Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 12, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | FG Financial Group, Inc. | ||
Entity Central Index Key | 0001591890 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 8,769,613 | ||
Entity Common Stock, Shares Outstanding | 4,988,310 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
ASSETS | ||
Equity securities, at fair value (cost basis of $20,750 and $25,500) | $ 8,542 | $ 29,487 |
Limited liability investments (including $4,013 and $0 held by the Company's consolidated VIE) | 9,346 | 4,005 |
Cash and cash equivalents (including $987 and $0 held by the Company's consolidated VIE) | 12,132 | 28,509 |
Funds deposited with reinsured companies | 2,444 | |
Current income taxes recoverable | 1,724 | 1,265 |
Other assets | 517 | 188 |
Total assets | 34,705 | 63,454 |
LIABILITIES | ||
Accounts payable | 455 | 400 |
Deferred tax liability, net | 106 | |
Other liabilities | 57 | 33 |
Total liabilities | 512 | 539 |
Commitments and contingencies (Note 13) | ||
SHAREHOLDERS' EQUITY | ||
Series A Preferred Shares, $25.00 par value, 1,000,000 shares authorized; 700,000 shares issued and outstanding as of both periods | 17,500 | 17,500 |
Common stock, $0.001 par value; 10,000,000 shares authorized; 6,269,821 and 6,217,307 shares issued as of December 31, 2020 and 2019, respectively and, 4,988,310 and 6,065,948 shares outstanding as of December 31, 2020 and 2019, respectively | 6 | 6 |
Additional paid-in capital | 47,065 | 46,754 |
Accumulated deficit | (24,193) | (336) |
Less: treasury stock at cost, 1,281,511 and 151,359 shares as of December 31, 2020 and 2019, respectively | (6,185) | (1,009) |
Total shareholders' equity | 34,193 | 62,915 |
Total liabilities and shareholders' equity | $ 34,705 | $ 63,454 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Equity securities, cost basis | $ 20,750 | $ 25,500 |
Limited liability investments held by VIE | 4,013 | 0 |
Cash and cash equivalents held by VIE | $ 987 | $ 0 |
Series A Preferred stock, par value | $ 25 | $ 25 |
Series A Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Series A Preferred stock, shares issued | 700,000 | 700,000 |
Series A Preferred stock, shares outstanding | 700,000 | 700,000 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, shares issued | 6,269,821 | 6,217,307 |
Common stock, shares outstanding | 4,988,310 | 6,065,948 |
Treasury stock, shares | 1,281,511 | 151,359 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenue: | ||
Net investment income (loss) | $ (17,260) | $ 5,587 |
Other income | 104 | 10 |
Total revenue | (17,156) | 5,597 |
Expenses: | ||
General and administrative expenses | 5,966 | 2,476 |
Total expenses | 5,966 | 2,476 |
Income (loss) from continuing operations before income tax expense (benefit) | (23,122) | 3,121 |
Income tax expense (benefit) | (665) | 738 |
Net income (loss) from continuing operations | (22,457) | 2,383 |
Discontinued operations (Note 4): | ||
Gain from sale of the Maison Business, net of taxes | 7,066 | |
Loss from the Maison Business, net of taxes | (9,138) | |
Net loss from discontinued operations, net of taxes | (2,072) | |
Net income (loss) | (22,457) | 311 |
Dividends declared on Series A Preferred Shares | 1,400 | 1,400 |
Loss attributable to common shareholders | $ (23,857) | $ (1,089) |
Basic and diluted net earnings (loss) per common share: | ||
Continuing operations | $ (4.15) | $ 0.16 |
Discontinued operations | (0.34) | |
Loss per share attributable to common shareholders | $ (4.15) | $ (0.18) |
Weighted average common shares outstanding: | ||
Basic and diluted | 5,746,259 | 6,018,542 |
Consolidated Statements of Comprehensive Income (Loss) | ||
Net income (loss) | $ (22,457) | $ 311 |
Unrealized gains on investments available for sale, net of income taxes | 1,342 | |
Comprehensive income (loss) | $ (22,457) | $ 1,653 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance at Dec. 31, 2018 | $ 17,500 | $ 6 | $ (1,009) | $ 46,340 | $ 639 | $ (729) | $ 62,747 |
Balance, shares at Dec. 31, 2018 | 700,000 | 6,012,764 | 151,359 | ||||
Cumulative effect of adoption of ASU 2016-01 | 104 | (104) | |||||
Cumulative effect of adoption of Topic 842 | 10 | 10 | |||||
Stock based compensation | $ 414 | $ 414 | |||||
Stock based compensation, shares | 53,184 | ||||||
Dividends declared on Series A Preferred Shares ($2.00 per share) | $ (1,400) | $ (1,400) | |||||
Net income (loss) | 311 | 311 | |||||
Other comprehensive income | 1,342 | 1,342 | |||||
Unrealized gains realized upon sale of Maison Business | (509) | (509) | |||||
Balance at Dec. 31, 2019 | $ 17,500 | $ 6 | $ (1,009) | 46,754 | (336) | 62,915 | |
Balance, shares at Dec. 31, 2019 | 700,000 | 6,065,948 | 151,359 | ||||
Stock based compensation | $ 311 | $ 311 | |||||
Stock based compensation, shares | 52,514 | ||||||
Share Repurchase Transaction | $ (5,176) | $ (5,176) | |||||
Share Repurchase Transaction, shares | (1,130,152) | 1,130,152 | |||||
Dividends declared on Series A Preferred Shares ($2.00 per share) | $ (1,400) | (1,400) | |||||
Net income (loss) | (22,457) | (22,457) | |||||
Other comprehensive income | |||||||
Balance at Dec. 31, 2020 | $ 17,500 | $ 6 | $ (6,185) | $ 47,065 | $ (24,193) | $ 34,193 | |
Balance, shares at Dec. 31, 2020 | 700,000 | 4,988,310 | 1,281,511 |
Consolidated Statements of Sh_2
Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Statement of Stockholders' Equity [Abstract] | ||
Cash dividend paid per share of preferred stock outstanding | $ 2 | $ 2 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Operating activities: | ||
Net income (loss) | $ (22,457) | $ 311 |
Net loss from discontinued operations, net of income taxes | 2,072 | |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Unrealized holding (gains) losses on equity investments | 16,010 | (3,998) |
Net realized loss in Share Repurchase Transaction | 2,111 | |
Net deferred income taxes | (106) | 371 |
Stock compensation expense | 311 | 414 |
Purchases of investments by consolidated investment company subsidiary | (4,013) | |
Changes in operating assets and liabilities: | ||
Accrued interest on surplus notes due from affiliate | 244 | |
Funds deposited with reinsured companies | (2,444) | |
Other assets | (315) | (121) |
Accounts payable and other accrued expenses | 79 | 331 |
Current income taxes payable | (459) | (2,197) |
Amounts due to affiliates | (2,698) | |
Net cash used by operating activities - continuing operations | (11,283) | (5,271) |
Net cash used by operating activities - discontinued operations | (15,367) | |
Net cash used by operating activities | (11,283) | (20,638) |
Investing activities: | ||
Proceeds from repayment of surplus notes due from affiliates | 18,000 | |
Net purchases of furniture and equipment | (13) | (3) |
Net purchases of other investments | (1,143) | |
Purchase of limited liability investments from subsidiary | (1,007) | |
Net cash provided (used) by investing activities - continuing operations | (1,156) | 16,990 |
Net cash provided by investing activities - discontinued operations | 2,694 | |
Net cash used by investing activities | (1,156) | (19,684) |
Financing activities: | ||
Payment of dividends on preferred shares | (1,400) | (1,400) |
Purchase of treasury shares | (2,538) | |
Net cash used by financing activities - continuing operations | (3,938) | (1,400) |
Net cash used by financing activities - discontinued operations | (39) | |
Net cash used by financing activities | (3,938) | (1,439) |
Net decrease in cash and cash equivalents | (16,377) | (2,393) |
Cash and cash equivalents at beginning of period | 28,509 | 30,902 |
Cash and cash equivalents at end of period | 12,132 | 28,509 |
Supplemental disclosure of cash flow information: | ||
Net refunds received during the period for income taxes | (100) | (628) |
Non-cash financing activities: | ||
Sale of equity investments to purchase treasury shares | $ 2,639 |
Nature of Business
Nature of Business | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | 1. Nature of Business FG Financial Group, Inc. (“FGF”, the “Company”, “we”, or “us”) is a reinsurance and investment management holding company focused on opportunistic collateralized and loss capped reinsurance, while allocating capital to SPAC and SPAC sponsor-related businesses. The Company’s principal business operations are conducted through its subsidiaries and affiliates. We were incorporated on October 2, 2012 in the State of Delaware under the name Maison Insurance Holdings, Inc., and changed our legal name to 1347 Property Insurance Holdings, Inc. on November 19, 2013. On March 31, 2014, we completed an initial public offering of our common stock. Prior to the offering, we were a wholly owned subsidiary of Kingsway America Inc., which, in turn, is a wholly owned subsidiary of Kingsway Financial Services Inc., or KFSI, a publicly owned Delaware holding company. From our inception through December 2, 2019, we operated as an insurance holding company, writing property and casualty insurance throughout the states of Louisiana, Florida and Texas through our subsidiaries. On December 2, 2019 we sold our three insurance subsidiaries as further described below, and embarked on a new strategy focused on insurance, reinsurance, real estate, and asset management. Accordingly, on December 14, 2020, our shareholders approved a change in our corporate name to FG Financial Group, Inc., to better align with this new business strategy. As of December 31, 2020, Fundamental Global Investors, LLC, a privately owned investment management company, and its affiliates, or FGI, beneficially owned approximately 61% of our outstanding shares of common stock. D. Kyle Cerminara, Chairman of our Board of Directors, serves as Chief Executive Officer, Co-Founder and Partner of FGI. Sale of the Maison Business On December 2, 2019, we completed the sale of all of the issued and outstanding equity of three of the Company’s then wholly-owned subsidiaries, Maison Insurance Company (“Maison”), Maison Managers Inc. (“MMI”) and ClaimCor, LLC (“ClaimCor” and, together with Maison and MMI, the “Maison Business” or the “Insurance Companies”), to FedNat Holding Company, a Florida corporation (“FedNat”), pursuant to the terms and conditions of the Equity Purchase Agreement, dated as of February 25, 2019 (the “Purchase Agreement”), by and among the Company and each of Maison, MMI and ClaimCor, on the one hand, and FedNat, on the other hand (the “Asset Sale”). As consideration for the Asset Sale, FedNat paid the Company $51.0 million, consisting of $25.5 million in cash and $25.5 million in FedNat’s common stock, or 1,773,102 shares of common stock. In addition, upon the closing of the Asset Sale, $18.0 million of outstanding surplus note obligations payable by Maison to the Company, plus all accrued but unpaid interest, was repaid to the Company. All of the employees of the Company became employees of FedNat as of the closing of the Asset Sale, other than John S. Hill, then serving as Vice President, Chief Financial Officer and Secretary of the Company and now serving as Executive Vice President, Chief Financial Officer and Secretary, and Brian D. Bottjer, then serving as Controller of the Company and now serving as Senior Vice President and Controller. On December 31, 2019, the shares of FedNat common stock issued to the Company in connection with the Asset Sale were registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the terms of the Registration Rights Agreement entered into by the Company and FedNat at the closing of the Asset Sale. In addition to the Registration Rights Agreement, the Company and FedNat entered into a Standstill Agreement, a Reinsurance Capacity Right of First Refusal Agreement (the “Reinsurance Agreement”), an Investment Advisory Agreement and a Transition Services Agreement at the closing of the Asset Sale. Standstill Agreement The Standstill Agreement imposes certain limitations and restrictions with respect to the voting securities of FedNat (including shares of FedNat common stock) that are owned or held beneficially or of record by the Company. Under the Standstill Agreement, the Company has agreed to vote all of the voting securities of FedNat beneficially owned by the Company in accordance with the recommendation of the board of directors of FedNat with respect to any matter that is before the stockholders of FedNat for a vote by such stockholders. The Standstill Agreement imposes limitations on the sale of voting securities of FedNat held by the Company and restricts the Company from taking certain actions as a holder of voting securities of FedNat. The term of the Standstill Agreement is five years. For insurance regulatory purposes, the Company has waived any rights that it may have to exercise control of FedNat. Reinsurance Capacity Right of First Refusal Agreement The Reinsurance Agreement provides the Company with a right of first refusal to sell reinsurance coverage to the insurance company subsidiaries of FedNat, providing reinsurance on up to 7.5% of any layer in FedNat’s catastrophe reinsurance program, subject to the annual reinsurance limit of $15.0 million, on the terms and subject to the conditions set forth in the Reinsurance Agreement. All reinsurance sold by the Company pursuant to the right of first refusal, if any, will be memorialized in an agreement in such form and subject to such terms and conditions as are customary in the property and casualty insurance industry. The Reinsurance Agreement is assignable by the Company subject to conditions set forth in the agreement. The term of the Reinsurance Agreement is five years. As of December 31, 2020, the Company has not provided any reinsurance coverage to FedNat under the Reinsurance Agreement. Investment Advisory Agreement Pursuant to the Investment Advisory Agreement, FG Strategic Consulting (“FGSC,” formerly Fundamental Global Advisors LLC), a wholly-owned subsidiary of the Company, was formed to provide investment advisory services to FedNat, including identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions. In exchange for providing the investment advisory services, FedNat has agreed to pay FGSC an annual fee of $100,000. FGI Funds Management, LLC serves as the manager to FGSC. FGI Funds Management, LLC is affiliated with Fundamental Global Investors, LLC (“FGI”), the Company’s largest stockholder. The term of the Investment Advisory Agreement is five years. Transition Services Agreement To facilitate the transition following the Asset Sale, the Company and FedNat entered into a Transition Services Agreement, pursuant to which the Company agreed to provide certain transition accounting services to FedNat and the Insurance Companies, as requested, and FedNat has agreed to arrange for certain prior employees of the Company who became employees of the FedNat in connection with the Asset Sale to provide transition accounting services to the Company, as requested, on the terms and conditions set forth in the Transition Services Agreement. The term of the Transition Services Agreement was one year, expiring on December 2, 2020. Current Business Our strategy has evolved to focus on opportunistic collateralized and loss capped reinsurance, while allocating capital to special purpose acquisition companies (“SPACs”) and SPAC sponsor-related businesses. Accordingly, in the first quarter 2021, we have launched our “SPAC Platform,” as further discussed below. As part of our refined focus, we have adopted the following capital allocation philosophy: “ Grow intrinsic value long-term focus fundamental research asymmetric risk/reward Historically, the Company has operated a real estate business through its subsidiary, FGI Metrolina Property Income Fund, LP, however, the Company does not anticipate that its real estate business will be a significant component of its future business plans. Reinsurance: The Company has formed a wholly-owned reinsurance subsidiary, Fundamental Global Reinsurance Ltd. (“FGRe”), a Cayman Islands limited liability company, to provide specialty property and casualty reinsurance. FGRe has been granted a Class B (iii) insurer license in accordance with the terms of The Insurance Law, 2010 and underlying regulations thereto and is subject to regulation by the Cayman Islands Monetary Authority (the “Authority”). The terms of the license require FGRe to receive a capital infusion in the amount of $5.0 million, which the Company effected in July 2020 via the transfer of 156,000 shares of FedNat common stock from the Company along with approximately $3.3 million in cash. The terms of the insurer license also require advance approval from the Authority should FGRe wish to enter into any reinsurance agreements which are not fully collateralized to their aggregate exposure limit. In November 2020, FGRe entered into its first reinsurance transaction, through a Funds at Lloyds syndicate. The maximum loss exposure in the transaction is approximately $2.9 million and covers all risks written by the syndicate during the 2021 calendar year. On November 12, 2020 FGRe initially funded a trust account at Lloyd’s with approximately $2.4 million in cash to collateralize its obligations under the contract. Asset Management: FGSC serves as an investment advisor to FedNat Holding Company under the investment advisory agreement entered into at the closing of the Asset Sale. The Company has also formed Fundamental Global Asset Management, LLC, a joint venture with a wholly owned subsidiary of FGI, to sponsor investment advisors that will manage private funds ranging the full spectrum of alternative equities, fixed income, private equity and real estate. In September 2020, the joint venture sponsored the launch of FG Special Situations Fund via an investment of $5.0 million. Approximately $4.0 million of this investment represented the sponsorship of our first special purpose acquisition company, or “SPAC”. Insurance: FGRe is currently in the process of establishing and seeking regulatory approvals for a Risk Retention Group (“RRG”) to be domiciled in the state of Vermont for the purpose of providing directors