Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 14-May-15 | |
Document and Entity Information | ||
Entity Registrant Name | State National Companies, Inc. | |
Entity Central Index Key | 1610793 | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -19 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 44,477,162 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Investments: | ||
Fixed-maturity securities - available-for-sale, at fair value (amortized cost - $310,676, $305,019, respectively) | $318,445 | $309,911 |
Equity securities - available-for-sale, at fair value (cost - $1,967, $1,419, respectively) | 3,171 | 2,642 |
Total investments | 321,616 | 312,553 |
Cash and cash equivalents | 31,239 | 38,348 |
Restricted cash and investments | 3,716 | 6,597 |
Accounts receivable from agents, net | 23,295 | 18,528 |
Reinsurance recoverable on paid losses | 948 | 1,200 |
Deferred acquisition costs | 921 | 1,036 |
Reinsurance recoverables | 1,711,956 | 1,656,534 |
Property and equipment, net (includes land held for sale -$1,034, $1,034, respectively) | 18,020 | 18,397 |
Interest receivable | 1,829 | 1,795 |
Deferred income taxes, net | 23,037 | 23,864 |
Goodwill and intangible assets, net | 6,502 | 6,683 |
Other assets | 5,992 | 6,229 |
Total assets | 2,149,071 | 2,091,764 |
Liabilities | ||
Unpaid losses and loss adjustment expenses | 1,235,049 | 1,209,905 |
Unearned premiums | 508,931 | 480,124 |
Allowance for policy cancellations | 50,428 | 55,500 |
Deferred ceding fees | 25,401 | 23,612 |
Accounts payable to agents | 2,071 | 2,448 |
Accounts payable to insurance companies | 2,386 | 4,399 |
Subordinated debentures | 44,500 | 44,500 |
Income taxes payable | 700 | 1,762 |
Other liabilities | 27,877 | 28,642 |
Total liabilities | 1,897,343 | 1,850,892 |
Shareholders' equity | ||
Common stock, $.001 par value (150,000,000 shares authorized; 44,477,162 and 44,247,102 shares issued at March 31, 2015 and December 31, 2014, respectively) | 44 | 44 |
Additional paid-in capital | 221,343 | 220,577 |
Retained earnings | 24,340 | 16,108 |
Accumulated other comprehensive income | 6,001 | 4,143 |
Total shareholders' equity | 251,728 | 240,872 |
Total liabilities and shareholders' equity | $2,149,071 | $2,091,764 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, except Share data, unless otherwise specified | ||
Condensed Consolidated Balance Sheets | ||
Fixed-maturity securities - available-for-sale, amortized cost | $310,676 | $305,019 |
Equity securities - available-for-sale, cost | 1,967 | 1,419 |
Property and equipment, net - land held for sale | $1,034 | $1,034 |
Common stock, par value (in dollars per share) | $0.00 | $0.00 |
Common stock, shares authorized | 150,000,000 | 150,000,000 |
Common stock, shares issued | 44,477,162 | 44,247,102 |
Preferred stock, par value (in dollars per share) | $0.00 | $0.00 |
Preferred stock, shares authorized | -10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Income (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Revenues: | ||
Premiums earned | $29,284 | $22,786 |
Commission income | 370 | 417 |
Ceding fees | 14,144 | 9,902 |
Net investment income | 1,681 | 1,112 |
Realized net investment gains | 265 | 400 |
Other income | 385 | 910 |
Total revenues | 46,129 | 35,527 |
Expenses: | ||
Losses and loss adjustment expenses | 13,533 | 9,996 |
Commissions | 1,497 | 836 |
Taxes, licenses, and fees | 712 | 605 |
General and administrative | 16,142 | 14,577 |
Founder special compensation | 11,203 | |
Interest expense | 500 | 574 |
Total expenses | 32,384 | 37,791 |
Income (loss) before income taxes | 13,745 | -2,264 |
Income taxes: | ||
Current tax expense | 5,244 | 1,678 |
Deferred tax expense (benefit) | -173 | -542 |
Total income tax expense | 5,071 | 1,136 |
Net income | $8,674 | ($3,400) |
Net income per share attributable to common shareholders: | ||
Basic earnings per share (in dollars per share) | $0.20 | ($0.10) |
Diluted earnings per share (in dollars per share) | $0.20 | ($0.10) |
Dividends, per share | $0.01 | $0.34 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Comprehensive Income (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Consolidated Statements of Comprehensive Income | ||
Net income | $8,674 | ($3,400) |
Unrealized gains (losses) on securities: | ||
Unrealized holding gains (losses) during the period | 2,946 | 1,607 |
Tax effect on unrealized holding gains (losses) during the period | -1,031 | -545 |
Less: reclassification adjustments for realized gains included in net income | -88 | -291 |
Tax effect on reclassification adjustments for realized gains included in net income | 31 | 100 |
Other comprehensive income (loss) | 1,858 | 871 |
Total comprehensive income | $10,532 | ($2,529) |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Shareholders' Equity (USD $) | Common stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income | Total |
In Thousands, unless otherwise specified | ||||||
Balance at Dec. 31, 2013 | $41 | $24,367 | $128,830 | ($10,000) | $2,116 | $145,354 |
Increase (decrease) in shareholder's equity | ||||||
Dividends | -16,683 | -16,683 | ||||
Net income | 11,013 | 11,013 | ||||
Other comprehensive loss, net of tax | 2,027 | 2,027 | ||||
Retirement of treasury stock | -7 | -9,993 | 10,000 | |||
Issuance of common stock | 31 | 289,291 | 289,322 | |||
Costs directly attributable to issuance of common stock | -1,578 | -1,578 | ||||
Redemption of existing common stock | -21 | -190,574 | -190,595 | |||
Stock-based compensation expense | 2,012 | 2,012 | ||||
Conversion from S corporation to C corporation tax status | 107,052 | -107,052 | ||||
Balance at Dec. 31, 2014 | 44 | 220,577 | 16,108 | 4,143 | 240,872 | |
Increase (decrease) in shareholder's equity | ||||||
Dividends | -442 | -442 | ||||
Net income | 8,674 | 8,674 | ||||
Other comprehensive loss, net of tax | 1,858 | 1,858 | ||||
Stock-based compensation expense | 766 | 766 | ||||
Balance at Mar. 31, 2015 | $44 | $221,343 | $24,340 | $6,001 | $251,728 |
Condensed_Consolidated_Stateme3
Condensed Consolidated Statements of Cash Flows (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
Operating activities | ||
Net cash provided by operating activities | ($437) | ($17,827) |
Investing activities | ||
Purchase of investments | -20,596 | -12,022 |
Proceeds from sale of investments | 6,938 | 3,111 |
Proceeds from maturities and principal receipts | 7,034 | 6,942 |
Proceeds from dispositions of property and equipment | 55 | -54 |
Purchase of property and equipment | -103 | -299 |
Net cash provided by (used in) investing activities | -6,672 | -2,322 |
Financing activities | ||
Dividends paid | -11,519 | |
Net cash provided by (used in) financing activities | -11,519 | |
Net change in cash and cash equivalents | -7,109 | -31,668 |
Cash and cash equivalents at beginning of period | 38,348 | 69,431 |
Cash and cash equivalents at end of period | $31,239 | $37,763 |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2015 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies |
Description of Business | |
State National Companies, Inc. (the Company) refers to a group of companies that conduct insurance-related activities along two major segments. The Company’s Program Services segment generates fee income, in the form of ceding fees, by offering issuing carrier capacity to both specialty general agents and other producers (GAs), who sell, control, and administer books of insurance business that are supported by third parties that assume reinsurance risk. Substantially all of the risk associated with the program business is ceded to unaffiliated, highly rated reinsurance companies or other reinsurers that provide substantial collateral. The Company’s Lender Services segment involves the writing and insuring of lines of insurance marketed to lending institutions, primarily collateral protection insurance (CPI) policies. | |
Basis of Presentation | |
Our unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and those transactions have been eliminated in consolidation. Certain footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2014 and 2013. | |
The interim financial data as of March 31, 2015 and 2014 is unaudited. However, in the opinion of the Company’s management (Management), the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for fair statements of the results for the interim period. The results of operations for the period ended March 31, 2015 and 2014 are not necessarily indicative of the operating results to be expected for the full year. | |
Refer to “Summary of Significant Accounting Policies” in our consolidated financial statements for the years ended December 31, 2014, 2013 and 2012 for information on accounting policies that we consider critical in preparing our consolidated financial statements. | |
Estimates | |
The preparation of financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from these estimates. | |
Earnings Per Share | |
The computation of earnings per share is based upon the weighted average number of common shares outstanding during the period plus the effect of common shares potentially issuable (in periods in which they have a dilutive effect). Earnings per share have been adjusted to reflect a 736 for 1 stock split in the form of a stock dividend on June 23, 2014. | |
Income Taxes | |
Historically, the Company had elected for its parent company to be taxed for federal income tax purposes as a “Subchapter S corporation” under the Internal Revenue Code. On June 25, 2014, the Company completed a private placement of common stock, which resulted in the termination of its Subchapter S corporation status. Prior to this change in tax status, deferred income taxes were recorded only on the Company’s insurance subsidiaries (and their immediate parent) to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end. All other entities included in the consolidated group filed under Subchapter S Corporation status; therefore, no provision for income taxes had been recorded for these entities. The Company recorded a net deferred income tax benefit related to this change in tax status to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. | |
For any uncertain tax positions not meeting the “more likely than not” recognition threshold, accounting standards require recognition, measurement, and disclosure in the financial statements. There were no uncertain tax positions at March 31, 2015 and December 31, 2014. | |
