investments, at fair value $ 43,905 $ 289,532 $ — $ 333,437 Other assets - embedded derivative, at fair value $ — $ — $ 10,725 $ 10,725 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Investments, Debt and Equity Securities [Abstract] | |
Unrealized Gain (Loss) on Investments | The difference between amortized cost or cost and estimated fair value and gross unrealized gains and losses, by major investment category, consisted of the following: Amortized Gross Gross Cost Unrealized Unrealized or Cost Gains Losses Fair Value (In thousands) March 31, 2022 Debt securities - available-for-sale: United States government obligations and authorities $ 82,328 $ 101 $ — $ 82,429 Obligations of states and political subdivisions 15,547 31 — 15,578 Corporate 148,648 960 — 149,608 International 22,577 25 — 22,602 $ 269,100 $ 1,117 $ — $ 270,217 Amortized Gross Gross Cost Unrealized Unrealized or Cost Gains Losses Fair Value (In thousands) December 31, 2021 Debt securities - available-for-sale: United States government obligations and authorities $ 90,750 $ 625 $ 683 $ 90,692 Obligations of states and political subdivisions 19,031 391 144 19,278 Corporate 186,489 4,413 1,922 188,980 International 28,591 212 221 28,582 $ 324,861 $ 5,641 $ 2,970 $ 327,532 |
Net Realized Gains (Losses) by Major Investment Category | Net realized and unrealized gains (losses) recognized in earnings, by major investment category, consisted of the following: Three Months Ended March 31, 2022 2021 (In thousands) Gross realized and unrealized gains: Debt securities $ 185 $ 864 Equity securities — 1 Total gross realized and unrealized gains 185 865 Gross realized and unrealized losses: Debt securities (14,681) (720) Equity securities (557) (53) Total gross realized and unrealized losses (15,238) (773) Net realized and unrealized gains (losses) on investments $ (15,053) $ 92 |
Gain (Loss) on Securities | The above line item, net realized and unrealized gains (losses) on investments, includes the following equity securities gains (losses) recognized in earnings: Three Months Ended March 31, 2022 2021 (In thousands) Net gains (losses) on equity securities: Realized $ — $ — Unrealized (557) (52) (557) (52) Less: Net realized and unrealized gains (losses) on securities sold — — Net unrealized gains (losses) still held as of the end-of-period $ (557) $ (52) |
Investments Classified by Contractual Maturity Date | Amortized cost and estimated fair value of debt securities, by contractual maturity, consisted of the following: March 31, 2022 Amortized Cost Fair Value Securities with Maturity Dates (In thousands) Debt securities, available-for-sale: One year or less $ 21,657 $ 21,720 Over one through five years 63,760 63,966 Over five through ten years 104,947 105,536 Over ten years 78,737 78,995 Total $ 269,100 $ 270,217 |
Summary of Net Investment Income | Net investment income consisted of the following: Three Months Ended March 31, 2022 2021 (In thousands) Interest income $ 1,214 $ 1,650 Dividends income 50 24 Net investment income $ 1,264 $ 1,674 |
Debt Securities, Available-for-sale | Gross unrealized losses and related fair values for debt securities, grouped by duration of time in a continuous unrealized loss position, consisted of the following: Less than 12 months 12 months or longer Total Gross Gross Gross Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (In thousands) December 31, 2021 Debt securities - available-for-sale: United States government obligations and authorities $ 46,038 $ 672 $ 881 $ 11 $ 46,919 $ 683 Obligations of states and political subdivisions 7,322 144 — — 7,322 144 Corporate 86,423 1,875 860 47 87,283 1,922 International 15,345 221 — — 15,345 221 $ 155,128 $ 2,912 $ 1,741 $ 58 $ 156,869 $ 2,970 |
REINSURANCE (Tables)
REINSURANCE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance Recoverables | Reinsurance recoverable, net consisted of the following: March 31, December 31, 2022 2021 (In thousands) Reinsurance recoverable on paid losses $ 100,499 $ 59,096 Reinsurance recoverable on unpaid losses 481,531 554,356 Allowance for credit loss (109) (249) Reinsurance recoverable, net $ 581,921 $ 613,203 |
Premiums Written and Earned | Net premiums written and net premiums earned consisted of the following: Three Months Ended March 31, 2022 2021 (In thousands) Net Premiums Written Direct $ 137,892 $ 174,207 Ceded (38,269) (78,149) $ 99,623 $ 96,058 Net Premiums Earned Direct $ 164,328 $ 179,002 Ceded (118,343) (139,257) $ 45,985 $ 39,745 |
ALLOWANCES FOR CREDIT LOSS (Tab
ALLOWANCES FOR CREDIT LOSS (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Receivables [Abstract] | |
Debt Securities, Held-to-maturity, Allowance for Credit Loss | Activity in the allowances for credit loss, by asset line item on the consolidated balance sheet, is summarized as follows: Reinsurance Premiums Recoverable, Receivable Net Total (In thousands) Balance as of December 31, 2021 $ 125 $ 249 $ 374 Credit loss expense (recovery) (1) 8 (140) (132) Balance as of March 31, 2022 $ 133 $ 109 $ 242 (1) Reflected in commissions and other underwriting expenses on the consolidated statements of comprehensive income (loss). |
Premium Receivable, Allowance for Credit Loss | The aging of our premiums receivable and associated allowance for credit loss was as follows: Days Past Due Current 1-29 30-59 60-89 90 plus Total March 31, 2022 (In thousands) Amortized cost $ 31,001 $ 1,914 $ 168 $ 63 $ 76 $ 33,222 Allowance for credit loss — (21) (15) (21) (76) (133) Net $ 31,001 $ 1,893 $ 153 $ 42 $ — $ 33,089 Days Past Due Current 1-29 30-59 60-89 90 plus Total December 31, 2021 (In thousands) Amortized cost $ 39,287 $ 1,670 $ 233 $ 16 $ 93 $ 41,299 Allowance for credit loss — (15) (12) (5) (93) (125) Net $ 39,287 $ 1,655 $ 221 $ 11 $ — $ 41,174 |
