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Financial report summary
?Risks
- The proposed Merger may not be completed in a timely manner or at all, which may adversely affect our business and the price of our Common Stock.
- The closing of the proposed Merger is subject to certain conditions, some of which we cannot control, including the adoption of the Merger Agreement by our stockholders and the receipt of certain regulatory approvals, and, if any of these conditions is not satisfied, the Merger may not be consummated.
- The occurrence of any event, change, or other circumstance or condition that could give rise to the termination of the Merger Agreement, including in circumstances requiring us to pay a termination fee.
- The announcement or pendency of the proposed Merger may adversely affect our business relationships, operating results, and business generally, and the proposed transaction may disrupt our current plans and operations.
- Our ability to retain and hire key personnel in light of the proposed Merger.
- Efforts to consummate the proposed Merger may divert management’s attention from our ongoing business operations.
- Potential litigation relating to the proposed Merger that could be instituted against Altaris, us, or our directors, managers, or officers.
- Certain restrictions during the pendency of the proposed Merger that may impact our ability to pursue certain business opportunities or strategic transactions.
- Failure of our Program Partners or our Owned MGAs to properly market, underwrite or administer policies could adversely affect us.
- We depend on a limited number of Program Partners for a substantial portion of our gross written premiums.
- Our business is subject to significant geographic concentration, as nearly half of our gross written premiums are written in three key states.
- A downgrade in the A.M. Best financial strength ratings of our insurance company subsidiaries may negatively affect our business.
- If we are unable to accurately underwrite risks and charge competitive yet profitable rates to our clients and policyholders, our business, financial condition and results of operations may be materially and adversely affected.
- If actual renewals of our existing contracts do not meet expectations, our written premiums in future years and our future results of operations could be materially adversely affected.
- We may change our underwriting guidelines or our strategy without stockholder approval.
- We may act based on inaccurate or incomplete information regarding the accounts we underwrite.
- Our employees could take excessive risks, which could negatively affect our financial condition and business.
- We may be unable to access the capital markets when needed, which may adversely affect our ability to take advantage of business opportunities as they arise and to fund our operations in a cost-effective manner.
- Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability.
- Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations and its financial condition and results of operations.
- Negative developments in the workers’ compensation insurance industry could adversely affect our business, financial condition and results of operations.
- The insurance industry is cyclical in nature.
- Our failure to accurately and timely pay claims could harm our business.
- The effects of emerging claim and coverage issues on our business are uncertain.
- Our risk management policies and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk.
- If we are unable to obtain reinsurance coverage at reasonable prices or on terms that adequately protect us, we may be required to bear increased risks or reduce the level of our underwriting commitments.
- We are subject to reinsurance counterparty credit risk. Our reinsurers may not pay on losses in a timely fashion, or at all.
- Some of our issuing carrier arrangements contain limits on the reinsurer’s obligations to us.
- Retention of business written by us or our Program Partners could expose us to potential losses.
- Our loss reserves may be inadequate to cover our actual losses.
- We may not be able to manage our growth effectively.
- Our ability to grow our business will depend in part on the addition of new Program Partners, and our inability to effectively onboard such new Program Partners could have a material adverse effect on our business, financial condition and results of operations.
- We could be adversely affected by the loss of one or more key executives or by an inability to attract and retain qualified personnel.
- Performance of our investment portfolio is subject to a variety of investment risks.
- Any shift in our investment strategy could increase the risk exposure of our investment portfolio and the volatility of our results, which, in turn, may adversely affect our profitability.
- We could be forced to sell investments to meet our liquidity requirements.
- We may face increased competition in our programs market.
- We compete with a large number of companies in the insurance industry for underwriting premium.
- Our results of operations, liquidity, financial condition and FSRs are subject to the effects of natural and man-made catastrophic events.
- Global climate change may in the future increase the frequency and severity of weather events and resulting losses, particularly to the extent our policies are concentrated in geographic areas where such events occur, may have an adverse effect on our business, financial condition and results of operations.