Stock-based Compensation | |
Compensation expense for stock-based payments is recognized based on the measurement-date fair value for awards that will settle in shares. Compensation expense for restricted stock grants and stock option awards that contain a service condition are recognized on a straight line pro rata basis over the vesting period. For restricted stock awards that contain a performance condition, the expense is recognized based on the awards expected to vest and the cumulative expense is adjusted whenever our estimate of the number of awards to vest changes. See Note 8 — “Stock-based Payments” for related disclosures. | |
Minimum Ceding Fees | |
Minimum ceding fees earned are based on estimates of annual premiums to be written for those programs that are subject to minimum premium levels and related ceding fees. These estimates are based upon various assumptions made regarding the production plans for the underlying program. These assumptions are reviewed by Management and the amount of annual premiums expected to be written are re-estimated as needed. As actual premiums emerge and revisions are made to earlier estimates, minimum ceding fees are earned or reversed and are reflected in current operations. | |
Recent Accounting Pronouncements | |
In June 2014, the FASB issued an accounting standards update (ASU 2014-12), “Compensation – Stock Compensation” (Topic 718). The main provision of this ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. This ASU is effective for annual reporting periods beginning after December 15, 2015 and interim periods within those annual periods. The Company awarded performance based stock compensation on March 30, 2015. The impact of this accounting pronouncement to the Company’s financial statements has not yet been determined. | |
In May 2014, the FASB issued an accounting standards update (ASU 2014-09), “Revenue from Contracts with Customers” (Topic 606). The core guidance of the ASU presents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The ASU provides a five-step analysis of transactions to determine when and how revenue is recognized and requires additional disclosures sufficient to describe the nature, amount, timing and uncertainty of revenue and cash flows for these transactions. This ASU is effective for annual periods beginning after December 15, 2016, including interim periods within that period. Early adoption is not permitted under GAAP. As insurance contracts are excluded from this ASU, the Company is currently evaluating what impact, if any, this ASU will have on our financial results and disclosures and which adoption method to apply. | |
In April 2015, the FASB issued an accounting standards update (ASU 2015-03), “Interest – Imputation of Interest” (Topic 835). The new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. For public business entities, the guidance is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The Company does not plan to early adopt and expects the impact of this pronouncement to be minimal. | |
Investments
Investments | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2015 | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Investments | 2. Investments | |||||||||||||||||||
The following table summarizes information on the amortized cost, gross unrealized gains and losses, and the fair value of investment securities by class: | ||||||||||||||||||||
Cost or | Gross | Gross | ||||||||||||||||||
March 31, 2015 | Amortized | Unrealized | Unrealized | Fair | ||||||||||||||||
($ in thousands) | Cost | Gains | Losses | Value | ||||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 14,382 | $ | 281 | $ | -3 | $ | 14,660 | ||||||||||||
Government agency | 2,313 | 62 | -1 | 2,374 | ||||||||||||||||
State and municipality | 61,987 | 1,560 | -9 | 63,538 | ||||||||||||||||
Industrial and miscellaneous | 112,804 | 3,708 | -229 | 116,283 | ||||||||||||||||
Residential mortgage-backed | 93,933 | 2,182 | -451 | 95,664 | ||||||||||||||||
Commercial mortgage-backed | 24,856 | 669 | — | 25,525 | ||||||||||||||||
Redeemable preferred stock | 401 | — | — | 401 | ||||||||||||||||
Total fixed-maturity securities | 310,676 | 8,462 | -693 | 318,445 | ||||||||||||||||
Equity securities | ||||||||||||||||||||
Non-redeemable preferred stock | 1,955 | 788 | — | 2,743 | ||||||||||||||||
Common stock | 12 | 416 | — | 428 | ||||||||||||||||
Total equity securities | 1,967 | 1,204 | — | 3,171 | ||||||||||||||||
Total investments | $ | 312,643 | $ | 9,666 | $ | -693 | $ | 321,616 | ||||||||||||
Cost or | Gross | Gross | ||||||||||||||||||
December 31, 2014 | Amortized | Unrealized | Unrealized | Fair | ||||||||||||||||
($ in thousands) | Cost | Gains | Losses | Value | ||||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 13,896 | $ | 195 | $ | -49 | $ | 14,042 | ||||||||||||
Government agency | 2,325 | 57 | -9 | 2,373 | ||||||||||||||||
State and municipality | 61,179 | 1,200 | -27 | 62,352 | ||||||||||||||||
Industrial and miscellaneous | 108,125 | 2,582 | -460 | 110,247 | ||||||||||||||||
Residential mortgage-backed | 96,610 | 1,825 | -764 | 97,671 | ||||||||||||||||
Commercial mortgage-backed | 22,483 | 339 | -27 | 22,795 | ||||||||||||||||
Redeemable preferred stock | 401 | 30 | — | 431 | ||||||||||||||||
Total fixed-maturity securities | 305,019 | 6,228 | -1,336 | 309,911 | ||||||||||||||||
Equity securities | ||||||||||||||||||||
Non-redeemable preferred stock | 1,407 | 806 | — | 2,213 | ||||||||||||||||
Common stock | 12 | 417 | — | 429 | ||||||||||||||||
Total equity securities | 1,419 | 1,223 | — | 2,642 | ||||||||||||||||
Total investments | $ | 306,438 | $ | 7,451 | $ | -1,336 | $ | 312,553 | ||||||||||||
Investment securities are exposed to various risks such as interest rate, market, and credit risk. Fair values of securities fluctuate based on the magnitude of changing market conditions; significant changes in market conditions could materially affect the portfolio fair value in the near term. | ||||||||||||||||||||
The following tables show the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position: | ||||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||
March 31, 2015 | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||
($ in thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 1,340 | $ | -3 | $ | — | $ | — | $ | 1,340 | $ | -3 | ||||||||
Government agency | 687 | -1 | — | — | 687 | -1 | ||||||||||||||
State and municipality | 1,965 | -2 | 676 | -7 | 2,641 | -9 | ||||||||||||||
Industrial and miscellaneous | 9,031 | -224 | 31 | -5 | 9,062 | -229 | ||||||||||||||
Residential mortgage-backed | 9,037 | -70 | 12,661 | -381 | 21,698 | -451 | ||||||||||||||
Total fixed-maturity securities | $ | 22,060 | $ | -300 | $ | 13,368 | $ | -393 | $ | 35,428 | $ | -693 | ||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||
December 31, 2014 | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||
($ in thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 522 | $ | -2 | $ | 3,094 | $ | -47 | $ | 3,616 | $ | -49 | ||||||||
Government agency | — | — | 685 | -9 | 685 | -9 | ||||||||||||||
State and municipality | 4,164 | -10 | 2,001 | -17 | 6,165 | -27 | ||||||||||||||
Industrial and miscellaneous | 34,433 | -418 | 2,637 | -42 | 37,070 | -460 | ||||||||||||||
Residential mortgage-backed | 15,491 | -94 | 19,428 | -670 | 34,919 | -764 | ||||||||||||||
Commercial mortgage-backed | 2,528 | -14 | 694 | -13 | 3,222 | -27 | ||||||||||||||
Total fixed-maturity securities | $ | 57,138 | $ | -538 | $ | 28,539 | $ | -798 | $ | 85,677 | $ | -1,336 | ||||||||
The determination that a security has incurred an other-than-temporary decline in fair value and the associated amount of any loss recognition requires the judgment of Management and a regular review of the Company’s investments. Management reviewed all securities with unrealized losses in accordance with the Company’s impairment policy described in Note 1 — “Summary of Significant Accounting Policies” in our consolidated financial statements for the years ended December 31, 2014, 2013 and 2012. Management believes that the temporary impairments are primarily the result of interest rate fluctuations, current conditions in the capital markets, and the impact of those conditions on market liquidity and prices. There were 69 securities in an unrealized loss position at March 31, 2015. Over 95% of these investments were investment-grade at March 31, 2015. The Company does not intend to sell the securities, and it is not more likely than not that the Company will be required to sell these securities before recovery of their amortized cost. Management has the intent and ability to hold the equity securities in an unrealized loss position until the recovery of their fair value. Therefore, Management does not consider these investments to be other-than-temporarily impaired at March 31, 2015. | ||||||||||||||||||||
Proceeds from sales of investments in fixed-maturity, equity and short-term securities through March 31, 2015 and 2014 were $6.9 million and $3.1 million, respectively. | ||||||||||||||||||||
The following table presents the Company’s gross realized gains (losses) for the periods ended March 31: | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||
($ in thousands) | 2015 | 2014 | ||||||||||||||||||
Realized gains: | ||||||||||||||||||||
Fixed-maturity securities | $ | 346 | $ | 395 | ||||||||||||||||
Equity securities | 16 | 26 | ||||||||||||||||||
Gross realized gains | 362 | 421 | ||||||||||||||||||
Realized losses: | ||||||||||||||||||||
Fixed-maturity securities | -97 | -19 | ||||||||||||||||||
Equity securities | — | -2 | ||||||||||||||||||
Gross realized losses | -97 | -21 | ||||||||||||||||||
Net realized investment gains | $ | 265 | $ | 400 | ||||||||||||||||
The Company had three non-cash exchanges of investment securities for the period ending March 31, 2015 and one non-cash exchange for the period ending March 31, 2014. Non-cash consideration received for these exchanges was $1.0 million and $549 thousand for the periods ending March 31, 2015 and March 31, 2014, respectively. Gains of $40 thousand and $258 thousand were recognized on these exchanges and are reflected in the “Realized net investment gains” balance shown on the condensed consolidated statements of income. | ||||||||||||||||||||
The following schedule details the maturities of the Company’s fixed-maturity securities, available-for-sale, as of March 31, 2015: | ||||||||||||||||||||
