|
|
|
|
|
Florida
|
|
65-0248866
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(IRS Employer Identification Number)
|
|
|
|
14050 N.W. 14
th
Street, Suite 180, Sunrise, FL
|
|
33323
|
(Address of principal executive offices)
|
|
(Zip Code)
|
|
|
|
|
March 31,
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
|
||||
Investments:
|
|
|
|
|
||||
Debt securities, available-for-sale, at fair value (amortized cost of $434,667 and $422,300, respectively)
|
|
$
|
429,457
|
|
|
$
|
423,238
|
|
Debt securities, held-to-maturity, at amortized cost
|
|
5,298
|
|
|
5,349
|
|
||
Equity securities, at fair value
|
|
16,515
|
|
|
15,434
|
|
||
Total investments (including $0 and $26,284 related to the VIE, respectively)
|
|
451,270
|
|
|
444,021
|
|
||
|
|
|
|
|
||||
Cash and cash equivalents (including $0 and $14,211 related to the VIE, respectively)
|
|
55,591
|
|
|
86,228
|
|
||
Prepaid reinsurance premiums
|
|
87,201
|
|
|
135,492
|
|
||
Premiums receivable, net of allowance of $72 and $70, respectively (including $0 and $1,184 related to the VIE, respectively)
|
|
45,667
|
|
|
46,393
|
|
||
Reinsurance recoverable, net
|
|
146,091
|
|
|
124,601
|
|
||
Deferred acquisition costs
|
|
39,401
|
|
|
40,893
|
|
||
Income taxes receivable, net
|
|
4,699
|
|
|
9,510
|
|
||
Deferred income taxes, net
|
|
4,368
|
|
|
307
|
|
||
Property and equipment, net
|
|
3,797
|
|
|
4,025
|
|
||
Other assets (including $0 and $2,322 related to the VIE, respectively)
|
|
10,130
|
|
|
13,403
|
|
||
TOTAL ASSETS
|
|
$
|
848,215
|
|
|
$
|
904,873
|
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
||||
LIABILITIES:
|
|
|
|
|
||||
Loss and loss adjustment expense reserves
|
|
$
|
236,214
|
|
|
$
|
230,515
|
|
Unearned premiums
|
|
282,397
|
|
|
294,423
|
|
||
Reinsurance payable
|
|
38,489
|
|
|
71,944
|
|
||
Long-term debt, net of deferred financing costs of $672 and $749, respectively
|
|
44,328
|
|
|
49,251
|
|
||
Deferred revenue
|
|
5,924
|
|
|
6,222
|
|
||
Other liabilities
|
|
32,783
|
|
|
25,059
|
|
||
Total liabilities
|
|
640,135
|
|
|
677,414
|
|
||
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
||||
Preferred stock, $0.01 par value: 1,000,000 shares authorized
|
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value: 25,000,000 shares authorized; 12,718,953 and 12,988,247 shares issued and outstanding, respectively
|
|
127
|
|
|
130
|
|
||
Additional paid-in capital
|
|
139,388
|
|
|
139,728
|
|
||
Accumulated other comprehensive (loss) income
|
|
(3,861
|
)
|
|
1,770
|
|
||
Retained earnings
|
|
72,426
|
|
|
70,009
|
|
||
Total shareholders’ equity attributable to Federated National Holding Company shareholders
|
|
208,080
|
|
|
211,637
|
|
||
Non-controlling interes
t
|
|
—
|
|
|
15,822
|
|
||
Total shareholders’ equity
|
|
208,080
|
|
|
227,459
|
|
||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
848,215
|
|
|
$
|
904,873
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Revenue:
|
|
|
|
|
||||
Net premiums earned
|
|
$
|
82,109
|
|
|
$
|
81,660
|
|
Net investment income
|
|
2,943
|
|
|
2,318
|
|
||
Net realized and unrealized investment losses
|
|
(1,052
|
)
|
|
(105
|
)
|
||
Direct written policy fees
|
|
3,576
|
|
|
4,712
|
|
||
Other income
|
|
5,501
|
|
|
4,469
|
|
||
Total revenue
|
|
93,077
|
|
|
93,054
|
|
||
|
|
|
|
|
|
|
||
Costs and expenses:
|
|
|
|
|
|
|
||
Losses and loss adjustment expenses
|
|
46,071
|
|
|
56,899
|
|
||
Commissions and other underwriting expenses
|
|
30,221
|
|
|
27,568
|
|
||
General and administrative expenses
|
|
6,085
|
|
|
4,619
|
|
||
Interest expense
|
|
1,084
|
|
|
84
|
|
||
Total costs and expenses
|
|
83,461
|
|
|
89,170
|
|
||
|
|
|
|
|
|
|
||
Income before income taxes
|
|
9,616
|
|
|
3,884
|
|
||
Income taxes
|
|
2,371
|
|
|
1,435
|
|
||
Net income
|
|
7,245
|
|
|
2,449
|
|
||
Net (loss) income attributable to noncontrolling interest
|
|
(218
|
)
|
|
27
|
|
||
Net income attributable to Federated National Holding Company shareholders
|
|
$
|
7,463
|
|
|
$
|
2,422
|
|
|
|
|
|
|
|
|
||
Net income per share attributable to Federated National Holding Company shareholders
|
|
|
|
|
|
|
||
Basic
|
|
$
|
0.58
|
|
|
$
|
0.18
|
|
Diluted
|
|
$
|
0.58
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
||
Weighted average number of shares of common stock outstanding:
|
|
|
|
|
|
|
||
Basic
|
|
12,850
|
|
|
13,432
|
|
||
Diluted
|
|
12,945
|
|
|
13,559
|
|
||
|
|
|
|
|
|
|
||
Dividends declared per share of common stock
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
|
|
|
||||
Net income
|
|
$
|
7,245
|
|
|
$
|
2,449
|
|
|
|
|
|
|
||||
Change in net unrealized (losses) gains on investments, available
-for-sale
|
|
(6,148
|
)
|
|
3,710
|
|
||
Comprehensive income before income taxes
|
|
1,097
|
|
|
6,159
|
|
||
|
|
|
|
|
||||
Income tax benefit (expense) related to items of other comprehensive income
|
|
1,587
|
|
|
(1,445
|
)
|
||
Comprehensive income
|
|
2,684
|
|
|
4,714
|
|
||
|
|
|
|
|
||||
Less: comprehensive (loss) income attributable to noncontrolling interest
|
|
(447
|
)
|
|
7
|
|
||
Comprehensive income attributable to Federated National Holding Company shareholders
|
|
$
|
3,131
|
|
|
$
|
4,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Shareholders'
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
Equity Attributable to
|
|
|
|
|
|||||||||||||||||
|
|
|
|
Common Stock
|
|
Additional
|
|
Other
|
|
|
|
Federated National
|
|
|
|
Total
|
|||||||||||||||||||
|
|
Preferred
|
|
Issued
|
|
|
|
Paid-in
|
|
Comprehensive
|
|
Retained
|
|
Holding Company
|
|
Noncontrolling
|
|
Shareholders'
|
|||||||||||||||||
|
|
Stock
|
|
Shares
|
|
Amount
|
|
Capital
|
|
(Loss) Income
|
|
Earnings
|
|
Shareholders
|
|
Interest
|
|
Equity
|
|||||||||||||||||
Balance as of December 31, 2017
|
|
$
|
—
|
|
|
12,988,247
|
|
|
$
|
130
|
|
|
$
|
139,728
|
|
|
$
|
1,770
|
|
|
$
|
70,009
|
|
|
$
|
211,637
|
|
|
$
|
15,822
|
|
|
$
|
227,459
|
|
Cumulative effect of new accounting standards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(994
|
)
|
|
994
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Net income (loss)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,463
|
|
|
7,463
|
|
|
(218
|
)
|
|
7,245
|
|
||||||||
Other comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,332
|
)
|
|
—
|
|
|
(4,332
|
)
|
|
(229
|
)
|
|
(4,561
|
)
|
||||||||
Dividends declared
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,043
|
)
|
|
(1,043
|
)
|
|
—
|
|
|
(1,043
|
)
|
||||||||
Acquisition of non-controlling interest
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,005
|
)
|
|
(305
|
)
|
|
—
|
|
|
(1,310
|
)
|
|
(15,375
|
)
|
|
(16,685
|
)
|
||||||||
Shares issued under share-based compensation plans
|
|
—
|
|
|
53,571
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Repurchases of common stock
|
|
—
|
|
|
(322,865
|
)
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
(4,997
|
)
|
|
(5,000
|
)
|
|
—
|
|
|
(5,000
|
)
|
||||||||
Share-based compensation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
665
|
|
|
—
|
|
|
—
|
|
|
665
|
|
|
—
|
|
|
665
|
|
||||||||
Balance as of March 31, 2018
|
|
$
|
—
|
|
|
12,718,953
|
|
|
$
|
127
|
|
|
$
|
139,388
|
|
|
$
|
(3,861
|
)
|
|
$
|
72,426
|
|
|
$
|
208,080
|
|
|
$
|
—
|
|
|
$
|
208,080
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Cash flow from operating activities:
|
|
|
|
|
||||
Net income
|
|
$
|
7,245
|
|
|
$
|
2,449
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
||||
Net realized and unrealized investment gains
|
|
1,052
|
|
|
105
|
|
||
Amortization of investment premium or discount, net
|
|
683
|
|
|
1,209
|
|
||
Depreciation and amortization
|
|
371
|
|
|
270
|
|
||
Share-based compensation
|
|
665
|
|
|
667
|
|
||
Tax impact related to share-based compensation
|
|
(77
|
)
|
|
(50
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Prepaid reinsurance premiums
|
|
48,291
|
|
|
44,475
|
|
||
Premiums receivable, net
|
|
726
|
|
|
(4,262
|
)
|
||
Reinsurance recoverable, net
|
|
(21,490
|
)
|
|
(1,181
|
)
|
||
Deferred acquisition costs
|
|
1,492
|
|
|
(691
|
)
|
||
Income taxes receivable, net
|
|
4,811
|
|
|
8,123
|
|
||
Deferred revenue
|
|
(298
|
)
|
|
831
|
|
||
Loss and loss adjustment expense reserves
|
|
5,699
|
|
|
(3,773
|
)
|
||
Unearned premiums
|
|
(12,026
|
)
|
|
(1,927
|
)
|
||
Reinsurance payable
|
|
(33,455
|
)
|
|
(24,723
|
)
|
||
Deferred income taxes, net of other comprehensive income
|
|
(2,290
|
)
|
|
1,359
|
|
||
Other, net
|
|
11,019
|
|
|
864
|
|
||
Net cash provided by operating activities
|
|
12,418
|
|
|
23,745
|
|
||
Cash flow from investing activities:
|
|
|
|
|
||||
Proceeds from sales of equity securities
|
|
4,262
|
|
|
3,704
|
|
||
Proceeds from sales of debt securities
|
|
73,830
|
|
|
124,863
|
|
||
Purchases of equity securities
|
|
(5,177
|
)
|
|
(16,875
|
)
|
||
Purchases of debt securities
|
|
(138,738
|
)
|
|
(139,861
|
)
|
||
Maturities and redemptions of debt securities
|
|
50,584
|
|
|
13,565
|
|
||
Purchases of property and equipment
|
|
(66
|
)
|
|
(314
|
)
|
||
Net cash used in investing activities
|
|
(15,305
|
)
|
|
(14,918
|
)
|
||
Cash flow from financing activities:
|
|
|
|
|
||||
Payment of long-term debt
|
|
(5,000
|
)
|
|
—
|
|
||
Purchase of non-controlling interest
|
|
(16,685
|
)
|
|
—
|
|
||
Purchases of Federated National Holding Company common stock
|
|
(5,000
|
)
|
|
(1,876
|
)
|
||
Issuance of common stock for share-based awards
|
|
—
|
|
|
1
|
|
||
Dividends paid
|
|
(1,065
|
)
|
|
(1,050
|
)
|
||
Net cash used in financing activities
|
|
(27,750
|
)
|
|
(2,925
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
|
(30,637
|
)
|
|
5,902
|
|
||
Cash and cash equivalents at beginning of period
|
|
86,228
|
|
|
74,593
|
|
||
Cash and cash equivalents at end of period
|
|
$
|
55,591
|
|
|
$
|
80,495
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
Supplemental disclosure of cash flow information:
|
|
|
|
|
||||
Cash paid (received) during the period for:
|
|
|
|
|
||||
Income taxes
|
|
$
|
70
|
|
|
$
|
(6,675
|
)
|
•
|
Level 1
- Quoted market prices (unadjusted) for identical assets or liabilities in active markets is defined as a market where transactions for the financial statement occur with sufficient frequency and volume to provide pricing information on an ongoing basis, or observable inputs.
