Florida
|
65-0248866
|
|
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No)
|
14050 N.W. 14
th
Street, Suite 180, Sunrise, Florida 33323
|
(Address of principal executive offices) (Zip Code)
|
Title of Each Class
|
Name of Each Exchange on Which Registered
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Common Stock, par value $0.01 per share
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NASDAQ Global Market
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Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x |
ITEM 1
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BUSINE
SS
|
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·
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the nature and severity of the loss;
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·
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weather-related patterns;
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|
·
|
the availability, cost and terms of reinsurance;
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|
·
|
underlying settlement costs, including medical and legal costs;
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|
·
|
legal and political factors such as legislative initiatives and public opinion;
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|
·
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macroeconomic issues.
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|
·
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improved property analytical qualities such as a broader geographical dispersion of risks throughout the state of Florida and avoiding risks that do not yield an underwriting profit;
|
|
·
|
continued territorial expansion of our homeowners’, commercial general liability and private passenger automobile insurance products into additional states;
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·
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employing our business practices developed and used in Florida in our expansion to other selected states;
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|
·
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maintaining a commitment to provide high quality customer service to our agents and insureds;
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|
·
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expansion of our marketing efforts by retaining key personnel and implementing direct marketing technologies;
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·
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offering attractive incentives to our agents to place a high volume of quality business with our companies;
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·
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offering our employees continuing education classes appropriate to the respective discipline employed within this organization;
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·
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assumption of existing risks from other carriers; and
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·
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additional strategies that may include possible acquisitions or further dispositions of assets, and development of procedures to improve claims history and mitigate losses from claims.
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Years Ended December 31
,
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||||||||||||||||||||||||
2012
|
2011
|
2010
|
||||||||||||||||||||||
Premium
|
Percent
|
Premium
|
Percent
|
Premium
|
Percent
|
|||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Gross written premiums:
|
||||||||||||||||||||||||
Automobile
|
$ | 2,996 | 2.5 | % | $ | 3,274 | 3.3 | % | $ | 3,721 | 3.9 | % | ||||||||||||
Federal Flood
|
5,293 | 4.4 | % | 4,468 | 4.5 | % | 3,951 | 4.1 | % | |||||||||||||||
Homeowners'
|
101,832 | 85.3 | % | 80,403 | 81.9 | % | 76,845 | 79.7 | % | |||||||||||||||
Commercial General Liability
|
9,338 | 7.8 | % | 10,125 | 10.3 | % | 11,894 | 12.3 | % | |||||||||||||||
Total gross written premiums
|
$ | 119,459 | 100.0 | % | $ | 98,270 | 100.0 | % | $ | 96,411 | 100.0 | % | ||||||||||||
Ceded premiums:
|
||||||||||||||||||||||||
Automobile
|
$ | 2,021 | 4.0 | % | $ | 1,541 | 3.3 | % | $ | 1,882 | 3.6 | % | ||||||||||||
Federal Flood
|
5,293 | 10.4 | % | 4,468 | 9.7 | % | 3,951 | 7.5 | % | |||||||||||||||
Homeowners'
|
43,331 | 84.7 | % | 40,273 | 87.0 | % | 46,893 | 88.5 | % | |||||||||||||||
Commercial General Liability
|
440 | 0.9 | % | 12 | 0.0 | % | 238 | 0.4 | % | |||||||||||||||
Total ceded premiums
|
$ | 51,085 | 100.0 | % | $ | 46,294 | 100.0 | % | $ | 52,964 | 100.0 | % | ||||||||||||
Net written premiums
|
||||||||||||||||||||||||
Automobile
|
$ | 975 | 1.4 | % | $ | 1,733 | 3.3 | % | $ | 1,839 | 4.3 | % | ||||||||||||
Federal Flood
|
- | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Homeowners'
|
58,501 | 85.6 | % | 40,130 | 77.2 | % | 29,952 | 68.9 | % | |||||||||||||||
Commercial General Liability
|
8,898 | 13.0 | % | 10,113 | 19.5 | % | 11,656 | 26.8 | % | |||||||||||||||
Total net written premiums
|
$ | 68,374 | 100.0 | % | $ | 51,976 | 100.0 | % | $ | 43,447 | 100.0 | % |
In-Force Policy Count
|
||||||||||||||||||||||||
Years Ended December 31,
|
||||||||||||||||||||||||
2012
|
2011
|
2010
|
||||||||||||||||||||||
County
|
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||||||||||
Palm Beach
|
7,270 | 11.9 | % | 8,203 | 18.7 | % | 12,221 | 28.3 | % | |||||||||||||||
Lee
|
5,175 | 8.5 | % | 3,133 | 7.2 | % | 2,404 | 5.6 | % | |||||||||||||||
Brevard
|
4,508 | 7.4 | % | 2,900 | 6.6 | % | 1,598 | 3.7 | % | |||||||||||||||
Pinellas
|
4,034 | 6.6 | % | 3,788 | 8.6 | % | 3,437 | 8.0 | % | |||||||||||||||
Broward
|
3,700 | 6.1 | % | 4,386 | 10.0 | % | 5,008 | 11.6 | % | |||||||||||||||
Collier
|
3,422 | 5.6 | % | 1,583 | 3.6 | % | 1,155 | 2.7 | % | |||||||||||||||
Saint Lucie
|
3,151 | 5.2 | % | 1,757 | 4.0 | % | 1,278 | 3.0 | % | |||||||||||||||
All others
|
29,842 | 48.7 | % | 18,043 | 41.3 | % | 16,031 | 37.1 | % | |||||||||||||||
Total
|
61,102 | 100.0 | % | 43,793 | 100.0 | % | 43,132 | 100.0 | % |
Years Ended December 31, | ||||||||||||||||||||||||
2012
|
2011
|
2010
|
||||||||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
State
|
||||||||||||||||||||||||
Florida
|
$ | 8,639 | 92.52 | % | $ | 8,606 | 84.99 | % | $ | 9,972 | 83.85 | % | ||||||||||||
Louisiana
|
217 | 2.32 | % | 916 | 9.05 | % | 1,094 | 9.19 | % | |||||||||||||||
Texas
|
426 | 4.56 | % | 534 | 5.28 | % | 665 | 5.59 | % | |||||||||||||||
Other
|
56 | 0.60 | % | 69 | 0.68 | % | 163 | 1.37 | % | |||||||||||||||
Total
|
$ | 9,338 | 100.00 | % | $ | 10,125 | 100.00 | % | $ | 11,894 | 100.00 | % |
Reinsurer
|
A.M. Best Rating
|
S&P Rating
|
||
UNITED STATES
|
||||
American Agricultural Insurance Company
|
A-
|
NR
|
||
Everest Reinsurance Company
|
A+
|
A+
|
||
Houston Casualty Company, (UK Branch)
|
A+
|
*
|
AA
|
|
Munich Reinsurance America, Inc.
|
A+
|
AA-
|
||
Odyssey Reinsurance Company
|
A
|
A-
|
||
BERMUDA
|
||||
ACE Tempest Reinsurance Limited
|
A+
|
*
|
AA-
|
|
Arch Reinsurance Limited
|
A+
|
*
|
A+
|
|
Ariel Reinsurance Bermuda Limited for and on Behalf of Ariel Syndicate 1910 (ARE)
|
A-
|
*
|
NR
|
|
DaVinci Reinsurance Limited
|
A
|
*
|
A+
|
|
JC Re Limited (Juniperus & fka Actua Re Limited)
|
NR
|
*
|
**
|
NR
|
Montpelier Reinsurance Limited
|
A-
|
A-
|
||
Nephila (via Allianz Risk Transfer AG, Bermuda Branch)
|
NR
|
AA-
|
||
Platinum Underwriters Bermuda Limited
|
A
|
*
|
A-
|
|
Renaissance Reinsurance Limited
|
A+
|
*
|
AA-
|
|
UNITED KINGDOM
|
||||
Amlin Syndicate No. 2001 (AML)
|
A
|
A+
|
||
Ariel Syndicate No. 1910 (ARE)
|
A
|
*
|
A+
|
|
ARK Syndicate No. 3902 (NOA)
|
A
|
A+
|
||
Barbican Syndication No. 1955 (BAR)
|
A
|
A+
|
||
Kiln Syndicate No. 510 (KLN)
|
A
|
A+
|
||
Liberty Syndicates Services Limited Paris, for and on Behalf of Lloyd's Syndicate No. 4472 (LIB)
|
NR
|
A+
|
||
MAP Underwriting Syndicate No. 2791 (Parallel) (MAP)
|
A
|
A+
|
||
Novae Syndicate No. 2007 (NVA)
|
A
|
A+
|
||
Tokio Marine Kiln Syndicate No. 1880 (TMK)
|
A
|
A+
|
||
Torus Syndicate No. 1301 (TUL)
|
A
|
A+
|
||
EUROPE
|
||||
Amlin Bermuda (Branch of Amlin AG)
|
A
|
A
|
||
SCOR Global P&C Zurich Branch
|
A
|
A
|
||
* Reinstatement Premium Protection Program Participants
|
||||
** Participant will fund a trust agreement for their exposure with cash and U.S. Government obligations of American institutions at fair market value. |
Reinsurer
|
A.M. Best Rating
|
S&P Rating
|
||
UNITED STATES
|
||||
American Agricultural Insurance Company
|
A-
|
NR
|
||
Everest Reinsurance Company
|
A+
|
A+
|
||
Houston Casualty Company, (UK Branch)
|
A+
|
AA
|
||
Munich Reinsurance America, Inc.
|
A+
|
AA-
|
||
Odyssey Reinsurance Company
|
A
|
A-
|
||
QBE Reinsurance Corporation
|
A
|
A+
|
||
BERMUDA
|
||||
ACE Tempest Reinsurance Limited
|
A+
|
*
|
A+
|
|
Arch Reinsurance Limited
|
A
|
A+
|
||
Ariel Reinsurance Company Limited, Bermuda
|
A-
|
*
|
A-
|
|
DaVinci Reinsurance Limited
|
A
|
*
|
A+
|
|
D.E. Shaw Re (Bermuda) Limited
|
NR
|
**
|
NR
|
|
JC Re Ltd (Juniperus & fka Actua Re Limited)
|
NR
|
*
|
**
|
NR
|
Montpelier Reinsurance Limited
|
A-
|
A-
|
||
Renaissance Reinsurance Limited
|
A+
|
*
|
AA-
|
|
Torus Insurance (Bermuda) Limited
|
A-
|
*
|
NR
|
|
UNITED KINGDOM
|
||||
Amlin Syndicate No. 2001 (AML)
|
A
|
*
|
A+
|
|
Antares Syndicate No. 1274 (AUL)
|
A
|
A+
|
||
Arrow Syndicate No. 1910 (ARW)
|
A
|
*
|
A+
|
|
Broadgate Syndicate No. 1301 (BGT)
|
A
|
A+
|
||
Liberty Syndicates Services Limited Paris, for and on Behalf of Lloyd's Syndicate No. 4472 (LIB)
|
A
|
A+
|
||
MAP Underwriting Syndicate No. 2791 (MAP)
|
A
|
*
|
A+
|
|
Novae Syndicate No. 2007 (NVA)
|
A
|
A+
|
||
EUROPE
|
||||
Amlin Bermuda ( Branch of Amlin AG)
|
A
|
A
|
||
Flagstone Reassurance Suisse SA
|
A-
|
NR
|
||
Lansforsakringar Sak Forsakringsaktiebolag (publ)
|
NR-5
|
A
|
||
SCOR Global P&C Zurich Branch
|
A
|
A
|
||
* Reinstatement Premium Protection Program Participants
|
||||
** Participant will fund a trust agreement for their exposure with cash and U.S. Government obligations of American institutions at fair market value.
|
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Balance at January 1
|
$ | 59,983 | $ | 66,529 | $ | 70,610 | ||||||
Less reinsurance recoverables
|
(2,088 | ) | (6,809 | ) | (11,594 | ) | ||||||
Net balance at January 1
|
$ | 57,895 | $ | 59,720 | $ | 59,016 | ||||||
Incurred related to
|
||||||||||||
Current year
|
$ | 31,636 | $ | 31,893 | $ | 37,288 | ||||||
Prior years
|
(1,427 | ) | (997 | ) | 2,800 | |||||||
Total incurred
|
$ | 30,209 | $ | 30,896 | $ | 40,088 | ||||||
Paid related to
|
||||||||||||
Current year
|
$ | 15,892 | $ | 13,672 | $ | 15,077 | ||||||
Prior years
|
25,807 | 19,048 | 24,308 | |||||||||
Total paid
|
$ | 41,699 | $ | 32,720 | $ | 39,385 | ||||||
Net balance at period end
|
$ | 46,405 | $ | 57,896 | $ | 59,719 | ||||||
Plus reinsurance recoverables
|
3,503 | 2,087 | 6,810 | |||||||||
Balance at period end
|
$ | 49,908 | $ | 59,983 | $ | 66,529 |
As of December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Transatlantic Reinsurance Company (A+ A.M. Best rated)
|
||||||||
Reinsurance (payable) recoverable on paid losses and LAE
|
$ | 8 | $ | (23 | ) | |||
Unpaid losses and LAE
|
62 | 113 | ||||||
$ | 70 | $ | 90 |
As of December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Catastrophe Excess of Loss (various participants) and FHCF
|
||||||||
Reinsurance recoverable on paid losses and LAE
|
$ | 47 | $ | 8 | ||||
Unpaid losses and LAE
|
94 | 542 | ||||||
$ | 141 | $ | 550 | |||||
Amounts due from (to) reinsurers consisted of amounts related to:
|
||||||||
Unpaid losses and LAE
|
$ | 94 | $ | 542 | ||||
Reinsurance recoverable on paid LAE
|
47 | 8 | ||||||
Reinsurance payable
|
- | (1 | ) | |||||
$ | 141 | $ | 549 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
GAAP basis Loss and LAE reserves
|
$ | 49,908 | $ | 59,983 | $ | 66,529 | ||||||
Less unpaid Losses and LAE ceded
|
3,189 | 2,319 | 6,810 | |||||||||
Balance Sheet Liability
|
46,719 | 57,664 | 59,719 | |||||||||
Add Insurance Apportionment Plan
|
6 | 17 | 14 | |||||||||
Intercompany Indemnification
|
(2,470 | ) | (2,114 | ) | (78 | ) | ||||||
SAP basis Loss and LAE reserves
|
$ | 44,255 | $ | 55,567 | $ | 59,655 |
Years Ended December 31, | ||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
GAAP basis Loss and LAE incurred
|
$ | 30,209 | $ | 30,896 | $ | 40,088 | ||||||
Intercompany adjusting and other expenses
|
3,744 | (726 | ) | 8 | ||||||||
Insurance apportionment plan
|
(4 | ) | - | (2 | ) | |||||||
SAP basis Loss and LAE incurred
|
$ | 33,949 | $ | 30,170 | $ | 40,094 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
Loss Ratio
|
50.9% | 63.7% | 89.0% | |||||||||
Expense Ratio
|
46.3% | 58.2% | 74.7% | |||||||||
Combined Ratio
|
97.2% | 121.9% | 163.7% |
|
·
|
The Merged Company retained the following licenses: (010) Fire, (020) Allied Lines, (040) Homeowners Multi Peril, (050) Commercial Multi Peril, (090) Inland Marine, (170) Other Liability, (192) Private Passenger Auto Liability, (194) Commercial Auto Liability, (211) Private Passenger Auto Physical Damage and (212) Commercial Auto Physical Damage.
