Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 09, 2022 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2022 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 001-36366 | |
Entity Registrant Name | FG Financial Group, Inc. | |
Entity Central Index Key | 0001591890 | |
Entity Tax Identification Number | 46-1119100 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 360 Central Avenue | |
Entity Address, Address Line Two | Suite 800 | |
Entity Address, City or Town | St. Petersburg | |
Entity Address, State or Province | FL | |
Entity Address, Postal Zip Code | 33701 | |
City Area Code | (847) | |
Local Phone Number | 773-1665 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 9,394,040 | |
Entity Information, Former Legal or Registered Name | Not Applicable | |
Common Stock, $0.001 par value per share | ||
Title of 12(b) Security | Common Stock, $0.001 par value per share | |
Trading Symbol | FGF | |
Security Exchange Name | NASDAQ | |
8.00% Cumulative Preferred Stock, Series A, $25.00 par value per share | ||
Title of 12(b) Security | 8.00% Cumulative Preferred Stock, Series A, $25.00 par value per share | |
Trading Symbol | FGFPP | |
Security Exchange Name | NASDAQ |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
ASSETS | ||
Equity securities, at fair value (cost basis of $1,983 and $14,495, respectively) | $ 16 | $ 1,421 |
Other investments | 22,008 | 14,040 |
Cash and cash equivalents | 9,647 | 15,542 |
Deferred policy acquisition costs | 1,920 | 786 |
Reinsurance balances receivable | 7,710 | 3,853 |
Funds deposited for benefit of reinsured companies | 6,679 | 4,442 |
Other assets | 943 | 745 |
Total assets | 48,923 | 40,829 |
LIABILITIES | ||
Loss and loss adjustment expense reserves | 4,133 | 2,133 |
Unearned premium reserves | 6,565 | 3,610 |
Accounts payable | 361 | 502 |
Other liabilities | 172 | 575 |
Total liabilities | 11,231 | 6,820 |
Commitments and contingencies (Note 10) | ||
SHAREHOLDERS’ EQUITY | ||
Series A Preferred Shares, $25.00 par and liquidation value, 1,000,000 shares authorized; 894,580 shares issued and outstanding as of September 30, 2022 and December 31, 2021 | 22,365 | 22,365 |
Common stock, $0.001 par value; 100,000,000 shares authorized; 9,394,040 and 6,497,205 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively | 9 | 6 |
Additional paid-in capital | 50,104 | 46,037 |
Accumulated deficit | (34,786) | (34,399) |
Total shareholders’ equity | 37,692 | 34,009 |
Total liabilities and shareholders’ equity | $ 48,923 | $ 40,829 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Statement of Financial Position [Abstract] | ||
Equity securities, cost basis | $ 1,983 | $ 14,495 |
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 | 894,580 | 894,580 |
Series A Preferred stock, shares outstanding | 894,580 | 894,580 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 9,394,040 | 6,497,205 |
Common stock, shares outstanding | 9,394,040 | 6,497,205 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue: | ||||
Net premiums earned | $ 4,383 | $ 1,099 | $ 9,809 | $ 2,221 |
Net investment income (loss) | 11,174 | (1,299) | 5,114 | 2,792 |
Other income | 214 | 67 | 266 | 146 |
Total revenue | 15,771 | (133) | 15,189 | 5,159 |
Expenses: | ||||
Net losses and loss adjustment expenses | 2,406 | 1,058 | 5,798 | 1,893 |
Amortization of deferred policy acquisition costs | 1,109 | 202 | 2,427 | 633 |
General and administrative expenses | 2,001 | 3,000 | 6,009 | 6,698 |
Total expenses | 5,516 | 4,260 | 14,234 | 9,224 |
Income (loss) from continuing operations before income taxes | 10,255 | (4,393) | 955 | (4,065) |
Income tax expense (benefit) | ||||
Net income (loss) from continuing operations | 10,255 | (4,393) | 955 | (4,065) |
Discontinued operations: | ||||
Gain from sale of the Maison Business, net of taxes | 145 | |||
Net income (loss) | 10,255 | (4,393) | 955 | (3,920) |
Gain attributable to noncontrolling interests | 569 | 1,235 | ||
Dividends declared on Series A Preferred Shares | 447 | 448 | 1,342 | 1,245 |
Income (loss) attributable to FG Financial Group, Inc. common shareholders | $ 9,808 | $ (5,410) | $ (387) | $ (6,400) |
Basic and diluted net income (loss) per common share: | ||||
Continuing operations | $ 1.05 | $ (1.08) | $ (0.05) | $ (1.31) |
Discontinued operations | 0.03 | |||
Basic and Diluted earning per share | $ 1.05 | $ (1.08) | $ (0.05) | $ (1.28) |
Weighted average common shares outstanding: | ||||
Basic and diluted | 9,333,709 | 5,032,615 | 7,564,017 | 5,012,139 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands | Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Total | Noncontrolling Interest [Member] |
Beginning balance, value at Dec. 31, 2020 | $ 17,500 | $ 6 | $ (6,185) | $ 47,065 | $ (24,193) | $ 34,193 | |
Beginning balance, shares at Dec. 31, 2020 | 700,000 | 4,988,310 | 1,281,511 | ||||
Stock based compensation | 177 | 177 | |||||
Stock based compensation, shares | 22,067 | ||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (350) | (350) | |||||
Interests issued for contributed cash | 657 | ||||||
Net income | 34 | 34 | (1) | ||||
Ending balance, value at Mar. 31, 2021 | $ 17,500 | $ 6 | $ (6,185) | 47,242 | (24,509) | 34,054 | 656 |
Ending balance, shares at Mar. 31, 2021 | 700,000 | 5,010,377 | 1,281,511 | ||||
Stock based compensation | 70 | 70 | |||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (447) | (447) | |||||
Net income | (227) | (227) | 667 | ||||
Series A Preferred Share issuance | $ 4,865 | (648) | 4,217 | ||||
Series A Preferred Share issuance, shares | 194,580 | ||||||
Ending balance, value at Jun. 30, 2021 | $ 22,365 | $ 6 | $ (6,185) | 46,664 | (25,183) | 37,667 | 1,323 |
Ending balance, shares at Jun. 30, 2021 | 894,580 | 5,010,377 | 1,281,511 | ||||
Stock based compensation | 129 | 129 | |||||
Stock based compensation, shares | 41,094 | ||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (448) | (448) | |||||
Interests issued for contributed cash | 3,490 | ||||||
Net income | (4,962) | (4,962) | 569 | ||||
Retirement of Treasury Stock | (1) | $ 6,185 | (6,184) | ||||
Retirement of Treasury Stock, Shares | (1,281,511,000) | ||||||
Ending balance, value at Sep. 30, 2021 | $ 22,365 | $ 5 | 40,609 | (30,593) | 32,386 | 5,382 | |
Ending balance, shares at Sep. 30, 2021 | 894,580 | 5,051,471 | |||||
Beginning balance, value at Dec. 31, 2021 | $ 22,365 | $ 6 | 46,037 | (34,399) | 34,009 | ||
Beginning balance, shares at Dec. 31, 2021 | 894,580 | 6,497,205 | |||||
Stock based compensation | $ 1 | 62 | 63 | ||||
Stock based compensation, shares | 30,796 | ||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (447) | (447) | |||||
Net income | (3,823) | (3,823) | |||||
Ending balance, value at Mar. 31, 2022 | $ 22,365 | $ 7 | 46,099 | (38,669) | 29,802 | ||
Ending balance, shares at Mar. 31, 2022 | 894,580 | 6,528,001 | |||||
Stock based compensation | 53 | 52 | |||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (447) | (447) | |||||
Net income | (5,478) | (5,478) | |||||
Common stock issuance | $ 2 | 3,781 | 3,784 | ||||
Common stock issuance, shares | 2,750,000 | ||||||
Ending balance, value at Jun. 30, 2022 | $ 22,365 | $ 9 | 49,933 | (44,594) | 27,713 | ||
Ending balance, shares at Jun. 30, 2022 | 894,580 | 9,278,001 | |||||
Stock based compensation | 65 | 65 | |||||
Stock based compensation, shares | 44,269 | ||||||
Dividends declared on Series A Preferred Shares ($0.50 per share) | (447) | (447) | |||||
Net income | 10,255 | 10,255 | |||||
Common stock issuance | 106 | 106 | |||||
Common stock issuance, shares | 71,770 | ||||||
Ending balance, value at Sep. 30, 2022 | $ 22,365 | $ 9 | $ 50,104 | $ (34,786) | $ 37,692 | ||
Ending balance, shares at Sep. 30, 2022 | 894,580 | 9,394,040 |
Consolidated Statements of Sh_2
Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) - $ / shares | 3 Months Ended | |||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | |
Statement of Stockholders' Equity [Abstract] | ||||||
Preferred Stock dividends per share cash paid | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 955 | $ (3,920) |
Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||
Net unrealized holding (gain) on equity investments | (10,521) | (2,670) |
(Income) loss from equity method investments, net of distributions received | (2,880) | |
Net realized loss on sale of equity investments | 11,263 | 4 |
Stock compensation expense | 180 | 376 |
Purchase of investments by consolidated investment company subsidiary | (6,479) | |
Changes in operating assets and liabilities: | ||
Current income taxes recoverable | 1,724 | |
Reinsurance balances receivable | (3,857) | (3,364) |
Amounts held on deposit with reinsured companies | (2,237) | (274) |
Deferred policy acquisition costs | (1,134) | (1,017) |
Other assets and receivables | (121) | (344) |
Loss and loss adjustment expense reserves | 2,000 | 1,344 |
Unearned premium reserves | 2,955 | 3,599 |
Accounts payable and other liabilities | (544) | 627 |
Net cash used by operating activities | (3,941) | (10,394) |
Cash flows from investing activities: | ||
Purchases of furniture and equipment | (77) | (10) |
Purchases of equity method investments | (6,795) | (73) |
Distribution from equity method investments | 1,521 | |
Proceeds from sales of equity securities | 664 | |
Return of capital – other investments | 185 | 155 |
Net cash (used) provided by investing activities | (4,502) | 72 |
Cash flows from financing activities: | ||
Payment of dividends on preferred shares | (1,341) | (1,245) |
Proceeds from issuance of preferred stock, net | 4,217 | |
Proceeds from issuance of common stock, net | 3,889 | |
Cash contributions from non-controlling interests | 4,147 | |
Net cash provided by financing activities | 2,548 | 7,119 |
Net decrease in cash and cash equivalents | (5,895) | (3,203) |
Cash and cash equivalents at beginning of period | 15,542 | 12,132 |
Cash and cash equivalents at end of period | $ 9,647 | $ 8,929 |
Nature of Business
Nature of Business | 9 Months Ended |
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business | Note 1. Nature of Business FG Financial Group, Inc. (“FGF”, the “Company”, “we”, or “us”) is a reinsurance and asset management holding company. We focus on opportunistic collateralized and loss capped reinsurance, while allocating capital in partnership with Fundamental Global ® As of September 30, 2022, Fundamental Global GP, LLC, a private partnership focused on long-term strategic holdings (“FG”), and its affiliated entity, collectively beneficially owned approximately 60.0 Sale of the Insurance Business On December 2, 2019, we completed the sale (“Asset Sale”) of our insurance subsidiaries to FedNat Holding Company for a combination of cash and FedNat common stock. As of September 30, 2022, the Company held 137,871 30,000 Current Business Our strategy has evolved to focus on opportunistic collateralized and loss capped reinsurance, with capital allocation to merchant banking activities. 