|
•
|
Level 2
- Quoted market prices for similar assets or liabilities and valuations, using models or other valuation techniques using observable market data. Significant other observable that can be corroborated by observable market data; and,
|
•
|
Level 3
- Instruments that use non-binding broker quotes or model driven valuations that do not have observable market data or those that are estimated based on an ownership interest to which a proportionate share of net assets is attributed.
|
|
|
March 31, 2018
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Debt securities - available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
||||||||
United States government obligations and authorities
|
|
$
|
77,109
|
|
|
$
|
52,601
|
|
|
$
|
—
|
|
|
$
|
129,710
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
23,302
|
|
|
—
|
|
|
23,302
|
|
||||
Corporate securities
|
|
—
|
|
|
258,518
|
|
|
—
|
|
|
258,518
|
|
||||
International securities
|
|
—
|
|
|
17,927
|
|
|
—
|
|
|
17,927
|
|
||||
Debt securities, at fair value
|
|
77,109
|
|
|
352,348
|
|
|
—
|
|
|
429,457
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities, at fair value
|
|
16,515
|
|
|
—
|
|
|
—
|
|
|
16,515
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total investments, at fair value
|
|
$
|
93,624
|
|
|
$
|
352,348
|
|
|
$
|
—
|
|
|
$
|
445,972
|
|
|
|
December 31, 2017
|
||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
(In thousands)
|
||||||||||||||
Debt securities - available-for-sale, at fair value:
|
|
|
|
|
|
|
|
|
||||||||
United States government obligations and authorities
|
|
$
|
51,219
|
|
|
$
|
46,918
|
|
|
$
|
—
|
|
|
$
|
98,137
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
66,266
|
|
|
—
|
|
|
66,266
|
|
||||
Corporate securities
|
|
—
|
|
|
240,919
|
|
|
—
|
|
|
240,919
|
|
||||
International securities
|
|
—
|
|
|
17,916
|
|
|
—
|
|
|
17,916
|
|
||||
Debt securities, at fair value
|
|
51,219
|
|
|
372,019
|
|
|
—
|
|
|
423,238
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Equity securities, at fair value
|
|
15,434
|
|
|
—
|
|
|
—
|
|
|
15,434
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total investments, at fair value
|
|
$
|
66,653
|
|
|
$
|
372,019
|
|
|
$
|
—
|
|
|
$
|
438,672
|
|
•
|
United States Government Obligations and Authorities:
In determining the fair value for United States government securities in Level 1, the Company uses quoted prices (unadjusted) in active markets for identical or similar assets. In determining the fair value for United States government securities in Level 2, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.
|
•
|
Obligations of States and Political Subdivisions:
In determining the fair value for state and municipal securities, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.
|
•
|
Corporate and International Securities:
In determining the fair value for corporate securities the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads (for investment grade securities), observations of equity and credit default swap curves (for high-yield corporates), reference data and industry and economic events.
|
•
|
Equity Securities:
In determining the fair value for equity securities in Level 1, the Company uses quoted prices (unadjusted) in active markets for identical or similar assets. In determining the fair value for equity securities in Level 2, the Company uses the market approach utilizing primary valuation inputs including reported trades, dealer quotes for identical or similar assets in markets that are not active, benchmark yields, credit spreads, reference data and industry and economic events.
|
|
|
Amortized
|
|
Gross
|
|
Gross
|
|
|
||||||||
|
|
Cost
|
|
Unrealized
|
|
Unrealized
|
|
|
||||||||
|
|
or Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
||||||||
|
|
(In thousands)
|
||||||||||||||
March 31, 2018
|
|
|
|
|
|
|
|
|
||||||||
Debt securities - available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||
United States government obligations and authorities
|
|
$
|
131,292
|
|
|
$
|
231
|
|
|
$
|
1,813
|
|
|
$
|
129,710
|
|
Obligations of states and political subdivisions
|
|
23,535
|
|
|
54
|
|
|
287
|
|
|
23,302
|
|
||||
Corporate
|
|
261,772
|
|
|
553
|
|
|
3,807
|
|
|
258,518
|
|
||||
International
|
|
18,068
|
|
|
11
|
|
|
152
|
|
|
17,927
|
|
||||
|
|
434,667
|
|
|
849
|
|
|
6,059
|
|
|
429,457
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Debt securities - held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
United States government obligations and authorities
|
|
4,161
|
|
|
3
|
|
|
139
|
|
|
4,025
|
|
||||
Corporate
|
|
1,072
|
|
|
6
|
|
|
4
|
|
|
1,074
|
|
||||
International
|
|
65
|
|
|
—
|
|
|
—
|
|
|
65
|
|
||||
|
|
5,298
|
|
|
9
|
|
|
143
|
|
|
5,164
|
|
||||
Total investments (1)
|
|
$
|
439,965
|
|
|
$
|
858
|
|
|
$
|
6,202
|
|
|
$
|
434,621
|
|
|
|
Amortized
|
|
Gross
|
|
Gross
|
|
|
||||||||
|
|
Cost
|
|
Unrealized
|
|
Unrealized
|
|
|
||||||||
|
|
or Cost
|
|
Gains
|
|
Losses
|
|
Fair Value
|
||||||||
|
|
(In thousands)
|
||||||||||||||
December 31, 2017
|
|
|
|
|
|
|
|
|
||||||||
Debt securities - available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||
United States government obligations and authorities
|
|
$
|
98,739
|
|
|
$
|
244
|
|
|
$
|
846
|
|
|
$
|
98,137
|
|
Obligations of states and political subdivisions
|
|
66,319
|
|
|
325
|
|
|
378
|
|
|
66,266
|
|
||||
Corporate
|
|
239,435
|
|
|
2,233
|
|
|
749
|
|
|
240,919
|
|
||||
International
|
|
17,807
|
|
|
136
|
|
|
27
|
|
|
17,916
|
|
||||
|
|
422,300
|
|
|
2,938
|
|
|
2,000
|
|
|
423,238
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Debt securities - held-to-maturity:
|
|
|
|
|
|
|
|
|
||||||||
United States government obligations and authorities
|
|
4,160
|
|
|
9
|
|
|
106
|
|
|
4,063
|
|
||||
Corporate
|
|
1,123
|
|
|
21
|
|
|
—
|
|
|
1,144
|
|
||||
International
|
|
66
|
|
|
1
|
|
|
—
|
|
|
67
|
|
||||
|
|
5,349
|
|
|
31
|
|
|
106
|
|
|
5,274
|
|
||||
Equity securities
|
|
14,085
|
|
|
1,628
|
|
|
279
|
|
|
15,434
|
|
||||
Total investments
|
|
$
|
441,734
|
|
|
$
|
4,597
|
|
|
$
|
2,385
|
|
|
$
|
443,946
|
|
|
|
March 31, 2018
|
||||||
|
|
Amortized
|
|
|
||||
|
|
Cost
|
|
Fair Value
|
||||
Securities with maturity dates:
|
|
(In thousands)
|
||||||
Debt securities, available-for-sale:
|
|
|
|
|
||||
One year or less
|
|
$
|
50,526
|
|
|
$
|
50,394
|
|
Over one through five years
|
|
207,292
|
|
|
205,249
|
|
||
Over five through ten years
|
|
175,529
|
|
|
172,538
|
|
||
Over ten years
|
|
1,320
|
|
|
1,276
|
|
||
|
|
434,667
|
|
|
429,457
|
|
||
Debt securities, held-to-maturity:
|
|
|
|
|
||||
One year or less
|
|
730
|
|
|
732
|
|
||
Over one through five years
|
|
3,940
|
|
|
3,812
|
|
||
Over five through ten years
|
|
628
|
|
|
620
|
|
||
|
|
5,298
|
|
|
5,164
|
|
||
Total
|
|
$
|
439,965
|
|
|
$
|
434,621
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Interest income
|
|
$
|
2,887
|
|
|
$
|
2,169
|
|
Dividends income
|
|
56
|
|
|
149
|
|
||
Net investment income
|
|
$
|
2,943
|
|
|
$
|
2,318
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
||||||||||||
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
||||||||||||
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
||||||||||||
March 31, 2018
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
||||||||||||||
Debt securities - available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
United States government obligations and authorities
|
|
$
|
61,093
|
|
|
$
|
1,284
|
|
|
$
|
18,399
|
|
|
$
|
529
|
|
|
$
|
79,492
|
|
|
$
|
1,813
|
|
Obligations of states and political subdivisions
|
|
15,762
|
|
|
203
|
|
|
1,821
|
|
|
84
|
|
|
17,583
|
|
|
287
|
|
||||||
Corporate
|
|
198,468
|
|
|
3,547
|
|
|
5,022
|
|
|
260
|
|
|
203,490
|
|
|
3,807
|
|
||||||
International
|
|
14,682
|
|
|
152
|
|
|
—
|
|
|
—
|
|
|
14,682
|
|
|
152
|
|
||||||
|
|
$
|