Fair | ||||||||||||||||||||
($ in thousands) | Amortized Cost | Value | ||||||||||||||||||
Due in one year or less | $ | 12,754 | $ | 12,887 | ||||||||||||||||
Due after one year through five years | 77,637 | 79,368 | ||||||||||||||||||
Due after five years through ten years | 91,094 | 93,760 | ||||||||||||||||||
Due after ten years | 10,402 | 11,241 | ||||||||||||||||||
Residential mortgage-backed securities | 93,933 | 95,664 | ||||||||||||||||||
Commercial mortgage-backed securities | 24,856 | 25,525 | ||||||||||||||||||
$ | 310,676 | $ | 318,445 | |||||||||||||||||
Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. | ||||||||||||||||||||
The Company’s investment portfolio includes $1.2 million of mortgage-backed securities collateralized by subprime residential loans, which represent approximately 0.37% of the Company’s total investments as of March 31, 2015. The Company does not own mortgage derivatives. | ||||||||||||||||||||
Net investment income for the periods ended March 31, consists of the following: | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||
($ in thousands) | 2015 | 2014 | ||||||||||||||||||
Interest on investments | $ | 1,821 | $ | 1,228 | ||||||||||||||||
Dividends | 29 | 23 | ||||||||||||||||||
Gross investment income | 1,850 | 1,251 | ||||||||||||||||||
Investment expenses | -169 | -139 | ||||||||||||||||||
Net investment income | $ | 1,681 | $ | 1,112 | ||||||||||||||||
The Company’s insurance subsidiaries, State National Insurance Company, Inc. (SNIC), National Specialty Insurance Company (NSIC) and United Specialty Insurance Company (USIC) are required to maintain deposits in various states where they are licensed to operate. These deposits consisted of fixed-maturity securities at fair values totaling $53.1 million and $36.9 million at March 31, 2015 and December 31, 2014, respectively. | ||||||||||||||||||||
Goodwill_and_Intangible_Assets
Goodwill and Intangible Assets | 3 Months Ended |
Mar. 31, 2015 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | 3. Goodwill and Intangible Assets |
Goodwill and intangible assets totaled $6.5 million at March 31, 2015. Goodwill of $2.6 million is attributable to our Program and Lender Services segments totaling $2.1 million and $450 thousand, respectively. Definite-lived intangible assets total $3.9 million, net of amortization, as of March 31, 2015 and are fully attributable to our Lender Services segment. | |
Annual impairment testing was performed on goodwill during 2014 and based upon this review, no impairments were recognized. In addition, as of March 31, 2015 there were no triggering events that occurred that would suggest an updated review was necessary. Customer relationships/lists and non-compete agreements are amortized based on discounted cash flow estimates over their expected useful lives of 15 years and five to nine years, respectively. | |
Income_Tax_Provision
Income Tax Provision | 3 Months Ended | |||||||||||
Mar. 31, 2015 | ||||||||||||
Income Tax Provision | ||||||||||||
Income Tax Provision | 4. Income Tax Provision | |||||||||||
The Company computes its provision for income taxes in interim periods by applying its estimated annual effective tax rate against income before income tax expense for the period. In addition, non-recurring or discrete items are recorded during the period in which they occur. The magnitude of the impact that discrete items have on the Company’s quarterly effective tax rate is dependent on the level of income in the period. Prior to the private placement, the Company computed its income tax provision using a 34.3% federal statutory tax rate as its taxable income was within the graduated rates of 34.0% to 35.0%. Prior to June 25, 2014, such a provision applied only to the Company’s insurance subsidiaries and their parent company, State National Intermediate Holdings, Inc. (SNIH). The Company’s other entities, including the ultimate parent company, previously qualified for Subchapter S Corporation status for federal income tax purposes. On June 25, 2014, the Company completed a private placement of common stock, which resulted in the termination of its Subchapter S corporation status. As a result, the Company is taxed as a C corporation and the Company revised its estimated annual effective tax rate to reflect a change in the federal statutory rate from 34.3% to 35.0%. The “exclusion of Subchapter S income” reflects the effect of the lack of income tax expense recorded for the Subchapter S entities for the year-to-date period ended March 31, 2014. A reconciliation of federal income tax expense computed by applying the federal statutory tax rate to income (loss) before income taxes for the three month periods ended March 31 is as follows: | ||||||||||||
2015 | 2014 | |||||||||||
Effective | Effective | |||||||||||
($ in thousands) | Amount | Tax Rate | Amount | Tax Rate | ||||||||
Expected tax expense (benefit) | $ | 4,811 | 35.0 | % | $ | -777 | 34.3 | % | ||||
Exclusion of Subchapter S income | — | — | 1,919 | -84.7 | ||||||||
Tax-exempt income | -94 | -0.7 | -73 | 3.2 | ||||||||
State income taxes | 392 | 2.9 | 56 | -2.5 | ||||||||
Other | -38 | -0.3 | 11 | -0.4 | ||||||||
Total income tax expense | $ | 5,071 | 36.9 | % | $ | 1,136 | -50.1 | % | ||||
Reinsurance
Reinsurance | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Reinsurance | ||||||||
Reinsurance | 5. Reinsurance | |||||||
Through unaffiliated general agents, SNIC, NSIC, and USIC write property and casualty lines of business. This business is written pursuant to quota share and excess of loss reinsurance contracts and general agency agreements that are tripartite agreements executed by SNIC, NSIC, or USIC, the reinsurer, and the general agent. Substantially all of the risk associated with this business is borne by the reinsurer. As compensation for writing this business, SNIC, NSIC, and USIC receive ceding fees from the producers and, accordingly, the related ceding fees receivable are reflected as accounts receivable from agents. If the producer defaults on its obligation to pay these fees (or any other amount due), the reinsurer is obligated to make the payment under the guarantee contained in the contracts. | ||||||||
In addition, the Company is party to a reinsurance agreement in which it cedes a percentage of certain CPI policies to CUMIS Insurance Society, Inc. (CUNA Mutual) and receives a ceding commission related to these policies. On May 19, 2014, the company signed an amendment to alter certain provisions of the July 24, 2009 Alliance with CUNA Mutual. The amendment, effective July 1, 2014, reduces CUNA Mutual’s quota share under the reinsurance agreement from 50% to 30% for all policies written on or after July 1, 2014. | ||||||||
SNIC, NSIC, and USIC remain liable for unearned premiums and unpaid losses and loss adjustment expenses with respect to reinsurance ceded should the reinsurer be unable to meet its obligations. Management considers the possibility of a reinsurer becoming unable to meet its obligations as remote due to the reinsurers’ financial stability, A.M. Best Company rating, size, security funds available, and other factors as appropriate. Following is a summary of these balances: | ||||||||
March 31, | December 31, | |||||||
($ in thousands) | 2015 | 2014 | ||||||
Ceded unearned premiums | $ | 487,974 | $ | 456,754 | ||||
Ceded loss and loss adjustment expense reserves | 1,223,982 | 1,199,780 | ||||||
Total reinsurance recoverables | 1,711,956 | 1,656,534 | ||||||
Secured reinsurance recoverables | -1,280,454 | -1,209,032 | ||||||
Unsecured reinsurance recoverables | $ | 431,502 | $ | 447,502 | ||||
The fair value of the collateral held by SNIC, NISC and USIC is approximately 169% of the secured reinsurance recoverables as of March 31, 2015. | ||||||||
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Fair Value Measurements | 6. Fair Value Measurements | |||||||||||||
Assets and liabilities reported in the condensed consolidated financial statements at fair value are required to be classified according to a fair value hierarchy that prioritizes the use of inputs used in valuation methodologies into three levels. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities. | ||||||||||||||
(Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s or liability’s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Level 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows: | ||||||||||||||
· | Level 1: Inputs are quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date. | |||||||||||||
· | Level 2: Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. These inputs include market interest rates and volatilities, spreads, and yield curves. | |||||||||||||
· | Level 3: Inputs are unobservable. Unobservable inputs reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. | |||||||||||||
A description of the Company’s valuation techniques used to measure its assets at fair value is as follows: | ||||||||||||||
· | Available-for-sale, fixed-maturity securities: All fixed-maturity investments are currently reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from either an independent pricing service using quoted prices or from its third-party investment managers. These Level 2 inputs are valued by either the pricing service or the investment managers utilizing observable data that may include dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus, prepayment speeds, credit information, and the security’s terms and conditions, among other things. Management has reviewed the processes used by the pricing services and has determined that they result in fair values consistent with requirements of ASC 820 for Level 2 investment securities. | |||||||||||||
· | Available-for-sale equity securities: Equity securities are reported at fair value utilizing Level 2 inputs. For these securities, the Company obtains fair value measurements from an independent pricing service using quoted prices or from its third-party investment managers. | |||||||||||||
Based on an analysis of the inputs, the Company’s investments measured at fair value on a recurring basis have been categorized as follows: | ||||||||||||||
March 31, 2015 | ||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||
Fixed-maturity securities | ||||||||||||||
Government | $ | — | $ | 14,660 | $ | — | $ | 14,660 | ||||||