LOSS AND LOSS ADJUSTMENT RESE_2
LOSS AND LOSS ADJUSTMENT RESERVES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Liability for Future Policy Benefit, before Reinsurance [Abstract] | |
Activity in Liability for Loss and LAE Reserves | Activity in the liability for loss and LAE reserves is summarized as follows: Three Months Ended March 31, 2022 2021 (In thousands) Gross reserves, beginning-of-period $ 738,794 $ 540,367 Less: reinsurance recoverable (1) (554,107) (358,128) Net reserves, beginning-of-period 184,687 182,239 Incurred loss, net of reinsurance, related to: Current year 55,312 47,493 Prior year loss development (redundancy) (2) 3,472 624 Ceded losses subject to offsetting experience account adjustments (3) — (96) Prior years 3,472 528 Amortization of acquisition fair value adjustment (1) (5) Total incurred loss and LAE, net of reinsurance 58,783 48,016 Paid loss, net of reinsurance, related to: Current year 4,407 24,669 Prior years 58,890 46,813 Total paid loss and LAE, net of reinsurance 63,297 71,482 Net reserves, end-of-period 180,173 158,773 Plus: reinsurance recoverable (1) 481,422 327,940 Gross reserves, end-of-period $ 661,595 $ 486,713 (1) Reinsurance recoverable in this table includes only ceded loss and LAE reserves. (2) Reflects loss development from prior accident years impacting pre-tax net income. Excludes losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment. (3) Reflects losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment, such that there is no impact on pre-tax net income (loss). |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Assets And Liabilities, Lessee | Additional information related to our operating lease agreement for office space consisted of the following: As of March 31, December 31, 2022 2021 (In thousands) Right-of-use asset $ 6,497 $ 6,693 Accrued rent (488) (482) Right-of-use asset, net $ 6,009 $ 6,211 Lease liability $ 6,497 $ 6,693 Weighted average discount rate 4.70 % 4.70 % Weighted average remaining years of lease term 6.5 6.7 |
Additional Lease Cost Information | Three Months Ended March 31, 2022 2021 (In thousands) Lease expense $ 280 $ 280 Sublease income (72) (109) Lease expense, net $ 208 $ 171 Net cash provided by (used in) operating activities $ (201) $ (156) |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Equity [Abstract] | |
Schedule of Share-based Compensation Arrangements | Share-based compensation arrangements include the following: Three Months Ended March 31, 2022 2021 (In thousands) Restricted stock $ 196 $ 322 Performance stock — 85 Total share-based compensation expense $ 196 $ 407 Recognized tax benefit $ — $ 85 Intrinsic value of options exercised — — Fair value of restricted stock vested 837 1,442 |
Schedule of RSA Activity | RSA activity includes the following: Number of Shares Weighted Average Grant Date Fair Value Outstanding at January 1, 2022 343,683 $ 9.98 Granted — — Vested (72,307) 11.57 Cancelled (54,647) 10.13 Outstanding at March 31, 2022 216,729 $ 9.41 |
Schedule of Accumulated Other Comprehensive Income (Loss) | Accumulated other comprehensive income (loss) associated with debt securities - available-for-sale consisted of the following: Three Months Ended March 31, 2022 2021 Before Tax Income Tax Net Before Tax Income Tax Net (In thousands) Accumulated other comprehensive income (loss), beginning-of-period $ 2,671 $ (3,705) $ (1,034) $ 15,086 $ (3,700) $ 11,386 Other comprehensive income (loss) before reclassification (16,050) — (16,050) (9,397) 2,306 (7,091) Reclassification adjustment for realized losses (gains) included in net income 14,496 25 14,521 (144) 35 (109) (1,554) 25 (1,529) (9,541) 2,341 (7,200) Accumulated other comprehensive income (loss), end-of-period $ 1,117 $ (3,680) $ (2,563) $ 5,545 $ (1,359) $ 4,186 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic | The following presents the calculation of basic and diluted EPS: Three Months Ended March 31, 2022 2021 (In thousands, except per share data) Net income (loss) attributable to FedNat Holding Company shareholders $ (43,914) $ (19,381) Weighted average number of common shares outstanding - basic 17,462 14,395 Net income (loss) per common share - basic $ (2.51) $ (1.35) Weighted average number of common shares outstanding - basic 17,462 14,395 Dilutive effect of convertible debt — — Dilutive effect of stock compensation plans — — Weighted average number of common shares outstanding - diluted 17,462 14,395 Net income (loss) per common share - diluted $ (2.51) $ (1.35) Dividends per share $ — $ — |
Schedule of Earnings Per Share, Diluted | The following presents the calculation of basic and diluted EPS: Three Months Ended March 31, 2022 2021 (In thousands, except per share data) Net income (loss) attributable to FedNat Holding Company shareholders $ (43,914) $ (19,381) Weighted average number of common shares outstanding - basic 17,462 14,395 Net income (loss) per common share - basic $ (2.51) $ (1.35) Weighted average number of common shares outstanding - basic 17,462 14,395 Dilutive effect of convertible debt — — Dilutive effect of stock compensation plans — — Weighted average number of common shares outstanding - diluted 17,462 14,395 Net income (loss) per common share - diluted $ (2.51) $ (1.35) Dividends per share $ — $ — |
ORGANIZATION, CONSOLIDATION A_2
ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION (Narrative) (Details) - Premiums Written Net - Homeowners Multiperil Insurance Product Line - Customer Concentration Risk | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Ivantage Select Agency Inc | ||
Organization, Consolidation, And Basis of Preparation [Line Items] | ||