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 Currently, the business operates as a diversified holding company of insurance, reinsurance, asset management and our “Special purpose acquisition corporation (“SPAC”) Platform” businesses. Insurance We are in the process of establishing a Risk Retention Group (“RRG”) for the purpose of providing directors and officers insurance coverage to SPAC vehicles. We intend to provide capital, along with other participants, 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. Reinsurance The Company’s wholly owned reinsurance subsidiary, FG Reinsurance Ltd. (“FGRe”), a Cayman Islands limited liability company, provides specialty property and casualty reinsurance. FGRe has been granted a Class B (iii) insurer license in accordance with the terms of The Insurance Act (as revised) of the Cayman Islands and underlying regulations thereto and is subject to regulation by the Cayman Islands Monetary Authority (the “Authority”). The terms of the license 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. FGRe participates in a Funds at Lloyds (“FAL”) syndicate covering risks written by the syndicate during the 2021 and 2022 calendar years. On April 1, 2021, FGRe entered its second reinsurance contract with a leading insurtech company that provides automotive insurance utilizing driver monitoring to predictively segment and price drivers. In addition to renewing this contract for a second year, the Company added a second agreement with the automotive insurance provider as of April 1, 2022. Beginning January 1, 2022, FGRe participates in a quota share reinsurance contact with a startup homeowners’ insurance company. On April 1, 2022, FGRe entered a homeowners’ property catastrophe excess of loss reinsurance contract with a specialty insurance company covering loss occurrences from named tropical storms arising out of the Atlantic. On July 1, 2022, FGRe entered a contract with a specialty insurance company that provides hired and non-owned automotive insurance. These agreements limit exposure by loss-caps stipulated within the reinsurance contracts. Asset Management Pursuant to the Investment Advisory Agreement, FG Strategic Consulting, LLC (“FGSC”) 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 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements SPAC Platform On December 21, 2020, we formed FG Management Solutions LLC (“FGMS”), formerly known as FG SPAC Solutions LLC, a Delaware company, to facilitate the launch of our “SPAC Platform”. Under the SPAC Platform, we provide various strategic, administrative, and regulatory support services to newly formed SPACs for a monthly fee. Additionally, the Company co-founded a partnership, FG Merchant Partners, LP (“FGMP”), formerly known as FG SPAC Partners, LP, 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. (“Fund”). As discussed in Note 4, the Company had consolidated the results of the Fund through November 30, 2021; however, effective December 1, 2021, the Company began accounting for its investment in the Fund under the equity method. The first transaction entered under the SPAC Platform occurred on January 11, 2021, by and among FGMS and Aldel Investors, LLC, the sponsor of Aldel Financial, Inc. (“Aldel”), a special purpose acquisition company which completed its business combination with Hagerty (NYSE: HGTY) on December 2, 2021. Under the services agreement between FGMS and Aldel Investors, LLC (the “Agreement”), FGMS provided accounting, regulatory, strategic advisory, and other administrative services to Aldel, which included assistance with negotiations with potential merger targets for the SPAC as well as assistance with the de-SPAC process. In March and April 2022, the Company continued to build upon its SPAC Platform strategy. On March 3, 2022, FG Merger Corp. (“FG Merger”) (Nasdaq: FGMCU) announced the closing of an $ 80.5 115 In the aggregate, the Company’s indirect exposure to FG Merger through its subsidiaries represents potential beneficial ownership of approximately 820,000 989,000 11.50 5 85,000 15.00 10 2.6 819,000 1,400,000 11.50 5 440,000 15 10 1,600,000 2 Merchant Banking In Q3 2022, the Company announced the expansion of its growth strategy through the formation of a merchant banking division. Company plans to expand the addressable market beyond SPACs to encompass a larger universe of opportunities including reverse mergers and sponsoring startups. Company believes this offers enhanced flexibility to capitalize on asymmetric risk/reward opportunities. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 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 accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation. 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. In September 2020, the Company invested approximately $ 5.0 Financial Services-Investment Companies See Note 4 for additional information regarding the Company’s consolidated investments. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements Discontinued Operations Due to the sale of all of the issued and outstanding equity of our previous insurance business on December 2, 2019, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. For the nine months ended September 30, 2021, we recognized a gain from the sale of this business for approximately $ 145,000 Schedule of Discontinued Operations 2022 2021 2022 2021 (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Pre-tax gain (loss) on sale $ – $ – $ – $ – Income tax benefit – – – 145 Net gain from sale of Maison Business $ – $ – $ – $ 145 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 deferred policy acquisition costs, premium revenue recognition, reserves for loss and loss adjustment expenses, and stock-based compensation expense. Investments in Equity Securities Investments in equity securities are carried at fair value with subsequent changes in fair value recorded to the Consolidated Statements of Operations as a component of net investment income. Other Investments Other investments consist, in part, of equity investments made in privately held companies accounted for under the equity method. We utilize the equity method to account for investments when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the investor possesses more than 20 In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee. We record dividends or other equity distributions as reductions in the carrying value of the investment. Should net losses of the investee reduce the carrying amount of the investment to zero, additional net losses may be recorded if other investments in the investee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value. When we receive distributions from our equity method investments, we utilize the cumulative earnings approach. When classifying the related cash flows under this approach, the Company compares the cumulative distributions received, less distributions received in prior periods, with the Company’s cumulative equity in earnings. Cumulative distributions that do not exceed cumulative equity in earnings represent returns on investment and are classified as cash inflows from operating activities. Cumulative distributions in excess of cumulative equity in earnings represent returns on investment and are classified as cash inflows from investing activities. Other investments also consist of equity we have purchased 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 are included in net investment income. Cash and Cash Equivalents Cash and cash equivalents include cash and highly liquid investments with original maturities of 90 days or less. Pursuant to the Company’s insurance license, the Authority has required that FGRe hold a minimum capital requirement of $ 200,000 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements 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 Premium Revenue Recognition The Company participates in quota-share contracts and estimates the ultimate premiums for the contract period. These estimates are based on information received from the ceding companies, whereby premiums are recorded as written in the same periods in which the underlying insurance contracts are written and are based on cession statements from cedents. These statements are received quarterly and in arrears, and thus, for any reporting lag, premiums written are estimated based on the portion of the ultimate estimated premiums relating to the risks underwritten during the lag period. Premium estimates are reviewed by management periodically. Such review includes a comparison of actual reported premiums to expected ultimate premiums. Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustments to these estimates are recorded in the period in which they are determined. Changes in premium estimates, including premiums receivable, are not unusual and may result in significant adjustments in any period. A significant portion of amounts included in “Reinsurance balances receivable” on the Company’s consolidated balance sheets represents estimated premiums written, net of commissions, brokerage, and loss and loss adjustment expense, and are not currently due based on the terms of the underlying contracts. Additional premiums due on a contract that has no remaining coverage period are earned in full when written. Premiums written are generally recognized as earned over the contract period in proportion to the risk covered. Unearned premiums represent the unexpired portion of reinsurance provided. Policy Acquisition Costs Policy acquisition costs are costs that vary with, and are directly related to, the successful production of new and renewal business, and consist principally of commissions, taxes and brokerage expenses. If the sum of a contract’s expected losses and loss expenses and deferred acquisition costs exceeds associated unearned premiums and expected investment income, a premium deficiency is determined to exist. In this event, deferred acquisition costs are written off to the extent necessary to eliminate the premium deficiency. If the premium deficiency exceeds deferred acquisition costs then a liability is accrued for the excess deficiency. There were no premium deficiency adjustments recognized during the periods presented herein. Funds Deposited for benefit of Reinsured Companies “Funds Deposited for benefit of Reinsured Companies” on the Company’s consolidated balance sheets includes amounts held by cedents provided to support our reinsurance contracts. On November 12, 2020, FGRe, our Cayman Islands based reinsurance subsidiary, initially funded a trust account at Lloyd’s with approximately $ 2.4 1.0 0.4 1.0 0.2 1.1 1.5 As of September 30, 2022, and December 31, 2021, the total cash collateral posted to support all of our reinsurance treaties was approximately $ 6.7 4.4 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements Loss and Loss Adjustment Expense Reserves The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense for reported and unreported claims from our reinsurance business. Loss and loss adjustment reserve estimates are based primarily on estimates derived from reports the Company has received from ceding companies. The Company then uses a variety of statistical and actuarial techniques to monitor reserve adequacy. When setting reserves, the Company considers many factors including: (1) the types of exposures and projected ultimate premium to be written by our cedants; (2) expected loss ratios by type of business; (3) actuarial methodologies which analyze loss reporting and payment experience, reports from ceding companies and historical trends; and (4) general economic conditions. The Company also engages independent actuarial specialists, at least annually, to assist management in establishing appropriate reserves. Since reserves are estimates, the final settlement of losses may vary from the reserves established, and any adjustments to the estimates, which may be material, are recorded in the period they are determined. The final settlement of losses may vary, perhaps materially, from the reserves recorded. U.S. GAAP does not permit establishing loss reserves, which include case reserves and IBNR loss reserves, until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date are established, with no allowance for the establishment of loss reserves to account for expected future loss events. Generally, the Company obtains regular updates of premium and loss related information for the current and historical periods, which are utilized to update the initial expected loss ratio. We also experience a lag between (i) claims being reported by the underlying insured to the Company’s cedent and (ii) claims being reported by the Company’s cedent to the Company. This lag may impact the Company’s loss reserve estimates. Client reports have pre-determined due dates (for example, thirty days after each month end). As a result, the lag depends in part upon the terms of the specific contract. The timing of the reporting requirements is designed so that the Company receives premium and loss information as soon as practicable once the client has closed its books. Accordingly, there should be a short lag in such reporting. Additionally, most of the contracts that have the potential for large single event losses have provisions that such loss notifications are provided to the Company immediately upon the occurrence of an event. 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. 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 September 30, 2022. Fair Value of Financial Instruments The carrying values of certain financial instruments, including cash, short-term investments, deposits held, accounts payable, and other liabilities 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 4 for further information on the fair value of the Company’s financial instruments. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements 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 | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
