Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 08, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Entity Registrant Name | ProSight Global, Inc. | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 42,999,027 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Entity Central Index Key | 0001634038 | |
Amendment Flag | false |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Fixed income securities, available-for-sale at fair value (amortized cost $1,855,160 in 2019 and $1,729,755 in 2018) | $ 1,883,989 | $ 1,693,382 |
Commercial levered loans at amortized cost (fair value $16,168 in 2019 and $15,858 in 2018) | 16,549 | 16,915 |
Limited partnerships and limited liability companies at fair value (cost $58,387 in 2019 and $51,903 in 2018) | 62,351 | 53,432 |
Short-term investments | 49,824 | 36,661 |
Total investments | 2,012,713 | 1,800,390 |
Cash and cash equivalents | 34,241 | 22,279 |
Restricted cash | 8,929 | 7,621 |
Accrued investment income | 13,314 | 12,279 |
Premiums and other receivables, net | 196,128 | 200,347 |
Receivable from reinsurers on paid losses | 9,927 | 12,428 |
Reinsurance receivable on unpaid losses | 210,021 | 185,295 |
Deferred policy acquisition costs | 101,740 | 93,613 |
Prepaid reinsurance premiums | 59,218 | 44,626 |
Net deferred income taxes | 13,724 | 33,239 |
Goodwill and net intangible assets | 29,204 | 29,219 |
Fixed assets and capitalized software, net | 38,145 | 39,001 |
Funds withheld related to sale of affiliate | 19,534 | 19,397 |
Other assets | 33,328 | 57,653 |
Assets of discontinued operations | 19,278 | 19,719 |
Total assets | 2,799,444 | 2,577,106 |
Liabilities | ||
Reserve for unpaid losses and loss adjustment expenses | 1,483,660 | 1,396,812 |
Reserve for unearned premiums | 472,907 | 435,933 |
Ceded reinsurance payable | 15,987 | 13,281 |
Notes payable, net of debt issuance costs | 182,517 | 182,355 |
Funds held under reinsurance agreements | 72,362 | 63,165 |
Other liabilities | 91,293 | 73,474 |
Liabilities of discontinued operations | 21,768 | 22,256 |
Total liabilities | 2,340,494 | 2,187,276 |
Stockholders’ equity | ||
Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued or outstanding | ||
Common stock, $0.01 par value; 200,000,000 shares authorized; 38,864,289 shares issued and 38,851,369 shares outstanding | 389 | 389 |
Paid-in capital | 603,163 | 607,260 |
Accumulated other comprehensive income (loss) | 28,844 | (22,315) |
Retained deficit | (173,246) | (195,304) |
Treasury shares - at cost (12,920 shares) | (200) | (200) |
Total stockholders’ equity | 458,950 | 389,830 |
Total liabilities and stockholders’ equity | $ 2,799,444 | $ 2,577,106 |
Consolidated Balance Sheets (_2
Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Consolidated Balance Sheets | ||
Fixed income securities, available-for-sale, amortized cost | $ 1,855,160 | $ 1,729,755 |
Commercial levered loans, fair value | 16,168 | 15,858 |
Limited partnerships and limited liability companies, cost | $ 58,387 | $ 51,903 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 38,864,289 | 38,864,289 |
Common stock, shares outstanding | 38,851,369 | 38,851,369 |
Treasury shares, shares | 12,920 | 12,920 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Consolidated Statements of Operations | ||||
Gross written premiums | $ 235,032 | $ 222,555 | $ 490,870 | $ 471,975 |
Net premiums earned | 202,480 | 183,123 | 398,088 | 350,579 |
Net investment income | 17,398 | 15,548 | 34,556 | 29,257 |
Realized investment gains, net | 137 | 686 | 250 | 399 |
Other income | 97 | 168 | 190 | 336 |
Total revenues | 220,112 | 199,525 | 433,084 | 380,571 |
Expenses: | ||||
Net losses and loss adjustment expenses incurred | 127,115 | 109,933 | 245,448 | 211,787 |
Policy acquisition expenses | 45,533 | 43,253 | 92,106 | 81,624 |
General and administrative expenses | 26,028 | 24,880 | 53,222 | 50,102 |
Interest expense | 3,147 | 3,084 | 6,509 | 6,115 |
Other expense | 7,170 | 7,170 | ||
Total expenses | 208,993 | 181,150 | 404,455 | 349,628 |
Income from continuing operations before income taxes | 11,119 | 18,375 | 28,629 | 30,943 |
Income tax provision: | ||||
Current | 82 | (397) | 223 | (404) |
Deferred | 2,341 | 4,120 | 6,015 | 6,685 |
Total income tax expense | 2,423 | 3,723 | 6,238 | 6,281 |
Net income from continuing operations | 8,696 | 14,652 | 22,391 | 24,662 |
Discontinued operations: | ||||
Net (loss) income from discontinued operations | (78) | (198) | (333) | 587 |
Net income | $ 8,618 | $ 14,454 | $ 22,058 | $ 25,249 |
Earnings per share - basic: | ||||
Net income from continuing operations | $ 0.22 | $ 0.38 | $ 0.58 | $ 0.64 |
Net income | 0.22 | 0.37 | 0.57 | 0.66 |
Earnings per share – diluted: | ||||
Net income from continuing operations | 0.22 | 0.37 | 0.57 | 0.63 |
Net income | $ 0.22 | $ 0.36 | $ 0.56 | $ 0.64 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited ) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Consolidated Statements of Comprehensive Income (Loss) | ||||
Net income | $ 8,618 | $ 14,454 | $ 22,058 | $ 25,249 |
Other comprehensive income (loss), net of taxes: | ||||
Change in unrealized holding gains (losses) on securities, net of deferred tax expense (benefit) of $6,206 and $13,447 in 2019 and $(2,769) and $(8,425) in 2018 | 23,624 | (10,499) | 51,186 | (31,606) |
Less reclassification adjustment for gains included in net income, net of tax (benefit) expense of $(28) and $(52) in 2019 and $45 and $(109) in 2018 | 217 | 731 | 27 | 1,083 |
Other comprehensive income (loss) | 23,407 | (11,230) | 51,159 | (32,689) |
Comprehensive income | $ 32,025 | $ 3,224 | $ 73,217 | $ (7,440) |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Consolidated Statements of Comprehensive Income (Loss) | ||||
Change in unrealized holding (losses) gains on securities, deferred tax expense (benefit) | $ 6,206 | $ (2,769) | $ 13,447 | $ (8,425) |
Reclassification adjustment for (losses) gains included in net income, tax expense (benefit) | $ (28) | $ 45 | $ (52) | $ (109) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited ) - USD ($) $ in Thousands | Common Stock | Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Deficit | Treasury Shares | Total |
Balance at the beginning of the period at Dec. 31, 2017 | $ 387 | $ 606,346 | $ 19,297 | $ (249,847) | $ (200) | $ 375,983 |
Increase (decrease) in Stockholders' Equity | ||||||
Stock based employee compensation plan | 238 | 238 | ||||
New unrealized gain (loss) on investment securities, net of deferred tax expense (benefit) | (21,459) | (21,459) | ||||
Net income | 10,795 | 10,795 | ||||
Balance at the end of the period at Mar. 31, 2018 | 387 | 606,584 | (2,162) | (239,052) | (200) | 365,557 |
Balance at the beginning of the period at Dec. 31, 2017 | 387 | 606,346 | 19,297 | (249,847) | (200) | 375,983 |
Increase (decrease) in Stockholders' Equity | ||||||
Net income | 25,249 | |||||
Balance at the end of the period at Jun. 30, 2018 | 387 | 606,744 | (13,392) | (224,598) | (200) | 368,941 |
Balance at the beginning of the period at Mar. 31, 2018 | 387 | 606,584 | (2,162) | (239,052) | (200) | 365,557 |
Increase (decrease) in Stockholders' Equity | ||||||
Stock based employee compensation plan | 160 | 160 | ||||
New unrealized gain (loss) on investment securities, net of deferred tax expense (benefit) | (11,230) | (11,230) | ||||
Net income | 14,454 | 14,454 | ||||
Balance at the end of the period at Jun. 30, 2018 | 387 | 606,744 | (13,392) | (224,598) | (200) | 368,941 |
Balance at the beginning of the period at Dec. 31, 2018 | 389 | 607,260 | (22,315) | (195,304) | (200) | 389,830 |
Increase (decrease) in Stockholders' Equity | ||||||
Stock based employee compensation plan | 77 | 77 | ||||
New unrealized gain (loss) on investment securities, net of deferred tax expense (benefit) | 27,752 | 27,752 | ||||
Equity distribution | (4,174) | (4,174) | ||||
Net income | 13,440 | 13,440 | ||||
Balance at the end of the period at Mar. 31, 2019 | 389 | 603,163 | 5,437 | (181,864) | (200) | 426,925 |
Balance at the beginning of the period at Dec. 31, 2018 | 389 | 607,260 | (22,315) | (195,304) | (200) | 389,830 |
Increase (decrease) in Stockholders' Equity | ||||||
Net income | 22,058 | |||||
Balance at the end of the period at Jun. 30, 2019 | 389 | 603,163 | 28,844 | (173,246) | (200) | 458,950 |
Balance at the beginning of the period at Mar. 31, 2019 | 389 | 603,163 | 5,437 | (181,864) | (200) | 426,925 |
Increase (decrease) in Stockholders' Equity | ||||||
New unrealized gain (loss) on investment securities, net of deferred tax expense (benefit) | 23,407 | 23,407 | ||||
Net income | 8,618 | 8,618 | ||||
Balance at the end of the period at Jun. 30, 2019 | $ 389 | $ 603,163 | $ 28,844 | $ (173,246) | $ (200) | $ 458,950 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited ) (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |||
Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | Mar. 31, 2018 | |
Statement of Stockholders' Equity | ||||
Net unrealized (loss) on investment securities, deferred tax (benefit) | $ 6,234 | $ 7,265 | $ (2,814) | $ (5,502) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited ) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Operating activities | ||
Net income from continuing operations | $ 22,391 | $ 24,662 |
Net (loss) income from discontinued operations | (333) | 587 |
Net Income | 22,058 | 25,249 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Provision for deferred taxes | 6,015 | 6,685 |
Net realized investment gains | (250) | (399) |
Net limited partnerships gains | (2,449) | (2,825) |
Net accretion from bonds and commercial loans | (2,227) | (2,080) |
Depreciation and amortization | 4,131 | 3,368 |
Amortization of debt issuance costs | 162 | 169 |
Stock based compensation | 77 | 398 |
Changes in: | ||
Premiums and other receivables | 4,219 | (60,746) |
Receivable from reinsurers on paid losses and reinsurance receivable from unpaid losses | (22,225) | (6,141) |
Ceded reinsurance payable | 2,706 | 24,185 |
Accrued investment income | (1,035) | (3,643) |
Deferred policy acquisition costs | (8,127) | (35,010) |
Prepaid reinsurance premiums | (14,592) | 58,366 |
Reserve for unpaid losses and loss adjustment expenses | 86,848 | 68,684 |
Reserve for unearned premiums | 36,974 | 80,474 |
Funds withheld related to sale of affiliate | (137) | (85) |
Funds held under reinsurance agreements | 9,197 | (43,061) |
Other assets | 20,149 | 8,757 |
Other liabilities | 17,819 | 8,703 |
Total adjustments | 137,255 | 105,799 |
Net cash provided by operating activities – continuing operations | 159,646 | 130,461 |
Net cash (used in) provided by operating activities – discontinued operations | (305) | 2,986 |
Net cash provided by operating activities | 159,341 | 133,447 |
Investing activities | ||
Purchases of available-for-sale fixed income securities | (221,287) | (201,987) |
Sales of available-for-sale fixed income securities | 32,791 | 73,779 |
Redemptions of available-for-sale fixed income securities | 64,310 | 46,330 |
Purchases of commercial levered loans | (2,612) | |
Redemptions of commercial levered loans | 350 | 8,346 |
Purchases of limited partnerships | (8,244) | (27,049) |
Distributions and redemptions from limited partnerships | 1,775 | 2,080 |
Purchases of short-term investments | (241,574) | (80,868) |
Sales of short-term investments | 228,765 | 28,615 |
Acquisition of fixed assets and capitalized software | (3,260) | (4,607) |
Net cash used in investing activities - continuing operations | (146,374) | (157,973) |
Net cash provided by (used in) investing activities - discontinued operations | (320) | 2,031 |
Net cash used in investing activities | (146,694) | (155,942) |
Net change in cash and cash equivalents | 12,647 | (22,495) |
Cash, cash equivalents and restricted cash at beginning of year - continuing operations | 29,900 | 77,872 |
Cash, cash equivalents and restricted cash at beginning of year - discontinued operations | 1,034 | 1,322 |
Less: cash, cash equivalents and restricted cash at end of period - discontinued operations | (411) | (6,318) |
Cash, cash equivalents and restricted cash at end of period - continuing operations | $ 43,170 | $ 50,381 |
Basis of Reporting
Basis of Reporting | 6 Months Ended |
Jun. 30, 2019 | |
Basis of Reporting | |