|
|
·
|
The Merged Company will not write commercial multi peril policy premium without prior approval from the Florida OIR. The Merged Company has no commercial multi peril policy premium in force.
|
|
·
|
The Merged Company surrendered its surety license. The Merged Company has no surety policy premium in force.
|
|
·
|
The Merged Company will not write new commercial habitation condominium associations without prior approval from the Florida OIR. The current commercial habitation book of business is less than $0.1 million of policy premium.
|
|
·
|
The Merged Company agreed to maintain the total number of its homeowners’ policies in Miami-Dade, Broward and Palm Beach counties (the “Tri-County Area”) at 35% of its entire homeowners’ book. As of December 31, 2012, the Company had approximately 20.4% of its homeowners’ policies located within Tri-County Area.
|
|
·
|
The managing general agency fees payable by the Merged Company to Federated National Underwriters, Inc. (“FNU”), formerly known as Assurance Managing General Agents, Inc., a wholly owned subsidiary of the Company, which were traditionally 6% of gross written premium, were reduced and will not exceed 4% without prior approval from the Florida OIR. The Merged Company has lowered the fee to amounts varying between 2% and 4% of gross written to further support the FNIC results of operations. This will have no impact on the Company’s consolidated financial results.
|
|
·
|
The claims service fees payable by the Merged Company to Federated National Adjusting, Inc. (“FNA”), formerly known as Superior Adjusting, Inc., were reduced from the traditional 4.5% of gross earned premium to 3.6% of gross earned premium. This will have no impact on the Company’s consolidated financial results.
|
ITEM
1A
|
RISK FACTORS
|
|
·
|
the availability of sufficient reliable data and our ability to properly analyze available data;
|
|
·
|
the uncertainties that inherently characterize estimates and assumptions;
|
|
·
|
our selection and application of appropriate rating and pricing techniques;
|
|
·
|
changes in legal standards, claim settlement practices, medical care expenses and restoration costs; and
|
|
·
|
legislatively imposed consumer initiatives.
|
|
·
|
Our articles of incorporation and bylaws contain provisions that may discourage takeover attempts and may result in entrenchment of management.
|
|
·
|
Our board of directors is elected in classes, with only two or three of the directors elected each year. As a result, shareholders would not be able to change the membership of the board in its entirety in any one year. Shareholders would also be unable to bring about, through the election of a new board of directors, changes in our officers.
|
|
·
|
Our articles of incorporation prohibit shareholders from acting by written consent, meaning that shareholders will be required to conduct a meeting in order to vote on any proposals or take any action.
|
|
·
|
Our bylaws require at least 60 days' notice if a shareholder desires to submit a proposal for a shareholder vote or to nominate a person for election to our board of directors.
|
|
·
|
The Florida Control Share Act provides that shares acquired in a "control share acquisition" will not have voting rights unless the voting rights are approved by a majority of the corporation's disinterested shareholders. A "control share acquisition" is an acquisition, in whatever form, of voting power in any of the following ranges: (a) at least 20% but less than 33-1/3% of all voting power, (b) at least 33-1/3% but less than a majority of all voting power; or (c) a majority or more of all voting power.
|
|
·
|
The Florida Affiliated Transactions Act requires supermajority approval by disinterested shareholders of certain specified transactions between a public company and holders of more than 10% of the outstanding voting shares of the corporation (or their affiliates).
|
ITEM
1B
|
UNRESOLVED STAFF COMMENTS
|
PROPERTIES
|
LEGAL PROCEEDINGS
|
MINE SAFETY DISCLOSURES
|
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Quarter Ended
|
High
|
Low
|
||||||
March 31, 2012
|
$ | 4.50 | $ | 3.02 | ||||
June 30, 2012
|
$ | 4.99 | $ | 3.81 | ||||
September 30, 2012
|
$ | 6.20 | $ | 4.25 | ||||
December 31, 2012
|
$ | 6.37 | $ | 3.02 | ||||
March 31, 2011
|
$ | 3.46 | $ | 3.07 | ||||
June 30, 2011
|
$ | 3.05 | $ | 2.58 | ||||
September 30, 2011
|
$ | 2.80 | $ | 2.30 | ||||
December 31, 2011
|
$ | 2.96 | $ | 2.32 |
Equity Compensation Plan Information
|
|||
Plan category
|
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|
(a)
|
(b)
|
(c)
|
|
Equity compensation plans approved by stock holders*
|
781,097
|
5.93
|
1,000,000
|
SELECTED FINANCIAL DATA
|
As of the Years Ended December 31,
|
||||||||||||||||||||
(Amounts in Thousands except Book Value Per Share) | ||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
Balance Sheet Data
|
||||||||||||||||||||
Total assets
|
$ | 185,888 | $ | 179,980 | $ | 184,049 | $ | 202,889 | $ | 197,102 | ||||||||||
Investments
|
130,096 | 129,467 | 122,485 | 114,219 | 26,065 | |||||||||||||||
Cash and short term investments
|
21,143 | 15,205 | 16,206 | 28,197 | 124,577 | |||||||||||||||
Total liabilities
|
119,983 | 121,836 | 126,118 | 135,447 | 120,871 | |||||||||||||||
Unpaid losses and LAE
|
49,908 | 59,983 | 66,529 | 70,611 | 64,775 | |||||||||||||||
Unearned premiums
|
59,006 | 47,933 | 47,136 | 50,857 | 40,508 | |||||||||||||||
Total shareholders' equity
|
65,905 | 58,144 | 57,931 | 67,442 | 76,231 | |||||||||||||||
Book value per share
|
$ | 8.26 | $ | 7.32 | $ | 7.29 | $ | 8.48 | $ | 9.51 |
Years Ended December 31, | ||||||||||||||||||||
(Amounts in Thousands except EPS and Dividends) | ||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
Operations Data:
|
||||||||||||||||||||
Revenue:
|
||||||||||||||||||||
Gross premiums written
|
$ | 119,459 | $ | 98,269 | $ | 96,410 | $ | 104,379 | $ | 88,248 | ||||||||||
Gross premiums ceded
|
(51,085 | ) | (46,293 | ) | (52,963 | ) | (56,217 | ) | (34,553 | ) | ||||||||||
Net premiums written
|
68,374 | 51,976 | 43,447 | 48,162 | 53,695 | |||||||||||||||
Increase (decrease) in prepaid reinsurance premiums
|
2,059 | (2,656 | ) | (2,108 | ) | 10,163 | (4,451 | ) | ||||||||||||
(Increase) decrease in unearned premiums
|
(11,074 | ) | (797 | ) | 3,721 | (10,349 | ) | 15,886 | ||||||||||||
Net change in prepaid reinsurance premiums and unearned premiums
|
(9,015 | ) | (3,453 | ) | 1,613 | (186 | ) | 11,435 | ||||||||||||
Net premiums earned
|
59,359 | 48,523 | 45,060 | 47,976 | 65,130 | |||||||||||||||
Commission income
|
1,377 | 994 | 1,388 | 1,362 | 1,612 | |||||||||||||||
Finance revenue
|
496 | 518 | 395 | 294 | 350 | |||||||||||||||
Managing general agent fees
|
2,007 | 1,583 | 1,609 | 1,620 | 1,745 | |||||||||||||||
Net investment income
|
3,819 | 4,079 | 3,726 | 3,397 | 6,461 | |||||||||||||||
Net realized investment gains (losses)
|
1,072 | 2,725 | 6,777 | 1,117 | (10,593 | ) | ||||||||||||||
Regulatory assessments recovered
|
- | 109 | 857 | 2,333 | 2,104 | |||||||||||||||
Other income
|
517 | 1,632 | 792 | 755 | 655 | |||||||||||||||
Total revenue
|
68,647 | 60,163 | 60,604 | 58,854 | 67,464 | |||||||||||||||
Expenses:
|
||||||||||||||||||||
Losses and LAE
|
30,209 | 30,896 | 40,088 | 43,706 | 41,869 | |||||||||||||||
Operating and underwriting expenses
|
9,996 | 9,916 | 10,835 | 9,681 | 7,209 | |||||||||||||||
Salaries and wages
|
8,439 | 8,004 | 8,611 | 7,930 | 7,428 | |||||||||||||||
Policy acquisition costs - amortization
|
13,255 | 12,347 | 13,025 | 13,747 | 14,760 | |||||||||||||||
Total expenses
|
61,899 | 61,163 | 72,559 | 75,064 | 71,266 | |||||||||||||||
Income (loss) before provision for income tax expense (benefit)
|
6,748 | (1,000 | ) | (11,955 | ) | (16,210 | ) | (3,802 | ) | |||||||||||
Provision for income tax expense (benefit)
|
2,435 | (570 | ) | (3,959 | ) | (5,921 | ) | (1,324 | ) | |||||||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) | $ | (10,289 | ) | $ | (2,478 | ) | ||||||
Earnings per share data
|
||||||||||||||||||||
Net income (loss) per share - basic
|
$ | 0.53 | $ | (0.05 | ) | $ | (1.01 | ) | $ | (1.29 | ) | $ | (0.31 | ) | ||||||
Net income (loss) per share - diluted
|
$ | 0.53 | $ | (0.05 | ) | $ | (1.01 | ) | $ | (1.29 | ) | $ | (0.31 | ) | ||||||
Dividends paid per share
|
$ | 0.02 | $ | - | $ | 0.06 | $ | 0.36 | $ | 0.72 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
·
|
the nature and severity of the loss;
|
|
·
|
weather-related patterns;
|
|
·
|
the availability, cost and terms of reinsurance;
|
|
·
|
underlying settlement costs, including medical and legal costs;
|
|
·
|
legal and political factors such as legislative initiatives and public opinion;
|
|
·
|
macroeconomic issues.