Government agency | — | 2,374 | — | 2,374 | ||||||||||
State and municipality | — | 63,538 | — | 63,538 | ||||||||||
Industrial and miscellaneous | — | 116,283 | — | 116,283 | ||||||||||
Residential mortgage-backed | — | 95,664 | — | 95,664 | ||||||||||
Commercial mortgage-backed | — | 25,525 | — | 25,525 | ||||||||||
Redeemable preferred stock | — | 401 | — | 401 | ||||||||||
Total fixed-maturity securities | — | 318,445 | — | 318,445 | ||||||||||
Equity securities | ||||||||||||||
Non-redeemable preferred stock | — | 2,743 | — | 2,743 | ||||||||||
Common stock | — | 428 | — | 428 | ||||||||||
Total equity securities | — | 3,171 | — | 3,171 | ||||||||||
Total investments | $ | — | $ | 321,616 | $ | — | $ | 321,616 | ||||||
December 31, 2014 | ||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||
Fixed-maturity securities | ||||||||||||||
Government | $ | — | $ | 14,042 | $ | — | $ | 14,042 | ||||||
Government agency | — | 2,373 | — | 2,373 | ||||||||||
State and municipality | — | 62,352 | — | 62,352 | ||||||||||
Industrial and miscellaneous | — | 110,247 | — | 110,247 | ||||||||||
Residential mortgage-backed | — | 97,671 | — | 97,671 | ||||||||||
Commercial mortgage-backed | — | 22,795 | — | 22,795 | ||||||||||
Redeemable preferred stock | — | 431 | — | 431 | ||||||||||
Total fixed-maturity securities | — | 309,911 | — | 309,911 | ||||||||||
Equity securities | ||||||||||||||
Non-redeemable preferred stock | — | 2,213 | — | 2,213 | ||||||||||
Common stock | — | 429 | — | 429 | ||||||||||
Total equity securities | — | 2,642 | — | 2,642 | ||||||||||
Total investments | $ | — | $ | 312,553 | $ | — | $ | 312,553 | ||||||
There was no Level 3 activity including gains or losses recognized, purchases, or sales transaction during the periods ending March 31, 2015 and December 31, 2014. | ||||||||||||||
Transfers between levels are recognized at the end of the reporting period. There were no transfers between Level 1, Level 2, and Level 3 at March 31, 2015 and December 31, 2014. | ||||||||||||||
401k_ProfitSharing_Plan_and_Tr
401(k) Profit-Sharing Plan and Trust | 3 Months Ended |
Mar. 31, 2015 | |
401(k) Profit-Sharing Plan and Trust | |
401(k) Profit-Sharing Plan and Trust | 7. 401(k) Profit-Sharing Plan and Trust |
The Company has a 401(k) profit-sharing plan for employees that covers substantially all officers and employees who are at least 18 years of age. Effective January 1, 2015, the Company is required to make a matching contribution of 100% of the first 1% and 50% of the next 5% of employees’ contributions. For employee contributions made prior to January 1, 2015, the Company was required to make matching contributions of 50% of employees’ contributions, limited to 6% of eligible employees’ compensation. Also, the Company may make additional matching and profit-sharing contributions that are discretionary and are determined at the end of each plan year. The employer contribution expense included in general and administrative expenses for the three months ended March 31, 2015 was $347 thousand (2014 - $335 thousand). | |
Stockbased_Payments
Stock-based Payments | 3 Months Ended |
Mar. 31, 2015 | |
Stock-based Payments | |
Stock-based Payments | 8. Stock-based Payments |
On May 29, 2014, the Company’s shareholders approved the 2014 Long-Term Incentive Plan (2014 Plan), which provides for an aggregate of 4.4 million shares of our common stock that may be issued to employees and non-employee directors. Awards under the 2014 Plan may be in the form of stock options (including incentive stock options that meet the requirements of Section 422 of the Internal Revenue Code and non-statutory stock options), restricted stock, restricted stock units, stock appreciation rights and performance units. Upon completion of the private placement, the Company made grants of non-qualified stock options to certain officers and employees to purchase an aggregate of 2,783,873 shares of our common stock. In addition to the grants of non-qualified stock options, the Company made grants of 12,000 shares of restricted stock to our non-employee directors. These non-qualified stock options and restricted stock grants are classified as equity based awards and will be recognized on a straight-line basis over the vesting period of 3 years and 1 year, respectively. | |
The fair value of each stock option grant is established on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions. The expected volatility is 32.96%, based on historical volatility of similar entities that are publicly traded for a period equal to the expected term. The estimated term of the options, all of which expire ten years after the grant date, is 5.5 years based on expected behavior of the group of option holders. The assumed risk-free interest rate is 1.85%, based on rates for U.S. Treasury Notes with maturity dates corresponding to the estimated term of the options on the date of grant. The assumed dividend yield was 0.40% and no forfeitures are expected. | |
On July 9, 2014 the company granted 38,500 shares of common stock to employees under the 2014 Plan. The fair value of the shares was determined based on the most recent trading price of the stock. | |
On March 30, 2015, the Company awarded 230,060 shares of performance-based restricted stock to certain officers under the 2014 Plan. The fair value of the shares was determined based on the most recent trading price of the stock as of the grant date. These restricted stock grants are classified as equity based awards and will vest based on achievement of performance objectives over one, two and three year performance periods. | |
Concentration_of_Risk
Concentration of Risk | 3 Months Ended |
Mar. 31, 2015 | |
Concentration of Risk | |
Concentration of Risk | 9. Concentration of Risk |
The Company maintains cash and cash equivalents in accounts with financial institutions in excess of the amount insured by the Federal Deposit Insurance Corporation. The Company monitors the financial stability of these institutions regularly, and Management does not believe there is significant credit risk associated with deposits in excess of federally insured amounts. | |
A significant portion of the Company’s writings occurs in California, New York, Texas and Florida. Three customers comprised approximately 7% of the Company’s CPI writings at March 31, 2015. Three reinsurers represent approximately 54% of the Company’s unsecured ceded balances at March 31, 2015. | |
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Commitments and Contingencies | |
Commitments and Contingencies | 10. Commitments and Contingencies |
The Company is involved in various legal proceedings incidental to its normal business activities. Management of the Company does not anticipate that the outcome of such legal actions will have a material effect on the Company’s consolidated financial position or results of operations. | |
SNIC, NSIC, and USIC are subject to assessments from various insurance regulatory agencies related to insurance company insolvencies. Management is not aware of any material assessments for which notice has not yet been received. However, to the extent that such assessments are made, the Company has the contractual right to recover these amounts from the underlying reinsurers. | |
In July 2009, the Company formed a Collateral Protection Alliance (the Alliance) with CUMIS Insurance Society, Inc., a subsidiary of CUNA Mutual, to administer and write CPI business for their customers. The Alliance includes an agency agreement and a reinsurance agreement whereby the Company ceded 50% of the business back to CUNA Mutual. The Company did not account for the Alliance as a business combination because it did not result in a change of control. In connection with the Alliance, the Company has a purchase option and CUNA Mutual has a put option, whereby the Company is obligated to purchase CUNA Mutual’s right to participate in future program business in the event of termination of the Alliance at a specified price. | |
On May 19, 2014, the company signed an amendment to alter certain provisions of the July 24, 2009 Alliance with CUNA Mutual related to the Company’s collateral protection business. The amendment, effective July 1, 2014, reduces CUNA Mutual’s quota share percentage under the reinsurance agreement from 50% to 30% for all policies written on or after July 1, 2014. In addition, the term of the Alliance was extended through July 31, 2018, with an automatic three-year renewal (subject to the right of either party to give notice of nonrenewal); the termination rights for each party were modified, and the purchase price calculation was modified. | |
In consideration of these changes, State National accrued the expense of $17.8 million as of June 30, 2014 and made two payments to CUNA Mutual on July 8, 2014. The first payment of $14.8 million is not subject to any future adjustments. The second payment of $3.0 million is subject to potential future adjustment based upon the net premium and loss ratio for the 12-month period ending June 30, 2015, with any payment adjustment due on August 7, 2015. | |
Earnings_Per_Share
Earnings Per Share | 3 Months Ended | ||||||
Mar. 31, 2015 | |||||||
Earnings Per Share | |||||||
Earnings Per Share | 11. Earnings Per Share | ||||||
We have adopted the provisions of ASC 260, “Earnings Per Share,” requiring presentation of both basic and diluted earnings per share. Earnings per share have been adjusted to reflect a 736 for 1 stock split in the form of a stock dividend on June 23, 2014. A reconciliation of the numerators and denominators of the basic and diluted per share calculations is presented below: | |||||||
Three Months Ended | |||||||
March 31, | March 31, | ||||||
($ in thousands, except for per share amounts) | 2015 | 2014 | |||||
Numerator for both basic and diluted earnings per share: | |||||||
Net income (loss) | $ | 8,674 | $ | -3,400 | |||
Denominator for both basic and diluted earnings per share: | |||||||
Weighted-average common shares outstanding | 44,235,102 | 34,176,896 | |||||
Dilutive effect of outstanding securities (determined using the treasury stock method) | 12,000 | — | |||||
Weighted-average common shares outstanding and potential common shares outstanding | 44,247,102 | 34,176,896 | |||||
Segment_Information
Segment Information | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Segment Information | ||||||||
Segment Information | 12. Segment Information | |||||||