Basis of Reporting | 1. Basis of Reporting The accompanying unaudited interim consolidated financial statements of ProSight Global, Inc. (the Company) have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) for interim financial information and do not contain all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, included in the Company’s final prospectus filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act) on July 25, 2019 (the Prospectus). In the opinion of management, all adjustments necessary for a fair presentation of the consolidated financial statements have been included. Such adjustments consist only of normal recurring items. All significant intercompany balances and transactions have been eliminated in consolidation. Interim results are not necessarily indicative of results of operations for the full year. Reorganization The Company was incorporated in Delaware in 2010. Prior to July 25, 2019, the Company was a wholly-owned subsidiary of ProSight Global Holdings Limited (PGHL), a Bermuda holding company. Effective July 25, 2019, prior to the completion of the Company’s initial public offering (IPO), PGHL merged with and into the Company, with the Company surviving the merger (the merger). The prior holders of PGHL’s equity interests then outstanding received, as merger consideration, the right to receive 6.46 shares of the Company’s common stock for each such outstanding PGHL equity interest. The total merger consideration was 38,851,369 shares of the Company’s common stock, which then comprised 100% of the shares of the Company’s outstanding common stock. As a result of the merger, the assets and liabilities of the Company include, effective July 25, 2019, the assets and liabilities of PGHL. In addition, on July 24, 2019, in connection with the merger, the Company’s duly adopted amended and restated certificate of incorporation (the Certificate of Incorporation) became effective, providing for, among other things, the authorization of 200,000,000 shares of common stock and 50,000,000 shares of preferred stock. All share and per share amounts in the unaudited interim consolidated financial statements and related notes have been restated for all historical periods presented to give effect to the merger and related conversion of shares, including reclassifying an amount equal to the change in value of common stock to additional paid-in capital, as well as the effectiveness of the Certificate of Incorporation. Prior to the merger, PGHL’s subsidiaries ProSight Specialty International Holdings Limited (PSIH) and ProSight Specialty European Holdings Limited (PSEH) were merged with and into the Company, effective February 5, 2019. Additionally, effective February 5, 2019, ProSight Specialty Bermuda Limited (PSBL) became a wholly owned subsidiary of the Company. Prior to February 5, 2019, PSBL was a wholly owned subsidiary of PSEH. Use of Estimates The preparation of the unaudited interim consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statement balances, as well as disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Management periodically reviews its estimates and assumptions. |
Recently Adopted Accounting Sta
Recently Adopted Accounting Standards | 6 Months Ended |
Jun. 30, 2019 | |
Recently Adopted Accounting Standards | |
Recently Adopted Accounting Standards | 2. Recently Adopted Accounting Standards No Accounting Standards Updates (ASU) have been adopted during the six months ended June 30, 2019. Accounting Guidance Not Yet Adopted In January 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-01, Financial Instruments – Overall, Recognition and Measurement of Financial Assets and Financial Liabilities . ASU 2016-01 provides guidance to improve certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Specifically the guidance: (i) requires equity investments to be measured at fair value with changes in fair value recognized in earnings; (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost; (iv) requires the use of the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) clarifies that the need for a valuation allowance on a deferred tax asset related to an available-for-sale (AFS) security should be evaluated with other deferred tax assets. The Company shall apply ASU 2016-01 by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. ASU 2016-01 is effective for public entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. For the Company, ASU 2016-01 is effective for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. The Company is currently evaluating the impact of ASU 2016-01 on its financial condition and results of operations. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to improve the financial reporting of leasing transactions. Under this ASU, lessees will recognize a right-of-use asset and corresponding liability on the balance sheet for all leases, except for leases covering a period of fewer than 12 months. The liability is to be measured as the present value of the future minimum lease payments taking into account renewal options if applicable plus initial incremental direct costs such as commissions. The minimum payments are discounted using the rate implicit in the lease or, if not known, the lessee’s incremental borrowing rate. The lessee’s income statement treatment for leases will vary depending on the nature of what is being leased. A financing type lease is present when, among other matters, the asset is being leased for a substantial portion of its economic life or has an end-of-term title transfer or a bargain purchase option as in today’s practice. The payment of the liability set up for such leases will be apportioned between interest and principal; the right-of use asset will be generally amortized on a straight-line basis. If the lease does not qualify as a financing type lease, it will be accounted for on the income statement as rent on a straight-line basis. ASU 2016-02 requires the application of a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. ASU 2016-02 is effective for public entities for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. For the Company, ASU 2016-02 is effective for annual periods beginning after December 15, 2019 and interim periods within annual periods beginning after December 15, 2020. The Company is currently evaluating ASU 2016-02, and does not expect a material impact on its financial condition or results of operations from the adoption of this guidance. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, Measurement of Credit Losses on Financial Instruments . ASU 2016-13 will change the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, including, among others, held-to-maturity debt securities, trade receivables, and reinsurance receivables. ASU 2016-13 requires a valuation allowance to be calculated on these financial assets and that they be presented on the financial statements net of the valuation allowance. The valuation allowance is a measurement of expected losses that is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This methodology is referred to as the current expected credit loss model. ASU 2016-13 is effective for public entities annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted. For the Company, ASU 2016-13 is effective for annual periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. The Company is currently evaluating the impact of ASU 2016-13 on its financial condition and results of operations. In October 2016, the FASB issued ASU 2016-16, Income Taxes, Intra-Entity Transfers of Assets Other Than Inventory . ASU 2016-16 requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, rather than when the asset has been sold to an outside party. ASU 2016-16 should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for public entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. For the Company, ASU 2016-16 is effective for annual periods beginning after December 15, 2018 and interim periods within annual periods beginning after December 15, 2019. The Company is currently evaluating ASU 2016-16 and does not expect a material impact on its financial condition or results of operations. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement: Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements. The modifications removed the following disclosure requirements: (i) the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level 3 fair value measurements. This ASU added the following disclosure requirements: (i) the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and (ii) the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements. This update shall be applied retrospectively and is effective for all entities annual and interim periods beginning after December 15, 2019, with early adoption permitted. As the requirements of this literature are disclosure only, ASU 2018-13 will not impact the Company’s financial condition or results of operations. In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract . ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. ASU 2018-15 provides the option to apply prospectively to costs for activities performed on or after the date that the entity first adopts or retrospectively in accordance with guidance on accounting changes. ASU 2018-15 is effective for public entities for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption permitted. For the Company, ASU 2018-15 is effective for annual periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. The Company is currently evaluating the impact of this guidance on its financial condition or results of operations. |
Supplemental Cash Flow
Supplemental Cash Flow | 6 Months Ended |
Jun. 30, 2019 | |
Supplemental Cash Flow | |
Supplemental Cash Flow | 3. Supplemental Cash Flow Supplemental cash flow information for the six months ended June 30, 2019 and 2018, is as follows: Six Months Ended June 30 ($ in thousands) 2019 2018 Cash paid during the period for: Interest $ 6,566 $ 6,105 |
Discontinued Operations
Discontinued Operations | 6 Months Ended |
Jun. 30, 2019 | |
Discontinued Operations | |
Discontinued Operations | 4. Discontinued Operations In March 2017, the Company announced its exit from the U.K. insurance market. The financial results and subsequent expenses directly attributable to U.K. operations are included in the Company’s financial statements and classified within discontinued operations for all periods presented. Net loss for discontinued operations was $0.1 million and $0.3 million for the three and six months ended June 30, 2019, respectively. Net loss for discontinued operations was $0.2 million and net income for discontinued operations was $0.6 million for the three and six months ended June 30, 2018, respectively. The following represents the carrying amounts of assets and liabilities associated with the exit from the insurance market in the U.K. reported as discontinued operations in its consolidated balance sheet: June 30, December 31, ($ in thousands) 2019 2018 Assets Total cash and investments $ 10,250 $ 10,436 Other assets 9,028 9,283 Total assets $ 19,278 $ 19,719 Liabilities Unpaid losses and loss adjustment expenses $ 13,917 $ 14,030 Other liabilities 7,851 8,226 Total liabilities $ 21,768 $ 22,256 |
Investments
Investments | 6 Months Ended |
Jun. 30, 2019 | |
Investments | |
Investments | 5. Investments Fixed income securities may include U.S. Treasury securities, government agency securities, municipal debt obligations, residential mortgage backed securities (RMBS), commercial mortgage backed securities (CMBS), collateralized loan obligations (CLO), asset backed securities (ABS) and corporate debt securities. (a) The gross unrealized gains and losses on AFS securities included in assets from continuing operations at June 30, 2019, are as follows: Cost/ Gross Gross Amortized Unrealized Unrealized Fair ($ in thousands) Cost Gains Losses Value Fixed income securities: U.S. Treasury securities $ 84,377 $ 901 $ (191) $ 85,087 Government agency securities 473 — — 473 Corporate debt securities 1,300,218 21,985 (5,838) 1,316,365 Municipal debt obligations 8,274 217 — 8,491 ABS 86,573 1,212 (231) 87,554 CLO 173,538 212 (1,609) 172,141 CMBS 65,174 1,489 (102) 66,561 RMBS - non-agency 66,350 10,916 (118) 77,148 RMBS - agency 70,183 464 (478) 70,169 Total fixed income securities $ 1,855,160 $ 37,396 $ (8,567) $ 1,883,989 The gross unrealized gains and losses on AFS securities included in assets from continuing operations at December 31, 2018, are as follows: Cost/ Gross Gross Amortized Unrealized Unrealized Fair ($ in thousands) Cost Gains Losses Value Fixed income securities: U.S. Treasury securities $ 92,219 $ 126 $ (2,017) $ 90,328 Corporate debt securities 1,231,352 1,216 (40,138) 1,192,430 Municipal debt obligations 6,238 — (153) 6,085 ABS 82,603 1,095 (117) 83,581 CLO 161,421 160 (4,668) 156,913 CMBS 55,980 — (2,137) 53,843 RMBS - non-agency 68,594 11,078 (121) 79,551 RMBS - agency 31,348 — (697) 30,651 Total fixed income securities $ 1,729,755 $ 13,675 $ (50,048) $ 1,693,382 (b) The following table summarizes all securities in an unrealized loss position at June 30, 2019, the fair value and gross unrealized loss by asset class and by length of time those securities have been in a loss position: Less Than 12 Months Greater Than 12 Months Total Total Fair Unrealized Fair Unrealized Total Unrealized ($ in thousands) Value Losses Value Losses Fair Value Losses U.S. Treasury securities $ 2,499 $ (5) $ 41,771 $ (186) $ 44,270 $ (191) Corporate debt securities 119,250 (1,646) 179,264 (4,192) 298,514 (5,838) ABS 30,311 (208) 2,795 (23) 33,106 (231) CLO 81,999 (552) 56,217 (1,057) 138,216 (1,609) CMBS 1,000 — 9,611 (102) 10,611 (102) RMBS - non-agency 1,104 (11) 2,703 (107) 3,807 (118) RMBS - agency 12,456 (308) 5,490 (170) 17,946 (478) Total $ 248,619 $ (2,730) $ 297,851 $ (5,837) $ 546,470 $ (8,567) The following table summarizes all securities in an unrealized loss position at December 31, 2018, the fair value and gross unrealized loss by asset class and by length of time those securities have been in a loss position: Less Than 12 Months Greater Than 12 Months Total Total Fair Unrealized Fair Unrealized Total Unrealized ($ in thousands) Value Losses Value Losses Fair Value Losses U.S. Treasury securities $ 8,263 $ (82) $ 69,727 $ (1,935) $ 77,990 $ (2,017) Corporate debt securities 393,931 (10,241) 710,482 (29,897) 1,104,413 (40,138) Municipal debt obligations — — 6,085 (153) 6,085 (153) ABS 25,258 (61) 4,249 (56) 29,507 (117) CLO 146,004 (4,668) — — 146,004 (4,668) CMBS — — 53,843 (2,137) 53,843 (2,137) RMBS - non-agency 529 (13) 2,449 (108) 2,978 (121) RMBS - agency 27,150 (513) 3,502 (184) 30,652 (697) Total $ 601,135 $ (15,578) $ 850,337 $ (34,470) $ 1,451,472 $ (50,048) The Company was holding 412 and 708 fixed income securities that were in an unrealized loss position as of June 30, 2019 and December 31, 2018, respectively. The Company believes these unrealized losses are temporary, as they resulted from changes in market conditions, including interest rates or sector spreads, and are not considered to be credit risk related. Other-than-temporary impairments (OTTI) charges are recognized as a realized loss to the extent that they are credit related, unless the Company has the intent to sell the security or it is more-likely-than not that the Company will be required to sell the security. In those circumstances, the security is written down to fair value with the entire amount of the write-down charged to earnings as a component of realized losses. The Company had no OTTI charges for the three and six months ended June 30, 2019 and 2018. (c) The amortized cost and fair value of fixed income securities, which excludes the Company’s structured securities portfolio, at June 30, 2019, by contractual maturity are shown below. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. June 30, 2019 Amortized Fair ($ in thousands) Cost Value Due in one year or less $ 85,287 $ 85,352 Due after one through five years 724,384 731,504 Due after five through ten years 499,428 510,299 Due after ten years 84,243 83,261 1,393,342 1,410,416 Structured securities: ABS 86,573 87,554 CLO 173,538 172,141 CMBS 65,174 66,561 RMBS - non-agency 66,350 77,148 RMBS - agency 70,183 70,169 Total $ 1,855,160 $ 1,883,989 The Company did not have any non-income producing fixed income investments as of June 30, 2019 and December 31, 2018, respectively. (d) The Company elected to account for its investments in limited partnerships and limited liability companies of $62.4 million and $53.4 million at June 30, 2019 and December 31, 2018, respectively, at fair value. Changes in fair value of such investments are recorded in the consolidated statements of operations within net investment income. The largest investment within the portfolio is the PIMCO Tactical Opportunities fund, which is carried at $32.0 million at June 30, 2019. The carrying values used for investment in limited partnerships and limited liability companies generally are established on the basis of the valuations provided monthly or quarterly by the managers of such investments. These valuations are determined based upon the valuation criteria established by the governing documents of such investments or utilized in the normal course of such manager’s business, which are reflective of fair value. Such valuations may differ significantly from the values that would have been used had available markets for these investments existed and the differences could be material. The Company’s strategies for its investments in limited partnerships and limited liability companies include investment funds that employ diverse and fundamentally driven approaches to investing which include effective risk management, hedging strategies and leverage. The portfolio of investments in limited partnerships and limited liability companies consists of common stocks, real estate assets, options, swaps, derivative instruments and other structured products. The limited partnerships and limited liability companies in which the Company invests sometimes impose limitations on the timing of withdrawals from the funds. The Company’s inability to withdraw its investment quickly from a particular limited partnership or a limited liability company that is performing poorly could result in losses and may affect liquidity. All of the Company’s limited partnerships and limited liability companies have timing limitations. Most limited partnerships and limited liability companies require a 90-day notice period in order to withdraw funds. Some limited partnerships and limited liability companies may require a withdrawal only at the end of their fiscal year. The Company may also be subject to withdrawal fees in the event the limited partnerships and limited liability companies is sold within a minimum holding period, which may be up to one year. Many limited partnerships and limited liability companies have invoked gated provisions that allow the fund to disperse redemption proceeds to investors over an extended period. The Company is subject to such restrictions, which may delay the receipt of proceeds from limited partnerships and limited liability companies. (e) The Company invests in commercial levered loans, which are private placements. Loans are reported at the principal amount outstanding, reduced by unearned discounts, net deferred loan fees, and an allowance for loan losses. Interest on loans is calculated using the simple interest method on the daily principal amount outstanding. The allowance for loan losses related to impaired loans is determined based on the difference of the carrying value of loans and the present value of expected cash flows discounted at the loan’s effective interest rate or, as a practical expedient, the loan’s observable market price. There was no allowance for loan losses at June 30, 2019 and December 31, 2018, respectively. (f) Proceeds from sales and redemptions in AFS securities totaled $53.7 million and $57.1 million for the three months ended June 30, 2019 and 2018, respectively. Proceeds from sales and redemptions in AFS securities totaled $97.1 million and $120.1 million for the six months ended June 30, 2019 and 2018, respectively. Gross realized gains from sales and redemptions in AFS securities totaled $0.4 million and $0.7 million for the three months ended June 30, 2019 and 2018, respectively, and $0.6 million and $0.8 million for the six months ended June 30, 2019 and 2018, respectively. Gross realized losses from sales and redemptions of AFS investments totaled $0.3 million and an insignificant amount for the three months ended June 30, 2019 and 2018, respectively, and $0.4 million for the six months ended June 30, 2019 and 2018. (g) Net investment income included in net income from continuing operations in the consolidated statements of operations from each major category of investments for the three and six months ended June 30, 2019 and 2018, is as follows: ($ in thousands) Three Months Ended June 30 Six Months Ended June 30 2019 2018 2019 2018 Fixed income securities $ 16,531 $ 14,016 $ 32,650 $ 26,408 Commercial levered loans 159 301 378 665 Net limited partnerships gains 1,143 1,563 2,394 2,825 Other 92 6 181 23 Gross investment income 17,925 15,886 35,603 29,921 Less: expenses 527 338 1,047 664 Net investment income $ 17,398 $ 15,548 $ 34,556 $ 29,257 (h) Included in investments at June 30, 2019 and December 31, 2018, are securities required to be held by the Company (or those that are on deposit) with various regulatory authorities as required by law with a fair value of $211.2 million and $188.6 million, respectively. Fair value and carrying value of assets in the amount of $358.4 million and $347.4 million, respectively, were on deposit in collateral agreements at June 30, 2019. Fair value and carrying value of assets in the amount of $358.5 million and $368.0 million, respectively, were on deposit in collateral agreements at December 31, 2018. (i) The investment portfolio has exposure to market risks, which include the effect of adverse changes in interest rates, credit quality, limited partnership value and illiquid securities including commercial loans and RMBS values on the portfolio. Interest rate risk includes the changes in the fair value of fixed maturities based upon changes in interest rates. Credit quality risk includes the risk of default by issuers of debt securities. Risks from investments in limited partnerships and limited liability companies and illiquid securities risks include the potential loss from the diminution in the value of the underlying investment of the limited partnerships and limited liability companies and the potential loss from changes in the fair value of commercial loans and RMBS. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | 6. Fair Value Measurements The Company has established a framework for valuing financial assets and financial liabilities. The framework is based on a hierarchy of inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The standard describes three levels of inputs that may be used to measure fair value and categorize the assets and liabilities within the hierarchy: Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. These prices generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: (i) many transactions, (ii) current prices, (iii) price quotes not varying substantially among market makers, (iv) narrow bid/ask spreads and (v) most information publicly available. As of June 30, 2019 and December 31, 2018, the Company does not hold any Level 1 securities. Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, nonbinding quotes in markets that are not active for identical or similar assets and other market observable inputs (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.). The Company’s Level 2 assets include U.S. Treasury securities, government agency securities, municipal debt obligations, RMBS, CMBS, CLO, ABS and corporate debt securities. The Company generally obtains valuations from third-party pricing services and/or security dealers for identical or comparable assets or liabilities by obtaining nonbinding broker quotes (when pricing service information is not available) in order to determine an estimate of fair value. The Company bases all of its estimates of fair value for assets on the bid price as it represents what a third-party market participant would be willing to pay in an arm’s-length transaction. Level 3 – Fair value is based on at least one or more significant unobservable inputs that are supported by little or no market activity for the asset. These inputs reflect the Company’s understanding about the assumptions market participants would use in pricing the asset or liability. The Company’s Level 3 assets include its investments in corporate debt securities and commercial levered loans as they are illiquid and trade in inactive markets. These markets are considered inactive as a result of the low level of trades of such investments. Commercial levered loans are also not considered within the Level 3 tabular disclosure, because they are in the “held for investment” category and are also not measured at fair value on a recurring basis. The corporate debt securities classified under Level 3 in the fair value hierarchy are provided to the Company by an independent valuation service provider which use both observable and unobservable inputs in the calculation of fair value. Unobservable inputs, significant to the measurement and valuation of the corporate debt securities are assumptions about prepayment speed, default rates and reinvestment parameters. Significant changes to any of these inputs, or combination of inputs, could significantly change the fair value measurement for these securities when using the income approach. The primary pricing sources for the Company’s investments in commercial levered loans are reviewed for reasonableness, based on the Company’s understanding of the respective market. Prices may then be determined using valuation methodologies such as discounted cash flow models, as well as matrix pricing analyses performed on nonbinding quotes from brokers or other market makers. The following are the major categories of assets measured at fair value on a recurring basis at June 30, 2019 and December 31, 2018, using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3): June 30, 2019 Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Identical Assets Inputs Inputs ($ in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities: U.S. Treasury securities $ — $ 85,087 $ — $ 85,087 Government agency securities — 473 — 473 Corporate debt securities — 1,188,347 128,018 1,316,365 Municipal debt obligations — 8,491 — 8,491 ABS — 87,554 — 87,554 CLO — 172,141 — 172,141 CMBS — 66,561 — 66,561 RMBS - non agency — 77,148 — 77,148 RMBS - agency — 70,169 — 70,169 Total fixed income securities $ — $ 1,755,971 $ 128,018 1,883,989 Investments measured at net asset value: Limited partnerships and limited liability companies 62,351 Total assets at fair value $ 1,946,340 December 31, 2018 Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Identical Assets Inputs Inputs ($ in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities: U.S. Treasury securities $ — $ 90,328 $ — $ 90,328 Corporate debt securities — 1,065,933 126,497 1,192,430 Municipal debt obligations — 6,085 — 6,085 ABS — 83,581 — 83,581 CLO — 156,913 — 156,913 CMBS — 53,843 — 53,843 RMBS - non agency — 79,551 — 79,551 RMBS - agency — 30,651 — 30,651 Total fixed income securities $ — $ 1,566,885 $ 126,497 1,693,382 Investments measured at net asset value: Limited partnerships and limited liability companies 53,432 Total assets at fair value $ 1,746,814 There were no transfers between Levels 1 and 2 for the six months ended June 30, 2019 and the year ended December 31, 2018. In 2018, securities in the amount of $126.5 million were transferred from Level 2 into Level 3 as it was determined that these securities trade in inactive markets. Management believes that the use of the fair value option as specified in Accounting Standards Codification No. 825 , Financial Instruments (ASC 825) to record limited partnerships and limited liability companies is consistent with its objective for such investments. As such, the entire limited partnership portfolio of $62.4 million and $53.4 