and officers insurance coverage to special purpose acquisition vehicles. The Company expects to begin operation of the RRG in the 4th quarter of 2021. FGRe would anticipate providing capital, along with others, to facilitate the underwriting of such insurance coverage. The Company will focus on fee income derived from originating, underwriting, and servicing the insurance business, while mitigating our financial risk with external reinsurance partners. SPAC Platform On December 21, 2020 we formed FG SPAC Solutions LLC (“FGSS”), a Delaware company, to facilitate the launch of our “SPAC Platform”. Under the SPAC Platform, we plan to provide various strategic, administrative, and regulatory support services to newly formed SPACs for a monthly fee. The Company co-founded a partnership to participate as a co-sponsor for newly formed SPACs. The Company also participates in the risk capital investments associated with the launch of such SPACs through its Asset Management business, specifically FG Special Situations Fund, LP. The first transaction entered into under the SPAC Platform occurred on January 11, 2021 by and among FGSS and Aldel Investors, LLC, the sponsor of Aldel Financial, Inc. (“Aldel”), a special purpose acquisition company which filed its initial registration statement with the Securities and Exchange Commission on February 16, 2021, but has not yet consummated an initial public offering. Under the agreement between FGSS and Aldel Investors, LLC (the “Agreement”), FGSS has agreed to provide certain accounting, regulatory, strategic advisory, and other administrative services to Aldel, which include assistance with negotiations with a potential merger target for the SPAC as well as assistance with the de-SPAC process. Additional information regarding our formation of FGSS and our SPAC Platform can be found in Note 9 – Related Party Transactions Appointment of Chief Executive Officer Effective November 10, 2020, the Company appointed Larry G. Swets Jr., to serve as the Company’s Chief Executive Officer (“CEO”). Mr. Swets, who has served as a director on the Board since November 2013, had been appointed to serve as the Company’s Interim Chief Executive Officer on June 17, 2020. As Interim CEO, Mr. Swets replaced D. Kyle Cerminara as the Company’s principal executive officer. Mr. Cerminara continues to serve as the Chairman of the Board of the Company. On June 18, 2020, the Company entered into a consulting agreement (the “Consulting Agreement”) by and between the Company and Itasca Financial LLC (“Itasca Financial”), an advisory and investment firm founded by Mr. Swets in 2005, pursuant to which Mr. Swets would provide the services described on behalf of Itasca Financial. The Consulting Agreement provided that Mr. Swets act as the Company’s Interim Chief Executive Officer. In consideration for the services, the Company has paid Itasca Financial $111,333 during the term of the Consulting Agreement. The Consulting Agreement was terminated on November 10, 2020 with Mr. Swets’ appointment as CEO. In connection with Mr. Swets’ appointment as CEO, the Company entered into an executive employment agreement with Mr. Swets, dated and effective as of November 10, 2020 (the “Swets Agreement”). The Swets Agreement has a three-year term and is subject to automatic three-year renewals, unless either party provides 60 days’ prior written notice of his or its intention, as applicable, not to renew such term. Under the Swets Agreement, Mr. Swets is entitled to an annual base salary of $550,000 until such time as the Board determines future compensation based on Swets’ performance or other merit-based criteria. In the event that the Company terminates Mr. Swets without cause, subject to Mr. Swets execution of a general release of waiver and claims in favor of the Company and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of two years of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s applicable health and welfare plans. In the event that the parties mutually agree to terminate Mr. Swets’ employment regardless of the reason, subject to Mr. Swets’ execution of a general release and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of one year of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s applicable health and welfare plans. The Swets Agreement also provides that Mr. Swets is subject to post-termination confidentiality covenants. On January 12, 2021, in connection with Mr. Swets’ appointment as CEO, the Company entered into a Stock Option Agreement (the “Stock Option”) with Mr. Swets under the Company’s 2018 Equity Incentive Plan. The Stock Option entitles Mr. Swets to purchase up to 130,000 shares of the Company’s common stock at an exercise price of $3.38 per share. The Stock Option becomes vested and fully exercisable in 20% increments on each anniversary of the grant date provided that Mr. Swets’ remain in the continuous service of the Company through each applicable vesting date and provided that the Company’s book value per share shall have increased by 15% or more as compared to the Company’s book value per shares as of the fiscal year end prior. The Stock Option expires on January 11, 2031. On January 18, 2021, Company entered into an Equity Award Letter Agreement (the “Letter Agreement”) with Mr. Swets, pursuant to which the Company clarified its intention to grant an additional 370,000 stock options, restricted shares or restricted stock units pursuant to a future award (the “Future Award”), subject to the approval of an amended and/or new equity plan, among other conditions. Specifically, under the Letter Agreement, no such Future Award may be granted until there is a determination by the Compensation Committee of the specific vesting and other terms of the award, and an amended and/or new equity plan, in a form to be prepared and reviewed by the Board of Directors of the Company (the “Board”), has been approved by the Board and stockholders of the Company that authorizes a sufficient number of shares of common stock to make such Future Award. Mr. Swets will remain a director of the Company if he is continued to be elected by its stockholders and will forgo the compensation of board fees while serving as CEO. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | 2. Significant Accounting Policies Basis of Presentation: These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Consolidation Policies: The consolidated financial statements include the accounts of the Company and entities in which it is required to consolidate under either the Variable Interest Entity (“VIE”) or Voting Interest Entity (“VOE”) models. Both models require the reporting entity to identify whether it has a controlling financial interest in a legal entity and is therefore required to consolidate the legal entity. Under the VOE model, a reporting entity with ownership of a majority of the voting interest of a legal entity is generally considered to have a controlling financial interest. The VIE model was established for situations in which control may be demonstrated other than by the possession of voting rights in a legal entity and instead focuses on the power to direct the activities that most significantly impact the legal entity’s economic performance, as well as the rights to receive benefits and obligations to absorb losses that could potentially be significant to the legal entity. The determination of whether a legal entity is consolidated under either model is reassessed where there is a substantive change in the governing documents or contractual arrangements of the entity, to the capital structure of the entity or in the activities of the entity. The Company continuously reassesses whether it should consolidate under either model. See Note 5 for additional information regarding the Company’s consolidated investments. Discontinued Operations: On December 2, 2019, we sold all of the issued and outstanding equity of Maison, MMI and ClaimCor. As a result, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. Certain transactions between the Company and its subsidiaries, which have historically been eliminated upon consolidation, are shown on a gross basis in the accompanying financial statements as such transactions have occurred between discontinued operations and those operations which the Company has continued to utilize following the closing of the Asset Sale. These items include surplus notes in the amount of $18 million plus accrued interest, all of which were settled upon the closing of the Asset Sale. Interest associated with these surplus notes has been recorded as part of net investment income from continuing operations as well as interest expense as part of discontinued operations on the Company’s consolidated statement of operations for the year ended December 31, 2020. All other significant intercompany balances and transactions have been eliminated upon consolidation. The Use of Estimates in the Preparation of Consolidated Financial Statements: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the valuation of our investments, the valuation of net deferred income taxes and stock-based compensation expense. The business and economic uncertainty resulting from the novel coronavirus (COVID-19) pandemic has made such estimates and assumptions difficult to calculate. Investments: The Company’s equity securities are recorded at fair value using observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. Effective January 1, 2019, we adopted Accounting Standards Update No. 2016-01, Financial Instruments–Overall Limited liability investments include investments in a limited partnership and a limited liability company for which there does not exist a readily determinable fair value. The Company accounts for these investments at their cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investment of the same issuer. Any profit distributions the Company receives on these investments is included in income. Limited liability investments also include an investment where the Company is a limited partner in a limited partnership, which we have determined to be a variable interest entity (VIE), in which the Company is not the primary beneficiary. The Company does not have a controlling financial interest in the limited partnership but exerts significant influence over the entity’s operating and financial policies. Accordingly, the Company has accounted for this investment under the equity method of accounting, recognizing any unrealized gains or losses on the investment through income. See Note 5 for additional information on the Company’s investment in the VIE. Additionally, in September 2020, the Company invested approximately $5.0 million, through its joint venture, Fundamental Global Asset Management, LLC (“FGAM”) to sponsor the launch of FG Special Situations Fund, LP (the “Fund”). The Fund, a VIE which the Company is required to consolidate, is considered an investment company for GAAP purposes and follows the accounting and reporting guidance in the Financial Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies Realized gains and losses on sales of investments are determined on a first-in, first-out basis, and are included in net investment income. Interest income is included in net investment income and is recorded as it accrues. The Company accounts for its investments using trade date accounting and also conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the statement of income if the fair value of the instrument falls below its amortized cost and the decline is considered other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. Cash and Cash Equivalents: Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less. Reinsurance: Reinsurance premiums, losses, and loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and losses ceded to other companies have been reported as a reduction of premium revenue and incurred net losses and loss adjustment expenses. A reinsurance recoverable is recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to other companies. Income Taxes: The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit). Concentration of Credit Risk: Financial instruments which potentially expose the Company to concentrations of credit risk include investments, cash, and deposits with reinsured companies. The Company maintains its cash with a major U.S. domestic banking institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250,000. As of December 31, 2020 the Company held funds in excess of these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the associated risk. The Company has not incurred losses related to these deposits. The Company had not experienced significant losses related to its amounts due from reinsurers. Revenue Recognition: Premium revenue, up to the date of the Asset Sale transaction was recognized on a pro rata basis over the term of each policy contract. Service charges on installment premiums were recognized as income upon receipt of related installment payments and were reflected in other income up to the date of the Asset Sale transaction. Revenue from policy fees was deferred and recognized over the term of the applicable policy period, with revenue reflected in other income up to the date of the Asset Sale transaction. Ceded premiums were charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. Stock-Based Compensation: The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – Stock Compensation The Company has also issued restricted stock units (“RSUs”) to certain of its employees and directors which have been accounted for as equity-based awards since, upon vesting, they are required to be settled in the Company’s common shares. We have used the fair value of the Company’s common stock on the date the RSUs were issued to estimate the grant date fair value of those RSUs which vest solely based upon the passage of time, as well as a Monte Carlo valuation model to estimate the fair value of those RSUs which vest solely upon market-based conditions. The fair value of each RSU is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest. In the case of those RSUs which vest upon market-based conditions, should the market-based condition be achieved prior to the expiration of the derived service period, any unrecognized cost will be recorded as compensation expense in the period in which the RSUs actually vest. Based upon the Company’s historical forfeiture rates relating to stock options and RSUs, the Company has not made any adjustment to stock compensation expense for expected forfeitures as of December 31, 2020. Fair Value of Financial Instruments: The carrying values of certain financial instruments, including cash, short-term investments, deposits held, accounts payable, and other accrued expenses approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 5 for further information on the fair value of the Company’s financial instruments. Earnings (loss) Per Common Share: Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the respective period. Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, restricted stock units, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive. |
Recently Adopted and Issued Acc
Recently Adopted and Issued Accounting Standards | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
Recently Adopted and Issued Accounting Standards | 3. Recently Adopted and Issued Accounting Standards Accounting Standards Pending Adoption ASU 2016-13: Financial Instruments – Credit Losses: In June 2016, the FASB issued ASU 2016-13: Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments |
Discontinued Operations
Discontinued Operations | 12 Months Ended |
Dec. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Discontinued Operations | 4. Discontinued Operations As previously discussed, on December 2, 2019, we completed the sale of all of the issued and outstanding equity of our three former wholly owned subsidiaries, Maison, MMI and ClaimCor. Accordingly, the Company has classified the Maison Business as discontinued operations for all periods presented in this report as set forth in ASC 205-20 – Discontinued Operations The following table presents a reconciliation of the major classes of line items constituting pretax profit (loss) of discontinued operations to the after-tax profit (loss) of discontinued operations that are presented in the Company’s consolidated statement of operations for the year ended December 31, 2019 ($ in thousands) Year ended December 31, 2019 Gain from sale of the Maison Business Cash consideration received from sale $ 25,500 Stock consideration received from sale 25,500 Total consideration received from sale 51,000 Less: Carrying value of the Maison Business on December 1, 2019 39,099 Transaction and other sale related costs 2,818 Total pre-tax reductions 41,917 Pre-tax gain on sale 9,083 Income tax expense 2,017 Net gain from sale of the Maison Business $ 7,066 Net premiums earned $ 49,691 Net investment income 4,354 Other income 2,854 Net losses and loss adjustment expenses (41,634 ) Amortization of deferred policy acquisition costs (15,983 ) General and administrative expenses (9,200 ) Interest expense on surplus notes due to affiliate (1,708 ) Pretax loss from the Maison Business (11,626 ) Income tax benefit (2,488 ) Loss from the Maison Business, net of taxes $ (9,138 ) Net loss from discontinued operations, net of taxes $ (2,072 ) |
Investments and Fair Value Disc
Investments and Fair Value Disclosures | 12 Months Ended |