290,005
|
|
|
$
|
5,186
|
|
|
$
|
25,242
|
|
|
$
|
873
|
|
|
$
|
315,247
|
|
|
$
|
6,059
|
|
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
||||||||||||||||||
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
|
Gross
|
||||||||||||
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
|
Fair
|
|
Unrealized
|
||||||||||||
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
|
Value
|
|
Losses
|
||||||||||||
December 31, 2017
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
||||||||||||||
Debt securities - available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
United States government obligations and authorities
|
|
$
|
52,368
|
|
|
$
|
517
|
|
|
$
|
19,287
|
|
|
$
|
329
|
|
|
$
|
71,655
|
|
|
$
|
846
|
|
Obligations of states and political subdivisions
|
|
32,030
|
|
|
221
|
|
|
5,676
|
|
|
157
|
|
|
37,706
|
|
|
378
|
|
||||||
Corporate
|
|
109,780
|
|
|
625
|
|
|
6,452
|
|
|
124
|
|
|
116,232
|
|
|
749
|
|
||||||
International
|
|
8,935
|
|
|
27
|
|
|
25
|
|
|
—
|
|
|
8,960
|
|
|
27
|
|
||||||
|
|
203,113
|
|
|
1,390
|
|
|
31,440
|
|
|
610
|
|
|
234,553
|
|
|
2,000
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Equity securities
|
|
4,312
|
|
|
279
|
|
|
—
|
|
|
—
|
|
|
4,312
|
|
|
279
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total investments
|
|
$
|
207,425
|
|
|
$
|
1,669
|
|
|
$
|
31,440
|
|
|
$
|
610
|
|
|
$
|
238,865
|
|
|
$
|
2,279
|
|
|
|
March 31,
|
|
December 31,
|
||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
Reinsurance recoverable on paid losses
|
|
$
|
34,664
|
|
|
$
|
26,256
|
|
Reinsurance recoverable on unpaid losses
|
|
111,427
|
|
|
98,345
|
|
||
Reinsurance recoverable, net
|
|
$
|
146,091
|
|
|
$
|
124,601
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
Net premiums written:
|
|
|
|
|
||||
Direct
|
|
$
|
134,395
|
|
|
$
|
146,051
|
|
Ceded
|
|
(20,107
|
)
|
|
(24,137
|
)
|
||
|
|
$
|
114,288
|
|
|
$
|
121,914
|
|
Net premiums earned:
|
|
|
|
|
|
|
||
Direct
|
|
$
|
146,442
|
|
|
$
|
147,978
|
|
Ceded
|
|
(64,333
|
)
|
|
(66,318
|
)
|
||
|
|
$
|
82,109
|
|
|
$
|
81,660
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Gross reserves, beginning of period
|
|
$
|
230,515
|
|
|
$
|
158,110
|
|
Less: reinsurance recoverable (1)
|
|
(98,345
|
)
|
|
(40,412
|
)
|
||
Net reserves, beginning of period
|
|
132,170
|
|
|
117,698
|
|
||
|
|
|
|
|
||||
Incurred loss, net of reinsurance, related to:
|
|
|
|
|
||||
Current year
|
|
48,459
|
|
|
60,277
|
|
||
Prior year loss development (2)
|
|
(653
|
)
|
|
2,905
|
|
||
Ceded losses subject to offsetting experience account adjustments (3)
|
|
(1,735
|
)
|
|
(6,283
|
)
|
||
Prior years
|
|
(2,388
|
)
|
|
(3,378
|
)
|
||
Total incurred loss and LAE, net of reinsurance
|
|
46,071
|
|
|
56,899
|
|
||
|
|
|
|
|
|
|||
Paid loss, net of reinsurance, related to:
|
|
|
|
|
|
|||
Current year
|
|
22,543
|
|
|
18,416
|
|
||
Prior years
|
|
30,911
|
|
|
36,316
|
|
||
Total paid loss and LAE, net of reinsurance
|
|
53,454
|
|
|
54,732
|
|
||
|
|
|
|
|
|
|||
Net reserves, end of period
|
|
124,787
|
|
|
119,865
|
|
||
Plus: reinsurance recoverable (1)
|
|
111,427
|
|
|
34,472
|
|
||
Gross reserves, end of period
|
|
$
|
236,214
|
|
|
$
|
154,337
|
|
(1)
|
Reinsurance recoverable in this table includes only ceded loss and LAE reserves.
|
(2)
|
Reflects loss development from prior accident years impacting pre-tax net income. Excludes losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment.
|
(3)
|
Reflects losses ceded under retrospective reinsurance treaties to the extent there is an offsetting experience account adjustment, such that there is no impact on pre-tax net income.
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
Federal:
|
|
|
|
|
||||
Current
|
|
$
|
3,878
|
|
|
$
|
658
|
|
Deferred
|
|
(2,076
|
)
|
|
527
|
|
||
Federal income tax expense
|
|
1,802
|
|
|
1,185
|
|
||
State:
|
|
|
|
|
|
|
||
Current
|
|
1,002
|
|
|
172
|
|
||
Deferred
|
|
(433
|
)
|
|
78
|
|
||
State income tax expense
|
|
569
|
|
|
250
|
|
||
Total income tax expense
|
|
$
|
2,371
|
|
|
$
|
1,435
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
Computed expected tax expense provision, at federal rate
|
|
$
|
2,020
|
|
|
$
|
1,360
|
|
State tax, net of federal tax benefit
|
|
401
|
|
|
53
|
|
||
Other
|
|
(50
|
)
|
|
22
|
|
||
Total income tax expense
|
|
$
|
2,371
|
|
|
$
|
1,435
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands)
|
||||||
Restricted stock
|
|
$
|
665
|
|
|
$
|
667
|
|
Stock options
|
|
—
|
|
|
—
|
|
||
Total share-based compensation expense
|
|
$
|
665
|
|
|
$
|
667
|
|
|
|
|
|
|
|
|
||
Intrinsic value of options exercised
|
|
$
|
—
|
|
|
$
|
7
|
|
Fair value of restricted stock vested
|
|
$
|
1,187
|
|
|
$
|
1,350
|
|
|
|
Number of Shares
|
|
Weighted Average Option Exercise Price
|
|||
Outstanding at January 1, 2018
|
|
50,351
|
|
|
$
|
3.72
|
|
Granted
|
|
—
|
|
|
—
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
|
Cancelled
|
|
—
|
|
|
—
|
|
|
Outstanding at March 31, 2018
|
|
50,351
|
|
|
$
|
3.72
|
|
|
|
Number of Shares
|
|
Weighted Average
|
|||
Outstanding at January 1, 2018
|
|
297,543
|
|
|
$
|
20.57
|
|
Granted
|
|
130,458
|
|
|
$
|
16.25
|
|
Vested
|
|
(53,571
|
)
|
|
$
|
22.15
|
|
Cancelled
|
|
(16,539
|
)
|
|
$
|
18.25
|
|
Outstanding at March 31, 2018
|
|
357,891
|
|
|
$
|
18.86
|
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
|
2018
|
|
2017
|
||||||||||||||||||||
|
|
Before Tax
|
|
Income Tax
|
|
Net
|
|
Before Tax
|
|
Income Tax
|
|
Net
|
||||||||||||
|
|
(in thousands)
|
||||||||||||||||||||||
Accumulated other comprehensive income, beginning of period
|
|
$
|
2,287
|
|
|
$
|
(593
|
)
|
|
$
|
1,694
|
|
|
$
|
3,324
|
|
|
$
|
(1,201
|
)
|
|
$
|
2,123
|
|
Cumulative effect of new accounting standards
|
|
(1,349
|
)
|
|
355
|
|
|
(994
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other comprehensive (loss) income before reclassification
|
|
(7,200
|
)
|
|
1,825
|
|
|
(5,375
|
)
|
|
3,605
|
|
|
(1,404
|
)
|
|
2,201
|
|
||||||
Reclassification adjustment for realized and unrealized losses (gains) included in net income
|
|
1,052
|
|
|
(238
|
)
|
|
814
|
|
|
105
|
|
|
(41
|
)
|
|
64
|
|
||||||
|
|
(6,148
|
)
|
|
1,587
|
|
|
(4,561
|
)
|
|
3,710
|
|
|
(1,445
|
)
|
|
2,265
|
|
||||||
Accumulated other comprehensive (loss) income, end of period
|
|
$
|
(5,210
|
)
|
|
$
|
1,349
|
|
|
$
|
(3,861
|
)
|
|
$
|
7,034
|
|
|
$
|
(2,646
|
)
|
|
$
|
4,388
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(in thousands, except per share data)
|
||||||
Net income attributable to Federated National Holding Company shareholders
|
|
$
|
7,463
|
|
|
$
|
2,422
|
|
|
|
|
|
|
|
|
||
Weighted average number of common shares outstanding - basic
|
|
12,850
|
|
|
13,432
|
|
||
Net income per share - basic
|
|
$
|
0.58
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Weighted average number of common shares outstanding - basic
|
|
12,850
|
|
|
13,432
|
|
||
Dilutive effect of stock compensation plans
|
|
95
|
|
|
127
|
|
||
Weighted average number of common shares outstanding - diluted
|
|
12,945
|
|
|
13,559
|
|
||
Net income per share - diluted
|
|
$
|
0.58
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
||
Dividends per share
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
•
|
FNU and MNIC entered into a managing general agent and claims administration agreement, pursuant to which FNU provided underwriting, accounting, reinsurance placement and claims administration services to MNIC. FNU received 4% of MNIC’s total written annual premium, excluding acquisition expenses payable to agents, for FNU’s managing general agent services; 3.6% of MNIC’s total earned annual premium for FNU’s claims administration services; and, a per-policy administrative fee of $25 for each policy underwritten for MNIC. We also received an annual expense reimbursement for accounting and related services.