|
|
·
|
Paid and Incurred Loss Development Method
|
|
·
|
Paid and Incurred Bornhuetter-Ferguson Incurred Method
|
|
·
|
Frequency / Severity Method
|
Reserves for unpaid loss and
LAE net of reinsurance
recoverable as
of December
31, 2012
|
Case Loss
Reserves
|
Case LAE
Reserves
|
Total Case
Reserves
|
IBNR
Reserves
(Including
LAE)
|
Reinsurance
Recoverable
on Unpaid
Loss and Loss
Expenses
|
Net
Reserves
|
||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Homeowners'
|
$ | 6,295 | $ | 1,430 | $ | 7,725 | $ | 8,855 | $ | 141 | $ | 16,439 | ||||||||||||
Commercial General Liability
|
1,197 | 1,509 | 2,706 | 22,677 | 77 | 25,306 | ||||||||||||||||||
Automobile
|
3,456 | 133 | 3,589 | 4,259 | 3,285 | 4,563 | ||||||||||||||||||
Fire
|
5 | 7 | 12 | 83 | - | 95 | ||||||||||||||||||
Inland Marine
|
- | - | - | 2 | - | 2 | ||||||||||||||||||
Total
|
$ | 10,953 | $ | 3,079 | $ | 14,032 | $ | 35,876 | $ | 3,503 | $ | 46,405 |
Reserves for unpaid loss and
LAE net of reinsurance
recoverable as
of December
31, 2011
|
Case Loss
Reserves
|
Case LAE
Reserves
|
Total Case
Reserves
|
IBNR
Reserves
(Including
LAE)
|
Reinsurance
Recoverable
on Unpaid
Loss and Loss
Expenses
|
Net
Reserves
|
||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Homeowners'
|
$ | 6,719 | $ | 1,571 | $ | 8,290 | $ | 12,328 | $ | 480 | $ | 20,138 | ||||||||||||
Commercial General Liability
|
2,369 | 1,606 | 3,975 | 28,089 | (190 | ) | 32,254 | |||||||||||||||||
Automobile
|
3,428 | 113 | 3,541 | 3,511 | 1,797 | 5,255 | ||||||||||||||||||
Fire
|
8 | 2 | 10 | 238 | - | 248 | ||||||||||||||||||
Inland Marine
|
- | - | - | 1 | - | 1 | ||||||||||||||||||
Total
|
$ | 12,524 | $ | 3,292 | $ | 15,816 | $ | 44,167 | $ | 2,087 | $ | 57,896 |
Years Ended December 31,
|
|||||||||||||||||
2012
|
2011
|
||||||||||||||||
Change in loss and
LAE reserves, net of
reinsurance
|
Adjusted loss and
LAE reserves, net of
reinsurance
|
Percentage
change in
equity (1)
|
Adjusted loss and
LAE reserves, net of
reinsurance
|
Percentage
change in
equity (1)
|
|||||||||||||
(Dollars in Thousands)
|
|||||||||||||||||
-10.0 | % | 41,764 | 4.5 |
%
|
52,107 | 4.3 | % | ||||||||||
-7.5 | % | 42,925 | 3.4 | % | 53,554 | 3.2 | % | ||||||||||
-5.0 | % | 44,085 | 2.3 | % | 55,001 | 2.1 | % | ||||||||||
-2.5 | % | 45,245 | 1.1 | % | 56,449 | 1.1 | % | ||||||||||
Base
|
46,405 | - | 57,896 | - | |||||||||||||
2.5 | % | 47,565 | -1.1 | % | 59,344 | -1.1 | % | ||||||||||
5.0 | % | 48,725 | -2.3 | % | 60,791 | -2.1 | % | ||||||||||
7.5 | % | 49,885 | -3.4 | % | 62,238 | -3.2 | % | ||||||||||
10.0 | % | 51,045 | -4.5 | % | 63,686 | -4.3 | % |
Unrealized Gains and (Losses)
|
||||||||
December 31, 2012
|
December 31, 2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Debt securities:
|
||||||||
United States government obligations and authorities
|
$ | 567 | $ | 659 | ||||
Obligations of states and political subdivisions
|
201 | 138 | ||||||
Corporate
|
3,760 | 1,543 | ||||||
International
|
106 | 5 | ||||||
4,634 | 2,345 | |||||||
Equity securities:
|
||||||||
Common stocks
|
1,887 | (939 | ) | |||||
Total debt and equity securities
|
$ | 6,521 | $ | 1,406 |
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities, at market:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 27,392 | 21.06 | % | $ | 37,217 | 28.75 | % | ||||||||
Obligations of states and political subdivisions
|
3,939 | 3.03 | % | 2,303 | 1.77 | % | ||||||||||
Corporate
|
67,313 | 51.74 | % | 63,268 | 48.87 | % | ||||||||||
International
|
3,111 | 2.39 | % | 1,523 | 1.18 | % | ||||||||||
101,755 | 78.22 | % | 104,311 | 80.57 | % | |||||||||||
Debt securities, at amortized cost:
|
||||||||||||||||
United States government obligations and authorities
|
6,016 | 4.62 | % | 6,166 | 4.76 | % | ||||||||||
Corporate
|
1,203 | 0.92 | % | 962 | 0.74 | % | ||||||||||
International
|
140 | 0.11 | % | - | 0.00 | % | ||||||||||
7,359 | 5.65 | % | 7,128 | 5.50 | % | |||||||||||
Total debt securities
|
109,114 | 83.87 | % | 111,439 | 86.07 | % | ||||||||||
Equity securities, at market:
|
20,982 | 16.13 | % | 18,028 | 13.93 | % | ||||||||||
Total investments
|
$ | 130,096 | 100.00 | % | $ | 129,467 | 100.00 | % |
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
AAA
|
$ | 10,967 | 10.05 | % | $ | 48,686 | 43.69 | % | ||||||||
AA
|
38,733 | 35.50 | % | 6,712 | 6.02 | % | ||||||||||
A | 31,774 | 29.12 | % | 31,960 | 28.68 | % | ||||||||||
BBB
|
27,640 | 25.33 | % | 22,193 | 19.92 | % | ||||||||||
Not rated
|
- | 0.00 | % | 1,888 | 1.69 | % | ||||||||||
$ | 109,114 | 100.00 | % | $ | 111,439 | 100.00 | % |
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Matures In:
|
||||||||||||||||
One year or less
|
$ | 2,938 | 2.70 | % | $ | 8,328 | 7.47 | % | ||||||||
One year to five years
|
51,439 | 47.14 | % | 48,176 | 43.24 | % | ||||||||||
Five years to 10 years
|
37,111 | 34.01 | % | 37,380 | 33.54 | % | ||||||||||
More than 10 years
|
17,626 | 16.15 | % | 17,555 | 15.75 | % | ||||||||||
Total debt securities
|
$ | 109,114 | 100.00 | % | $ | 111,439 | 100.00 | % |
Years Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Allowance for credit losses at beginning of year
|
$ | 73 | $ | 68 | ||||
Additions charged to bad debt expense
|
161 | 115 | ||||||
Write-downs charged against the allowance
|
(165 | ) | (110 | ) | ||||
Allowance for credit losses at end of year
|
$ | 69 | $ | 73 |
Years Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands) | ||||||||
Balance, beginning of year
|
$ | 7,718 | $ | 7,879 | ||||
Acquisition costs deferred
|
14,016 | 12,186 | ||||||
Amortization expense during year
|
(13,255 | ) | (12,347 | ) | ||||
Balance, end of year
|
$ | 8,479 | $ | 7,718 |
Years Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
Deferred tax assets:
|
||||||||
Unpaid losses and loss adjustment expenses
|
$ | 1,725 | $ | 2,385 | ||||
Unearned premiums
|
2,629 | 1,950 | ||||||
Discount on advance premiums
|
167 | 195 | ||||||
Allowance for credit losses
|
31 | 34 | ||||||
Allowance for impairments
|
91 | 317 | ||||||
FIGA Guaranty Assessment
|
306 | - | ||||||
Depreciation & amortization
|
366 | 317 | ||||||
Reserve for claims settlements
|
809 | 809 | ||||||
NOL Carryforward
|
3,259 | 5,696 | ||||||
AMT credit
|
253 | - | ||||||
Stock option expense per ASC 718
|
432 | 410 | ||||||
Total deferred tax assets
|
10,068 | 12,113 | ||||||
Deferred tax liabilities:
|
||||||||
Deferred acquisition costs, net
|
(3,191 | ) | (2,905 | ) | ||||
Dividends Collected vs. Earned
|
(18 | ) | - | |||||
Regulatory assessments
|
(67 | ) | (67 | ) | ||||
Unrealized Gain on investment securities
|
(2,454 | ) | (529 | ) | ||||
Total deferred tax liabilities
|
(5,730 | ) | (3,501 | ) | ||||
Net deferred tax asset
|
$ | 4,338 | $ | 8,612 |
December 31, 2012
|
December 31, 2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Accrued interest income receivable
|
$ | 966 | $ | 1,130 | ||||
Deposits
|
249 | 185 | ||||||
Prepaid expenses
|
478 | 432 | ||||||
Receivable for investments sold
|
598 | - | ||||||
Other
|
367 | 347 | ||||||
Total
|
$ | 2,658 | $ | 2,094 |
December 31, 2012 | December 31, 2011 | |||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars in Thousands)
|
(Dollars in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$ | 8,276 | $ | 6,637 | $ | 14,913 | $ | 8,795 | $ | 10,652 | $ | 19,447 | ||||||||||||
Commercial General Liability
|
2,956 | 22,310 | 25,266 | 4,225 | 27,717 | 31,942 | ||||||||||||||||||
Automobile
|
3,643 | 6,086 | 9,729 | 3,533 | 5,061 | 8,594 | ||||||||||||||||||
Total
|
$ | 14,875 | $ | 35,033 | $ | 49,908 | $ | 16,553 | $ | 43,430 | $ | 59,983 |
Years Ended December 31,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Homeowners'
|
$ | 101,832 | 85.24 | % | $ | 80,402 | 81.82 | % | ||||||||
Commercial General Liability
|
9,338 | 7.82 | % | 10,125 | 10.30 | % | ||||||||||
Federal Flood
|
5,293 | 4.43 | % | 4,468 | 4.55 | % | ||||||||||
Automobile
|
2,996 | 2.51 | % | 3,274 | 3.33 | % | ||||||||||
Gross written premiums
|
$ | 119,459 | 100.00 | % | $ | 98,269 | 100.00 | % |
Years Ended December 31, | ||||||||||||||||
2012
|
2011
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars in Thousands) | ||||||||||||||||
State
|
||||||||||||||||
Florida
|
$ | 8,639 | 92.52 | % | $ | 8,606 | 84.99 | % | ||||||||
Louisiana
|
217 | 2.32 | % | 916 | 9.05 | % | ||||||||||
Texas
|
426 | 4.56 | % | 534 | 5.28 | % | ||||||||||
Other
|
56 | 0.60 | % | 69 | 0.68 | % | ||||||||||
Total
|
$ | 9,338 | 100.00 | % | $ | 10,125 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Homeowners'
|
$ | 49,209 | 82.90 | % | $ | 35,785 | 73.75 | % | ||||||||
Commercial General Liability
|
9,196 | 15.49 | % | 10,632 | 21.91 | % | ||||||||||
Automobile
|
954 | 1.61 | % | 2,106 | 4.34 | % | ||||||||||
Net premiums earned
|
$ | 59,359 | 100.00 | % | $ | 48,523 | 100.00 | % |
Years Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Realized gains:
|
||||||||
Debt securities
|
$ | 1,783 | $ | 3,569 | ||||
Equity securities
|
1,403 | 1,240 | ||||||
Total realized gains
|
3,186 | 4,809 | ||||||
Realized losses:
|
||||||||
Debt securities
|
(391 | ) | (595 | ) | ||||
Equity securities
|
(1,723 | ) | (1,489 | ) | ||||
Total realized losses
|
(2,114 | ) | (2,084 | ) | ||||
Net realized gains on investments
|
$ | 1,072 | $ | 2,725 |
December 31, 2012 | December 31, 2011 | |||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars in Thousands)
|
(Dollars in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$ | 8,276 | $ | 6,637 | $ | 14,913 | $ | 8,795 | $ | 10,652 | $ | 19,447 | ||||||||||||
Commercial General Liability
|
2,956 | 22,310 | 25,266 | 4,225 | 27,717 | 31,942 | ||||||||||||||||||
Automobile
|
3,643 | 6,086 | 9,729 | 3,533 | 5,061 | 8,594 | ||||||||||||||||||
Total
|
$ | 14,875 | $ | 35,033 | $ | 49,908 | $ | 16,553 | $ | 43,430 | $ | 59,983 |
Years Ended December 31, | ||||||||
2012
|
2011
|
|||||||
Homeowners'
|
51.85 | % | 57.79 | % | ||||
Commercial General Liability
|
32.85 | % | 60.11 | % | ||||
Automobile
|
175.17 | % | 181.67 | % | ||||
All lines
|
50.89 | % | 63.67 | % |
|
Operating and Underwriting Expenses
|
Years Ended December 31,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Homeowners'
|
$ | 80,402 | 81.82 | % | $ | 76,844 | 79.70 | % | ||||||||
Commercial General Liability
|
10,125 | 10.30 | % | 11,894 | 12.34 | % | ||||||||||
Federal Flood
|
4,468 | 4.55 | % | 3,951 | 4.10 | % | ||||||||||
Automobile
|
3,274 | 3.33 | % | 3,721 | 3.86 | % | ||||||||||
Gross written premiums
|
$ | 98,269 | 100.00 | % | $ | 96,410 | 100.00 | % |
Years Ended December 31, | ||||||||||||||||
2011
|
2010
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
State
|
||||||||||||||||
Florida
|
$ | 8,606 | 84.99 | % | $ | 9,972 | 83.85 | % | ||||||||
Louisiana
|
916 | 9.05 | % | 1,094 | 9.19 | % | ||||||||||
Texas
|
534 | 5.28 | % | 665 | 5.59 | % | ||||||||||
Other
|
69 | 0.68 | % | 163 | 1.37 | % | ||||||||||
Total
|
$ | 10,125 | 100.00 | % | $ | 11,894 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Homeowners'
|
$ | 35,785 | 73.75 | % | $ | 30,040 | 66.67 | % | ||||||||
Commercial General Liability
|
10,632 | 21.91 | % | 13,302 | 29.52 | % | ||||||||||
Automobile
|
2,106 | 4.34 | % | 1,718 | 3.81 | % | ||||||||||
Net premiums earned
|
$ | 48,523 | 100.00 | % | $ | 45,060 | 100.00 | % |
Years Ended December 31,
|
||||||||
2011
|
2010
|
|||||||
(Dollars in Thousands)
|
||||||||
Realized gains:
|
||||||||
Debt securities
|
$ | 3,569 | $ | 4,484 | ||||
Equity securities
|
1,240 | 4,228 | ||||||
Total realized gains
|
4,809 | 8,712 | ||||||
Realized losses:
|
||||||||
Debt securities
|
(595 | ) | (209 | ) | ||||
Equity securities
|
(1,489 | ) | (1,726 | ) | ||||
Total realized losses
|
(2,084 | ) | (1,935 | ) | ||||
Net realized gains on investments
|
$ | 2,725 | $ | 6,777 |
December 31, 2011 | December 31, 2010 | |||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars in Thousands)
|
(Dollars in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$ | 8,795 | $ | 10,652 | $ | 19,447 | $ | 5,825 | $ | 16,847 | $ | 22,672 | ||||||||||||
Commercial General Liability
|
4,225 | 27,717 | 31,942 | 8,230 | 27,819 | 36,049 | ||||||||||||||||||
Automobile
|
3,533 | 5,061 | 8,594 | 3,447 | 4,361 | 7,808 | ||||||||||||||||||
Total
|
$ | 16,553 | $ | 43,430 | $ | 59,983 | $ | 17,502 | $ | 49,027 | $ | 66,529 |
Years Ended December 31, | ||||||||
2011
|
2010
|
|||||||
Homeowners'
|
57.79 | % | 92.06 | % | ||||
Commercial General Liability
|
60.11 | % | 69.39 | % | ||||
Automobile
|
181.67 | % | 186.30 | % | ||||
All lines
|
63.67 | % | 88.96 | % |
(Dollars in Thousands)
|
||||||||||||||||||||||||
Contractual Obligations
|
Total
|
2013
|
2014
|
2015
|
2016
|
Thereafter
|
||||||||||||||||||
Unpaid Losses and LAE
|
$ | 49,908 | $ | 29,626 | $ | 11,933 | $ | 5,490 | $ | 1,916 | $ | 943 | ||||||||||||
Operating leases
|
1,687 | 373 | 380 | 388 | 395 | 151 | ||||||||||||||||||
Total
|
$ | 51,595 | $ | 29,999 | $ | 12,313 | $ | 5,878 | $ | 2,311 | $ | 1,094 |
Year Ended December 31, 2012 | ||||||||||||||||
(Dollars in Thousands except EPS) | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Revenue:
|
||||||||||||||||
Net premiums earned
|
$ | 12,818 | $ | 14,693 | $ | 15,088 | $ | 16,760 | ||||||||
Other revenue
|
1,925 | 2,130 | 2,173 | 3,060 | ||||||||||||
Total revenue
|
14,743 | 16,823 | 17,261 | 19,820 | ||||||||||||
Expenses:
|
||||||||||||||||
Losses and LAE
|
5,728 | 7,136 | 8,049 | 9,296 | ||||||||||||
Other expenses
|
7,370 | 7,347 | 8,109 | 8,864 | ||||||||||||
Total expenses
|
13,098 | 14,483 | 16,158 | 18,160 | ||||||||||||
Income before provision for income tax expense
|
1,645 | 2,340 | 1,103 | 1,660 | ||||||||||||
Provision for income tax expense
|
573 | 918 | 353 | 591 | ||||||||||||
Net income
|
$ | 1,072 | $ | 1,422 | $ | 750 | $ | 1,069 | ||||||||
Basic net income per share
|
$ | 0.13 | $ | 0.18 | $ | 0.09 | $ | 0.13 | ||||||||
Fully diluted net income per share
|
$ | 0.13 | $ | 0.18 | $ | 0.09 | $ | 0.13 | ||||||||
Weighted average number of common shares outstanding
|
7,946 | 7,947 | 7,949 | 7,965 | ||||||||||||
Weighted average number of common shares outstanding (assuming dilution)
|
7,962 | 7,994 | 8,042 | 8,096 |