Recently Adopted and Issued Accounting Standards | Note 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 |
Investments and Fair Value Disc
Investments and Fair Value Disclosures | 9 Months Ended |
Sep. 30, 2022 | |
Investments, All Other Investments [Abstract] | |
Investments and Fair Value Disclosures | Note 4. Investments and Fair Value Disclosures The following table summarizes the Company’s investments held at fair value as of September 30, 2022 and December 31, 2021: Schedule of Investments (in thousands) As of September 30, 2022 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount FedNat common stock $ 1,983 $ – $ 1,967 $ 16 Total investments $ 1,983 $ – $ 1,967 $ 16 As of December 31, 2021 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount FedNat common stock $ 14,495 $ – $ 13,074 $ 1,421 Total investments $ 14,495 $ – $ 13,074 $ 1,421 FedNat Common Stock As of September 30, 2022, the Company held 137,871 1,773,102 1,635,231 217,500 30,000 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements Deconsolidation of Subsidiary The Company’s original investment in FG Special Situations Fund, LP (the “Fund”), a Delaware limited partnership, consisted of an investment as both a limited and general partner. At the time of the Company’s initial investment into the Fund, in September 2020, the Company had determined that its investment represented an investment in a variable interest entity (“VIE”) in which the Company was the primary beneficiary and as such, had consolidated the financial results of the Fund through November 30, 2021. At each reporting date, the Company evaluates whether it remains the primary beneficiary and continuously reconsiders that conclusion. On December 1, 2021, the Company no longer had the power to govern the financial and operating policies of the Fund, and accordingly derecognized the related assets, liabilities, and noncontrolling interests of the Fund as of that date. The Company did not receive any consideration in the deconsolidation of the Fund, nor did it record any gain or loss upon deconsolidation as the Company carried its investment at fair value. The assets and liabilities of the Fund, over which the Company lost control, were as follows: Schedule of Subsidiaries Assets As of December 1, 2021 (in thousands) Cash and cash equivalents $ 100 Investments in private placements 15,734 Investments in public SPACs 22 Other assets 18 Other liabilities (34 ) Net assets deconsolidated $ 15,840 While the Company’s investments in the Fund are no longer consolidated, the Company has retained its interest in all of the investments held at the Fund. Accordingly, the Company has not presented its investment in the Fund as a discontinued operation. Effective December 1, 2021, the Company began accounting for its investment in the Fund via the equity method of accounting. Equity Method Investments Other investments on the Company’s Consolidated Balance Sheets consists of equity method investments, which as of September 30, 2022 includes our investment in FGMP and the Fund. On January 4, 2021, FGMP 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 FGMP and holds a limited partner interest in FGMP directly and through its subsidiaries. FGMP participates as a co-sponsor of the SPACs launched under our SPAC Platform. For the nine months ended September 30, 2022, the Company has contributed $ 0.1 2.4 million. The carrying value of our investment in FGMP as of September 30, 2022 was approximately $ 4.9 million, all of which is in the form of undistributed earnings. Of the $ 4.9 million carrying value of our investment in FGMP, the Company may allocate up to approximately $ 1.0 million to incentivize and compensate individuals and entities for the successful merger of SPAC’s launched under our platform. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements Certain investments held by our equity method investees are valued using Monte-Carlo simulation and option pricing models. Inherent in Monte-Carlo simulation and option pricing models are assumptions related to expected volatility and discount for lack of marketability of the underlying investment. Our investees estimate the volatility of these investments based on the historical performance of various broad market indices blended with various peer companies which they consider as having similar characteristics to the underlying investment, as well as consideration of price and volatility of relevant publicly traded securities such as SPAC warrants . Equity method investments also include our investment in the Fund as of September 30, 2022. Until December 1, 2021, we had consolidated the Fund as a variable interest entity, however, effective December 1, 2021, we began accounting for this investment under the equity method of accounting. For the nine months ended September 30, 2022, the Company has contributed $ 6.7 has received distributions in the approximate amount of $ 3.3 million . The Company has recorded equity method gains 3.6 million for the nine months ended September 30, 2022. As of September 30, 2022, the carrying value of our investment in the Fund was approximately $ 16.8 million. Financial information for our investments accounted for under the equity method, in the aggregate, is as follows: Schedule of Investments under Equity Method As of As of (in thousands) Other investments $ 33,762 $ 25,936 Cash 130 72 Other assets 39 16 Total assets 33,931 26,024 Accounts payable $ 42 $ 19 Other liabilities – – Total liabilities 42 19 Nine months ended September 30, 2022 Nine months ended September 30, 2021 (in thousands) Net investment income (loss) $ 8,170 $ 7,498 General and administrative expenses (95 ) (143 ) Net income (loss) 8,075 7,355 Investments without Readily Determinable Fair Value In addition to our equity method investments, other investments as listed on our balance sheet also consist of equity we have purchased in a limited partnership and a limited liability company for which there does not exist readily determinable fair values. 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 are included in net investment income. The Company’s total investment in these two entities was approximately $ 298,000 62 776,000 Impairment For equity securities without readily determinable fair values, 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. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements For equity method investments, such as the Company’s investments in FGMP and the Fund, 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 investment for which observable market prices are not available are inherently imprecise. We have not recorded an impairment on our investments for either of the nine months ended September 30, 2022 or 2021. Net investment income (loss) for the three and nine months ended September 30, 2022 and 2021 is as follows: Schedule of Net Investment Income (Loss) 2022 2021 2022 2021 ($ in thousands) Three Months Ended Nine Months Ended 2022 2021 2022 2021 Investment income (loss): Realized loss on FedNat common stock $ (2,472 ) $ - $ (11,441 ) $ - Unrealized gain (loss) on FedNat common stock 2,448 (2,424 ) 10,521 (4,978 ) Unrealized holding gain on private placement investments – 4 – 5,120 Equity method earnings 11,226 1,070 6,080 2,527 Other (28 ) 51 (46 ) 123 Net investment income (loss) $ 11,174 $ (1,299 ) $ 5,114 $ 2,792 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. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements We have valued our investment in FedNat at its 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. Financial instruments measured, on a recurring basis, at fair value as of September 30, 2022 and December 31, 2021 in accordance with the guidance promulgated by the FASB are as follows. Schedule of Financial Instruments Measured at Fair Value (in thousands) As of September 30, 2022 Level 1 Level 2 Level 3 Total FedNat common stock $ 16 $ – $ – $ 16 $ 16 $ – $ – $ 16 As of December 31, 2021 FedNat common stock $ 1,421 $ – $ – $ 1,421 $ 1,421 $ – $ – $ 1,421 |
Loss and Loss Adjustment Expens
Loss and Loss Adjustment Expense Reserves | 9 Months Ended |
Sep. 30, 2022 | |
Loss And Loss Adjustment Expense Reserves | |
Loss and Loss Adjustment Expense Reserves | Note 5. Loss and Loss Adjustment Expense Reserves A significant degree of judgment is required to determine amounts recorded in the Company’s consolidated financial statements for the provision for loss and loss adjustment expense (“LAE”) reserves. The process for establishing this provision reflects the uncertainties and significant judgmental factors inherent in predicting future results of both known and unknown loss events. The process of establishing the provision for loss and LAE reserves relies on the judgment and opinions of many individuals, including the opinions of the Company’s management, as well as the management of ceding companies and their actuaries. The COVID-19 pandemic is unprecedented, and the Company does not have previous loss experience on which to base the associated estimate for loss and loss adjustment expenses. In estimating losses, the Company may assess any of the following: ● a review of in-force treaties that may provide coverage and incur losses; ● general forecasts, catastrophe and scenario modelling analyses and results shared by cedents; ● reviews of industry insured loss estimates and market share analyses; and ● management’s judgment. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements Assumptions which served as the basis for the Company’s estimates of reserves for the COVID-19 pandemic losses and loss adjustment expenses include: ● the scope of coverage provided by the underlying policies, particularly those that provide for business interruption coverage; ● the regulatory, legislative, and judicial actions that could influence contract interpretations across the insurance industry; ● the extent of economic contraction caused by the COVID-19 pandemic and associated actions; and ● the ability of the cedents and insured to mitigate some or all of their losses. Under the terms of certain of our quota-share agreements, and due to the nature of claims and premium reporting, a lag exists between (i) claims being reported by the underlying insured to the Company’s cedent and (ii) claims being reported by the Company’s cedent to the Company. This lag may impact the Company’s loss reserve estimates. The reports we receive from our cedents have pre-determined due dates. In the case of the Company’s FAL contracts, third quarter 2022 premium and loss information will not be made available to the Company until subsequent to the filing of this quarterly report. Thus, our third quarter results, including the loss and loss adjustment expense reserves presented herein, have been based upon a combination of actual results through the second quarter 2022 as well as forecasts for the remainder of 2022 reported to us by the ceding companies. We have approximated third quarter 2022 results under our contracts based upon this historical and forecasted information. While the Company believes its estimate of loss and loss adjustment expense reserves are adequate as of September 30, 2022, based on available information, actual losses may ultimately differ materially from the Company’s current estimates. The Company will continue to monitor the appropriateness of its assumptions as new information is provided. A summary of changes in outstanding loss and loss adjustment expense reserves for the nine months ended September 30, 2022 and 2021, is as follows: Summary of Changes in Outstanding Loss and Loss Adjustment Expense Reserves 2022 2021 (in thousands) Nine months ended September 30, 2022 2021 Balance, beginning of period, gross of reinsurance $ 2,133 $ – Less: reinsurance recoverable on loss and LAE expense reserves – – Balance, beginning of period, net of reinsurance $ 2,133 $ – Incurred related to: – – Current year 4,984 1,893 Prior year 814 – Paid related to: Current year (2,568 ) (549 ) Prior years (1,230 ) – Balance, September 30, net of reinsurance $ 4,133 $ 1,344 Plus: reinsurance recoverable related to loss and LAE expense reserves – – Reinsurance recoverable related to loss and LAE expense reserves Balance, September 30, gross of reinsurance $ 4,133 $ 1,344 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 6. Income Taxes A summary of income tax