Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 01, 2019 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | FEDNAT HOLDING Co | |
Entity Central Index Key | 0001069996 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 | |
Trading Symbol | fnhc | |
Amendment Flag | false | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 12,849,319 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Investments: | ||
Debt securities, available-for-sale, at fair value (amortized cost of $438,720 and $433,664, respectively) | $ 451,124 | $ 428,641 |
Debt securities, held-to-maturity, at amortized cost | 4,499 | 5,126 |
Equity securities, at fair value | 22,112 | 17,758 |
Total investments | 477,735 | 451,525 |
Cash and cash equivalents | 133,787 | 64,423 |
Prepaid reinsurance premiums | 82,781 | 108,577 |
Premiums receivable, net of allowance of $82 and $77, respectively | 31,239 | 29,791 |
Reinsurance recoverable, net | 199,313 | 211,424 |
Deferred acquisition costs, net | 45,539 | 39,436 |
Income taxes, net | 2,369 | 5,220 |
Other assets | 23,520 | 14,975 |
Total assets | 996,283 | 925,371 |
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
Loss and loss adjustment expense reserves | 268,735 | 296,230 |
Unearned premiums | 303,808 | 281,992 |
Reinsurance payable | 52,760 | 63,599 |
Long-term debt, net of deferred financing costs of $1,558 and $596, respectively | 98,442 | 44,404 |
Deferred revenue | 5,122 | 4,585 |
Other liabilities | 36,631 | 19,302 |
Total liabilities | 765,498 | 710,112 |
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: 25,000,000 shares authorized; 12,849,319 and 12,784,444 shares issued and outstanding, respectively | 128 | 128 |
Additional paid-in capital | 142,486 | 141,128 |
Accumulated other comprehensive income (loss) | 9,260 | (3,750) |
Retained earnings | 78,911 | 77,753 |
Total shareholders’ equity | 230,785 | 215,259 |
Total liabilities and shareholders' equity | $ 996,283 | $ 925,371 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Investments: | ||
Debt securities, available-for-sale, at amortized cost | $ 438,720 | $ 433,664 |
Total investments (including $0,000 and $26,284 related to the VIE, respectively) | 477,735 | 451,525 |
Premiums receivable, allowance for doubtful accounts | 82 | 77 |
Deferred financing costs | $ 1,558 | $ 596 |
Shareholders' Equity | ||
Preferred stock, par value (in dollars) | $ 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) | 25,000,000 | 25,000,000 |
Common stock, shares issued (in shares) | 12,849,319 | 12,784,444 |
Common stock, shares outstanding (in shares) | 12,849,319 | 12,784,444 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Revenues: | ||||
Net premiums earned | $ 92,306 | $ 83,557 | $ 181,090 | $ 165,666 |
Net investment income | 4,259 | 2,978 | 7,969 | 5,921 |
Net realized and unrealized investment gains (losses) | 1,955 | 208 | 4,256 | (844) |
Direct written policy fees | 2,403 | 3,313 | 4,794 | 6,889 |
Other income | 4,378 | 5,686 | 8,389 | 11,187 |
Total revenues | 105,301 | 95,742 | 206,498 | 188,819 |
Costs and expenses: | ||||
Losses and loss adjustment expenses | 65,340 | 47,570 | 132,179 | 93,641 |
Commissions and other underwriting expenses | 22,562 | 29,873 | 50,796 | 60,094 |
General and administrative expenses | 5,779 | 5,260 | 12,090 | 11,345 |
Interest expense | 1,915 | 1,023 | 6,966 | 2,107 |
Total costs and expenses | 95,596 | 83,726 | 202,031 | 167,187 |
Income (loss) before income taxes | 9,705 | 12,016 | 4,467 | 21,632 |
Income tax expense (benefit) | 2,595 | 3,196 | 1,222 | 5,567 |
Net income (loss) | 7,110 | 8,820 | 3,245 | 16,065 |
Net income (loss) attributable to non-controlling interest | 0 | 0 | 0 | (218) |
Net income (loss) attributable to FedNat Holding Company shareholders | $ 7,110 | $ 8,820 | $ 3,245 | $ 16,283 |
Net Income (Loss) Per Common Share | ||||
Basic (in dollars per share) | $ 0.55 | $ 0.69 | $ 0.25 | $ 1.27 |
Diluted (in dollars per share) | $ 0.55 | $ 0.69 | $ 0.25 | $ 1.26 |
Weighted Average Number of Shares of Common Stock Outstanding | ||||
Basic (in shares) | 12,844 | 12,726 | 12,820 | 12,788 |
Diluted (in shares) | 12,883 | 12,846 | 12,876 | 12,889 |
Dividends declared per share of common stock (in dollars per share) | $ 0.08 | $ 0.08 | $ 0.16 | $ 0.16 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 7,110 | $ 8,820 | $ 3,245 | $ 16,065 |
Change in net unrealized gains (losses) on investments, available-for-sale, net of tax | 6,122 | (1,489) | 13,010 | (6,050) |
Comprehensive income (loss) | 13,232 | 7,331 | 16,255 | 10,015 |
Less: comprehensive income (loss) attributable to non-controlling interest, net of tax | 0 | 0 | 0 | (447) |
Comprehensive income (loss) attributable to FedNat Holding Company shareholders | $ 13,232 | $ 7,331 | $ 16,255 | $ 10,462 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Total | Total Shareholders' Equity Attributable to Federated National Holding Company Shareholders | Preferred Stock | Common Stock | Additional Paid-in Capital | Other Comprehensive Income (Loss) | Retained Earnings | Noncontrolling Interest |
Balance (in shares) at Dec. 31, 2017 | 0 | 12,988,247 | ||||||
Balance at Dec. 31, 2017 | $ 227,459 | $ 211,637 | $ 130 | $ 139,728 | $ 1,770 | $ 70,009 | $ 15,822 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income (loss) | 16,065 | 16,283 | 16,283 | (218) | ||||
Other comprehensive income (loss) | (6,050) | (5,821) | (5,821) | (229) | ||||
Dividends declared | (2,079) | (2,079) | (2,079) | |||||
Acquisition of non-controlling interest | (16,685) | (1,310) | (1,005) | (305) | (15,375) | |||
Shares issued under share-based compensation plans (in shares) | 70,238 | |||||||
Shares issued under share-based compensation plans | 16 | 16 | 16 | |||||
Repurchases of common stock (in shares) | (326,708) | |||||||
Repurchases of common stock | (5,061) | (5,061) | $ (3) | (5,058) | ||||
Share-based compensation | 1,363 | 1,363 | 1,363 | |||||
Balance (in shares) at Jun. 30, 2018 | 0 | 12,731,777 | ||||||
Balance at Jun. 30, 2018 | 215,028 | 215,028 | $ 127 | 140,102 | (5,350) | 80,149 | 0 | |
Balance (in shares) at Mar. 31, 2018 | 0 | 12,718,953 | ||||||
Balance at Mar. 31, 2018 | 208,080 | 208,080 | $ 127 | 139,388 | (3,861) | 72,426 | 0 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income (loss) | 8,820 | 8,820 | 8,820 | 0 | ||||
Other comprehensive income (loss) | (1,489) | (1,489) | (1,489) | 0 | ||||
Dividends declared | (1,036) | (1,036) | (1,036) | |||||
Shares issued under share-based compensation plans (in shares) | 16,667 | |||||||
Shares issued under share-based compensation plans | 16 | 16 | 16 | |||||
Repurchases of common stock (in shares) | (3,843) | |||||||
Repurchases of common stock | (61) | (61) | $ 0 | (61) | ||||
Share-based compensation | 698 | 698 | 698 | |||||
Balance (in shares) at Jun. 30, 2018 | 0 | 12,731,777 | ||||||
Balance at Jun. 30, 2018 | 215,028 | 215,028 | $ 127 | 140,102 | (5,350) | 80,149 | 0 | |
Balance (in shares) at Dec. 31, 2018 | 0 | 12,784,444 | ||||||
Balance at Dec. 31, 2018 | 215,259 | 215,259 | $ 128 | 141,128 | (3,750) | 77,753 | 0 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income (loss) | 3,245 | 3,245 | 3,245 | 0 | ||||
Other comprehensive income (loss) | 13,010 | 13,010 | 13,010 | 0 | ||||
Dividends declared | (2,087) | (2,087) | (2,087) | |||||
Shares issued under share-based compensation plans (in shares) | 64,875 | |||||||
Shares issued under share-based compensation plans | 0 | 0 | 0 | |||||
Share-based compensation | 1,358 | 1,358 | 1,358 | |||||
Balance (in shares) at Jun. 30, 2019 | 0 | 12,849,319 | ||||||
Balance at Jun. 30, 2019 | 230,785 | 230,785 | $ 128 | 142,486 | 9,260 | 78,911 | 0 | |
Balance (in shares) at Mar. 31, 2019 | 0 | 12,836,401 | ||||||
Balance at Mar. 31, 2019 | 217,916 | 217,916 | $ 128 | 141,803 | 3,138 | 72,847 | 0 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income (loss) | 7,110 | 7,110 | 7,110 | |||||
Other comprehensive income (loss) | 6,122 | 6,122 | 6,122 | |||||
Dividends declared | (1,046) | (1,046) | (1,046) | |||||
Shares issued under share-based compensation plans (in shares) | 12,918 | |||||||
Share-based compensation | 683 | 683 | 683 | |||||
Balance (in shares) at Jun. 30, 2019 | 0 | 12,849,319 | ||||||
Balance at Jun. 30, 2019 | $ 230,785 | $ 230,785 | $ 128 | $ 142,486 | $ 9,260 | $ 78,911 | $ 0 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Cash flow from operating activities: | ||
Net income (loss) | $ 3,245 | $ 16,065 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Net realized and unrealized investment (gains) losses | (4,256) | 844 |
Loss (gain) on early extinguishment of debt | 3,575 | 0 |
Amortization of investment premium or discount, net | 354 | 1,034 |
Depreciation and amortization | 725 | 682 |
Share-based compensation | 1,358 | 1,363 |
Tax impact related to share-based compensation | (35) | (97) |
Changes in operating assets and liabilities: | ||
Prepaid reinsurance premiums | 25,796 | 34,385 |
Premiums receivable, net | (1,448) | 3,361 |
Reinsurance recoverable, net | 12,111 | (83,686) |
Deferred acquisition costs | (6,103) | (2,027) |
Income taxes, net | (1,531) | 3,300 |
Deferred revenue | 537 | 60 |
Loss and loss adjustment expense reserves | (27,495) | 61,160 |
Unearned premiums | 21,816 | 7,872 |
Reinsurance payable | (10,839) | (7,724) |
Other | 7,787 | 4,444 |
Net cash provided by (used in) operating activities | 25,597 | 41,036 |
Cash flow from investing activities: | ||
Proceeds from sales of equity securities | 2,242 | 6,092 |
Proceeds from sales of debt securities | 96,247 | 128,722 |
Purchases of equity securities | (2,971) | (6,831) |
Purchases of debt securities | (117,564) | (212,654) |
Maturities and redemptions of debt securities | 18,249 | 70,444 |
Purchases of property and equipment | (741) | (277) |
Net cash provided by (used in) investing activities | (4,538) | (14,504) |
Cash flow from financing activities: | ||
Issuance of long-term debt, net of issuance costs | 98,390 | 0 |
Payment of long-term debt and prepayment penalties | (48,000) | (5,000) |
Purchase of non-controlling interest | 0 | (16,685) |
Purchases of FedNat Holding Company common stock | 0 | (5,061) |
Issuance of common stock for share-based awards | 0 | 16 |
Dividends paid | (2,085) | (2,106) |
Net cash provided by (used in) financing activities | 48,305 | (28,836) |
Net increase (decrease) in cash and cash equivalents | 69,364 | (2,304) |
Cash and cash equivalents at beginning-of-period | 64,423 | 86,228 |
Cash and cash equivalents at end-of-period | 133,787 | 83,924 |
Supplemental disclosure of cash flow information: | ||
Cash paid (received) during the period for interest | 902 | 1,977 |
Cash paid (received) during the period for income taxes | 2,732 | $ 2,405 |
Right-of-use asset | (7,998) | |
Lease liability | $ 7,998 |
ORGANIZATION, CONSOLIDATION AND
ORGANIZATION, CONSOLIDATION AND BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2019 | |
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 an 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. The Company, through its wholly owned subsidiaries, is authorized to underwrite and/or place homeowners multi-peril ("homeowners"), federal flood and other lines of insurance in Florida and other states. The Company markets, distributes and services its 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 specific lines of insurance by the state’s insurance departments, in Florida, Louisiana, Texas, Georgia, South Carolina and Alabama. Monarch National Insurance Company (“MNIC”), our other insurance subsidiary, is licensed as an admitted carrier in Florida. Admitted carriers are bound by rate and form regulations, and are strictly regulated to protect policyholders from a variety of illegal and unethical practices. Admitted carriers are also required to financially contribute to the state guarantee fund used to pay for losses if an insurance carrier becomes insolvent or unable to pay loss amounts due to their policyholders. Refer to Basis of Presentation and Principles of Consolidation and below. 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 the Company’s homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 23.9% and 24.4% were from Allstate’s network of Florida agents, for the three months ended June 30, 2019 and 2018 , respectively. For the six months ended June 30, 2019 and 2018 , 23.4% and 23.7% , respectively, of the homeowners premiums we underwrote were from Allstate's network of Florida agents. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (“SageSure”) to facilitate growth in our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 22.0% and 14.5% , respectively, of the Company’s premiums were underwritten by SageSure, for the three months ended June 30, 2019 and 2018 , respectively. For the six months ended June 30, 2019 and 2018 , 21.0% and 13.3% , respectively, of the Company's homeowners premiums were underwritten by Sagesure. 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 variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