Year Ended December 31, 2011 | ||||||||||||||||
(Dollars in Thousands except EPS) | ||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Revenue:
|
||||||||||||||||
Net premiums earned
|
$ | 11,144 | $ | 11,660 | $ | 12,892 | $ | 12,827 | ||||||||
Other revenue
|
1,982 | 2,516 | 3,302 | 3,840 | ||||||||||||
Total revenue
|
13,126 | 14,176 | 16,194 | 16,667 | ||||||||||||
Expenses:
|
||||||||||||||||
Losses and LAE
|
8,447 | 7,818 | 7,852 | 6,779 | ||||||||||||
Other expenses
|
7,852 | 7,474 | 7,800 | 7,141 | ||||||||||||
Total expenses
|
16,299 | 15,292 | 15,652 | 13,920 | ||||||||||||
(Loss) income before provision for income tax (benefit) expense
|
(3,173 | ) | (1,116 | ) | 542 | 2,747 | ||||||||||
Provision for income tax (benefit) expense
|
(1,166 | ) | (311 | ) | 114 | 793 | ||||||||||
Net (loss) income
|
$ | (2,007 | ) | $ | (805 | ) | $ | 428 | $ | 1,954 | ||||||
Basic net (loss) income per share
|
$ | (0.25 | ) | $ | (0.10 | ) | $ | 0.05 | $ | 0.25 | ||||||
Fully diluted net (loss) income per share
|
$ | (0.25 | ) | $ | (0.10 | ) | $ | 0.05 | $ | 0.25 | ||||||
Weighted average number of common shares outstanding
|
7,946 | 7,946 | 7,946 | 7,946 |
|
For the years ended December 31, 2012 and 2011, we had no off balance sheet transactions.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
Carrying
|
||||||||||||||||||||||||||||||||
2013
|
2014
|
2015
|
2016
|
2017
|
Thereafter
|
Total
|
Amount
|
|||||||||||||||||||||||||
Principal amount by expected maturity:
|
||||||||||||||||||||||||||||||||
United States government obligations and authorities
|
$ | 1,603 | $ | 600 | $ | 1,160 | $ | 435 | $ | 918 | $ | 11,653 | $ | 16,369 | $ | 17,719 | ||||||||||||||||
Obligations of states and political subdivisions
|
350 | - | - | 195 | 350 | 2,700 | 3,595 | 3,939 | ||||||||||||||||||||||||
Corporate securities
|
739 | 4,509 | 4,907 | 6,986 | 6,505 | 31,023 | 54,669 | 62,074 | ||||||||||||||||||||||||
International securities
|
- | - | - | 790 | 75 | 2,000 | 2,865 | 3,251 | ||||||||||||||||||||||||
Collateralized mortgage obligations
|
223 | 965 | 7,462 | 11,215 | 458 | 0 | 20,323 | 22,131 | ||||||||||||||||||||||||
Equity securities, at market
|
- | - | - | - | - | - | - | 20,982 | ||||||||||||||||||||||||
All investments
|
$ | 2,915 | $ | 6,074 | $ | 13,529 | $ | 19,621 | $ | 8,306 | $ | 47,376 | $ | 97,821 | $ | 130,096 | ||||||||||||||||
Weighted average interest rate by expected maturity:
|
||||||||||||||||||||||||||||||||
United States government obligations and authorities
|
3.53 | % | 1.51 | % | 0.35 | % | 2.16 | % | 0.72 | % | 2.35 | % | 2.54 | % | ||||||||||||||||||
Obligations of states and political subdivisions
|
2.04 | % | 0.00 | % | 0.00 | % | 1.60 | % | 1.65 | % | 4.14 | % | 3.75 | % | ||||||||||||||||||
Corporate securities
|
3.55 | % | 5.09 | % | 3.77 | % | 3.97 | % | 4.60 | % | 5.46 | % | 5.01 | % | ||||||||||||||||||
International securities
|
0.00 | % | 0.00 | % | 0.00 | % | 1.98 | % | 1.38 | % | 4.99 | % | 4.07 | % | ||||||||||||||||||
Collateralized mortgage obligations
|
5.07 | % | 4.59 | % | 4.54 | % | 4.57 | % | 3.50 | % | 0.00 | % | 4.60 | % | ||||||||||||||||||
Equity securities, at market
|
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||||
All investments
|
3.47 | % | 4.66 | % | 3.90 | % | 4.17 | % | 3.96 | % | 4.60 | % | 4.44 | % |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
PAGE
|
|
Report of Independent Registered Public Accounting Firm
|
64
|
Consolidated Balance Sheets
|
|
as of December 31, 2012 and 2011
|
65
|
Consolidated Statements of Operations
|
|
For the years ended December 31, 2012, 2011 and 2010
|
66
|
Consolidated Statements of Comprehensive Income (Loss)
|
|
For the years ended December 31, 2012, 2011 and 2010
|
67
|
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Loss
|
|
For the years ended December 31, 2012, 2011 and 2010
|
68
|
Consolidated Statements of Cash Flows
|
|
For the years ended December 31, 2012, 2011 and 2010
|
69
|
Notes to Consolidated Financial Statements
|
71
|
Period Ending | ||||||||
December 31, 2012
|
December 31, 2011
|
|||||||
ASSETS
|
(Dollars in Thousands)
|
|||||||
Investments
|
||||||||
Debt maturities, available for sale, at fair value
|
$ | 101,755 | $ | 104,311 | ||||
Debt maturities, held to maturity, at amortized cost
|
7,359 | 7,128 | ||||||
Equity securities, available for sale, at fair value
|
20,982 | 18,028 | ||||||
Total investments
|
130,096 | 129,467 | ||||||
Cash and short term investments
|
21,143 | 15,205 | ||||||
Prepaid reinsurance premiums
|
7,045 | 8,339 | ||||||
Premiums receivable, net of allowance for credit losses of $69 and $73, respectively
|
8,023 | 5,616 | ||||||
Reinsurance recoverable, net
|
3,503 | 2,087 | ||||||
Deferred policy acquisition costs
|
8,479 | 7,718 | ||||||
Deferred income taxes, net
|
4,338 | 8,612 | ||||||
Income taxes receivable
|
39 | - | ||||||
Property, plant and equipment, net
|
564 | 842 | ||||||
Other assets
|
2,658 | 2,094 | ||||||
Total assets
|
$ | 185,888 | $ | 179,980 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Unpaid losses and LAE
|
$ | 49,908 | $ | 59,983 | ||||
Unearned premiums
|
59,006 | 47,933 | ||||||
Premiums deposits and customer credit balances
|
2,458 | 2,804 | ||||||
Bank overdraft
|
5,987 | 7,930 | ||||||
Income taxes payable
|
- | 77 | ||||||
Accounts payable and accrued expenses
|
2,624 | 3,109 | ||||||
Total liabilities
|
119,983 | 121,836 | ||||||
Shareholders' equity:
|
||||||||
Common stock, $0.01 par value. Authorized 25,000,000 shares; issued and outstanding 7,979,488 and 7,946,384, respectively
|
80 | 79 | ||||||
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued or outstanding
|
- | - | ||||||
Additional paid-in capital
|
51,356 | 50,940 | ||||||
Accumulated other comprehensive income
|
||||||||
Unrealized net gains on investments, available for sale
|
4,067 | 877 | ||||||
Total accumulated other comprehensive income
|
4,067 | 877 | ||||||
Retained earnings
|
10,402 | 6,248 | ||||||
Total shareholders' equity
|
65,905 | 58,144 | ||||||
Total liabilities and shareholders' equity
|
$ | 185,888 | $ | 179,980 |
Twelve Months Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands except EPS and Share and Dividend Data)
|
||||||||||||
Revenue:
|
||||||||||||
Gross premiums written
|
$ | 119,459 | $ | 98,269 | $ | 96,410 | ||||||
Gross premiums ceded
|
(51,085 | ) | (46,293 | ) | (52,963 | ) | ||||||
Net premiums written
|
68,374 | 51,976 | 43,447 | |||||||||
Increase (decrease) in prepaid reinsurance premiums
|
2,059 | (2,656 | ) | (2,108 | ) | |||||||
(Increase) decrease in unearned premiums
|
(11,074 | ) | (797 | ) | 3,721 | |||||||
Net change in prepaid reinsurance premiums and unearned premiums
|
(9,015 | ) | (3,453 | ) | 1,613 | |||||||
Net premiums earned
|
59,359 | 48,523 | 45,060 | |||||||||
Commission income
|
1,377 | 994 | 1,388 | |||||||||
Finance revenue
|
496 | 518 | 395 | |||||||||
Managing general agent fees
|
2,007 | 1,583 | 1,609 | |||||||||
Net investment income
|
3,819 | 4,079 | 3,726 | |||||||||
Net realized investment gains
|
1,072 | 2,725 | 6,777 | |||||||||
Regulatory assessments recovered
|
- | 109 | 857 | |||||||||
Other income
|
517 | 1,632 | 792 | |||||||||
Total revenue
|
68,647 | 60,163 | 60,604 | |||||||||
Expenses:
|
||||||||||||
Losses and LAE
|
30,209 | 30,896 | 40,088 | |||||||||
Operating and underwriting expenses
|
9,996 | 9,916 | 10,835 | |||||||||
Salaries and wages
|
8,439 | 8,004 | 8,611 | |||||||||
Policy acquisition costs - amortization
|
13,255 | 12,347 | 13,025 | |||||||||
Total expenses
|
61,899 | 61,163 | 72,559 | |||||||||
Income (loss) before provision for income tax expense (benefit)
|
6,748 | (1,000 | ) | (11,955 | ) | |||||||
Provision for income tax expense (benefit)
|
2,435 | (570 | ) | (3,959 | ) | |||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) | ||||
Net income (loss) per share - basic
|
$ | 0.53 | $ | (0.05 | ) | $ | (1.01 | ) | ||||
Net income (loss) per share - diluted
|
$ | 0.53 | $ | (0.05 | ) | $ | (1.01 | ) | ||||
Weighted average number of common shares outstanding - basic
|
7,951,906 | 7,946,384 | 7,946,384 | |||||||||
Weighted average number of common shares outstanding - diluted
|
8,016,110 | 7,946,384 | 7,946,384 | |||||||||
Dividends paid per share
|
$ | 0.02 | $ | - | $ | 0.06 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) | ||||
Change in net unrealized gains (losses) on investments available for sale
|
5,114 | 572 | (2,415 | ) | ||||||||
Comprehensive income (loss) before tax
|
9,427 | 142 | (10,411 | ) | ||||||||
Income tax (expense) benefit related to items of other comprehensive income (loss)
|
(1,924 | ) | (215 | ) | 909 | |||||||
Comprehensive income (loss)
|
$ | 7,503 | $ | (73 | ) | $ | (9,502 | ) |
Comprehensive
(Loss)
|
Common
Stock
|
Additional
Paid-in
|
Accumulated
Other
|
Retained
Earnings
|
Total
Shareholder's
|
|||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||||||||
Balance as of December 31, 2009
|
$ | 79 | $ | 50,185 | $ | 2,026 | $ | 15,151 | $ | 67,441 | ||||||||||||||
Net loss
|
$ | (7,996 | ) | (7,996 | ) | (7,996 | ) | |||||||||||||||||
Cash dividends
|
(477 | ) | (477 | ) | ||||||||||||||||||||
Treasury stock acquired
|
||||||||||||||||||||||||
Shares based compensation
|
469 | 469 | ||||||||||||||||||||||
Net unrealized change in investments, net of tax effect of $909
|
(1,506 | ) | (1,506 | ) | (1,506 | ) | ||||||||||||||||||
Comprehensive loss
|
$ | (9,502 | ) | |||||||||||||||||||||
Balance as of December 31, 2010
|
$ | 79 | $ | 50,654 | $ | 520 | $ | 6,678 | $ | 57,931 | ||||||||||||||
Net loss
|
$ | (430 | ) | (430 | ) | (430 | ) | |||||||||||||||||
Cash dividends
|
||||||||||||||||||||||||
Treasury stock acquired
|
||||||||||||||||||||||||
Shares based compensation
|
286 | 286 | ||||||||||||||||||||||
Net unrealized change in investments, net of tax effect of ($215)
|
357 | 357 | 357 | |||||||||||||||||||||
Comprehensive loss
|
$ | (73 | ) | |||||||||||||||||||||
Balance as of December 31, 2011
|
$ | 79 | $ | 50,940 | $ | 877 | $ | 6,248 | $ | 58,144 | ||||||||||||||
Net income
|
$ | 4,313 | 4,313 | 4,313 | ||||||||||||||||||||
Cash dividends
|
(159 | ) | (159 | ) | ||||||||||||||||||||
Treasury stock acquired
|
||||||||||||||||||||||||
Stock options exercised
|
1 | 128 | 129 | |||||||||||||||||||||
Shares based compensation
|
288 | 288 | ||||||||||||||||||||||
Net unrealized change in investments, net of tax effect of ($1,924)
|
3,190 | 3,190 | 3,190 | |||||||||||||||||||||
Comprehensive income
|
$ | 7,503 | ||||||||||||||||||||||
Balance as of December 31, 2012
|
$ | 80 | $ | 51,356 | $ | 4,067 | $ | 10,402 | $ | 65,905 |
For the Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Cash flow from operating activities:
|
||||||||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:
|
||||||||||||
Amortization of investment premium discount, net
|
1,356 | 1,249 | 1,039 | |||||||||
Depreciation and amortization of property plant and equipment, net
|
195 | 168 | 221 | |||||||||
Net realized investment gains
|
(1,072 | ) | (2,725 | ) | (6,777 | ) | ||||||
Non-cash impairment recognition
|
(44 | ) | - | - | ||||||||
(Recovery) provision for credit losses, net
|
(12 | ) | 18 | 23 | ||||||||
Provision (recovery) for uncollectible premiums receivable
|
5 | (5 | ) | (44 | ) | |||||||
Non-cash compensation
|
188 | 196 | 319 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Premiums receivable
|
(2,412 | ) | 29 | 4,716 | ||||||||
Prepaid reinsurance premiums
|
1,293 | 2,076 | (96 | ) | ||||||||
Reinsurance recoverable, net
|
(1,415 | ) | 5,951 | 7,264 | ||||||||
Income taxes recoverable
|
(39 | ) | 2,393 | 4,676 | ||||||||
Deferred income tax expense, net of other comprehensive income (loss)
|
2,350 | (912 | ) | (2,332 | ) | |||||||
Policy acquisition costs, net of amortization
|
(761 | ) | 161 | 388 | ||||||||
Other assets
|
(552 | ) | (308 | ) | 837 | |||||||
Unpaid losses and LAE
|
(10,075 | ) | (6,547 | ) | (4,081 | ) | ||||||
Unearned premiums
|
11,074 | 797 | (3,721 | ) | ||||||||
Premium deposits and customer credit balances
|
(347 | ) | 441 | 234 | ||||||||
Income taxes payable
|
(77 | ) | 77 | - | ||||||||
Bank overdraft
|
(1,942 | ) | 498 | (821 | ) | |||||||
Accounts payable and accrued expenses
|
(486 | ) | 956 | (440 | ) | |||||||
Net cash provided (used) by operating activities
|
1,540 | 4,083 | (6,591 | ) | ||||||||
Cash flow provided (used) by investing activities:
|
||||||||||||
Proceeds from sale of investment securities
|
90,449 | 108,318 | 149,025 | |||||||||
Purchases of investment securities available for sale
|
(86,203 | ) | (113,251 | ) | (153,969 | ) | ||||||
Purchases of property and equipment
|
83 | (243 | ) | (130 | ) | |||||||
Net cash provided (used) by investing activities
|
4,329 | (5,176 | ) | (5,074 | ) | |||||||
Cash flow provided (used) by financing activities:
|
||||||||||||
Exercised stock options
|
128 | - | - | |||||||||
Dividends paid
|
(159 | ) | - | (477 | ) | |||||||
Tax benefit related to non-cash compensation
|
100 | 92 | 151 | |||||||||
Net cash provided (used) by financing activities
|
69 | 92 | (326 | ) | ||||||||
Net increase (decrease) in cash and short term investments
|
5,938 | (1,001 | ) | (11,991 | ) | |||||||
Cash and short term investments at beginning of period
|
15,205 | 16,206 | 28,197 | |||||||||
Cash and short term investments at end of period
|
$ | 21,143 | $ | 15,205 | $ | 16,206 |
For the Years Ended December 31,
|
||||||||||||
(continued)
|
2012
|
2011
|
2010
|
|||||||||
(Dollars in Thousands)
|
||||||||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid during the period for:
|
||||||||||||
Income taxes
|
$ | 165 | $ | - | $ | - | ||||||
Non-cash investing and finance activities:
|
||||||||||||
Accrued dividends payable
|
$ | 159 | $ | - | $ | - |
|
·
|
the quality of the insurable risks underwritten;
|
|
·
|
the nature and severity of the loss;
|
|
·
|
weather-related patterns;
|
|
·
|
the availability, cost and terms of reinsurance;
|
|
·
|
underlying settlement costs, including medical and legal costs;
|
|
·
|
legal and political factors such as legislative initiatives and public opinion;
|
|
·
|
macroeconomic issues.