The following is business segment information for the periods indicated: | ||||||||
Three Months Ended | ||||||||
March 31, | March 31, | |||||||
($ in thousands) | 2015 | 2014 | ||||||
Revenues: | ||||||||
Program | $ | 14,133 | $ | 9,886 | ||||
Lender | 30,016 | 23,530 | ||||||
Corporate | 1,980 | 2,111 | ||||||
Consolidated Revenues | $ | 46,129 | $ | 35,527 | ||||
Income (loss) before income taxes: | ||||||||
Program | $ | 10,581 | $ | 6,782 | ||||
Lender | 4,520 | 2,144 | ||||||
Corporate | -1,356 | -11,190 | ||||||
Consolidated Income (loss) before income taxes | $ | 13,745 | $ | -2,264 | ||||
The following tables summarize the financial assets of the Company’s segments as of the periods indicated: | ||||||||
March 31, | December 31, | |||||||
($ in thousands) | 2015 | 2014 | ||||||
Assets: | ||||||||
Program | $ | 1,735,924 | $ | 1,677,971 | ||||
Lender | 14,696 | 16,270 | ||||||
Corporate | 398,451 | 397,523 | ||||||
$ | 2,149,071 | $ | 2,091,764 | |||||
Common_Stock
Common Stock | 3 Months Ended |
Mar. 31, 2015 | |
Common Stock. | |
Common Stock | 13. Common Stock |
On March 30, 2015, the Company filed a registration statement on Form S-8 with the United States Securities and Exchange Commission to register (i) 2,783,873 shares of the Company’s common stock issuable upon the exercise of the stock options previously granted to certain officers under the 2014 Plan, (ii) 12,000 shares of the Company’s restricted common stock issued to non-employee directors under the 2014 Plan and (iii) up to an aggregate of 1,585,627 shares of the Company’s common stock available for future issuance under the 2014 Plan. | |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policy ) | 3 Months Ended |
Mar. 31, 2015 | |
Summary of Significant Accounting Policies | |
Description of Business | Description of Business |
State National Companies, Inc. (the Company) refers to a group of companies that conduct insurance-related activities along two major segments. The Company’s Program Services segment generates fee income, in the form of ceding fees, by offering issuing carrier capacity to both specialty general agents and other producers (GAs), who sell, control, and administer books of insurance business that are supported by third parties that assume reinsurance risk. Substantially all of the risk associated with the program business is ceded to unaffiliated, highly rated reinsurance companies or other reinsurers that provide substantial collateral. The Company’s Lender Services segment involves the writing and insuring of lines of insurance marketed to lending institutions, primarily collateral protection insurance (CPI) policies. | |
Basis of Presentation | Basis of Presentation |
Our unaudited condensed consolidated financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and those transactions have been eliminated in consolidation. Certain footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (SEC) for interim financial reporting. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the years ended December 31, 2014 and 2013. | |
The interim financial data as of March 31, 2015 and 2014 is unaudited. However, in the opinion of the Company’s management (Management), the interim data includes all adjustments, consisting of normal recurring adjustments, necessary for fair statements of the results for the interim period. The results of operations for the period ended March 31, 2015 and 2014 are not necessarily indicative of the operating results to be expected for the full year. | |
Refer to “Summary of Significant Accounting Policies” in our consolidated financial statements for the years ended December 31, 2014, 2013 and 2012 for information on accounting policies that we consider critical in preparing our consolidated financial statements. | |
Estimates | Estimates |
The preparation of financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ materially from these estimates. | |
Earnings Per Share | Earnings Per Share |
The computation of earnings per share is based upon the weighted average number of common shares outstanding during the period plus the effect of common shares potentially issuable (in periods in which they have a dilutive effect). Earnings per share have been adjusted to reflect a 736 for 1 stock split in the form of a stock dividend on June 23, 2014. | |
Income Taxes | Income Taxes |
Historically, the Company had elected for its parent company to be taxed for federal income tax purposes as a “Subchapter S corporation” under the Internal Revenue Code. On June 25, 2014, the Company completed a private placement of common stock, which resulted in the termination of its Subchapter S corporation status. Prior to this change in tax status, deferred income taxes were recorded only on the Company’s insurance subsidiaries (and their immediate parent) to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end. All other entities included in the consolidated group filed under Subchapter S Corporation status; therefore, no provision for income taxes had been recorded for these entities. The Company recorded a net deferred income tax benefit related to this change in tax status to reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. | |
For any uncertain tax positions not meeting the “more likely than not” recognition threshold, accounting standards require recognition, measurement, and disclosure in the financial statements. There were no uncertain tax positions at March 31, 2015 and December 31, 2014. | |
Stock-based Compensation | Stock-based Compensation |
Compensation expense for stock-based payments is recognized based on the measurement-date fair value for awards that will settle in shares. Compensation expense for restricted stock grants and stock option awards that contain a service condition are recognized on a straight line pro rata basis over the vesting period. For restricted stock awards that contain a performance condition, the expense is recognized based on the awards expected to vest and the cumulative expense is adjusted whenever our estimate of the number of awards to vest changes. See Note 8 — “Stock-based Payments” for related disclosures. | |
Minimum Ceding Fees | Minimum Ceding Fees |
Minimum ceding fees earned are based on estimates of annual premiums to be written for those programs that are subject to minimum premium levels and related ceding fees. These estimates are based upon various assumptions made regarding the production plans for the underlying program. These assumptions are reviewed by Management and the amount of annual premiums expected to be written are re-estimated as needed. As actual premiums emerge and revisions are made to earlier estimates, minimum ceding fees are earned or reversed and are reflected in current operations. | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
In June 2014, the FASB issued an accounting standards update (ASU 2014-12), “Compensation – Stock Compensation” (Topic 718). The main provision of this ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. This ASU is effective for annual reporting periods beginning after December 15, 2015 and interim periods within those annual periods. The Company awarded performance based stock compensation on March 30, 2015. The impact of this accounting pronouncement to the Company’s financial statements has not yet been determined. | |
In May 2014, the FASB issued an accounting standards update (ASU 2014-09), “Revenue from Contracts with Customers” (Topic 606). The core guidance of the ASU presents a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. The ASU provides a five-step analysis of transactions to determine when and how revenue is recognized and requires additional disclosures sufficient to describe the nature, amount, timing and uncertainty of revenue and cash flows for these transactions. This ASU is effective for annual periods beginning after December 15, 2016, including interim periods within that period. Early adoption is not permitted under GAAP. As insurance contracts are excluded from this ASU, the Company is currently evaluating what impact, if any, this ASU will have on our financial results and disclosures and which adoption method to apply. | |
In April 2015, the FASB issued an accounting standards update (ASU 2015-03), “Interest – Imputation of Interest” (Topic 835). The new guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. For public business entities, the guidance is effective for annual and interim periods beginning after December 15, 2015. Early adoption is permitted. The Company does not plan to early adopt and expects the impact of this pronouncement to be minimal. | |
Investments_Tables
Investments (Tables) | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2015 | ||||||||||||||||||||
Investments | ||||||||||||||||||||
Summary of amortized cost, gross unrealized gains and losses, and the fair value of investment securities by class | ||||||||||||||||||||
Cost or | Gross | Gross | ||||||||||||||||||
March 31, 2015 | Amortized | Unrealized | Unrealized | Fair | ||||||||||||||||
($ in thousands) | Cost | Gains | Losses | Value | ||||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 14,382 | $ | 281 | $ | -3 | $ | 14,660 | ||||||||||||
Government agency | 2,313 | 62 | -1 | 2,374 | ||||||||||||||||
State and municipality | 61,987 | 1,560 | -9 | 63,538 | ||||||||||||||||
Industrial and miscellaneous | 112,804 | 3,708 | -229 | 116,283 | ||||||||||||||||
Residential mortgage-backed | 93,933 | 2,182 | -451 | 95,664 | ||||||||||||||||
Commercial mortgage-backed | 24,856 | 669 | — | 25,525 | ||||||||||||||||
Redeemable preferred stock | 401 | — | — | 401 | ||||||||||||||||
Total fixed-maturity securities | 310,676 | 8,462 | -693 | 318,445 | ||||||||||||||||
Equity securities | ||||||||||||||||||||
Non-redeemable preferred stock | 1,955 | 788 | — | 2,743 | ||||||||||||||||
Common stock | 12 | 416 | — | 428 | ||||||||||||||||
Total equity securities | 1,967 | 1,204 | — | 3,171 | ||||||||||||||||
Total investments | $ | 312,643 | $ | 9,666 | $ | -693 | $ | 321,616 | ||||||||||||
Cost or | Gross | Gross | ||||||||||||||||||
December 31, 2014 | Amortized | Unrealized | Unrealized | Fair | ||||||||||||||||
($ in thousands) | Cost | Gains | Losses | Value | ||||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 13,896 | $ | 195 | $ | -49 | $ | 14,042 | ||||||||||||
Government agency | 2,325 | 57 | -9 | 2,373 | ||||||||||||||||