SIGNIFICANT 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 2018 Form 10-K. Other than the changes noted in "Recently Issued Accounting Pronouncements, Adopted" below, there have been no significant changes in our significant accounting policies for the six months ended June 30, 2019 . 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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) . The update superseded the prior lease guidance in Topic 840, Leases and lessees are required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Additionally, lessees are required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company adopted the guidance effective January 1, 2019, by reflecting a $6.1 million right-of-use asset, after-tax, and $6.1 million lease liability, after-tax, on our consolidated balance sheets for our leases in existence as of that date. All of the Company's leases were classified as operating leases and we elected the practical expedient, therefore no adjustment to comparative prior periods presented have been made. The provisions of this ASU did not have an impact on our pattern of lease expense recognition on our consolidated statements of operations. Refer to Note 10 below for additional information regarding leases. Recently Issued Accounting Pronouncements, Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The update requires entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as currently performed under the other-than-temporary impairment ("OTTI") model. The update also requires enhanced disclosures for financial assets measured at amortized cost and available-for-sale debt securities to help the financial statement users better understand significant judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The update is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is in the early stage of evaluating the impact that the update will have on the Company’s consolidated financial position or results of operations. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The update is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is in the early stage of evaluating the impact that the update will have on the Company’s consolidated financial position or results of operations. |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Jun. 30, 2019 | |
Business Combinations [Abstract] | |
ACQUISITIONS | 3. ACQUISITIONS On February 25, 2019, the Company executed a definitive agreement for the acquisition of the insurance operations of 1347 Property Insurance Holdings, Inc. ("PIH"). Specifically, the Company will purchase Maison Insurance Company ("MIC"), Maison Managers, Inc., and ClaimCor LLC (collectively, the "Maison Companies"). The purchase price is $51.0 million , which includes $25.5 million in cash and $25.5 million in shares of the Company’s common stock. The shares to be issued will be subsequently registered and will be subject to a five-year standstill agreement. Additionally, in connection with the pending acquisition, on March 5, 2019, the Company closed on an offering of $100 million of Senior Unsecured Notes due 2029, which bear interest at the annual rate of 7.5% . A portion of the cash from the offering was used to retire the full $45.0 million of outstanding debt (thereby lowering our overall cost of borrowing) and the remainder will be used to purchase the Maison Companies and for other general corporate purposes. In addition to the purchase price, PIH will receive five-year rights of first refusal to provide reinsurance of up to 7.5% of any layer in FedNat’s catastrophe reinsurance program and a five-year agreement for PIH to provide investment advisory services to FedNat. PIH has also agreed to a non-compete for five years following the closing with respect to residential property insurance in Alabama, Florida, Georgia, Louisiana, South Carolina and Texas. The transaction, which is subject to the Maison Companies having consolidated GAAP net book value of at least $42 million as of closing and regulatory approvals for the acquisition of the Maison Companies, which are in the process of being finalized. The Company anticipates receiving documentation evidencing such approval in the next few days. Pursuant to the provisions of the Equity Purchase Agreement with PIH, the transaction is expected, assuming satisfaction of all other conditions to closing, to close as soon as practicable after November 30, 2019, after the conclusion of hurricane season. |
FAIR VALUE
FAIR VALUE | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE | 4. 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: June 30, 2019 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 50,047 $ 100,673 $ — $ 150,720 Obligations of states and political subdivisions — 11,717 — 11,717 Corporate securities — 267,994 — 267,994 International securities — 20,693 — 20,693 Debt securities, at fair value 50,047 401,077 — 451,124 Equity securities, at fair value 20,114 1,998 — 22,112 Total investments, at fair value $ 70,161 $ 403,075 $ — $ 473,236 December 31, 2018 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 43,918 $ 83,950 $ — $ 127,868 Obligations of states and political subdivisions — 9,767 — 9,767 Corporate securities — 268,731 — 268,731 International securities — 22,275 — 22,275 Debt securities, at fair value 43,918 384,723 — 428,641 Equity securities, at fair value 16,037 1,721 — 17,758 Total investments, at fair value $ 59,955 $ 386,444 $ — $ 446,399 Held-to-maturity debt securities reported on the consolidated balance sheets at amortized cost and disclosed at fair value below (and in Note 5) and the level of fair value hierarchy of inputs used consisted of the following: Level 1 Level 2 Level 3 Total (In thousands) June 30, 2019 $ 3,418 $ 1,045 $ — $ 4,463 December 31, 2018 3,809 1,155 — 4,964 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. 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. 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 June 30, 2019 and December 31, 2018 . There were no transfers between the fair value hierarchy levels during the six months ended June 30, 2019 and 2018 . |
INVESTMENTS
INVESTMENTS | 6 Months Ended |
Jun. 30, 2019 | |
Investments [Abstract] | |
INVESTMENTS | 5. 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) June 30, 2019 Debt securities - available-for-sale: United States government obligations and authorities $ 147,663 $ 3,206 $ 149 $ 150,720 Obligations of states and political subdivisions 11,483 240 6 11,717 Corporate 259,243 8,905 154 267,994 International 20,331 373 11 20,693 438,720 12,724 320 451,124 Debt securities - held-to-maturity: United States government obligations and authorities 3,591 11 68 3,534 Corporate 853 20 — 873 International 55 1 — 56 4,499 32 68 4,463 Total investments, excluding equity securities $ 443,219 $ 12,756 $ 388 $ 455,587 Amortized Gross Gross Cost Unrealized Unrealized or Cost Gains Losses Fair Value (In thousands) December 31, 2018 Debt securities - available-for-sale: United States government obligations and authorities $ 127,928 $ 1,091 $ 1,151 $ 127,868 Obligations of states and political subdivisions 9,870 27 130 9,767 Corporate 273,192 510 4,971 268,731 International 22,674 12 411 22,275 433,664 1,640 6,663 428,641 Debt securities - held-to-maturity: United States government obligations and authorities 4,085 1 158 3,928 Corporate 986 2 6 982 International 55 — 1 54 5,126 3 165 4,964 Total investments, excluding equity securities $ 438,790 $ 1,643 $ 6,828 $ 433,605 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 Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Gross realized and unrealized gains: Debt securities $ 834 $ 41 $ 1,151 $ 264 Equity securities 1,477 1,088 4,307 2,241 Total gross realized and unrealized gains 2,311 1,129 5,458 2,505 Gross realized and unrealized losses: Debt securities (120 ) (877 ) (520 ) (2,318 ) Equity securities (236 ) (44 ) (682 ) (1,031 ) Total gross realized and unrealized losses (356 ) (921 ) (1,202 ) (3,349 ) Net realized and unrealized gains (losses) on investments $ 1,955 $ 208 $ 4,256 $ (844 ) 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 Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Net realized and unrealized gains (losses) $ 1,241 $ 1,044 $ 3,625 $ 1,210 Less: Net realized and unrealized gains (losses) on securities sold (76 ) 42 250 324 Net unrealized gains (losses) still held as of the end-of-period $ 1,317 $ 1,002 $ 3,375 $ 886 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: June 30, 2019 Amortized Cost Fair Value Securities with Maturity Dates (In thousands) Debt securities, available-for-sale: One year or less $ 16,722 $ 16,739 Over one through five years 161,198 164,830 Over five through ten years 127,038 132,236 Over ten years 133,762 137,319 438,720 451,124 Debt securities, held-to-maturity: One year or less 80 80 Over one through five years 4,185 4,146 Over five through ten years 234 237 4,499 4,463 Total $ 443,219 $ 455,587 Net Investment Income Net investment income consisted of the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Interest income $ 4,169 $ 2,927 $ 7,826 $ 5,815 Dividends income 90 51 143 106 Net investment income $ 4,259 $ 2,978 $ 7,969 $ 5,921 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) June 30, 2019 Debt securities - available-for-sale: United States government obligations and authorities $ 3,088 $ 2 $ 21,210 $ 147 $ 24,298 $ 149 Obligations of states and political subdivisions — — 2,606 6 2,606 6 Corporate 11,678 87 15,689 67 27,367 154 International 3,027 10 679 1 3,706 11 17,793 99 40,184 221 57,977 320 Debt securities, held-to-maturity: United States government obligations and authorities — — 2,894 68 2,894 68 Corporate 20 — — — 20 — International — — 40 — 40 — 20 — 2,934 68 2,954 68 Total investments, excluding equity securities $ 17,813 $ 99 $ 43,118 $ 289 $ 60,931 $ 388 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, 2018 Debt securities - available-for-sale: United States government obligations and authorities $ 22,673 $ 246 $ 29,727 $ 905 $ 52,400 $ 1,151 Obligations of states and political subdivisions 3,254 18 4,786 112 8,040 130 Corporate 160,361 3,058 53,232 1,913 213,593 4,971 International 15,608 217 4,678 194 20,286 411 201,896 3,539 92,423 3,124 294,319 6,663 Debt securities, held-to-maturity: United States government obligations and authorities 229 1 3,113 157 3,342 158 Corporate 591 6 90 — 681 6 International 54 1 — — 54 1 874 8 3,203 157 4,077 165 Total investments, excluding equity securities $ 202,770 $ 3,547 $ 95,626 $ 3,281 $ 298,396 $ 6,828 As of June 30, 2019 , the Company held a total of 171 debt securities that were in an unrealized loss position, of which 123 securities were in an unrealized loss position continuously for 12 months or more. As of December 31, 2018 , the Company held a total of 1,222 debt and equity securities that were in an unrealized loss position, of which 371 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. The Company holds some of its debt securities as available-for-sale and as such, these securities are recorded at fair value. The Company continually monitors the difference between cost and the estimated fair value of its investments, which involves uncertainty as to whether declines in value are temporary in nature. If the decline of a particular investment is deemed temporary, the Company records the decline as an unrealized loss in shareholders’ equity. If the decline is deemed to be other than temporary, the Company will write the security’s cost-basis or amortized cost-basis down to the fair value of the investment and recognizes an OTTI loss in the Company’s consolidated statement of operations. Additionally, any portion of such decline related to debt securities that is believed to arise from factors other than credit will be recorded as a component of other comprehensive income rather than charged against income. The Company did not have any OTTI losses on its available-for-sale debt securities for the first six months of 2019 and 2018. The Company's equity investments are measured at fair value through net income (loss). Collateral Deposits Cash and cash equivalents and investments, the majority of which were debt securities, with fair values of $10.7 million and $10.3 million , were deposited with governmental authorities and into custodial bank accounts as required by law or contractual obligations as of June 30, 2019 and December 31, 2018 , respectively. |
REINSURANCE
REINSURANCE | 6 Months Ended |
Jun. 30, 2019 | |
Reinsurance Disclosures [Abstract] | |