|
|
·
|
Our financial condition could be adversely affected by the occurrence of natural and man-made disasters.
|
|
·
|
Although we follow the industry practice of reinsuring a portion of our risks, our costs of obtaining reinsurance fluctuates and we may not be able to successfully alleviate risk through reinsurance arrangements.
|
|
·
|
We face a risk of non-collectability of reinsurance, which could materially and adversely affect our business, results of operations and/or financial condition.
|
|
·
|
Our January 2011 Consent Order with the Florida OIR, as amended in February 2013, limits our business in certain respects and may prevent us from growing our business.
|
|
·
|
If we are unable to continue our growth because our capital must be used to pay greater than anticipated claims, our financial results may suffer.
|
|
·
|
We may require additional capital in the future which may not be available or only available on unfavorable terms.
|
|
·
|
Our business is heavily regulated, and changes in regulation may reduce our profitability and limit our growth.
|
|
·
|
We may experience financial exposure from climate change.
|
|
·
|
Our loss reserves may be inadequate to cover our actual liability for losses, causing our results of operations to be adversely affected.
|
|
·
|
Our revenues and operating performance may fluctuate due to statutorily approved assessments that support property and casualty insurance pools and associations.
|
|
·
|
Our investment portfolio may suffer reduced returns or losses, which would significantly reduce our earnings.
|
|
·
|
We may experience a loss due to the concentration of credit risk.
|
|
·
|
We face risks in connection with potential material weakness resulting from our Sarbanes-Oxley Section 404 management report and any related remedial measures that we undertake.
|
|
·
|
The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or our results of operations.
|
|
·
|
The effects of emerging claim and coverage issues on our business are uncertain.
|
|
·
|
Our failure to pay claims accurately could adversely affect our business, financial results and capital requirements.
|
|
·
|
Our insurance companies are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.
|
|
·
|
Our revenues and operating performance may fluctuate with business cycles in the property and casualty insurance industry.
|
|
·
|
We may not obtain the necessary regulatory approvals to expand the types of insurance products we offer or the states in which we operate.
|
|
·
|
Adverse ratings by insurance rating agencies may adversely impact our ability to write new policies, renew desirable policies or obtain adequate insurance, which could limit or halt our growth and harm our business.
|
|
·
|
We rely on independent and general agents to write our insurance policies, and if we are not able to attract and retain independent and general agents, our revenues would be negatively affected.
|
|
·
|
We rely on our information technology and telecommunications systems, and the failure of these systems could disrupt our operations.
|
|
·
|
Nonstandard automobile insurance historically has a higher frequency of claims than standard automobile insurance, thereby increasing our potential for loss exposure beyond what we would be likely to experience if we offered only standard automobile insurance.
|
|
·
|
Florida's personal injury protection insurance statute contains provisions that favor claimants, causing us to experience a higher frequency of claims than might otherwise be the case if we operated only outside of Florida.
|
|
·
|
Our success depends on our ability to accurately price the risks we underwrite.
|
|
·
|
Current operating resources are necessary to develop future new insurance products.
|
|
·
|
Increased competition, competitive pressures, industry developments and market conditions could affect the growth of our business and adversely impact our financial results.
|
|
·
|
Our senior management team is critical to the strategic direction of our company. If there were an unplanned loss of service by any of our officers our business could be harmed.
|
|
·
|
We have authorized but unissued preferred stock, which could affect rights of holders of common stock.
|
|
·
|
Our articles of incorporation, bylaws and Florida law may discourage takeover attempts and may result in entrenchment of management.
|
|
·
|
As a holding company, we depend on the earnings of our subsidiaries and their ability to pay management fees and dividends to the holding company as the primary source of our income.
|
|
·
|
Compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FASB issued guidance, and
|
|
·
|
Compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair-value estimated in accordance with the provisions of FASB issued guidance. Results for prior periods have not been restated, as they are not required to be by the pronouncement.
|
|
·
|
rating downgrade or other credit event (eg., failure to pay interest when due);
|
|
·
|
length of time and the extent to which the fair value has been less than amortized cost;
|
|
·
|
financial condition and near term prospects of the issuer, including any specific events which may influence the operations of the issuer such as changes in technology or discontinuance of a business segment;
|
|
·
|
prospects for the issuer’s industry segment;
|
|
·
|
intent and ability of the Company to retain the investment for a period of time sufficient to allow for anticipated recovery in market value;
|
|
·
|
historical volatility of the fair value of the security.
|
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities, at market:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 27,392 | 21.06 | % | $ | 37,217 | 28.75 | % | ||||||||
Obligations of states and political subdivisions
|
3,939 | 3.03 | % | 2,303 | 1.77 | % | ||||||||||
Corporate
|
67,313 | 51.74 | % | 63,268 | 48.87 | % | ||||||||||
International
|
3,111 | 2.39 | % | 1,523 | 1.18 | % | ||||||||||
101,755 | 78.22 | % | 104,311 | 80.57 | % | |||||||||||
Debt securities, at amortized cost:
|
||||||||||||||||
United States government obligations and authorities
|
6,016 | 4.62 | % | 6,166 | 4.76 | % | ||||||||||
Corporate
|
1,203 | 0.92 | % | 962 | 0.74 | % | ||||||||||
International
|
140 | 0.11 | % | - | 0.00 | % | ||||||||||
7,359 | 5.65 | % | 7,128 | 5.50 | % | |||||||||||
Total debt securities
|
109,114 | 83.87 | % | 111,439 | 86.07 | % | ||||||||||
Equity securities, at market:
|
20,982 | 16.13 | % | 18,028 | 13.93 | % | ||||||||||
Total investments
|
$ | 130,096 | 100.00 | % | $ | 129,467 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
Gains
|
Fair Value
|
Gains
|
Fair Value
|
|||||||||||||
(Losses)
|
at Sale
|
(Losses)
|
at Sale
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities
|
$ | 1,783 | $ | 50,950 | $ | 3,569 | $ | 66,680 | ||||||||
Equity securities
|
1,403 | 6,709 | 1,240 | 8,305 | ||||||||||||
Total realized gains
|
3,186 | 57,659 | 4,809 | 74,985 | ||||||||||||
Debt securities
|
(391 | ) | 13,291 | (595 | ) | 18,086 | ||||||||||
Equity securities
|
(1,723 | ) | 6,560 | (1,489 | ) | 3,510 | ||||||||||
Total realized losses
|
(2,114 | ) | 19,851 | (2,084 | ) | 21,596 | ||||||||||
Net realized gains on investments
|
$ | 1,072 | $ | 77,510 | $ | 2,725 | $ | 96,581 |
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
December 31, 2012
|
||||||||||||||||
Debt Securities - Available-For-Sale:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 26,825 | $ | 632 | $ | 65 | $ | 27,392 | ||||||||
Obligations of states and political subdivisions
|
3,738 | 202 | 1 | 3,939 | ||||||||||||
Corporate
|
63,553 | 3,794 | 34 | 67,313 | ||||||||||||
International
|
3,005 | 107 | 1 | 3,111 | ||||||||||||
$ | 97,121 | $ | 4,735 | $ | 101 | $ | 101,755 | |||||||||
Debt Securities - Held-To-Maturity:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 6,016 | $ | 149 | $ | 12 | $ | 6,153 | ||||||||
Corporate
|
1,203 | 61 | 2 | 1,262 | ||||||||||||
International
|
140 | - | 1 | 139 | ||||||||||||
$ | 7,359 | $ | 210 | $ | 15 | $ | 7,554 | |||||||||
Equity securities - common stocks
|
$ | 19,095 | $ | 2,505 | $ | 618 | $ | 20,982 | ||||||||
December 31, 2011
|
||||||||||||||||
Debt Securities - Available-For-Sale:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 36,558 | $ | 686 | $ | 27 | $ | 37,217 | ||||||||
Obligations of states and political subdivisions
|
2,165 | 138 | - | 2,303 | ||||||||||||
Corporate
|
61,724 | 1,934 | 390 | 63,268 | ||||||||||||
International
|
1,519 | 9 | 5 | 1,523 | ||||||||||||
$ | 101,966 | $ | 2,767 | $ | 422 | $ | 104,311 | |||||||||
Debt Securities - Held-To-Maturity:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 6,166 | $ | 249 | $ | - | $ | 6,415 | ||||||||
Corporate
|
962 | 39 | 1 | 1,000 | ||||||||||||
$ | 7,128 | $ | 288 | $ | 1 | $ | 7,415 | |||||||||
Equity securities - common stocks
|
$ | 18,966 | $ | 1,057 | $ | 1,995 | $ | 18,028 |
Unrealized Losses
|
Less than 12 months
|
12 months or longer
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Debt securities:
|
||||||||||||
United States government obligations and authorities
|
$ | 65 | $ | 65 | $ | - | ||||||
Obligations of states and political subdivisions
|
1 | 1 | - | |||||||||
Corporate
|
34 | 34 | - | |||||||||
International
|
1 | 1 | - | |||||||||
101 | 101 | - | ||||||||||
Equity securities:
|
||||||||||||
Common stocks
|
618 | 430 | 188 | |||||||||
Total debt and equity securities
|
$ | 719 | $ | 531 | $ | 188 |
December 31, 2012
|
December 31, 2011
|
|||||||||||||||
Amortized
|
Estimated
|
Amortized
|
Estimated
|
|||||||||||||
Cost
|
Fair Value
|
Cost
|
Fair Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Due in one year or less
|
$ | 2,925 | $ | 2,944 | $ | 8,284 | $ | 8,376 | ||||||||
Due after one through five years
|
49,826 | 51,523 | 47,294 | 48,314 | ||||||||||||
Due after five through ten years
|
35,070 | 37,182 | 36,525 | 37,448 | ||||||||||||
Due after ten years
|
16,659 | 17,660 | 16,991 | 17,588 | ||||||||||||
Total
|
$ | 104,480 | $ | 109,309 | $ | 109,094 | $ | 111,726 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Interest on debt securities
|
$ | 3,380 | $ | 3,681 | $ | 3,224 | ||||||
Dividends on equity securities
|
436 | 394 | 491 | |||||||||
Interest on cash and cash equivalents
|
3 | 4 | 11 | |||||||||
Total investment income
|
$ | 3,819 | $ | 4,079 | $ | 3,726 | ||||||
Net realized gains
|
$ | 1,072 | $ | 2,725 | $ | 6,777 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Net realized gains
|
||||||||||||
Debt securities
|
$ | 1,392 | $ | 2,974 | $ | 4,275 | ||||||
Equity securities
|
(320 | ) | (249 | ) | 2,502 | |||||||
Total
|
$ | 1,072 | $ | 2,725 | $ | 6,777 | ||||||
Net unrealized gains
|
||||||||||||
Debt securities
|
$ | 4,634 | $ | 2,345 | $ | 143 | ||||||
Equity securities
|
1,887 | (939 | ) | 692 | ||||||||
Total
|
$ | 6,521 | $ | 1,406 | $ | 835 |
Years Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Building and improvements
|
$ | - | $ | 254 | ||||
Furniture and fixtures
|
3,993 | 4,092 | ||||||
Property, plant and equipment, gross
|
3,993 | 4,346 | ||||||
Accumulated depreciation
|
(3,429 | ) | (3,504 | ) | ||||
Property, plant and equipment, net
|
$ | 564 | $ | 842 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Premium written
|
||||||||||||
Direct and Assumed
|
$ | 119,459 | $ | 98,269 | $ | 96,410 | ||||||