Concentration risk, percentage | 17.40% | 19.60% |
SageSure Insurance Managers LLC | ||
Organization, Consolidation, And Basis of Preparation [Line Items] | ||
Concentration risk, percentage | 11.70% | 24.50% |
Profit sharing agreement, profit sharing percent | 50.00% |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Details) $ in Thousands | Jun. 30, 2022USD ($) | Mar. 31, 2022USD ($) | Mar. 31, 2021USD ($) | Jun. 29, 2022policy |
Reinsurance Retention Policy [Line Items] | ||||
Net realized and unrealized gains (losses) | $ (15,053) | $ 92 | ||
Change in net unrealized gains (losses) on investments, available-for-sale, net of tax | (1,529) | $ (7,200) | ||
FNIC | ||||
Reinsurance Retention Policy [Line Items] | ||||
Impairment of securities | 12,600 | |||
Net realized and unrealized gains (losses) | (12,600) | |||
Change in net unrealized gains (losses) on investments, available-for-sale, net of tax | $ 12,600 | |||
FNIC | Forecast | ||||
Reinsurance Retention Policy [Line Items] | ||||
Refunds of unearned premiums to policyholders impacted by mid-term cancellations | $ 126,000 | |||
Mid-Term cancellations, number of policies | policy | 68,200 |
FAIR VALUE (Available-for-Sale
FAIR VALUE (Available-for-Sale Financial Instruments Measured at Fair Value) (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | $ 270,217 | $ 327,532 |
Equity securities, at fair value | 5,348 | 5,905 |
Total investments, at fair value | 275,565 | 333,437 |
Embedded Derivative Financial Instruments | ||
Investments, Debt and Equity Securities [Abstract] | ||
Other assets - embedded derivative, at fair value | 10,448 | 10,725 |
United States government obligations and authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 82,429 | 90,692 |
Obligations of states and political subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 15,578 | 19,278 |
Corporate securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 149,608 | 188,980 |
International securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 22,602 | 28,582 |
Level 1 | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 41,124 | 42,026 |
Equity securities, at fair value | 1,652 | 1,879 |
Total investments, at fair value | 42,776 | 43,905 |
Level 1 | Embedded Derivative Financial Instruments | ||
Investments, Debt and Equity Securities [Abstract] | ||
Other assets - embedded derivative, at fair value | 0 | 0 |
Level 1 | United States government obligations and authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 41,125 | 41,125 |
Level 1 | Obligations of states and political subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | (1) | 0 |
Level 1 | Corporate securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 0 | 0 |
Level 1 | International securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 0 | 901 |
Level 2 | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 229,093 | 285,506 |
Equity securities, at fair value | 3,696 | 4,026 |
Total investments, at fair value | 232,789 | 289,532 |
Level 2 | Embedded Derivative Financial Instruments | ||
Investments, Debt and Equity Securities [Abstract] | ||
Other assets - embedded derivative, at fair value | 0 | 0 |
Level 2 | United States government obligations and authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 41,304 | 49,567 |
Level 2 | Obligations of states and political subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 15,579 | 19,278 |
Level 2 | Corporate securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 149,608 | 188,980 |
Level 2 | International securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 22,602 | 27,681 |
Level 3 | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 0 | 0 |
Equity securities, at fair value | 0 | 0 |
Total investments, at fair value | 0 | 0 |
Level 3 | Embedded Derivative Financial Instruments | ||
Investments, Debt and Equity Securities [Abstract] | ||
Other assets - embedded derivative, at fair value | 10,448 | 10,725 |
Level 3 | United States government obligations and authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 0 | 0 |
Level 3 | Obligations of states and political subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 0 | 0 |
Level 3 | Corporate securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | 0 | 0 |
Level 3 | International securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, at fair value | $ 0 | $ 0 |
FAIR VALUE - Narrative (Details
FAIR VALUE - Narrative (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Fair Value Disclosures [Abstract] | |||
Changes in valuation inputs or changes in assumptions | $ 0 | $ 0 | |
Unobservable inputs reconciliation, transfers | 0 | $ 0 | |
Other Assets | |||
Embedded Derivative [Line Items] | |||
Embedded derivative, fair value | $ 10,400,000 |
INVESTMENTS (Summary of Amortiz
INVESTMENTS (Summary of Amortized Cost and Fair Value of Debt and Equity Securities) (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Debt securities - available-for-sale: | ||
Amortized Cost of Cost | $ 269,100 | $ 324,861 |
Debt securities, at fair value | 270,217 | 327,532 |
Debt Securities | ||
Debt securities - available-for-sale: | ||
Amortized Cost of Cost | 269,100 | 324,861 |
Gross Unrealized Gains | 1,117 | 5,641 |
Gross Unrealized Losses | 0 | 2,970 |
Debt securities, at fair value | 270,217 | 327,532 |
United States government obligations and authorities | ||
Debt securities - available-for-sale: | ||
Amortized Cost of Cost | 82,328 | 90,750 |
Gross Unrealized Gains | 101 | 625 |
Gross Unrealized Losses | 0 | 683 |
Debt securities, at fair value | 82,429 | 90,692 |
Obligations of states and political subdivisions | ||
Debt securities - available-for-sale: | ||