REINSURANCE | 6. 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 2018-2019 Excess of Loss Reinsurance Programs With the February 21, 2018 acquisition of the minority interests of MNIC, the Company has combined both FNIC and MNIC under a single program allowing the Company to capitalize on efficiencies and scale. FNIC and MNIC’s combined 2018-2019 reinsurance programs cost $148.8 million . This amount includes $102.7 million for the private reinsurance for the Company’s exposure, including prepaid automatic premium reinstatement protection, along with $46.1 million payable to the FHCF. The combination of private and FHCF reinsurance treaties affords FNIC and MNIC $1.8 billion of aggregate coverage with a maximum single event coverage totaling $1.3 billion , exclusive of retentions. Both FNIC and MNIC maintained their FHCF participation at 75% for the 2018 hurricane season. FNIC’s single event pre-tax retention for a catastrophic event in Florida is $20.0 million , up slightly from the 2017-2018 reinsurance program and MNIC’s single event pre-tax retention for a catastrophic event is $3.0 million , down slightly from the 2017-2018 reinsurance program. The combined FNIC and MNIC private market excess of loss treaties, covering both Florida and non-Florida exposures, became effective July 1, 2018 and all private layers have prepaid automatic reinstatement protection, which affords the Company additional coverage for subsequent events. These private market excess of loss treaties structure coverage into layers, with a cascading feature such that substantially all layers attach after $20.0 million in losses for FNIC and after $3.0 million in losses for MNIC. If the aggregate limit of the preceding layer is exhausted, the next layer drops down (cascades) in its place. Additionally, any unused layer protection drops down for subsequent events until exhausted. Given current market conditions, FNIC has elected not to purchase any multiple year protection and terminated the second year of the $89.0 million of multiple year protection that FNIC purchased last year on a two-year basis. FNIC also had $156.0 million of multiple year protection that expired on June 30, 2018. The overall reinsurance programs are with reinsurers that currently have an A.M. Best or Standard & Poor’s rating of “A-” or better, or have fully collateralized their maximum potential obligations in dedicated trusts. FNIC’s non-Florida excess of loss reinsurance treaties afford us an additional $23.0 million of aggregate coverage with first event coverage totaling $5.0 million and second event coverage totaling $18.0 million , with the incremental $13.0 million of second event coverage applying to hurricane losses only. The end result is a non-Florida retention of $15.0 million for the first event and $2.0 million for the second event though these retentions are reduced to $7.5 million and $1.0 million after taking into account the profit sharing agreement that FNIC has with the nonaffiliated managing general underwriter that writes our non-Florida property business. FNIC’s non-Florida reinsurance program cost will $2.0 million for this private reinsurance, including prepaid automatic premium reinstatement protection. The Company’s cost and amounts of reinsurance are based on management’s current analysis of exposure to catastrophic risk. The data will be subjected to exposure level analysis at various dates during the period ending December 31, 2018. This analysis of the Company’s exposure level in relation to the total exposures to the FHCF and excess of loss treaties may produce changes in retentions, limits and reinsurance premiums as a result of increases or decreases in the Company’s exposure level. 2019-2020 Catastrophe Excess of Loss Reinsurance Program Given the pending acquisition of Maison Companies, the Company and PIH agreed to combine FNIC, MNIC, and MIC under a single reinsurance program allowing the carriers to capitalize on efficiencies, spread of risk and scale. The combined reinsurance treaties provides approximately $1.28 billion of single-event reinsurance coverage in excess of a $27 million retention for catastrophic losses, including hurricanes, and aggregate coverage of $1.84 billion , at an approximate total cost of $204.7 million , of which FNIC and MNIC share of the cost is estimated to $162.0 million . The combined FNIC, MNIC and MIC private market excess of loss treaties, covering both Florida and non-Florida exposures, become effective July 1, 2019 and all private layers have prepaid automatic reinstatement protection, which affords the carriers additional coverage for subsequent events. This private market excess of loss treaty structure breaks coverage into layers, with a cascading feature such that substantially all layers attach after $20 million in losses for FNIC, $2 million in losses for MNIC and $5 million in losses for MIC. If the aggregate limit of the preceding layer is exhausted, the next layer drops down (cascades) in its place. Additionally, any unused layer protection drops down for subsequent events until exhausted. The overall reinsurance program is with reinsurers that currently have an A.M. Best Company or Standard & Poor’s rating of “A-” or better, or have fully collateralized their maximum potential obligations in dedicated trusts. As indicated above, FNIC, MNIC and MIC’s combined 2019-2020 reinsurance program is estimated to cost $204.7 million . This amount includes approximately $162.2 million for private reinsurance for the carriers’ exposure described above, including prepaid automatic premium reinstatement protection, along with approximately $42.5 million payable to the FHCF. The combination of private and FHCF reinsurance treaties will afford FNIC, MNIC, and MIC approximately $1.84 billion of aggregate coverage with a maximum single event coverage totaling approximately $1.28 billion , exclusive of retentions. Each carrier will pay directly its allocated portion of the aggregate premium cost. The allocation methodology by which FNIC, MNIC, and MIC will determine their share of the premium and distribution of reinsurance recoveries under the combined reinsurance tower is based on catastrophe loss modeling of the separate books of business. Each carrier will share 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. Both FNIC and MNIC maintained their FHCF participation at 75% for the 2019 hurricane season, and MIC increased its FHCF participation to 90% . FNIC’s non-Florida excess of loss reinsurance treaties afford us an additional $18 million of coverage for a second event, which applies to hurricane losses only. The result is a non-Florida retention of $20 million for FNIC for the first event and $2 million for the second event, although these retentions are reduced to $10 million and $1 million after taking into account the profit-sharing agreement that FNIC has with the non-affiliated managing general underwriter that writes FNIC’s non-Florida property business. FNIC’s non-Florida reinsurance program cost will approximate $1.5 million for this private reinsurance. The insurance carriers’ cost and amounts of reinsurance are based on current analysis of exposure to catastrophic risk. The data is subjected to exposure level analysis at various dates through December 31, 2019. This analysis of the carriers’ exposure level 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's reinsurance programs also include quota-share treaties. One such treaty for 30% became effective July 1, 2014, and another for 10% became effective on July 1, 2015 with each running for two years. The combined treaties provided up to a 40% quota-share reinsurance on covered losses for the homeowners’ property and liability insurance program in Florida. The treaties are accounted for as retrospectively rated contracts whereby the estimated ultimate premium or commission is recognized over the period of the contracts. On July 1, 2016, the 30% quota-share treaty expired on a cut-off basis, which means as of that date the Company retained an incremental 30% of its unearned premiums and losses. On July 1, 2017, the 10% quota-share treaty expired on a cut-off basis, which means as of that date we retained an incremental 10% of the underlying unearned premiums and losses. The reinsurers remain liable for the paid losses occurring during the terms of the treaties, until each treaty is commuted. On July 1, 2017, FNIC bound a 10% quota-share on its Florida homeowners book of business, which excluded named storms, subject to certain limitations including, but not limited to caps on losses associated with occurrences. This treaty is not subject to accounting as a retrospectively rated contract. This treaty expired on July 1, 2018 on a cut-off basis, meaning that the reinsurer will not be liable (under this agreement) for losses as a result of occurrences taking place after the date of termination, and the unearned premium previously ceded will be returned to FNIC. On July 1, 2018, FNIC renewed the quota-share treaty on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms, which was initially set at 2% , and is subject to certain limitations including, but not limited to caps on losses associated with occurrences. In addition, this quota-share allowed FNIC to prospectively increase or decrease the cession percentage up to three times during the term of the agreement. Effective October 1, 2018, FNIC elected to increase the cession percentage from 2% to 10% on an in-force, new and renewal basis. The treaty expired on July 1, 2019 on a cut-off basis, meaning that the reinsurer will not be liable (under this agreement) for losses as a result of occurrences taking place after the date of termination, and the unearned premium previously ceded will be returned to FNIC. On July 1, 2019, FNIC renewed the quota-share treaty on its Florida homeowners book of business, on an in-force, new and renewal basis, excluding named storms, which was initially set at 10% , which is subject to certain limitations including, but not limited to, caps on losses associated with non-named storm catastrophe losses. In addition, this quota-share allows FNIC the flexibility to prospectively increase or decrease the cession percentage up to three times during the term of the agreement. The Company’s private passenger automobile quota-share treaties are typically programs which become effective at different points in the year and cover auto policies across several states. The automobile quota-share treaties cede approximately 75% of all written premiums entered into by the Company, subject to certain limitations including, but not limited to premium and other caps. Associated Trust Agreements Certain reinsurance agreements require FNIC and MNIC to secure the credit, regulatory and business risk. Fully funded trust agreements securing these risks for FNIC totaled less than $0.1 million as of June 30, 2019 and December 31, 2018 . 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: June 30, December 31, 2019 2018 (In thousands) Reinsurance recoverable on paid losses $ 58,513 $ 45,028 Reinsurance recoverable on unpaid losses 140,800 166,396 Reinsurance recoverable, net $ 199,313 $ 211,424 As of June 30, 2019 and December 31, 2018 , the Company had reinsurance recoverable of $165.1 million and $183.5 million , respectively as a result of Hurricane Michael and Irma. All reinsurers in our excess-of-loss reinsurance programs have an A.M. Best or Standard & Poor’s rating of “A-“ or better, or have fully collateralized their maximum potential obligations in dedicated trusts. Net Premiums Written and Net Premiums Earned Net premiums written and net premiums earned consisted of the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Net Premiums Written Direct $ 169,170 $ 166,734 $ 301,403 $ 301,129 Ceded (62,339 ) (78,804 ) (74,132 ) (96,581 ) $ 106,831 $ 87,930 $ 227,271 $ 204,548 Net Premiums Earned Direct $ 141,220 $ 146,890 $ 279,587 $ 293,332 Ceded (48,914 ) (63,333 ) (98,497 ) (127,666 ) $ 92,306 $ 83,557 $ 181,090 $ 165,666 |
LOSS AND LOSS ADJUSTMENT RESERV
LOSS AND LOSS ADJUSTMENT RESERVES | 6 Months Ended |
Jun. 30, 2019 | |
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: Six Months Ended June 30, 2019 2018 (In thousands) Gross reserves, beginning-of-period $ 296,230 $ 230,515 Less: reinsurance recoverable (1) (166,396 ) (98,345 ) Net reserves, beginning-of-period 129,834 132,170 Incurred loss, net of reinsurance, related to: Current year 132,087 98,132 Prior year loss development (redundancy) (2) 1,524 (1,192 ) Ceded losses subject to offsetting experience account adjustments (3) (1,432 ) (3,299 ) Prior years 92 (4,491 ) Total incurred loss and LAE, net of reinsurance 132,179 93,641 Paid loss, net of reinsurance, related to: Current year 69,248 42,260 Prior years 64,830 57,569 Total paid loss and LAE, net of reinsurance 134,078 99,829 Net reserves, end-of-period 127,935 125,982 Plus: reinsurance recoverable (1) 140,800 165,693 Gross reserves, end-of-period $ 268,735 $ 291,675 (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 six months ended June 30, 2019 , the Company experienced $1.5 million of unfavorable loss and LAE reserve development on prior accident years in its commercial general liability and personal automobile lines of business, offset by redundancy in the homeowners line of business as a result of lower LAE expenses associated primarily with Hurricane Irma. During the six months ended June 30, 2018 , the Company experienced $1.2 million of favorable loss and LAE reserve redundancy in accident year 2017. The redundancy was the result of lower LAE expenses associated primarily with Hurricane Irma. As previously disclosed, the Company entered into 30% and 10% retrospectively-rated Florida-only property quota-share treaties, which ended on July 1, 2016 and 2017, respectively. These agreements included a profit share (experience account) provision, under which the Company will receive ceded premium adjustments at the end of the treaty to the extent there is a positive balance in the experience account. This experience account is based on paid losses rather than incurred losses. Due to the retrospectively-rated nature of this treaty, when the experience account is positive we cede losses under these treaties as the claims are paid with an equal and offsetting adjustment to ceded premiums (in recognition of the related change to the experience account receivable), with no impact on net income. Conversely, when the experience account is negative, the Company cedes losses on an incurred basis with no offsetting adjustment to ceded premiums, which impacts net income. Loss development can be either favorable or unfavorable regardless of whether the experience account is in a positive or negative position. |
LONG-TERM DEBT