million as of June 30, 2019 and December 31, 2018, respectively and was recorded using net asset value, which the Company has determined to be the best indicator of fair value for these investments. The following tables disclose the carrying value and fair value of financial instruments that are not recognized or are not carried at fair value in the consolidated balance sheets as of June 30, 2019 and December 31, 2018: June 30, 2019 Carrying Fair Value ($ in thousands) Value Total Level 1 Level 2 Level 3 Assets Commercial levered loans $ 16,549 $ 16,168 $ — $ — $ 16,168 Liabilities Notes payable 182,993 185,979 — 185,979 — Unamortized debt issuance costs (476) Total notes payable $ 182,517 December 31, 2018 Carrying Fair Value ($ in thousands) Value Total Level 1 Level 2 Level 3 Assets Commercial levered loans $ 16,915 $ 15,858 $ — $ — $ 15,858 Liabilities Notes payable 183,000 183,999 — 183,999 — Unamortized debt issuance costs (645) Total notes payable $ 182,355 The fair value of the notes payable at June 30, 2019, approximated a price equal to $186.0 million or 101.6% of the par value. The fair value of the notes payable at December 31, 2018, approximated a price equal to $184.0 million or 100.5% of the par value. The following tables provides a summary of the changes in the fair value of securities measured using Level 3 inputs during the six months ended June 30, 2019 and 2018: Level 3 Corporate ($ in thousands) Securities Fair value, December 31, 2018 $ 126,497 Total net gains (losses) for the period included in: Other comprehensive income 921 Net realized loss (71) Purchases 3,516 Sales — Issuances — Settlements (2,845) Transfers into Level 3 — Transfers out of Level 3 — Fair value, June 30, 2019 $ 128,018 Level 3 Corporate ($ in thousands) Securities Fair value, December 31, 2017 $ — Total net losses for the period included in: Other comprehensive loss (558) Net realized loss (6) Purchases 4,127 Sales — Issuances — Settlements (895) Transfers into Level 3 119,004 Transfers out of Level 3 — Fair value, June 30, 2018 $ 121,672 |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Income (Loss) | 6 Months Ended |
Jun. 30, 2019 | |
Accumulated Other Comprehensive Income (Loss) | |
Accumulated Other Comprehensive Income (Loss) | 7. Accumulated Other Comprehensive Income (Loss) The following table summarizes the components of accumulated other comprehensive income (loss) (AOCI) for the three and six months ended June 30, 2019 and 2018: ($ in thousands) Gross Tax Net March 31, 2019 $ 5,257 $ (180) $ 5,437 Unrealized holding gains on fixed income securities 29,830 6,206 23,624 Amounts reclassified into net income 189 (28) 217 Other comprehensive income 29,641 6,234 23,407 June 30, 2019 $ 34,898 $ 6,054 $ 28,844 ($ in thousands) Gross Tax Net March 31, 2018 $ (4,696) $ (2,534) $ (2,162) Unrealized holding losses on fixed income securities (13,268) (2,769) (10,499) Amounts reclassified into net income 776 45 731 Other comprehensive loss (14,044) (2,814) (11,230) June 30, 2018 $ (18,740) $ (5,348) $ (13,392) ($ in thousands) Gross Tax Net December 31, 2018 $ (29,760) $ (7,445) $ (22,315) Unrealized holding gains on fixed income securities 64,633 13,447 51,186 Amounts reclassified into net income (25) (52) 27 Other comprehensive income 64,658 13,499 51,159 June 30, 2019 $ 34,898 $ 6,054 $ 28,844 ($ in thousands) Gross Tax Net December 31, 2017 $ 22,265 $ 2,968 $ 19,297 Unrealized holding losses on fixed income securities (40,031) (8,425) (31,606) Amounts reclassified into net income 974 (109) 1,083 Other comprehensive loss (41,005) (8,316) (32,689) June 30, 2018 $ (18,740) $ (5,348) $ (13,392) The following table presents reclassifications out of AOCI attributable to the Company during the three and six months ended June 30, 2019 and 2018: Line in Consolidated Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) Statements of Operations 2019 2018 2019 2018 AOCI Unrealized gains on securities Realized investment gains (losses) $ 189 $ 776 $ (25) $ 974 Income tax (benefit) expense (28) 45 (52) (109) Total reclassifications Net realized investment gains $ 217 $ 731 $ 27 $ 1,083 |
Related-Party Information
Related-Party Information | 6 Months Ended |
Jun. 30, 2019 | |
Related-Party Information | |
Related-Party Information | 8. Related-Party Information Loans to Executives and Equity Distribution At December 31, 2018, the Company had $4.2 million in loans to executives. On March 15, 2019, the $4.2 million in loans to executives were repaid. On the same date, a special equity distribution of $4.2 million was made by the Company, which was accounted for as a non-cash transaction on the Company’s consolidated balance sheet. Transition and Separation Agreement On May 3, 2019, the Company entered into a Transition and Separation Agreement (the Separation Agreement) with its former Chief Executive Officer (the former CEO). Under the Separation Agreement, the former CEO and the Company agreed to a general release of claims and his compliance with the restrictive covenants. The Company recorded an expense of $7.2 million within Other Expense in the consolidated statements of operations for the three and six months ended June 30, 2019 relating to the severance payments and benefits payable to the former CEO. Per the terms of the Separation Agreement, the former CEO’s profit interests known as P Shares (P Shares) were forfeited and outstanding restricted stock units (RSUs) will be treated in accordance with the terms of the applicable award agreements. |
Insurance Operations
Insurance Operations | 6 Months Ended |
Jun. 30, 2019 | |
Insurance Operations | |
Insurance Operations | 9. Insurance Operations Total reinsurance ceded and assumed relating to premiums written, earned premiums and net losses and loss adjustment expenses incurred, are as follows: Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) 2019 2018 2019 2018 Written premiums Direct written premiums $ 234,306 $ 221,116 $ 489,291 $ 468,205 Assumed from other companies 726 1,439 1,579 3,770 Ceded to other companies 24,464 9,520 70,400 (2,412) Net written premiums $ 210,568 $ 213,035 $ 420,470 $ 474,387 Earned premiums Direct earned premiums $ 231,088 $ 212,835 $ 454,090 $ 411,736 Assumed from other companies 932 2,294 1,874 7,164 Ceded to other companies 29,540 32,006 57,876 68,321 Net earned premiums $ 202,480 $ 183,123 $ 398,088 $ 350,579 Percent of amount assumed to net Losses and loss adjustment expenses incurred Direct net losses and loss adjustment expenses incurred $ 166,696 $ 135,069 $ 302,044 $ 255,453 Assumed from other companies (26,023) (5,669) (23,204) (6,678) Ceded to other companies 13,558 19,467 33,392 36,988 Net losses and loss adjustment expenses incurred $ 127,115 $ 109,933 $ 245,448 $ 211,787 In 2017, the Company ceded significant amounts of premium under the whole account quota share reinsurance agreements (WAQS). In 2018, the WAQS were terminated. To the extent of unearned premium at the time of termination, ceded written premiums, net of the ceding commission, was returned. For the three and six months ended June 30, 2019 and 2018 under the WAQS, the Company recorded the following: Three Months Ended June 30 ($ in thousands) 2019 2018 Ceded written premium (return of ceded prepaid) $ — $ (18,831) Ceded earned premium — 1,368 (Increase) reduction to net loss and loss adjustment expenses incurred (2,255) 642 Reduction to policy acquisition expenses 2,255 624 Reduction to pre-tax income $ - $ 102 Six Months Ended June 30 ($ in thousands) 2019 2018 Ceded written premium (return of ceded prepaid) $ (3) $ (68,800) Ceded earned premium (3) 14,544 (Increase) reduction to net loss and loss adjustment expenses incurred (2,207) 8,548 Reduction to policy acquisition expenses 2,205 4,906 (Increase) reduction to pre-tax income $ (1) $ 1,090 Distribution Partners The Company negotiates with distribution partners to write direct premium on behalf of the Company’s affiliates. In January 2019, a distribution partner of the Company was acquired by a third-party insurance carrier. In 2018, the Company has sourced 13.5% of direct premium from this distribution partner. The Company does not anticipate any future premiums from this distribution partner after the first quarter of 2019. The three distribution partners contributing the largest amounts of direct written premium (excluding the distribution partner above) totaled $80.4 million and $72.5 million for the three months ended June 30, 2019 and 2018, respectively. The three distribution partners contributing the largest amounts of direct written premium (excluding the distribution partner above) totaled $133.3 million and $131.9 million for the six months ended June 30, 2019 and 2018, respectively. Unpaid Losses Unpaid losses are based on individual case estimates for losses reported and include a provision for incurred but not reported (IBNR) losses and loss adjustment expenses. The following table provides a roll forward of the Company’s reserve for losses and loss adjustment expenses: June 30 ($ in thousands) 2019 2018 Gross unpaid losses and loss expenses, at beginning of year $ 1,396,812 $ 1,258,237 Ceded unpaid losses and loss expenses, at beginning of year 185,295 201,156 Net reserve for losses and loss expenses, at beginning of year 1,211,517 1,057,081 Add: Incurred losses and loss expenses occurring in the: Current year 238,634 214,392 Prior years (3,128) (2,605) Prior years attributable to adjusted premium 9,942 - Total incurred losses and loss expenses 245,448 211,787 Less: Paid losses and loss expenses for claims occurring in the: Current year 18,725 17,179 Prior years 164,601 127,696 Total paid losses and loss expenses for claims 183,326 144,875 Net reserves for losses and loss expenses, at end of period 1,273,639 1,123,993 Ceded unpaid losses and loss expenses, at end of period 210,021 202,928 Gross unpaid losses and loss expenses, at end of period $ 1,483,660 $ 1,326,921 During the six months ended June 30, 2019, the Company’s estimated losses and loss expenses for accident years 2018 and prior developed favorably by $3.1 million driven by $14.5 million favorable development in Workers’ Compensation lines and $6.7 million favorable development in Auto Liability lines. The favorable experience was partially offset by $13.2 million in unfavorable development in General Liability lines and $4.6 million unfavorable development in Marine Liability lines within the All Other Lines category. The Company incurred $9.9 million of losses and loss adjustment expenses on earned premium attributable to prior accident years during the six months ended June 30, 2019. During the six months ended June 30, 2018, the Company’s estimated losses and loss expenses for accident years 2017 and prior developed favorably by $2.6 million driven by $7.2 million of favorable development in Workers’ Compensation, $7.8 million of favorable development in Commercial Auto lines and $2.1 million of favorable development in Marine Liability lines within the All Other Lines category, partially offset by $8.3 million of unfavorable development in General Liability lines and $6.1 million of unfavorable development in Commercial Multiple Peril lines. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Taxes | |
Income Taxes | 10. Income Taxes The Company and its respective U.S. subsidiaries are subject to the tax laws and regulations of the United States and various state jurisdictions. The Company files a consolidated federal tax return that includes all domestic subsidiaries. The Company has one non-U.S. subsidiary, PSBL, which has received an undertaking from the Minister of Finance in Bermuda that would exempt it from Bermudian taxation until March 2035. The Company uses the estimated annual effective tax rate method for calculating its tax provision in interim periods, which represents the Company’s best estimate of the effective tax rate expected for the full year. The estimated annual effective tax rate typically differs from the U.S. statutory tax rate primarily as a result of applying the Bermuda statutory tax rate of 0% to Bermuda income before taxes, tax-exempt investment income and any discrete items recognized during the period. The Company’s effective tax rates were 21.8% and 20.3% for the three and six months ended June 30, 2019 and 2018, respectively. The increase in the effective tax rate in the three and six months ended June 30, 2019 compared to the same period in 2018 was primarily due to prior year adjustments recorded in of 2018 related to state income taxes. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt | |
Debt | 11. Debt On March 15, 2019, the Company entered into an amended and restated revolving loan agreement (as amended, the revolving facility), among other things, (a) extended the maturity date to the earlier of (i) March 15, 2022, or (ii) 91 days before the maturity of the senior notes due November 2020 or, if such senior notes are amended or replaced, 91 days before the maturity of such amendment or replacement and (b) increased the aggregate principal amount of $25.0 million to $50.0 million. |
Segment Information
Segment Information | 6 Months Ended |
Jun. 30, 2019 | |
Segment Information | |