- Because our business depends on insurance brokers, we are exposed to certain risks arising out of our reliance on these distribution channels that could adversely affect our results.
- Our operating results have in the past varied from quarter to quarter and may not be indicative of our long-term prospects.
- Any failure to protect our intellectual property rights could impair our ability to protect our intellectual property, proprietary technology platform and brand, or we may be sued by third parties for alleged infringement of their proprietary rights.
- Technology breaches or failures of our or our business partners’ systems could adversely affect our business.
- Any significant interruption in the operation of our computer systems could adversely affect our business, financial condition and results of operations.
- We employ third-party licensed software for use in our business and the inability to maintain these licenses or errors in the software we license, could result in increased costs, or reduced service levels, which would adversely affect our business.
- We are subject to extensive regulation and such regulation may become more extensive in the future.
- Regulators may challenge our use of fronting arrangements in states in which our Program Partners are not licensed.
- Increasing regulatory focus on privacy issues and expanding laws could affect our business model and expose us to increased liability.
- As a holding company, we rely on dividends and payments from our insurance company subsidiaries to operate our business. Our ability to receive dividends and permitted payments from our subsidiaries is subject to regulatory constraints.
- We may have exposure to losses from acts of terrorism as we are required by law to provide certain coverage for such losses.
- Assessments and premium surcharges for state guaranty funds, secondary-injury funds, residual market programs and other mandatory pooling arrangements may reduce our profitability.
- Changes in federal, state or foreign tax laws could adversely affect our business, financial condition, results of operations and liquidity.
- The discontinuance of LIBOR may adversely affect the value of certain investments we hold and any other assets or liabilities whose value may be tied to LIBOR.
- Our stock price may be volatile or may decline regardless of our operating performance.
- If securities analysts do not publish research or reports about our business or our industry or if they issue unfavorable commentary or negative recommendations with respect to our Common Stock, the price of our Common Stock could decline.
- Our principal stockholders will be able to exert significant influence over us and our corporate decisions.
- Sales or issuances of a substantial amount of shares of our Common Stock in the public market, particularly sales by directors, executive officers or our principal stockholders, or the perception that such sales of issuances may occur, of our Common Stock may cause the market price of our common stock to decline and make it more difficult for investors to sell their Common Stock at a time and price that they may deem appropriate.
- We will incur significant increased costs as a result of operating as a public company, and operating as a public company will place additional demands on our management.
- We currently do not anticipate declaring or paying regular dividends on our Common Stock.
- Provisions in our organizational documents, Delaware corporate law, state insurance laws and certain of our contractual agreements and compensation arrangements may prevent or delay an acquisition of us.
- Our amended and restated certificate of incorporation provides that our principal stockholders have no obligation to offer us corporate opportunities.
- We are an "emerging growth company" within the meaning of the Securities Act and have elected to take advantage of reduced disclosure requirements and other exemptions applicable to emerging growth companies.
- Because we have elected to use the extended transition period for complying with new or revised accounting standards for an "emerging growth company," our consolidated financial statements may not be comparable to companies that currently comply with these accounting standards.
- Changes in accounting practices and future pronouncements may materially affect our reported financial results.
- We are required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal control over financial reporting. If we are unable to achieve and maintain effective internal controls, our business, operating results and financial condition could be harmed.
- The effects of litigation on our business are uncertain and could have an adverse effect on our business.
- Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Management Discussion
- This section of Form 10-K generally discusses fiscal year 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of fiscal year 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in Item 7 of Part II of our 2020 Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the U.S. Securities and Exchange Commission on March 16, 2022 and which is available free of charge on the SEC's website at https://www.sec.gov and our website at https://www.trean.com, on the Investor Relations’ page under “Financial Info—Annual Reports.”
- (1) The Company defines increases or decreases greater than 200% as "NM" or not meaningful.
- (2) See "Financial Condition, Liquidity and Capital Resources—Financial Condition—Goodwill and intangible asset valuation" below for additional information.