Dec. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Investments and Fair Value Disclosures | 5. Investments and Fair Value Disclosures The following table summarizes the Company’s investments as of December 31, 2020 and 2019. ($ in thousands) Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount As of December 31, 2020 FedNat common stock $ 20,751 $ – $ 12,209 $ 8,542 Limited liability investments 8,651 695 – 9,346 Total investments $ 29,402 $ 695 $ 12,209 $ 17,888 As of December 31, 2019 FedNat common stock $ 25,500 $ 3,987 $ – $ 29,487 Limited liability investments 3,495 510 – 4,005 Total investments $ 28,995 $ 4,497 $ – $ 33,492 FedNat Common Stock On December 2, 2019, the Company received 1,773,102 shares of FedNat Holding Company common stock (Nasdaq: FNHC), along with $25.5 million cash as consideration for the Asset Sale. On July 14, 2020, the Company transferred 156,000 shares of FedNat common stock to FGRe, a wholly-owned subsidiary of the Company, as a capital contribution for no consideration, and, on September 15, 2020, the Company transferred 330,231 shares of FedNat common stock to the Hale Parties as further discussed in Note 9 – “Related Party Transactions”. Following the transactions, the Company directly holds 1,286,871 shares of FedNat common stock. As of March 15, 2021, the estimated fair value of the 1,442,871 shares of FedNat common stock held in the aggregate by the Company and its subsidiary was $6.9 million. Limited Liability Investments The Company’s limited liability investments are comprised of investments in a limited partnership and a limited liability company which seek to provide equity and asset-backed debt investment in a variety of privately-owned companies. The Company’s total investment in these two entities was approximately $638,000 as of December 31, 2020. The limited liability company is managed by Argo Management Group, LLC, which is wholly owned by KFSI. The Company has accounted for these two investments at cost minus impairment, if any, as the investments do not have readily determinable fair values. For the years ended December 31, 2020 and 2019, the Company has received profit distributions of $80,000 and $91,000 on these investments, respectively, which has been included in income. Furthermore, both investments began the process of returning capital back to its investors in 2020. As of December 31, 2020, the Company has received approximately 18% of its initial $776,000 investment back from these investments. On June 18, 2018, the Company invested approximately $2.2 million in FGI Metrolina Property Income Fund, LP (“Metrolina”), which invests in real estate through a real estate investment trust which is wholly owned by Metrolina. The general partner of Metrolina, FGI Metrolina GP, LLC, is managed, in part, by Mr. Cerminara, the Chairman of the Company’s Board of Directors. The Company, a limited partner of Metrolina, does not have a controlling interest, but exerts significant influence over the entity’s operating and financial policies as it owns an economic interest of approximately 53% as of December 31, 2020. Accordingly, the Company has accounted for this investment under the equity method of accounting, recognizing any unrealized holding gains or losses in income. On August 6, 2020, the Company increased its total investment in Metrolina to $4.0 million. As of December 31, 2020, Metrolina’s carrying amount on the Company’s balance sheet was approximately $4.7 million, consisting of $0.7 million in undistributed earnings. Limited Liability Investment in Consolidated VIE In September 2020, the Company invested $5.0 million into its joint venture, Fundamental Global Asset Management, LLC (“FGAM’), to capitalize FG Special Situations Fund Advisor, LLC (“Advisor”), a Delaware limited liability company formed on September 2, 2020, and to sponsor the launch of FG Special Situations Fund, LP (the “Fund”), a Delaware limited partnership formed on September 2, 2020. The Fund is wholly owned by FGAM through the Fund’s general partner and Advisor, both of which are ultimately controlled by Mr. Cerminara, the Chairman of the Company’s Board of Directors. Of the total $5.0 million investment, approximately $4.0 million was used by FG New America Investors, LLC (the “Sponsor”) as part of a total $8.6 million of risk capital used to launch FG New America Acquisition Corp (NYSE: FGNA), a special purpose acquisition company which consummated its initial public offering on October 2, 2020, and entered into a definitive business combination with Opportunity Financial LLC on February 10, 2021. The Fund’s specific investment consists of both class A and class A-1 interests of the Sponsor, purchased for approximately $4.0 million. The interests represent a potential beneficial ownership of approximately 1.4 million common shares of FGNA as well as approximately 0.4 million warrants to purchase common shares of FGNA at a price of $11.50 per share. Both the class A and class A-1 interests of the Sponsor are subject to complete loss if FGNA is not able to consummate a business combination in accordance with the terms of its initial public offering. The class A and class A-1 interests have not been registered under the Securities Act of 1933, as amended, and are not transferrable except as provided for in the operating agreement of the Sponsor. The remaining $987,000 invested in FGAM consists of cash equivalents owned by the Fund as of December 31, 2020 which are expected to be invested by the Fund in the future. Mr. Cerminara, the Chairman of our Board, is the President and a director of FGNA and a manager of the Sponsor. Mr. Swets, our Chief Executive Officer, is the Chief Executive Officer and a director of FGNA and a manager of the Sponsor. The Company has determined that its investment in FGAM represents an investment in a variable interest entity (“VIE”) in which the Company is the primary beneficiary and as such, has consolidated the financial results of FGAM as of December 31, 2020. The Company evaluates whether it is the primary beneficiary of a VIE at the time it becomes involved with a variable interest entity and continuously reconsiders that conclusion. In determining whether the Company is the primary beneficiary, the Company evaluates its control rights as well as economic interests in the entity held either directly or indirectly through affiliates via both qualitative and quantitative analysis. Further investments in, or redemptions of investments in FGAM, by either member of joint venture could affect the entity’s status as a VIE or the determination of the primary beneficiary. At each reporting date, the Company assesses whether it is the primary beneficiary and will consolidate or deconsolidate accordingly. Immaterial Revision to Previously Issued Financial Statements Subsequent to the issuance of the September 30, 2020 consolidated financial statements, the Company determined that the Fund should be considered an investment company for GAAP purposes, following the accounting and reporting guidance in ASC Topic 946, Financial Services – Investment Companies We have determined that the Company’s Quarterly Report on Form 10-Q for the period ending September 30, 2020 contained an immaterial error as the Fund was not presented as an investment company under ASC 946. The Company assessed the materiality of the error considering both qualitative and quantitative factors and determined that the adjustments for the nine-month period ended September 30, 2020 were immaterial. These adjustments resulted in a revision within the Company’s consolidated statement of cash flows for the nine months ended September 30, 2020. Cash flows from investing activities were understated by $4.0 million while cash flows from operating activities were overstated by $4.0 million. As revised, purchases of other investments within the cash flows from investing activities is an outflow of $1.2 million and purchases of investments by consolidated investment company subsidiary within cash flows from operating activities is an inflow of $4.0 million. Furthermore, the Company’s quarterly report should have contained, in footnote 12 to the financial statements, disclosure of $4.0 million as a Level 3 investment as of September 30, 2020, in the fair value hierarchy promulgated by the FASB, as it has been presented in this annual report. The error had no impact on the consolidated balance sheets, statements of operations and comprehensive loss or statements of shareholders’ equity presented in the Company’s quarterly report. All assets of our investment company subsidiary have been included in the Company’s consolidated balance sheet as of December 31, 2020 as listed in the table below. The Fund reported no liabilities as of either date presented. The assets of the Fund may only be used to settle its obligations. The Company’s maximum exposure to loss as a result of its involvement with the Fund is $5.0 million as of December 31, 2020. December 31, 2020 December 31, 2019 Schedule of Investments Cash equivalents $ 987 $ – Limited liability investments (Class A and Class A-1 interests in Sponsor) 4,013 – Total assets $ 5,000 $ – Impairment: For equity securities without readily determinable fair values, such as the Company’s two limited liability investments, impairment is determined via a qualitative assessment which considers indicators to evaluate whether the investment is impaired. Some of these indicators include a significant deterioration in the earnings performance or asset quality of the investee, a significant adverse change in regulatory, economic or general market conditions in which the investee operates, or doubt over an investee’s ability to continue as a going concern. If the investment is deemed to be impaired after conducting this analysis, the Company would estimate the fair value of the investment to determine the amount of impairment loss. For equity method investments, such as the Company’s investment in Metrolina, evidence of a loss in value might include a series of operating losses of an investee, the absence of an ability to recover the carrying amount of the investment, or a deterioration in the value of the investee’s underlying assets. If these, or other indicators lead to the conclusion that there is a decrease in the value of the investment that is other than temporary, the Company would recognize that decrease in value even though the decrease may be in excess of what would otherwise be recognized under the equity method of accounting. The risks and uncertainties inherent in the assessment methodology used to determine impairment include, but may not be limited to, the following: ● the opinions of professional investment managers and appraisers could be incorrect; ● the past operating performance and cash flows generated from the investee’s operations may not reflect their future performance; and ● the estimated fair values for investments for which observable market prices are not available are inherently imprecise. We have not recorded an impairment on our investments for either of the years ended December 31, 2020 and 2019. Net investment income (loss) for the years ended December 31, 2020 and 2019 is as follows: (in thousands) Year Ended December 31, 2020 2019 Investment income (loss): Unrealized holding gain (loss) on FNHC common stock $ (16,196 ) $ 3,987 Realized loss on FNHC common stock (2,110 ) – Dividend income from FNHC common stock 609 – Interest on surplus notes issued by Maison – 1,708 Income from limited liability investments 265 101 Loss on assignment of limited liability investments – (239 ) Other 172 30 Net investment income (loss) $ (17,260 ) $ 5,587 Fair Value Measurements The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The FASB has issued guidance that defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal, or most advantageous market in an orderly transaction between market participants. This guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance categorizes assets and liabilities at fair value into one of three different levels depending on the observation of the inputs employed in the measurements, as follows: ● Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets providing the most reliable measurement of fair value since it is directly observable. ● Level 2 – inputs to the valuation methodology which include quoted prices for similar assets or liabilities in active markets. These inputs are observable, either directly or indirectly, for substantially the full-term of the financial instrument. ● Level 3 – inputs to the valuation methodology which are unobservable and significant to the measurement of fair value. The availability of valuation techniques and observable inputs can vary from investment to investment and are affected by a variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, the liquidity of markets and other characteristics specific to the individual investment. In some cases, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the hierarchy based on the lowest level input that is significant to the fair value measurement. When determining fair value, the Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. We have valued our FedNat common stock at their last reported sales price as the shares are traded on a national exchange. They have been characterized in Level 1 of the fair value hierarchy. Our investment in the class A and class A-1 interests of the Sponsor consist of limited partner interests in a private operating company which have been characterized in Level 3 of the fair value hierarchy. For private operating companies, the transaction price, excluding transaction costs, is typically the best estimate of fair value at acquisition. As of December 31, 2020, the Fund’s investment in the class A and class A-1 interests in the Sponsor have been valued at their transaction price, excluding transaction costs, due to: 1) the fact that the Fund just recently acquired these securities, in September 2020, 2) there have not been any additional transactions in these securities, or in substantially similar securities since our original purchase and; 3) no significant events have occurred with respect to the Sponsor or to FGNA as of measurement date, which warranted an adjustment to fair value. At each subsequent measurement date, the Fund will review the valuation of these investments and will record adjustments as necessary to reflect the expected exit value of the investment under current market conditions. The Fund uses an independent pricing service to value its private operating company investments which may include an income approach, a market approach, or a combination thereof. The Fund may use multiple valuation approaches and estimate fair value based on a weighted average or a selected outcome within a range of multiple valuation results. Due to the inherent uncertainty of valuations, the fair values reflected in the financial statements as of the measurement date may differ materially from: 1) values that would have been used had a readily available market existed for these investments; and 2) the values that may ultimately be realized upon sale of the investments. Financial instruments measured, on a recurring basis, at fair value as of December 31, 2020 and 2019 in accordance with the guidance promulgated by the FASB are as follows. (in thousands) Level 1 Level 2 Level 3 Total As of December 31, 2020 FedNat common stock $ 8,542 $ – $ – $ 8,542 Limited liability investments (class A and A-1 interests) – – 4,013 4,013 $ 8,542 $ – $ 4,013 $ 12,555 As of December 31, 2019 FedNat common stock $ 29,487 $ – $ – $ 29,487 The following table presents the changes in assets classified in Level 3 of the fair value hierarchy during the year ended December 31, 2020. (in thousands) Limited Liability Investments Purchases $ 4,013 Transfers into Level 3 – Transfers out of Level 3 – Balance, December 31, 2020 $ 4,013 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 6. Income Taxes A summary of income tax expense (benefit) is as follows: ($ in thousands) Year Ended December 31, 2020 2019 Current income tax (benefit) – from continuing operations $ (559 ) $ – Current income tax (benefit) – from discontinued operations – (894 ) Total current income tax (benefit) (559 ) (894 ) Deferred income tax expense (benefit) – from continuing operations (106 ) 738 Deferred income tax expense – from discontinued operations – 423 Total deferred income tax expense (benefit) (106 ) 1,161 Total income tax expense (benefit) – from continuing operations (665 ) 738 Total income tax (benefit) – from discontinued operations – (471 ) Total income tax expense (benefit) $ (665 ) $ 267 Actual income tax expense (benefit) differs from the income tax expense computed by applying the applicable effective federal and state tax rates to income before income tax expense as follows: ($ in thousands) Year Ended December 31, 2020 2019 Amount % Amount % Provision for taxes at U.S. statutory marginal income tax rate of 21% $ (4,856 ) 21.0 % $ 121 21.0 % Valuation allowance for deferred tax assets deemed unrealizable 3,934 (17.0 )% – – % Rate differential due to CARES Act (214 ) 0.9 % – – % Non-deductible expenses associated with the Share Repurchase Transaction 516 2.2 % – – % Net operating loss carryback – – % (213 ) (36.9 )% State income tax (net of federal benefit) – – % 265 45.9 % Other (45 ) 0.2 % 94 16.3 % Income tax expense (benefit) $ (665 ) 2.9 % $ 267 46.2 % As a result of the passage of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Company recorded a credit of $214,000 against its income tax expense for the year ended December 31, 2020, due to a provision in the CARES Act which allows for the five-year carryback of net operating losses. Prior to the passage of the CARES Act, these net operating losses were only available to offset future taxable income generated by the Company. As a result of the Share Repurchase Transaction, discussed in further detail in Note 9 – “Related Party Transactions”, the Company has permanent non-deductible expenses of approximately $2.5 million, which are comprised of the cost of purchasing the Company’s own stock as well as the legal fees associated with the transaction. These are shown at the tax effected rate of 21%, or $516,000 in the preceding table. Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes as compared to the amounts used for income tax purposes. For the year ended December 31, 2020, the Company recorded an unrealized loss of approximately $12.2 million on its investment of FedNat common stock, resulting in a deferred tax asset of approximately $2.5 million. The Company’s gross deferred tax assets are $3.9 million as of December 31, 2020, however the Company has recorded a valuation allowance against all of its deferred tax assets, resulting in a net deferred income tax asset of $0 as of December 31, 2020, due to the uncertain nature surrounding our ability to realize these tax benefits in the future. As of December 31, 2019, the financial statements show a net deferred tax liability in the amount of $106,000 due to the sale of the Maison Business. Significant components of the Company’s net deferred tax assets are as follows: ($ in thousands) As of December 31, 2020 2019 Deferred income tax assets: Net operating loss carryforward $ 1,143 $ 463 Share-based compensation 216 214 Investments 2,570 – Other 5 7 Deferred income tax assets 3,934 684 Less: Valuation allowance (3,934 ) – Deferred income tax assets net of valuation allowance $ – $ 684 Deferred income tax liabilities: Investments $ – $ 789 Other – 1 Deferred income tax liabilities $ – $ 790 Net deferred income tax asset (liability) $ – $ (106 ) As of December 31, 2020, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $5.4 million, which will be available to offset future taxable income. Approximately $0.6 million of the Company’s NOLs will expire on December 31, 2039, while the remaining $4.8 million of the Company’s NOLs do not expire under current tax law. As of December 31, 2020, the Company had no unrecognized tax benefits. The Company analyzed its tax positions in accordance with the provisions of Accounting Standards Codification Topic 740, Income Taxes The Company files federal income tax returns as well as multiple state and local tax returns. The Company’s consolidated federal and state income tax returns for the years 2016 through 2019 are open for review by the Internal Revenue Service (“IRS”) and the various state taxing authorities. |