Segment Information | 12. Segment Information The following table provides a summary of the Company’s gross written premium by customer segments within our Specialty Insurance reportable segment. Gross written premiums included in “Other” consist of (i) primary and excess workers’ compensation coverage for Self-Insured Groups, (ii) niches exited prior to 2018, many with a concentration in commercial auto, (iii) fronting arrangements in which all premium written is ceded to a third party, (iv) participation in industry pools, and (v) emerging new business customer segments. Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) 2019 2018 2019 2018 Customer Segment Construction $ 32,495 $ 26,575 $ 55,743 $ 49,528 Consumer Services 37,893 28,387 65,378 50,294 Marine and Energy 20,845 18,884 36,779 34,146 Media and Entertainment 39,300 37,977 76,842 78,231 Professional Services 29,104 27,939 58,666 57,504 Real Estate 46,614 44,072 75,349 72,030 Transportation 23,499 23,448 57,514 50,362 Customer Segment subtotal 229,750 207,282 426,271 392,095 Other 5,282 15,273 64,599 79,880 Specialty Insurance total $ 235,032 $ 222,555 $ 490,870 $ 471,975 The following table provides a summary of the Company’s gross written premium by line of business within our Specialty Insurance segment: Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) 2019 2018 2019 2018 Line of Business Commercial Auto $ 54,296 $ 34,451 $ 96,080 $ 72,702 General Liability 83,156 81,585 154,451 145,630 Workers’ Compensation 34,921 45,278 124,983 144,048 Commercial Multiple Peril 17,040 18,812 36,674 34,072 All Other Lines 45,619 42,429 78,682 75,523 Specialty Insurance total $ 235,032 $ 222,555 $ 490,870 $ 471,975 |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings per Share | |
Earnings per Share | 13. Earnings per Share The following table provides a reconciliation of the numerators and denominators of basic and diluted earnings per share (EPS) based on restated shares: Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Loss Shares Per Share Three Months Ended June 30, 2019 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income (loss) available to common stockholders $ 8,696 38,851 $ 0.22 $ (78) 38,851 $ — Effect of dilutive securities: Stock compensation plans 604 — 604 — Diluted EPS $ 8,696 39,455 $ 0.22 $ (78) 39,455 $ — Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Loss Shares Per Share Three Months Ended June 30, 2018 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income (loss) available to common stockholders $ 14,652 38,743 $ 0.38 $ (198) 38,743 $ (0.01) Effect of dilutive securities: Stock compensation plans 698 0.01 698 — Diluted EPS $ 14,652 39,441 $ 0.37 $ (198) 39,441 $ (0.01) Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Loss Shares Per Share Six Months Ended June 30, 2019 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income (loss) available to common stockholders $ 22,391 38,851 $ 0.58 $ (333) 38,851 $ (0.01) Effect of dilutive securities: Stock compensation plans 604 0.01 604 — Diluted EPS $ 22,391 39,455 $ 0.57 $ (333) 39,455 $ (0.01) Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Income Shares Per Share Six Months Ended June 30, 2018 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income available to common stockholders $ 24,662 38,743 $ 0.64 $ 587 38,743 $ 0.02 Effect of dilutive securities: Stock compensation plans 698 0.01 698 0.01 Diluted EPS $ 24,662 39,441 $ 0.63 $ 587 39,441 $ 0.01 |
Legal Proceedings
Legal Proceedings | 6 Months Ended |
Jun. 30, 2019 | |
Legal Proceedings | |
Legal Proceedings | 14. Legal Proceedings In the normal course of business, the Company’s insurance subsidiaries are subject to disputes, including litigation and arbitration, arising out of the ordinary course of business. The Company’s estimates of the costs of settling such matters are reflected in its reserves for losses and loss expenses, and the Company does not believe that the ultimate outcome of such matters will have a material adverse effect on its financial condition or results of operations. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2019 | |
Subsequent Events | |
Subsequent Events | 15. Subsequent Events Initial Public Offering On July 29, 2019, the Company completed the IPO with the sale of 7,857,145 shares of the Company’s common stock, including the issuance and sale by the Company of 4,285,715 shares of the Company’s common stock and the sale by ProSight Parallel Investment LLC and ProSight Investment LLC (collectively, the GS Investors) and ProSight TPG, L.P., TPG PS 1, L.P., TPG PS 2, L.P., TPG PS 3, L.P. and TPG PS 4, L.P. (collectively the TPG Investors and together with the GS Investors, the Principal Stockholders) of 3,571,430 shares of the Company’s common stock. Shares of the Company’s common stock were initially offered to the public by the underwriters in the IPO at a per-share price of $14.00. After deducting underwriting discounts and commissions and estimated offering expenses, the net proceeds to the Company from the IPO were approximately $51.6 million. The Company did not receive any of the proceeds from the sale of the shares of the Company’s common stock sold by the Principal Stockholders in the IPO. Following the IPO, the GS Investors continue to hold approximately 40.9% of the Company’s outstanding common stock and the TPG Investors continue to hold approximately 39.4% of the Company’s outstanding common stock. 2019 Equity Incentive Plan In connection with, and prior to the completion of the IPO, PGHL’s Amended and Restated 2010 Equity Incentive Plan (the 2010 Plan) was terminated. Immediately prior to the merger, all outstanding P Shares granted under the 2010 Plan prior to the IPO, were cancelled, and all outstanding RSUs granted under the 2010 Plan converted into RSUs based on the shares of common stock of the Company . On July 24, 2019, the Company’s 2019 Equity Incentive Plan (the 2019 Plan) became effective immediately prior to the effectiveness of the registration statement filed in connection with the IPO. The 2019 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, RSUs, performance shares, and units and other cash‑based or share‑based awards. The 2019 Plan is administered by the compensation committee of the Company’s board of directors. Subject to the provisions of the 2019 Plan, the compensation committee determines in its discretion the persons to whom and the times at which awards are granted, the size of awards (subject to certain limitations set forth in the compensation committee charter) and the terms and conditions of awards. A total of 4,500,000 shares of common stock are initially authorized and reserved for issuance under the 2019 Plan, including shares underlying RSUs granted under the 2010 Plan, which converted into the Company’s common stock, effective July 25, 2019, as a result of the merger. The following is a summary of the post-offering compensation included in the 2019 Plan, including the number of common stock reserved to each award mentioned below: (i) 183,095 annual long-term incentive awards in respect of 2019, 50% of which are time-vesting RSUs and 50% of which are performance-vesting RSUs, granted to management in connection with the IPO. The fair value of such awards is $2.6 million at grant date. (ii) 1,302,198 supplemental RSU awards, 100% of which are time-vesting RSUs, granted to management in connection with the IPO and subject to vesting as follows: 25% vested at grant date, 25% will vest on the second anniversary of the grant date, subject to continued service, and 50% will vest on the third anniversary of the grant date, subject to continued service. The fair value of the supplemental RSUs is $18.2 million. (iii) 250,000 founders grant awards in the form of time-vesting RSUs with a fair value of $3.5 million at grant date. These awards will cliff vest on the third anniversary of the grant date. (iv) 26,399 non-employee director RSU awards with a fair value of $0.4 million at grant date (other than RSUs granted to non-employee directors designated by the Company’s principal stockholders, if any, which will be determined by the Board of Directors. These awards are fully vested on grant date. (v) 668,135 RSUs initially granted under the 2010 Plan that were converted into RSUs based on shares of the Company’s common stock upon the consummation of the merger. 2019 Employee Stock Purchase Plan On July 24, 2019, the Company’s 2019 Employee Stock Purchase Plan (the 2019 ESPP) became effective immediately prior to the effectiveness of the registration statement filed in connection with the IPO. A total of 1,000,000 shares of the Company’s common stock will be reserved and available for sale under the 2019 ESPP. The compensation committee of the board of directors administers the 2019 ESPP and have full authority to interpret the terms of the 2019 ESPP. |
Supplemental Cash Flow (Tables)
Supplemental Cash Flow (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Supplemental Cash Flow | |
Summary of supplemental cash flow information | Six Months Ended June 30 ($ in thousands) 2019 2018 Cash paid during the period for: Interest $ 6,566 $ 6,105 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Discontinued Operations | |
Summary of results of operations and carrying amounts of assets and liabilities for discontinued operations | June 30, December 31, ($ in thousands) 2019 2018 Assets Total cash and investments $ 10,250 $ 10,436 Other assets 9,028 9,283 Total assets $ 19,278 $ 19,719 Liabilities Unpaid losses and loss adjustment expenses $ 13,917 $ 14,030 Other liabilities 7,851 8,226 Total liabilities $ 21,768 $ 22,256 |
Investments (Tables)
Investments (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Investments | |
Summary of gross unrealized gains and losses on AFS securities included in assets | The gross unrealized gains and losses on AFS securities included in assets from continuing operations at June 30, 2019, are as follows: Cost/ Gross Gross Amortized Unrealized Unrealized Fair ($ in thousands) Cost Gains Losses Value Fixed income securities: U.S. Treasury securities $ 84,377 $ 901 $ (191) $ 85,087 Government agency securities 473 — — 473 Corporate debt securities 1,300,218 21,985 (5,838) 1,316,365 Municipal debt obligations 8,274 217 — 8,491 ABS 86,573 1,212 (231) 87,554 CLO 173,538 212 (1,609) 172,141 CMBS 65,174 1,489 (102) 66,561 RMBS - non-agency 66,350 10,916 (118) 77,148 RMBS - agency 70,183 464 (478) 70,169 Total fixed income securities $ 1,855,160 $ 37,396 $ (8,567) $ 1,883,989 The gross unrealized gains and losses on AFS securities included in assets from continuing operations at December 31, 2018, are as follows: Cost/ Gross Gross Amortized Unrealized Unrealized Fair ($ in thousands) Cost Gains Losses Value Fixed income securities: U.S. Treasury securities $ 92,219 $ 126 $ (2,017) $ 90,328 Corporate debt securities 1,231,352 1,216 (40,138) 1,192,430 Municipal debt obligations 6,238 — (153) 6,085 ABS 82,603 1,095 (117) 83,581 CLO 161,421 160 (4,668) 156,913 CMBS 55,980 — (2,137) 53,843 RMBS - non-agency 68,594 11,078 (121) 79,551 RMBS - agency 31,348 — (697) 30,651 Total fixed income securities $ 1,729,755 $ 13,675 $ (50,048) $ 1,693,382 |
Summary of all securities in an unrealized loss position, the fair value and gross unrealized loss by asset class and by length of time those securities have been in a loss position | The following table summarizes all securities in an unrealized loss position at June 30, 2019, the fair value and gross unrealized loss by asset class and by length of time those securities have been in a loss position: Less Than 12 Months Greater Than 12 Months Total Total Fair Unrealized Fair Unrealized Total Unrealized ($ in thousands) Value Losses Value Losses Fair Value Losses U.S. Treasury securities $ 2,499 $ (5) $ 41,771 $ (186) $ 44,270 $ (191) Corporate debt securities 119,250 (1,646) 179,264 (4,192) 298,514 (5,838) ABS 30,311 (208) 2,795 (23) 33,106 (231) CLO 81,999 (552) 56,217 (1,057) 138,216 (1,609) CMBS 1,000 — 9,611 (102) 10,611 (102) RMBS - non-agency 1,104 (11) 2,703 (107) 3,807 (118) RMBS - agency 12,456 (308) 5,490 (170) 17,946 (478) Total $ 248,619 $ (2,730) $ 297,851 $ (5,837) $ 546,470 $ (8,567) The following table summarizes all securities in an unrealized loss position at December 31, 2018, the fair value and gross unrealized loss by asset class and by length of time those securities have been in a loss position: Less Than 12 Months Greater Than 12 Months Total Total Fair Unrealized Fair Unrealized Total Unrealized ($ in thousands) Value Losses Value Losses Fair Value Losses U.S. Treasury securities $ 8,263 $ (82) $ 69,727 $ (1,935) $ 77,990 $ (2,017) Corporate debt securities 393,931 (10,241) 710,482 (29,897) 1,104,413 (40,138) Municipal debt obligations — — 6,085 (153) 6,085 (153) ABS 25,258 (61) 4,249 (56) 29,507 (117) CLO 146,004 (4,668) — — 146,004 (4,668) CMBS — — 53,843 (2,137) 53,843 (2,137) RMBS - non-agency 529 (13) 2,449 (108) 2,978 (121) RMBS - agency 27,150 (513) 3,502 (184) 30,652 (697) Total $ 601,135 $ (15,578) $ 850,337 $ (34,470) $ 1,451,472 $ (50,048) |
Summary of amortized cost and fair value of fixed income securities | June 30, 2019 Amortized Fair ($ in thousands) Cost Value Due in one year or less $ 85,287 $ 85,352 Due after one through five years 724,384 731,504 Due after five through ten years 499,428 510,299 Due after ten years 84,243 83,261 1,393,342 1,410,416 Structured securities: ABS 86,573 87,554 CLO 173,538 172,141 CMBS 65,174 66,561 RMBS - non-agency 66,350 77,148 RMBS - agency 70,183 70,169 Total $ 1,855,160 $ 1,883,989 |
Summary of net investment income included in net income from continuing operations | ($ in thousands) Three Months Ended June 30 Six Months Ended June 30 2019 2018 2019 2018 Fixed income securities $ 16,531 $ 14,016 $ 32,650 $ 26,408 Commercial levered loans 159 301 378 665 Net limited partnerships gains 1,143 1,563 2,394 2,825 Other 92 6 181 23 Gross investment income 17,925 15,886 35,603 29,921 Less: expenses 527 338 1,047 664 Net investment income $ 17,398 $ 15,548 $ 34,556 $ 29,257 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Fair Value Measurements | |