Amortized Cost of Cost | 15,547 | 19,031 |
Gross Unrealized Gains | 31 | 391 |
Gross Unrealized Losses | 0 | 144 |
Debt securities, at fair value | 15,578 | 19,278 |
Corporate securities | ||
Debt securities - available-for-sale: | ||
Amortized Cost of Cost | 148,648 | 186,489 |
Gross Unrealized Gains | 960 | 4,413 |
Gross Unrealized Losses | 0 | 1,922 |
Debt securities, at fair value | 149,608 | 188,980 |
International securities | ||
Debt securities - available-for-sale: | ||
Amortized Cost of Cost | 22,577 | 28,591 |
Gross Unrealized Gains | 25 | 212 |
Gross Unrealized Losses | 0 | 221 |
Debt securities, at fair value | $ 22,602 | $ 28,582 |
INVESTMENTS (Net Realized Gains
INVESTMENTS (Net Realized Gains (Losses) by Major Investment Category (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Gross realized and unrealized gains: | ||
Total gross realized and unrealized gains | $ 185 | $ 865 |
Gross realized and unrealized losses: | ||
Total gross realized and unrealized losses | (15,238) | (773) |
Net realized and unrealized gains (losses) on investments | (15,053) | 92 |
Debt Securities | ||
Gross realized and unrealized gains: | ||
Debt securities | 185 | 864 |
Gross realized and unrealized losses: | ||
Debt securities | (14,681) | (720) |
Equity Securities | ||
Gross realized and unrealized gains: | ||
Equity securities | 0 | 1 |
Gross realized and unrealized losses: | ||
Equity securities | $ (557) | $ (53) |
INVESTMENTS (Net Unrealized Gai
INVESTMENTS (Net Unrealized Gains (Losses) Still Held (Details) - Equity Securities - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Net gains (losses) on equity securities: | ||
Realized | $ 0 | $ 0 |
Unrealized | (557) | (52) |
Net gains (losses) on equity securities | (557) | (52) |
Less: Net realized and unrealized gains (losses) on securities sold | 0 | 0 |
Net unrealized gains (losses) still held as of the end-of-period | $ (557) | $ (52) |
INVESTMENTS (Amortized Cost and
INVESTMENTS (Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity) (Details) $ in Thousands | Mar. 31, 2022USD ($) |
Amortized Cost | |
One year or less | $ 21,657 |
Over one through five years | 63,760 |
Over five through ten years | 104,947 |
Over ten years | 78,737 |
Amortized Cost | 269,100 |
Fair Value | |
One year or less | 21,720 |
Over one through five years | 63,966 |
Over five through ten years | 105,536 |
Over ten years | 78,995 |
Fair Value | $ 270,217 |
INVESTMENTS (Summary of Net Inv
INVESTMENTS (Summary of Net Investment Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Investment Income, Interest and Dividend [Abstract] | ||
Interest income | $ 1,214 | $ 1,650 |
Dividends income | 50 | 24 |
Net investment income | $ 1,264 | $ 1,674 |
INVESTMENTS (Aging of Gross Unr
INVESTMENTS (Aging of Gross Unrealized Losses) (Details) $ in Thousands | Dec. 31, 2021USD ($) |
United States government obligations and authorities | |
Fair value [Abstract] | |
Less than 12 months | $ 46,038 |
12 Months or Longer | 881 |
Total | 46,919 |
Gross unrealized losses [Abstract] | |
Less than 12 months | 672 |
12 Months or Longer | 11 |
Total | 683 |
Obligations of states and political subdivisions | |
Fair value [Abstract] | |
Less than 12 months | 7,322 |
12 Months or Longer | 0 |
Total | 7,322 |
Gross unrealized losses [Abstract] | |
Less than 12 months | 144 |
12 Months or Longer | 0 |
Total | 144 |
Corporate securities | |
Fair value [Abstract] | |
Less than 12 months | 86,423 |
12 Months or Longer | 860 |
Total | 87,283 |
Gross unrealized losses [Abstract] | |
Less than 12 months | 1,875 |
12 Months or Longer | 47 |
Total | 1,922 |
International securities | |
Fair value [Abstract] | |
Less than 12 months | 15,345 |
12 Months or Longer | 0 |
Total | 15,345 |
Gross unrealized losses [Abstract] | |
Less than 12 months | 221 |
12 Months or Longer | 0 |
Total | 221 |
Debt Securities | |
Fair value [Abstract] | |
Less than 12 months | 155,128 |
12 Months or Longer | 1,741 |
Total | 156,869 |
Gross unrealized losses [Abstract] | |
Less than 12 months | 2,912 |
12 Months or Longer | 58 |
Total | $ 2,970 |
INVESTMENTS (Narrative) (Detail
INVESTMENTS (Narrative) (Details) $ in Millions | Mar. 31, 2022USD ($) | Dec. 31, 2021USD ($)security |
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities, available-for-sale, unrealized loss position, number of positions | 351 | |
Debt securities, available-for-sale, continuous unrealized loss position, 12 months or longer, number of positions | 5 | |
Fair value of investments deposited with governmental authorities required by law | $ | $ 11.4 | $ 9.3 |
REINSURANCE (Narrative) (Detail
REINSURANCE (Narrative) (Details) - USD ($) | Dec. 31, 2021 | Nov. 15, 2021 | Jul. 01, 2021 | Mar. 01, 2021 | Feb. 01, 2021 | Jan. 01, 2021 | Dec. 31, 2020 | Nov. 15, 2020 | Nov. 04, 2020 | Nov. 03, 2020 | Nov. 02, 2020 | Oct. 13, 2020 | Oct. 01, 2020 | Sep. 30, 2020 | Sep. 03, 2020 | Jul. 01, 2020 | Jun. 30, 2020 | Mar. 31, 2022 | Dec. 31, 2021 |
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | $ 102,748,000 | $ 46,535,000 | $ 102,748,000 | ||||||||||||||||
Reinsurance recoverable | 613,203,000 | 581,921,000 | 613,203,000 | ||||||||||||||||
Maximum | Hurricane | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance recoverable | 504,800,000 | 480,000,000 | 504,800,000 | ||||||||||||||||
FNIC | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Trust agreement for loss exposure (Less than) | $ 100,000 | 100,000 | $ 100,000 | ||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 305,900,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Maximum | First Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance retention amount | 18,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Maximum | Second Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Additional coverage amount | 16,000,000 | ||||||||||||||||||