Equity Incentive Plans
Equity Incentive Plans | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Equity Incentive Plans | 7. Equity Incentive Plans In April 2014, the Company established an equity incentive plan for employees and directors of the Company (the “2014 Plan”). The purpose of the Plan was to create incentives designed to motivate recipients to significantly contribute toward the Company’s growth and success, to attract and retain persons of outstanding competence, and to provide such persons with an opportunity to acquire an equity interest in the Company. The Plan allowed for the issuance of non-qualified stock options, restricted stock, restricted stock units (“RSUs”), performance shares, performance cash awards, and other stock-based awards and provided for the issuance of 354,912 shares of common stock. On May 31, 2018, the 2014 Plan was terminated with the adoption of the 2018 Plan, as discussed below. On May 31, 2018, our shareholders approved the 1347 Property Insurance Holdings, Inc., 2018 Equity Incentive Plan (the “2018 Plan”). The purpose of the 2018 Plan is to attract and retain directors, consultants, and other key employees of the Company and its subsidiaries and to provide to such persons incentives and rewards for superior performance. The 2018 Plan is administered by the Compensation and Management Resources Committee of the Board and has a term of ten years. The 2018 Plan allows for the issuance of both incentive stock options and non-qualified stock options, stock appreciation rights, RSUs, and other stock-based, as well as cash-based awards, and provides for a maximum of 300,000 shares available for issuance. As of December 31, 2020, the only awards outstanding were restricted stock units issued under both of the 2014 and 2018 Plans. Stock Options Issued under the 2014 Plan The following table summarizes activity for stock options issued under the 2014 Plan for the year ended December 31, 2019. There was no activity for the year ended December 31, 2020. Common Stock Options Shares Weighted Average Exercise Price Weighted Ave Remaining Contractual Term (Years) Weighted Ave Grant Date Fair Value Aggregate Intrinsic Value Outstanding, January 1, 2019 177,456 $ 8.06 0.25 $ 1.07 $ – Exercisable, January 1, 2019 177,456 $ 8.06 0.25 $ 1.07 $ – Granted – Exercised – Vested – Cancelled (177,456 ) Outstanding, December 31, 2019 – $ – – $ – $ – Exercisable, December 31, 2019 – $ – – $ – $ – Restricted Stock Units Issued under both the 2014 and 2018 Plans On May 29, 2015, the Company’s Board of Directors granted 20,500 RSUs to certain of its executive officers under the 2014 Plan. Each RSU granted entitles the grantee to one share of the Company’s common stock upon the vesting date of the RSU. The RSUs vest as follows: (i) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $10.00 per share; and (ii) 50% upon the date that the closing price of the Company’s common stock equals or exceeds $12.00 per share. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued. In connection with the Asset Sale and pursuant to the employment and resignation agreements entered into between the Company and its former executive officers, Douglas N. Raucy and Dean E. Stroud, a total of 16,500 RSUs issued under this grant to Messrs. Raucy and Stroud were cancelled and forfeited on December 2, 2019. As of December 31, 2020, 4,000 RSUs remain outstanding under this grant which have been issued to our Chief Financial Officer, John S. Hill. On May 31, 2017, the Compensation Committee of the Company’s Board of Directors approved a share matching arrangement resulting in the issuance of 108,330 RSUs to the Company’s officers and non-employee directors then serving under the 2014 Plan. The RSUs were issued on December 15, 2017, and entitle each grantee to one share of the Company’s common stock upon the vesting date of the RSU, which will vest 20% per year over a period of five years following the date granted, subject to each officer’s continued employment with the Company, or each director’s continued service on the Board. Prior to the vesting of the RSUs, the grantee will not be entitled to any dividends declared on the Company’s common stock. The RSUs do not expire; however, should the grantee discontinue employment with the Company for any reason other than death or disability, all unvested RSUs will be deemed forfeited on the date employment is discontinued. The Board of Directors may, in its discretion, accelerate vesting in the event of early retirement. In connection with the Asset Sale, the Compensation and Management Resources Committee (the “Compensation Committee”) of the Board previously approved the accelerated vesting of the RSUs granted to the Company’s former executive officers, Douglas N. Raucy and Dean E. Stroud, under the share-matching arrangement. Accordingly, pursuant to the employment and resignation agreements entered into between the Company and Messrs. Raucy and Stroud, a total of 34,400 unvested RSUs issued to Messrs. Raucy and Stroud vested in full on December 2, 2019. The RSUs granted on December 15, 2017 will also vest in full as of the last date of service as a director of the Company should the director make himself or herself available and consent to be nominated by the Company for continued service but is not nominated by the Board for election by the shareholders, other than for good reason as determined by the Board in its discretion. On August 22, 2018, the Compensation Committee granted 1,000 shares of the Company’s common stock (the “Bonus Shares”) and 1,000 RSUs to Mr. Hill, under the 2018 Plan. Each RSU represents a contingent right to receive one share of the Company’s common stock. These RSUs vest in five equal annual installments beginning with the first anniversary of the grant date, subject to continued employment, with vesting subject to Mr. Hill maintaining ownership of the Bonus Shares through the full five-year vesting period. Also, on August 22, 2018, the Company modified its compensation program for all non-employee directors of the Company, effective September 1, 2018. The modified compensation program allows for an annual grant of RSUs with a value of $40, vesting in five equal annual installments, beginning with the first anniversary of the grant date. Accordingly, on August 22, 2018, August 13, 2019, and again on August 12, 2020, the Board issued RSUs to each of the Company’s then serving non-employee directors, representing a value of $40 per director. The total number of RSUs granted were 34,284 on August 22, 2018, 61,776 on August 13, 2019, and 60,998 on August 12, 2020. Furthermore, on January 11, 2019, the Company’s Board appointed two new directors to the Board, Ambassador Rita Hayes and Dr. Marsha G. King, resulting in the issuance of 5,397 RSUs to each of these two directors, representing their pro-rata share of the RSU grant issued to each of the Company’s non-employee directors on an annual basis. The terms of the RSUs granted allow for their immediate vesting, subject to the Board’s discretion, upon a director’s resignation or retirement from the Board. Accordingly, upon the resignation of Marsha G. King and Lewis M. Johnson on December 14, 2020 and March 12, 2021, respectively, the Board accelerated the vesting of 19,210 RSUs that had been previously granted to Ms. King, and 20,987 RSUs that had been previously granted to Mr. Johnson. The following table summarizes RSU activity for the years ended December 31, 2020 and 2019. Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Non-vested units, January 1, 2019 137,116 $ 6.27 Granted 72,570 5.14 Vested (53,184 ) 7.17 Forfeited (16,500 ) 1.34 Non-vested units, December 31, 2019 140,002 $ 5.93 Granted 60,998 4.59 Vested (52,514 ) 5.75 Forfeited – – Non-vested units, December 31, 2020 148,486 $ 5.44 Total stock-based compensation expense for the years ended December 31, 2020 and 2019 was $312,000 and $413,000, respectively. As of December 31, 2020, total unrecognized stock compensation expense of $736,000 remains, which will be recognized through September 30, 2025. Warrants For the year ended December 31, 2019, a total of 406,875 warrants expired having a weighted average exercise price of $9.69. Warrants were neither granted nor exercised during the two years ended December 31, 2020. As of December 31, 2020, the Company had 1,500,000 warrants outstanding with an exercise price of $15.00, which expire on February 24, 2022. |
Shareholders' Equity
Shareholders' Equity | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Shareholders' Equity | 8. Shareholders’ Equity Offering of 8.00% Cumulative Preferred Stock, Series A On February 28, 2018, we completed the underwritten public offering of 640,000 shares of the Preferred Stock designated as 8.00% Cumulative Preferred Stock, Series A, par value $25.00 per share. Also, on March 26, 2018, we issued an additional 60,000 shares of Preferred Stock pursuant to the exercise of the underwriters’ over-allotment option. Dividends on the Preferred Stock are cumulative from the date of original issue and are payable quarterly on the 15th day of March, June, September and December of each year, commencing on June 15, 2018 when, as and if declared by our Board of Directors or a duly authorized committee thereof. The first dividend record date for the Preferred Stock was on June 1, 2018. For each of the years ended December 31, 2020 and 2019, the Company declared dividends of $1.4 million, representing all quarterly amounts due on the Preferred Stock. Dividends are payable out of amounts legally available therefor at a rate equal to 8.00% per annum per $25.00 of stated liquidation preference per share, or $2.00 per share of Preferred Stock per year. The Company’s Board of Directors declared the first quarter 2021 dividend on the shares of Series A Preferred Stock on February 8, 2021. The Preferred Stock is not redeemable prior to February 28, 2023. On and after that date, the Preferred Stock will be redeemable at our option, for cash, in whole or in part, at a redemption price of $25.00 per share of Preferred Stock, plus all accumulated and unpaid dividends to, but not including, the date of redemption. The Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption. The Preferred Stock will generally have no voting rights except as provided in the Certificate of Designations or as from time to time provided by law. The affirmative vote of the holders of at least two-thirds of the outstanding shares of Preferred Stock and each other class or series of voting parity stock will be required at any time for us to authorize, create or issue any class or series of our capital stock ranking senior to the Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up, to amend any provision of our Certificate of Incorporation so as to materially and adversely affect any rights of the Preferred Stock or to take certain other actions. The shares trade on the Nasdaq Stock Market under the symbol “FGFPP”. A fund managed by Fundamental Global Investors, LLC, the Company’s largest shareholder, purchased an aggregate of 34,620 shares of the Series A Preferred Stock in the Company’s public offering of the shares, at the public offering price of $25.00 per share, including 31,680 shares purchased for a total of approximately $792,000 on February 28, 2018, the closing date of the offering, and 2,940 shares purchased for a total of approximately $74,000 on March 26, 2018 in connection with the underwriters’ exercise of their over-allotment option. No discounts or commissions were paid to the underwriters on the purchase of these shares. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 9. Related Party Transactions Related party transactions are carried out in the normal course of operations and are measured in part by the amount of consideration paid or received as established and agreed by the parties. Management believes that consideration paid for such services in each case approximates fair value. Except where disclosed elsewhere in these consolidated financial statements, the following is a summary of related party transactions. Investment in Limited Liability Company and Limited Partnership On April 21, 2016, KFSI completed the acquisition of Argo Management Group LLC (“Argo”). Argo’s primary business is to act as the Managing Member of Argo Holdings Fund I, LLC, an investment fund in which the Company has committed to invest $0.5 million. The managing member of Argo, Mr. John T. Fitzgerald, was appointed as President and Chief Executive Officer of KFSI on September 5, 2018 and has served on its board of directors since April 21, 2016. As of December 31, 2020, the Company has invested $0.3 million in Argo. As of December 31, 2020, the Company has invested $4.0 million as a limited partner in FGI Metrolina Property Income Fund, LP (“Metrolina”), which invests in real estate through a real estate investment trust which is wholly owned by Metrolina. The general partner of Metrolina, FGI Metrolina GP, LLC, is managed, in part, by Mr. Cerminara, the Chairman of the Board of Directors of the Company. For the year ending December 31, 2020, the Company paid $80,000 in performance-based fees to the general partner of Metrolina. For the year ending December 31, 2019, approximately $37,000 in performance-based fees were waived by the general partner of Metrolina. Metrolina’s investment program is managed by FGI Funds Management LLC, an affiliate of FGI, which, with its affiliates, is the largest stockholder of the Company. The Company’s investment represents an approximate 53% ownership stake in Metrolina as of December 31, 2020. Joint Venture Agreement On March 31, 2020, the Company entered into the Limited Liability Company Agreement (the “LLC Agreement”) of Fundamental Global Asset Management, LLC (“FGAM”), a newly-formed joint venture owned 50% by each of the Company and FGI Funds Management, LLC, an affiliate of FGI (“FGIFM” and together with the Company, each a “Member” and collectively, the “Members”). The purpose of FGAM is to sponsor, capitalize and provide strategic advice to investment managers (“Underlying Managers”) in connection with the launch and/or growth of their asset management business and the investment products they sponsor (each, a “Sponsored Fund”). FGAM is governed by a Board of Managers consisting of four managers, two of which have been appointed by each Member. The Company has appointed two of its independent directors to the Board of Managers of FGAM. Certain major actions, including any decision to sponsor a new investment manager, require the prior consent of both Members. The LLC Agreement provides that each Member will contribute its proportionate interest of the amount of capital determined by the Board of Managers to be required to operate FGAM (“Operating Capital”). Unless otherwise agreed, the Company will contribute the capital required to be contributed to a Sponsored Fund (“Seed Capital”), as well as any amounts required to be contributed to an Underlying Manager for working capital purposes (“Working Capital”). Proceeds attributable to a contribution, directly or indirectly through an Underlying Manager, to a Sponsored Fund will be distributed to the Members in proportion to their capital contributions in respect of Seed Capital. All other proceeds received by FGAM attributable to a Sponsored Fund, including proceeds from revenue shares or ownership interests in Underlying Managers, will be distributed as follows: (i) first, to the Members until they have received cumulative distributions up to an amount of the Operating Capital funded by them; (ii) second, to the Members until they have received cumulative distributions up to an amount of Working Capital previously funded by them, plus a return of 5% per annum; and (iii) third, to the Members in proportion to their percentage interests. In addition, neither FGIFM nor any of its affiliates may participate in a Sponsored Fund Transaction other than through FGAM unless FGIFM has first presented the opportunity to FGAM and either the Board of Managers or the Company has rejected such opportunity. Notwithstanding the foregoing, if such opportunity requires in excess of $5.0 million, FGIFM may offer amounts in excess of $5.0 million to a third party, subject to certain conditions. On