expense (benefit) is as follows: Summary of Income Tax Expense (Benefit) 2022 2021 (in thousands) Nine months ended September 30, 2022 2021 Current income tax benefit – from continuing operations $ – $ – Current income tax benefit – from discontinued operations – – Total current income tax benefit – – Deferred income tax benefit – from continuing operations – – Deferred income tax benefit – from discontinued operations – – Total deferred income tax benefit – – Total income tax benefit – from continuing operations – – Total income tax benefit – from discontinued operations $ – $ (145 ) Total income tax benefit $ – $ (145 ) FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements 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: Schedule of Reconciliation Effective Tax Rates 2022 2021 2022 2021 ($ in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Provision for taxes at U.S, statutory marginal income tax rate of 21 $ 2,154 $ (923 ) $ 201 $ (854 ) Valuation allowance for deferred tax assets deemed unrealizable (2,168 ) 1,041 (219 ) 1,081 Rate differential due to CARES Act – – – – Non-deductible expenses associated with the Share Repurchase Transaction 2 – 2 - Net operating loss carryback – - State income tax (net of federal benefit) – - – (114 ) Noncontrolling interests (119 ) (259 ) Share-based compensation 12 16 – Other – 1 1 Income tax expense (benefit) $ – $ – $ – $ (145 ) 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. The Company’s gross deferred tax assets and liabilities are $ 7.9 2.4 5.5 Schedule of Deferred Income Taxes (in thousands) As of September 30, 2022 As of December 31, 2021 Deferred income tax assets: Net operating loss carryforward $ 3,981 $ 3,010 Loss and loss adjustment expense reserves 48 25 Unearned premium reserves 276 152 Capital loss carryforward 2,929 1,114 Share-based compensation 241 253 Investments 413 1,692 Other 3 3 Deferred income tax assets $ 7,891 $ 6,249 Less: Valuation allowance (5,496 ) (5,715 ) Deferred income tax assets net of valuation allowance $ 2,395 $ 534 Deferred income tax liabilities: Investments $ 1,989 $ 369 Other 3 – Deferred policy acquisition costs 403 165 Deferred income tax liabilities $ 2,395 $ 534 Net deferred income tax asset (liability) $ – $ – As of September 30, 2022, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of approximately $ 19.0 0.5 0.1 1.6 16.8 2.9 As of September 30, 2022, 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 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
Equity Incentive Plan Grants
Equity Incentive Plan Grants | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Equity Incentive Plan Grants | Note 7. Equity Incentive Plan Grants On December 15, 2021, our shareholders approved the FG Financial Group, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The purpose of the 2021 Plan is to attract and retain directors, consultants, officers and other key employees of the Company and its subsidiaries and to provide to such persons incentives and rewards for superior performance. The 2021 Plan is administered by the Compensation and Management Resources Committee of the Board and has a term of ten years. The 2021 Plan awards may be in the form of stock options (which may be incentive stock options or nonqualified stock options), stock appreciation rights (or “SARs”), restricted shares, restricted stock units (“RSUs”), and other share-based awards, and provides for a maximum of 1,500,000 As of September 30, 2022, the Company had 272,815 25,000 130,000 RSUs Outstanding The following table summarizes RSU activity for the nine months ended September 30, 2022 and 2021. Schedule of Restricted Stock Units Activity Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Non-vested units, January 1, 2022 164,655 $ 4.35 Granted 158,225 1.58 Vested (50,065 ) 4.81 Forfeited — — Non-vested units, September 30, 2022 272,815 $ 2.66 Non-vested units, January 1, 2021 148,486 $ 5.44 Granted — — Vested (63,161 ) 5.55 Forfeited — — Non-vested units, September 30, 2021 85,325 $ 5.36 On December 17, 2021, we issued a total of 83,329 14,492 15,224 158,225 Restricted Shares On July 31, 2022, the Company issued 25,000 Stock Options Outstanding On January 12, 2021, in connection with Larry G. Swets, Jr.’s appointment as Chief Executive Officer, the Company entered into a Stock Option Agreement (the “Stock Option”) with Mr. Swets. The Stock Option entitles Mr. Swets to purchase up to 130,000 3.38 The Stock Option becomes vested and fully exercisable in 20% increments on each anniversary of the grant date, provided that Mr. Swets remains in the continuous service of the Company through each applicable vesting date and that the Company’s book value per share has increased by 15% or more as compared to the Company’s book value per share as of the fiscal year end prior. The Stock Option expires on January 11, 2031 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements The Stock Option contains performance and service conditions that affect vesting. Pursuant to ASC Topic 718- Stock Compensation, 3.3 In estimating the fair value of the Stock Option, the Company estimated volatility based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury Constant Maturity similar to the expected remaining life of the Stock Option. The expected life of the Stock Option is assumed to be equivalent to its contractual term. The dividend rate is based on our historical rate, which the Company anticipates will remain at zero. The following assumptions were used to determine the estimated fair value of the Stock Option: Schedule of Fair Value of Stock Options Expected volatility 45.60 % Expected life (years) 10.00 Risk-free interest rate 1.15 % Dividend yield 0.00 % The following table summarizes activity for stock options issued for the nine months ended September 30, 2022 and 2021. Schedule of Stock Option Activity Common Stock Options Shares Weighted Ave Exercise Price Weighted Ave Remaining Contractual Term (yrs) Weighted Ave Grant Date Fair Value Aggregate Intrinsic Value Outstanding, January 1, 2022 130,000 $ 3.38 9.04 $ 1.88 $ 49,400 Exercisable, January 1, 2022 – $ – – $ – $ – Granted – – Exercised – – – – – Cancelled – – – – – Outstanding, September 30, 2022 130,000 $ 3.38 8.29 $ 1.88 $ – Exercisable, September 30, 2022 – $ – – $ – $ – Outstanding, January 1, 2021 – $ – – $ – $ – Exercisable, January 1, 2021 – $ – – $ – $ – Granted 130,000 3.38 10.00 1.88 – Exercised – – – – – Cancelled – – – – – Outstanding, September 30, 2021 130,000 $ 3.38 9.29 $ 1.88 $ 193,700 Exercisable, September 30, 2021 – $ – – $ – $ – On January 18, 2021, the 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 Total stock-based compensation expense for the nine months ended September 30, 2022 and 2021 was approximately $ 180,000 376,000 718,000 Warrants No warrants were granted or exercised during the nine months ended September 30, 2022 and 2021. On February 24, 2022 1,500,000 15.00 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 8. 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. Joint Venture Agreement On March 31, 2020, the Company entered into a Limited Liability Company Agreement with Fundamental Global Asset Management, LLC (“FGAM”), a newly formed joint venture owned 50 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. FG Special Situations Fund As of September 30, 2022, the Company had invested $ 12.1 Mr. Cerminara, our chairman, and Mr. Swets, our Chief Executive Officer and Director, are managers of the sponsor company of FG New America Acquisition Corp (“FGNA”). Mr. Cerminara, Mr. Swets and Mr. Baqar, our Executive Vice President and Chief Financial Officer, serve as managers of the sponsor companies of FG Merger and FG Acquisition. Until FGNA’s business combination with OppFi (NYSE: OPFI), Mr. Swets was the Chief Executive Officer and a Director of FGNA, Mr. Cerminara was a Director of FGNA, and Mr. Baqar was the Chief Financial Officer of FGNA. Until Aldel’s business combination with Hagerty, Mr. Swets served as Senior Advisor to Aldel, Mr. Baqar served as Chief Financial Officer of Aldel, and Mr. Cerminara served as a Director of Aldel. Messrs. Cerminara, Swets, and Baqar also hold financial interests in the SPACs and/or their sponsor companies. Mr. Swets serves as Chairman of FG Merger, while Messrs. Baqar and Cerminara serve as Director and Senior Advisor of FG Merger, respectively. Mr. Swets serves as Chief Executive Officer and Director of FG Acquisition. Mr. Baqar serves as Chief Financial Officer, Secretary and Director of FG Acquisition. Mr. Cerminara serves as Chairman of FG Acquisition. FG Merchant Partners FGMP was formed to co-sponsor newly formed SPACs with their founders or partners. The Company is the sole managing member of the general partner of FGMP and holds a limited partner interest in FGMP. Certain of our directors and officers also hold limited partner interests in FGMP. Mr. Swets holds a limited partner interest through Itasca Financial LLC, an advisory and investment firm for which Mr. Swets is managing member. Mr. Baqar also holds a limited partner interest through Sequoia Financial LLC, an advisory firm for which Mr. Baqar is managing member. Mr. Cerminara also holds a limited partner interest through Fundamental Global, LLC, a holding company for which Mr. Cerminara is the manager and one of the members. FGMP has invested in the founder shares and warrants of Aldel, FG Merger and FG Acquisition. Certain of our directors and officers are affiliated with these SPACs and their sponsor companies as described above. 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 FG, 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. In exchange for these services, the Company pays FGM a fee of $ 456,000 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements 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. In the third quarter of 2022, the Shared Services Agreement was amended to eliminate termination fees and to increase the termination notice from 120 days to 365 days. The Company paid $ 1,368,000 |
Net Earnings Per Share
Net Earnings Per Share | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Net Earnings Per Share | Note 9. 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 numerators and denominators used in determining basic and diluted earnings per share for the three and nine months ended September 30, 2022 and 2021. Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share 2022 2021 2022 2021 ($ in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Basic and diluted: Net income (loss) from continuing operations $ 10,255 $ (4,393 ) $ 955 $ (4,065 ) Gain attributable to noncontrolling interests – (569 ) – (1,235 ) Dividends declared on Series A Preferred Shares (447 ) (448 ) (1,342 ) (1,245 ) Income (loss) attributable to FG Financial Group, Inc. common shareholders from continuing operations 9,808 (5,410 ) (387 ) (6,545 ) Weighted average common shares 9,333,709 5,032,615 7,564,017 5,012,139 Income (loss) per common share from continuing operations $ 1.05 $ (1.08 ) $ (0.05 ) $ (1.31 ) Gain from sale of former insurance business $ – $ – – $ 145 Weighted average common shares outstanding 9,333,709 5,032,615 7,564,017 5,012,139 Income per common share from discontinued operations $ – $ – $ – $ 0.03 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements The following potentially dilutive securities outstanding as of September 30, 2022 and 2021 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive. Schedule of Potentially Dilutive Securities Excluded from Calculation As of September 30, 2022 2021 Warrants to purchase common stock – 1,500,000 Options to purchase common stock 130,000 130,000 Restricted Shares 25,000 - Restricted stock units 272,815 85,325 427,815 1,715,325 |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 10. Commitments and Contingencies Legal Proceedings: As of September 30, 2022, the Company was not a party to any legal proceedings and was not aware of any material claims or actions pending or threatened against us Operating Lease Commitments: In July 2021, the Company entered into a lease agreement for office space in St. Petersburg, FL. The lease had a term of 12 months. Total minimum rent over the 12 17,000 10,000 In April 2022, the Company entered into a lease agreement for office space in Itasca, IL. The lease has a term of 44 77,000 61,000 8,800 Schedule of Future Minimum Lease Commitments Year ending December 31, Minimum Commitment 2022 $ 5,250 2023 21,000 2024 21,000 2025 15,750 Total $ 63,000 Impact of Coronavirus (COVID-19) Pandemic 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. 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. Impact of Russian/Ukraine Conflict Management is currently evaluating the impact of rising interest rates, inflation and the Russia-Ukraine war and has concluded that while it is reasonably possible that any of these could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of these unaudited consolidated financial statements. The unaudited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