|
•
|
The Monarch Entities and Crosswinds AUM, a wholly owned subsidiary of Crosswinds Holdings, entered into an investment management agreement, pursuant to which Crosswinds AUM managed the investment portfolios of the Monarch Entities. The management fee, on an annual basis, was 0.75% of assets under management up to $100 million; 0.50% of assets under management of more than $100 million but less than $200 million; and, 0.30% of assets under management of more than $200 million.
|
•
|
MNIC and TransRe also entered into a reinsurance capacity right of first refusal agreement, pursuant to which TransRe had a right of first refusal for all quota share and excess of loss reinsurance agreements that MNIC determined necessary in its sole discretion for so long as TransRe remains a member of Monarch Delaware or the MNHC debt remains outstanding. TransRe also had the right to provide, at market rates and terms, a maximum of 15% of any reinsurance coverage obtained by MNIC in any individual reinsurance contract.
|
•
|
Our Chief Executive Officer held his respective position and our Chief Accounting Officer held the position of Chief Financial Officer with the Monarch Entities.
|
|
|
Three Months Ended
|
|||||||||
|
|
March 31,
|
|||||||||
|
|
2018
|
|
% Change
|
|
2017
|
|||||
|
|
(In thousands)
|
|||||||||
Revenue:
|
|
|
|
|
|
|
|||||
Gross premiums written
|
|
$
|
134,395
|
|
|
(8.0
|
)%
|
|
$
|
146,051
|
|
Gross premiums earned
|
|
146,442
|
|
|
(1.0
|
)%
|
|
147,978
|
|
||
Ceded premiums
|
|
(64,333
|
)
|
|
(3.0
|
)%
|
|
(66,318
|
)
|
||
Net premiums earned
|
|
82,109
|
|
|
0.5
|
%
|
|
81,660
|
|
||
Net investment income
|
|
2,943
|
|
|
27.0
|
%
|
|
2,318
|
|
||
Net realized and unrealized investment losses
|
|
(1,052
|
)
|
|
901.9
|
%
|
|
(105
|
)
|
||
Direct written policy fees
|
|
3,576
|
|
|
(24.1
|
)%
|
|
4,712
|
|
||
Other income
|
|
5,501
|
|
|
23.1
|
%
|
|
4,469
|
|
||
Total revenue
|
|
93,077
|
|
|
—
|
%
|
|
93,054
|
|
||
|
|
|
|
|
|
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||
Losses and loss adjustment expenses
|
|
46,071
|
|
|
(19.0
|
)%
|
|
56,899
|
|
||
Commissions and other underwriting expenses
|
|
30,221
|
|
|
9.6
|
%
|
|
27,568
|
|
||
General and administrative expenses
|
|
6,085
|
|
|
31.7
|
%
|
|
4,619
|
|
||
Interest expense
|
|
1,084
|
|
|
1,190.5
|
%
|
|
84
|
|
||
Total costs and expenses
|
|
83,461
|
|
|
(6.4
|
)%
|
|
89,170
|
|
||
|
|
|
|
|
|
|
|
||||
Income before income taxes
|
|
9,616
|
|
|
147.6
|
%
|
|
3,884
|
|
||
Income taxes
|
|
2,371
|
|
|
65.2
|
%
|
|
1,435
|
|
||
Net income
|
|
7,245
|
|
|
195.8
|
%
|
|
2,449
|
|
||
Net (loss) income attributable to non-controlling interest
|
|
(218
|
)
|
|
(907.4
|
)%
|
|
27
|
|
||
Net income attributable to FNHC shareholders
|
|
$
|
7,463
|
|
|
208.1
|
%
|
|
$
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
||
Ratios to net premiums earned:
|
|
|
|
|
|
|
|
|
|
||
Net loss ratio
|
|
56.1
|
%
|
|
|
|
|
69.7
|
%
|
||
Net expense ratio
|
|
44.2
|
%
|
|
|
|
|
39.4
|
%
|
||
Combined ratio
|
|
100.3
|
%
|
|
|
|
|
109.1
|
%
|
(1)
|
Net loss ratio is calculated as losses and LAE divided by net premiums earned.
|
(2)
|
Net expense ratio is calculated as all operating expenses less interest expense divided by net premiums earned.
|
(3)
|
Combined ratio is calculated as the sum of losses and loss adjustment expense and all operating expenses less interest expense divided by net premiums earned.
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
Homeowners
|
|
Automobile
|
|
Other
|
|
Consolidated
|
|
Homeowners
|
|
Automobile
|
|
Other
|
|
Consolidated
|
||||||||||||||||
|
(Dollars in thousands)
|
||||||||||||||||||||||||||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Gross premiums written
|
$
|
122,815
|
|
|
$
|
6,347
|
|
|
$
|
5,233
|
|
|
$
|
134,395
|
|
|
$
|
121,221
|
|
|
$
|
19,291
|
|
|
$
|
5,539
|
|
|
$
|
146,051
|
|
Gross premiums earned
|
132,463
|
|
|
8,328
|
|
|
5,651
|
|
|
146,442
|
|
|
126,644
|
|
|
15,647
|
|
|
5,687
|
|
|
147,978
|
|
||||||||
Ceded premiums
|
(55,058
|
)
|
|
(6,117
|
)
|
|
(3,158
|
)
|
|
(64,333
|
)
|
|
(56,048
|
)
|
|
(7,611
|
)
|
|
(2,659
|
)
|
|
(66,318
|
)
|
||||||||
Net premiums earned
|
77,405
|
|
|
2,211
|
|
|
2,493
|
|
|
82,109
|
|
|
70,596
|
|
|
8,036
|
|
|
3,028
|
|
|
81,660
|
|
||||||||
Net investment income
|
—
|
|
|
—
|
|
|
2,943
|
|
|
2,943
|
|
|
—
|
|
|
—
|
|
|
2,318
|
|
|
2,318
|
|
||||||||
Net realized and unrealized investment losses
|
—
|
|
|
—
|
|
|
(1,052
|
)
|
|
(1,052
|
)
|
|
—
|
|
|
—
|
|
|
(105
|
)
|
|
(105
|
)
|
||||||||
Direct written policy fees
|
1,923
|
|
|
1,467
|
|
|
186
|
|
|
3,576
|
|
|
2,124
|
|
|
2,430
|
|
|
158
|
|
|
4,712
|
|
||||||||
Other income
|
3,977
|
|
|
488
|
|
|
1,036
|
|
|
5,501
|
|
|
2,791
|
|
|
1,059
|
|
|
619
|
|
|
4,469
|
|
||||||||
Total revenue
|
83,305
|
|
|
4,166
|
|
|
5,606
|
|
|
93,077
|
|
|
75,511
|
|
|
11,525
|
|
|
6,018
|
|
|
93,054
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Losses and loss adjustment expenses
|
41,955
|
|
|
2,236
|
|
|
1,880
|
|
|
46,071
|
|
|
44,802
|
|
|
9,559
|
|
|
2,538
|
|
|
56,899
|
|
||||||||
Commissions and other underwriting expenses
|
27,356
|
|
|
1,860
|
|
|
1,005
|
|
|
30,221
|
|
|
22,046
|
|
|
4,266
|
|
|
1,256
|
|
|
27,568
|
|
||||||||
General and administrative expenses
|
4,889
|
|
|
125
|
|
|
1,071
|
|
|
6,085
|
|
|
3,490
|
|
|
175
|
|
|
954
|
|
|
4,619
|
|
||||||||
Interest expense
|
100
|
|
|
—
|
|
|
984
|
|
|
1,084
|
|
|
84
|
|
|
—
|
|
|
—
|
|
|
84
|
|
||||||||
Total costs and expenses
|
74,300
|
|
|
4,221
|
|
|
4,940
|
|
|
83,461
|
|
|
70,422
|
|
|
14,000
|
|
|
4,748
|
|
|
89,170
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Income (loss) before income taxes
|
9,005
|
|
|
(55
|
)
|
|
666
|
|
|
9,616
|
|
|
5,089
|
|
|
(2,475
|
)
|
|
1,270
|
|
|
3,884
|
|
||||||||
Income taxes (benefits)
|
2,282
|
|
|
(14
|
)
|
|
103
|
|
|
2,371
|
|
|
1,964
|
|
|
(956
|
)
|
|
427
|
|
|
1,435
|
|
||||||||
Net income (loss)
|
6,723
|
|
|
(41
|
)
|
|
563
|
|
|
7,245
|
|
|
3,125
|
|
|
(1,519
|
)
|
|
843
|
|
|
2,449
|
|
||||||||
Net (loss) income attributable to non-controlling interest
|
(218
|
)
|
|
—
|
|
|
—
|
|
|
(218
|
)
|
|
27
|
|
|
—
|
|
|
—
|
|
|
27
|
|
||||||||
Net income (loss) attributable to FNHC shareholders
|
$
|
6,941
|
|
|
$
|
(41
|
)
|
|
$
|
563
|
|
|
$
|
7,463
|
|
|
$
|
3,098
|
|
|
$
|
(1,519
|
)
|
|
$
|
843
|
|
|
$
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Ratios to net premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss ratio
|
54.2
|
%
|
|
101.1
|
%
|
|
75.4
|
%
|
|
56.1
|
%
|
|
63.5
|
%
|
|
119.0
|
%
|
|
83.8
|
%
|
|
69.7
|
%
|
||||||||
Net expense ratio
|
41.7
|
%
|
|
|
|
|
|
44.2
|
%
|
|
36.2
|
%
|
|
|
|
|
|
39.4
|
%
|
||||||||||||
Combined ratio
|
95.9
|
%
|
|
|
|
|
|
100.3
|
%
|
|
99.6
|
%
|
|
|
|
|
|
109.1
|
%
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Gross premiums written:
|
|
|
|
|
||||
Homeowners Florida
|
|
$
|
108,371
|
|
|
$
|
110,853
|
|
Homeowners non-Florida
|
|
14,444
|
|
|
10,368
|
|
||
Automobile
|
|
6,347
|
|
|
19,291
|
|
||
Commercial general liability
|
|
2,514
|
|
|
3,296
|
|
||
Federal flood
|
|
2,719
|
|
|
2,243
|
|
||
Total gross premiums written
|
|
$
|
134,395
|
|
|
$
|
146,051
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Gross premiums earned:
|
|
|
|
|
||||
Homeowners Florida
|
|
$
|
118,824
|
|
|
$
|
117,544
|