Reinsurance retention amount | 2,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Federated National's Florida Exposure | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 258,300,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | FHCF | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 47,600,000 | ||||||||||||||||||
Maximum single event coverage | $ 650,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | FHCF | Maximum | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 90.00% | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | FNIC | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 25,000,000 | ||||||||||||||||||
Retention percentage | 100.00% | ||||||||||||||||||
Amount reinsured, co-participation | $ 6,000,000 | ||||||||||||||||||
Retention percentage, co-participation | 9.10% | ||||||||||||||||||
Threshold limit above initial insured amount | $ 70,000,000 | ||||||||||||||||||
Potential decrease in retention if placed on parametric basis with an excess and surplus lines carrier | 28.50% | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | FNIC | Second and Third Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 10,000,000 | ||||||||||||||||||
Retention percentage, co-participation | 71.50% | ||||||||||||||||||
Threshold limit above initial insured amount | $ 15,000,000 | ||||||||||||||||||
Second and third event retention, combined basis | 14,300,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | FNIC | Second and Third Event Coverage | Hurricane Delta and Subsequent Events | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 13,500,000 | $ 8,000,000 | $ 39,200,000 | ||||||||||||||||
Reinsurance payable and funds withheld liabilities | $ 2,000,000 | $ 875,000 | $ 11,200,000 | ||||||||||||||||
Retention percentage, co-participation | 50.00% | ||||||||||||||||||
Threshold limit above initial insured amount | $ 10,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | FNIC | Second and Third Event Coverage | Storm Events in 2020 | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 25,000,000 | ||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 2,800,000 | ||||||||||||||||||
Retention percentage, co-participation | 5000.00% | ||||||||||||||||||
Threshold limit above initial insured amount | $ 70,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 1,300,000,000 | ||||||||||||||||||
Excess retention, amount reinsured | 25,000,000 | ||||||||||||||||||
Liability for catastrophe claims | 1,900,000,000 | ||||||||||||||||||
Maximum single event coverage | 650,000,000 | ||||||||||||||||||
Increase in carrying amount | 345,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | Florida | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 1,300,000,000 | ||||||||||||||||||
Liability for catastrophe claims | 1,900,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | First Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 31,000,000 | ||||||||||||||||||
2020-2021 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | Maximum | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 90.00% | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Prepaid automatic reinstatement protection | $ 30,000,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Florida Homeowners Book of Business | First Event Coverage | Florida | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 972,000,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Non-Florida Homeowners Book Of Business | First Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 910,000,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Non-Florida Homeowners Book Of Business | Second and Third Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 831,000,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Federated National's Florida Exposure | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | $ 237,900,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | FHCF | Maximum | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 90.00% | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | FHCF | Non-Florida Homeowners Book Of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | $ 504,000,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 1,400,000,000 | ||||||||||||||||||
Liability for catastrophe claims | 2,250,000,000 | ||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 274,100,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | First Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 18,250,000 | ||||||||||||||||||
First event retention reduction, percent | 41.00% | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | Florida Homeowners Book of Business | First Event Coverage | Florida | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | $ 468,000,000 | ||||||||||||||||||
2021-2022 Catastrophe Excess of Loss Reinsurance Program | Private and FHCF Reinsurance | Non-Florida Homeowners Book Of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 2,250,000,000 | ||||||||||||||||||
Primary Tower | Non-Florida Homeowners Book Of Business | First Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 468,000,000 | ||||||||||||||||||
Primary Tower | FHCF | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 36,200,000 | ||||||||||||||||||
Primary Tower | FNIC | First Event Coverage | Hurricane Delta and Subsequent Events | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | 10,000,000 | ||||||||||||||||||
Threshold limit above initial insured amount | 20,000,000 | ||||||||||||||||||
Primary Tower | Private and FHCF Reinsurance | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | 204,800,000 | ||||||||||||||||||