Ceded
|
(51,085 | ) | (46,293 | ) | (52,963 | ) | ||||||
$ | 68,374 | $ | 51,976 | $ | 43,447 | |||||||
Premiums earned
|
||||||||||||
Direct and Assumed
|
$ | 109,312 | $ | 97,473 | $ | 100,131 | ||||||
Ceded
|
(49,953 | ) | (48,950 | ) | (55,071 | ) | ||||||
$ | 59,359 | $ | 48,523 | $ | 45,060 | |||||||
Losses and LAE incurred
|
||||||||||||
Direct and Assumed
|
$ | 33,329 | $ | 33,055 | $ | 42,723 | ||||||
Ceded
|
(3,120 | ) | (2,159 | ) | (2,635 | ) | ||||||
$ | 30,209 | $ | 30,896 | $ | 40,088 |
As of December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Unpaid losses and LAE, net
|
||||||||
Direct and Assumed
|
$ | 49,908 | $ | 59,983 | ||||
Ceded
|
(3,503 | ) | (2,087 | ) | ||||
$ | 46,405 | $ | 57,896 | |||||
Unearned premiums
|
||||||||
Direct and Assumed
|
$ | 59,006 | $ | 47,933 | ||||
Ceded
|
(24,083 | ) | (22,024 | ) | ||||
$ | 34,923 | $ | 25,909 |
As of December 31,
|
||||||||
2012
|
2011
|
|||||||
(Dollars in Thousands)
|
||||||||
Transatlantic Reinsurance Company (A+ A.M. Best rated)
|
||||||||
Reinsurance (payable) recoverable on paid losses and LAE
|
$ | 8 | $ | (23 | ) | |||
Unpaid losses and LAE
|
62 | 113 | ||||||
$ | 70 | $ | 90 |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Balance at January 1
|
$ | 59,983 | $ | 66,529 | $ | 70,610 | ||||||
Less reinsurance recoverables
|
(2,088 | ) | (6,809 | ) | (11,594 | ) | ||||||
Net balance at January 1
|
$ | 57,895 | $ | 59,720 | $ | 59,016 | ||||||
Incurred related to
|
||||||||||||
Current year
|
$ | 31,636 | $ | 31,893 | $ | 37,288 | ||||||
Prior years
|
(1,427 | ) | (997 | ) | 2,800 | |||||||
Total incurred
|
$ | 30,209 | $ | 30,896 | $ | 40,088 | ||||||
Paid related to
|
||||||||||||
Current year
|
$ | 15,892 | $ | 13,672 | $ | 15,077 | ||||||
Prior years
|
25,807 | 19,048 | 24,308 | |||||||||
Total paid
|
$ | 41,699 | $ | 32,720 | $ | 39,385 | ||||||
Net balance at period end
|
$ | 46,405 | $ | 57,896 | $ | 59,719 | ||||||
Plus reinsurance recoverables
|
3,503 | 2,087 | 6,810 | |||||||||
Balance at period end
|
$ | 49,908 | $ | 59,983 | $ | 66,529 |
|
·
|
Paid and Incurred Loss Development Method
|
|
·
|
Paid and Incurred Bornhuetter-Ferguson Incurred Method
|
|
·
|
Frequency / Severity Method
|
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Federal
|
||||||||||||
Current
|
$ | 63 | $ | 310 | $ | (1,701 | ) | |||||
Deferred
|
2,052 | (490 | ) | (1,928 | ) | |||||||
Provision for Federal income tax expense (benefit)
|
2,115 | (180 | ) | (3,629 | ) | |||||||
State
|
||||||||||||
Current
|
- | - | - | |||||||||
Deferred
|
320 | (390 | ) | (330 | ) | |||||||
Provision for state income tax expense (benefit)
|
320 | (390 | ) | (330 | ) | |||||||
Provision for income tax expense (benefit)
|
$ | 2,435 | $ | (570 | ) | $ | (3,959 | ) |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Computed expected tax expense (benefit) provision, at federal rate
|
$ | 2,294 | $ | (341 | ) | $ | (4,065 | ) | ||||
State tax, net of federal deduction expense (benefit)
|
245 | (36 | ) | (434 | ) | |||||||
Tax-exempt interest
|
(26 | ) | (41 | ) | (211 | ) | ||||||
Dividend received deduction
|
(88 | ) | (80 | ) | (99 | ) | ||||||
Stock option expense and other permanent differences
|
72 | 87 | 114 | |||||||||
Intercompany
|
- | - | 223 | |||||||||
AMT tax credit
|
(113 | ) | - | - | ||||||||
Other
|
51 | (159 | ) | 513 | ||||||||
Provision for income tax expense (benefit)
|
$ | 2,435 | $ | (570 | ) | $ | (3,959 | ) |
Years Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
Deferred tax assets:
|
||||||||
Unpaid losses and loss adjustment expenses
|
$ | 1,725 | $ | 2,385 | ||||
Unearned premiums
|
2,629 | 1,950 | ||||||
Discount on advance premiums
|
167 | 195 | ||||||
Allowance for credit losses
|
31 | 34 | ||||||
Allowance for impairments
|
91 | 317 | ||||||
FIGA Guaranty Assessment
|
306 | - | ||||||
Depreciation & amortization
|
366 | 317 | ||||||
Reserve for claims settlements
|
809 | 809 | ||||||
NOL Carryforward
|
3,259 | 5,696 | ||||||
AMT credit
|
253 | - | ||||||
Stock option expense per ASC 718
|
432 | 410 | ||||||
Total deferred tax assets
|
10,068 | 12,113 | ||||||
Deferred tax liabilities:
|
||||||||
Deferred acquisition costs, net
|
(3,191 | ) | (2,905 | ) | ||||
Dividends Collected vs. Earned
|
(18 | ) | - | |||||
Regulatory assessments
|
(67 | ) | (67 | ) | ||||
Unrealized Gain on investment securities
|
(2,454 | ) | (529 | ) | ||||
Total deferred tax liabilities
|
(5,730 | ) | (3,501 | ) | ||||
Net deferred tax asset
|
$ | 4,338 | $ | 8,612 |
|
·
|
The Merged Company retained the following licenses: (010) Fire, (020) Allied Lines, (040) Homeowners Multi Peril, (050) Commercial Multi Peril, (090) Inland Marine, (170) Other Liability, (192) Private Passenger Auto Liability, (194) Commercial Auto Liability, (211) Private Passenger Auto Physical Damage and (212) Commercial Auto Physical Damage.
|
|
·
|
The Merged Company will not write commercial multi peril policy premium without prior approval from the Florida OIR. The Merged Company has no commercial multi peril policy premium in force.
|
|
·
|
The Merged Company surrendered its surety license. The Merged Company has no surety policy premium in force.
|
|
·
|
The Merged Company will not write new commercial habitation condominium associations without prior approval from the Florida OIR. The current commercial habitation book of business is less than $0.1 million of policy premium.
|
|
·
|
The Merged Company agreed to maintain the total number of its homeowners’ policies in Miami-Dade, Broward and Palm Beach counties (the “Tri-County Area”) at 35% of its entire homeowners’ book. As of December 31, 2012, the Company had approximately 20.4% of its homeowners’ policies located within Tri-County Area.
|
|
·
|
The managing general agency fees payable by the Merged Company to Federated National Underwriters, Inc. (“FNU”), formerly known as Assurance Managing General Agents, Inc., a wholly owned subsidiary of the Company, which were traditionally 6% of gross written premium, were reduced and will not exceed 4% without prior approval from the Florida OIR. The Merged Company has lowered the fee to amounts varying between 2% and 4% of gross written to further support the FNIC results of operations. This will have no impact on the Company’s consolidated financial results.
|
|
·
|
The claims service fees payable by the Merged Company to Federated National Adjusting, Inc. (“FNA”), formerly known as Superior Adjusting, Inc., were reduced from the traditional 4.5% of gross earned premium to 3.6% of gross earned premium. This will have no impact on the Company’s consolidated financial results.
|
IRIS Ratios
|
Unusual Values Equal to Or |
2012
|
2011
|
|||||||||||||
Over
|
Under
|
FNIC
|
FNIC
|
|||||||||||||
Gross Premiums to Policyholders' Surplus
|
900 | - | 233 | 253 | ||||||||||||
Net Premium to Policyholders' Surplus
|
300 | - | 135 | 136 | ||||||||||||
Change in Net Writings
|
33 | (33 | ) | 32 | 18 | |||||||||||
Surplus Aid to Policyholders' Surplus
|
15 | - | 1 | 1 | ||||||||||||
Two-year Overall Operating Ratio
|
100 | - | 92 | 123 | * | |||||||||||
Investment Yield
|
6.5 | 3.0 | 2.4 | * | 2.7 | * | ||||||||||
Gross Change in Policyholders' Surplus
|
50 | (10 | ) | 32 | (3 | ) | ||||||||||
Net Change in Adjusted Policyholders' Surplus
|
25 | (10 | ) | 32 | * | (3 | ) | |||||||||
Liabilities to Liquid Assets
|
105 | - | 69 | 75 | ||||||||||||
Gross Agents' Balance to Policyholders' Surplus
|
40 | - | 3 | 3 | ||||||||||||
One-Year Reserve Development to Policyholders' Surplus
|
20 | - | (3 | ) | 0 | |||||||||||
Two-Year Reserve Development to Policyholders' Surplus
|
20 | - | (2 | ) | 8 | |||||||||||
Estimated Current Reserve Deficiency to Policyholders' Surplus
|
25 | - | 50 | * | 15 | |||||||||||
* indicates an unusual value
|
Fiscal Year
|
Payments
|
|||
(Dollars in Thousands)
|
||||
2013
|
373 | |||
2014
|
380 | |||
2015
|
388 | |||
2016
|
395 | |||
2017
|
151 | |||
Total
|
$ | 1,687 |
Income (loss)
|
Shares Outstanding
|
Per-share
|
||||||||||
(Numerator)
|
(Denominator)
|
Amount
|
||||||||||
(Amounts in Thousands)
|
||||||||||||
For the year ended December 31, 2012
|
||||||||||||
Basic net income per share
|
$ | 4,313 | 7,952 | $ | 0.53 | |||||||
Fully diluted income per share
|
$ | 4,313 | 8,016 | $ | 0.53 | |||||||
For the year ended December 31, 2011
|
||||||||||||
Basic net loss per share
|
$ | (430 | ) | 7,946 | $ | (0.05 | ) | |||||
Fully diluted loss per share
|
$ | (430 | ) | 7,946 | $ | (0.05 | ) | |||||
For the year ended December 31, 2010
|
||||||||||||
Basic net loss per share
|
$ | (7,996 | ) | 7,946 | $ | (1.01 | ) | |||||
Fully diluted loss per share
|
$ | (7,996 | ) | 7,946 | $ | (1.01 | ) |
|
·
|
Revenue, including unaffiliated and inter-segment sales or transfers, is 10% or more of total revenue of all operating segments.
|
|
·
|
Operating profit or loss is 10% or more of the greater, in absolute amount, of the combined operating profit (or loss) of all industry segments with operating profits (or losses).
|
|
·
|
Identifiable assets are 10% or more of total assets of all operating segments.
|
1998 Plan
|
2002 Plan
|
2012 Plan
|
||||||||||||||||||||||
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
|||||||||||||||||||
Outstanding at January 1, 2010
|
124,599 | $ | 15.88 | 736,951 | $ | 12.03 | - | $ | - | |||||||||||||||
Granted
|
- | $ | - | 109,500 | $ | 3.59 | - | $ | - | |||||||||||||||
Exercised
|
- | $ | - | - | $ | - | - | $ | - | |||||||||||||||
Cancelled
|
(34,849 | ) | $ | 23.74 | (271,651 | ) | $ | 14.78 | - | $ | - | |||||||||||||
Outstanding at January 1, 2011
|
89,750 | $ | 12.83 | 574,800 | $ | 9.12 | - | $ | - | |||||||||||||||
Granted
|
- | $ | - | 179,000 | $ | 2.45 | - | $ | - | |||||||||||||||
Exercised
|
- | $ | - | - | $ | - | - | $ | - | |||||||||||||||
Cancelled
|
- | $ | - | (129,100 | ) | $ | 14.29 | - | $ | - | ||||||||||||||
Outstanding at January 1, 2012
|
89,750 | $ | 12.83 | 624,700 | $ | 6.15 | - | $ | - | |||||||||||||||
Granted
|
- | $ | - | 181,500 | $ | 4.40 | - | $ | - | |||||||||||||||
Exercised
|
- | $ | - | (33,104 | ) | $ | 3.86 | - | $ | - | ||||||||||||||
Cancelled
|
(11,250 | ) | $ | 13.54 | (70,499 | ) | $ | 12.45 | - | $ | - | |||||||||||||
Outstanding at December 31, 2012
|
78,500 | $ | 12.73 | 702,597 | $ | 5.17 | - | $ | - |
1998 Plan
|
2002 Plan
|
2012 Plan
|
||||||||||||||||||||||
Options Exercisable at:
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
||||||||||||||||||
December 31, 2012
|
77,800 | $ | 12.73 | 314,825 | $ | 5.17 | - | $ | - | |||||||||||||||
December 31, 2013
|
700 | $ | 12.73 | 164,458 | $ | 5.17 | - | $ | - | |||||||||||||||
December 31, 2014
|
- | $ | 12.73 | 145,114 | $ | 5.17 | - | $ | - | |||||||||||||||
December 31, 2015
|
- | $ | 12.73 | 78,200 | $ | 5.17 | - | $ | - | |||||||||||||||
December 31, 2016
|
- | $ | 12.73 | - | $ | 5.17 | - | $ | - | |||||||||||||||
Thereafter
|
- | $ | 12.73 | - | $ | 5.17 | - | $ | - | |||||||||||||||
Total options exercisable
|
78,500 | 702,597 | - |
|
·
|
Compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FASB issued guidance, and
|
|
·
|
Compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair-value estimated in accordance with the provisions of FASB issued guidance. Results for prior periods have not been restated, as they are not required to be by the pronouncement.