Segment Reporting
Segment Reporting | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Segment Reporting | Note 11. Segment Reporting The Company has two operating segments—insurance and asset management. The chief operating decision maker (“CODM”) is the Company’s Chief Executive Officer. The measure of profit or loss used by the CODM to identify and measure the Company’s reportable segments is income before income tax. Our insurance segment consists of the operations of our Cayman Islands-based reinsurance subsidiary, FGRe, which, as of September 30, 2022, included our seven reinsurance agreements, as well as the returns associated with the investments made by our reinsurance operations, which include the Company’s FedNat common stock investment, as well as a portion of our investments in the SPACs which we have sponsored. Our asset management segment includes our investment in the Fund, as well as our investment advisory agreement with FedNat. The following table presents the financial information for each segment that is specifically identifiable or based on allocations using internal methodology as of and for the three and nine months ended September 30, 2022 and 2021. The ‘other’ category in the table below consists largely of corporate general and administrative expenses which have not been allocated to a specific segment. Segment assets for the “other” category primarily consist of unrestricted cash in the amounts of $ 8.7 8.2 Summary of Segment Reporting (in thousands) Insurance Asset Management Other Total Net premiums earned $ 4,383 $ – $ – $ 4,383 Net investment income 2,468 8,706 – 11,174 Other income – 89 125 214 Total revenue 6,851 8,795 125 15,771 Income (loss) before income tax 3,274 8,798 (1,817 ) 10,255 For the nine months ended September 30, 2022 Net premiums earned $ 9,809 $ – $ – $ 9,809 Net investment income 1,562 3,552 – 5,114 Other income – 141 125 266 Total revenue 11,371 3,693 125 15,189 Income (loss) before income tax 2,728 3,680 (5,453 ) 955 As of September 30, 2022 Segment assets $ 21,662 $ 17,777 $ 9,484 $ 48,923 For the three months ended September 30, 2021 Net premiums earned $ 1,099 $ – $ – $ 1,099 Net investment income (loss) 2,784 (4,083 ) – (1,299 ) Other income – 67 – 67 Total revenue 3,883 (4,016 ) – (133 ) Income (loss) before income tax 2,276 (4,123 ) (2,546 ) (4,393 ) For the nine months ended September 30, 2021 Net premiums earned $ 2,221 $ – $ – $ 2,221 Net investment income 1,674 1,118 – 2,792 Other income – 146 – 146 Total revenue 3,895 1,264 – 5,159 Income (loss) before income tax 686 905 (5,656 ) (4,065 ) As of September 30, 2021 Segment assets $ 13,452 $ 21,382 $ 9,016 $ 43,850 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 12. Subsequent Events On October 11, 2022, the Company invested $ 2.0 On October 19, 2022, the Company entered into an Agreement and Plan of Merger, dated as of October 19, 2022 by and between the Company and FG Financial Group, Inc., a Nevada corporation and a wholly owned subsidiary of the Company, pursuant to which the Company will be reincorporated from Delaware to Nevada. The Plan of Merger was adopted and approved by the board of directors of the Company by unanimous written consent on October 14, 2022. Consummation of the reincorporation is subject to the adoption and approval of the Plan of Merger by the holders of a majority of the outstanding common stock of the Company. On November 3, 2022, the Company entered into a Sales Agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time through the Sales Agent, shares of the Company’s common stock, par value $ 0.001 2,575,976 |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
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 accompanying consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated upon consolidation. 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. In September 2020, the Company invested approximately $ 5.0 Financial Services-Investment Companies See Note 4 for additional information regarding the Company’s consolidated investments. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
Discontinued Operations | Discontinued Operations Due to the sale of all of the issued and outstanding equity of our previous insurance business on December 2, 2019, these operations have been classified as discontinued operations in the Company’s financial statements presented herein. For the nine months ended September 30, 2021, we recognized a gain from the sale of this business for approximately $ 145,000 Schedule of Discontinued Operations 2022 2021 2022 2021 (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Pre-tax gain (loss) on sale $ – $ – $ – $ – Income tax benefit – – – 145 Net gain from sale of Maison Business $ – $ – $ – $ 145 |
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 deferred policy acquisition costs, premium revenue recognition, reserves for loss and loss adjustment expenses, and stock-based compensation expense. |
Investments in Equity Securities | Investments in Equity Securities Investments in equity securities are carried at fair value with subsequent changes in fair value recorded to the Consolidated Statements of Operations as a component of net investment income. |
Other Investments | Other Investments Other investments consist, in part, of equity investments made in privately held companies accounted for under the equity method. We utilize the equity method to account for investments when we possess the ability to exercise significant influence, but not control, over the operating and financial policies of the investee. The ability to exercise significant influence is presumed when the investor possesses more than 20 In applying the equity method, we record the investment at cost and subsequently increase or decrease the carrying amount of the investment by our proportionate share of the net earnings or losses and other comprehensive income of the investee. We record dividends or other equity distributions as reductions in the carrying value of the investment. Should net losses of the investee reduce the carrying amount of the investment to zero, additional net losses may be recorded if other investments in the investee are at-risk, even if we have not committed to provide financial support to the investee. Such additional equity method losses, if any, are based upon the change in our claim on the investee’s book value. When we receive distributions from our equity method investments, we utilize the cumulative earnings approach. When classifying the related cash flows under this approach, the Company compares the cumulative distributions received, less distributions received in prior periods, with the Company’s cumulative equity in earnings. Cumulative distributions that do not exceed cumulative equity in earnings represent returns on investment and are classified as cash inflows from operating activities. Cumulative distributions in excess of cumulative equity in earnings represent returns on investment and are classified as cash inflows from investing activities. Other investments also consist of equity we have purchased 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 are included in net investment income. |
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. Pursuant to the Company’s insurance license, the Authority has required that FGRe hold a minimum capital requirement of $ 200,000 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
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 |
Premium Revenue Recognition | Premium Revenue Recognition The Company participates in quota-share contracts and estimates the ultimate premiums for the contract period. These estimates are based on information received from the ceding companies, whereby premiums are recorded as written in the same periods in which the underlying insurance contracts are written and are based on cession statements from cedents. These statements are received quarterly and in arrears, and thus, for any reporting lag, premiums written are estimated based on the portion of the ultimate estimated premiums relating to the risks underwritten during the lag period. Premium estimates are reviewed by management periodically. Such review includes a comparison of actual reported premiums to expected ultimate premiums. Based on management’s review, the appropriateness of the premium estimates is evaluated, and any adjustments to these estimates are recorded in the period in which they are determined. Changes in premium estimates, including premiums receivable, are not unusual and may result in significant adjustments in any period. A significant portion of amounts included in “Reinsurance balances receivable” on the Company’s consolidated balance sheets represents estimated premiums written, net of commissions, brokerage, and loss and loss adjustment expense, and are not currently due based on the terms of the underlying contracts. Additional premiums due on a contract that has no remaining coverage period are earned in full when written. Premiums written are generally recognized as earned over the contract period in proportion to the risk covered. Unearned premiums represent the unexpired portion of reinsurance provided. |
Policy Acquisition Costs | Policy Acquisition Costs Policy acquisition costs are costs that vary with, and are directly related to, the successful production of new and renewal business, and consist principally of commissions, taxes and brokerage expenses. If the sum of a contract’s expected losses and loss expenses and deferred acquisition costs exceeds associated unearned premiums and expected investment income, a premium deficiency is determined to exist. In this event, deferred acquisition costs are written off to the extent necessary to eliminate the premium deficiency. If the premium deficiency exceeds deferred acquisition costs then a liability is accrued for the excess deficiency. There were no premium deficiency adjustments recognized during the periods presented herein. |
Funds Deposited for benefit of Reinsured Companies | Funds Deposited for benefit of Reinsured Companies “Funds Deposited for benefit of Reinsured Companies” on the Company’s consolidated balance sheets includes amounts held by cedents provided to support our reinsurance contracts. On November 12, 2020, FGRe, our Cayman Islands based reinsurance subsidiary, initially funded a trust account at Lloyd’s with approximately $ 2.4 1.0 0.4 1.0 0.2 1.1 1.5 As of September 30, 2022, and December 31, 2021, the total cash collateral posted to support all of our reinsurance treaties was approximately $ 6.7 4.4 FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