Primary Tower | Private and FHCF Reinsurance | Florida Homeowners Book of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | 982,000,000 | ||||||||||||||||||
Excess retention, amount reinsured | 10,000,000 | ||||||||||||||||||
FNIC SageSure Tower | FNIC | First Event Coverage | Hurricane Delta and Subsequent Events | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | 8,000,000 | ||||||||||||||||||
Threshold limit above initial insured amount | 22,000,000 | ||||||||||||||||||
FNIC SageSure Tower | FNIC | Non-Florida Homeowners Book Of Business | Second Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 9,750,000 | ||||||||||||||||||
Retention percentage, co-participation | 75.00% | ||||||||||||||||||
Threshold limit above initial insured amount | $ 27,000,000 | ||||||||||||||||||
FNIC SageSure Tower | FNIC | Non-Florida Homeowners Book Of Business | Third Event Coverage | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 17,300,000 | ||||||||||||||||||
Retention percentage, co-participation | 47.00% | ||||||||||||||||||
Threshold limit above initial insured amount | $ 27,000,000 | ||||||||||||||||||
FNIC SageSure Tower | Private and FHCF Reinsurance | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | $ 69,400,000 | ||||||||||||||||||
Downward premium exposure adjustment from exposure management initiatives, percent | 19.00% | ||||||||||||||||||
FNIC SageSure Tower | Private and FHCF Reinsurance | All Perils | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 30,000,000 | ||||||||||||||||||
FNIC SageSure Tower | Private and FHCF Reinsurance | First Event Coverage | Hurricane | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 6,000,000 | ||||||||||||||||||
Retention percentage | 34.00% | ||||||||||||||||||
FNIC SageSure Tower | Private and FHCF Reinsurance | First Event Coverage | All Perils | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 12,000,000 | ||||||||||||||||||
Retention percentage | 66.00% | ||||||||||||||||||
FNIC SageSure Tower | Private and FHCF Reinsurance | Non-Florida Homeowners Book Of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Aggregate maximum single event coverage | $ 450,000,000 | ||||||||||||||||||
Excess retention, amount reinsured | $ 8,250,000 | ||||||||||||||||||
Quota Share One | FNIC | Florida Homeowners Book of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 7.50% | 10.00% | 20.00% | 10.00% | 10.00% | ||||||||||||||
Percentage of quota share reinsurance treaty terminated | 10.00% | 10.00% | |||||||||||||||||
Quota Share One | FNIC | Non-Florida Homeowners Book Of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 80.00% | 50.00% | |||||||||||||||||
Percentage of quota share reinsurance treaty terminated | 80.00% | ||||||||||||||||||
Proceeds from initial commutation agreement | $ 7,200,000 | ||||||||||||||||||
New percentage quota share reinsurance treaty | 80.00% | ||||||||||||||||||
Pre-tax loss from settlement of managerial general underwriting and profit sharing agreements | $ 2,500,000 | ||||||||||||||||||
Quota Share One | FNIC | Non-Florida Homeowners Book Of Business | SageSure LLP | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of quota share reinsurance treaty terminated | 80.00% | 80.00% | |||||||||||||||||
New percentage quota share reinsurance treaty | 100.00% | ||||||||||||||||||
Quota Share One | FNIC | Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | SageSure LLP | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 50.00% | ||||||||||||||||||
Profit sharing agreement, profit sharing percent | 50.00% | ||||||||||||||||||
Maison Insurance Company (MIC) | FNIC | Hurricane Delta and Subsequent Events | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Reinsurance payable and funds withheld liabilities | $ 13,000,000 | $ 2,300,000 | |||||||||||||||||
Maison Insurance Company (MIC) | FNIC | First Event Coverage | Hurricane Delta and Subsequent Events | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 10,000,000 | ||||||||||||||||||
Retention percentage, co-participation | 65.00% | ||||||||||||||||||
Threshold limit above initial insured amount | 50,000,000 | $ 15,000,000 | |||||||||||||||||
Excess retention, occurrence deductible | 850,000 | ||||||||||||||||||
Maison Insurance Company (MIC) | FNIC | Second Event Coverage | Hurricane Delta and Subsequent Events | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Excess retention, amount reinsured | $ 10,000,000 | $ 4,150,000 | |||||||||||||||||
Number of layers protection was secured | 2 | ||||||||||||||||||
Quota Share Two | FNIC | Florida Homeowners Book of Business | |||||||||||||||||||
Liability for Catastrophe Claims [Line Items] | |||||||||||||||||||
Percentage of property quota share reinsurance treaty | 20.00% | 10.00% | 10.00% |
REINSURANCE (Reinsurance Recove
REINSURANCE (Reinsurance Recoverables) (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Reinsurance Disclosures [Abstract] | ||
Reinsurance recoverable on paid losses | $ 100,499 | $ 59,096 |
Reinsurance recoverable on unpaid losses | 481,531 | 554,356 |
Allowance for credit loss | (109) | (249) |
Reinsurance recoverable, net | $ 581,921 | $ 613,203 |
REINSURANCE (Premiums Written a
REINSURANCE (Premiums Written and Earned) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Net Premiums Written | ||
Direct | $ 137,892 | $ 174,207 |
Ceded | (38,269) | (78,149) |
Total premiums written | 99,623 | 96,058 |
Net Premiums Earned | ||
Direct | 164,328 | 179,002 |
Ceded | (118,343) | (139,257) |
Net premiums earned | $ 45,985 | $ 39,745 |
ALLOWANCES FOR CREDIT LOSS (Sch
ALLOWANCES FOR CREDIT LOSS (Schedule of allowance for credit loss) (Details) $ in Thousands | 3 Months Ended |