|
Homeowners non-Florida
|
|
13,639
|
|
|
9,100
|
|
||
Automobile
|
|
8,328
|
|
|
15,647
|
|
||
Commercial general liability
|
|
2,629
|
|
|
3,194
|
|
||
Federal flood
|
|
3,022
|
|
|
2,493
|
|
||
Total gross premiums earned
|
|
$
|
146,442
|
|
|
$
|
147,978
|
|
|
|
Three Months Ended
|
|||||||||
|
|
March 31,
|
|||||||||
|
|
2018
|
|
% Change
|
|
2017
|
|||||
|
|
(In thousands)
|
|||||||||
Other income:
|
|
|
|
|
|
|
|||||
Commission income
|
|
$
|
1,409
|
|
|
(14.9
|
)%
|
|
$
|
1,656
|
|
Brokerage
|
|
3,542
|
|
|
54.3
|
%
|
|
2,295
|
|
||
Partnership income
|
|
43
|
|
|
(172.9
|
)%
|
|
(59
|
)
|
||
Financing revenue
|
|
507
|
|
|
(12.1
|
)%
|
|
577
|
|
||
Total other income
|
|
$
|
5,501
|
|
|
23.1
|
%
|
|
$
|
4,469
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2018
|
|
2017
|
||||
|
|
(In thousands)
|
||||||
Commissions and other underwriting expenses:
|
|
|
|
|
||||
Homeowners Florida
|
|
$
|
14,363
|
|
|
$
|
13,759
|
|
All others
|
|
6,452
|
|
|
8,524
|
|
||
Ceding commissions
|
|
(3,715
|
)
|
|
(4,382
|
)
|
||
Total commissions and other fees
|
|
17,100
|
|
|
17,901
|
|
||
Salaries and wages
|
|
3,766
|
|
|
3,675
|
|
||
Other underwriting expenses
|
|
9,355
|
|
|
5,992
|
|
||
Total commissions and other underwriting expenses
|
|
$
|
30,221
|
|
|
$
|
27,568
|
|
|
|
|
|
|
|
Total Number of
|
|
Approximate Dollar
|
|||||
|
|
Total Number
|
|
Average
|
|
Shares Purchased
|
|
Value of Shares That
|
|||||
|
|
of Shares
|
|
Price Paid
|
|
as Part of Publicly
|
|
May Yet Be Purchased
|
|||||
|
|
Repurchased
|
|
Per Share
|
|
Announced Plans
|
|
Under the Plans
(1)
|
|||||
January 2018
|
|
40,789
|
|
|
$
|
16.03
|
|
|
40,789
|
|
|
10,127,392
|
|
February 2018
|
|
213,304
|
|
|
$
|
15.22
|
|
|
213,304
|
|
|
6,881,302
|
|
March 2018
|
|
68,772
|
|
|
$
|
16.00
|
|
|
68,772
|
|
|
5,780,911
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In December 2017, the Company’s Board of Directors authorized an additional share repurchase program under which the Company may repurchase up to
$10.0 million
(plus $0.8 million remaining from previous authorization) of its outstanding shares of common stock through December 31, 2018. As of
March 31, 2018
, the remaining availability for future repurchases of our common stock was
$5.8 million
.
|
Exhibit No.
|
Description
|
10.1
|
|
10.2
|
|
31.1
|
|
31.2
|
|
32.1
|
|
32.2
|
|
101.INS
|
XBRL Instance Document**
|
101.SCH
|
XBRL Taxonomy Extension Schema Document**
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document**
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document**
|
101.PRE
|
XBRLTaxonomy Extension Presentation Linkbase Document**
|
|
FEDERATED NATIONAL HOLDING COMPANY
|
|
|
|
|
|
|
|
By:
|
/s/ Michael H. Braun
|
|
|
|
Michael H. Braun, Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/
Ronald Jordan
|
|
|
|
Ronald Jordan, Chief Financial Officer
|
|
|
|
(Principal Financial Officer)
|
|
|
STATE BOARD OF ADMINISTRATION
OF FLORIDA
1801 HERMITAGE BOULEVARD
TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300
|
RICK SCOTT
GOVERNOR
CHAIR
JIMMY PATRONIS
CHIEF FINANCIAL OFFICER
PAM BONDI
ATTORNEY GENERAL
ASH WILLIAMS
EXECUTIVE DIRECTOR & CIO
|
(1)
|
Term
|
(2)
|
Mandatory Nature of this Contract
|
(a)
|
Statutory Requirement
|
(b)
|
Duty to Provide a Fully and Timely Executed Copy of this Contract to the FHCF Administrator
|
(3)
|
Contract Deemed Executed Notwithstanding Execution Errors
|
(a)
|
For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the coverage level from the prior Contract Year shall be deemed.
|
(b)
|
For Companies that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year shall be deemed.
|
(c)
|
For New Participants that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed.
|
(d)
|
For New Participants that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed to have been selected.
|
(1)
|
The SBA shall reimburse the Company, with respect to each Covered Event commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss paid
|
(2)
|
The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under Article XX.
|
(3)
|
The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this Contract Year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding reimbursement calculations, see section (3)(c) of Article X.
|
(4)
|
Upon the occurrence of a Covered Event, the SBA shall evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.
|
(5)
|
Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements.
|
(6)
|
After the end of the calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the SBA shall publish in the
Florida Administrative Register
a statement of the FHCF’s estimated Borrowing Capacity, Estimated Claims-Paying Capacity, and the projected Balance of the Fund as of December 31.
|
(7)
|
The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the maximum amount the SBA is able to raise through the issuance of revenue bonds or through other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes. The obligations and the liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.).
|
(1)
|
Actual Claims-Paying Capacity of the FHCF
|
(2)
|
Actuarially Indicated
|
(3)
|
Additional Living Expense (ALE)
|
(4)
|
Administrator
|
(5)
|
Authorized Insurer
|
(6)
|
Borrowing Capacity
|
(a)
|
Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.
|
(b)
|
Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual statement required to be filed by Section 624.424, Florida Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s statutory annual statement as:
|
1.
|
Fire
|
2.
|
Allied Lines
|
3.
|
Farmowners Multiple Peril
|
4.
|
Homeowners Multiple Peril
|
5.
|
Commercial Multiple Peril (non liability portion, covering condominiums and apartments)
|
6.
|
Inland Marine
|
(c)
|
This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
|
(d)
|
Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available.
|
(e)
|
See Article VI for specific exclusions.
|
(17)
|
Fund Balance or Balance of the Fund as of December 31
|
(1)
|
Insurer Group
|
(2)
|
Loss
|
(3)
|
Loss Adjustment Expense Reimbursement
|
(a)
|
Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed Losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
|
(b)
|
The 5% Loss Adjustment Expense Reimbursement is included in the total Payout Multiple applied to each Company.
|
(4)
|
New Participant(s)
|
(5)
|
Office of Insurance Regulation
|
(6)
|
Payout Multiple
|
(7)
|
Premium
|
(8)
|
Projected Payout Multiple
|
(9)
|
Reimbursement Premium
|
(10)
|
Residential Structures
|
(11)
|
Retention
|
(a)
|
When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.
|
(b)
|
When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.
|
1.
|
All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.
|
2.
|
Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports, but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made quarterly by the SBA only if the Proof of Loss Reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.
|
(c)
|
The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.
|
(12)
|
Retention Multiple
|
(a)
|
The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2018/2019 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2016/2017 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA.
|
(b)
|
The Retention Multiple shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:
|
1.