LONG-TERM DEBT | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | 8. LONG-TERM DEBT As discussed in Note 3 above, the net proceeds of the offering discussed in Senior Unsecured Notes below, were in part used to redeem all $45 million of the Company's Senior Unsecured Fixed Rate Notes Due 2022 and the Company's Senior Notes Due 2027. We recognized $3.6 million as interest expense in our consolidated statements of operations for the six months ended June 30, 2019, for prepayment fees, including the write-off unamortized debt issuance costs on the repayment. Senior Unsecured Notes On March 5, 2019, the Company completed a private placement offering and issued $100.0 million in principal amount of Senior Unsecured Fixed Rate Notes due 2029 (the "Notes”), pursuant to an indenture dated as of March 5, 2019 (the “Indenture”). The Notes mature on March 15, 2029 and bear interest at a fixed rate of 7.5% per year, payable semi-annually in arrears, subject to increases in the interest rate payable in the event of a downgrade in the credit rating assigned to the Notes. The Notes are not convertible or exchangeable for any equity securities, other securities or assets of the Company or any subsidiary. The Company may redeem the Notes under certain circumstances as set forth in the Indenture. Prior to March 15, 2024, the Company may redeem the Notes, in whole or in part, at a redemption price equal to 100.00% of the principal amount of the Notes to be redeemed, plus the “Applicable Premium,” plus accrued and unpaid interest on such Notes, if any, on the Notes redeemed, to the applicable redemption date. The “Applicable Premium” is defined in the Indenture to mean, with respect to any Note on any applicable redemption date, the greater of (1) 1.0% of the then-outstanding principal amount of such Note and (2) the excess (if any) of: (A) the present value at such redemption date of (i) the applicable redemption price of such Note at March 15, 2024 (excluding any accrued but unpaid interest), plus (ii) all required interest payments due on such Note through March 15, 2024 (excluding accrued but unpaid interest), computed using a discount rate equal to the Treasury Rate (as defined in the Indenture) on such redemption date plus 50 basis points; over (B) the then-outstanding principal amount of such Note. On and after March 15, 2024, the Company may redeem the Notes, in whole or in part, at 103.750% in 2024, 101.875% in 2025, and 100% in 2026 and thereafter, together with any accrued and unpaid interest on the Notes being redeemed to but excluding the date of redemption. If a change in control of the Company, as defined in the Indenture, occurs, the holders of the Notes will have the right to require the Company to purchase all or a portion of their Notes at a price in cash equal to 101% of the principal amount thereof, plus any accrued but unpaid interest. The Notes are senior unsecured obligations of the Company and will rank equally with all of the Company’s other future senior unsecured indebtedness. The Indenture includes customary covenants and events of default. Among other things, the covenants restrict the ability of the Company and its subsidiaries to incur additional indebtedness or make restricted payments, including dividends, and under certain circumstances, the Company is required to maintain certain levels of reinsurance coverage while the Notes remain outstanding, and maintain certain other financial covenants. These covenants are subject to important exceptions and qualifications set forth in the Indenture. Principal and interest on the Notes are subject to acceleration in the event of certain events of default, including automatic acceleration upon certain bankruptcy-related events. Long-term debt consisted of the following: June 30, December 31, 2019 2018 (In thousands) Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively $ 98,442 $ — Senior unsecured floating rate notes, due December 31, 2027, net of deferred financing costs of $0 and $348, respectively — 24,652 Senior unsecured fixed rate notes, due December 31, 2022, net of deferred financing costs of $0 and $248, respectively — 19,752 Total long-term debt, net $ 98,442 $ 44,404 As of June 30, 2019 , the Company's estimated annual aggregate amount of debt maturities includes the following: Aggregate Debt For the Years Ending December 31, Maturities (In thousands) 2019 $ — 2020 — 2021 — 2022 — 2023 — Thereafter 100,000 Total debt maturities 100,000 Less: deferred financing costs 1,558 Total debt maturities, net $ 98,442 |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2019 | |
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 26.7% and 26.6% for the three months ended June 30, 2019 and 2018 , respectively. The effective income tax rate was 27.4% and 25.7% for the six months ended June 30, 2019 and 2018 , 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 and other items. The Company had an uncertain tax position of $0.6 million as of June 30, 2019 and December 31, 2018 . The Company does not have a valuation allowance as of June 30, 2019 and December 31, 2018 . 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 and six months ended June 30, 2019 and 2018 , the Company did not recognize any expenses related to an uncertain tax position and our associated accrued interest and penalties was less than $0.1 million . |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
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. Regarding the matter involving the Co-Existence Agreement effective as of April 30, 2013 with Federated Mutual Insurance Company and the related arbitration (please see Note 9 of our 2018 Form 10-K for more information), the U.S. Court of Appeals for the Eighth Circuit agreed with the Company’s position that the U.S. District Court in Minnesota did not have jurisdiction over the Company, vacated the judgment of the Minnesota court confirming the arbitration award, and ordered the Minnesota matter dismissed. FNHC’s motion to confirm the arbitration award in part and vacate in part remains pending in the U. S. District Court for the Northern District of Illinois. On July 26, 2019, Capital Returns Management, LLC (“Capital Returns”) filed suit against the Company in the Circuit Court for Broward County, Florida to compel the Company to hold its 2019 annual meeting of stockholders. Discussions with Capital Returns are ongoing as of the date of this Form 10-Q. 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, Florida Automobile Joint Underwriters Association (“JUA”), Georgia Insurers Insolvency Pool (“GIIP”), Special Insurance Fraud Fund (“SIIF”), Fair Access to Insurance Requirements Plan (“FAIRP”), Georgia Automobile Insurance Plan (“GAIP”), Property Insurance Association of Louisiana (“PIAL”), Louisiana Automobile Insurance Plan (“LAIP”), South Carolina Property & Casualty Insurance Guaranty Association (“SCPCIGA”), Texas Property and Casualty Insurance Guaranty Association (“TPCIGA”), Texas Windstorm Insurance Association (“TWIA”), Texas Automobile Insurance Plan Association (“TAIPA”), Alabama Insurance Guaranty Association (“AIGA”), and Alabama Insurance Underwriters Association (“AIUA”). As a direct premium writer in Florida, we are required to participate in certain insurer solvency associations under Florida law, administered by FIGA. 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, 2018. Future assessments by the JUA and the JUA Plan are indeterminable at this time. Leases The Company is committed under an operating lease agreement for office space with a nine-and-a-half-year term remaining. 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: June 30, 2019 (In thousands) Right-of-use asset $ 7,998 Accrued rent (250 ) Right-of-use asset, net $ 7,748 Lease liability $ 7,998 Weighted-average discount rate 4.71 % Six Months Ended June 30, 2019 (In thousands) Lease expense $ 519 Sublease income (78 ) Lease expense, net $ 441 Net cash provided by (used in) operating activities $ (252 ) The interest rate implicit in our lease was 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 lease 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. Refer to Note 2 above for additional information regarding the implementation of new lease accounting rules on January 1, 2019. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | 11. SHAREHOLDERS' EQUITY Common Stock Repurchases The Company may repurchase shares in open market transactions in accordance with Rule 10b-18 or under Rule 10b5-1 of the Exchange Act from time to time in its discretion, based on ongoing assessments of the Company’s capital needs, the market price of its common stock and general market conditions. The amount and timing of all repurchase transactions are contingent upon market conditions, applicable legal requirements and other factors. In December 2018, the Company’s Board of Directors authorized an additional share repurchase program under which the Company may repurchase up to $10.0 million of its outstanding shares of common stock through December 31, 2019. As of June 30, 2019 , the remaining availability for future repurchases of our common stock under this program was $10.0 million . The Company may repurchase shares in open market transactions in accordance with Rule 10b-18 or under Rule 10b5-1 of the Exchange Act from time to time in its discretion, based on ongoing assessments of the Company’s capital needs, the market price of its common stock and general market conditions. The amount and timing of all repurchase transactions are contingent upon market conditions, applicable legal requirements and other factors. 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. No securities have been offered or sold under this registration statement. Stock Compensation Plan In June 2018, the Company filed with the SEC on Form S-8, a registration statement registering 800,000 shares of common stock reserved for issuance under the Company’s 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”). The 2018 Plan, which was approved by the Company’s shareholders at the 2018 annual meeting, is an equity compensation plan that may be used for our employees, non-employee directors, consultants and advisors. Share-Based Compensation Expense Share-based compensation arrangements include the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Restricted stock $ 502 $ 526 $ 996 $ 1,148 Performance stock 181 172 362 215 Total share-based compensation expense $ 683 $ 698 $ 1,358 $ 1,363 Recognized tax benefit $ 173 $ 177 $ 344 $ 345 Intrinsic value of options exercised — 78 — 78 Fair value of restricted stock vested $ 306 $ 289 $ 1,233 $ 1,476 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 A summary of the Company’s stock option activity includes the following: Number of Shares Weighted Average Option Exercise Price Outstanding at January 1, 2019 39,017 $ 3.80 Granted — — Exercised — — Cancelled — — Outstanding at June 30, 2019 39,017 $ 3.80 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, excluding relative total shareholder return ("TSR"), 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. Our TSR cliff vesting awards contain performance criteria which are tied to the achievement of certain market conditions. The TSR grant date fair value was determined using a Monte Carlo simulation and, unlike the performance condition awards, the expense is not reversed if the performance condition is not met. This value is recognized as expense over the requisite service period using the straight‑line recognition method. During the six months ended June 30, 2019 and 2018 , the Board of Directors granted 140,156 and 133,208 RSAs, respectively, vesting over three or five years , to the Company’s directors, executives and other key employees. RSA activity includes the following: Number of Shares Weighted Average Grant Date Fair Value Outstanding at January 1, 2019 262,334 $ 18.78 Granted 140,156 18.03 Vested (64,875 ) 19.01 Cancelled (12,960 ) 18.15 Outstanding at June 30, 2019 324,655 $ 18.44 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 June 30, 2019 2018 Before Tax Income Tax Net Before Tax Income Tax Net (In thousands) Accumulated other comprehensive income (loss), beginning-of-period $ 4,204 $ (1,066 ) $ 3,138 $ (5,210 ) $ 1,349 $ (3,861 ) Other comprehensive income (loss) before reclassification 6,530 (1,655 ) 4,875 (1,748 ) 443 (1,305 ) Reclassification adjustment for realized losses (gains) included in net income 1,670 (423 ) 1,247 (208 ) 24 (184 ) 8,200 (2,078 ) 6,122 (1,956 ) 467 (1,489 ) Accumulated other comprehensive income (loss), end-of-period $ 12,404 $ (3,144 ) $ 9,260 $ (7,166 ) $ 1,816 $ (5,350 ) Six Months Ended June 30, 2019 2018 Before Tax Income Tax Net Before Tax Income Tax Net (In thousands) Accumulated other comprehensive income (loss), beginning-of-period $ (5,023 ) $ 1,273 $ (3,750 ) $ 2,287 $ (593 ) $ 1,694 Cumulative effect of new accounting standards — — — (1,349 ) 355 (994 ) Other comprehensive income (loss) before reclassification 18,058 (4,577 ) 13,481 (8,948 ) 2,268 (6,680 ) Reclassification adjustment for realized losses (gains) included in net income (631 ) 160 (471 ) 844 (214 ) 630 17,427 (4,417 ) 13,010 (8,104 ) 2,054 (6,050 ) Accumulated other comprehensive income (loss), end-of-period $ 12,404 $ (3,144 ) $ 9,260 $ (7,166 ) $ 1,816 $ (5,350 ) |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | 12. EARNINGS PER SHARE Basic earnings per share (“EPS”) is computed by dividing net income 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 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 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 table presents the calculation of basic and diluted EPS: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands, except per share data) Net income (loss) attributable to FedNat Holding Company shareholders $ 7,110 $ 8,820 $ 3,245 $ 16,283 Weighted average number of common shares outstanding - basic 12,844 12,726 12,820 12,788 Net income (loss) per common share - basic $ 0.55 $ 0.69 $ 0.25 $ 1.27 Weighted average number of common shares outstanding - basic 12,844 12,726 12,820 12,788 Dilutive effect of stock compensation plans 39 120 56 101 Weighted average number of common shares outstanding - diluted 12,883 12,846 12,876 12,889 Net income (loss) per common share - diluted $ 0.55 $ 0.69 $ 0.25 $ 1.26 Dividends per share $ 0.08 $ 0.08 $ 0.16 $ 0.16 Dividends Declared In January 2019, our Board of Directors declared a $0.08 per common share dividend, payable in March 2019, to shareholders of record on February 14, 2019, amounting to $1.0 million . In May 2019, our Board of Directors declared a $0.08 per common share dividend, payable in June 2019, to shareholders of record on May 14, 2019, amounting to $1.1 million . In July 2019, our Board of Directors declared a $0.08 per common share dividend, payable in September 2019, to shareholders of record on August 16, 2019, amounting to $1.0 million . |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | 13. SUBSEQUENT EVENTS Dividends Declared Refer to Note 12 above for information related to our dividend declared in July 2019. 2019-2020 Catastrophe Excess of Loss Reinsurance Program Refer to Note 6 above for information related to our combined FNIC, MNIC and MIC private market excess of loss treaties, covering both Florida and non-Florida exposures, which become effective July 1, 2019 and all private layers. Note 6 also provides information related to FNIC renewal of its quota-share reinsurance program for 2019-2020 to be effective on July 1, 2019 on an in-force, new and renewal basis. Litigation and Legal Proceedings Refer to Note 10 above for information related to Capital Returns suit against the Company filed on July 26, 2019. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