|
December 31, 2012
|
December 31, 2011
|
December 31, 2010
|
||||||
Dividend yield
|
N/A
|
N/A
|
1.78% - 5.80%
|
|||||
Expected volatility
|
39.79%
|
35.21% - 39.08%
|
73.13% - 82.36%
|
|||||
Risk-free interest rate
|
0.28%
|
0.20% - 0.25%
|
0.99% - 1.33%
|
|||||
Expected life (in years)
|
4.45
|
4.29 - 4.35
|
3.06 - 3.78
|
Weighted Average
|
Weighted
|
|||||||||||||||||||
Range of
|
Outstanding at
|
Contractual
|
Average
|
Exercisable at
|
||||||||||||||||
Exercise Price
|
December 31, 2012
|
Periods in Years
|
Exercise Price
|
December 31, 2012
|
||||||||||||||||
1998 Plan
|
$ | 8.67 - $16.59 | 78,500 | 0.71 | $ | 12.73 | 77,800 | |||||||||||||
2002 Plan
|
$ | 2.45 - $13.24 | 702,597 | 5.90 | $ | 5.17 | 314,825 | |||||||||||||
2012 Plan
|
N/A | - | N/A | N/A | - |
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) | ||||
Change in net unrealized gains (losses) on investments available for sale
|
5,114 | 572 | (2,415 | ) | ||||||||
Comprehensive income (loss) before tax
|
9,427 | 142 | (10,411 | ) | ||||||||
Income tax (expense) benefit related to items of other comprehensive income (loss)
|
(1,924 | ) | (215 | ) | 909 | |||||||
Comprehensive income (loss)
|
$ | 7,503 | $ | (73 | ) | $ | (9,502 | ) |
Condensed Balance Sheets (Unaudited)
|
Period Ending December 31,
|
|||||||
ASSETS
|
2012
|
2011
|
||||||
(Dollars in Thousands)
|
||||||||
Cash and short term investments
|
$ | 1,494 | $ | 2,283 | ||||
Investments and advances to subsidiaries
|
61,005 | 60,554 | ||||||
Deferred income taxes receivable
|
4,338 | 8,612 | ||||||
Income taxes receivable
|
9,515 | 9,474 | ||||||
Property, plant and equipment, net
|
98 | 260 | ||||||
Other assets
|
4,069 | 4,024 | ||||||
Total assets
|
$ | 80,519 | $ | 85,207 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Income taxes payable
|
- | 78 | ||||||
Other liabilities
|
125 | 143 | ||||||
Total liabilities
|
125 | 221 | ||||||
Shareholders' equity:
|
||||||||
Common stock
|
80 | 80 | ||||||
Additional paid-in capital
|
45,378 | 45,250 | ||||||
Accumulated other comprehensive (loss) income
|
(1,039 | ) | 494 | |||||
Retained earnings
|
35,975 | 39,162 | ||||||
Total shareholders' equity
|
80,394 | 84,986 | ||||||
Total liabilities and shareholders' equity
|
$ | 80,519 | $ | 85,207 |
Condensed Statements of Operations (Unaudited)
|
Years Ended December 31,
|
|||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Revenue:
|
||||||||||||
Management fees from subsidiaries
|
$ | 1,228 | $ | 1,734 | $ | 1,669 | ||||||
Equity in income of subsidiaries
|
8,787 | (48 | ) | (10,080 | ) | |||||||
Net investment income
|
34 | 31 | 2 | |||||||||
Other income
|
476 | 1,345 | 518 | |||||||||
Total revenue
|
10,525 | 3,062 | (7,891 | ) | ||||||||
Expenses:
|
||||||||||||
Salaries and wages
|
1,853 | 1,775 | 1,930 | |||||||||
Legal fees
|
198 | 54 | 19 | |||||||||
Other expenses
|
1,726 | 2,233 | 2,114 | |||||||||
Total expenses
|
3,777 | 4,062 | 4,063 | |||||||||
Income (loss) before provision for income tax expense (benefit)
|
6,748 | (1,000 | ) | (11,955 | ) | |||||||
Provision for income tax expense (benefit)
|
2,435 | (570 | ) | (3,959 | ) | |||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) |
Condensed Statements of Cash Flow (Unaudited)
|
||||||||||||
Years Ended December 31,
|
||||||||||||
2012
|
2011
|
2010
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Cash flow from operating activities:
|
||||||||||||
Net income (loss)
|
$ | 4,313 | $ | (430 | ) | $ | (7,996 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||||||
Equity in (income) loss of subsidiaries
|
(8,787 | ) | 48 | 10,080 | ||||||||
Depreciation and amortization of property plant and equipment, net
|
23 | 7 | 13 | |||||||||
Deferred income tax (benefit) expense
|
(4,274 | ) | 696 | 3,241 | ||||||||
Income tax (payable) recoverable
|
(78 | ) | 78 | - | ||||||||
Change in dividends payable
|
- | - | (477 | ) | ||||||||
Non-cash compensation
|
188 | 263 | 431 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Property, plant and equipment
|
(138 | ) | 73 | (259 | ) | |||||||
Deferred gain on sale of assets
|
(30 | ) | (506 | ) | (500 | ) | ||||||
Other assets
|
45 | (292 | ) | (301 | ) | |||||||
Other liabilities
|
(18 | ) | (770 | ) | (675 | ) | ||||||
Net cash provided by operating activities
|
(8,756 | ) | (833 | ) | 3,557 | |||||||
Cash flow used in investing activities:
|
||||||||||||
Purchases of investment securities available for sale
|
(451 | ) | (846 | ) | (5,024 | ) | ||||||
Increased capital of subsidiaries
|
- | - | (5,025 | ) | ||||||||
Cash flow used in investing activities:
|
(451 | ) | (846 | ) | (10,049 | ) | ||||||
Net cash used in financing activities:
|
||||||||||||
Dividends paid
|
(159 | ) | - | (477 | ) | |||||||
Stock options exercised
|
128 | - | - | |||||||||
Tax benefit related to non-cash compensation
|
100 | 92 | 151 | |||||||||
Advances (to) from subsidiaries
|
8,349 | 668 | 3,832 | |||||||||
Net cash used in financing activities:
|
8,418 | 760 | 3,506 | |||||||||
Net decrease in cash and short term investments
|
(789 | ) | (919 | ) | (2,986 | ) | ||||||
Cash and short term investments at beginning of year
|
2,283 | 3,202 | 6,188 | |||||||||
Cash and short term investments at end of year
|
$ | 1,494 | $ | 2,283 | $ | 3,202 |
Loss and LAE
|
Loss and LAE
|
Amortization of
deferred policy
acquisition
|
Paid losses and
LAE
|
Net premiums
|
||||||||||||||||
- Current Year
|
- Prior year
|
expenses
|
expenses
|
written
|
||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||
2012
|
$ | 31,636 | $ | (1,427 | ) | $ | 13,255 | $ | 15,892 | $ | 68,374 | |||||||||
2011
|
$ | 31,893 | $ | (997 | ) | $ | 12,347 | $ | 13,672 | $ | 51,976 | |||||||||
2010
|
$ | 37,288 | $ | 2,800 | $ | 13,025 | $ | 15,077 | $ | 43,447 | ||||||||||
Affiliation with registrant
|
Deferred policy
acquisition costs
|
Reserves for
losses and LAE
|
Discount, if any,
deducted from
previous column
|
Unearned
premiums
|
Net premiums
earned
|
|||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||
Consolidated Property and Casualty Subsidiaries
|
||||||||||||||||||||
2012
|
$ | 8,479 | $ | 49,908 | $ | - | $ | 59,006 | $ | 59,359 | ||||||||||
2011
|
$ | 7,718 | $ | 59,983 | $ | - | $ | 47,933 | $ | 48,523 | ||||||||||
2010
|
$ | 7,879 | $ | 66,529 | $ | - | $ | 47,136 | $ | 45,060 |
As of December 31, 2012
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
United States government obligations and authorities
|
$ | 12,464 | $ | 14,928 | $ | - | $ | 27,392 | ||||||||
Obligations of states and political subdivisions
|
- | 3,939 | - | 3,939 | ||||||||||||
Corporate
|
67,313 | - | - | 67,313 | ||||||||||||
International
|
- | 3,111 | - | 3,111 | ||||||||||||
79,777 | 21,978 | - | 101,755 | |||||||||||||
Equity securities:
|
||||||||||||||||
Common stocks
|
20,982 | - | - | 20,982 | ||||||||||||
20,982 | - | - | 20,982 | |||||||||||||
Total debt and equity securities
|
$ | 100,759 | $ | 21,978 | $ | - | $ | 122,737 |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
CONTROLS AND PROCEDURES
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Name
|
Age
|
Position with the Company
|
Michael H. Braun(5)(6)
|
45
|
Chief Executive Officer, President, Class I Director
|
Peter J. Prygelski, III (2)
|
44
|
Chief Financial Officer, Treasurer, Class I Director
|
Bruce F. Simberg (2)(3)(4)(5)
|
64
|
Chairman, Class II Director
|
Richard W. Wilcox, Jr. (1)(3)(4)(6)
|
1
|
Class II Director
|
Carl Dorf (1)(2)(3)(4)
|
72
|
Class III Director
|
Charles B. Hart, Jr. (2)(3)(4)(5)(6)
|
74
|
Class III Director
|
Jenifer G. Kimbrough (1)(3)(4)
|
41
|
Class I Director
|
(1)
|
Audit Committee Member
|
(2)
|
Investment Committee Member
|
(3)
|
Compensation Committee Member
|
(4)
|
Nominating Committee Member
|
(5)
|
Directors Compensation Committee Member
|
(6)
|
Strategic Initiatives Committee Member
|
EXECUTIVE COMPENSATION
|
SUMMARY COMPENSATION
|
|||||||||||||||||||||||||||||||||
Name and Principal Position
|
Year
|
Salary
|
Bonus
|
Stock Awards
|
Option
Awards
(1)
|
Non-Equity
Incentive Plan Compensation
|
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
(2)
|
Total
|
||||||||||||||||||||||||
Michael H. Braun
Chief Executive Officer, President
|
2012
|
$ | 278,261 | $ | 70,800 | -- | $ | 21,743 | -- | -- | $ | 27,821 | $ | 398,625 | |||||||||||||||||||
2011
|
$ | 236,002 | $ | 44,250 | -- | $ | 7,823 | -- | -- | $ | 36,369 | $ | 324,444 | ||||||||||||||||||||
Peter J. Prygelski, III
Chief Financial Officer, Treasurer
|
2012
|
$ | 222,535 | $ | 59,400 | -- | $ | 21,743 | -- | -- | $ | 27,573 | $ | 331,251 | |||||||||||||||||||
2011
|
$ | 198,000 | $ | 29,700 | -- | $ | 7,823 | -- | -- | $ | 35,223 | $ | 270,746 |
(1)
|
This amount reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of this amount are included in Footnote 14 to the Company’s audited financial statements for fiscal years ended December 31, 2012 and December 31, 2011, respectively.
|
(2)
|
See table "All Other Compensation" for an itemized disclosure of this element of compensation.
|
ALL OTHER COMPENSATION
|
|||||||||||||||||||||
Name
|
Year
|
Auto
|
Club Member
Fees
|
Insurance
Benefits (1)
|
Contribution to
401(k) Plan (2)
|
All Other
Compensation
Total
|
|||||||||||||||
Michael H. Braun
|
2012
|
$ | 9,578 | -- | $ | 8,313 | $ | 9,930 | $ | 27,821 | |||||||||||
2011
|
$ | 10,994 | -- | $ | 20,078 | $ | 8,297 | $ | 36,369 | ||||||||||||
Peter J. Prygelski, III
|
2012
|
$ | 6,000 | $ | 8,100 | $ | 6,018 | $ | 7,455 | $ | 27,573 | ||||||||||
2011
|
$ | 6,000 | $ | 7,284 | $ | 14,667 | $ | 7,272 | $ | 35,223 |
(1)
|
Represents premiums for life, medical and dental insurance.
|
(2)
|
Represents matching contributions made by the Company on behalf of the Named Executive Officers to the Company’s 401(k) plan.
|
GRANTS OF PLAN-BASED AWARDS
|
|||||||||||||
Name
|
Grant Date
|
All Other Option Awards / Number
of Securities Underlying Options
|
Exercise or Base
Price of Option
Awards
|
Grant Date Fair Value of
Stock and Option Awards
(1)
|
|||||||||
Michael H. Braun
|
04/6/2012
|
15,000 | $ | 4.40 | $ | 21,742.50 | |||||||
Peter J. Prygelski, III
|
04/6/2012
|
15,000 | $ | 4.40 | $ | 21,742.50 |
(1)
|
This amount reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of this amount are included in Footnote 14 to the Company’s audited financial statements for fiscal year ended December 31, 2012.