|
If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;
|
2.
|
If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or
|
3.
|
If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.
|
(13)
|
Ultimate Net Loss
|
(a)
|
This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and reimbursement percentage, and excluding loss adjustment expense and any exclusions under Article VI.
|
(c)
|
Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.
|
(d)
|
All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
|
(e)
|
Nothing in this clause shall be construed to mean that Losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.
|
(f)
|
The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.
|
(1)
|
Any losses not defined as being within the scope of a Covered Policy.
|
(2)
|
Any policy which excludes wind or hurricane coverage.
|
(3)
|
Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.
|
(4)
|
(a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess
|
(5)
|
Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.
|
(6)
|
Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(10)(d).
|
(7)
|
Any reinsurance assumed by the Company.
|
(8)
|
Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property used solely for commercial purposes.
|
(9)
|
Any exposure for homeowner associations if no habitational structures are insured under the policy.
|
(10)
|
Any exposure for homes and condominium structures or units that are non-owner occupied and rented for 6 or more rental periods by different parties during the course of a 12-month period.
|
(11)
|
Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
|
(12)
|
Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).
|
(13)
|
Policies covering only Additional Living Expense.
|
(14)
|
Any exposure for barns or barns with apartments or living quarters.
|
(15)
|
Any exposure for builders risk coverage or new Residential Structures still under construction.
|
(16)
|
Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.
|
(17)
|
Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.
|
(18)
|
Any losses paid in excess of a policy’s hurricane limit in force at the time of each Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and additional living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.
|
(19)
|
Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call for the applicable Contract Year (unless policy limits have changed effective after June 30 of the Contract Year).
|
(20)
|
Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.
|
(21)
|
Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.
|
(22)
|
Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes.
|
(23)
|
Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Authorized Insurer and Citizens are covered by this Contract.
|
(24)
|
All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
|
(25)
|
Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
|
(26)
|
The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
|
(27)
|
Policies and endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:
|
(a)
|
A policy or endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.
|
1.
|
For purposes of this exemption, a Specialized Fine Arts Risk policy or endorsement is a policy or endorsement that:
|
a.
|
Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;
|
b.
|
Charges a minimum premium of $500; and
|
c.
|
Insures scheduled items valued, in the aggregate, at no less than $100,000.
|
2.
|
The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:
|
(b)
|
A policy form or endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such policy forms or endorsements are subject to the exclusion provided in this paragraph when the policy or endorsement limit equals or exceeds $500,000. Generally such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such a policy or endorsement represents an unusually high exposure value and such policy is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.
|
(28)
|
Any losses under liability coverages.
|
(29)
|
Any exposure for a condominium structure insured on a commercial policy in which more than 50% of the individual units are non-owner occupied and rented for 6 or more rental periods by different parties during the course of a 12-month period.
|
(30)
|
Any structure used
exclusively or predominantly for non-dwelling or non-habitational occupancies.
|
(1)
|
The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).
|
(3)
|
Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Premium if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Premium billed but is less than the final Premium, interest will not accrue. If the Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate for interest charges will accrue at this rate plus 5%.
|
(a)
|
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
|
(b)
|
If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
|
(c)
|
If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
|
(d)
|
The requirement that a report is due on a certain date means that the report shall be received by the SBA no later than 4 p.m. Eastern Time on the due date. Reports sent to the FHCF Administrator in Minneapolis, Minnesota, will be returned to the sender. Reports not in the physical possession of the SBA by 4 p.m., Eastern Time, on the applicable due date are late.
|
(a)
|
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.
|
(c)
|
A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Premium due as calculated above.
|
(d)
|
A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.
|
(e)
|
The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.
|
(f)
|
Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued
pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.
|
(a)
|
In General
|
(b)
|
Loss Reports
|
1.
|
At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Covered Event to provide information to the SBA in determining any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required.
|
2.
|
FHCF reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under
Rule
19-8.029, F.A.C.
|
a.
|
To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.
|
b.
|
The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and must be prepared to supply a Detailed Claims Listing for any subsequent Proof of Loss Report upon request.
|
c.
|
While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no earlier than December 1 and no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received.
|
d.
|
For the Proof of Loss Reports due by December 31 of the Contract Year, and the required subsequent quarterly and annual reports required under subparagraphs 3. and 4. below, the Company shall submit its Proof of Loss Reports by each quarter-end or year-end using the most current data available. However, the date of such data shall not be more than sixty days prior to the applicable quarter-end or year-end date.
|
e.
|
For the Proof of Loss Reports due by December 31 of the Contract Year and the required subsequent annual reports required under subparagraph 4. below, the Company shall include a Detailed Claims Listing if requested by the SBA.
|
3.
|
Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until all Losses resulting from a Covered Event are fully discharged including any adjustments to such Losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Covered Event occurred. Guidelines follow:
|
a.
|
Quarterly Proof of Loss Reports are due by March 31 from a Company whose Losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Covered Event.
|
b.
|
Quarterly Proof of Loss Reports are due by June 30 from a Company whose Losses exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Covered Event.
|
c.
|
Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from a Company whose Losses exceed, or are expected to exceed, its FHCF Retention for a specific Covered Event.
|
4.
|
Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Covered Event, as applicable, using the most current data available. This Proof of Loss Report shall be filed no earlier than December 1 and no later than December 31 of each year and shall continue until the earlier of the commutation process described in paragraph (3)(d) below
|
5.
|
The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.
|
a.
|
The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.
|
b.
|
The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.
|
c.
|
The SBA shall have the right to conduct a loss examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.
|
6.
|
All Proof of Loss Reports received will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5. above, Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company’s Premium, Retention, and coverage for the Contract Year, will be required before the Company’s request for reimbursement or an advance will be fully processed by the Administrator.
|
(c)
|
Loss Reimbursement Calculations
|
1.
|
In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(28)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
|
1.
|
Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable Losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable Losses for the previous Contract Year, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.
|
(a)
|
Commutation
|
1.
|
Except as provided in subparagraph 3. below, not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report(s), with the exception of Companies having no reportable Losses as described in sub-subparagraph a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in sub-subparagraph b. below. The Company and SBA may mutually agree to initiate commutation after 36 months and prior to 60 months after the end of the Contract Year. The commutation negotiations shall begin at the later of 60 months after the end of the
|
a.
|
If the Company’s most recently submitted Proof of Loss Report(s) indicates that it has no Losses resulting from Covered Events during the Contract Year, the SBA shall after 36 months request that the Company execute a final commutation agreement. The final commutation agreement shall constitute a complete and final release of all obligations of the SBA with respect to Losses. If the Company chooses not to execute a final commutation agreement, the SBA shall be released from all obligations 60 months following the end of the Contract Year if no Proof of Loss Report indicating reimbursable Losses had been filed and the commutation shall be deemed concluded. However during this time, if the Company determines that it does have Losses to report for FHCF reimbursement, the Company must submit an updated Proof of Loss Report prior to the end of 60 months after the Contract Year and the Company shall be required to follow the commutation provisions and time frames otherwise specified in this section.
|
b.
|
If the Company has submitted a Proof of Loss Report indicating that it does have Losses resulting from a Covered Event during the Contract Year, the SBA may require the Company to submit within 30 days an updated, current Proof of Loss Report for each Covered Event during the Contract Year. The Proof of Loss Report must include all paid Losses as well as all outstanding Losses and incurred but not reported Losses, which are not finally settled and which may be reimbursable Losses under this Contract, and must be accompanied by supporting documentation (at a minimum an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary. Failure of the Company to provide an updated current Proof of Loss Report, supporting documentation, and an opinion by the date requested by the SBA may result in referral to the Office of Insurance Regulation for a violation of the Contract. Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or commutation.
|
2.
|
Determining the present value of outstanding Losses.
|
3.
|
The Company and SBA may mutually agree to initiate and complete a commutation for zero dollars prior to the 36 months provided in subparagraph (d)1. above. Such early commutation, once completed, eliminates the mandatory Proof of Loss Report requirements required under subparagraphs (b)3. and 4. above for all reporting periods subsequent to the completion of the commutation.
|
|
(b) For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. In addition to the prime rate, an additional 5% interest charge will apply on excess advances. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment.
|
1.
|
Advances to Companies to prevent insolvency, as defined under Article XV.
|
a.
|
Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.
|
b.
|
In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information:
|
i.
|
Current assets;
|
c.
|
The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.
|
a.
|
Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.
|
b.
|
In addition to the requirements outlined in paragraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.
|
(a)
|
In determining whether or not to grant an advance and the amount of an advance, the SBA:
|
1.
|
Shall determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
|
2.
|
Shall review and consider all the information submitted by such Companies;
|
3.
|
Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
|
4.
|
Shall consult with all relevant regulatory agencies to seek all relevant information;
|
5.
|
Shall review the damage caused by the Covered Event and when that Covered Event occurred;
|
6.
|
Shall consider whether the Company has substantially exhausted amounts previously advanced;
|
7.
|
Shall consider any other factors deemed relevant; and
|
8.
|
Shall require commercial self-insurance funds established under section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.
|
(a)
|
Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event which has precipitated the immediate need to continue to pay additional claims as they become due.
|
(1)
|
Inadequate Data Submissions
|
(2)
|
Confidential Information/Trade Secret Information
|
(1)
|
Purpose of FHCF Examination
|
(2)
|
Examination Requirements for Exposure Verification
|
(3)
|
Examination Requirements for Loss Reports
|
(4)
|
Examination Procedures
|
(a)
|
The FHCF will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.
|
(b)
|
The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site. Any records to support reported exposure or Losses which are provided after the examiner has left the work-site will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination already in progress. All costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.
|
(c)
|
At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward an examination report to the Company.
|
(d)
|
Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the FHCF. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.
|
(e)
|
If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.
|
(f)
|
If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
|
(g)
|
1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. Once the resubmission is received, the FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings, and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.
|
(h)
|
If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss
|
(i)
|
The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.