September 14, 2020 and September 28, 2020, the Company provided Seed Capital of $2.0 million and $3.0 million, respectively, into FGAM, to capitalize FG Special Situations Fund Advisor, LLC (“Advisor”), a Delaware limited liability company formed on September 2, 2020, and to sponsor the launch of FG Special Situations Fund, LP (the “Fund”), a Delaware limited partnership also formed on September 2, 2020. The Fund is wholly owned by FGAM through the Fund’s general partner and the Advisor, both of which are ultimately controlled by Mr. Cerminara, the Chairman of the Company’s Board of Directors. Of the total $5.0 million invested, approximately $4.0 million was used by FG New America Investors, LLC (the “Sponsor”) as part of a total $8.6 million of risk capital used to launch FG New America Acquisition Corp (NYSE: FGNA), a newly formed special purpose acquisition company which consummated its initial public offering on October 2, 2020, and entered into a definitive business combination with Opportunity Financial LLC, on February 10, 2021. The Fund’s specific investment consists of both class A and class A-1 interests of the Sponsor, purchased for approximately $4.0 million. The class A and class A-1 interests represent beneficial ownership of approximately 1.4 million common shares of FGNA as well as approximately 0.4 million warrants to purchase common shares of FGNA at a price of $11.50 per share. Both the class A and class A-1 interests of the Sponsor are subject to complete loss if FGNA is not able to consummate a business combination in accordance with the terms of its initial public offering. The class A and class A-1 interests have not been registered under the Securities Act of 1933, as amended, and are not transferrable except as provided for in the operating agreement of the Sponsor. The remaining $1.0 million invested in FGAM consists of cash owned by the Fund as of December 31, 2020 and will be used by the Fund to sponsor additional future investments. Mr. Cerminara, the Chairman of our Board, is the President and a director of FGNA and a manager of the Sponsor. Mr. Swets, our Chief Executive Officer, is the Chief Executive Officer and a director of FGNA and a manager of the Sponsor. Investment Advisory Agreement Pursuant to the Investment Advisory Agreement entered into upon closing of the Asset Sale, FG Strategic Consulting (“FGSC,”, formerly Fundamental Global Advisors LLC), a wholly-owned subsidiary of the Company, has agreed to provide investment advisory services to FedNat, including identifying, analyzing and recommending potential investments, advising as to existing investments and investment optimization, recommending investment dispositions, and providing advice regarding macro-economic conditions. In exchange for providing the investment advisory services, FedNat has agreed to pay FGSC an annual fee of $100,000. FGI Funds Management, LLC will serve as the manager to FGSC. Both Advisor and FGI Funds Management, LLC are affiliates of Fundamental Global Investors, LLC, the Company’s largest stockholder. The Investment Advisory Agreement runs through December 2, 2024. Shared Services Agreement On March 31, 2020, the Company entered into a Shared Services Agreement (the “Shared Services Agreement”) with Fundamental Global Management, LLC (“FGM”), an affiliate of FGI, pursuant to which FGM provides the Company with certain services related to the day-to-day management of the Company, including assisting with regulatory compliance, evaluating the Company’s financial and operational performance, providing a management team to supplement the executive officers of the Company, and such other services consistent with those customarily performed by executive officers and employees of a public company (collectively, the “Services”). In exchange for the Services, the Company pays FGM a fee of $456,250 per quarter (the “Shared Services Fee”), plus reimbursement of expenses incurred by FGM in connection with the performance of the Services, subject to certain limitations approved by the Company’s Board of Directors or Compensation Committee from time to time. The Shared Services Agreement has an initial term of three years, and thereafter renews automatically for successive one-year terms unless terminated in accordance with its terms. The Shared Services Agreement may be terminated by FGM or by the Company, by a vote of the Company’s independent directors, at the end of the initial or automatic renewal term upon 120 days’ notice, subject to payment by the Company of certain costs incurred by FGM to wind down the provision of Services and, in the case of a termination by the Company without cause, payment of a termination fee equal to the Shared Services Fee paid for the two quarters preceding termination. For the year ended December 31, 2020, the Company paid $1.4 million to FGM under the Shared Services Agreement. Share Repurchase Transaction On September 15, 2020, the Company entered into a Share Repurchase and Cooperation Agreement (the “Share Repurchase Agreement”) with Hale Partnership Capital Management, LLC and certain of its affiliates (collectively, the “Hale Parties”), which, prior to the transaction, owned more than 18% of our outstanding common stock (the “Share Repurchase Transaction”). Pursuant to the Share Repurchase Agreement, the Company agreed to purchase (exclusive of any fees or expenses) all of the 1,130,152 shares of the Company’s common stock, owned, of record or beneficially, by the Hale Parties, in exchange for an aggregate of approximately $2.8 million in cash and 330,231 shares of common stock, par value $0.01 per share, of FedNat Holding Company previously owned by the Company (the “FedNat Shares”) having an estimated fair value of approximately $2.7 million on September 15, 2020. As acknowledged by the Hale Parties in the Share Repurchase Agreement, that certain Standstill Agreement, dated December 2, 2019, by and between FedNat Holding Company and the Company, imposes certain restrictions in respect of the FedNat Shares transferred by the Company to the Hale Parties. FedNat Holding Company is not party to, or a third-party beneficiary of, the Agreement. The Share Purchase Agreement contains certain customary standstill provisions that, for a period of five years commencing September 15, 2020 (the “Standstill Period”), prohibit, among other things, the Hale Parties from (i) making certain announcements regarding the Company’s transactions, (ii) soliciting proxies, (iii) acquiring ownership of any securities of the Company, (iv) advising, encouraging or influencing any vote or disposition of any securities of the Company, (v) selling securities of the Company resulting in any third party owning more than 4.9% of the outstanding shares of the Company’s common stock (subject to certain exceptions set forth in the Share Purchase Agreement), (vi) taking actions to change or influence the Board of Directors of the Company, Company management or the direction of certain Company matters and (vii) exercising certain stockholder rights. The Company and the Hale Parties further agreed that they will not disparage each other and that they will not initiate any lawsuit, claim or proceeding with respect to any claims against the Company or any of the Hale Parties, as applicable, based on facts known as of the Effective Date, in each case applicable during the Standstill Period, and to a mutual release of claims. Each of the Company and the Hale Parties has the right to terminate the Share Purchase Agreement prior to the end of the Standstill Period if (i) any of the Hale Parties, in the case of the Company, or (ii) the Company, in the case of the Hale Parties, commits a material breach of the Share Purchase Agreement and such breach is not cured within 15 days after notice is given to the breaching party. As the total consideration paid in the Share Repurchase transaction exceeded the fair value of the treasury shares repurchased by the Company, the Company recorded a charge of approximately $0.2 million to general and administrative expense for the year ended December 31, 2020, representing the estimated fair value of the rights conveyed to the Company pursuant to the standstill provisions in the agreement. The fair value of the 1,130,152 shares of Company common stock, or approximately $5.2 million, was recorded to treasury stock. Formation of FG SPAC Partners, LP On January 4, 2021, FG SPAC Partners, LP (“FGSP”) was formed as a Delaware limited partnership to co-sponsor newly formed SPACs with their founders or partners. The Company is the sole managing member of the general partner of FGSP and holds an approximate 49% limited partner interest in FGSP directly and through its subsidiaries. Certain of our directors and officers also hold limited partner interests in FGSP. Our Chief Executive Officer and Director, Larry G. Swets, holds a 10% limited partner interest through Itasca Financial LLC, an advisory and investment firm for which Mr. Swets is managing member. The Chairman of our Board of Directors, D. Kyle Cerminara also holds a limited partner interest in FGSP through Fundamental Global, LLC, a newly formed holding company for which Mr. Cerminara is the manager and a member. On January 11, 2021, FGSP purchased 1,075,000 founder shares from Aldel, for total consideration of $4,674. Concurrent with Aldel’s initial public offering, FGSP will purchase 650,000 warrants at a price of $0.10 per warrant, each exercisable to purchase one share of Aldel’s Class A common stock at an exercise price of $15.00 per share (the “OTM Warrants”), for an aggregate purchase price of $65,000. In addition, the Company through its joint venture investment in Fundamental Global Asset Management, LLC and the FG Special Situations Fund, LP, will invest approximately $1.0 million in the risk capital of Aldel Investors, LLC. The Company’s limited partnership interests in FGSP potentially represent beneficial ownership of approximately 816,700 founder shares and approximately 321,000 OTM Warrants of Aldel. Our Chief Executive Officer and Director, Larry G. Swets, will serve as Senior Advisor to Aldel upon the closing of its offering and has received 25,000 common shares of Aldel. The Chairman of our Board of Directors, D. Kyle Cerminara will serve as director of Aldel upon the closing of its offering and has also received 25,000 shares of Aldel. |
Net Earnings Per Share
Net Earnings Per Share | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Net Earnings Per Share | 10. Net Earnings Per Share Net earnings per share is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding during the periods presented. In calculating diluted earnings per share, those potential common shares that are found to be anti-dilutive are excluded from the calculation. The table below provides a summary of the calculations used in determining basic and diluted earnings per share for the years ended December 31, 2020 and 2019. ($ in thousands) Year Ended December 31, 2020 2019 Basic and diluted: Net income (loss) (in thousands) $ (22,457 ) $ 311 Less: dividends declared on Series A Preferred Shares (1,400 ) (1,400 ) Loss attributable to common shareholders (23,857 ) (1,089 ) Weighted average common shares outstanding 5,746,259 6,018,542 Loss attributable to common shareholders $ (4.15 ) $ (0.18 ) Net income (loss) from continuing operations (in thousands) $ (22,457 ) $ 2,383 Less: dividends declared on Series A Preferred Shares (1,400 ) (1,400 ) Income (Loss) from continuing operations attributable to common shareholders (23,857 ) 983 Weighted average common shares outstanding 5,746,259 6,018,542 Earnings (Loss) per common share from continuing operations $ (4.15 ) $ 0.16 Net loss from discontinued operations, net of income taxes (in thousands) $ – $ (2,072 ) Weighted average common shares outstanding – 6,018,542 Loss per common share from discontinued operations $ – $ (0.34 ) The following potentially dilutive securities outstanding as of December 31, 2020 and 2019 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive. As of December 31, 2020 2019 Warrants to purchase common stock 1,500,000 1,500,000 Restricted stock units 152,731 140,002 1,652,731 1,640,002 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 12 Months Ended |
Dec. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Accumulated Other Comprehensive Loss | 11. Accumulated Other Comprehensive Loss The table below details the change in the balance of each component of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2020 and 2019. (in thousands) Year Ended December 31, 2020 2019 Unrealized gains (losses) on available-for-sale securities: Balance, January 1 $ – $ (729 ) Other comprehensive income (loss) before reclassifications – 1,093 Amounts reclassified from accumulated other comprehensive income (loss) – 695 Income tax (benefit) expense – (446 ) Net current-period other comprehensive income (loss) – 1,342 Reclassification of certain tax effects from accumulated other comprehensive loss – (104 ) Unrealized gains realized upon sale of Maison Business, net of taxes – (509 ) Balance, December 31 $ – $ – |
Retirement Plans
Retirement Plans | 12 Months Ended |
Dec. 31, 2020 | |
Retirement Benefits [Abstract] | |
Retirement Plans | 12. Retirement plans The 1347 Property Insurance Holdings, Inc. 401(k) Plan (the “Retirement Plan”) was established effective January 1, 2015, as a defined contribution plan. The Retirement Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”); eligible employees of the Company and its subsidiaries may participate in the plan. Employees who have completed one month of service are eligible to participate and are permitted to make annual pre and post-tax salary reduction contributions not to exceed the limits imposed by the Internal Revenue Code of 1986, as amended. Contributions are invested at the direction of the employee participant in various money market and mutual funds. The Company matches contributions up to 100% of each participant’s contribution, limited to contributions up to 4% of a participant’s eligible earnings. The Company may also elect to make a profit-sharing contribution to the Retirement Plan based upon discretionary amounts and percentages authorized by the Company’s Board of Directors. For the years ended December 31, 2020 and 2019, the Company made matching contributions to the Retirement Plan in the amount of $18,000 and $97,000, respectively, but did not make any profit-sharing contributions to the Retirement Plan in either year. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 13. Commitments and Contingencies Legal Proceedings: From time to time, we are involved in legal proceedings and litigation arising in the ordinary course of business. Currently, it is not possible to predict legal outcomes and their impact on the future development of claims. Any such development will be affected by future court decisions and interpretations. Because of these uncertainties, additional liabilities may arise for amounts in excess of the Company’s current reserves. Operating Lease Commitments: Effective December 1, 2020, the Company entered into a lease agreement for office space in St. Petersburg, FL. The lease has a term of six months. Total minimum rent over the six-month term is expected to be $9,000. Due to the short term nature of the lease, the Company has recognized lease expense on a straight line basis over the term of the lease, with any variable lease payments recognized in the period in which the obligation for the payment occurred. Rent expense was $32,000 and $443,000 for the years ended December 31, 2020 and 2019, respectively. The entirety of rent expense for the year ended December 31, 2019 has been included as part of net income from discontinued operations, as it was associated with the operations of the Maison Business, sold on December 2, 2019. Impact of Coronavirus (COVID-19) Pandemic: We continue to monitor the recent outbreak of the novel coronavirus (COVID-19) on our operations. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 pandemic on our business. Adverse events such as health-related concerns about working in our offices, the inability to travel and other matters affecting the general work environment have negatively impacted and could continue to harm our business and our business strategy. In addition, during the pandemic, we have experienced significant losses related to the value of our investment in shares of FedNat common stock, and we may continue to experience such losses to the extent the pandemic negatively impacts FedNat’s business. The extent to which our operations and investments may continue to be impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted, including new developments concerning the severity of the pandemic and actions by government authorities to contain the pandemic or treat its impact. Furthermore, the impacts of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown. In the event of a major disruption caused by the pandemic, we may lose the services of our employees, experience system interruptions or face challenges accessing the capital or credit markets, which could lead to diminishment of our business operations. Any of the foregoing could harm our business and delay the implementation of our business strategy. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 14. Subsequent Events On March 5, 2021, FedNat Holding Company filed a preliminary prospectus supplement with the SEC indicating that, as of the date of that filing, FedNat is prohibited from paying dividends on their common stock under the terms of their indenture for their senior notes, as their debt-to-capital ratio currently exceeds 35%. As of March 15, 2021, the Company owns 1,442,871 shares of FedNat Holding Company common stock. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: These statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). |