State and municipality | 61,179 | 1,200 | -27 | 62,352 | ||||||||||||||||
Industrial and miscellaneous | 108,125 | 2,582 | -460 | 110,247 | ||||||||||||||||
Residential mortgage-backed | 96,610 | 1,825 | -764 | 97,671 | ||||||||||||||||
Commercial mortgage-backed | 22,483 | 339 | -27 | 22,795 | ||||||||||||||||
Redeemable preferred stock | 401 | 30 | — | 431 | ||||||||||||||||
Total fixed-maturity securities | 305,019 | 6,228 | -1,336 | 309,911 | ||||||||||||||||
Equity securities | ||||||||||||||||||||
Non-redeemable preferred stock | 1,407 | 806 | — | 2,213 | ||||||||||||||||
Common stock | 12 | 417 | — | 429 | ||||||||||||||||
Total equity securities | 1,419 | 1,223 | — | 2,642 | ||||||||||||||||
Total investments | $ | 306,438 | $ | 7,451 | $ | -1,336 | $ | 312,553 | ||||||||||||
Schedule of gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position | ||||||||||||||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||
March 31, 2015 | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||
($ in thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 1,340 | $ | -3 | $ | — | $ | — | $ | 1,340 | $ | -3 | ||||||||
Government agency | 687 | -1 | — | — | 687 | -1 | ||||||||||||||
State and municipality | 1,965 | -2 | 676 | -7 | 2,641 | -9 | ||||||||||||||
Industrial and miscellaneous | 9,031 | -224 | 31 | -5 | 9,062 | -229 | ||||||||||||||
Residential mortgage-backed | 9,037 | -70 | 12,661 | -381 | 21,698 | -451 | ||||||||||||||
Total fixed-maturity securities | $ | 22,060 | $ | -300 | $ | 13,368 | $ | -393 | $ | 35,428 | $ | -693 | ||||||||
Less than 12 Months | 12 Months or More | Total | ||||||||||||||||||
December 31, 2014 | Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||
($ in thousands) | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||
Fixed-maturity securities | ||||||||||||||||||||
Government | $ | 522 | $ | -2 | $ | 3,094 | $ | -47 | $ | 3,616 | $ | -49 | ||||||||
Government agency | — | — | 685 | -9 | 685 | -9 | ||||||||||||||
State and municipality | 4,164 | -10 | 2,001 | -17 | 6,165 | -27 | ||||||||||||||
Industrial and miscellaneous | 34,433 | -418 | 2,637 | -42 | 37,070 | -460 | ||||||||||||||
Residential mortgage-backed | 15,491 | -94 | 19,428 | -670 | 34,919 | -764 | ||||||||||||||
Commercial mortgage-backed | 2,528 | -14 | 694 | -13 | 3,222 | -27 | ||||||||||||||
Total fixed-maturity securities | $ | 57,138 | $ | -538 | $ | 28,539 | $ | -798 | $ | 85,677 | $ | -1,336 | ||||||||
Schedule of gross realized gains (losses) | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||
($ in thousands) | 2015 | 2014 | ||||||||||||||||||
Realized gains: | ||||||||||||||||||||
Fixed-maturity securities | $ | 346 | $ | 395 | ||||||||||||||||
Equity securities | 16 | 26 | ||||||||||||||||||
Gross realized gains | 362 | 421 | ||||||||||||||||||
Realized losses: | ||||||||||||||||||||
Fixed-maturity securities | -97 | -19 | ||||||||||||||||||
Equity securities | — | -2 | ||||||||||||||||||
Gross realized losses | -97 | -21 | ||||||||||||||||||
Net realized investment gains | $ | 265 | $ | 400 | ||||||||||||||||
Schedule detailing the maturities of the Company's fixed-maturity securities, available-for-sale | ||||||||||||||||||||
Fair | ||||||||||||||||||||
($ in thousands) | Amortized Cost | Value | ||||||||||||||||||
Due in one year or less | $ | 12,754 | $ | 12,887 | ||||||||||||||||
Due after one year through five years | 77,637 | 79,368 | ||||||||||||||||||
Due after five years through ten years | 91,094 | 93,760 | ||||||||||||||||||
Due after ten years | 10,402 | 11,241 | ||||||||||||||||||
Residential mortgage-backed securities | 93,933 | 95,664 | ||||||||||||||||||
Commercial mortgage-backed securities | 24,856 | 25,525 | ||||||||||||||||||
$ | 310,676 | $ | 318,445 | |||||||||||||||||
Schedule of net investment income | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
March 31, | March 31, | |||||||||||||||||||
($ in thousands) | 2015 | 2014 | ||||||||||||||||||
Interest on investments | $ | 1,821 | $ | 1,228 | ||||||||||||||||
Dividends | 29 | 23 | ||||||||||||||||||
Gross investment income | 1,850 | 1,251 | ||||||||||||||||||
Investment expenses | -169 | -139 | ||||||||||||||||||
Net investment income | $ | 1,681 | $ | 1,112 | ||||||||||||||||
Income_Tax_Provision_Tables
Income Tax Provision (Tables) | 3 Months Ended | |||||||||||
Mar. 31, 2015 | ||||||||||||
Income Tax Provision | ||||||||||||
Schedule of reconciliation of federal income tax expense computed by applying the federal statutory tax rate to income (loss) before federal income tax expense (benefit) | s ended March 31 is as follows: | |||||||||||
2015 | 2014 | |||||||||||
Effective | Effective | |||||||||||
($ in thousands) | Amount | Tax Rate | Amount | Tax Rate | ||||||||
Expected tax expense (benefit) | $ | 4,811 | 35.0 | % | $ | -777 | 34.3 | % | ||||
Exclusion of Subchapter S income | — | — | 1,919 | -84.7 | ||||||||
Tax-exempt income | -94 | -0.7 | -73 | 3.2 | ||||||||
State income taxes | 392 | 2.9 | 56 | -2.5 | ||||||||
Other | -38 | -0.3 | 11 | -0.4 | ||||||||
Total income tax expense | $ | 5,071 | 36.9 | % | $ | 1,136 | -50.1 | % | ||||
Reinsurance_Tables
Reinsurance (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Reinsurance | ||||||||
Summary of balances | ||||||||
March 31, | December 31, | |||||||
($ in thousands) | 2015 | 2014 | ||||||
Ceded unearned premiums | $ | 487,974 | $ | 456,754 | ||||
Ceded loss and loss adjustment expense reserves | 1,223,982 | 1,199,780 | ||||||
Total reinsurance recoverables | 1,711,956 | 1,656,534 | ||||||
Secured reinsurance recoverables | -1,280,454 | -1,209,032 | ||||||
Unsecured reinsurance recoverables | $ | 431,502 | $ | 447,502 | ||||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2015 | ||||||||||||||
Fair Value Measurements | ||||||||||||||
Schedule of investments measured at fair value on recurring basis | ||||||||||||||
March 31, 2015 | ||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||
Fixed-maturity securities | ||||||||||||||
Government | $ | — | $ | 14,660 | $ | — | $ | 14,660 | ||||||
Government agency | — | 2,374 | — | 2,374 | ||||||||||
State and municipality | — | 63,538 | — | 63,538 | ||||||||||
Industrial and miscellaneous | — | 116,283 | — | 116,283 | ||||||||||
Residential mortgage-backed | — | 95,664 | — | 95,664 | ||||||||||
Commercial mortgage-backed | — | 25,525 | — | 25,525 | ||||||||||
Redeemable preferred stock | — | 401 | — | 401 | ||||||||||
Total fixed-maturity securities | — | 318,445 | — | 318,445 | ||||||||||
Equity securities | ||||||||||||||
Non-redeemable preferred stock | — | 2,743 | — | 2,743 | ||||||||||
Common stock | — | 428 | — | 428 | ||||||||||
Total equity securities | — | 3,171 | — | 3,171 | ||||||||||
Total investments | $ | — | $ | 321,616 | $ | — | $ | 321,616 | ||||||
December 31, 2014 | ||||||||||||||
($ in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||
Fixed-maturity securities | ||||||||||||||
Government | $ | — | $ | 14,042 | $ | — | $ | 14,042 | ||||||
Government agency | — | 2,373 | — | 2,373 | ||||||||||
State and municipality | — | 62,352 | — | 62,352 | ||||||||||
Industrial and miscellaneous | — | 110,247 | — | 110,247 | ||||||||||
Residential mortgage-backed | — | 97,671 | — | 97,671 | ||||||||||
Commercial mortgage-backed | — | 22,795 | — | 22,795 | ||||||||||
Redeemable preferred stock | — | 431 | — | 431 | ||||||||||
Total fixed-maturity securities | — | 309,911 | — | 309,911 | ||||||||||
Equity securities | ||||||||||||||
Non-redeemable preferred stock | — | 2,213 | — | 2,213 | ||||||||||
Common stock | — | 429 | — | 429 | ||||||||||
Total equity securities | — | 2,642 | — | 2,642 | ||||||||||
Total investments | $ | — | $ | 312,553 | $ | — | $ | 312,553 | ||||||
Earnings_Per_Share_Tables
Earnings Per Share (Tables) | 3 Months Ended | ||||||
Mar. 31, 2015 | |||||||
Earnings Per Share | |||||||
Schedule of reconciliation of the numerators and denominators of the basic and diluted per share calculations | |||||||
Three Months Ended | |||||||
March 31, | March 31, | ||||||
($ in thousands, except for per share amounts) | 2015 | 2014 | |||||
Numerator for both basic and diluted earnings per share: | |||||||
Net income (loss) | $ | 8,674 | $ | -3,400 | |||
Denominator for both basic and diluted earnings per share: | |||||||
Weighted-average common shares outstanding | 44,235,102 | 34,176,896 | |||||
Dilutive effect of outstanding securities (determined using the treasury stock method) | 12,000 | — | |||||
Weighted-average common shares outstanding and potential common shares outstanding | 44,247,102 | 34,176,896 | |||||
Segment_Information_Tables
Segment Information (Tables) | 3 Months Ended | |||||||
Mar. 31, 2015 | ||||||||
Segment Information | ||||||||
Schedule of business segment information | ||||||||
Three Months Ended | ||||||||
March 31, | March 31, | |||||||
($ in thousands) | 2015 | 2014 | ||||||
Revenues: | ||||||||
Program | $ | 14,133 | $ | 9,886 | ||||
Lender | 30,016 | 23,530 | ||||||
Corporate | 1,980 | 2,111 | ||||||
Consolidated Revenues | $ | 46,129 | $ | 35,527 | ||||
Income (loss) before income taxes: | ||||||||
Program | $ | 10,581 | $ | 6,782 | ||||
Lender | 4,520 | 2,144 | ||||||
Corporate | -1,356 | -11,190 | ||||||
Consolidated Income (loss) before income taxes | $ | 13,745 | $ | -2,264 | ||||
Schedule of the financial assets of the Entity's segments | ||||||||
March 31, | December 31, | |||||||
($ in thousands) | 2015 | 2014 | ||||||
Assets: | ||||||||
Program | $ | 1,735,924 | $ | 1,677,971 | ||||
Lender | 14,696 | 16,270 | ||||||
Corporate | 398,451 | 397,523 | ||||||
$ | 2,149,071 | $ | 2,091,764 | |||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Details) (USD $) | 0 Months Ended | 3 Months Ended | |
Jun. 23, 2014 | Mar. 31, 2015 | Dec. 31, 2014 | |
item | |||
Summary of Significant Accounting Policies | |||
Number of major segments | 2 | ||
Goodwill and Intangible Assets | |||
Impairments of goodwill | $0 | ||
Earnings Per Share | |||
Stock split ratio | 0.001359 | ||
Income Taxes | |||
Uncertain tax positions | $0 | $0 |
Investments_Details
Investments (Details) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Investments | ||
Cost or Amortized Cos | $312,643 | $306,438 |
Gross Unrealized Gains | 9,666 | 7,451 |
Gross Unrealized Losses | -693 | -1,336 |
Total investments | 321,616 | 312,553 |
Fixed-maturity securities | ||
Investments | ||
Cost or Amortized Cos | 310,676 | 305,019 |