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 the Company’s homeowners insurance products to consumers in Florida. As a percentage of the total homeowners premiums we underwrote, 23.9% and 24.4% were from Allstate’s network of Florida agents, for the three months ended June 30, 2019 and 2018 , respectively. For the six months ended June 30, 2019 and 2018 , 23.4% and 23.7% , respectively, of the homeowners premiums we underwrote were from Allstate's network of Florida agents. SageSure Insurance Managers, LLC The Company is a party to a managing general underwriting agreement with SageSure Insurance Managers, LLC (“SageSure”) to facilitate growth in our FNIC homeowners business outside of Florida. As a percentage of the total homeowners premiums, 22.0% and 14.5% , respectively, of the Company’s premiums were underwritten by SageSure, for the three months ended June 30, 2019 and 2018 , respectively. For the six months ended June 30, 2019 and 2018 , 21.0% and 13.3% , respectively, of the Company's homeowners premiums were underwritten by Sagesure. |
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 variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements. |
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 variable interests in a VIE to determine whether the Company has a controlling financial interest and would therefore be considered the primary beneficiary of the VIE. If the Company determines it is the primary beneficiary of a VIE, the Company consolidates the assets and liabilities of the VIE in its consolidated financial statements. |
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 | Recently Issued Accounting Pronouncements, Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) . The update superseded the prior lease guidance in Topic 840, Leases and lessees are required to recognize for all leases, with the exception of short-term leases, a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis. Additionally, lessees are required to recognize a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company adopted the guidance effective January 1, 2019, by reflecting a $6.1 million right-of-use asset, after-tax, and $6.1 million lease liability, after-tax, on our consolidated balance sheets for our leases in existence as of that date. All of the Company's leases were classified as operating leases and we elected the practical expedient, therefore no adjustment to comparative prior periods presented have been made. The provisions of this ASU did not have an impact on our pattern of lease expense recognition on our consolidated statements of operations. Refer to Note 10 below for additional information regarding leases. Recently Issued Accounting Pronouncements, Not Yet Adopted In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The update requires entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as currently performed under the other-than-temporary impairment ("OTTI") model. The update also requires enhanced disclosures for financial assets measured at amortized cost and available-for-sale debt securities to help the financial statement users better understand significant judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. The update is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is in the early stage of evaluating the impact that the update will have on the Company’s consolidated financial position or results of operations. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . ASU 2018-15 requires a customer in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification 350-40 to determine which implementation costs to defer and recognize as an asset. The update is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is in the early stage of evaluating the impact that the update will have on the Company’s consolidated financial position or results of operations. |
FAIR VALUE (Tables)
FAIR VALUE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Disclosures [Abstract] | |
Fair Value, Assets Measured on Recurring Basis | Held-to-maturity debt securities reported on the consolidated balance sheets at amortized cost and disclosed at fair value below (and in Note 5) and the level of fair value hierarchy of inputs used consisted of the following: Level 1 Level 2 Level 3 Total (In thousands) June 30, 2019 $ 3,418 $ 1,045 $ — $ 4,463 December 31, 2018 3,809 1,155 — 4,964 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: June 30, 2019 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 50,047 $ 100,673 $ — $ 150,720 Obligations of states and political subdivisions — 11,717 — 11,717 Corporate securities — 267,994 — 267,994 International securities — 20,693 — 20,693 Debt securities, at fair value 50,047 401,077 — 451,124 Equity securities, at fair value 20,114 1,998 — 22,112 Total investments, at fair value $ 70,161 $ 403,075 $ — $ 473,236 December 31, 2018 Level 1 Level 2 Level 3 Total (In thousands) Debt securities - available-for-sale, at fair value: United States government obligations and authorities $ 43,918 $ 83,950 $ — $ 127,868 Obligations of states and political subdivisions — 9,767 — 9,767 Corporate securities — 268,731 — 268,731 International securities — 22,275 — 22,275 Debt securities, at fair value 43,918 384,723 — 428,641 Equity securities, at fair value 16,037 1,721 — 17,758 Total investments, at fair value $ 59,955 $ 386,444 $ — $ 446,399 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Investments [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) June 30, 2019 Debt securities - available-for-sale: United States government obligations and authorities $ 147,663 $ 3,206 $ 149 $ 150,720 Obligations of states and political subdivisions 11,483 240 6 11,717 Corporate 259,243 8,905 154 267,994 International 20,331 373 11 20,693 438,720 12,724 320 451,124 Debt securities - held-to-maturity: United States government obligations and authorities 3,591 11 68 3,534 Corporate 853 20 — 873 International 55 1 — 56 4,499 32 68 4,463 Total investments, excluding equity securities $ 443,219 $ 12,756 $ 388 $ 455,587 Amortized Gross Gross Cost Unrealized Unrealized or Cost Gains Losses Fair Value (In thousands) December 31, 2018 Debt securities - available-for-sale: United States government obligations and authorities $ 127,928 $ 1,091 $ 1,151 $ 127,868 Obligations of states and political subdivisions 9,870 27 130 9,767 Corporate 273,192 510 4,971 268,731 International 22,674 12 411 22,275 433,664 1,640 6,663 428,641 Debt securities - held-to-maturity: United States government obligations and authorities 4,085 1 158 3,928 Corporate 986 2 6 982 International 55 — 1 54 5,126 3 165 4,964 Total investments, excluding equity securities $ 438,790 $ 1,643 $ 6,828 $ 433,605 |
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 Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Gross realized and unrealized gains: Debt securities $ 834 $ 41 $ 1,151 $ 264 Equity securities 1,477 1,088 4,307 2,241 Total gross realized and unrealized gains 2,311 1,129 5,458 2,505 Gross realized and unrealized losses: Debt securities (120 ) (877 ) (520 ) (2,318 ) Equity securities (236 ) (44 ) (682 ) (1,031 ) Total gross realized and unrealized losses (356 ) (921 ) (1,202 ) (3,349 ) Net realized and unrealized gains (losses) on investments $ 1,955 $ 208 $ 4,256 $ (844 ) |
Schedule of Net 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 Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Net realized and unrealized gains (losses) $ 1,241 $ 1,044 $ 3,625 $ 1,210 Less: Net realized and unrealized gains (losses) on securities sold (76 ) 42 250 324 Net unrealized gains (losses) still held as of the end-of-period $ 1,317 $ 1,002 $ 3,375 $ 886 |
Investments Classified by Contractual Maturity Date | Amortized cost and estimated fair value of debt securities, by contractual maturity, consisted of the following: June 30, 2019 Amortized Cost Fair Value Securities with Maturity Dates (In thousands) Debt securities, available-for-sale: One year or less $ 16,722 $ 16,739 Over one through five years 161,198 164,830 Over five through ten years 127,038 132,236 Over ten years 133,762 137,319 438,720 451,124 Debt securities, held-to-maturity: One year or less 80 80 Over one through five years 4,185 4,146 Over five through ten years 234 237 4,499 4,463 Total $ 443,219 $ 455,587 |
Summary of Net Investment Income | Net investment income consisted of the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Interest income $ 4,169 $ 2,927 $ 7,826 $ 5,815 Dividends income 90 51 143 106 Net investment income $ 4,259 $ 2,978 $ 7,969 $ 5,921 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | 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) June 30, 2019 Debt securities - available-for-sale: United States government obligations and authorities $ 3,088 $ 2 $ 21,210 $ 147 $ 24,298 $ 149 Obligations of states and political subdivisions — — 2,606 6 2,606 6 Corporate 11,678 87 15,689 67 27,367 154 International 3,027 10 679 1 3,706 11 17,793 99 40,184 221 57,977 320 Debt securities, held-to-maturity: United States government obligations and authorities — — 2,894 68 2,894 68 Corporate 20 — — — 20 — International — — 40 — 40 — 20 — 2,934 68 2,954 68 Total investments, excluding equity securities $ 17,813 $ 99 $ 43,118 $ 289 $ 60,931 $ 388 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, 2018 Debt securities - available-for-sale: United States government obligations and authorities $ 22,673 $ 246 $ 29,727 $ 905 $ 52,400 $ 1,151 Obligations of states and political subdivisions 3,254 18 4,786 112 8,040 130 Corporate 160,361 3,058 53,232 1,913 213,593 4,971 International 15,608 217 4,678 194 20,286 411 201,896 3,539 92,423 3,124 294,319 6,663 Debt securities, held-to-maturity: United States government obligations and authorities 229 1 3,113 157 3,342 158 Corporate 591 6 90 — 681 6 International 54 1 — — 54 1 874 8 3,203 157 4,077 165 Total investments, excluding equity securities $ 202,770 $ 3,547 $ 95,626 $ 3,281 $ 298,396 $ 6,828 |
REINSURANCE (Tables)
REINSURANCE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Reinsurance Disclosures [Abstract] | |
Reinsurance Recoverables | Reinsurance recoverable, net consisted of the following: June 30, December 31, 2019 2018 (In thousands) Reinsurance recoverable on paid losses $ 58,513 $ 45,028 Reinsurance recoverable on unpaid losses 140,800 166,396 Reinsurance recoverable, net $ 199,313 $ 211,424 |
Premiums Written and Earned | Net premiums written and net premiums earned consisted of the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Net Premiums Written Direct $ 169,170 $ 166,734 $ 301,403 $ 301,129 Ceded (62,339 ) (78,804 ) (74,132 ) (96,581 ) $ 106,831 $ 87,930 $ 227,271 $ 204,548 Net Premiums Earned Direct $ 141,220 $ 146,890 $ 279,587 $ 293,332 Ceded (48,914 ) (63,333 ) (98,497 ) (127,666 ) $ 92,306 $ 83,557 $ 181,090 $ 165,666 |
LOSS AND LOSS ADJUSTMENT RESE_2
LOSS AND LOSS ADJUSTMENT RESERVES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
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: Six Months Ended June 30, 2019 2018 (In thousands) Gross reserves, beginning-of-period $ 296,230 $ 230,515 Less: reinsurance recoverable (1) (166,396 ) (98,345 ) Net reserves, beginning-of-period 129,834 132,170 Incurred loss, net of reinsurance, related to: Current year 132,087 98,132 Prior year loss development (redundancy) (2) 1,524 (1,192 ) Ceded losses subject to offsetting experience account adjustments (3) (1,432 ) (3,299 ) Prior years 92 (4,491 ) Total incurred loss and LAE, net of reinsurance 132,179 93,641 Paid loss, net of reinsurance, related to: Current year 69,248 42,260 Prior years 64,830 57,569 Total paid loss and LAE, net of reinsurance 134,078 99,829 Net reserves, end-of-period 127,935 125,982 Plus: reinsurance recoverable (1) 140,800 165,693 Gross reserves, end-of-period $ 268,735 $ 291,675 (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). |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | Long-term debt consisted of the following: June 30, December 31, 2019 2018 (In thousands) Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively $ 98,442 $ — Senior unsecured floating rate notes, due December 31, 2027, net of deferred financing costs of $0 and $348, respectively — 24,652 Senior unsecured fixed rate notes, due December 31, 2022, net of deferred financing costs of $0 and $248, respectively — 19,752 Total long-term debt, net $ 98,442 $ 44,404 |