Consolidation Policies | Consolidation Policies: The consolidated financial statements include the accounts of the Company and entities in which it is required to consolidate under either the Variable Interest Entity (“VIE”) or Voting Interest Entity (“VOE”) models. Both models require the reporting entity to identify whether it has a controlling financial interest in a legal entity and is therefore required to consolidate the legal entity. Under the VOE model, a reporting entity with ownership of a majority of the voting interest of a legal entity is generally considered to have a controlling financial interest. The VIE model was established for situations in which control may be demonstrated other than by the possession of voting rights in a legal entity and instead focuses on the power to direct the activities that most significantly impact the legal entity’s economic performance, as well as the rights to receive benefits and obligations to absorb losses that could potentially be significant to the legal entity. The determination of whether a legal entity is consolidated under either model is reassessed where there is a substantive change in the governing documents or contractual arrangements of the entity, to the capital structure of the entity or in the activities of the entity. The Company continuously reassesses whether it should consolidate under either model. See Note 5 for additional information regarding the Company’s consolidated investments. |
Discontinued Operations | Discontinued Operations: On December 2, 2019, we sold all of the issued and outstanding equity of Maison, MMI and ClaimCor. As a result, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. Certain transactions between the Company and its subsidiaries, which have historically been eliminated upon consolidation, are shown on a gross basis in the accompanying financial statements as such transactions have occurred between discontinued operations and those operations which the Company has continued to utilize following the closing of the Asset Sale. These items include surplus notes in the amount of $18 million plus accrued interest, all of which were settled upon the closing of the Asset Sale. Interest associated with these surplus notes has been recorded as part of net investment income from continuing operations as well as interest expense as part of discontinued operations on the Company’s consolidated statement of operations for the year ended December 31, 2020. All other significant intercompany balances and transactions have been eliminated upon consolidation. |
The Use of Estimates in the Preparation of Consolidated Financial Statements | The Use of Estimates in the Preparation of Consolidated Financial Statements: The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates. Estimates and their underlying assumptions are reviewed on an ongoing basis. Changes in estimates are recorded in the accounting period in which they are determined. The critical accounting estimates and assumptions in the accompanying consolidated financial statements include the valuation of our investments, the valuation of net deferred income taxes and stock-based compensation expense. The business and economic uncertainty resulting from the novel coronavirus (COVID-19) pandemic has made such estimates and assumptions difficult to calculate. |
Investments | Investments: The Company’s equity securities are recorded at fair value using observable inputs such as quoted prices in inactive markets, quoted prices in active markets for similar instruments, benchmark interest rates, broker quotes and other relevant inputs. Effective January 1, 2019, we adopted Accounting Standards Update No. 2016-01, Financial Instruments–Overall Limited liability investments include investments in a limited partnership and a limited liability company for which there does not exist a readily determinable fair value. The Company accounts for these investments at their cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investment of the same issuer. Any profit distributions the Company receives on these investments is included in income. Limited liability investments also include an investment where the Company is a limited partner in a limited partnership, which we have determined to be a variable interest entity (VIE), in which the Company is not the primary beneficiary. The Company does not have a controlling financial interest in the limited partnership but exerts significant influence over the entity’s operating and financial policies. Accordingly, the Company has accounted for this investment under the equity method of accounting, recognizing any unrealized gains or losses on the investment through income. See Note 5 for additional information on the Company’s investment in the VIE. Additionally, in September 2020, the Company invested approximately $5.0 million, through its joint venture, Fundamental Global Asset Management, LLC (“FGAM”) to sponsor the launch of FG Special Situations Fund, LP (the “Fund”). The Fund, a VIE which the Company is required to consolidate, is considered an investment company for GAAP purposes and follows the accounting and reporting guidance in the Financial Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies Realized gains and losses on sales of investments are determined on a first-in, first-out basis, and are included in net investment income. Interest income is included in net investment income and is recorded as it accrues. The Company accounts for its investments using trade date accounting and also conducts a quarterly review to identify and evaluate investments that show objective indications of possible impairment. Impairment is charged to the statement of income if the fair value of the instrument falls below its amortized cost and the decline is considered other-than-temporary. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, and the Company’s ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. |
Cash and Cash Equivalents | Cash and Cash Equivalents: Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less. |
Reinsurance | Reinsurance: Reinsurance premiums, losses, and loss adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and losses ceded to other companies have been reported as a reduction of premium revenue and incurred net losses and loss adjustment expenses. A reinsurance recoverable is recorded for that portion of paid and unpaid losses and loss adjustment expenses that are ceded to other companies. |
Income Taxes | Income Taxes: The Company follows the asset and liability method of accounting for income taxes, whereby deferred income tax assets and liabilities are recognized for (i) the differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and (ii) loss and tax credit carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. Current federal income taxes are charged or credited to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense (benefit). |
Concentration of Credit Risk | Concentration of Credit Risk: Financial instruments which potentially expose the Company to concentrations of credit risk include investments, cash, and deposits with reinsured companies. The Company maintains its cash with a major U.S. domestic banking institution which is insured by the Federal Deposit Insurance Corporation (“FDIC”) for up to $250,000. As of December 31, 2020 the Company held funds in excess of these FDIC insured amounts. The terms of these deposits are on demand to mitigate some of the associated risk. The Company has not incurred losses related to these deposits. The Company had not experienced significant losses related to its amounts due from reinsurers. |
Revenue Recognition | Revenue Recognition: Premium revenue, up to the date of the Asset Sale transaction was recognized on a pro rata basis over the term of each policy contract. Service charges on installment premiums were recognized as income upon receipt of related installment payments and were reflected in other income up to the date of the Asset Sale transaction. Revenue from policy fees was deferred and recognized over the term of the applicable policy period, with revenue reflected in other income up to the date of the Asset Sale transaction. Ceded premiums were charged to income over the applicable term of the various reinsurance contracts with third party reinsurers. |
Stock-Based Compensation | Stock-Based Compensation: The Company has accounted for stock-based compensation under the provisions of ASC Topic 718 – Stock Compensation The Company has also issued restricted stock units (“RSUs”) to certain of its employees and directors which have been accounted for as equity-based awards since, upon vesting, they are required to be settled in the Company’s common shares. We have used the fair value of the Company’s common stock on the date the RSUs were issued to estimate the grant date fair value of those RSUs which vest solely based upon the passage of time, as well as a Monte Carlo valuation model to estimate the fair value of those RSUs which vest solely upon market-based conditions. The fair value of each RSU is recorded as compensation expense over the requisite service period, which is generally the expected period over which the awards will vest. In the case of those RSUs which vest upon market-based conditions, should the market-based condition be achieved prior to the expiration of the derived service period, any unrecognized cost will be recorded as compensation expense in the period in which the RSUs actually vest. Based upon the Company’s historical forfeiture rates relating to stock options and RSUs, the Company has not made any adjustment to stock compensation expense for expected forfeitures as of December 31, 2020. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments: The carrying values of certain financial instruments, including cash, short-term investments, deposits held, accounts payable, and other accrued expenses approximate fair value due to their short-term nature. The Company measures the fair value of financial instruments in accordance with GAAP which defines fair value as the exchange price that would be received for an asset (or paid to transfer a liability) in the principal or most advantageous market for the asset (or liability) in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. See Note 5 for further information on the fair value of the Company’s financial instruments. |
Earnings (Loss) Per Common Share | Earnings (loss) Per Common Share: Basic earnings (loss) per common share is computed using the weighted average number of shares outstanding during the respective period. Diluted earnings (loss) per common share assumes conversion of all potentially dilutive outstanding stock options, restricted stock units, warrants or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted earnings (loss) per share if their effect is anti-dilutive. |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Disposal Groups, Including Discontinued Operations | The following table presents a reconciliation of the major classes of line items constituting pretax profit (loss) of discontinued operations to the after-tax profit (loss) of discontinued operations that are presented in the Company’s consolidated statement of operations for the year ended December 31, 2019 ($ in thousands) Year ended December 31, 2019 Gain from sale of the Maison Business Cash consideration received from sale $ 25,500 Stock consideration received from sale 25,500 Total consideration received from sale 51,000 Less: Carrying value of the Maison Business on December 1, 2019 39,099 Transaction and other sale related costs 2,818 Total pre-tax reductions 41,917 Pre-tax gain on sale 9,083 Income tax expense 2,017 Net gain from sale of the Maison Business $ 7,066 Net premiums earned $ 49,691 Net investment income 4,354 Other income 2,854 Net losses and loss adjustment expenses (41,634 ) Amortization of deferred policy acquisition costs (15,983 ) General and administrative expenses (9,200 ) Interest expense on surplus notes due to affiliate (1,708 ) Pretax loss from the Maison Business (11,626 ) Income tax benefit (2,488 ) Loss from the Maison Business, net of taxes $ (9,138 ) Net loss from discontinued operations, net of taxes $ (2,072 ) |
Investments and Fair Value Di_2
Investments and Fair Value Disclosures (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Investments, Debt and Equity Securities [Abstract] | |
Schedule of Investments | The following table summarizes the Company’s investments as of December 31, 2020 and 2019. ($ in thousands) Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount As of December 31, 2020 FedNat common stock $ 20,751 $ – $ 12,209 $ 8,542 Limited liability investments 8,651 695 – 9,346 Total investments $ 29,402 $ 695 $ 12,209 $ 17,888 As of December 31, 2019 FedNat common stock $ 25,500 $ 3,987 $ – $ 29,487 Limited liability investments 3,495 510 – 4,005 Total investments $ 28,995 $ 4,497 $ – $ 33,492 |
Schedule of Subsidiaries Assets | The Company’s maximum exposure to loss as a result of its involvement with the Fund is $5.0 million as of December 31, 2020. December 31, 2020 December 31, 2019 Schedule of Investments Cash equivalents $ 987 $ – Limited liability investments (Class A and Class A-1 interests in Sponsor) 4,013 – Total assets $ 5,000 $ – |
Schedule of Net Investment Income | Net investment income (loss) for the years ended December 31, 2020 and 2019 is as follows: (in thousands) Year Ended December 31, 2020 2019 Investment income (loss): Unrealized holding gain (loss) on FNHC common stock $ (16,196 ) $ 3,987 Realized loss on FNHC common stock (2,110 ) – Dividend income from FNHC common stock 609 – Interest on surplus notes issued by Maison – 1,708 Income from limited liability investments 265 101 Loss on assignment of limited liability investments – (239 ) Other 172 30 Net investment income (loss) $ (17,260 ) $ 5,587 |
Schedule of Financial Instruments Measured at Fair Value | Financial instruments measured, on a recurring basis, at fair value as of December 31, 2020 and 2019 in accordance with the guidance promulgated by the FASB are as follows. (in thousands) Level 1 Level 2 Level 3 Total As of December 31, 2020 FedNat common stock $ 8,542 $ – $ – $ 8,542 Limited liability investments (class A and A-1 interests) – – 4,013 4,013 $ 8,542 $ – $ 4,013 $ 12,555 As of December 31, 2019 FedNat common stock $ 29,487 $ – $ – $ 29,487 |
Schedule of Changes in Classified Assets | The following table presents the changes in assets classified in Level 3 of the fair value hierarchy during the year ended December 31, 2020. (in thousands) Limited Liability Investments Purchases $ 4,013 Transfers into Level 3 – Transfers out of Level 3 – Balance, December 31, 2020 $ 4,013 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Summary of Income Tax Expense (Benefit) | A summary of income tax expense (benefit) is as follows: ($ in thousands) Year Ended December 31, 2020 2019 Current income tax (benefit) – from continuing operations $ (559 ) $ – Current income tax (benefit) – from discontinued operations – (894 ) Total current income tax (benefit) (559 ) (894 ) Deferred income tax expense (benefit) – from continuing operations (106 ) 738 Deferred income tax expense – from discontinued operations – 423 Total deferred income tax expense (benefit) (106 ) 1,161 Total income tax expense (benefit) – from continuing operations (665 ) 738 Total income tax (benefit) – from discontinued operations – (471 ) Total income tax expense (benefit) $ (665 ) $ 267 |
Schedule of Reconciliation Effective Tax Rates | Actual income tax expense (benefit) differs from the income tax expense computed by applying the applicable effective federal and state tax rates to income before income tax expense as follows: ($ in thousands) Year Ended December 31, 2020 2019 Amount % Amount % Provision for taxes at U.S. statutory marginal income tax rate of 21% $ (4,856 ) 21.0 % $ 121 21.0 % Valuation allowance for deferred tax assets deemed unrealizable 3,934 (17.0 )% – – % Rate differential due to CARES Act (214 ) 0.9 % – – % Non-deductible expenses associated with the Share Repurchase Transaction 516 2.2 % – – % Net operating loss carryback – – % (213 ) (36.9 )% State income tax (net of federal benefit) – – % 265 45.9 % Other (45 ) 0.2 % 94 16.3 % Income tax expense (benefit) $ (665 ) 2.9 % $ 267 46.2 % |
Schedule of Deferred Income Taxes | Significant components of the Company’s net deferred tax assets are as follows: ($ in thousands) As of December 31, 2020 2019 Deferred income tax assets: Net operating loss carryforward $ 1,143 $ 463 Share-based compensation 216 214 Investments 2,570 – Other 5 7 Deferred income tax assets 3,934 684 Less: Valuation allowance (3,934 ) – Deferred income tax assets net of valuation allowance $ – $ 684 Deferred income tax liabilities: Investments $ – $ 789 Other – 1 Deferred income tax liabilities $ – $ 790 Net deferred income tax asset (liability) $ – $ (106 ) |
Equity Incentive Plans (Tables)
Equity Incentive Plans (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | The following table summarizes activity for stock options issued under the 2014 Plan for the year ended December 31, 2019. There was no activity for the year ended December 31, 2020. Common Stock Options Shares Weighted Average Exercise Price Weighted Ave Remaining Contractual Term (Years) Weighted Ave Grant Date Fair Value Aggregate Intrinsic Value Outstanding, January 1, 2019 177,456 $ 8.06 0.25 $ 1.07 $ – Exercisable, January 1, 2019 177,456 $ 8.06 0.25 $ 1.07 $ – Granted – Exercised – Vested – Cancelled (177,456 ) Outstanding, December 31, 2019 – $ – – $ – $ – Exercisable, December 31, 2019 – $ – – $ – $ – |
Schedule of Restricted Stock Units Activity | The following table summarizes RSU activity for the years ended December 31, 2020 and 2019. Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Non-vested units, January 1, 2019 137,116 $ 6.27 Granted 72,570 5.14 Vested (53,184 ) 7.17 Forfeited (16,500 ) 1.34 Non-vested units, December 31, 2019 140,002 $ 5.93 Granted 60,998 4.59 Vested (52,514 ) 5.75 Forfeited – – Non-vested units, December 31, 2020 148,486 $ 5.44 |
Net Earnings Per Share (Tables)
Net Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Earnings Per Share [Abstract] | |
Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share | The table below provides a summary of the calculations used in determining basic and diluted earnings per share for the years ended December 31, 2020 and 2019. ($ in thousands) Year Ended December 31, 2020 2019 Basic and diluted: Net income (loss) (in thousands) $ (22,457 ) $ 311 Less: dividends declared on Series A Preferred Shares (1,400 ) (1,400 ) Loss attributable to common shareholders (23,857 ) (1,089 ) Weighted average common shares outstanding 5,746,259 6,018,542 Loss attributable to common shareholders $ (4.15 ) $ (0.18 ) Net income (loss) from continuing operations (in thousands) $ (22,457 ) $ 2,383 Less: dividends declared on Series A Preferred Shares (1,400 ) (1,400 ) Income (Loss) from continuing operations attributable to common shareholders (23,857 ) 983 Weighted average common shares outstanding 5,746,259 6,018,542 Earnings (Loss) per common share from continuing operations $ (4.15 ) $ 0.16 Net loss from discontinued operations, net of income taxes (in thousands) $ – $ (2,072 ) Weighted average common shares outstanding – 6,018,542 Loss per common share from discontinued operations $ – $ (0.34 ) |
Schedule of Potentially Dilutive Securities Excluded from Calculation | The following potentially dilutive securities outstanding as of December 31, 2020 and 2019 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive. As of December 31, 2020 2019 Warrants to purchase common stock 1,500,000 1,500,000 Restricted stock units 152,731 140,002 1,652,731 1,640,002 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of Accumulated Other Comprehensive Loss | The table below details the change in the balance of each component of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2020 and 2019. (in thousands) Year Ended December 31, 2020 2019 Unrealized gains (losses) on available-for-sale securities: Balance, January 1 $ – $ (729 ) Other comprehensive income (loss) before reclassifications – 1,093 Amounts reclassified from accumulated other comprehensive income (loss) – 695 Income tax (benefit) expense – (446 ) Net current-period other comprehensive income (loss) – 1,342 Reclassification of certain tax effects from accumulated other comprehensive loss – (104 ) Unrealized gains realized upon sale of Maison Business, net of taxes – (509 ) Balance, December 31 $ – $ – |
Nature of Business (Details Nar
Nature of Business (Details Narrative) - USD ($) | Jan. 18, 2021 | Jan. 12, 2021 | Nov. 30, 2020 | Nov. 11, 2020 | Sep. 30, 2020 | Jul. 14, 2020 | Jun. 18, 2020 | Dec. 02, 2019 | Dec. 31, 2020 | Dec. 31, 2019 | Sep. 28, 2020 | Sep. 14, 2020 |
Surplus notes | $ 18,000,000 | |||||||||||
Net loss | (22,457,000) | $ 311,000 | ||||||||||
Real estate investments | 4,700,000 | |||||||||||
Purchase of company | $ 1,143,000 | |||||||||||
Number of options entitled to receive | ||||||||||||
Reinsurance Capacity Right of First Refusal Agreement [Member] | ||||||||||||
Reinsurance capacity right, percentage | 7.50% | |||||||||||
Annual reinsurance limit | $ 15,000,000 | |||||||||||
Annual fee for advisory services | 100,000 | |||||||||||
Executive Employment Agreement [Member] | Larry G. Swets Jr [Member] | ||||||||||||
Agreement term | 3 years | |||||||||||
Agreement renewal term | 3 years | |||||||||||
Notice period | 60 days | |||||||||||
Annual base salary | $ 550,000 | |||||||||||
Competition description | In the event that the Company terminates Mr. Swets without cause, subject to Mr. Swets execution of a general release of waiver and claims in favor of the Company and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of two years of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company's applicable health and welfare plans. In the event that the parties mutually agree to terminate Mr. Swets' employment regardless of the reason, subject to Mr. Swets' execution of a general release and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting of one year of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company's applicable health and welfare plans. The Swets Agreement also provides that Mr. Swets is subject to post-termination confidentiality covenants. | |||||||||||
Stock Option Agreement [Member] | Larry G. Swets Jr [Member] | Subsequent Event [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||
Common stock exercise price | $ 3.38 | |||||||||||
Stock Option Agreement [Member] | Maximum [Member] | Larry G. Swets Jr [Member] | Subsequent Event [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||
Number of options entitled to receive | 130,000 | |||||||||||
Stock option description | The Stock Option becomes vested and fully exercisable in 20% increments on each anniversary of the grant date provided that Mr. Swets' remain in the continuous service of the Company through each applicable vesting date and provided that the Company's book value per share shall have increased by 15% or more as compared to the Company's book value per shares as of the fiscal year end prior. The Stock Option expires on January 11, 2031. | |||||||||||
Equity Award Letter Agreement [Member] | Larry G. Swets Jr [Member] | Subsequent Event [Member] | ||||||||||||
Intention to additional grant stock options | 370,000 | |||||||||||
Common Stock [Member] | ||||||||||||
Net loss | ||||||||||||
Fundamental Global Investor [Member] | ||||||||||||
Capital infusion | $ 5,000,000 | |||||||||||
Shares transferred | 156,000 | |||||||||||
Shares transfer, amount | $ 3,300,000 | |||||||||||
Collateralize obligations | 2,400,000 | |||||||||||
Real estate investments | $ 3,000,000 | $ 2,000,000 | ||||||||||
Fundamental Global Investor [Member] | Maximum [Member] | ||||||||||||
Net loss | $ 2,900,000 | $ 5,000,000 | ||||||||||
Fundamental Global Investor [Member] | Common Stock [Member] | ||||||||||||
Sale of stock ownership, percentage | 61.00% | |||||||||||
FedNat Holding Company [Member] | ||||||||||||
Received the payment for asset sale consideration | $ 51,000,000 | |||||||||||
Cash consideration transferred | 25,500,000 | |||||||||||
Stock issued for sale consideration, value | $ 25,500,000 | |||||||||||
Stock issued for sale consideration, shares | 1,773,102 | |||||||||||
Surplus notes | $ 18,000,000 | |||||||||||
Shares transferred | 156,000 | |||||||||||
Fundamental Global Asset Management, LLC [Member] | ||||||||||||
Real estate investments | $ 5,000,000 | |||||||||||
FG New America Investors, LLC [Member] | ||||||||||||
Purchase of company | $ 4,000,000 | |||||||||||
Itasca Financial LLC [Member] | Consulting Agreement [Member] | ||||||||||||
Consideration paid for services | $ 111,333 |
Significant Accounting Polici_3
Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Sep. 30, 2020 | |
Surplus notes | $ 18,000 | |
Real estate investment | 4,700 | |
Fundamental Global Asset Management, LLC [Member] | ||
Real estate investment | $ 5,000 | |
Maximum [Member] | Third Party [Member] | ||
Cash deposit per institution insured by FDIC | $ 250 | |
Cash and Cash Equivalents [Member] | Maximum [Member] | ||
Maturity of liquid investments | 90 days |
Discontinued Operations - Sched
Discontinued Operations - Schedule of Disposal Groups, Including Discontinued Operations (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Cash consideration received from sale of Maison Business | $ 25,500 | |
Stock consideration received from sale of Maison Business | 25,500 | |
Total consideration received from sale of Maison Business | 51,000 | |
Less: Carrying value of the Maison Business on December 1, 2019 | 39,099 | |
Less: Transaction and other sale related costs | 2,818 | |
Total pre-tax reductions | 41,917 | |
Pre-tax gain (loss) on sale | 9,083 | |
Income tax expense | 2,017 | |
Net gain from sale of the Maison Business | 7,066 | |
Net premiums earned | 49,691 | |
Net investment income | 4,354 | |
Other income | 2,854 | |
Net losses and loss adjustment expenses | (41,634) | |
Amortization of deferred policy acquisition costs | (15,983) | |
General and administrative expenses | (9,200) | |
Interest expense on surplus notes due to affiliate | (1,708) | |
Pretax loss from the Maison Business | (11,626) | |
Income tax benefit | (2,488) | |
Loss from the Maison Business, net of taxes | (9,138) | |
Net loss from discontinued operations, net of taxes | $ (2,072) |
Investments and Fair Value Di_3
Investments and Fair Value Disclosures (Details Narrative) - USD ($) | Mar. 15, 2021 | Nov. 30, 2020 | Sep. 30, 2020 | Sep. 15, 2020 | Sep. 02, 2020 | Jul. 14, 2020 | Dec. 02, 2019 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Sep. 28, 2020 | Sep. 14, 2020 | Aug. 06, 2020 | Jun. 18, 2018 |
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Commitment to total investment in partnerships | $ 638,000 | |||||||||||||
Profit distributions | $ 80,000 | $ 91,000 | ||||||||||||
Investment from the partnership percentage | 18.00% | |||||||||||||
Investment back from the partnership | $ 776,000 | |||||||||||||
Real estate investment | $ 4,700,000 | |||||||||||||
Investment ownership, percentage | 53.00% | |||||||||||||
Undistributed earnings of the fund | $ 700,000 | |||||||||||||
Purchase of company | 1,143,000 | |||||||||||||
Purchases of investments by consolidated investment company subsidiary | 4,013,000 | |||||||||||||
Net loss | (22,457,000) | $ 311,000 | ||||||||||||
Immaterial Revision [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Purchase of company | (1,200,000) | |||||||||||||
Cash flows from investing activities understated value | 4,000,000 | |||||||||||||
cash flows from operating activities overstated value | 4,000,000 | |||||||||||||
Purchases of investments by consolidated investment company subsidiary | 4,000,000 | |||||||||||||
Immaterial Revision [Member] | Level 3 [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Purchases of investments by consolidated investment company subsidiary | $ 4,000,000 | |||||||||||||
FG New America Acquisition Corp [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Shares issued during period | 1,400,000 | |||||||||||||
Estimated fair value of common stock | $ 4,000,000 | |||||||||||||
Real estate investment | 987,000 | |||||||||||||
Risk capital | 8,600,000 | |||||||||||||
Purchase of company | $ 4,000,000 | $ 4,000,000 | ||||||||||||
Warrants to purchase common shares | 400,000 | |||||||||||||
Share price | $ 11.50 | |||||||||||||
FedNat Holding Company [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Stock issued for sale consideration, shares | 1,773,102 | |||||||||||||
Stock issued for sale consideration, value | $ 25,500,000 | |||||||||||||
Shares transferred | 156,000 | |||||||||||||
Number of shares hold during period, shares | 1,286,871 | |||||||||||||
FedNat Holding Company [Member] | Subsequent Event [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Shares issued during period | 1,442,871 | |||||||||||||
Estimated fair value of common stock | $ 6,900,000 | |||||||||||||
FedNat Holding Company [Member] | Hale Parties [Member] | Share Repurchase and Cooperation Agreement [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Repurchase of common stock in exchange of shares | 330,231 | |||||||||||||
Estimated fair value of common stock | $ 2,700,000 | |||||||||||||
FGI Metrolina Property Income Fund, LP [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Real estate investment | $ 2,200,000 | |||||||||||||
FGI Metrolina GP, LLC [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Real estate investment | $ 4,000,000 | |||||||||||||
Fundamental Global Asset Management, LLC [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Real estate investment | $ 5,000,000 | $ 5,000,000 | ||||||||||||
FG New America Investors, LLC [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Purchase of company | $ 4,000,000 | |||||||||||||
Fundamental Global Investor [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Shares transferred | 156,000 | |||||||||||||
Real estate investment | $ 3,000,000 | $ 2,000,000 | ||||||||||||
Fundamental Global Investor [Member] | Maximum [Member] | ||||||||||||||
Debt Securities, Available-for-sale [Line Items] | ||||||||||||||
Net loss | $ 2,900,000 | $ 5,000,000 |
Investments and Fair Value Di_4
Investments and Fair Value Disclosures - Schedule of Investments (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | $ 29,402 | $ 28,995 |
Investments: Gross Unrealized Gains | 695 | 4,497 |
Investments: Gross Unrealized Losses | 12,209 | |
Investments: Carrying Amount | 17,888 | 33,492 |
FedNat Common Stock [Member] | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | 20,751 | 25,500 |
Investments: Gross Unrealized Gains | 3,987 | |
Investments: Gross Unrealized Losses | 12,209 | |
Investments: Carrying Amount | 8,542 | 29,487 |
Limited Liability Investments [Member] | ||
Debt and Equity Securities, FV-NI [Line Items] | ||
Investments: Cost basis | 8,651 | 3,495 |
Investments: Gross Unrealized Gains | 695 | 510 |
Investments: Gross Unrealized Losses | ||
Investments: Carrying Amount | $ 9,346 | $ 4,005 |
Investments and Fair Value Di_5
Investments and Fair Value Disclosures - Schedule of Subsediary Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Limited liability investments (Class A and Class A-1 interests in Sponsor) | $ 9,346 | $ 4,005 |
Total assets | 34,705 | 63,454 |
Investment Subsidiaries [Member] | ||
Cash equivalents | 987 | |
Limited liability investments (Class A and Class A-1 interests in Sponsor) | 4,013 | |
Total assets | $ 5,000 |
Investments and Fair Value Di_6
Investments and Fair Value Disclosures - Schedule of Net Investment Income (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Net Investment Income [Line Items] | ||
Net investment income (loss) | $ (17,260) | $ 5,587 |
Unrealized Holding gain (loss) on FNHC Common Stock [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | (16,196) | 3,987 |
Realized Loss on FNHC Common Stock [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | (2,110) | |
Dividend Income from FNHC Common Stock [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | 609 | |
Interest on Surplus Notes Issued by Maison [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | 1,708 | |
Income From Limited Liability Investments [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | 265 | 101 |
Loss on Assignment of Limited Liability Investments from Miason [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | (239) | |
Other [Member] | ||
Net Investment Income [Line Items] | ||
Net investment income (loss) | $ 172 | $ 30 |
Investments and Fair Value Di_7
Investments and Fair Value Disclosures - Schedule of Financial Instruments Measured at Fair Value (Details) - Recurring [Member] - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Equity securities, common stock | $ 12,555 | $ 29,847 |
FedNat Common Stock [Member] | ||
Equity securities, common stock | 8,542 | 29,487 |
Limited Liability Investments [Member] | ||
Equity securities, common stock | 4,013 | |
Level 1 [Member] | ||
Equity securities, common stock | 8,542 | 29,487 |
Level 1 [Member] | FedNat Common Stock [Member] | ||
Equity securities, common stock | 8,542 | 29,487 |
Level 1 [Member] | Limited Liability Investments [Member] | ||
Equity securities, common stock | ||
Level 2 [Member] | ||
Equity securities, common stock | ||
Level 2 [Member] | FedNat Common Stock [Member] | ||
Equity securities, common stock | ||
Level 2 [Member] | Limited Liability Investments [Member] | ||
Equity securities, common stock | ||
Level 3 [Member] | ||
Equity securities, common stock | 4,013 | |
Level 3 [Member] | FedNat Common Stock [Member] | ||
Equity securities, common stock | ||
Level 3 [Member] | Limited Liability Investments [Member] | ||
Equity securities, common stock | $ 4,013 |
Investments and Fair Value Di_8
Investments and Fair Value Disclosures- Schedule of Changes in Classified Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Balance, December 31, 2020 | $ 4,013,000 | |
Limited Liability Investments [Member] | ||
Purchases | 4,013 | |
Transfers into Level 3 | ||
Transfers out of Level 3 | ||
Balance, December 31, 2020 | $ 4,013 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income tax expense | $ (665) | $ 738 |
Nondeductible expense share repurchase transaction | $ 2,500 | |
Effective tax rate | 21.00% | 21.00% |
Non-deductible expenses associated with the Share Repurchase Transaction | $ 516 | |
Unrealized loss | (16,010) | $ 3,998 |
Deferred tax assets | 0 | 684 |
Gross deferred tax assets | 3,934 | 684 |
Operating loss carryforwards | $ 5,400 | |
Operating loss carryforwards, expiration date | Dec. 31, 2039 | |
Expire on December 31, 2039 [Member] | ||
Operating loss carryforwards | $ 600 | |
Not Expire Under Current Tax Law [Member] | ||
Operating loss carryforwards | 4,800 | |
Maison Business [Member] | ||
Net deferred tax liabilities | $ 106 | |
FedNat Common Stock [Member] | ||
Unrealized loss | 12,200 | |
Deferred tax assets | 2,500 | |
CARES Act [Member] | ||
Income tax expense | $ 214 |
Income Taxes - Summary of Incom
Income Taxes - Summary of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Current income tax (benefit) - from continuing operations | $ (559) | |
Current income tax (benefit) - from discontinued operations | (894) | |
Total current income tax (benefit) | (559) | (894) |
Deferred income tax expense (benefit) - from continuing operations | (106) | 371 |
Deferred income tax expense - from discontinued operations | 423 | |
Total deferred income tax expense (benefit) | (106) | 1,161 |
Total income tax expense (benefit) - from continuing operations | (665) | 738 |
Total income tax (benefit) - from discontinued operations | (471) | |
Total income tax expense (benefit) | $ (665) | $ 267 |
Income Taxes - Schedule of Reco
Income Taxes - Schedule of Reconciliation Effective Tax Rates (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Provision for taxes at U.S. statutory marginal income tax rate of 21% | $ (4,856) | $ 121 |
Valuation allowance for deferred tax assets deemed unrealizable | 3,934 | |
Rate differential due to CARES Act | (214) | |
Non-deductible expenses associated with the Share Repurchase Transaction | 516 | |