Gross Unrealized Gains | 8,462 | 6,228 |
Gross Unrealized Losses | -693 | -1,336 |
Total investments | 318,445 | 309,911 |
Government | ||
Investments | ||
Cost or Amortized Cos | 14,382 | 13,896 |
Gross Unrealized Gains | 281 | 195 |
Gross Unrealized Losses | -3 | -49 |
Total investments | 14,660 | 14,042 |
Government agency | ||
Investments | ||
Cost or Amortized Cos | 2,313 | 2,325 |
Gross Unrealized Gains | 62 | 57 |
Gross Unrealized Losses | -1 | -9 |
Total investments | 2,374 | 2,373 |
State and municipality | ||
Investments | ||
Cost or Amortized Cos | 61,987 | 61,179 |
Gross Unrealized Gains | 1,560 | 1,200 |
Gross Unrealized Losses | -9 | -27 |
Total investments | 63,538 | 62,352 |
Industrial and miscellaneous | ||
Investments | ||
Cost or Amortized Cos | 112,804 | 108,125 |
Gross Unrealized Gains | 3,708 | 2,582 |
Gross Unrealized Losses | -229 | -460 |
Total investments | 116,283 | 110,247 |
Residential mortgage-backed | ||
Investments | ||
Cost or Amortized Cos | 93,933 | 96,610 |
Gross Unrealized Gains | 2,182 | 1,825 |
Gross Unrealized Losses | -451 | -764 |
Total investments | 95,664 | 97,671 |
Commercial mortgage-backed | ||
Investments | ||
Cost or Amortized Cos | 24,856 | 22,483 |
Gross Unrealized Gains | 669 | 339 |
Gross Unrealized Losses | -27 | |
Total investments | 25,525 | 22,795 |
Redeemable preferred stock | ||
Investments | ||
Cost or Amortized Cos | 401 | 401 |
Gross Unrealized Gains | 30 | |
Total investments | 401 | 431 |
Equity securities | ||
Investments | ||
Cost or Amortized Cos | 1,967 | 1,419 |
Gross Unrealized Gains | 1,204 | 1,223 |
Total investments | 3,171 | 2,642 |
Non-redeemable preferred stock | ||
Investments | ||
Cost or Amortized Cos | 1,955 | 1,407 |
Gross Unrealized Gains | 788 | 806 |
Total investments | 2,743 | 2,213 |
Common stock | ||
Investments | ||
Cost or Amortized Cos | 12 | 12 |
Gross Unrealized Gains | 416 | 417 |
Total investments | $428 | $429 |
Investments_Details_2
Investments (Details 2) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
item | |||
Unrealized Losses | |||
Number of securities in unrealized loss position | 69 | ||
Proceeds from sales of investments in fixed-maturity, equity and short-term securities | $6,900,000 | $3,100,000 | |
Fixed-maturity securities | |||
Fair Value | |||
Less Than 12 Months | 22,060,000 | 57,138,000 | |
12 Months or More | 13,368,000 | 28,539,000 | |
Total | 35,428,000 | 85,677,000 | |
Unrealized Losses | |||
Less Than 12 Months | -300,000 | -538,000 | |
12 Months or More | -393,000 | -798,000 | |
Total | -693,000 | -1,336,000 | |
Government | |||
Fair Value | |||
Less Than 12 Months | 1,340,000 | 522,000 | |
12 Months or More | 3,094,000 | ||
Total | 1,340,000 | 3,616,000 | |
Unrealized Losses | |||
Less Than 12 Months | -3,000 | -2,000 | |
12 Months or More | -47,000 | ||
Total | -3,000 | -49,000 | |
Government agency | |||
Fair Value | |||
Less Than 12 Months | 687,000 | ||
12 Months or More | 685,000 | ||
Total | 687,000 | 685,000 | |
Unrealized Losses | |||
Less Than 12 Months | -1,000 | ||
12 Months or More | -9,000 | ||
Total | -1,000 | -9,000 | |
State and municipality | |||
Fair Value | |||
Less Than 12 Months | 1,965,000 | 4,164,000 | |
12 Months or More | 676,000 | 2,001,000 | |
Total | 2,641,000 | 6,165,000 | |
Unrealized Losses | |||
Less Than 12 Months | -2,000 | -10,000 | |
12 Months or More | -7,000 | -17,000 | |
Total | -9,000 | -27,000 | |
Industrial and miscellaneous | |||
Fair Value | |||
Less Than 12 Months | 9,031,000 | 34,433,000 | |
12 Months or More | 31,000 | 2,637,000 | |
Total | 9,062,000 | 37,070,000 | |
Unrealized Losses | |||
Less Than 12 Months | -224,000 | -418,000 | |
12 Months or More | -5,000 | -42,000 | |
Total | -229,000 | -460,000 | |
Residential mortgage-backed | |||
Fair Value | |||
Less Than 12 Months | 9,037,000 | 15,491,000 | |
12 Months or More | 12,661,000 | 19,428,000 | |
Total | 21,698,000 | 34,919,000 | |
Unrealized Losses | |||
Less Than 12 Months | -70,000 | -94,000 | |
12 Months or More | -381,000 | -670,000 | |
Total | -451,000 | -764,000 | |
Commercial mortgage-backed | |||
Fair Value | |||
Less Than 12 Months | 2,528,000 | ||
12 Months or More | 694,000 | ||
Total | 3,222,000 | ||
Unrealized Losses | |||
Less Than 12 Months | -14,000 | ||
12 Months or More | -13,000 | ||
Total | ($27,000) | ||
Investment-grade | |||
Unrealized Losses | |||
Percentage of investments in unrealized loss position | 95.00% |
Investments_Details_3
Investments (Details 3) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 |
item | item | |
Realized gains: | ||
Fixed-maturity securities | $346 | $395 |
Equity securities | 16 | 26 |
Gross realized gains | 362 | 421 |
Realized losses: | ||
Fixed-maturity securities | -97 | -19 |
Equity securities | -2 | |
Gross realized losses | -97 | -21 |
Net realized investment gains | 265 | 400 |
Number of non-cash exchanges of an investment security | 3 | 1 |
Non-cash consideration received for exchanges | 1,000 | 549 |
Gains recognized on exchanges | $40 | $258 |
Investments_Details_4
Investments (Details 4) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | |
Amortized Cost | ||
Due in one year or less | $12,754,000 | |
Due after one year through five years | 77,637,000 | |
Due after five years through ten years | 91,094,000 | |
Due after ten years | 10,402,000 | |
Total amortized cost for fixed maturity securities | 310,676,000 | 305,019,000 |
Fair value | ||
Due in one year or less | 12,887,000 | |
Due after one year through five years | 79,368,000 | |
Due after five years through ten years | 93,760,000 | |
Due after ten years | 11,241,000 | |
Total fixed maturity securities | 318,445,000 | 309,911,000 |
Mortgage-backed securities | ||
Fair value | ||
Mortgage-backed securities collateralized by subprime residential loans | 1,200,000 | |
Percentage of total investments which are collateralized by subprime residential loans | 0.37% | |
Residential mortgage-backed | ||
Amortized Cost | ||
Residential mortgage-backed securities and Commercial mortgage-backed securities | 93,933,000 | |
Fair value | ||
Residential mortgage-backed securities and Commercial mortgage-backed securities | 95,664,000 | |
Commercial mortgage-backed | ||
Amortized Cost | ||
Residential mortgage-backed securities and Commercial mortgage-backed securities | 24,856,000 | |
Fair value | ||
Residential mortgage-backed securities and Commercial mortgage-backed securities | $25,525,000 |
Investments_Details_5
Investments (Details 5) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Net investment income | |||
Interest on investments | $1,821,000 | $1,228,000 | |
Dividends | 29,000 | 23,000 | |
Gross investment income | 1,850,000 | 1,251,000 | |
Investment expenses | -169,000 | -139,000 | |
Net investment income | 1,681,000 | 1,112,000 | |
Fair value of fixed-maturity securities on deposit | $53,100,000 | $36,900,000 |
Goodwill_and_Intangible_Assets1
Goodwill and Intangible Assets (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Dec. 31, 2014 | |
Goodwill and intangible assets | ||
Goodwill | $2,600,000 | |
Goodwill and intangible assets | 6,502,000 | 6,683,000 |
Impairments of goodwill | 0 | |
Customer relationships/lists | ||
Goodwill and intangible assets | ||
Expected useful lives of definite lived intangible assets | 15 years | |
Non-compete agreements | Minimum | ||
Goodwill and intangible assets | ||
Expected useful lives of definite lived intangible assets | 5 years | |
Non-compete agreements | Maximum | ||
Goodwill and intangible assets | ||
Expected useful lives of definite lived intangible assets | 9 years | |
Program segment | ||
Goodwill and intangible assets | ||
Goodwill | 2,100,000 | |
Lender segment | ||
Goodwill and intangible assets | ||
Goodwill | 450,000 | |
Definite-lived intangible assets, net of amortization | $3,900,000 |
Income_Tax_Provision_Details
Income Tax Provision (Details) (USD $) | 0 Months Ended | 3 Months Ended | ||
In Thousands, unless otherwise specified | Jun. 26, 2014 | Jun. 25, 2014 | Mar. 31, 2015 | Mar. 31, 2014 |
Federal And State Income Tax Expense Benefit Abstract | ||||
Total income tax expense (benefit) | $5,071 | $1,136 | ||
Federal graduated rates | 35.00% | 34.30% | 35.00% | 34.30% |
Amount | ||||
Expected tax expense (benefit) | 4,811 | -777 | ||
Exclusion of Subchapter S income | 1,919 | |||
Tax-exempt income | -94 | -73 | ||
State income taxes | 392 | 56 | ||
Other | -38 | 11 | ||
Total income tax expense | $5,071 | $1,136 | ||
Effective Tax Rate | ||||
Expected tax expense (benefit) (as a percent) | 35.00% | 34.30% | 35.00% | 34.30% |
Exclusion of Subchapter S income (as a percent) | -84.70% | |||
Tax-exempt income (as a percent) | -0.70% | 3.20% | ||
State income taxes (as a percent) | 2.90% | -2.50% | ||
Other (as a percent) | -0.30% | -0.40% | ||
Total income tax expense (benefit) (as a percent) | 36.90% | -50.10% | ||
Minimum | ||||
Federal And State Income Tax Expense Benefit Abstract | ||||
Federal graduated rates | 34.00% | |||
Effective Tax Rate | ||||
Expected tax expense (benefit) (as a percent) | 34.00% | |||
Maximum | ||||
Federal And State Income Tax Expense Benefit Abstract | ||||
Federal graduated rates | 35.00% | |||
Effective Tax Rate | ||||
Expected tax expense (benefit) (as a percent) | 35.00% |
Reinsurance_Details
Reinsurance (Details) (USD $) | 3 Months Ended | 0 Months Ended | ||
In Thousands, unless otherwise specified | Mar. 31, 2015 | Jul. 01, 2014 | Jun. 30, 2014 | Dec. 31, 2014 |
Ceded unearned premiums | $487,974 | $456,754 | ||
Ceded loss and loss adjustment expense reserves | 1,223,982 | 1,199,780 | ||
Total reinsurance recoverables | 1,711,956 | 1,656,534 | ||
Secured reinsurance recoverables | 1,280,454 | 1,209,032 | ||
Unsecured reinsurance recoverables | $431,502 | $447,502 | ||
Fair value of the collateral held by SNIC, NISC and USIC as a percentage of the secured reinsurance recoverables | 169.00% | |||
CUMIS Insurance Society Inc Member | ||||
Percentage of certain CPI policies ceded. | 30.00% | 50.00% |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | 3 Months Ended | 12 Months Ended |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Dec. 31, 2014 |
Fair Value Measurements | ||
Fixed-maturity securities | $318,445 | $309,911 |
Equity securities | 3,171 | 2,642 |
Level 3 activity | 0 | 0 |
Transfers between Level 1, Level 2, and Level 3 | 0 | 0 |
Recurring basis | Level 2 | ||
Fair Value Measurements | ||