Loss and Loss Adjustment Expense Reserves | Loss and Loss Adjustment Expense Reserves The Company maintains reserves equal to our estimated ultimate liability for losses and loss adjustment expense for reported and unreported claims from our reinsurance business. Loss and loss adjustment reserve estimates are based primarily on estimates derived from reports the Company has received from ceding companies. The Company then uses a variety of statistical and actuarial techniques to monitor reserve adequacy. When setting reserves, the Company considers many factors including: (1) the types of exposures and projected ultimate premium to be written by our cedants; (2) expected loss ratios by type of business; (3) actuarial methodologies which analyze loss reporting and payment experience, reports from ceding companies and historical trends; and (4) general economic conditions. The Company also engages independent actuarial specialists, at least annually, to assist management in establishing appropriate reserves. Since reserves are estimates, the final settlement of losses may vary from the reserves established, and any adjustments to the estimates, which may be material, are recorded in the period they are determined. The final settlement of losses may vary, perhaps materially, from the reserves recorded. U.S. GAAP does not permit establishing loss reserves, which include case reserves and IBNR loss reserves, until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date are established, with no allowance for the establishment of loss reserves to account for expected future loss events. Generally, the Company obtains regular updates of premium and loss related information for the current and historical periods, which are utilized to update the initial expected loss ratio. We also experience a lag between (i) claims being reported by the underlying insured to the Company’s cedent and (ii) claims being reported by the Company’s cedent to the Company. This lag may impact the Company’s loss reserve estimates. Client reports have pre-determined due dates (for example, thirty days after each month end). As a result, the lag depends in part upon the terms of the specific contract. The timing of the reporting requirements is designed so that the Company receives premium and loss information as soon as practicable once the client has closed its books. Accordingly, there should be a short lag in such reporting. Additionally, most of the contracts that have the potential for large single event losses have provisions that such loss notifications are provided to the Company immediately upon the occurrence of an event. |
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. 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 September 30, 2022. |
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 liabilities 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 4 for further information on the fair value of the Company’s financial instruments. FG FINANCIAL GROUP, INC. Notes to Consolidated Financial Statements |
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. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Schedule of Discontinued Operations | Schedule of Discontinued Operations 2022 2021 2022 2021 (in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Pre-tax gain (loss) on sale $ – $ – $ – $ – Income tax benefit – – – 145 Net gain from sale of Maison Business $ – $ – $ – $ 145 |
Investments and Fair Value Di_2
Investments and Fair Value Disclosures (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Investments, All Other Investments [Abstract] | |
Schedule of Investments | The following table summarizes the Company’s investments held at fair value as of September 30, 2022 and December 31, 2021: Schedule of Investments (in thousands) As of September 30, 2022 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount FedNat common stock $ 1,983 $ – $ 1,967 $ 16 Total investments $ 1,983 $ – $ 1,967 $ 16 As of December 31, 2021 Cost Basis Gross Unrealized Gains Gross Unrealized Losses Carrying Amount FedNat common stock $ 14,495 $ – $ 13,074 $ 1,421 Total investments $ 14,495 $ – $ 13,074 $ 1,421 |
Schedule of Subsidiaries Assets | Schedule of Subsidiaries Assets As of December 1, 2021 (in thousands) Cash and cash equivalents $ 100 Investments in private placements 15,734 Investments in public SPACs 22 Other assets 18 Other liabilities (34 ) Net assets deconsolidated $ 15,840 |
Schedule of Investments under Equity Method | Financial information for our investments accounted for under the equity method, in the aggregate, is as follows: Schedule of Investments under Equity Method As of As of (in thousands) Other investments $ 33,762 $ 25,936 Cash 130 72 Other assets 39 16 Total assets 33,931 26,024 Accounts payable $ 42 $ 19 Other liabilities – – Total liabilities 42 19 Nine months ended September 30, 2022 Nine months ended September 30, 2021 (in thousands) Net investment income (loss) $ 8,170 $ 7,498 General and administrative expenses (95 ) (143 ) Net income (loss) 8,075 7,355 |
Schedule of Net Investment Income (Loss) | Net investment income (loss) for the three and nine months ended September 30, 2022 and 2021 is as follows: Schedule of Net Investment Income (Loss) 2022 2021 2022 2021 ($ in thousands) Three Months Ended Nine Months Ended 2022 2021 2022 2021 Investment income (loss): Realized loss on FedNat common stock $ (2,472 ) $ - $ (11,441 ) $ - Unrealized gain (loss) on FedNat common stock 2,448 (2,424 ) 10,521 (4,978 ) Unrealized holding gain on private placement investments – 4 – 5,120 Equity method earnings 11,226 1,070 6,080 2,527 Other (28 ) 51 (46 ) 123 Net investment income (loss) $ 11,174 $ (1,299 ) $ 5,114 $ 2,792 |
Schedule of Financial Instruments Measured at Fair Value | Financial instruments measured, on a recurring basis, at fair value as of September 30, 2022 and December 31, 2021 in accordance with the guidance promulgated by the FASB are as follows. Schedule of Financial Instruments Measured at Fair Value (in thousands) As of September 30, 2022 Level 1 Level 2 Level 3 Total FedNat common stock $ 16 $ – $ – $ 16 $ 16 $ – $ – $ 16 As of December 31, 2021 FedNat common stock $ 1,421 $ – $ – $ 1,421 $ 1,421 $ – $ – $ 1,421 |
Loss and Loss Adjustment Expe_2
Loss and Loss Adjustment Expense Reserves (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Loss And Loss Adjustment Expense Reserves | |
Summary of Changes in Outstanding Loss and Loss Adjustment Expense Reserves | A summary of changes in outstanding loss and loss adjustment expense reserves for the nine months ended September 30, 2022 and 2021, is as follows: Summary of Changes in Outstanding Loss and Loss Adjustment Expense Reserves 2022 2021 (in thousands) Nine months ended September 30, 2022 2021 Balance, beginning of period, gross of reinsurance $ 2,133 $ – Less: reinsurance recoverable on loss and LAE expense reserves – – Balance, beginning of period, net of reinsurance $ 2,133 $ – Incurred related to: – – Current year 4,984 1,893 Prior year 814 – Paid related to: Current year (2,568 ) (549 ) Prior years (1,230 ) – Balance, September 30, net of reinsurance $ 4,133 $ 1,344 Plus: reinsurance recoverable related to loss and LAE expense reserves – – Reinsurance recoverable related to loss and LAE expense reserves Balance, September 30, gross of reinsurance $ 4,133 $ 1,344 |
Income Taxes (Tables)
Income Taxes (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Income Tax Disclosure [Abstract] | |
Summary of Income Tax Expense (Benefit) | A summary of income tax expense (benefit) is as follows: Summary of Income Tax Expense (Benefit) 2022 2021 (in thousands) Nine months ended September 30, 2022 2021 Current income tax benefit – from continuing operations $ – $ – Current income tax benefit – from discontinued operations – – Total current income tax benefit – – Deferred income tax benefit – from continuing operations – – Deferred income tax benefit – from discontinued operations – – Total deferred income tax benefit – – Total income tax benefit – from continuing operations – – Total income tax benefit – from discontinued operations $ – $ (145 ) Total income tax benefit $ – $ (145 ) |
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: Schedule of Reconciliation Effective Tax Rates 2022 2021 2022 2021 ($ in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Provision for taxes at U.S, statutory marginal income tax rate of 21 $ 2,154 $ (923 ) $ 201 $ (854 ) Valuation allowance for deferred tax assets deemed unrealizable (2,168 ) 1,041 (219 ) 1,081 Rate differential due to CARES Act – – – – Non-deductible expenses associated with the Share Repurchase Transaction 2 – 2 - Net operating loss carryback – - State income tax (net of federal benefit) – - – (114 ) Noncontrolling interests (119 ) (259 ) Share-based compensation 12 16 – Other – 1 1 Income tax expense (benefit) $ – $ – $ – $ (145 ) |
Schedule of Deferred Income Taxes | Schedule of Deferred Income Taxes (in thousands) As of September 30, 2022 As of December 31, 2021 Deferred income tax assets: Net operating loss carryforward $ 3,981 $ 3,010 Loss and loss adjustment expense reserves 48 25 Unearned premium reserves 276 152 Capital loss carryforward 2,929 1,114 Share-based compensation 241 253 Investments 413 1,692 Other 3 3 Deferred income tax assets $ 7,891 $ 6,249 Less: Valuation allowance (5,496 ) (5,715 ) Deferred income tax assets net of valuation allowance $ 2,395 $ 534 Deferred income tax liabilities: Investments $ 1,989 $ 369 Other 3 – Deferred policy acquisition costs 403 165 Deferred income tax liabilities $ 2,395 $ 534 Net deferred income tax asset (liability) $ – $ – |
Equity Incentive Plan Grants (T
Equity Incentive Plan Grants (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Restricted Stock Units Activity | The following table summarizes RSU activity for the nine months ended September 30, 2022 and 2021. Schedule of Restricted Stock Units Activity Restricted Stock Units Number of Units Weighted Average Grant Date Fair Value Non-vested units, January 1, 2022 164,655 $ 4.35 Granted 158,225 1.58 Vested (50,065 ) 4.81 Forfeited — — Non-vested units, September 30, 2022 272,815 $ 2.66 Non-vested units, January 1, 2021 148,486 $ 5.44 Granted — — Vested (63,161 ) 5.55 Forfeited — — Non-vested units, September 30, 2021 85,325 $ 5.36 |
Schedule of Fair Value of Stock Options | Schedule of Fair Value of Stock Options Expected volatility 45.60 % Expected life (years) 10.00 Risk-free interest rate 1.15 % Dividend yield 0.00 % |
Schedule of Stock Option Activity | The following table summarizes activity for stock options issued for the nine months ended September 30, 2022 and 2021. Schedule of Stock Option Activity Common Stock Options Shares Weighted Ave Exercise Price Weighted Ave Remaining Contractual Term (yrs) Weighted Ave Grant Date Fair Value Aggregate Intrinsic Value Outstanding, January 1, 2022 130,000 $ 3.38 9.04 $ 1.88 $ 49,400 Exercisable, January 1, 2022 – $ – – $ – $ – Granted – – Exercised – – – – – Cancelled – – – – – Outstanding, September 30, 2022 130,000 $ 3.38 8.29 $ 1.88 $ – Exercisable, September 30, 2022 – $ – – $ – $ – Outstanding, January 1, 2021 – $ – – $ – $ – Exercisable, January 1, 2021 – $ – – $ – $ – Granted 130,000 3.38 10.00 1.88 – Exercised – – – – – Cancelled – – – – – Outstanding, September 30, 2021 130,000 $ 3.38 9.29 $ 1.88 $ 193,700 Exercisable, September 30, 2021 – $ – – $ – $ – |
Net Earnings Per Share (Tables)
Net Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share | Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share 2022 2021 2022 2021 ($ in thousands) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 Basic and diluted: Net income (loss) from continuing operations $ 10,255 $ (4,393 ) $ 955 $ (4,065 ) Gain attributable to noncontrolling interests – (569 ) – (1,235 ) Dividends declared on Series A Preferred Shares (447 ) (448 ) (1,342 ) (1,245 ) Income (loss) attributable to FG Financial Group, Inc. common shareholders from continuing operations 9,808 (5,410 ) (387 ) (6,545 ) Weighted average common shares 9,333,709 5,032,615 7,564,017 5,012,139 Income (loss) per common share from continuing operations $ 1.05 $ (1.08 ) $ (0.05 ) $ (1.31 ) Gain from sale of former insurance business $ – $ – – $ 145 Weighted average common shares outstanding 9,333,709 5,032,615 7,564,017 5,012,139 Income per common share from discontinued operations $ – $ – $ – $ 0.03 |
Schedule of Potentially Dilutive Securities Excluded from Calculation | The following potentially dilutive securities outstanding as of September 30, 2022 and 2021 have been excluded from the computation of diluted weighted-average shares outstanding as their effect would be anti-dilutive. Schedule of Potentially Dilutive Securities Excluded from Calculation As of September 30, 2022 2021 Warrants to purchase common stock – 1,500,000 Options to purchase common stock 130,000 130,000 Restricted Shares 25,000 - Restricted stock units 272,815 85,325 427,815 1,715,325 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Commitments | Schedule of Future Minimum Lease Commitments Year ending December 31, Minimum Commitment 2022 $ 5,250 2023 21,000 2024 21,000 2025 15,750 Total $ 63,000 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Segment Reporting [Abstract] | |