Net operating loss carryback | (213) | |
State income tax (net of federal benefit) | 265 | |
Other | (45) | 94 |
Income tax expense (benefit) | $ (665) | $ 738 |
Provision for taxes at U.S. statutory marginal income tax rate of 21%, percentage | 21.00% | 21.00% |
Valuation allowance for deferred tax assets deemed unrealizable, percentage | (17.00%) | 0.00% |
Rate differential due to CARES Act, percentage | 0.90% | 0.00% |
Non-deductible expenses associated with the Share Repurchase Transaction, percentage | 2.20% | 0.00% |
Net operating loss carryback, percentage | 0.00% | (36.90%) |
State income tax (net of federal benefit), percentage | 0.00% | 45.90% |
Other, percentage | 0.20% | 16.30% |
Income tax expense (benefit), percentage | 2.90% | 46.20% |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Income Taxes (Details) - USD ($) $ in Thousands | Dec. 31, 2020 | Dec. 31, 2019 |
Income Tax Disclosure [Abstract] | ||
Deferred income tax assets: Net operating loss carryforward | $ 1,143 | $ 463 |
Deferred income tax assets: Share-based compensation | 216 | 214 |
Deferred income tax assets: Investments | 2,570 | |
Deferred income tax assets: Other | 5 | 7 |
Deferred income tax assets | 3,934 | 684 |
Less: Valuation allowance | (3,934) | |
Deferred income tax assets net of valuation allowance | 0 | 684 |
Deferred income tax liabilities: Investments | 789 | |
Deferred income tax liabilities: Other | 1 | |
Deferred income tax liabilities | 790 | |
Net deferred income tax asset (liability) | $ (106) |
Equity Incentive Plans (Details
Equity Incentive Plans (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Mar. 12, 2021 | Dec. 14, 2020 | Aug. 12, 2020 | Dec. 02, 2019 | Aug. 13, 2019 | Jan. 11, 2019 | Aug. 22, 2018 | Dec. 15, 2017 | May 31, 2017 | May 29, 2015 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | May 31, 2018 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Common share options authorized under plan | 354,912 | |||||||||||||
Number of shares granted | ||||||||||||||
Stock based compensation | $ 312 | $ 413 | ||||||||||||
Expiration date | Sep. 30, 2025 | |||||||||||||
Through September 30, 2024 [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Unrecognized stock based compensation expense | $ 736 | |||||||||||||
Warrant [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Expiration date | Feb. 24, 2022 | |||||||||||||
Number of warrants, expired | 406,875 | |||||||||||||
Weighted average exercise price, expired | $ 9.69 | |||||||||||||
Warrants outstanding | 1,500,000 | |||||||||||||
Weighted average exercise price, outstanding | $ 15 | |||||||||||||
Chief Financial Officer [Member] | Common Stock [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of shares granted | 1,000 | |||||||||||||
Restricted Stock Units [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Vesting percentage | 20.00% | |||||||||||||
Number of restricted stock issued | 61,776 | 34,284 | 60,998 | 72,570 | ||||||||||
Number of restricted stock outstanding | 148,486 | 140,002 | 137,116 | |||||||||||
Stock vesting period | 5 years | 5 years | ||||||||||||
Fair value of restricted stock units | $ 40 | |||||||||||||
Restricted Stock Units [Member] | Swets Jr. [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 108,330 | |||||||||||||
Restricted Stock Units [Member] | Messrs. Raucy [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of stock vested fully | 34,400 | |||||||||||||
Restricted Stock Units [Member] | Chief Financial Officer [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 1,000 | |||||||||||||
Restricted Stock Units [Member] | Non Employee Director [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 60,998 | |||||||||||||
Fair value of restricted stock units | $ 40 | $ 40 | ||||||||||||
Restricted Stock Units [Member] | Rita Hayes and Dr. Marsha G. King [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 5,397 | |||||||||||||
Restricted Stock Units [Member] | Dr. Marsha G. King [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 19,210 | |||||||||||||
Restricted Stock Units [Member] | Lewis M Johnson [Member] | Subsequent Event [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 20,987 | |||||||||||||
2018 Equity Incentive Plan [Member] | Maximum [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Common share options available for issuance | 300,000 | |||||||||||||
2014 Equity Incentive Plan [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of shares granted | ||||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Closing Price $10 [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Vesting percentage | 50.00% | |||||||||||||
Share price | $ 10 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Closing Price $12 [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Vesting percentage | 50.00% | |||||||||||||
Share price | $ 12 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Executive Officers [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of shares granted | 20,500 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | Douglas N. Raucy, and Dean E. Stroud [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock issued | 16,500 | |||||||||||||
2014 Equity Incentive Plan [Member] | Restricted Stock Units [Member] | John S. Hill [Member] | ||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||||
Number of restricted stock outstanding | 4,000 |
Equity Incentive Plans - Schedu
Equity Incentive Plans - Schedule of Stock Option Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Shares, Granted | ||
2014 Equity Incentive Plan [Member] | ||
Shares, Outstanding, Beginning balance | 177,456 | |
Shares, Exercisable, Beginning balance | 177,456 | |
Shares, Granted | ||
Shares, Exercised | ||
Shares, Vested | ||
Shares, Cancelled | (177,456) | |
Shares, Outstanding, Ending balance | ||
Shares, Exercisable, Ending balance | ||
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 8.06 | |
Weighted Average Exercise Price, Exercisable, Beginning balance | 8.06 | |
Weighted Average Exercise Price, Outstanding, Ending balance | ||
Weighted Average Exercise Price, Exercisable, Ending balance | ||
Weighted Ave Remaining Contractual Term (Years), Outstanding, Beginning balance | 2 months 30 days | |
Weighted Ave Remaining Contractual Term (Years), Exercisable, Beginning balance | 2 months 30 days | |
Weighted Ave Remaining Contractual Term (Years), Outstanding, Ending balance | 0 years | |
Weighted Ave Remaining Contractual Term (Years), Exercisable, Ending balance | 0 years | |
Weighted Ave Grant Date Fair Value, Outstanding, Beginning balance | $ 1.07 | |
Weighted Ave Grant Date Fair Value, Exercisable, Beginning balance | 1.07 | |
Weighted Ave Grant Date Fair Value, Outstanding, Ending balance | ||
Weighted Ave Grant Date Fair Value, Exercisable, Ending balance | ||
Aggregate Intrinsic Value, Outstanding, Beginning balance | ||
Aggregate Intrinsic Value, Exercisable, Beginning balance | ||
Aggregate Intrinsic Value, Outstanding, Ending balance | ||
Aggregate Intrinsic Value, Exercisable, Ending balance |
Equity Incentive Plans - Sche_2
Equity Incentive Plans - Schedule of Restricted Stock Units Activity (Details) - Restricted Stock Units [Member] - $ / shares | Aug. 13, 2019 | Aug. 22, 2018 | Dec. 31, 2020 | Dec. 31, 2019 |
Number of Non-vested Units, Beginning balance | 140,002 | 137,116 | ||
Number of Non-vested Units, Granted | 61,776 | 34,284 | 60,998 | 72,570 |
Number of Non-vested Units, Vested | (52,514) | (53,184) | ||
Number of Non-vested Units, Forfeited | (16,500) | |||
Number of Non-vested Units, Ending balance | 148,486 | 140,002 | ||
Weighted Average Grant Date Fair Value, Beginning balance | $ 5.93 | $ 6.27 | ||
Weighted Average Grant Date Fair Value, Granted | 4.59 | 5.14 | ||
Weighted Average Grant Date Fair Value, Vested | 5.75 | 7.17 | ||
Weighted Average Grant Date Fair Value, Forfeited | 1.34 | |||
Weighted Average Grant Date Fair Value, Ending balance | $ 5.44 | $ 5.93 |
Shareholders' Equity (Details N
Shareholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | Mar. 26, 2018 | Feb. 28, 2018 | Dec. 31, 2020 | Dec. 31, 2019 |
Preferred stock, par value | $ 25 | $ 25 | ||
8.00% Cumulative Preferred Stock, Series A [Member] | ||||
Number of shares issued | 60,000 | |||
Preferred stock, dividend percentage | 8.00% | 8.00% | ||
Preferred stock, par value | $ 2 | $ 2 | ||
Payment of dividend | $ 1,400 | $ 1,400 | ||
Liquidation preference per share | $ 25 | $ 25 | ||
Preferred stock, redemption price per share | $ 25 | |||
Series A Preferred Stock [Member] | Fundamental Global Investors, LLC [Member] | ||||
Number of shares purchased in connection with underwriters' exercise of over-allotment option | 2,940 | |||
Number of shares purchased in connection with underwriters' exercise of over-allotment option, value | $ 74 | |||
Public Offering [Member] | 8.00% Cumulative Preferred Stock, Series A [Member] | ||||
Number of shares issued | 640,000 | |||
Preferred stock, dividend percentage | 8.00% | |||
Preferred stock, par value | $ 25 | |||
Dividend record date | Jun. 1, 2018 | |||
Public Offering [Member] | Series A Preferred Stock [Member] | Fundamental Global Investor [Member] | ||||
Number of preferred stock purchased during period | 34,620 | |||
Shares issued price per share | $ 25 | |||
Public Offering [Member] | Series A Preferred Stock [Member] | Fundamental Global Investor [Member] | Closing Date of Offering [Member] | ||||
Number of preferred stock purchased during period | 31,680 | |||
Number of shares issued, value | $ 792 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Mar. 15, 2021 | Jan. 11, 2021 | Sep. 15, 2020 | Sep. 02, 2020 | Mar. 31, 2020 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Jan. 04, 2021 | Sep. 28, 2020 | Sep. 14, 2020 | Apr. 21, 2016 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Investment ownership percentage | 53.00% | |||||||||||
Real estate investment | $ 4,700,000 | |||||||||||
Purchase of company | $ 1,143,000 | |||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | ||||||||||
Fair value of treasury stock | $ 5,200,000 | |||||||||||
General and Administrative Expense [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Share buyback expense | $ 200,000 | |||||||||||
Common Stock [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Repurchase of common stock | (1,130,152) | |||||||||||
FG New America Acquisition Corp [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Real estate investment | $ 987,000 | |||||||||||
Purchase of company | $ 4,000,000 | 4,000,000 | ||||||||||
Risk capital | 8,600,000 | |||||||||||
Estimated fair value of common stock | $ 4,000,000 | |||||||||||
Shares issued during period | 1,400,000 | |||||||||||
Warrants to purchase common shares | 400,000 | |||||||||||
Share price | $ 11.50 | |||||||||||
FG New America Acquisition Corp [Member] | Cerminara [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Real estate investment | 1,000,000 | |||||||||||
Joint Venture Agreement [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Investment ownership percentage | 50.00% | 50.00% | ||||||||||
Investment description | All other proceeds received by FGAM attributable to a Sponsored Fund, including proceeds from revenue shares or ownership interests in Underlying Managers, will be distributed as follows: (i) first, to the Members until they have received cumulative distributions up to an amount of the Operating Capital funded by them; (ii) second, to the Members until they have received cumulative distributions up to an amount of Working Capital previously funded by them, plus a return of 5% per annum; and (iii) third, to the Members in proportion to their percentage interests. | |||||||||||
Shared Services Agreement [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Shared services fee | $ 456,250 | |||||||||||
Share Repurchase and Cooperation Agreement [Member] | Hale Parties [Member] | Common Stock [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Investment ownership percentage | 18.00% | |||||||||||
Share Repurchase and Cooperation Agreement [Member] | Minimum [Member] | Third Party [Member] | Common Stock [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Investment ownership percentage | 4.90% | |||||||||||
Metrolina Property Income Fund, LP [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Real estate investment | 4,000,000 | |||||||||||
Waived fees | $ 80,000 | $ 37,000 | ||||||||||
Investment ownership percentage | 53.00% | |||||||||||
Fundamental Global Investor [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Real estate investment | $ 3,000,000 | $ 2,000,000 | ||||||||||
Fundamental Global Advisors LLC [Member] | Investment Advisory Agreement [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Advisor annual fee | $ 100,000 | |||||||||||
Fundamental Global Management, LLC [Member] | Shared Services Agreement [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Payment of termination fees | 1,400,000 | |||||||||||
FedNat Holding Company [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Estimated fair value of common stock | $ 6,900,000 | |||||||||||
Shares issued during period | 1,442,871 | |||||||||||
FedNat Holding Company [Member] | Share Repurchase and Cooperation Agreement [Member] | Hale Parties [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Estimated fair value of common stock | $ 2,700,000 | |||||||||||
Repurchase of common stock | 1,130,152 | |||||||||||
Value of repurchase of common stock | $ 2,800,000 | |||||||||||
Repurchase of common stock in exchange of shares | 330,231 | |||||||||||
Common stock, par value | $ 0.01 | |||||||||||
Notice period to cure breach | 15 days | |||||||||||
FG SPAC Partners LP [Member] | Chief Financial Officer and Director [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Partnership percentage of units acquired | 0.10 | |||||||||||
Adel Financial Inc [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Purchase of company | $ 1,000,000 | |||||||||||
Adel Financial Inc [Member] | Founder Shares [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Number of shares purchased | 1,075,000 | |||||||||||
Payment for purchase of shares | $ 4,674 | |||||||||||
Adel Financial Inc [Member] | OTMWarrants [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Warrants purchased | 650,000 | |||||||||||
Purchase price of warrants | $ 0.10 | |||||||||||
Payments for purchase of warrants | $ 65,000 | |||||||||||
Adel Financial Inc [Member] | Larry G. Swets Jr [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Number of shares purchased | 25,000 | |||||||||||
Adel Financial Inc [Member] | D.Kyle Cerminara [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Number of shares purchased | 25,000 | |||||||||||
Argo Management Group LLC [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Investment | 300,000 | $ 500,000 | ||||||||||
Third Party [Member] | Maximum [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Due to related party | $ 5,000,000 | |||||||||||
General Partner [Member] | FG SPAC Partners LP [Member] | Subsequent Event [Member] | ||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||||||
Partnership percentage of units acquired | 0.49 |
Net Earnings Per Share - Schedu
Net Earnings Per Share - Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Earnings Per Share [Abstract] | ||
Net income (loss) (in thousands) | $ (22,457) | $ 311 |
Less: dividends declared on Series A Preferred Shares | (1,400) | (1,400) |
Loss attributable to common shareholders | $ (23,857) | $ (1,089) |
Weighted average common shares outstanding | 5,746,259 | 6,018,542 |
Loss attributable to common shareholders | $ (4.15) | $ (0.18) |
Net income (loss) from continuing operations (in thousands) | $ (22,457) | $ 2,383 |
Less: dividends declared on Series A Preferred Shares | (1,400) | (1,400) |
Income (Loss) from continuing operations attributable to common shareholders | $ (23,857) | $ 983 |
Weighted average common shares outstanding | 5,746,259 | 6,018,542 |
Earnings (Loss) per common share from continuing operations | $ (4.15) | $ 0.16 |
Net loss from discontinued operations, net of income taxes (in thousands) | $ (2,072) | |
Weighted average common shares outstanding | 6,018,542 | |
Loss per common share from discontinued operations | $ (0.34) |
Net Earnings Per Share - Sche_2
Net Earnings Per Share - Schedule of Potentially Dilutive Securities Excluded from Calculation (Details) - shares | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 1,652,731 | 1,640,002 |
Warrants To Purchase Common Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 1,500,000 | 1,500,000 |
Restricted Stock Units [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 152,731 | 140,002 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Loss - Schedule of Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | ||
Balance, beginning of period | $ (729) | |
Other comprehensive income (loss) before reclassifications | 1,093 | |
Amounts reclassified from accumulated other comprehensive income (loss) | 695 | |
Income tax (benefit) expense | (446) | |
Net current-period other comprehensive income (loss) | 1,342 | |
Reclassification of certain tax effects from accumulated other comprehensive loss | (104) | |
Unrealized gains realized upon sale of Maison Business, net of taxes | (509) | |
Balance, end of period |
Retirement Plans (Details Narra
Retirement Plans (Details Narrative) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Retirement Benefits [Abstract] | ||
Percentage of contribution matched by employer | 100.00% | |
Limited contributions by employees, employer match | 4.00% | |
Matching contributions | $ 18 | $ 97 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands | Dec. 02, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Rent expenses | $ 32 | $ 443 | |
Lease Agreement [Member] | Six Months Term [Member] | |||
Rent expenses | $ 9 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - FedNat Holding Company [Member] | Mar. 05, 2021shares |
Common stock dividend percentage | 35.00% |
Maximum [Member] | |
Number of common stock owned | 1,442,871 |