Summary of major categories of assets measured at fair value on a recurring basis | June 30, 2019 Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Identical Assets Inputs Inputs ($ in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities: U.S. Treasury securities $ — $ 85,087 $ — $ 85,087 Government agency securities — 473 — 473 Corporate debt securities — 1,188,347 128,018 1,316,365 Municipal debt obligations — 8,491 — 8,491 ABS — 87,554 — 87,554 CLO — 172,141 — 172,141 CMBS — 66,561 — 66,561 RMBS - non agency — 77,148 — 77,148 RMBS - agency — 70,169 — 70,169 Total fixed income securities $ — $ 1,755,971 $ 128,018 1,883,989 Investments measured at net asset value: Limited partnerships and limited liability companies 62,351 Total assets at fair value $ 1,946,340 December 31, 2018 Quoted Prices in Significant Active Markets Other Significant for Observable Unobservable Identical Assets Inputs Inputs ($ in thousands) (Level 1) (Level 2) (Level 3) Total Fixed income securities: U.S. Treasury securities $ — $ 90,328 $ — $ 90,328 Corporate debt securities — 1,065,933 126,497 1,192,430 Municipal debt obligations — 6,085 — 6,085 ABS — 83,581 — 83,581 CLO — 156,913 — 156,913 CMBS — 53,843 — 53,843 RMBS - non agency — 79,551 — 79,551 RMBS - agency — 30,651 — 30,651 Total fixed income securities $ — $ 1,566,885 $ 126,497 1,693,382 Investments measured at net asset value: Limited partnerships and limited liability companies 53,432 Total assets at fair value $ 1,746,814 |
Summary of carrying value and fair value of financial instruments that are not recognized or are not carried at fair value | June 30, 2019 Carrying Fair Value ($ in thousands) Value Total Level 1 Level 2 Level 3 Assets Commercial levered loans $ 16,549 $ 16,168 $ — $ — $ 16,168 Liabilities Notes payable 182,993 185,979 — 185,979 — Unamortized debt issuance costs (476) Total notes payable $ 182,517 December 31, 2018 Carrying Fair Value ($ in thousands) Value Total Level 1 Level 2 Level 3 Assets Commercial levered loans $ 16,915 $ 15,858 $ — $ — $ 15,858 Liabilities Notes payable 183,000 183,999 — 183,999 — Unamortized debt issuance costs (645) Total notes payable $ 182,355 |
Summary of the changes in the fair value of securities measured using Level 3 inputs | Level 3 Corporate ($ in thousands) Securities Fair value, December 31, 2018 $ 126,497 Total net gains (losses) for the period included in: Other comprehensive income 921 Net realized loss (71) Purchases 3,516 Sales — Issuances — Settlements (2,845) Transfers into Level 3 — Transfers out of Level 3 — Fair value, June 30, 2019 $ 128,018 Level 3 Corporate ($ in thousands) Securities Fair value, December 31, 2017 $ — Total net losses for the period included in: Other comprehensive loss (558) Net realized loss (6) Purchases 4,127 Sales — Issuances — Settlements (895) Transfers into Level 3 119,004 Transfers out of Level 3 — Fair value, June 30, 2018 $ 121,672 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Income (Loss) (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Accumulated Other Comprehensive Income (Loss) | |
Summary of the components of accumulated other comprehensive income (loss) | ($ in thousands) Gross Tax Net March 31, 2019 $ 5,257 $ (180) $ 5,437 Unrealized holding gains on fixed income securities 29,830 6,206 23,624 Amounts reclassified into net income 189 (28) 217 Other comprehensive income 29,641 6,234 23,407 June 30, 2019 $ 34,898 $ 6,054 $ 28,844 ($ in thousands) Gross Tax Net March 31, 2018 $ (4,696) $ (2,534) $ (2,162) Unrealized holding losses on fixed income securities (13,268) (2,769) (10,499) Amounts reclassified into net income 776 45 731 Other comprehensive loss (14,044) (2,814) (11,230) June 30, 2018 $ (18,740) $ (5,348) $ (13,392) ($ in thousands) Gross Tax Net December 31, 2018 $ (29,760) $ (7,445) $ (22,315) Unrealized holding gains on fixed income securities 64,633 13,447 51,186 Amounts reclassified into net income (25) (52) 27 Other comprehensive income 64,658 13,499 51,159 June 30, 2019 $ 34,898 $ 6,054 $ 28,844 ($ in thousands) Gross Tax Net December 31, 2017 $ 22,265 $ 2,968 $ 19,297 Unrealized holding losses on fixed income securities (40,031) (8,425) (31,606) Amounts reclassified into net income 974 (109) 1,083 Other comprehensive loss (41,005) (8,316) (32,689) June 30, 2018 $ (18,740) $ (5,348) $ (13,392) |
Summary of reclassifications out of accumulated other comprehensive income (loss) | Line in Consolidated Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) Statements of Operations 2019 2018 2019 2018 AOCI Unrealized gains on securities Realized investment gains (losses) $ 189 $ 776 $ (25) $ 974 Income tax (benefit) expense (28) 45 (52) (109) Total reclassifications Net realized investment gains $ 217 $ 731 $ 27 $ 1,083 |
Insurance Operations (Tables)
Insurance Operations (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Insurance Operations | |
Summary of reinsurance ceded and assumed relating to premiums written, earned premiums and net losses and loss adjustment expenses | Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) 2019 2018 2019 2018 Written premiums Direct written premiums $ 234,306 $ 221,116 $ 489,291 $ 468,205 Assumed from other companies 726 1,439 1,579 3,770 Ceded to other companies 24,464 9,520 70,400 (2,412) Net written premiums $ 210,568 $ 213,035 $ 420,470 $ 474,387 Earned premiums Direct earned premiums $ 231,088 $ 212,835 $ 454,090 $ 411,736 Assumed from other companies 932 2,294 1,874 7,164 Ceded to other companies 29,540 32,006 57,876 68,321 Net earned premiums $ 202,480 $ 183,123 $ 398,088 $ 350,579 Percent of amount assumed to net Losses and loss adjustment expenses incurred Direct net losses and loss adjustment expenses incurred $ 166,696 $ 135,069 $ 302,044 $ 255,453 Assumed from other companies (26,023) (5,669) (23,204) (6,678) Ceded to other companies 13,558 19,467 33,392 36,988 Net losses and loss adjustment expenses incurred $ 127,115 $ 109,933 $ 245,448 $ 211,787 |
Summary of effects of the termination of Quota Share Arrangements on pre-tax income | Three Months Ended June 30 ($ in thousands) 2019 2018 Ceded written premium (return of ceded prepaid) $ — $ (18,831) Ceded earned premium — 1,368 (Increase) reduction to net loss and loss adjustment expenses incurred (2,255) 642 Reduction to policy acquisition expenses 2,255 624 Reduction to pre-tax income $ - $ 102 Six Months Ended June 30 ($ in thousands) 2019 2018 Ceded written premium (return of ceded prepaid) $ (3) $ (68,800) Ceded earned premium (3) 14,544 (Increase) reduction to net loss and loss adjustment expenses incurred (2,207) 8,548 Reduction to policy acquisition expenses 2,205 4,906 (Increase) reduction to pre-tax income $ (1) $ 1,090 |
Summary of unpaid losses | June 30 ($ in thousands) 2019 2018 Gross unpaid losses and loss expenses, at beginning of year $ 1,396,812 $ 1,258,237 Ceded unpaid losses and loss expenses, at beginning of year 185,295 201,156 Net reserve for losses and loss expenses, at beginning of year 1,211,517 1,057,081 Add: Incurred losses and loss expenses occurring in the: Current year 238,634 214,392 Prior years (3,128) (2,605) Prior years attributable to adjusted premium 9,942 - Total incurred losses and loss expenses 245,448 211,787 Less: Paid losses and loss expenses for claims occurring in the: Current year 18,725 17,179 Prior years 164,601 127,696 Total paid losses and loss expenses for claims 183,326 144,875 Net reserves for losses and loss expenses, at end of period 1,273,639 1,123,993 Ceded unpaid losses and loss expenses, at end of period 210,021 202,928 Gross unpaid losses and loss expenses, at end of period $ 1,483,660 $ 1,326,921 |
Segment Information (Tables)
Segment Information (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Segment Information | |
Summary of gross written premiums by customer segments | Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) 2019 2018 2019 2018 Customer Segment Construction $ 32,495 $ 26,575 $ 55,743 $ 49,528 Consumer Services 37,893 28,387 65,378 50,294 Marine and Energy 20,845 18,884 36,779 34,146 Media and Entertainment 39,300 37,977 76,842 78,231 Professional Services 29,104 27,939 58,666 57,504 Real Estate 46,614 44,072 75,349 72,030 Transportation 23,499 23,448 57,514 50,362 Customer Segment subtotal 229,750 207,282 426,271 392,095 Other 5,282 15,273 64,599 79,880 Specialty Insurance total $ 235,032 $ 222,555 $ 490,870 $ 471,975 |
Summary of gross written premiums by line of business across customer segments | Three Months Ended June 30 Six Months Ended June 30 ($ in thousands) 2019 2018 2019 2018 Line of Business Commercial Auto $ 54,296 $ 34,451 $ 96,080 $ 72,702 General Liability 83,156 81,585 154,451 145,630 Workers’ Compensation 34,921 45,278 124,983 144,048 Commercial Multiple Peril 17,040 18,812 36,674 34,072 All Other Lines 45,619 42,429 78,682 75,523 Specialty Insurance total $ 235,032 $ 222,555 $ 490,870 $ 471,975 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings per Share | |
Summary of reconciliation of the numerators and denominators of basic and diluted EPS | Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Loss Shares Per Share Three Months Ended June 30, 2019 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income (loss) available to common stockholders $ 8,696 38,851 $ 0.22 $ (78) 38,851 $ — Effect of dilutive securities: Stock compensation plans 604 — 604 — Diluted EPS $ 8,696 39,455 $ 0.22 $ (78) 39,455 $ — Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Loss Shares Per Share Three Months Ended June 30, 2018 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income (loss) available to common stockholders $ 14,652 38,743 $ 0.38 $ (198) 38,743 $ (0.01) Effect of dilutive securities: Stock compensation plans 698 0.01 698 — Diluted EPS $ 14,652 39,441 $ 0.37 $ (198) 39,441 $ (0.01) Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Loss Shares Per Share Six Months Ended June 30, 2019 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income (loss) available to common stockholders $ 22,391 38,851 $ 0.58 $ (333) 38,851 $ (0.01) Effect of dilutive securities: Stock compensation plans 604 0.01 604 — Diluted EPS $ 22,391 39,455 $ 0.57 $ (333) 39,455 $ (0.01) Continuing Operations Discontinued Operations ($ in thousands, except per share amounts) Income Shares Per Share Income Shares Per Share Six Months Ended June 30, 2018 (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount Basic EPS: Net income available to common stockholders $ 24,662 38,743 $ 0.64 $ 587 38,743 $ 0.02 Effect of dilutive securities: Stock compensation plans 698 0.01 698 0.01 Diluted EPS $ 24,662 39,441 $ 0.63 $ 587 39,441 $ 0.01 |
Basis of Reporting (Details)
Basis of Reporting (Details) - shares | Jul. 25, 2019 | Jul. 24, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Common stock, shares authorized | 200,000,000 | 200,000,000 | ||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 | ||
Subsequent Event | ||||
Shares of the Company issued as merger consideration | 38,851,369 | |||
Percentage of equity interests of the Company issued as merger consideration | 100.00% | |||
Conversion ratio of PGHL shares to Company shares | 6.46 | |||
Common stock, shares authorized | 200,000,000 | |||
Preferred stock, shares authorized | 50,000,000 |
Statements of Cash Flow (Detail
Statements of Cash Flow (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Supplemental cash flow information | ||
Interest | $ 6,566 | $ 6,105 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Assets | |||||
Total assets | $ 19,278 | $ 19,278 | $ 19,719 | ||
Liabilities | |||||
Total liabilities | 21,768 | 21,768 | 22,256 | ||
Insurance Operations, U.K. | Discontinued operation | |||||
Net income (loss) | |||||
Net income (loss) from discontinued operations | 100 | $ 200 | 300 | $ 600 | |
Assets | |||||
Total cash and investments | 10,250 | 10,250 | 10,436 | ||
Other assets | 9,028 | 9,028 | 9,283 | ||
Total assets | 19,278 | 19,278 | 19,719 | ||
Liabilities | |||||
Unpaid losses and loss adjustment expenses | 13,917 | 13,917 | 14,030 | ||
Other liabilities | 7,851 | 7,851 | 8,226 | ||
Total liabilities | $ 21,768 | $ 21,768 | $ 22,256 |
Investments - Gross Unrealized
Investments - Gross Unrealized Gains and Losses on AFS Securities (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | $ 1,855,160 | $ 1,729,755 |
Gross Unrealized Gains | 37,396 | 13,675 |
Gross Unrealized Losses | (8,567) | (50,048) |
Fair Value | 1,883,989 | 1,693,382 |
U.S. Treasury securities | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 84,377 | 92,219 |
Gross Unrealized Gains | 901 | 126 |
Gross Unrealized Losses | (191) | (2,017) |
Fair Value | 85,087 | 90,328 |
Government agency securities | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 473 | |
Fair Value | 473 | |
Corporate debt securities | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 1,300,218 | 1,231,352 |
Gross Unrealized Gains | 21,985 | 1,216 |
Gross Unrealized Losses | (5,838) | (40,138) |
Fair Value | 1,316,365 | 1,192,430 |
Municipal debt obligations | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 8,274 | 6,238 |
Gross Unrealized Gains | 217 | |
Gross Unrealized Losses | (153) | |
Fair Value | 8,491 | 6,085 |
ABS | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 86,573 | 82,603 |