Total | 321,616 | 312,553 |
Recurring basis | Level 2 | Fixed-maturity securities | ||
Fair Value Measurements | ||
Fixed-maturity securities | 318,445 | 309,911 |
Recurring basis | Level 2 | Government | ||
Fair Value Measurements | ||
Fixed-maturity securities | 14,660 | 14,042 |
Recurring basis | Level 2 | Government agency | ||
Fair Value Measurements | ||
Fixed-maturity securities | 2,374 | 2,373 |
Recurring basis | Level 2 | State and municipality | ||
Fair Value Measurements | ||
Fixed-maturity securities | 63,538 | 62,352 |
Recurring basis | Level 2 | Industrial and miscellaneous | ||
Fair Value Measurements | ||
Fixed-maturity securities | 116,283 | 110,247 |
Recurring basis | Level 2 | Residential mortgage-backed | ||
Fair Value Measurements | ||
Fixed-maturity securities | 95,664 | 97,671 |
Recurring basis | Level 2 | Commercial mortgage-backed | ||
Fair Value Measurements | ||
Fixed-maturity securities | 25,525 | 22,795 |
Recurring basis | Level 2 | Redeemable preferred stock | ||
Fair Value Measurements | ||
Fixed-maturity securities | 401 | 431 |
Recurring basis | Level 2 | Equity securities | ||
Fair Value Measurements | ||
Equity securities | 3,171 | 2,642 |
Recurring basis | Level 2 | Non-redeemable preferred stock | ||
Fair Value Measurements | ||
Equity securities | 2,743 | 2,213 |
Recurring basis | Level 2 | Common stock | ||
Fair Value Measurements | ||
Equity securities | 428 | 429 |
Recurring basis | Total | ||
Fair Value Measurements | ||
Total | 321,616 | 312,553 |
Recurring basis | Total | Fixed-maturity securities | ||
Fair Value Measurements | ||
Fixed-maturity securities | 318,445 | 309,911 |
Recurring basis | Total | Government | ||
Fair Value Measurements | ||
Fixed-maturity securities | 14,660 | 14,042 |
Recurring basis | Total | Government agency | ||
Fair Value Measurements | ||
Fixed-maturity securities | 2,374 | 2,373 |
Recurring basis | Total | State and municipality | ||
Fair Value Measurements | ||
Fixed-maturity securities | 63,538 | 62,352 |
Recurring basis | Total | Industrial and miscellaneous | ||
Fair Value Measurements | ||
Fixed-maturity securities | 116,283 | 110,247 |
Recurring basis | Total | Residential mortgage-backed | ||
Fair Value Measurements | ||
Fixed-maturity securities | 95,664 | 97,671 |
Recurring basis | Total | Commercial mortgage-backed | ||
Fair Value Measurements | ||
Fixed-maturity securities | 25,525 | 22,795 |
Recurring basis | Total | Redeemable preferred stock | ||
Fair Value Measurements | ||
Fixed-maturity securities | 401 | 431 |
Recurring basis | Total | Equity securities | ||
Fair Value Measurements | ||
Equity securities | 3,171 | 2,642 |
Recurring basis | Total | Non-redeemable preferred stock | ||
Fair Value Measurements | ||
Equity securities | 2,743 | 2,213 |
Recurring basis | Total | Common stock | ||
Fair Value Measurements | ||
Equity securities | $428 | $429 |
401k_ProfitSharing_Plan_and_Tr1
401(k) Profit-Sharing Plan and Trust (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Minimum age of officers and employees covered under plan | 18 years | ||
Employer contribution expense | $347 | $335 | |
First One Percent Member | |||
Contribution required to made by employer which match with employees contribution (as a percent) | 100.00% | ||
Next Five Percent Member | |||
Contribution required to made by employer which match with employees contribution (as a percent) | 50.00% | ||
Six Percent [Member] | |||
Contribution required to made by employer which match with employees contribution (as a percent) | 50.00% |
Stockbased_Payments_Details
Stock-based Payments (Details) (Long-Term Incentive Plan 2014) | 0 Months Ended | 3 Months Ended | |||
Jul. 09, 2014 | Jun. 25, 2014 | Mar. 30, 2015 | Mar. 31, 2015 | 29-May-14 | |
Stock-based Payments | |||||
Granted (in shares) | 38,500 | ||||
Employee and non-employee director | |||||
Stock-based Payments | |||||
Shares issued | 4,400,000 | ||||
Non-qualified stock options | Executive officers and certain employees | |||||
Stock-based Payments | |||||
Granted (in shares) | 2,783,873 | ||||
Vesting period | 3 years | ||||
Average assumptions used to value stock-based payments | |||||
Volatility (as a percent) | 32.96% | ||||
Expiration term | 10 years | ||||
Expected term | 5 years 6 months | ||||
Risk-free interest rate (as a percent) | 1.85% | ||||
Dividend yield (as a percent) | 0.40% | ||||
Restricted stock | |||||
Stock-based Payments | |||||
Granted (in shares) | 230,060 | ||||
Restricted stock | Non-employee directors | |||||
Stock-based Payments | |||||
Granted (in shares) | 12,000 | ||||
Restricted stock | Executive officers and certain employees | |||||
Stock-based Payments | |||||
Vesting period | 1 year | ||||
Performance Shares | |||||
Stock-based Payments | |||||
Vesting period | 2 years | ||||
Performance Shares | Minimum | |||||
Stock-based Payments | |||||
Vesting period | 1 year | ||||
Performance Shares | Maximum | |||||
Stock-based Payments | |||||
Vesting period | 3 years |
Concentration_of_Risk_Details
Concentration of Risk (Details) | 3 Months Ended |
Mar. 31, 2015 | |
item | |
Customer | |
Concentration of Risk | |
Number of customers | 3 |
Concentration of risk (as a percent) | 7.00% |
Reinsurer | |
Concentration of Risk | |
Number of reinsurers | 3 |
Concentration of risk (as a percent) | 54.00% |
Commitments_and_Contingencies_
Commitments and Contingencies (Details) (Alliance, CUNA, USD $) | 0 Months Ended | 3 Months Ended | ||||
In Millions, unless otherwise specified | Jul. 08, 2014 | Jul. 01, 2014 | Jun. 30, 2014 | Jul. 24, 2009 | Mar. 31, 2015 | Jun. 30, 2014 |
item | ||||||
Alliance | CUNA | ||||||
Commitments and Contingencies | ||||||
Ceded percentage | 50.00% | |||||
Quota share percentage | 30.00% | 50.00% | ||||
Automatic renewal term | 3 years | |||||
Accrued expenses | $17.80 | $17.80 | ||||
Number of payments made to the counterparty | 2 | |||||
Amount of first payment made which is not subject to any future adjustments | 14.8 | |||||
Amount of second payment made which is subject to potential future adjustments based upon the net premium and loss ratio | $3 |
Earnings_Per_Share_Details
Earnings Per Share (Details) (USD $) | 0 Months Ended | 3 Months Ended | 12 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Jun. 23, 2014 | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
Earnings Per Share | ||||
Stock split ratio | 0.001359 | |||
Numerator for both basic and diluted earnings per share: | ||||
Net income | $8,674 | ($3,400) | $11,013 | |
Denominator for both basic and diluted earnings per share: | ||||
Weighted-average common shares outstanding (in shares) | 44,235,102 | 34,176,896 | ||
Dilutive effect of outstanding securities (determined using the treasury stock method) (in shares) | 12,000 | |||
Weighted-average common shares outstanding and potential common shares outstanding (in shares) | 44,247,102 | 34,176,896 |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | 12 Months Ended | |
In Thousands, unless otherwise specified | Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 |
item | |||
Business segment information | |||
Number of Operating Segments | 2 | ||
Revenues: | |||
Premiums earned | $29,284 | $22,786 | |
Commission income | 370 | 417 | |
Ceding fees | 14,144 | 9,902 | |
Net investment income | 1,681 | 1,112 | |
Realized net investment gains | 265 | 400 | |
Other income | 385 | 910 | |
Total revenues | 46,129 | 35,527 | |
Expenses: | |||
Losses and loss adjustment expenses | 13,533 | 9,996 | |
Commissions | 1,497 | 836 | |
Taxes, licenses, and fees | 712 | 605 | |
General and administrative | 16,142 | 14,577 | |
Founder special compensation | 11,203 | ||
Interest Expense, Long-term Debt | 500 | 574 | |
Total expenses | 32,384 | 37,791 | |
Income (loss) before income taxes | 13,745 | -2,264 | |
Total income tax expense | 5,071 | 1,136 | |
Net income | 8,674 | -3,400 | 11,013 |
Income (loss) before income taxes: | |||
Income (loss) before income taxes | 13,745 | -2,264 | |
Corporate | |||
Revenues: | |||
Total revenues | 1,980 | 2,111 | |
Income (loss) before income taxes: | |||
Income (loss) before income taxes | -1,356 | -11,190 | |
Operating segment | Program segment | |||
Revenues: | |||
Total revenues | 14,133 | 9,886 | |
Income (loss) before income taxes: | |||
Income (loss) before income taxes | 10,581 | 6,782 | |
Operating segment | Lender segment | |||
Revenues: | |||
Total revenues | 30,016 | 23,530 | |
Income (loss) before income taxes: | |||
Income (loss) before income taxes | $4,520 | $2,144 |
Segment_Information_Details_2
Segment Information (Details 2) (USD $) | Mar. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2013 |
In Thousands, unless otherwise specified | |||
Assets | |||
Accounts receivable from agents, net | $23,295 | $18,528 | |
Reinsurance recoverable on paid losses | 948 | 1,200 | |
Reinsurance recoverables | 1,711,956 | 1,656,534 | |
Deferred income taxes, net | 23,037 | 23,864 | |
Goodwill and intangible assets, net | 6,502 | 6,683 | |
Total assets | 2,149,071 | 2,091,764 | |
Liabilities | |||
Unpaid losses and loss adjustment expenses | 1,235,049 | 1,209,905 | |
Unearned premiums | 508,931 | 480,124 | |
Allowance for policy cancellations | 50,428 | 55,500 | |
Deferred ceding fees | 25,401 | 23,612 | |
Total liabilities | 1,897,343 | 1,850,892 | |
Shareholders' equity | |||
Common stock, $.001 par value (150,000,000 shares authorized; 44,477,162 and 44,247,102 shares issued at March 31, 2015 and December 31, 2014, respectively) | 44 | 44 | |
Additional paid-in capital | 221,343 | 220,577 | |
Retained earnings | 24,340 | 16,108 | |
Accumulated other comprehensive income | 6,001 | 4,143 | |
Total shareholders' equity | 251,728 | 240,872 | 145,354 |
Total liabilities and shareholders' equity | 2,149,071 | 2,091,764 | |
Program segment | |||
Assets | |||
Total assets | 1,735,924 | 1,677,971 | |
Lender segment | |||
Assets | |||
Total assets | 14,696 | 16,270 | |
Corporate | |||
Assets | |||
Total assets | $398,451 | $397,523 |
Common_Stock_Details
Common Stock (Details) (Long-Term Incentive Plan 2014) | 0 Months Ended |
Mar. 30, 2015 | |
Common Stock | |
Aggregate number of shares registered and issuable | 1,585,627 |
Certain officers [Member] | |
Common Stock | |
Aggregate number of shares registered and issuable | 2,783,873 |
Restricted stock | Non-employee directors | |
Common Stock | |
Stock Issued During Period, Shares, New Issues | 12,000 |