Mar. 31, 2022USD ($) | |
Premium Receivable, Allowance for Credit Loss [Roll Forward] | |
Balance as of December 31, 2021 | $ 125 |
Balance as of March 31, 2022 | 133 |
Reinsurance Recoverable, Allowance for Credit Loss [Roll Forward] | |
Balance as of December 31, 2021 | 249 |
Balance as of March 31, 2022 | 109 |
Financing Receivable, Allowance for Credit Loss [Roll Forward] | |
Balance as of December 31, 2021 | 374 |
Credit loss, expense (reversal) | (132) |
Balance as of March 31, 2022 | 242 |
Premiums Receivable | |
Premium Receivable, Allowance for Credit Loss [Roll Forward] | |
Balance as of December 31, 2021 | 125 |
Credit loss expense (reversal) | 8 |
Balance as of March 31, 2022 | 133 |
Reinsurance Recoverable, Net | |
Reinsurance Recoverable, Allowance for Credit Loss [Roll Forward] | |
Balance as of December 31, 2021 | 249 |
Credit loss expense (reversal) | (140) |
Balance as of March 31, 2022 | $ 109 |
ALLOWANCES FOR CREDIT LOSS (Pre
ALLOWANCES FOR CREDIT LOSS (Premium Receivable Past Due) (Details) - USD ($) $ in Thousands | Mar. 31, 2022 | Dec. 31, 2021 |
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | $ 33,222 | $ 41,299 |
Allowance for credit loss | (133) | (125) |
Net | 33,089 | 41,174 |
Current | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 31,001 | 39,287 |
Allowance for credit loss | 0 | 0 |
Net | 31,001 | 39,287 |
Days Past Due 1-29 | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 1,914 | 1,670 |
Allowance for credit loss | (21) | (15) |
Net | 1,893 | 1,655 |
Days Past Due 30-59 | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 168 | 233 |
Allowance for credit loss | (15) | (12) |
Net | 153 | 221 |
Days Past Due 60-89 | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 63 | 16 |
Allowance for credit loss | (21) | (5) |
Net | 42 | 11 |
Days Past Due 90 Plus | ||
Financing Receivable, Past Due [Line Items] | ||
Amortized cost | 76 | 93 |
Allowance for credit loss | (76) | (93) |
Net | $ 0 | $ 0 |
LOSS AND LOSS ADJUSTMENT RESE_3
LOSS AND LOSS ADJUSTMENT RESERVES (Activity in Liability for Loss and LAE Reserves) (Details) - USD ($) $ in Thousands | 3 Months Ended | |||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | Dec. 31, 2020 | |
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||||
Gross reserves, beginning-of-period | $ 738,794 | $ 540,367 | ||
Less: reinsurance recoverable | (481,422) | (327,940) | $ (554,107) | $ (358,128) |
Net reserves, beginning-of-period | 184,687 | 182,239 | ||
Incurred loss, net of reinsurance, related to: | ||||
Current year | 55,312 | 47,493 | ||
Prior year loss development (redundancy) | 3,472 | 624 | ||
Ceded losses subject to offsetting experience account adjustments | 0 | (96) | ||
Prior years | 3,472 | 528 | ||
Amortization of acquisition fair value adjustment | (1) | (5) | ||
Total incurred loss and LAE, net of reinsurance | 58,783 | 48,016 | ||
Paid loss, net of reinsurance, related to: | ||||
Current year | 4,407 | 24,669 | ||
Prior years | 58,890 | 46,813 | ||
Total paid loss and LAE, net of reinsurance | 63,297 | 71,482 | ||
Net reserves, end-of-period | 180,173 | 158,773 | ||
Plus: reinsurance recoverable | 481,422 | 327,940 | $ 554,107 | $ 358,128 |
Gross reserves, end-of-period | $ 661,595 | $ 486,713 |
LOSS AND LOSS ADJUSTMENT RESE_4
LOSS AND LOSS ADJUSTMENT RESERVES (Narrative) (Details) - USD ($) $ in Thousands | Feb. 28, 2021 | Jul. 01, 2017 | Jul. 31, 2016 | Mar. 31, 2022 | Mar. 31, 2021 |
Liability for Future Policy Benefit, by Product Segment [Line Items] | |||||
Claim and claim adjustment expenses incurred related to current year | $ 55,312 | $ 47,493 | |||
Reinsurance Programs | Florida | |||||
Liability for Future Policy Benefit, by Product Segment [Line Items] | |||||
Claim and claim adjustment expenses incurred related to current year | $ 3,500 | $ 600 | |||
Quota Share Treaties | Florida | Property Insurance Product Line | |||||
Liability for Future Policy Benefit, by Product Segment [Line Items] | |||||
Percentage of property quota share reinsurance treaty | 30.00% | 10.00% | 30.00% | ||
Settlement adjustment | $ 11,200 |
LONG-TERM DEBT (Narrative) (Det
LONG-TERM DEBT (Narrative) (Details) - Unsecured Debt - USD ($) $ in Millions | Mar. 31, 2022 | Mar. 31, 2021 |
2026 Notes | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Fair Value | $ 22.5 | $ 22.1 |
2029 Notes | ||
Debt Instrument [Line Items] | ||
Long-term Debt, Fair Value | $ 102.8 | $ 106.5 |
INCOME TAXES (Narrative) (Detai
INCOME TAXES (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Income Tax Disclosure [Abstract] | |||
Effective income tax rate | 2.30% | 20.20% | |
Unrecognized tax benefits | $ 0.2 | $ 0.2 | |
Deferred tax asset valuation allowance | 26 | $ 30.5 | |
Recognized benefit related to uncertain tax positions | 0 | $ 0 | |
Income tax expense from uncertain tax position (less than) | $ 0.1 | $ 0.1 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Millions | Apr. 30, 2022USD ($) |
Loss from Catastrophes | Pending Litigation | Subsequent Event | |
Loss Contingencies [Line Items] | |
Estimate of possible catastrophe losses retained | $ 14.5 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Leases) (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2022 | Mar. 31, 2021 | Dec. 31, 2021 | |
Balance Sheet Related Disclosures [Abstract] | |||
Right-of-use asset | $ 6,497 | $ 6,693 | |
Accrued rent | (488) | (482) | |
Right-of-use asset, net | 6,009 | 6,211 | |
Lease liability | $ 6,497 | $ 6,693 | |
Weighted average discount rate | 4.70% | 4.70% | |
Weighted average remaining years of lease term | 6 years 6 months | 6 years 8 months 12 days | |
Income Statement Related Disclosures [Abstract] | |||