Schedule of Maturities of Long-term Debt | As of June 30, 2019 , the Company's estimated annual aggregate amount of debt maturities includes the following: Aggregate Debt For the Years Ending December 31, Maturities (In thousands) 2019 $ — 2020 — 2021 — 2022 — 2023 — Thereafter 100,000 Total debt maturities 100,000 Less: deferred financing costs 1,558 Total debt maturities, net $ 98,442 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Assets And Liabilities, Lessee | Additional information related to our operating lease agreement for office space consisted of the following: June 30, 2019 (In thousands) Right-of-use asset $ 7,998 Accrued rent (250 ) Right-of-use asset, net $ 7,748 Lease liability $ 7,998 Weighted-average discount rate 4.71 % |
Additional Lease Cost Information | Six Months Ended June 30, 2019 (In thousands) Lease expense $ 519 Sublease income (78 ) Lease expense, net $ 441 Net cash provided by (used in) operating activities $ (252 ) |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | Share-based compensation arrangements include the following: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands) Restricted stock $ 502 $ 526 $ 996 $ 1,148 Performance stock 181 172 362 215 Total share-based compensation expense $ 683 $ 698 $ 1,358 $ 1,363 Recognized tax benefit $ 173 $ 177 $ 344 $ 345 Intrinsic value of options exercised — 78 — 78 Fair value of restricted stock vested $ 306 $ 289 $ 1,233 $ 1,476 |
Schedule of Stock Options Roll Forward | A summary of the Company’s stock option activity includes the following: Number of Shares Weighted Average Option Exercise Price Outstanding at January 1, 2019 39,017 $ 3.80 Granted — — Exercised — — Cancelled — — Outstanding at June 30, 2019 39,017 $ 3.80 |
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | RSA activity includes the following: Number of Shares Weighted Average Grant Date Fair Value Outstanding at January 1, 2019 262,334 $ 18.78 Granted 140,156 18.03 Vested (64,875 ) 19.01 Cancelled (12,960 ) 18.15 Outstanding at June 30, 2019 324,655 $ 18.44 |
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 June 30, 2019 2018 Before Tax Income Tax Net Before Tax Income Tax Net (In thousands) Accumulated other comprehensive income (loss), beginning-of-period $ 4,204 $ (1,066 ) $ 3,138 $ (5,210 ) $ 1,349 $ (3,861 ) Other comprehensive income (loss) before reclassification 6,530 (1,655 ) 4,875 (1,748 ) 443 (1,305 ) Reclassification adjustment for realized losses (gains) included in net income 1,670 (423 ) 1,247 (208 ) 24 (184 ) 8,200 (2,078 ) 6,122 (1,956 ) 467 (1,489 ) Accumulated other comprehensive income (loss), end-of-period $ 12,404 $ (3,144 ) $ 9,260 $ (7,166 ) $ 1,816 $ (5,350 ) Six Months Ended June 30, 2019 2018 Before Tax Income Tax Net Before Tax Income Tax Net (In thousands) Accumulated other comprehensive income (loss), beginning-of-period $ (5,023 ) $ 1,273 $ (3,750 ) $ 2,287 $ (593 ) $ 1,694 Cumulative effect of new accounting standards — — — (1,349 ) 355 (994 ) Other comprehensive income (loss) before reclassification 18,058 (4,577 ) 13,481 (8,948 ) 2,268 (6,680 ) Reclassification adjustment for realized losses (gains) included in net income (631 ) 160 (471 ) 844 (214 ) 630 17,427 (4,417 ) 13,010 (8,104 ) 2,054 (6,050 ) Accumulated other comprehensive income (loss), end-of-period $ 12,404 $ (3,144 ) $ 9,260 $ (7,166 ) $ 1,816 $ (5,350 ) |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share, Basic and Diluted | The following table presents the calculation of basic and diluted EPS: Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 (In thousands, except per share data) Net income (loss) attributable to FedNat Holding Company shareholders $ 7,110 $ 8,820 $ 3,245 $ 16,283 Weighted average number of common shares outstanding - basic 12,844 12,726 12,820 12,788 Net income (loss) per common share - basic $ 0.55 $ 0.69 $ 0.25 $ 1.27 Weighted average number of common shares outstanding - basic 12,844 12,726 12,820 12,788 Dilutive effect of stock compensation plans 39 120 56 101 Weighted average number of common shares outstanding - diluted 12,883 12,846 12,876 12,889 Net income (loss) per common share - diluted $ 0.55 $ 0.69 $ 0.25 $ 1.26 Dividends per share $ 0.08 $ 0.08 $ 0.16 $ 0.16 |
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 | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Ivantage Select Agency Inc | ||||
Organization, Consolidation, And Basis of Preparation [Line Items] | ||||
Concentration risk, percentage | 23.90% | 24.40% | 23.40% | 23.70% |
SageSure Insurance Managers LLC | ||||
Organization, Consolidation, And Basis of Preparation [Line Items] | ||||
Concentration risk, percentage | 22.00% | 14.50% | 21.00% | 13.30% |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (Narrative) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Jan. 01, 2019 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right-of-use asset | $ 7,998 | |
Lease liability | $ 7,998 | |
Accounting Standards Update 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Right-of-use asset | $ 6,100 | |
Lease liability | $ 6,100 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - USD ($) | Feb. 25, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Mar. 05, 2019 |
Business Acquisition [Line Items] | ||||
Repayments of debt | $ 45,000,000 | $ 48,000,000 | $ 5,000,000 | |
Senior Unsecured Fixed Rate Notes, Due 2029 | ||||
Business Acquisition [Line Items] | ||||
Debt instrument face amount | $ 100,000,000 | |||
Stated interest rate | 7.50% | |||
1347 Property Insurance Holdings, Inc | ||||
Business Acquisition [Line Items] | ||||
Consideration transferred | 51,000,000 | |||
Cash payments made in acquisition | 25,500,000 | |||
Equity interest issued | $ 25,500,000 | |||
Resale of shares issues, standstill agreement term | 5 years | |||
Right of first refusal agreement, term | 5 years | |||
Right of first refusal agreement, threshold percent | 7.50% | |||
Investment advisory services agreement, term | 5 years | |||
Non-compete agreement, term | 5 years | |||
Minimum net book value | $ 42,000,000 |
FAIR VALUE (Available-for-Sale
FAIR VALUE (Available-for-Sale Financial Instruments Measured at Fair Value) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | $ 451,124 | $ 428,641 |
Equity securities, at fair value | 22,112 | 17,758 |
Total investments, at fair value | 473,236 | 446,399 |
United States Government Obligations and Authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 150,720 | 127,868 |
Obligations of States and Political Subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 11,717 | 9,767 |
Corporate Securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 267,994 | 268,731 |
International | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 20,693 | 22,275 |
Level 1 | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 50,047 | 43,918 |
Equity securities, at fair value | 20,114 | 16,037 |
Total investments, at fair value | 70,161 | 59,955 |
Level 1 | United States Government Obligations and Authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 50,047 | 43,918 |
Level 1 | Obligations of States and Political Subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 0 | |
Level 1 | Corporate Securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 0 | |
Level 1 | International | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 0 | |
Level 2 | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 401,077 | 384,723 |
Equity securities, at fair value | 1,998 | 1,721 |
Total investments, at fair value | 403,075 | 386,444 |
Level 2 | United States Government Obligations and Authorities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 100,673 | 83,950 |
Level 2 | Obligations of States and Political Subdivisions | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 11,717 | 9,767 |
Level 2 | Corporate Securities | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | 267,994 | 268,731 |
Level 2 | International | ||
Investments, Debt and Equity Securities [Abstract] | ||
Debt securities - available-for-sale, at fair value: | $ 20,693 | $ 22,275 |
FAIR VALUE (Held-to-Maturity Fi
FAIR VALUE (Held-to-Maturity Financial Instruments Measured at Fair Value) (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Changes in valuation inputs or changes in assumptions | $ 0 | $ 0 | |
Unobservable inputs reconciliation, transfers | 0 | $ 0 | |
US Government Obligations and Authorities, Corporate and International Securities | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Held-to-maturity securities, fair value | 4,463 | $ 4,964 | |
US Government Obligations and Authorities, Corporate and International Securities | Level 1 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Held-to-maturity securities, fair value | 3,418 | 3,809 | |
US Government Obligations and Authorities, Corporate and International Securities | Level 2 | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Held-to-maturity securities, fair value | $ 1,045 | $ 1,155 |
INVESTMENTS (Narrative) (Detail
INVESTMENTS (Narrative) (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019USD ($)security | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)security | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($)security | |
Investments [Abstract] | |||||
Unrealized gains and losses for equity securities (Less Than) | $ 1,000 | ||||
Debt and equity securities held in an unrealized loss position | security | 171 | 171 | 1,222 | ||
Debt securities and equity securities held in an unrealized loss position 12 months or more | security | 123 | 123 | 371 | ||
OTTI losses | $ 0 | $ 0 | $ 0 | $ 0 | |
Fair value of investments deposited with governmental authorities required by law | $ 10,700 | $ 10,700 | $ 10,300 |
INVESTMENTS (Summary of Amortiz
INVESTMENTS (Summary of Amortized Cost and Fair Value of Debt and Equity Securities) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Schedule of Investments [Line Items] | ||
Debt securities, available-for-sale, at amortized cost | $ 438,720 | $ 433,664 |
Debt securities - available-for-sale, at fair value: | 451,124 | 428,641 |
Held-to-maturity securities, Amortized Cost or Cost | 4,499 | 5,126 |
Total investments, Amortized Cost or Cost | 443,219 | 438,790 |
Total investments, Gross Unrealized Gain | 12,756 | 1,643 |
Total investments, Gross Unrealized Loss | 388 | 6,828 |
Total investments, Fair Value | 455,587 | 433,605 |
Debt Securities | ||
Schedule of Investments [Line Items] | ||
Debt securities, available-for-sale, at amortized cost | 438,720 | 433,664 |
Debt securities, available-for-sale securities, Gross Unrealized Gain | 12,724 | 1,640 |
Debt securities, available-for-sale securities, Gross Unrealized Losses | 320 | 6,663 |
Debt securities - available-for-sale, at fair value: | 451,124 | 428,641 |
Held-to-maturity securities, Amortized Cost or Cost | 4,499 | 5,126 |
Held-to-maturity securities, Gross Unrealized Gains | 32 | 3 |
Held-to-maturity securities, Gross Unrealized Losses | 68 | 165 |
Held-to-maturity securities, fair value | 4,463 | 4,964 |
United States Government Obligations and Authorities | ||
Schedule of Investments [Line Items] | ||
Debt securities, available-for-sale, at amortized cost | 147,663 | 127,928 |
Debt securities, available-for-sale securities, Gross Unrealized Gain | 3,206 | 1,091 |
Debt securities, available-for-sale securities, Gross Unrealized Losses | 149 | 1,151 |
Debt securities - available-for-sale, at fair value: | 150,720 | 127,868 |
Held-to-maturity securities, Amortized Cost or Cost | 3,591 | 4,085 |
Held-to-maturity securities, Gross Unrealized Gains | 11 | 1 |
Held-to-maturity securities, Gross Unrealized Losses | 68 | 158 |
Held-to-maturity securities, fair value | 3,534 | 3,928 |
Obligations of States and Political Subdivisions | ||
Schedule of Investments [Line Items] | ||
Debt securities, available-for-sale, at amortized cost | 11,483 | 9,870 |
Debt securities, available-for-sale securities, Gross Unrealized Gain | 240 | 27 |
Debt securities, available-for-sale securities, Gross Unrealized Losses | 6 | 130 |
Debt securities - available-for-sale, at fair value: | 11,717 | 9,767 |
Corporate | ||
Schedule of Investments [Line Items] | ||
Debt securities, available-for-sale, at amortized cost | 259,243 | 273,192 |
Debt securities, available-for-sale securities, Gross Unrealized Gain | 8,905 | 510 |
Debt securities, available-for-sale securities, Gross Unrealized Losses | 154 | 4,971 |
Debt securities - available-for-sale, at fair value: | 267,994 | 268,731 |
Held-to-maturity securities, Amortized Cost or Cost | 853 | 986 |
Held-to-maturity securities, Gross Unrealized Gains | 20 | 2 |
Held-to-maturity securities, Gross Unrealized Losses | 0 | 6 |
Held-to-maturity securities, fair value | 873 | 982 |
International | ||
Schedule of Investments [Line Items] | ||
Debt securities, available-for-sale, at amortized cost | 20,331 | 22,674 |
Debt securities, available-for-sale securities, Gross Unrealized Gain | 373 | 12 |
Debt securities, available-for-sale securities, Gross Unrealized Losses | 11 | 411 |
Debt securities - available-for-sale, at fair value: | 20,693 | 22,275 |
Held-to-maturity securities, Amortized Cost or Cost | 55 | 55 |
Held-to-maturity securities, Gross Unrealized Gains | 1 | 0 |
Held-to-maturity securities, Gross Unrealized Losses | 0 | 1 |
Held-to-maturity securities, fair value | $ 56 | $ 54 |