Gross Unrealized Gains | 1,212 | 1,095 |
Gross Unrealized Losses | (231) | (117) |
Fair Value | 87,554 | 83,581 |
CLO | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 173,538 | 161,421 |
Gross Unrealized Gains | 212 | 160 |
Gross Unrealized Losses | (1,609) | (4,668) |
Fair Value | 172,141 | 156,913 |
CMBS | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 65,174 | 55,980 |
Gross Unrealized Gains | 1,489 | |
Gross Unrealized Losses | (102) | (2,137) |
Fair Value | 66,561 | 53,843 |
RMBS - non-agency | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 66,350 | 68,594 |
Gross Unrealized Gains | 10,916 | 11,078 |
Gross Unrealized Losses | (118) | (121) |
Fair Value | 77,148 | 79,551 |
RMBS - agency | ||
Gross unrealized gains and losses on AFS securities included in assets | ||
Cost/Amortized Cost | 70,183 | 31,348 |
Gross Unrealized Gains | 464 | |
Gross Unrealized Losses | (478) | (697) |
Fair Value | $ 70,169 | $ 30,651 |
Investments - Unrealized Loss P
Investments - Unrealized Loss Position (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019USD ($)security | Jun. 30, 2018USD ($) | Jun. 30, 2019USD ($)security | Jun. 30, 2018USD ($) | Dec. 31, 2018USD ($)security | |
Fair Value | |||||
Less Than 12 Months | $ 248,619 | $ 248,619 | $ 601,135 | ||
Greater Than 12 Months | 297,851 | 297,851 | 850,337 | ||
Total Fair Value | 546,470 | 546,470 | 1,451,472 | ||
Unrealized Losses | |||||
Less Than 12 Months | (2,730) | (2,730) | (15,578) | ||
Greater Than 12 Months | (5,837) | (5,837) | (34,470) | ||
Total Unrealized Losses | $ (8,567) | $ (8,567) | $ (50,048) | ||
Fixed income securities, unrealized loss position | security | 412 | 412 | 708 | ||
Other-than-temporary impairment (OTTI) charges | $ 0 | $ 0 | $ 0 | $ 0 | |
U.S. Treasury securities | |||||
Fair Value | |||||
Less Than 12 Months | 2,499 | 2,499 | $ 8,263 | ||
Greater Than 12 Months | 41,771 | 41,771 | 69,727 | ||
Total Fair Value | 44,270 | 44,270 | 77,990 | ||
Unrealized Losses | |||||
Less Than 12 Months | (5) | (5) | (82) | ||
Greater Than 12 Months | (186) | (186) | (1,935) | ||
Total Unrealized Losses | (191) | (191) | (2,017) | ||
Corporate debt securities | |||||
Fair Value | |||||
Less Than 12 Months | 119,250 | 119,250 | 393,931 | ||
Greater Than 12 Months | 179,264 | 179,264 | 710,482 | ||
Total Fair Value | 298,514 | 298,514 | 1,104,413 | ||
Unrealized Losses | |||||
Less Than 12 Months | (1,646) | (1,646) | (10,241) | ||
Greater Than 12 Months | (4,192) | (4,192) | (29,897) | ||
Total Unrealized Losses | (5,838) | (5,838) | (40,138) | ||
Municipal debt obligations | |||||
Fair Value | |||||
Greater Than 12 Months | 6,085 | ||||
Total Fair Value | 6,085 | ||||
Unrealized Losses | |||||
Greater Than 12 Months | (153) | ||||
Total Unrealized Losses | (153) | ||||
ABS | |||||
Fair Value | |||||
Less Than 12 Months | 30,311 | 30,311 | 25,258 | ||
Greater Than 12 Months | 2,795 | 2,795 | 4,249 | ||
Total Fair Value | 33,106 | 33,106 | 29,507 | ||
Unrealized Losses | |||||
Less Than 12 Months | (208) | (208) | (61) | ||
Greater Than 12 Months | (23) | (23) | (56) | ||
Total Unrealized Losses | (231) | (231) | (117) | ||
CLO | |||||
Fair Value | |||||
Less Than 12 Months | 81,999 | 81,999 | 146,004 | ||
Greater Than 12 Months | 56,217 | 56,217 | |||
Total Fair Value | 138,216 | 138,216 | 146,004 | ||
Unrealized Losses | |||||
Less Than 12 Months | (552) | (552) | (4,668) | ||
Greater Than 12 Months | (1,057) | (1,057) | |||
Total Unrealized Losses | (1,609) | (1,609) | (4,668) | ||
CMBS | |||||
Fair Value | |||||
Less Than 12 Months | 1,000 | 1,000 | |||
Greater Than 12 Months | 9,611 | 9,611 | 53,843 | ||
Total Fair Value | 10,611 | 10,611 | 53,843 | ||
Unrealized Losses | |||||
Greater Than 12 Months | (102) | (102) | (2,137) | ||
Total Unrealized Losses | (102) | (102) | (2,137) | ||
RMBS - non-agency | |||||
Fair Value | |||||
Less Than 12 Months | 1,104 | 1,104 | 529 | ||
Greater Than 12 Months | 2,703 | 2,703 | 2,449 | ||
Total Fair Value | 3,807 | 3,807 | 2,978 | ||
Unrealized Losses | |||||
Less Than 12 Months | (11) | (11) | (13) | ||
Greater Than 12 Months | (107) | (107) | (108) | ||
Total Unrealized Losses | (118) | (118) | (121) | ||
RMBS - agency | |||||
Fair Value | |||||
Less Than 12 Months | 12,456 | 12,456 | 27,150 | ||
Greater Than 12 Months | 5,490 | 5,490 | 3,502 | ||
Total Fair Value | 17,946 | 17,946 | 30,652 | ||
Unrealized Losses | |||||
Less Than 12 Months | (308) | (308) | (513) | ||
Greater Than 12 Months | (170) | (170) | (184) | ||
Total Unrealized Losses | $ (478) | $ (478) | $ (697) |
Investments - Amortized Cost an
Investments - Amortized Cost and Fair Value of Fixed Income Securities (Details) $ in Thousands | Jun. 30, 2019USD ($) |
Amortized Cost | |
Due in one year or less | $ 85,287 |
Due after one through five years | 724,384 |
Due after five through ten years | 499,428 |
Due after ten years | 84,243 |
Amortized Cost | 1,393,342 |
Fair Value | |
Due in one year or less | 85,352 |
Due after one through five years | 731,504 |
Due after five through ten years | 510,299 |
Due after ten years | 83,261 |
Fair Value | 1,410,416 |
Amortized Cost - Structured securities | 1,855,160 |
Fair Value - Structured securities | 1,883,989 |
ABS | |
Fair Value | |
Amortized Cost - Structured securities | 86,573 |
Fair Value - Structured securities | 87,554 |
CLO | |
Fair Value | |
Amortized Cost - Structured securities | 173,538 |
Fair Value - Structured securities | 172,141 |
CMBS | |
Fair Value | |
Amortized Cost - Structured securities | 65,174 |
Fair Value - Structured securities | 66,561 |
RMBS - non-agency | |
Fair Value | |
Amortized Cost - Structured securities | 66,350 |
Fair Value - Structured securities | 77,148 |
RMBS - agency | |
Fair Value | |
Amortized Cost - Structured securities | 70,183 |
Fair Value - Structured securities | $ 70,169 |
Investments - Limited Partnersh
Investments - Limited Partnerships and Limited Liability Company Investments (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Dec. 31, 2018 | |
Investments | ||
Investments in limited partnership and limited liability companies | $ 62,351 | $ 53,432 |
Threshold notice period to withdraw funds | 90 days | |
Minimum holding period | 1 year | |
PIMCO Tactical Opportunities fund | ||
Investments | ||
Investments in limited partnership and limited liability companies | $ 32,000 |
Investments - Gain Loss on Inve
Investments - Gain Loss on Investment (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Investments | |||||
Allowance for loan losses | $ 0 | $ 0 | $ 0 | ||
Proceeds from sales and redemptions in AFS securities | 53.7 | $ 57.1 | 97.1 | $ 120.1 | |
Gross realized gains from sales and redemptions in AFS securities | 0.4 | $ 0.7 | 0.6 | 0.8 | |
Gross realized losses from sales and redemptions of AFS investments | $ 0.3 | $ 0.4 | $ 0.4 |
Investments - Net Investment In
Investments - Net Investment Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Net investment income included in net income (loss) | ||||
Gross investment income | $ 17,925 | $ 15,886 | $ 35,603 | $ 29,921 |
Less: expenses | 527 | 338 | 1,047 | 664 |
Net investment income | 17,398 | 15,548 | 34,556 | 29,257 |
Fixed income securities | ||||
Net investment income included in net income (loss) | ||||
Gross investment income | 16,531 | 14,016 | 32,650 | 26,408 |
Commercial levered loans | ||||
Net investment income included in net income (loss) | ||||
Gross investment income | 159 | 301 | 378 | 665 |
Net limited partnerships gains | ||||
Net investment income included in net income (loss) | ||||
Gross investment income | 1,143 | 1,563 | 2,394 | 2,825 |
Other | ||||
Net investment income included in net income (loss) | ||||
Gross investment income | $ 92 | $ 6 | $ 181 | $ 23 |
Investments - Other Details (De
Investments - Other Details (Details) - USD ($) $ in Millions | Jun. 30, 2019 | Dec. 31, 2018 |
Investments | ||
Securities required to be held with various regulatory authorities as required by law | $ 211.2 | $ 188.6 |
Fair value of assets on deposit in collateral agreements | 358.4 | 358.5 |
Carrying value of assets on deposit in collateral agreements | $ 347.4 | $ 368 |
Fair Value Measurements - Asset
Fair Value Measurements - Assets Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2018 | Jun. 30, 2019 | |
Major categories of assets measured at fair value on a recurring basis | |||
Investments in limited partnership and limited liability companies | $ 53,432 | $ 62,351 | |
Transfers from level 1 to level 2 | 0 | 0 | |
Transfer from level 2 to level 3 | 126,500 | ||
Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 1,693,382 | 1,883,989 | |
Total assets at fair value | 1,746,814 | 1,946,340 | |
Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 1,566,885 | 1,755,971 | |
Level 3 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 126,497 | 128,018 | |
U.S. Treasury securities | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 90,328 | 85,087 | |
U.S. Treasury securities | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 90,328 | 85,087 | |
Government agency securities | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 473 | ||
Government agency securities | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 473 | ||
Corporate debt securities | |||
Major categories of assets measured at fair value on a recurring basis | |||
Transfer from level 2 to level 3 | $ 119,004 | ||
Corporate debt securities | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 1,192,430 | 1,316,365 | |
Corporate debt securities | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 1,065,933 | 1,188,347 | |
Corporate debt securities | Level 3 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 126,497 | 128,018 | |
Municipal debt obligations | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 6,085 | 8,491 | |
Municipal debt obligations | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 6,085 | 8,491 | |
ABS | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 83,581 | 87,554 | |
ABS | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 83,581 | 87,554 | |
CLO | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 156,913 | 172,141 | |
CLO | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 156,913 | 172,141 | |
CMBS | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 53,843 | 66,561 | |
CMBS | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 53,843 | 66,561 | |
RMBS - non-agency | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 79,551 | 77,148 | |
RMBS - non-agency | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 79,551 | 77,148 | |
RMBS - agency | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 30,651 | 70,169 | |
RMBS - agency | Level 2 | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Total fixed income securities | 30,651 | 70,169 | |
Carrying Value | Recurring | |||
Major categories of assets measured at fair value on a recurring basis | |||
Investments in limited partnership and limited liability companies | $ 53,432 | $ 62,351 |
Fair Value Measurements - Carry
Fair Value Measurements - Carrying and Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Commercial levered loans | $ 16,168 | |
Liabilities | ||
Notes payable | 185,979 | |
Total notes payable | $ 182,517 | $ 182,355 |
Fair value of the notes payable as a percentage of par value | 101.60% | 100.50% |
Carrying Value | ||
Assets | ||
Commercial levered loans | $ 16,549 | $ 16,915 |
Liabilities | ||
Notes payable | 182,993 | 183,000 |
Unamortized debt issuance costs | (476) | (645) |
Total notes payable | 182,517 | 182,355 |
Fair Value | ||
Assets | ||
Commercial levered loans | 15,858 | |
Liabilities | ||
Notes payable | 186,000 | 183,999 |
Level 2 | Fair Value | ||
Liabilities | ||
Notes payable | 185,979 | 183,999 |
Level 3 | Fair Value | ||
Assets | ||
Commercial levered loans | $ 16,168 | $ 15,858 |
Fair Value Measurements - Secur
Fair Value Measurements - Securities Measured Using Level 3 (Details) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Changes in fair value of securities measured using Level 3 inputs | |||
Fair value at beginning of period | $ 126,497 | ||
Other comprehensive income (loss) | 921 | ||
Net realized loss | (71) | ||
Purchases | 3,516 | ||
Settlements | (2,845) | ||
Transfers into Level 3 | $ 126,500 | ||
Fair value at end of period | $ 128,018 | $ 126,497 | |
Corporate debt securities | |||
Changes in fair value of securities measured using Level 3 inputs | |||
Other comprehensive income (loss) | $ (558) | ||
Net realized loss | (6) | ||
Purchases | 4,127 | ||
Settlements | (895) | ||
Transfers into Level 3 | 119,004 | ||
Fair value at end of period | $ 121,672 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) - Components of AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
AOCI Attributable to Parent, Net of Tax | ||||
Balance at the beginning of period, gross | $ 5,257 | $ (4,696) | $ (29,760) | $ 22,265 |
Unrealized holding gains (losses) on fixed income securities, gross | 29,830 | (13,268) | 64,633 | (40,031) |
Amounts reclassified into net loss, gross | 189 | 776 | (25) | 974 |
Other comprehensive income, gross | 29,641 | (14,044) | 64,658 | (41,005) |
Balance at the end of period, gross | 34,898 | (18,740) | 34,898 | (18,740) |
Balance at the beginning of period, tax | (180) | (2,534) | (7,445) | 2,968 |
Unrealized holding gains (losses) on fixed income securities, tax | 6,206 | (2,769) | 13,447 | (8,425) |
Amounts reclassified into net loss, tax | (28) | 45 | (52) | (109) |
Other comprehensive income, tax | 6,234 | (2,814) | 13,499 | (8,316) |