Lease expense | $ 280 | $ 280 | |
Sublease income | (72) | (109) | |
Lease expense, net | 208 | 171 | |
Net cash provided by (used in) operating activities | $ (201) | $ (156) |
SHAREHOLDERS' EQUITY (Narrative
SHAREHOLDERS' EQUITY (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | Mar. 15, 2021 | Apr. 30, 2021 | Mar. 31, 2022 | Mar. 31, 2021 | Jun. 30, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Securities offerings, reserved for future issuance | $ 150 | ||||
Stock options outstanding (in shares) | 19,832 | ||||
Stock options outstanding, weighted average option exercise price (in dollars per share) | $ 4.40 | ||||
Stock options granted (in shares) | 0 | ||||
Stock options exercised (in shares) | 0 | ||||
Stock options cancelled (in shares) | 0 | ||||
Public Stock Offering | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares issued in transaction (in shares) | 3,500,000 | 100,650 | |||
Sale of stock, price per share (in dollars per share) | $ 4.75 | ||||
Gross consideration received | $ 16.6 | ||||
Net proceeds received | $ 15.1 | $ 0.4 | |||
Restricted stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award requisite service period | 1 year | ||||
Restricted stock awards, granted (in shares) | 0 | 171,576 | |||
Minimum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 3 years | ||||
Minimum | Restricted stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Ultimate expense range, percent of target | 0.00% | ||||
Maximum | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 5 years | ||||
Maximum | Restricted stock | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Ultimate expense range, percent of target | 250.00% |
SHAREHOLDERS' EQUITY (Schedule
SHAREHOLDERS' EQUITY (Schedule of Share-based Compensation Arrangements) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | $ 196 | $ 407 |
Recognized tax benefit | 0 | 85 |
Intrinsic value of options exercised | 0 | 0 |
Fair value of restricted stock vested | 837 | 1,442 |
Restricted stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | 196 | 322 |
Performance stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total share-based compensation expense | $ 0 | $ 85 |
SHAREHOLDERS' EQUITY (Summary o
SHAREHOLDERS' EQUITY (Summary of Restricted Stock Activity) (Details) - Restricted stock - $ / shares | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Number of Shares | ||
Outstanding, beginning of period (in shares) | 343,683 | |
Granted (in shares) | 0 | 171,576 |
Vested (in shares) | (72,307) | |
Cancelled (in shares) | (54,647) | |
Outstanding, end of period (in shares) | 216,729 | |
Weighted Average Grant Date Fair Value | ||
Outstanding, beginning of period (in dollars per share) | $ 9.98 | |
Granted (in dollars per share) | 0 | |
Vested (in dollars per share) | 11.57 | |
Cancelled (in dollars per share) | 10.13 | |
Outstanding, end of period (in dollars per share) | $ 9.41 |
SHAREHOLDERS' EQUITY (Reconcili
SHAREHOLDERS' EQUITY (Reconciliation of Changes in Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Net | ||
Accumulated other comprehensive income (loss), net of tax | $ (1,034) | |
Other comprehensive income (loss), before reclassifications, net of tax | (16,050) | $ (7,091) |
Reclassification adjustment for realized losses (gains) included in net income, net | 14,521 | (109) |
Other comprehensive income (loss), net of tax, portion attributable to parent | (1,529) | (7,200) |
Accumulated other comprehensive income (loss), net of tax | (2,563) | |
AOCI Attributable to Parent | ||
Before Tax | ||
AOCI including portion attributable to noncontrolling interest, before tax | 2,671 | 15,086 |
Other comprehensive income (loss), before reclassifications, before tax | (16,050) | (9,397) |
Reclassification adjustment for realized losses (gains) included in net income, before tax | 14,496 | (144) |
Comprehensive income (loss) | (1,554) | (9,541) |
AOCI including portion attributable to noncontrolling interest, before tax | 1,117 | 5,545 |
Income Tax | ||
AOCI including portion attributable to noncontrolling interest, tax | (3,705) | (3,700) |
Other comprehensive income (loss) before reclassifications, tax | 0 | 2,306 |
Reclassification adjustment for realized losses (gains) included in net income, tax | 25 | 35 |
Other comprehensive income (loss), tax | 25 | 2,341 |
AOCI including portion attributable to noncontrolling interest, tax | (3,680) | (1,359) |
Net | ||
Accumulated other comprehensive income (loss), net of tax | (1,034) | 11,386 |
Accumulated other comprehensive income (loss), net of tax | $ (2,563) | $ 4,186 |
EARNINGS PER SHARE (Schedule of
EARNINGS PER SHARE (Schedule of Calculation of Basic and Diluted Net Income Per Common Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Net income (loss) attributable to FedNat Holding Company shareholders | $ (43,914) | $ (19,381) |
Basic (in shares) | 17,462 | 14,395 |
Basic (in dollars per share) | $ (2.51) | $ (1.35) |
Dilutive effect of convertible debt (in shares) | 0 | 0 |
Dilutive effect of stock compensation plans (in shares) | 0 | 0 |
Weighted average number of common shares outstanding - diluted | 17,462 | 14,395 |
Net income (loss) per common share - diluted (in dollars per share) | $ (2.51) | $ (1.35) |
Dividends per share (in dollars per share) | $ 0 | $ 0 |
Weighted average number of shares excluded from computation of EPS because inclusion would have been antidilutive | 3,500 | |
Interest Expense | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Interest expense | $ 300 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | Jun. 29, 2022policy |
FNIC | Forecast | |
Subsequent Event [Line Items] | |
Mid-Term cancellations, number of policies | 68,200 |