INVESTMENTS (Net Realized Gains
INVESTMENTS (Net Realized Gains (Losses) by Major Investment Category (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract] (Deprecated 2018-01-31) | ||||
Gross realized and unrealized gains: | $ 2,311 | $ 1,129 | $ 5,458 | $ 2,505 |
Gross realized and unrealized losses: | (356) | (921) | (1,202) | (3,349) |
Net realized and unrealized gains (losses) on investments | 1,955 | 208 | 4,256 | (844) |
Debt Securities | ||||
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract] (Deprecated 2018-01-31) | ||||
Gross realized and unrealized gains: | 834 | 41 | 1,151 | 264 |
Gross realized and unrealized losses: | (120) | (877) | (520) | (2,318) |
Equity Securities | ||||
Available-for-sale Securities, Gross Realized Gain (Loss) [Abstract] (Deprecated 2018-01-31) | ||||
Gross realized and unrealized gains: | 1,477 | 1,088 | 4,307 | 2,241 |
Gross realized and unrealized losses: | $ (236) | $ (44) | $ (682) | $ (1,031) |
INVESTMENTS (Net Realized and U
INVESTMENTS (Net Realized and Unrealized Gains (Losses) on Investments) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Gain (Loss) on Securities [Line Items] | ||||
Net realized and unrealized gains (losses) on securities sold | $ (76) | $ 42 | $ 250 | $ 324 |
Equity Securities | ||||
Gain (Loss) on Securities [Line Items] | ||||
Net realized and unrealized gains (losses) | 1,241 | 1,044 | 3,625 | 1,210 |
Net unrealized gains (losses) still held as of the end-of-period | $ 1,317 | $ 1,002 | $ 3,375 | $ 886 |
INVESTMENTS (Amortized Cost and
INVESTMENTS (Amortized Cost and Estimated Fair Value of Debt Securities by Contractual Maturity) (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Debt Securities, Available-for-sale, Amortized Cost, Fiscal Year Maturity [Abstract] | |
One year or less | $ 16,722 |
Over one through five years | 161,198 |
Over five through ten years | 127,038 |
Over ten years | 133,762 |
Amortized cost | 438,720 |
Available-for-sale Securities, Debt maturities, Fair value: | |
One year or less | 16,739 |
Over one through five years | 164,830 |
Over five through ten years | 132,236 |
Over ten years | 137,319 |
Fair value | 451,124 |
Held-to-maturity Securities, Debt maturities, Amortized cost [Abstract] | |
One year or less | 80 |
Over one through five years | 4,185 |
Over five through ten years | 234 |
Amortized cost | 4,499 |
Held-to-maturity Securities, Debt Maturities, Fair value: | |
One year or less | 80 |
Over one through five years | 4,146 |
Over five through ten years | 237 |
Fair value | 4,463 |
Total Investments | |
Amortized cost | 443,219 |
Fair value | $ 455,587 |
INVESTMENTS (Summary of Net Inv
INVESTMENTS (Summary of Net Investment Income) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Investment Income, Interest and Dividend [Abstract] | ||||
Interest income | $ 4,169 | $ 2,927 | $ 7,826 | $ 5,815 |
Dividends income | 90 | 51 | 143 | 106 |
Net investment income | $ 4,259 | $ 2,978 | $ 7,969 | $ 5,921 |
INVESTMENTS (Gross Unrealized L
INVESTMENTS (Gross Unrealized Losses and Related Fair Values for Debt and Equity Securities, Grouped by Duration of Time in Continuous Unrealized Loss Position) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Fair Value [Abstract] | ||
Less than 12 months | $ 20 | $ 874 |
12 months or longer | 2,934 | 3,203 |
Total | 2,954 | 4,077 |
Gross unrealized loss position [Abstract] | ||
Less than 12 months | 0 | 8 |
12 Months or longer | 68 | 157 |
Total | 68 | 165 |
Total Investments, excluding equity securities, less than 12 months, Fair Value | 17,813 | 202,770 |
Total Investments, excluding equity securities, Less than 12 Months, Gross Unrealized Losses | 99 | 3,547 |
Total Investments, excluding equity securities, 12 months or longer, Fair Value | 43,118 | 95,626 |
Total Investments, excluding equity securities, 12 months or longer, Gross Unrealized Losses | 289 | 3,281 |
Total Investments, excluding equity securities, Total Fair Value | 60,931 | 298,396 |
Total Investments, excluding equity securities, Total Gross Unrealized Losses | 388 | 6,828 |
United States Government Obligations and Authorities | ||
Fair value [Abstract] | ||
Less than 12 months | 3,088 | 22,673 |
12 months or longer | 21,210 | 29,727 |
Total | 24,298 | 52,400 |
Gross unrealized losses [Abstract] | ||
Less than 12 months | 2 | 246 |
12 months or longer | 147 | 905 |
Total | 149 | 1,151 |
Fair Value [Abstract] | ||
Less than 12 months | 0 | 229 |
12 months or longer | 2,894 | 3,113 |
Total | 2,894 | 3,342 |
Gross unrealized loss position [Abstract] | ||
Less than 12 months | 0 | 1 |
12 Months or longer | 68 | 157 |
Total | 68 | 158 |
Obligations of States and Political Subdivisions | ||
Fair value [Abstract] | ||
Less than 12 months | 0 | 3,254 |
12 months or longer | 2,606 | 4,786 |
Total | 2,606 | 8,040 |
Gross unrealized losses [Abstract] | ||
Less than 12 months | 0 | 18 |
12 months or longer | 6 | 112 |
Total | 6 | 130 |
Corporate | ||
Fair value [Abstract] | ||
Less than 12 months | 11,678 | 160,361 |
12 months or longer | 15,689 | 53,232 |
Total | 27,367 | 213,593 |
Gross unrealized losses [Abstract] | ||
Less than 12 months | 87 | 3,058 |
12 months or longer | 67 | 1,913 |
Total | 154 | 4,971 |
Fair Value [Abstract] | ||
Less than 12 months | 20 | 591 |
12 months or longer | 0 | 90 |
Total | 20 | 681 |
Gross unrealized loss position [Abstract] | ||
Less than 12 months | 0 | 6 |
12 Months or longer | 0 | 0 |
Total | 0 | 6 |
International | ||
Fair value [Abstract] | ||
Less than 12 months | 3,027 | 15,608 |
12 months or longer | 679 | 4,678 |
Total | 3,706 | 20,286 |
Gross unrealized losses [Abstract] | ||
Less than 12 months | 10 | 217 |
12 months or longer | 1 | 194 |
Total | 11 | 411 |
Fair Value [Abstract] | ||
Less than 12 months | 0 | 54 |
12 months or longer | 40 | 0 |
Total | 40 | 54 |
Gross unrealized loss position [Abstract] | ||
Less than 12 months | 0 | 1 |
12 Months or longer | 0 | 0 |
Total | 0 | 1 |
Debt Securities | ||
Fair value [Abstract] | ||
Less than 12 months | 17,793 | 201,896 |
12 months or longer | 40,184 | 92,423 |
Total | 57,977 | 294,319 |
Gross unrealized losses [Abstract] | ||
Less than 12 months | 99 | 3,539 |
12 months or longer | 221 | 3,124 |
Total | $ 320 | $ 6,663 |
REINSURANCE (Narrative) (Detail
REINSURANCE (Narrative) (Details) - USD ($) $ in Thousands | Jul. 01, 2018 | Jul. 01, 2017 | Jul. 31, 2016 | Jun. 30, 2019 | Dec. 31, 2018 | Jul. 01, 2016 |
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | $ 52,760 | $ 63,599 | ||||
Reinsurance recoverable, net | 199,313 | 211,424 | ||||
Maximum | Hurricane Irma | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance recoverable, net | 165,100 | $ 183,500 | ||||
Federated National 2018-2019 Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | 148,800 | |||||
Federated National 2018-2019 Reinsurance Programs | First Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 3,000 | |||||
Federated National 2018-2019 Reinsurance Programs | Maximum | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 20,000 | |||||
Multiple Year Protection Terminated | Maximum | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 89,000 | |||||
Multiple Year Protection Plan Expired | Maximum | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 156,000 | |||||
Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | 1,500 | |||||
Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | First Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 5,000 | |||||
Reinsurance retention amount | 15,000 | |||||
Reinsurance amount retained on net basis with profit share agreement | 7,500 | |||||
Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | Second Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 13,000 | |||||
Reinsurance retention amount | 2,000 | |||||
Reinsurance amount retained on net basis with profit share agreement | 1,000 | |||||
Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | Maximum | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 23,000 | |||||
Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | Maximum | Second Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 18,000 | |||||
2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | 204,700 | |||||
2019-2020 Catastrophe Excess Loss Reinsurance Programs | First Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance retention amount | 20,000 | |||||
Reinsurance amount retained on net basis with profit share agreement | 10,000 | |||||
2019-2020 Catastrophe Excess Loss Reinsurance Programs | Second Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance retention amount | 2,000 | |||||
Reinsurance amount retained on net basis with profit share agreement | 1,000 | |||||
2019-2020 Catastrophe Excess Loss Reinsurance Programs | Maximum | Second Event Coverage | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | $ 18,000 | |||||
Quota Share Treaties | Private Passenger Automobile Insurance Product Line | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share reinsurance treaty | 75.00% | |||||
FHCF | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | $ 42,500 | |||||
Percentage of property quota share reinsurance treaty | 90.00% | |||||
FNIC | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Trust agreement for loss exposure (Less than for September 30, 2018) | $ 100 | |||||
FNIC | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Excess retention, amount reinsured | 27,000 | |||||
Additional coverage amount | $ 20,000 | |||||
FNIC | Quota Share One | Property Insurance Product Line | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share expired on cut off basis | 10.00% | |||||
FNIC | Quota Share One | Florida Homeowners Book of Business | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share reinsurance treaty | 2.00% | 30.00% | ||||
FNIC | Quota Share Two | Florida Homeowners Book of Business | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share reinsurance treaty | 10.00% | |||||
Private and FHCF Reinsurance | Federated Nationals Insurance Company Non Florida Reinsurance Program 2018-2019 | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | $ 2,000 | |||||
Private and FHCF Reinsurance | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Liability for catastrophe claims | 1,840,000 | |||||
Maximum single event coverage | $ 1,280,000 | |||||
Percentage of property quota share reinsurance treaty | 75.00% | |||||
FNIC and MNIC | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | $ 162,000 | |||||
Monarch National S Florida | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 2,000 | |||||
Maison | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Additional coverage amount | 5,000 | |||||
Florida | Quota Share Treaties | Property Insurance Product Line | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share reinsurance treaty | 10.00% | 30.00% | ||||
Florida | Quota Share One | Property Insurance Product Line | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share expired on cut off basis | 30.00% | |||||
Percentage of unearned premiums and losses retained | 30.00% | |||||
Florida | Federated National's Florida Exposure | Federated National 2018-2019 Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | 102,700 | |||||
Florida | Federated National's Florida Exposure | 2019-2020 Catastrophe Excess Loss Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | 162,200 | |||||
Florida | FHCF | Federated National 2018-2019 Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Reinsurance payable | $ 46,100 | |||||
Percentage of property quota share reinsurance treaty | 75.00% | |||||
Florida | FNIC | Quota Share Treaties | Property Insurance Product Line | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Percentage of property quota share reinsurance treaty | 40.00% | |||||
Number of property quota share treaties | 2 years | |||||
Florida | Private and FHCF Reinsurance | Federated National 2018-2019 Reinsurance Programs | ||||||
Liability for Catastrophe Claims [Line Items] | ||||||
Liability for catastrophe claims | $ 1,800,000 | |||||
Maximum single event coverage | $ 1,300,000 |
REINSURANCE (Reinsurance Recove
REINSURANCE (Reinsurance Recoverables) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Reinsurance Disclosures [Abstract] | ||||
Reinsurance recoverable on paid losses | $ 58,513 | $ 45,028 | ||
Reinsurance recoverable on unpaid losses | 140,800 | 166,396 | $ 165,693 | $ 98,345 |
Reinsurance recoverable, net | $ 199,313 | $ 211,424 |
REINSURANCE (Premiums Written a
REINSURANCE (Premiums Written and Earned) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Net Premiums Written | ||||
Direct | $ 169,170 | $ 166,734 | $ 301,403 | $ 301,129 |
Ceded | (62,339) | (78,804) | (74,132) | (96,581) |
Total premiums written | 106,831 | 87,930 | 227,271 | 204,548 |
Net Premiums Earned | ||||
Direct | 141,220 | 146,890 | 279,587 | 293,332 |
Ceded | (48,914) | (63,333) | (98,497) | (127,666) |
Total premiums earned | $ 92,306 | $ 83,557 | $ 181,090 | $ 165,666 |
LOSS AND LOSS ADJUSTMENT RESE_3
LOSS AND LOSS ADJUSTMENT RESERVES (Activity in Liability for Loss and LAE Reserves) (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Liability for Future Policy Benefit, before Reinsurance [Abstract] | ||
Gross reserves, beginning-of-period | $ 296,230 | $ 230,515 |
Less: reinsurance recoverable | (166,396) | (98,345) |
Net reserves, beginning-of-period | 129,834 | 132,170 |
Incurred loss, net of reinsurance, related to: | ||
Current year | 132,087 | 98,132 |
Prior year loss development | 1,524 | (1,192) |
Ceded losses subject to offsetting experience account adjustments | (1,432) | (3,299) |
Prior years | 92 | (4,491) |
Total incurred loss and LAE, net of reinsurance | 132,179 | 93,641 |