Summary of Segment Reporting | Summary of Segment Reporting (in thousands) Insurance Asset Management Other Total Net premiums earned $ 4,383 $ – $ – $ 4,383 Net investment income 2,468 8,706 – 11,174 Other income – 89 125 214 Total revenue 6,851 8,795 125 15,771 Income (loss) before income tax 3,274 8,798 (1,817 ) 10,255 For the nine months ended September 30, 2022 Net premiums earned $ 9,809 $ – $ – $ 9,809 Net investment income 1,562 3,552 – 5,114 Other income – 141 125 266 Total revenue 11,371 3,693 125 15,189 Income (loss) before income tax 2,728 3,680 (5,453 ) 955 As of September 30, 2022 Segment assets $ 21,662 $ 17,777 $ 9,484 $ 48,923 For the three months ended September 30, 2021 Net premiums earned $ 1,099 $ – $ – $ 1,099 Net investment income (loss) 2,784 (4,083 ) – (1,299 ) Other income – 67 – 67 Total revenue 3,883 (4,016 ) – (133 ) Income (loss) before income tax 2,276 (4,123 ) (2,546 ) (4,393 ) For the nine months ended September 30, 2021 Net premiums earned $ 2,221 $ – $ – $ 2,221 Net investment income 1,674 1,118 – 2,792 Other income – 146 – 146 Total revenue 3,895 1,264 – 5,159 Income (loss) before income tax 686 905 (5,656 ) (4,065 ) As of September 30, 2021 Segment assets $ 13,452 $ 21,382 $ 9,016 $ 43,850 |
Nature of Business (Details Nar
Nature of Business (Details Narrative) - USD ($) | 9 Months Ended | ||||
Oct. 02, 2022 | Apr. 05, 2022 | Mar. 03, 2022 | Sep. 30, 2022 | Feb. 24, 2022 | |
Number of common stock in hold | 137,871 | ||||
Investment | $ 298,000 | ||||
Cash | 200,000 | ||||
FG Strategic Consulting LLC [Member] | |||||
Annual fee for advisory services | $ 100,000 | ||||
Warrant [Member] | |||||
Warrants to issue common stock | 1,500,000 | ||||
Exercise price of warrants per share | $ 15 | ||||
Fundamental Global Investor [Member] | Common Stock [Member] | |||||
Sale of stock, percentage of ownership after transaction | 60% | ||||
FedNat Holding Company [Member] | Subsequent Event [Member] | |||||
Sale of stock consideration received on transaction | $ 30,000 | ||||
FG Merger Corp [Member] | |||||
Investment | $ 2,600,000 | ||||
FG Merger Corp [Member] | IPO [Member] | |||||
Payments for merger related costs | $ 80,500,000 | ||||
FG Merger Corp [Member] | Common Stock [Member] | |||||
Investment owned balance shares | 820,000 | ||||
FG Merger Corp [Member] | Warrant [Member] | |||||
Warrants to issue common stock | 989,000 | ||||
Exercise price of warrants per share | $ 11.50 | ||||
Warrants term | 5 years | ||||
FG Merger Corp [Member] | Warrant One [Member] | |||||
Warrants to issue common stock | 85,000 | ||||
Exercise price of warrants per share | $ 15 | ||||
Warrants term | 10 years | ||||
FG Acquisition Corp [Member] | IPO [Member] | Facility Closing [Member] | |||||
Payments for merger related costs | $ 115,000,000 | ||||
FG Acquisition Corp [Member] | Common Stock [Member] | |||||
Investment owned balance shares | 819,000 | ||||
FG Acquisition Corp [Member] | Warrant [Member] | |||||
Warrants to issue common stock | 1,400,000 | ||||
Exercise price of warrants per share | $ 11.50 | ||||
Warrants term | 5 years | ||||
Warrants value | 1,600,000 | ||||
FG Acquisition Corp [Member] | Warrant [Member] | Maximum [Member] | |||||
Cash | $ 2,000,000 | ||||
FG Acquisition Corp [Member] | Warrant One [Member] | |||||
Warrants to issue common stock | 440,000 | ||||
Exercise price of warrants per share | $ 15 | ||||
Warrants term | 10 years |
Schedule of Discontinued Operat
Schedule of Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Accounting Policies [Abstract] | ||||
Pre-tax gain (loss) on sale | ||||
Income tax benefit | 145 | |||
Net gain from sale of Maison Business | $ 145 |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | |||
Apr. 04, 2022 | Nov. 12, 2020 | Jun. 30, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | Sep. 30, 2020 | |
Gain loss on sale of business | $ 145,000 | |||||
Investment interest rate | 20% | |||||
Cash in bank | $ 200,000 | |||||
Cash deposit per institution insured by FDIC | 250,000 | |||||
Proceeds from collateral | $ 200,000 | $ 2,400,000 | $ 400,000 | 1,000,000 | $ 1,000,000 | |
Cash collateral total | 6,700,000 | $ 4,400,000 | ||||
Fundamental Global Reinsurance Ltd [Member] | ||||||
Proceeds from collateral | 1,500,000 | |||||
Fundamental Global Reinsurance Ltd [Member] | Quota Share Agreement [Member] | ||||||
Proceeds from collateral | $ 1,100,000 | |||||
Variable Interest Entity, Primary Beneficiary [Member] | Fundamental Global Asset Management, LLC [Member] | ||||||
Real estate investment | $ 5,000,000 |
Schedule of Investments (Detail
Schedule of Investments (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2022 | Dec. 31, 2021 | |
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
Investments: Cost basis | $ 1,983 | $ 14,495 |
Investments: Gross Unrealized Gains | ||
Investments: Gross Unrealized Losses | 1,967 | 13,074 |
Investments: Carrying Amount | 16 | 1,421 |
FedNat Common Stock [Member] | ||
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items] | ||
Investments: Cost basis | 1,983 | 14,495 |
Investments: Gross Unrealized Gains | ||
Investments: Gross Unrealized Losses | 1,967 | 13,074 |
Investments: Carrying Amount | $ 16 | $ 1,421 |
Schedule of Subsidiaries Assets
Schedule of Subsidiaries Assets (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 | Dec. 02, 2021 |
Other assets | $ 943 | $ 745 | |
FG Special Situations Fund LP [Member] | |||
Cash and cash equivalents | $ 100 | ||
Investments in private placements | 15,734 | ||
Investments in public SPACs | 22 | ||
Other assets | 18 | ||
Other liabilities | (34) | ||
Net assets deconsolidated | $ 15,840 |
Schedule of Investments under E
Schedule of Investments under Equity Method (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Schedule of Equity Method Investments [Line Items] | |||||
Cash | $ 200,000 | $ 200,000 | |||
Other assets | 943,000 | 943,000 | $ 745,000 | ||
Total assets | 48,923,000 | $ 43,850,000 | 48,923,000 | $ 43,850,000 | 40,829,000 |
Accounts payable | 361,000 | 361,000 | 502,000 | ||
Total liabilities | 11,231,000 | 11,231,000 | 6,820,000 | ||
General and administrative expenses | (2,001,000) | $ (3,000,000) | (6,009,000) | (6,698,000) | |
Equity Method Investment [Member] | |||||
Schedule of Equity Method Investments [Line Items] | |||||
Other investments | 33,762,000 | 33,762,000 | 25,936,000 | ||
Cash | 130,000 | 130,000 | 72,000 | ||
Other assets | 39,000 | 39,000 | 16,000 | ||
Total assets | 33,931,000 | 33,931,000 | 26,024,000 | ||
Accounts payable | 42,000 | 42,000 | 19,000 | ||
Other liabilities | |||||
Total liabilities | $ 42,000 | 42,000 | $ 19,000 | ||
Net investment income (loss) | 8,170,000 | 7,498,000 | |||
General and administrative expenses | (95,000) | (143,000) | |||
Net income (loss) | $ 8,075,000 | $ 7,355,000 |
Schedule of Net Investment Inco
Schedule of Net Investment Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Net Investment Income [Line Items] | ||||
Net investment income (loss) | $ 11,174 | $ (1,299) | $ 5,114 | $ 2,792 |
Realized Loss on FedNat Common Stock [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income (loss) | (2,472) | (11,441) | ||
Unrealized Gain (Loss) on FedNat Common Stock [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income (loss) | 2,448 | (2,424) | 10,521 | (4,978) |
Unrealized Holding Gain On Private Placement Investments [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income (loss) | 4 | 5,120 | ||
Equity Method Earnings Losses [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income (loss) | 11,226 | 1,070 | 6,080 | 2,527 |
Other Investment Income [Member] | ||||
Net Investment Income [Line Items] | ||||
Net investment income (loss) | $ (28) | $ 51 | $ (46) | $ 123 |
Schedule of Financial Instrumen
Schedule of Financial Instruments Measured at Fair Value (Details) - Fair Value, Recurring [Member] - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | $ 16 | $ 1,421 |
FedNat Common Stock [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | 16 | 1,421 |
Fair Value, Inputs, Level 1 [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | 16 | 1,421 |
Fair Value, Inputs, Level 1 [Member] | FedNat Common Stock [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | 16 | 1,421 |
Fair Value, Inputs, Level 2 [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | ||
Fair Value, Inputs, Level 2 [Member] | FedNat Common Stock [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | ||
Fair Value, Inputs, Level 3 [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock | ||
Fair Value, Inputs, Level 3 [Member] | FedNat Common Stock [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Equity securities, common stock |
Investments and Fair Value Di_3
Investments and Fair Value Disclosures (Details Narrative) - USD ($) | 9 Months Ended | |
Oct. 02, 2022 | Sep. 30, 2022 | |
Gain loss on investments | $ 6,700,000 | |
Investments | 298,000 | |
Proceeds from Equity Method Investment, Distribution | 3,300,000 | |
Equity Method Investment, Realized Gain (Loss) on Disposal | $ 3,600,000 | |
Investment from the partnership percentage | 20% | |
Investment in Fund [Member] | ||
Equity Method Investments | $ 16,800,000 | |
FedNat Holding Company [Member] | ||
Number of shares hold during period, shares | 137,871 | |
Stock issued for sale consideration, shares | 1,773,102 | |
Sale of stock number of shares sold | 1,635,231 | |
FedNat Holding Company [Member] | Subsequent Event [Member] | ||
Sale of stock consideration received on transaction | $ 30,000 | |
FedNat Holding Company [Member] | Hale Parties [Member] | ||
Sale of stock number of shares sold | 217,500 | |
FGMP [Member] | ||
Gain loss on investments | $ 100,000 | |
FG SPAC Partners LP [Member] | ||
Gain loss on investments | 2,400,000 | |
Undistributed earnings | 4,900,000 | |
Investments | 4,900,000 | |
FG SPAC Partners LP [Member] | Maximum [Member] | ||
Investments | $ 1,000,000 | |
Two Companies [Member] | ||
Investment from the partnership percentage | 62% | |
Proceeds from investments | $ 776,000 |
Summary of Changes in Outstandi
Summary of Changes in Outstanding Loss and Loss Adjustment Expense Reserves (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Loss And Loss Adjustment Expense Reserves | ||
Balance, beginning of period, gross of reinsurance | $ 2,133 | |
Reinsurance recoverable related to loss and LAE expense reserves | ||
Balance, beginning of period, net of reinsurance | 2,133 | |
Incurred related to: | ||
Current year | 4,984 | 1,893 |
Prior year | 814 | |
Paid related to: | ||
Current year | (2,568) | (549) |
Prior years | (1,230) | |
Balance, September 30, net of reinsurance | 4,133 | 1,344 |
Balance, September 30, gross of reinsurance | $ 4,133 | $ 1,344 |
Summary of Income Tax Expense (
Summary of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Current income tax benefit – from continuing operations | ||||
Current income tax benefit – from discontinued operations | ||||
Total current income tax benefit | ||||
Deferred income tax benefit – from continuing operations | ||||
Deferred income tax benefit – from discontinued operations | ||||
Total deferred income tax benefit | ||||
Total income tax benefit – from continuing operations | ||||
Total income tax benefit – from discontinued operations | (145) | |||
Total income tax benefit | $ (145) |
Schedule of Reconciliation Effe
Schedule of Reconciliation Effective Tax Rates (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Provision for taxes at U.S, statutory marginal income tax rate of 21% | $ 2,154 | $ (923) | $ 201 | $ (854) |
Valuation allowance for deferred tax assets deemed unrealizable | (2,168) | 1,041 | (219) | 1,081 |
Rate differential due to CARES Act | ||||
Non-deductible expenses associated with the Share Repurchase Transaction | 2 | 2 | ||
Net operating loss carryback | ||||
State income tax (net of federal benefit) | (114) | |||
Noncontrolling interests | (119) | (259) | ||
Share-based compensation | 12 | 16 | ||
Other | 1 | 1 | ||
Income tax expense (benefit) | $ (145) |
Schedule of Reconciliation Ef_2
Schedule of Reconciliation Effective Tax Rates (Details) (Parenthetical) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Income Tax Disclosure [Abstract] | ||||
Income tax rate | 21% | 21% | 21% | 21% |
Schedule of Deferred Income Tax
Schedule of Deferred Income Taxes (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Deferred income tax assets: | ||
Net operating loss carryforward | $ 3,981 | $ 3,010 |
Loss and loss adjustment expense reserves | 48 | 25 |
Unearned premium reserves | 276 | 152 |
Capital loss carryforward | 2,929 | 1,114 |
Share-based compensation | 241 | 253 |
Investments | 413 | 1,692 |
Other | 3 | 3 |
Deferred income tax assets | 7,891 | 6,249 |
Less: Valuation allowance | (5,496) | (5,715) |