Balance at the end of period, tax | 6,054 | (5,348) | 6,054 | (5,348) |
Balance at the beginning of period, net | 5,437 | (2,162) | (22,315) | 19,297 |
Unrealized holding gains (losses) on fixed income securities | 23,624 | (10,499) | 51,186 | (31,606) |
Amounts reclassified into net income | 217 | 731 | 27 | 1,083 |
Other comprehensive income (loss) | 23,407 | (11,230) | 51,159 | (32,689) |
Balance at the end of period, net | $ 28,844 | $ (13,392) | $ 28,844 | $ (13,392) |
Accumulated Other Comprehensi_4
Accumulated Other Comprehensive Income (Loss) - Reclassifications Out of AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Unrealized gains on securities, tax | $ (28) | $ 45 | $ (52) | $ (109) |
Total reclassifications | 217 | 731 | 27 | 1,083 |
Realized Investment Gains (Losses) | ||||
Unrealized gains on securities | 189 | 776 | (25) | 974 |
Income Tax Benefit | ||||
Unrealized gains on securities, tax | $ (28) | $ 45 | $ (52) | $ (109) |
Related-Party Information (Deta
Related-Party Information (Details) - USD ($) $ in Thousands | Mar. 15, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Related party transactions | |||||
Equity distribution for executive loan repayment | $ 4,174 | ||||
Severance expense | $ 7,200 | $ 7,200 | |||
Executives | |||||
Related party transactions | |||||
Loans payable | $ 4,200 | ||||
Repayment of loans | $ 4,200 | ||||
Paid-In Capital | |||||
Related party transactions | |||||
Equity distribution for executive loan repayment | $ 4,200 | $ 4,174 |
Insurance Operations - Reinsura
Insurance Operations - Reinsurance Ceded and Assumed (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Written premiums | ||||
Direct written premiums | $ 234,306 | $ 221,116 | $ 489,291 | $ 468,205 |
Assumed from other companies | 726 | 1,439 | 1,579 | 3,770 |
Ceded to other companies | 24,464 | 9,520 | 70,400 | |
Ceded to other companies | (2,412) | |||
Net written premiums | 210,568 | 213,035 | 420,470 | 474,387 |
Earned premiums | ||||
Direct earned premiums | 231,088 | 212,835 | 454,090 | 411,736 |
Assumed from other companies | 932 | 2,294 | 1,874 | 7,164 |
Ceded to other companies | 29,540 | 32,006 | 57,876 | 68,321 |
Net premiums earned | $ 202,480 | $ 183,123 | $ 398,088 | $ 350,579 |
Percent of amount assumed to net | 0.50% | 1.30% | 0.50% | 2.00% |
Losses and loss adjustment expenses incurred | ||||
Direct net losses and loss adjustment expenses incurred | $ 166,696 | $ 135,069 | $ 302,044 | $ 255,453 |
Assumed from other companies | (26,023) | (5,669) | (23,204) | (6,678) |
Ceded to other companies | 13,558 | 19,467 | 33,392 | 36,988 |
Net losses and loss adjustment expenses incurred | $ 127,115 | $ 109,933 | $ 245,448 | $ 211,787 |
Insurance Operations - Quota Sh
Insurance Operations - Quota Share Arrangements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Insurance activity | ||||
Ceded earned premium | $ 29,540 | $ 32,006 | $ 57,876 | $ 68,321 |
Increase/reduction to pre-tax income | (11,119) | (18,375) | (28,629) | (30,943) |
Whole Account Quota Share Reinsurance Agreement | ||||
Insurance activity | ||||
Ceded written premium (return of ceded prepaid) | (18,831) | (3) | (68,800) | |
Ceded earned premium | 1,368 | 14,544 | ||
Ceded earned premium | (3) | |||
(Increase) reduction to net loss and loss adjustment expenses incurred | (2,255) | 642 | (2,207) | 8,548 |
Reduction to policy acquisition expenses | $ 2,255 | 624 | 2,205 | 4,906 |
Increase/reduction to pre-tax income | $ 102 | $ (1) | $ 1,090 |
Insurance Operations - Gross Wr
Insurance Operations - Gross Written Premiums (Details) $ in Millions | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($)item | Jun. 30, 2019USD ($)item | Jun. 30, 2018USD ($)item | Dec. 31, 2018 | |
Insurance Operations | |||||
Percentage of direct premiums sourced from distribution party acquired by a third party insurance carrier | 13.50% | ||||
Number of distribution partners contributing the largest amounts of direct written premiums | item | 3 | 3 | 3 | 3 | |
Direct premiums written by the largest distribution partners | $ | $ 80.4 | $ 72.5 | $ 133.3 | $ 131.9 |
Insurance Operations - Unpaid L
Insurance Operations - Unpaid Losses (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Liability for Unpaid Claims and Claims Adjustment Expense [Roll Forward] | ||
Gross unpaid losses and loss expenses, at beginning of year | $ 1,396,812 | $ 1,258,237 |
Ceded unpaid losses and loss expenses, at beginning of year | 185,295 | 201,156 |
Net reserve for losses and loss expenses, at beginning of year | 1,211,517 | 1,057,081 |
Incurred losses and loss expenses occurring in the: | ||
Current year | 238,634 | 214,392 |
Prior years | (3,128) | (2,605) |
Prior years attributable to adjusted premium | 9,942 | |
Total incurred losses and loss expenses | 245,448 | 211,787 |
Paid losses and loss expenses for claims occurring in the: | ||
Current year | 18,725 | 17,179 |
Prior years | 164,601 | 127,696 |
Total paid losses and loss expenses for claims | 183,326 | 144,875 |
Net reserves for losses and loss expenses, at end of period | 1,273,639 | 1,123,993 |
Ceded unpaid losses and loss expenses, at end of period | 210,021 | 202,928 |
Gross unpaid losses and loss expenses, at end of period | 1,483,660 | 1,326,921 |
Commercial Auto | ||
Incurred losses and loss expenses occurring in the: | ||
Prior years | (6,700) | (7,800) |
General Liability | ||
Incurred losses and loss expenses occurring in the: | ||
Prior years | 13,200 | 8,300 |
Workers' Compensation | ||
Incurred losses and loss expenses occurring in the: | ||
Prior years | (14,500) | (7,200) |
Commercial Multiple Peril | ||
Incurred losses and loss expenses occurring in the: | ||
Prior years | 6,100 | |
Marine Liability | ||
Incurred losses and loss expenses occurring in the: | ||
Prior years | $ 4,600 | $ (2,100) |
Income Taxes (Details)
Income Taxes (Details) - subsidiary | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Number of foreign subsidiaries | 1 | |||
Effective income tax rate | 21.80% | 20.30% | 21.80% | 20.30% |
PSGH | Bermuda | ||||
Statutory income tax rate | 0.00% | 0.00% |
Debt (Details)
Debt (Details) - USD ($) $ in Millions | Mar. 15, 2019 | Mar. 14, 2019 |
Debt | ||
Number of days before the maturity of the senior notes due November 2020 that the credit facility matures | 91 days | |
Number of days before the maturity of the senior notes due November 2020, as amended or replaced, that the credit facility matures | 91 days | |
Maximum borrowing capacity | $ 50 | $ 25 |
Segment Information (Details)
Segment Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 235,032 | $ 222,555 | $ 490,870 | $ 471,975 |
Commercial Auto | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 54,296 | $ 34,451 | $ 96,080 | $ 72,702 |
Gross written premiums, percent | 23.10% | 15.50% | 19.60% | 15.40% |
General Liability | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 83,156 | $ 81,585 | $ 154,451 | $ 145,630 |
Gross written premiums, percent | 35.40% | 36.70% | 31.50% | 30.90% |
Workers' Compensation | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 34,921 | $ 45,278 | $ 124,983 | $ 144,048 |
Gross written premiums, percent | 14.90% | 20.30% | 25.40% | 30.50% |
Commercial Multiple Peril | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 17,040 | $ 18,812 | $ 36,674 | $ 34,072 |
Gross written premiums, percent | 7.20% | 8.40% | 7.50% | 7.20% |
All Other Lines | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 45,619 | $ 42,429 | $ 78,682 | $ 75,523 |
Gross written premiums, percent | 19.40% | 19.10% | 16.00% | 16.00% |
Customer Segment | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 229,750 | $ 207,282 | $ 426,271 | $ 392,095 |
Gross written premiums, percent | 97.80% | 93.10% | 86.80% | 83.10% |
Construction | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 32,495 | $ 26,575 | $ 55,743 | $ 49,528 |
Gross written premiums, percent | 13.80% | 11.90% | 11.40% | 10.50% |
Consumer Services | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 37,893 | $ 28,387 | $ 65,378 | $ 50,294 |
Gross written premiums, percent | 16.10% | 12.80% | 13.30% | 10.60% |
Marine and Energy | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 20,845 | $ 18,884 | $ 36,779 | $ 34,146 |
Gross written premiums, percent | 8.90% | 8.50% | 7.50% | 7.20% |
Media and Entertainment | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 39,300 | $ 37,977 | $ 76,842 | $ 78,231 |
Gross written premiums, percent | 16.70% | 17.10% | 15.70% | 16.60% |
Professional Services | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 29,104 | $ 27,939 | $ 58,666 | $ 57,504 |
Gross written premiums, percent | 12.40% | 12.50% | 11.90% | 12.20% |
Real Estate | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 46,614 | $ 44,072 | $ 75,349 | $ 72,030 |
Gross written premiums, percent | 19.90% | 19.80% | 15.30% | 15.30% |
Transportation | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 23,499 | $ 23,448 | $ 57,514 | $ 50,362 |
Gross written premiums, percent | 10.00% | 10.50% | 11.70% | 10.70% |
Other | ||||
Summary of the Company’s gross written premium by customer segments within our Specialty Insurance segment | ||||
Gross written premiums | $ 5,282 | $ 15,273 | $ 64,599 | $ 79,880 |
Gross written premiums, percent | 2.20% | 6.90% | 13.20% | 16.90% |
Earnings per Share (Details)
Earnings per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Basic EPS- Income: | ||||
Net income (loss) available to common stockholders, continuing operations | $ 8,696 | $ 14,652 | $ 22,391 | $ 24,662 |
Net income (loss) available to common stockholders, discontinued operations | $ (78) | $ (198) | $ (333) | $ 587 |
Basic EPS - Shares: | ||||
Shares outstanding, basic (in shares) | 38,851 | 38,743 | 38,851 | 38,743 |
Basic EPS - Per Share Amount: | ||||
Net Income available to common stockholders, continuing operations (in dollars per share) | $ 0.22 | $ 0.38 | $ 0.58 | $ 0.64 |
Net Income available to common stockholders, discontinued operations (in dollars per share) | $ (0.01) | $ (0.01) | $ 0.02 | |
Effect of dilutive securities - Shares: | ||||
Stock compensation plans (in shares) | 604 | 698 | 604 | 698 |
Effect of dilutive securities - Per Share Amount: | ||||
Stock compensation plans, continuing operations (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | |
Stock compensation plans, discontinued operations (in dollars per share) | $ 0.01 | |||
Diluted EPS - Income | ||||
Diluted EPS, Diluted net income - continuing operations | $ 8,696 | $ 14,652 | $ 22,391 | $ 24,662 |
Diluted EPS, Diluted net income - discontinued operations | $ (78) | $ (198) | $ (333) | $ 587 |
Diluted EPS - Shares | ||||
Shares outstanding, diluted (in shares) | 39,455 | 39,441 | 39,455 | 39,441 |
Diluted EPS - Per Share Amount | ||||
Diluted EPS, continuing operations (in dollars per share) | $ 0.22 | $ 0.37 | $ 0.57 | $ 0.63 |
Diluted EPS, discontinued operations (in dollars per share) | $ (0.01) | $ (0.01) | $ 0.01 |
Subsequent Events - Initial Pub
Subsequent Events - Initial Public Offering (Details) - Subsequent Event $ / shares in Units, $ in Millions | Jul. 29, 2019USD ($)$ / sharesshares |
GS Investors | |
Subsequent Events | |
Ownership percentage | 40.90% |
TPG Investors | |
Subsequent Events | |
Ownership percentage | 39.40% |
IPO | |
Subsequent Events | |
Total shares sold | 7,857,145 |
Number of shares issued | 4,285,715 |
Price per share | $ / shares | $ 14 |
Net proceeds from the IPO | $ | $ 51.6 |
IPO | Principal Stockholders | |
Subsequent Events | |
Shares sold by principal shareholders in offering | 3,571,430 |
Subsequent Events - 2019 Equity
Subsequent Events - 2019 Equity Incentive Plan (Details) - Subsequent Event - USD ($) $ in Millions | Jul. 25, 2019 | Jul. 24, 2019 |
2019 Equity Incentive Plan | ||
Subsequent Events | ||
Number of common stock authorized | 4,500,000 | |
Number of common shares reserved for issuance | 4,500,000 | |
2019 Equity Incentive Plan | Long-term Equity Incentive Plan Awards (RSUs) | ||
Subsequent Events | ||
Restricted stock unit awards granted | 183,095 | |
Percentage of time-vesting awards | 50.00% | |
Percentage of performance vesting awards | 50.00% | |
Grant date fair value | $ 2.6 | |
2019 Equity Incentive Plan | Supplemental RSUs | ||
Subsequent Events | ||
Restricted stock unit awards granted | 1,302,198 | |
Percentage of time-vesting awards | 100.00% | |
Grant date fair value | $ 18.2 | |
2019 Equity Incentive Plan | Supplemental RSUs | At Grant Date | ||
Subsequent Events | ||
Vesting percentage | 25.00% | |
2019 Equity Incentive Plan | Supplemental RSUs | At Two Years | ||
Subsequent Events | ||
Vesting percentage | 25.00% | |
2019 Equity Incentive Plan | Supplemental RSUs | At Three Years | ||
Subsequent Events | ||
Vesting percentage | 50.00% | |
2019 Equity Incentive Plan | Founders Grant Awards, RSUs | ||
Subsequent Events | ||
Restricted stock unit awards granted | 250,000 | |
Grant date fair value | $ 3.5 | |
Cliff vesting period | 3 years | |
2019 Equity Incentive Plan | Director RSUs | ||
Subsequent Events | ||
Restricted stock unit awards granted | 26,399 | |
Grant date fair value | $ 0.4 | |
2010 Equity Incentive Plan | Restricted stock unit | ||
Subsequent Events | ||
Number of RSUs converted into RSUs based on common stock upon merger | 668,135 |
Subsequent Events - 2019 Employ
Subsequent Events - 2019 Employee Stock Purchase Plan (Details) | Jul. 24, 2019shares |
Subsequent Event | 2019 Employee Stock Purchase Plan | |
Subsequent Events | |
Number of common shares reserved for sale | 1,000,000 |