Paid loss, net of reinsurance, related to: | ||
Current year | 69,248 | 42,260 |
Prior years | 64,830 | 57,569 |
Total paid loss and LAE, net of reinsurance | 134,078 | 99,829 |
Net reserves, end-of-period | 127,935 | 125,982 |
Plus: reinsurance recoverable | 140,800 | 165,693 |
Gross reserves, end-of-period | $ 268,735 | $ 291,675 |
LOSS AND LOSS ADJUSTMENT RESE_4
LOSS AND LOSS ADJUSTMENT RESERVES (Narrative) (Details) - USD ($) $ in Thousands | Jul. 01, 2017 | Jul. 31, 2016 | Jun. 30, 2019 | Jun. 30, 2018 |
Liability for Future Policy Benefit, by Product Segment [Line Items] | ||||
Claim and claim adjustment expenses incurred related to current year | $ (132,087) | $ (98,132) | ||
Claim and claim adjustment expenses incurred related to prior year | 92 | (4,491) | ||
Reinsurance Programs | Florida | ||||
Liability for Future Policy Benefit, by Product Segment [Line Items] | ||||
Claim and claim adjustment expenses incurred related to current year | $ (1,500) | $ (1,200) | ||
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 | 10.00% | 30.00% |
LONG-TERM DEBT - (Narrative) (D
LONG-TERM DEBT - (Narrative) (Details) - USD ($) | Feb. 25, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Mar. 05, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | |||||
Repayments of promissory note | $ 45,000,000 | $ 48,000,000 | $ 5,000,000 | ||
Senior unsecured fixed rate notes, due December 31, 2022, net of deferred financing costs of $0 and $248, respectively | |||||
Debt Instrument [Line Items] | |||||
Interest expense, debt | 3,600,000 | ||||
Deferred financing costs (less than) | 0 | $ 248,000 | |||
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | |||||
Debt Instrument [Line Items] | |||||
Deferred financing costs (less than) | $ 1,599,000 | $ 0 | |||
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | Unsecured Debt | |||||
Debt Instrument [Line Items] | |||||
Debt instrument face amount | $ 100,000,000 | ||||
Stated interest rate | 7.50% | ||||
Redemption price, percentage | 100.00% | ||||
Default rate, increase in fixed rate | 0.50% | ||||
Redemption premium, percent | 1.00% | ||||
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | Unsecured Debt | After March 15, 2024 | |||||
Debt Instrument [Line Items] | |||||
Redemption price, percentage | 103.75% | ||||
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | Unsecured Debt | March 15, 2025 through March 14, 2026 | |||||
Debt Instrument [Line Items] | |||||
Redemption price, percentage | 101.875% | ||||
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | Unsecured Debt | March 15, 2026 and thereafter | |||||
Debt Instrument [Line Items] | |||||
Redemption price, percentage | 100.00% | ||||
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | Unsecured Debt | Change in Control | |||||
Debt Instrument [Line Items] | |||||
Redemption price, percentage | 101.00% | ||||
1347 Property Insurance Holdings, Inc | Senior unsecured fixed rate notes, due December 31, 2022, net of deferred financing costs of $0 and $248, respectively | |||||
Debt Instrument [Line Items] | |||||
Repayments of promissory note | $ 45,000,000 |
LONG-TERM DEBT - (Schedule of D
LONG-TERM DEBT - (Schedule of Debt) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Total debt maturities | $ 98,442 | $ 44,404 |
Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | ||
Debt Instrument [Line Items] | ||
Deferred financing costs | 1,599 | 0 |
Senior unsecured floating rate notes, due December 31, 2027, net of deferred financing costs of $0 and $348, respectively | ||
Debt Instrument [Line Items] | ||
Deferred financing costs | 0 | 348 |
Senior unsecured fixed rate notes, due December 31, 2022, net of deferred financing costs of $0 and $248, respectively | ||
Debt Instrument [Line Items] | ||
Deferred financing costs | 0 | 248 |
Unsecured Debt | Senior unsecured fixed rate notes, due March 15, 2029, net of deferred financing costs of $1,558 and $0, respectively | ||
Debt Instrument [Line Items] | ||
Total debt maturities | 98,442 | 0 |
Unsecured Debt | Senior unsecured floating rate notes, due December 31, 2027, net of deferred financing costs of $0 and $348, respectively | ||
Debt Instrument [Line Items] | ||
Total debt maturities | 0 | 24,652 |
Unsecured Debt | Senior unsecured fixed rate notes, due December 31, 2022, net of deferred financing costs of $0 and $248, respectively | ||
Debt Instrument [Line Items] | ||
Total debt maturities | $ 0 | $ 19,752 |
LONG-TERM DEBT - (Schedule of M
LONG-TERM DEBT - (Schedule of Maturities of Long-term Debt) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Debt Disclosure [Abstract] | ||
2019 | $ 0 | |
2020 | 0 | |
2021 | 0 | |
2022 | 0 | |
2023 | 0 | |
Thereafter | 100,000 | |
Total debt maturities | 100,000 | |
Less: deferred financing costs | 1,558 | $ 596 |
Total debt maturities, net | $ 98,442 | $ 44,404 |
INCOME TAXES (Narrative) (Detai
INCOME TAXES (Narrative) (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |||||
Effective income tax rate | 26.70% | 26.60% | 27.40% | 25.70% | |
Unrecognized Tax Benefits | $ 0.6 | $ 0.6 | $ 0.6 | ||
Income tax expense from uncertain tax position (less than) | $ 0.1 | $ 0.1 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Leases) (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Operating lease, term | 9 years 6 months | |
Balance Sheet Related Disclosures [Abstract] | ||
Right-of-use asset | $ 7,998 | |
Accrued rent | (250) | |
Right-of-use asset, net | 7,748 | |
Lease liability | $ 7,998 | |
Weighted-average discount rate | 4.71% | |
Income Statement Related Disclosures [Abstract] | ||
Lease expense | $ 519 | |
Sublease income | (78) | |
Lease expense, net | 441 | |
Net cash provided by (used in) operating activities | $ (252) |
SHAREHOLDERS' EQUITY (Narrative
SHAREHOLDERS' EQUITY (Narrative) (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Repurchases of common stock | $ 61,000 | $ 5,061,000 | ||
Remaining authorized repurchase amount | $ 10,000,000 | |||
Securities Offerings, reserved for future issuance | $ 150,000,000 | $ 150,000,000 | ||
Granted (in shares) | 140,156 | 133,208 | ||
Reserved for future issuance (in shares) | 800,000 | 800,000 | ||
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Award requisite service period | 1 year | |||
Granted (in shares) | 140,156 | |||
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] | ||||
Common stock repurchases authorized amount | $ 10,000,000 | |||
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 | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | $ 683 | $ 698 | $ 1,358 | $ 1,363 |
Recognized tax benefit | 173 | 177 | 344 | 345 |
Intrinsic value of options exercised | 0 | 78 | 0 | 78 |
Fair value of restricted stock vested | 306 | 289 | 1,233 | 1,476 |
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | 502 | 526 | 996 | 1,148 |
Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Total share-based compensation expense | $ 181 | $ 172 | $ 362 | $ 215 |
SHAREHOLDERS' EQUITY (Summary o
SHAREHOLDERS' EQUITY (Summary of Stock Option Activity) (Details) | 6 Months Ended |
Jun. 30, 2019$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Outstanding, beginning of period (in shares) | shares | 39,017,000 |
Granted (in shares) | shares | 0 |
Exercised (in shares) | shares | 0 |
Canceled (in shares) | shares | 0 |
Outstanding, end of period (in shares) | shares | 39,017,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract] | |
Outstanding, beginning of period (in dollars per share) | $ / shares | $ 3.80 |
Granted, Weighted Average Options Exercise Price (in dollars per share) | $ / shares | 0 |
Exercised, Weighted Average Options Exercise Price (in dollars per share) | $ / shares | 0 |
Canceled, Weighted Average Options Exercise Price (in dollars per share) | $ / shares | 0 |
Outstanding, end of period (in dollars per share) | $ / shares | $ 3.80 |
SHAREHOLDERS' EQUITY (Summary_2
SHAREHOLDERS' EQUITY (Summary of Restricted Stock Activity) (Details) - $ / shares | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Granted (in shares) | 140,156 | 133,208 |
Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Outstanding, beginning of period (in shares) | 262,334 | |
Granted (in shares) | 140,156 | |
Vested (in shares) | (64,875) | |
Cancelled (in shares) | (12,960) | |
Outstanding, end of period (in shares) | 324,655 | |
Restricted Shares, Weighted Average Option Exercise Price [Roll Forward] | ||
Outstanding, beginning of period (in dollars per share) | $ 18.78 | |
Granted (in dollars per share) | 18.03 | |
Vested (in dollars per share) | 19.01 | |
Cancelled (in dollars per share) | 18.15 | |
Outstanding, end of period (in dollars per share) | $ 18.44 |
SHAREHOLDERS' EQUITY (Reconcili
SHAREHOLDERS' EQUITY (Reconciliation of Changes in Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Accumulated Other Comprehensive Income (Loss), Cumulative Effect of New Accounting Standards, Before Tax | $ (1,349) | |||
Accumulated Other Comprehensive Income (Loss), Cumulative Effect of New Accounting Standards, Tax | 355 | |||
Accumulated Other Comprehensive Income (Loss), Cumulative Effect of New Accounting Standards, Net of Tax | (994) | |||
Net | ||||
Accumulated other comprehensive income (loss), beginning-of-period | $ (3,750) | |||
Accumulated other comprehensive income (loss), end-of-period | $ 9,260 | 9,260 | ||
AOCI Attributable to Parent | ||||
Before Tax | ||||
Accumulated other comprehensive income (loss), beginning-of-period | 4,204 | $ (5,210) | (5,023) | 2,287 |
Other comprehensive income (loss) before reclassification | 6,530 | (1,748) | 18,058 | (8,948) |
Reclassification adjustment for realized losses (gains) included in net income | 1,670 | (208) | (631) | 844 |
Comprehensive income (loss) | 8,200 | (1,956) | 17,427 | (8,104) |
Accumulated other comprehensive income (loss), end-of-period | 12,404 | (7,166) | 12,404 | (7,166) |
Income Tax | ||||
Accumulated other comprehensive income (loss), beginning-of-period | (1,066) | 1,349 | 1,273 | (593) |
Other comprehensive income (loss) before reclassification | (1,655) | 443 | (4,577) | 2,268 |
Reclassification adjustment for realized losses (gains) included in net income | (423) | 24 | 160 | (214) |
Other Comprehensive Income (Loss), Tax | (2,078) | 467 | (4,417) | 2,054 |
Accumulated other comprehensive income (loss), end-of-period | (3,144) | 1,816 | (3,144) | 1,816 |
Net | ||||
Accumulated other comprehensive income (loss), beginning-of-period | 3,138 | (3,861) | (3,750) | 1,694 |
Other comprehensive income (loss) before reclassification | 4,875 | (1,305) | 13,481 | (6,680) |
Reclassification adjustment for realized losses (gains) included in net income | 1,247 | (184) | (471) | 630 |
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent | 6,122 | (1,489) | 13,010 | (6,050) |
Accumulated other comprehensive income (loss), end-of-period | $ 9,260 | $ (5,350) | $ 9,260 | $ (5,350) |
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 | May 08, 2019 | Jan. 31, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 |
Earnings Per Share [Abstract] | ||||||
Net income (loss) attributable to FedNat Holding Company shareholders | $ 7,110 | $ 8,820 | $ 3,245 | $ 16,283 | ||
Weighted average number of common shares outstanding - basic | 12,844 | 12,726 | 12,820 | 12,788 | ||
Net (loss) income per share - basic (in dollars per share) | $ 0.55 | $ 0.69 | $ 0.25 | $ 1.27 | ||
Dilutive effect of stock compensation plans | 39 | 120 | 56 | 101 | ||
Weighted average number of common shares outstanding - diluted | 12,883 | 12,846 | 12,876 | 12,889 | ||
Net (loss) income per share - diluted (in dollars per share) | $ 0.55 | $ 0.69 | $ 0.25 | $ 1.26 | ||
Dividends declared per share (in dollars per share) | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.16 | $ 0.16 |
EARNINGS PER SHARE (Dividends D
EARNINGS PER SHARE (Dividends Declared) (Details) - USD ($) $ / shares in Units, $ in Millions | May 08, 2019 | Jul. 31, 2019 | Jan. 31, 2019 | Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Dividends declared per share (in dollars per share) | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.08 | $ 0.16 | $ 0.16 | |
Payments of ordinary dividends, amount | $ 1.1 | $ 1 | |||||
Subsequent Event | |||||||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | |||||||
Dividends declared per share (in dollars per share) | $ 0.08 | ||||||
Payments of ordinary dividends, amount | $ 1 |
VARIABLE INTEREST ENTITY (Carry
VARIABLE INTEREST ENTITY (Carrying Amount of VIE Consolidated Assets and Liabilities) (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | Dec. 31, 2017 |
Investments | ||||
Debt securities - available-for-sale, at fair value: | $ 451,124 | $ 428,641 | ||
Equity securities, at fair value | 22,112 | 17,758 | ||
Total investments | 477,735 | 451,525 | ||
Cash and cash equivalents | 133,787 | 64,423 | ||
Reinsurance recoverable | 199,313 | 211,424 | ||
Prepaid reinsurance premiums | 82,781 | 108,577 | ||
Premiums receivable, net | 31,239 | 29,791 | ||
Deferred acquisition costs, net | 45,539 | 39,436 | ||
Other assets | 23,520 | 14,975 | ||
Total assets | 996,283 | 925,371 | ||
Liabilities | ||||
Loss and loss adjustment expense reserves | 268,735 | 296,230 | $ 291,675 | $ 230,515 |
Unearned premiums | 303,808 | 281,992 | ||
Reinsurance payable | 52,760 | 63,599 | ||
Debt, net of deferred financing costs | 98,442 | 44,404 | ||
Other liabilities | 36,631 | 19,302 | ||
Total liabilities | $ 765,498 | $ 710,112 |
Uncategorized Items - fnhc-2019
Label | Element | Value |
AOCI Attributable to Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (994,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 994,000 |