Deferred income tax assets net of valuation allowance | 2,395 | 534 |
Deferred income tax liabilities: | ||
Investments | 1,989 | 369 |
Other | 3 | |
Deferred policy acquisition costs | 403 | 165 |
Deferred income tax liabilities | 2,395 | 534 |
Net deferred income tax asset (liability) |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Deferred tax assets, gross | $ 7,891 | $ 6,249 |
Deferred tax liabilities | 2,400 | |
Deferred tax valuation allowances | 5,500 | |
Operating loss carryforwards | 19,000 | |
Expire on December 31, 2039 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforwards | 500 | |
Expire on December 31, 2040 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforwards | 100 | |
Expire on December 31, 2041 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforwards | 1,600 | |
Not Expire Under Current Tax Law [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforwards | 16,800 | |
Expire on December 2026 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Operating loss carryforwards | $ 2,900 |
Schedule of Restricted Stock Un
Schedule of Restricted Stock Units Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Number of Non-vested Units, Beginning balance | 164,655 | 148,486 |
Weighted Average Grant Date Fair Value, Beginning balance | $ 4.35 | $ 5.44 |
Number of Non-vested Units, Granted | 158,225 | |
Weighted Average Grant Date Fair Value, Granted | $ 1.58 | |
Number of Non-vested Units, Vested | (50,065) | (63,161) |
Weighted Average Grant Date Fair Value, Vested | $ 4.81 | $ 5.55 |
Number of Non-vested Units, Forfeited | ||
Weighted Average Grant Date Fair Value, Forfeited | ||
Number of Non-vested Units, Ending balance | 272,815 | 85,325 |
Weighted Average Grant Date Fair Value, Ending balance | $ 2.66 | $ 5.36 |
Schedule of Fair Value of Stock
Schedule of Fair Value of Stock Options (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Expected volatility | 45.60% |
Expected life (years) | 10 years |
Risk-free interest rate | 1.15% |
Dividend yield | 0% |
Schedule of Stock Option Activi
Schedule of Stock Option Activity (Details) - 2014 Equity Incentive Plan [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Shares, Outstanding, Beginning balance | 130,000 | |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ 3.38 | |
Weighted Ave Remaining Contractual Term (Years), Outstanding, Beginning balance | 9 years 14 days | |
Weighted Ave Grant Date Fair Value, Outstanding, Beginning balance | $ 1.88 | |
Aggregate Intrinsic Value, Outstanding, Beginning balance | $ 49,400 | |
Shares, Exercisable, Beginning balance | ||
Weighted Average Exercise Price, Exercisable, Beginning balance | ||
Weighted Ave Grant Date Fair Value, Exercisable, Beginning balance | ||
Aggregate Intrinsic Value, Exercisable, Beginning balance | ||
Weighted Average Grant date Fair Value, Granted | $ 1.88 | |
Aggregate Intrinsic Value, Granted | ||
Shares, Exercised | ||
Weighted Average Exercise Price, Exercised | ||
Weighted Average Grant date Fair Value, Exercised | ||
Aggregate Intrinsic Value, Exercised | ||
Shares, Celled | ||
Weighted Average Exercise Price, Cancelled | ||
Weighted Average Grant date Fair Value, Cancelled | ||
Aggregate Intrinsic Value, Cancelled | ||
Shares, Outstanding, Ending balance | 130,000 | 130,000 |
Weighted Average Exercise Price, Outstanding, Ending balance | $ 3.38 | $ 3.38 |
Weighted Ave Remaining Contractual Term (Years), Outstanding, Ending balance | 8 years 3 months 14 days | 9 years 3 months 14 days |
Weighted Ave Grant Date Fair Value, Outstanding, Ending balance | $ 1.88 | $ 1.88 |
Aggregate Intrinsic Value, Outstanding, Ending balance | $ 193,700 | |
Shares, Exercisable, Ending balance | ||
Weighted Average Exercise Price, Exercisable, Ending balance | ||
Weighted Ave Grant Date Fair Value, Exercisable, Ending balance | ||
Aggregate Intrinsic Value, Exercisable, Ending balance | ||
Shares, Granted | 130,000 | |
Weighted Average Exercise Price, Granted | $ 3.38 | |
Weighted Ave Remaining Contractual Term (Years), Granted | 10 years |
Equity Incentive Plan Grants (D
Equity Incentive Plan Grants (Details Narrative) - USD ($) | 9 Months Ended | ||||||||||
Aug. 19, 2022 | Jul. 31, 2022 | Dec. 17, 2021 | Jan. 18, 2021 | Jan. 12, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Feb. 24, 2022 | Dec. 31, 2021 | Dec. 15, 2021 | Dec. 31, 2020 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Share-based payment arrangement, expense | $ 180,000 | $ 376,000 | |||||||||
Unrecognized stock based compensation expense | $ 718,000 | ||||||||||
Warrant [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Warrants outstanding | 1,500,000 | ||||||||||
Exercise price of warrants | $ 15 | ||||||||||
Larry G. Swets Jr [Member] | Stock Option Agreement [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Share-based compensation arrangement by share-based payment award, options, grants in period, gross | 130,000 | ||||||||||
Exercise price of shares | $ 3.38 | ||||||||||
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 remains in the continuous service of the Company through each applicable vesting date and that the Company’s book value per share has increased by 15% or more as compared to the Company’s book value per share as of the fiscal year end prior. The Stock Option expires on January 11, 2031. | ||||||||||
Stock option, expiry date | Jan. 11, 2031 | ||||||||||
Stock option service period | 3 years 3 months 18 days | ||||||||||
Larry G. Swets Jr [Member] | Equity Award Letter Agreement [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Share-based compensation arrangement by share-based payment award, options, grants in period, gross | 370,000 | ||||||||||
Restricted Stock Units (RSUs) [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of stock outstanding | 272,815 | 85,325 | 164,655 | 148,486 | |||||||
Number of restricted stock issued | 158,225 | ||||||||||
Restricted Stock Units (RSUs) [Member] | Non Employee Director [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of restricted stock issued | 158,225 | 83,329 | |||||||||
Restricted Stock Units (RSUs) [Member] | Mr Wong [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of restricted stock issued | 14,492 | ||||||||||
Additional number of restricted stock issued | 15,224 | ||||||||||
2021 Incentive Plan [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of stock options outstanding | 130,000 | ||||||||||
2021 Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of stock outstanding | 272,815 | ||||||||||
Number of stock options outstanding | 25,000 | ||||||||||
2021 Incentive Plan [Member] | Maximum [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of share available for issuance | 1,500,000 | ||||||||||
Twenty Twenty One Equity Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | Employee Director [Member] | |||||||||||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||||||||
Number of shares issued | 25,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 9 Months Ended | ||
Mar. 31, 2020 | Sep. 30, 2022 | Sep. 30, 2021 | |
Service agreement Description | In the third quarter of 2022, the Shared Services Agreement was amended to eliminate termination fees and to increase the termination notice from 120 days to 365 days. | ||
Fundamental Global Special Situations Fund LLC [Member] | |||
Real estate investments | $ 12,100,000 | ||
Fundamental Global Management, LLC [Member] | Shared Services Agreement [Member] | |||
Shared services fee | $ 456,000 | $ 1,368,000 | $ 1,368,000 |
Joint Venture Agreement [Member] | |||
Investment ownership percentage | 50% |
Schedule of Numerators and Deno
Schedule of Numerators and Denominators Used in Calculation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Earnings Per Share [Abstract] | ||||
Net income (loss) from continuing operations | $ 10,255 | $ (4,393) | $ 955 | $ (4,065) |
Gain attributable to noncontrolling interests | (569) | (1,235) | ||
Dividends declared on Series A Preferred Shares | (447) | (448) | (1,342) | (1,245) |
Income (loss) attributable to FG Financial Group, Inc. common shareholders from continuing operations | $ 9,808 | $ (5,410) | $ (387) | $ (6,545) |
Weighted average common shares | 9,333,709 | 5,032,615 | 7,564,017 | 5,012,139 |
Income (loss) per common share from continuing operations | $ 1.05 | $ (1.08) | $ (0.05) | $ (1.31) |
Gain from sale of former insurance business | $ 145 | |||
Weighted average common shares outstanding | 9,333,709 | 5,032,615 | 7,564,017 | 5,012,139 |
Income per common share from discontinued operations | $ 0.03 |
Schedule of Potentially Dilutiv
Schedule of Potentially Dilutive Securities Excluded from Calculation (Details) - shares shares in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 427,815 | 1,715,325 |
Warrants to Purchase Common Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 1,500,000 | |
Equity Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 130,000 | 130,000 |
Restricted Shares [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 25,000 | |
Restricted Stock Units (RSUs) [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Potentially dilutive securities outstanding | 272,815 | 85,325 |
Schedule of Future Minimum Leas
Schedule of Future Minimum Lease Commitments (Details) $ in Thousands | Sep. 30, 2022 USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2022 | $ 5,250 |
2023 | 21,000 |
2024 | 21,000 |
2025 | 15,750 |
Total | $ 63,000 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | ||
Apr. 30, 2022 | Sep. 30, 2022 | Apr. 28, 2022 | Jul. 31, 2021 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Lease term | 44 months | |||
Lease payments | $ 63,000,000 | |||
Payments for rent | 8,800 | |||
Lease liability | 61,000 | |||
Lease Agreement [Member] | ||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
Lease term | 12 months | |||
Lease payments | $ 17,000 | |||
Payments for rent | $ 10,000 | |||
Payments for rent | $ 77,000 |
Summary of Segment Reporting (D
Summary of Segment Reporting (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | |
Segment Reporting Information [Line Items] | |||||
Net premiums earned | $ 4,383 | $ 1,099 | $ 9,809 | $ 2,221 | |
Net investment (loss) income | 11,174 | (1,299) | 5,114 | 2,792 | |
Other income | 214 | 67 | 266 | 146 | |
Total revenue | 15,771 | (133) | 15,189 | 5,159 | |
Income (loss) before income tax | 10,255 | (4,393) | 955 | (4,065) | |
Segment assets | 48,923 | 43,850 | 48,923 | 43,850 | $ 40,829 |
Insurance [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net premiums earned | 4,383 | 1,099 | 9,809 | 2,221 | |
Net investment (loss) income | 2,468 | 2,784 | 1,562 | 1,674 | |
Other income | |||||
Total revenue | 6,851 | 3,883 | 11,371 | 3,895 | |
Income (loss) before income tax | 3,274 | 2,276 | 2,728 | 686 | |
Segment assets | 21,662 | 13,452 | 21,662 | 13,452 | |
Asset Management [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net premiums earned | |||||
Net investment (loss) income | 8,706 | (4,083) | 3,552 | 1,118 | |
Other income | 89 | 67 | 141 | 146 | |
Total revenue | 8,795 | (4,016) | 3,693 | 1,264 | |
Income (loss) before income tax | 8,798 | (4,123) | 3,680 | 905 | |
Segment assets | 17,777 | 21,382 | 17,777 | 21,382 | |
Other Segments [Member] | |||||
Segment Reporting Information [Line Items] | |||||
Net premiums earned | |||||
Net investment (loss) income | |||||
Other income | 125 | 125 | |||
Total revenue | 15,771 | (133) | 15,189 | ||
Income (loss) before income tax | (1,817) | (2,546) | (5,453) | (5,656) | |
Segment assets | $ 9,484 | $ 9,016 | $ 9,484 | $ 9,016 |
Segment Reporting (Details Narr
Segment Reporting (Details Narrative) - USD ($) | Sep. 30, 2022 | Sep. 30, 2021 |
Cash and Cash Equivalents [Line Items] | ||
Unrestricted cash | $ 200,000 | |
Unrestricted Cash [Member] | ||
Cash and Cash Equivalents [Line Items] | ||
Unrestricted cash | $ 8,700,000 | $ 8,200,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Nov. 03, 2022 | Oct. 11, 2022 | Sep. 30, 2022 | Dec. 31, 2021 |
Subsequent Event [Line Items] | ||||
Investments | $ 298,000 | |||
Common stock par value | $ 0.001 | $ 0.001 | ||
Subsequent Event [Member] | Sales Agreement [Member] | Common Stock [Member] | ||||
Subsequent Event [Line Items] | ||||
Common stock par value | $ 0.001 | |||
Proceeds from issuance initial public offering | $ 2,575,976 | |||
Subsequent Event [Member] | FG Communities Inc [Member] | ||||
Subsequent Event [Line Items] | ||||
Investments | $ 2,000,000 |