|
(1)
|
Costs of the Examinations
|
(a)
|
NAIC Group Affirmation
: Initial the following box if the Company is part of an NAIC Group:
|
MHB
|
|
45%OR
|
MHB
|
75%OR
|
|
90%
|
(1)
|
Additional Living Expense (ALE) Written as Time Element Coverage
|
|
OR
|
MHB
|
Yes - Time Element ALE
|
|
No - Time Element ALE
|
By:
|
/s/ Martin K. Helgestad
|
|
3/30/2018
|
|
|
|
Date
|
|
Michael H. Braun
|
|
CEO & President
|
|
Printed Name and Title
|
|
By:
|
/s/ Michael H Braun
|
|
2/6/2018
|
|
|
|
Date
|
|
STATE BOARD OF ADMINISTRATION
OF FLORIDA
1801 HERMITAGE BOULEVARD
TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300
|
RICK SCOTT
GOVERNOR
CHAIR
JIMMY PATRONIS
CHIEF FINANCIAL OFFICER
PAM BONDI
ATTORNEY GENERAL
ASH WILLIAMS
EXECUTIVE DIRECTOR & CIO
|
(1)
|
Term
|
(2)
|
Mandatory Nature of this Contract
|
(a)
|
Statutory Requirement
|
(b)
|
Duty to Provide a Fully and Timely Executed Copy of this Contract to the FHCF Administrator
|
(3)
|
Contract Deemed Executed Notwithstanding Execution Errors
|
(a)
|
For Companies that are a member of a National Association of Insurance Commissioners (NAIC) group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the coverage level from the prior Contract Year shall be deemed.
|
(b)
|
For Companies that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the coverage level from the prior Contract Year shall be deemed.
|
(c)
|
For New Participants that are a member of an NAIC group, the same coverage level selected by the other Companies of the same NAIC group shall be deemed.
|
(d)
|
For New Participants that are not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45%, 75% or 90% coverage levels may be selected providing that the FHCF Administrator receives executed Contracts within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45% coverage level shall be deemed to have been selected.
|
(1)
|
The SBA shall reimburse the Company, with respect to each Covered Event commencing during the Contract Year for the “Reimbursement Percentage” elected, this percentage times the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to Article V(28), plus 5% of the reimbursed Losses for Loss Adjustment Expense Reimbursement.
|
(2)
|
The Reimbursement Percentage will be 45% or 75% or 90%, at the Company’s option as elected under Article XX.
|
(3)
|
The aggregate liability of the FHCF with respect to all Reimbursement Contracts covering this Contract Year shall not exceed the limit set forth under Section 215.555(4)(c)1., Florida Statutes. For specifics regarding reimbursement calculations, see section (3)(c) of Article X.
|
(4)
|
Upon the occurrence of a Covered Event, the SBA shall evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.
|
(5)
|
Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s limit of coverage has been exhausted, the Company will not be entitled to further reimbursements.
|
(6)
|
After the end of the calendar year, the SBA shall notify insurers of the estimated Borrowing Capacity and the Balance of the Fund as of December 31. In May and October of each year, the SBA shall publish in the
Florida Administrative Register
a statement of the FHCF’s estimated Borrowing Capacity, Estimated Claims-Paying Capacity, and the projected Balance of the Fund as of December 31.
|
(7)
|
The obligation of the SBA with respect to all Contracts covering a particular Contract Year shall not exceed the Balance of the Fund as of December 31 of that Contract Year, together with the maximum amount the SBA is able to raise through the issuance of revenue bonds or through other means available to the SBA under Section 215.555, Florida Statutes, up to the limit in accordance with Section 215.555(4)(c)1. and (6), Florida Statutes. The obligations and the liability of the SBA are more fully described in Rule 19-8.013, Florida Administrative Code (F.A.C.).
|
(1)
|
Actual Claims-Paying Capacity of the FHCF
|
(2)
|
Actuarially Indicated
|
(3)
|
Additional Living Expense (ALE)
|
(4)
|
Administrator
|
(5)
|
Authorized Insurer
|
(6)
|
Borrowing Capacity
|
(a)
|
Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.
|
(b)
|
Due to the specialized nature of the definition of Covered Policies, Covered Policies are not limited to only one line of business in the Company’s annual statement required to be filed by Section 624.424, Florida Statutes. Instead, Covered Policies are found in several lines of business on the Company’s annual statement. Covered Policies will at a minimum be reported in the Company’s statutory annual statement as:
|
1.
|
Fire
|
2.
|
Allied Lines
|
3.
|
Farmowners Multiple Peril
|
4.
|
Homeowners Multiple Peril
|
5.
|
Commercial Multiple Peril (non liability portion, covering condominiums and apartments)
|
6.
|
Inland Marine
|
(c)
|
This definition applies only to the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.
|
(d)
|
Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, if such policy can be accurately reported as required in Section 215.555(5), Florida Statutes. A Company will be deemed to be able to accurately report data if the required data, as specified in the Premium Formula adopted in Section 215.555(5), Florida Statutes, is available.
|
(e)
|
See Article VI for specific exclusions.
|
(17)
|
Fund Balance or Balance of the Fund as of December 31
|
(1)
|
Insurer Group
|
(2)
|
Loss
|
(3)
|
Loss Adjustment Expense Reimbursement
|
(a)
|
Loss Adjustment Expense Reimbursement shall be 5% of the reimbursed Losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.
|
(b)
|
The 5% Loss Adjustment Expense Reimbursement is included in the total Payout Multiple applied to each Company.
|
(4)
|
New Participant(s)
|
(5)
|
Office of Insurance Regulation
|
(6)
|
Payout Multiple
|
(7)
|
Premium
|
(8)
|
Projected Payout Multiple
|
(9)
|
Reimbursement Premium
|
(10)
|
Residential Structures
|
(11)
|
Retention
|
(a)
|
When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.
|
(b)
|
When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.
|
1.
|
All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.
|
2.
|
Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports, but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made quarterly by the SBA only if the Proof of Loss Reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.
|
(c)
|
The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.
|
(12)
|
Retention Multiple
|
(a)
|
The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2018/2019 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2016/2017 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90% reimbursement percentage level for the Contract Year as determined by the SBA.
|
(b)
|
The Retention Multiple shall be adjusted to reflect the reimbursement percentage elected by the Company under this Contract as follows:
|
1.
|
If the Company elects a 90% reimbursement percentage, the adjusted Retention Multiple is 100% of the amount determined under (29)(a) above;
|
2.
|
If the Company elects a 75% reimbursement percentage, the adjusted Retention Multiple is 120% of the amount determined under (29)(a) above; or
|
3.
|
If the Company elects a 45% reimbursement percentage, the adjusted Retention Multiple is 200% of the amount determined under (29)(a) above.
|
(13)
|
Ultimate Net Loss
|
(a)
|
This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and reimbursement percentage, and excluding loss adjustment expense and any exclusions under Article VI.
|
(c)
|
Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.
|
(d)
|
All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.
|
(e)
|
Nothing in this clause shall be construed to mean that Losses under this Contract are not recoverable until the Company’s Ultimate Net Loss has been ascertained.
|
(f)
|
The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.
|
(1)
|
Any losses not defined as being within the scope of a Covered Policy.
|
(2)
|
Any policy which excludes wind or hurricane coverage.
|
(3)
|
Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.
|
(4)
|
(a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess
|
(5)
|
Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.
|
(6)
|
Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(10)(d).
|
(7)
|
Any reinsurance assumed by the Company.
|
(8)
|
Any exposure for hotels, motels, timeshares, shelters, camps, retreats, and any other rental property used solely for commercial purposes.
|
(9)
|
Any exposure for homeowner associations if no habitational structures are insured under the policy.
|
(10)
|
Any exposure for homes and condominium structures or units that are non-owner occupied and rented for 6 or more rental periods by different parties during the course of a 12-month period.
|
(11)
|
Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.
|
(12)
|
Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).
|
(13)
|
Policies covering only Additional Living Expense.
|
(14)
|
Any exposure for barns or barns with apartments or living quarters.
|
(15)
|
Any exposure for builders risk coverage or new Residential Structures still under construction.
|
(16)
|
Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.
|
(17)
|
Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.
|
(18)
|
Any losses paid in excess of a policy’s hurricane limit in force at the time of each Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and additional living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.
|
(19)
|
Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call for the applicable Contract Year (unless policy limits have changed effective after June 30 of the Contract Year).
|
(20)
|
Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.
|
(21)
|
Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.
|
(22)
|
Losses in excess of the sum of the Balance of the Fund as of December 31 of the Contract Year and the amount the SBA is able to raise through the issuance of revenue bonds or by the use of other financing mechanisms, up to the limit pursuant to Section 215.555(4)(c), Florida Statutes.
|
(23)
|
Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Authorized Insurer and Citizens are covered by this Contract.
|
(24)
|
All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.
|
(25)
|
Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
|
(26)
|
The FHCF does not provide coverage for water damage which is generally excluded under property insurance contracts and has been defined to mean flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.
|
(27)
|
Policies and endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:
|
(a)
|
A policy or endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.
|
1.
|
For purposes of this exemption, a Specialized Fine Arts Risk policy or endorsement is a policy or endorsement that:
|
a.
|
Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;
|
b.
|
Charges a minimum premium of $500; and
|
c.
|
Insures scheduled items valued, in the aggregate, at no less than $100,000.
|
2.
|
The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:
|
(b)
|
A policy form or endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such policy forms or endorsements are subject to the exclusion provided in this paragraph when the policy or endorsement limit equals or exceeds $500,000. Generally such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such a policy or endorsement represents an unusually high exposure value and such policy is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.
|
(28)
|
Any losses under liability coverages.
|
(29)
|
Any exposure for a condominium structure insured on a commercial policy in which more than 50% of the individual units are non-owner occupied and rented for 6 or more rental periods by different parties during the course of a 12-month period.
|
(30)
|
Any structure used
exclusively or predominantly for non-dwelling or non-habitational occupancies.
|
(1)
|
The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).
|
(3)
|
Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Premium installments. However, if the Company’s estimation is less than the provisional Premium billed, an interest charge will accrue on the difference between the estimated Premium and the final Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Premium if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Premium billed but is less than the final Premium, interest will not accrue. If the Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Premium which is overpaid as either an estimate or as a provisional Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. The applicable interest rate for interest charges will accrue at this rate plus 5%.
|
(a)
|
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
|
(b)
|
If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.
|
(c)
|
If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.
|
(d)
|
The requirement that a report is due on a certain date means that the report shall be received by the SBA no later than 4 p.m. Eastern Time on the due date. Reports sent to the FHCF Administrator in Minneapolis, Minnesota, will be returned to the sender. Reports not in the physical possession of the SBA by 4 p.m., Eastern Time, on the applicable due date are late.
|
(a)
|
If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on
|
(c)
|
A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before February 1 of the Contract Year. To recognize that New Participants have limited exposure during this period, the actual Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Premium shall be credited, and the resulting amount shall be the total Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Premium due as calculated above.
|
(d)
|
A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.
|
(e)
|
The requirement that the Reimbursement Premium is due on a certain date means that the Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.
|
(f)
|
Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued
pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.
|
(a)
|
In General
|
(b)
|
Loss Reports
|
1.
|
At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Covered Event to provide information to the SBA in determining any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required.
|
2.
|
FHCF reimbursements will be issued based on Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under
Rule
19-8.029, F.A.C.
|
a.
|
To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.
|
b.
|
The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and must be prepared to supply a Detailed Claims Listing for any subsequent Proof of Loss Report upon request.
|
c.
|
While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no earlier than December 1 and no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received.
|
d.
|
For the Proof of Loss Reports due by December 31 of the Contract Year, and the required subsequent quarterly and annual reports required under subparagraphs 3. and 4. below, the Company shall submit its Proof of Loss Reports by each quarter-end or year-end using the most current data available. However, the date of such data shall not be more than sixty days prior to the applicable quarter-end or year-end date.
|
e.
|
For the Proof of Loss Reports due by December 31 of the Contract Year and the required subsequent annual reports required under subparagraph 4. below, the Company shall include a Detailed Claims Listing if requested by the SBA.
|
3.
|
Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until all Losses resulting from a Covered Event are fully discharged including any adjustments to such Losses due to salvage or other recoveries, or the Company has received its full coverage under the Contract Year in which the Covered Event occurred. Guidelines follow:
|
a.
|
Quarterly Proof of Loss Reports are due by March 31 from a Company whose Losses exceed, or are expected to exceed, 50% of its FHCF Retention for a specific Covered Event.
|
b.
|
Quarterly Proof of Loss Reports are due by June 30 from a Company whose Losses exceed, or are expected to exceed, 75% of its FHCF Retention for a specific Covered Event.
|
c.
|
Quarterly Proof of Loss Reports are due by September 30 and quarterly thereafter from a Company whose Losses exceed, or are expected to exceed, its FHCF Retention for a specific Covered Event.
|
4.
|
Annually after December 31 of the Contract Year, all Companies shall submit a mandatory year-end Proof of Loss Report for each Covered Event, as applicable, using the most current data available. This
|
5.
|
The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.
|
a.
|
The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.
|
b.
|
The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.
|
c.
|
The SBA shall have the right to conduct a loss examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed under regulatory supervision by a State or where control has been transferred through any legal or regulatory proceeding to a state regulator or court appointed receiver or rehabilitator.
|
6.
|
All Proof of Loss Reports received will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and loss examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5. above, Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call which, as the Data Call impacts the Company’s Premium, Retention, and coverage for the Contract Year, will be required before the Company’s request for reimbursement or an advance will be fully processed by the Administrator.
|
(c)
|
Loss Reimbursement Calculations
|
1.
|
In general, the Company’s paid Ultimate Net Losses must exceed its full FHCF Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(28)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.
|
1.
|
Reserve established. When a Covered Event occurs in a subsequent Contract Year when reimbursable Losses are still being paid for a Covered Event in a previous Contract Year, the SBA will establish a reserve for the outstanding reimbursable Losses for the previous Contract Year, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.
|
(a)
|
Commutation
|
1.
|
Except as provided in subparagraph 3. below, not less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report(s), with the exception of Companies having no reportable Losses as described in sub-subparagraph a. below. Otherwise, the final Proof of Loss Report(s) is required as specified in sub-subparagraph b. below. The Company and SBA
|
a.
|
If the Company’s most recently submitted Proof of Loss Report(s) indicates that it has no Losses resulting from Covered Events during the Contract Year, the SBA shall after 36 months request that the Company execute a final commutation agreement. The final commutation agreement shall constitute a complete and final release of all obligations of the SBA with respect to Losses. If the Company chooses not to execute a final commutation agreement, the SBA shall be released from all obligations 60 months following the end of the Contract Year if no Proof of Loss Report indicating reimbursable Losses had been filed and the commutation shall be deemed concluded. However during this time, if the Company determines that it does have Losses to report for FHCF reimbursement, the Company must submit an updated Proof of Loss Report prior to the end of 60 months after the Contract Year and the Company shall be required to follow the commutation provisions and time frames otherwise specified in this section.
|
b.
|
If the Company has submitted a Proof of Loss Report indicating that it does have Losses resulting from a Covered Event during the Contract Year, the SBA may require the Company to submit within 30 days an updated, current Proof of Loss Report for each Covered Event during the Contract Year. The Proof of Loss Report must include all paid Losses as well as all outstanding Losses and incurred but not reported Losses, which are not finally settled and which may be reimbursable Losses under this Contract, and must be accompanied by supporting documentation (at a minimum an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary. Failure of the Company to provide an updated current Proof of Loss Report, supporting documentation, and an opinion by the date requested by the SBA may result in referral to the Office of Insurance Regulation for a violation of the Contract. Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or commutation.
|
2.
|
Determining the present value of outstanding Losses.
|
3.
|
The Company and SBA may mutually agree to initiate and complete a commutation for zero dollars prior to the 36 months provided in subparagraph (d)1. above. Such early commutation, once completed, eliminates the mandatory Proof of Loss Report requirements required under subparagraphs (b)3. and 4. above for all reporting periods subsequent to the completion of the commutation.
|
|
(b) For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. In addition to the prime rate, an additional 5% interest charge will apply on excess advances. All interest charged will commence on the date the SBA issues a check for an advance and will cease on the date upon which the FHCF has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment.
|
1.
|
Advances to Companies to prevent insolvency, as defined under Article XV.
|
a.
|
Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.
|
b.
|
In addition to the requirements outlined in subparagraph (4)(a) above, the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates it is likely to qualify
|
i.
|
Current assets;
|
c.
|
The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.
|
a.
|
Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity created pursuant to Section 627.351(6), Florida Statutes, up to 90% of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.
|
b.
|
In addition to the requirements outlined in paragraph (4)(a) above, the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.
|
(a)
|
In determining whether or not to grant an advance and the amount of an advance, the SBA:
|
1.
|
Shall determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;
|
2.
|
Shall review and consider all the information submitted by such Companies;
|
3.
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Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;
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4.
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Shall consult with all relevant regulatory agencies to seek all relevant information;
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5.
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Shall review the damage caused by the Covered Event and when that Covered Event occurred;
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6.
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Shall consider whether the Company has substantially exhausted amounts previously advanced;
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7.
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Shall consider any other factors deemed relevant; and
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8.
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Shall require commercial self-insurance funds established under section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.
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(a)
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Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event which has precipitated the immediate need to continue to pay additional claims as they become due.
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(1)
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Inadequate Data Submissions
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(2)
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Confidential Information/Trade Secret Information
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(1)
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Purpose of FHCF Examination
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(2)
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Examination Requirements for Exposure Verification
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(3)
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Examination Requirements for Loss Reports
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(4)
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Examination Procedures
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(a)
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The FHCF will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.
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(b)
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The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examiner is on site. Any records not required to be provided to the examiner in advance shall be made available at the time the examiner arrives on site. Any records to support reported exposure or Losses which are provided after the examiner has left the work-site will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination already in progress. All costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.
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(c)
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At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward an examination report to the Company.
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(d)
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Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the FHCF. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.
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(e)
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If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.
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(f)
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If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.
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(g)
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1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. Once the resubmission is received, the FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings, and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.
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(h)
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If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss Report(s) is received by the FHCF Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings, and accept the Proof of Loss
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(i)
|
The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.
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(1)
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Costs of the Examinations
|
(a)
|
NAIC Group Affirmation
: Initial the following box if the Company is part of an NAIC Group:
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MHB
|
|
45%OR
|
MHB
|
75%OR
|
|
90%
|
(1)
|
Additional Living Expense (ALE) Written as Time Element Coverage
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|
OR
|
MHB
|
Yes - Time Element ALE
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|
No - Time Element ALE
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By:
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/s/ Martin K. Helgestad
|
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3/30/2018
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|
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Date
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|
Michael H. Braun
|
|
CEO & President
|
|
Printed Name and Title
|
|
By:
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/s/ Michael H Braun
|
|
2/6/2018
|
|
|
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Date
|
|
|
/s/ Michael H. Braun
|
|
Michael H. Braun
|
|
Chief Executive Officer (Principal Executive Officer)
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|
/s/ Ronald Jordan
|
|
Ronald Jordan
|
|
Cheif Financial Officer
|
|
(Principal Financial and Accounting Officer)
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|
|
(1)
|
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Federated National Holding Company.
|
/s/ Michael H. Braun
|
|
Michael H. Braun
|
|
Chief Executive Officer (Principal Executive Officer)
|
|
|
(1)
|
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Federated National Holding Company.
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/s/ Ronald Jordan
|
|
Ronald Jordan
|
|
Chief Financial Officer
|
|
(Principal Financial and Accounting Officer)
|
|