|
Vesting Schedule
|
||
From the Grant Date
|
Portion of Grant Vested
|
|
Less than 1 year
|
0%
|
|
1 year
|
33 1/3%
|
|
2 years
|
33 1/3%
|
|
3 years
|
33 1/3%
|
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|||||||
Option Awards
|
|||||||
Name
|
Number of Securities
Underlying Unexercised
Options-Exercisable
|
Number of Securities
Underlying Unexercised
Options-Unexercisable
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
|||
Michael H. Braun
|
5,000
|
0
|
16.59
|
10/25/2013 (1)
|
|||
20,000
|
0
|
14.36
|
11/08/2013 (2)
|
||||
500
|
0
|
13.17
|
12/06/2013 (3)
|
||||
3,600
|
900
|
12.58
|
01/30/2014 (4)
|
||||
32,000
|
8,000
|
8.32
|
07/01/2014 (5)
|
||||
500
|
0
|
4.59
|
12/12/2018 (6)
|
||||
24,000
|
8,000
|
4.73
|
01/02/2015 (7)
|
||||
6,000
|
9,000
|
4.36
|
03/03/2020 (8)
|
||||
3,334
|
6,666
|
2.45
|
08/22/2021 (9 )
|
||||
0
|
15,000
|
4.40
|
04/06/2022 (10)
|
||||
Peter J. Prygelski, III
|
20,000
|
0
|
11.11
|
06/25/2013 (11)
|
|||
500
|
0
|
13.17
|
12/06/2013 (3)
|
||||
3,600
|
900
|
12.58
|
01/30/2014 (4)
|
||||
8,000
|
2,000
|
8.32
|
07/01/2014 (5)
|
||||
500
|
0
|
4.59
|
12/12/2014 (6)
|
||||
6,000
|
9,000
|
4.36
|
03/03/2020 (8)
|
||||
3,334
|
6,666
|
2.45
|
08/22/2021 (9 )
|
||||
0
|
15,000
|
4.40
|
04/06/2022 (10)
|
(1)
|
Options vested as to 100% of the underlying shares on December 31, 2012.
|
(2)
|
Options vested as to 100% of the underlying shares on December 31, 2012.
|
(3)
|
Options vested as to 100% of the underlying shares on December 31, 2012.
|
(4)
|
Options vested as to 80% of the underlying shares on December 31, 2012, the remaining 20% vest on 1/30/2013.
|
(5)
|
Options vested as to 80% of the underlying shares on December 31, 2012, the remaining 20% vest on 7/1/2013.
|
(6)
|
Options vested as to 100% of the underlying shares on December 31, 2012.
|
(7)
|
Options vested as to 60% of the underlying shares on December 31, 2012, the remaining 40% vest as follows:
|
|
20% on 1/2/2013 and 20% on 1/2/2014.
|
(8)
|
Options vested as to 40% of the underlying shares on December 31, 2012, the remaining 60% vest as follows:
|
|
20% on 3/3/2013, 20% on 3/3/2014 and 20% on 3/3/2015.
|
(9)
|
Options vested as to 33 1/3% of the underlying shares on December 31, 2012, the remaining 66 2/3% vest as follows:
|
|
33 1/3% on 8/22/2013 and 33 1/3% on 8/22/2014.
|
(10)
|
Options vested as to 0% of the underlying shares on December 31, 2012, the remaining 100% vest as follows:
|
|
33 1/3% on4/6/2013, 33 1/3% on 4/6/2014 and 33 1/3% on 4/6/2015.
|
(11)
|
Options vested as to 100% of the underlying shares on December 31, 2012.
|
NON-EMPLOYEE DIRECTORS' COMPENSATION SUMMARY
|
||||||||||||||||||||||||||||
Name
|
Fees
Earned or
Paid in
Cash
|
Stock Awards
|
Option
Awards (2)
|
Non-Equity Incentive Plan Compensation
|
Non-Qualified Deferred Compensation Earnings
|
All Other Compensation
|
Total
|
|||||||||||||||||||||
Carl Dorf
|
$ | 43,750 | -- | $ | 21,743 | -- | -- | -- | $ | 65,493 | ||||||||||||||||||
Charles B. Hart, Jr.
|
$ | 43,500 | -- | $ | 21,743 | -- | -- | $ | 5, 300(1) | $ | 70,543 | |||||||||||||||||
Bruce F. Simberg
|
$ | 45,750 | -- | $ | 21,743 | -- | -- | -- | $ | 67,493 | ||||||||||||||||||
Richard W. Wilcox, Jr.
|
$ | 43,500 | -- | $ | 21,743 | -- | -- | $ | 65,243 | |||||||||||||||||||
Jenifer G. Kimbrough
|
$ | 44,000 | -- | $ | 21,743 | -- | -- | -- | $ | 65,743 |
(1)
|
Includes $1,000 paid for country club membership and $4,300 for events attended by director in 2012.
|
(2)
|
The following table provides certain additional information concerning the currently outstanding options held by our non-employee directors as of the end of 2012:
|
Name
|
Total Stock Option
Awards Outstanding at
2012 Fiscal Year End
(Shares)
|
Option Awards
Granted During Fiscal
Year 2012 (a)
(Shares)
|
Grant Date Fair Value of
Option Awards Granted
During Fiscal Year 2012 ($)
|
|||||||||
Carl Dorf
|
45,000 (b) | 15,000 (a) | $ | 21,743 | ||||||||
Charles B. Hart, Jr.
|
45,000 (b) | 15,000 (a) | $ | 21,743 | ||||||||
Bruce F. Simberg
|
55,000 (c) | 15,000 (a) | $ | 21,743 | ||||||||
Richard W. Wilcox, Jr.
|
45,000 (b) | 15,000 (a) | $ | 21,743 | ||||||||
Jenifer G. Kimbrough
|
35,000 (d) | 15,000 (a) | $ | 21,743 |
(a)
|
The stock options reported in this column were granted in April 2012 and vest 33 1/3% per year over three years on each anniversary of the date of grant.
|
(b)
|
Includes 500 options granted on 12/6/2007 with an exercise price of $13.17, vest 20% per year, and expire on 12/6/2013; 4,500 options granted on 1/30/2008 with an exercise price of $12.58, vest 20% per year and expire on 1/30/2014; 15,000 options granted on 1/2/2009 with an exercise price of $4.73, vest 33 1/3% per year and expire on 1/2/2015; 10,000 options granted on 8/22/2011 with an exercise price of $2.45, vest 33 1/3% per year, and expire on 8/22/2021; and 15,000 options granted on 4/6/2012 with an exercise price of $4.40, vest 33 1/3% per year, and expire on 4/6/2022.
|
(c)
|
Includes 500 options granted on 12/6/2007 with an exercise price of $13.17, vest 20% per year, and expire on 12/6/2013; 4,500 options granted on 1/30/2008 with an exercise price of $12.58, vest 20% per year and expire on 1/30/2014; and 25,000 options granted on 1/2/2009 with an exercise price of $4.73, vest 33 1/3% per year and expire on 1/2/2015; 10,000 options granted on 8/22/2011 with an exercise price of $2.45, vest 33 1/3% per year, and expire on 8/22/2021; and 15,000 options granted on 4/6/2012 with an exercise price of $4.40, vest 33 1/3% per year, and expire on 4/6/2022.
|
(d)
|
Includes 10,000 options granted on 4/1/2009 with an exercise price of $3.30, vest 20% per year and expire on 4/1/2015; 10,000 options granted on 8/22/2011 with an exercise price of $2.45, vest 33 1/3% per year, and expire on 8/22/2021; and 15,000 options granted on 4/6/2012 with an exercise price of $4.40, vest 33 1/3% per year, and expire on 4/6/2022.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
Name and Address of Beneficial Owner
|
Number of Shares
Beneficially
Owned
|
Percent of
Class
Outstanding (1)
|
Bruce F. Simberg (2)
|
363,517
|
4.47%
|
Richard W. Wilcox, Jr. (3)
|
168,918
|
2.08%
|
Michael H. Braun (4)
|
154,734
|
1.89%
|
Carl Dorf (5)
|
147,622
|
1.82%
|
Peter J. Prygelski, III (6)
|
71,034
|
*
|
Charles B. Hart, Jr. (7)
|
32,334
|
*
|
Jenifer G. Kimbrough (8)
|
21,244
|
*
|
All directors and executive officers as a group (seven persons) (9)
|
959,403
|
11.44%
|
5% or greater holders:
|
||
Lloyd I. Miller, III (10)
|
775,809
|
9.59%
|
4550 Gordon Drive
|
||
Naples, FL 34102
|
||
Dimensional Fund Advisors LP (11)
|
551,527
|
6.82%
|
Palisades West, Building One
|
||
6300 Bee Cave Road
|
||
Austin, TX 78746
|
*
|
Less than 1%.
|
(1)
|
Based on
8,085,589
shares outstanding as of March 26, 2013.
|
(2)
|
Includes 4,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 38,334 shares of common stock issuable upon the exercise of vested stock options held by Mr. Simberg.
|
(3)
|
Includes 3,000 shares of common stock held in Mr. Wilcox’s IRA, 40,000 shares of common stock held by Mr. Wilcox’s spouse, 4,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 28,334 shares of common stock issuable upon the exercise of vested stock options held by Mr. Wilcox.
|
(4)
|
Includes 25,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 111,834 shares of common stock issuable upon the exercise of vested stock options held by Mr. Braun.
|
(5)
|
Includes 59,624 shares of common stock held by Carl Dorf Rollover IRA, 54,164 shares of common stock held by Dorf Trust, 4,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 28,334 shares of common stock issuable upon the exercise of vested stock options held by Mr. Dorf.
|
(6)
|
Includes 4,000 shares of common stock held in Mr. Prygelski’s IRA, 15,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 50,834 shares of common stock issuable upon the exercise of vested stock options held by Mr. Prygelski.
|
(7)
|
Includes 4,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 28,334 shares of common stock issuable upon the exercise of vested stock options held by Mr. Hart.
|
(8)
|
Includes 4,000 shares of restricted stock one-third of which vest each year beginning on March 4, 2014, and 16,334 shares of common stock issuable upon the exercise of vested stock options held by Ms. Kimbrough.
|
(9)
|
Includes 60,000 shares of restricted stock, one-third of which vest each year beginning on March 4, 2014, and 302,338 shares of common stock issuable upon the exercise of vested stock options.
|
(10)
|
Includes 12,000 shares of common stock that Lloyd I. Miller, III has shared voting and dispositive power as co-trustee of a certain trust. This information is based on an Amendment No. 2 to Schedule 13G filed with the SEC on February 14, 2012.
|
(11)
|
This information is based on an Amendment No. 3 to Schedule 13G filed with the SEC on February 11, 2013.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
Fiscal 2012
|
Fiscal 2011
|
|||||||
Audit Fees (1)
|
$ | 372,168 | $ | 317,278 | ||||
Audit-Related Fees (2)
|
$ | 15,953 | $ | 9,700 | ||||
Tax Fees (3)
|
$ | 0 | $ | 0 | ||||
Total
|
$ | 388,121 | $ | 326,978 |
(1)
|
Audit fees consisted of audit work performed in the preparation of financial statements, as well as work generally only the independent auditor can reasonably be expected to provide, such as statutory audits.
|
(2)
|
Audit-related fees consisted primarily of audits of employee benefit plans and special procedures related to regulatory filings in 2012 and 2011.
|
(3)
|
Tax fees consisted primarily of assistance with tax compliance and reporting.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
|
Exhibit
|
Description
|
3.1
|
Amended and Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC on November 14, 2012).
|
3.2
|
Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on November 28, 2007).
|
4.1
|
Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 in Amendment No. 1 to the Company’s Registration Statement on Form SB-2 filed with the SEC on October 7, 1998 [File No. 333-63623]).
|
10.1
|
Non-Compete Agreement dated December 19, 2005 between the Company and Michael Braun dated December 19, 2005 (incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on December 29, 2005).+
|
10.2
|
Non-Compete Agreement between the Company and Peter J. Prygelski, effective June 25, 2007 (incorporated by reference to Exhibit 10.3 contained in the Company's Form 8-K filed on June 19, 2007).+
|
10.3
|
Amended and Restated 2012 Stock Incentive Plan.+*
|
10.4
|
Form of Restricted Stock Agreement between the Company and individuals awarded restricted stock from the 2012 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on March 8, 2012).+
|
10.5
|
Federated National Holding Company 2002 Stock Option Plan, as amended, and Stock Plan Acknowledgment (incorporated by reference to Annex A in the Company’s Definitive Proxy Statement for its 2009 Annual Meeting of Stockholders filed with the SEC on April 2, 2009).+
|
10.6
|
Federated National Holding Company 1998 Stock Option Plan, as amended, and Stock Plan Acknowledgment (incorporated by reference to Annex A in the Company’s Definitive Proxy Statement filed with the SEC on May 12, 2000).+
|
10.7
|
Form of Indemnification Agreement between the Company and its directors and executive officers (incorporated by reference from Exhibit 10.15 in the Company’s Annual Report on Form 10-K for its year ended December 31, 1007 filed with the SEC on March 17, 2008).
|
10.8
|
Consent Order for Case Number 114165-10-CO between Federated National Insurance Company, American Vehicle Insurance Company, 21
st
Century Holding Company and the Florida Office of Insurance Regulation filed January 25, 2011 to approve of the merger of Federated National Insurance Company with and into American Vehicle Insurance Company (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on January 27, 2011).
|
10.9
|
Amended Consent Order dated February 5, 2013 between the Florida Office of Insurance Regulation and Federated National Insurance Company (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on February 8, 2013).
|
10.10
|
Reimbursement Contract between Federated National Insurance Company and The State Board of Administration of Florida (SBA) which administers the Florida Hurricane Catastrophe Fund (FHCF) and Addendum No. 1 effective June 1, 2012 (incorporated by reference to Exhibit 10.1 – 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on March 2, 2012).
|
10.11
|
Excess Catastrophe Reinsurance Contract, effective July 1, 2012, between Federated National Insurance Company and subscribing reinsurers (incorporated by reference to Exhibit 10.1 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC on November 14, 2012).
|
10.12
|
Reinstatement Premium Protection Reinsurance Contract, effective July 1, 2012, between Federated National Insurance Company and subscribing reinsurers (incorporated by reference to Exhibit 10.2 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC on November 14, 2012).
|
10.13
|
INCR 5th Layer Excess Catastrophe Reinsurance Contract, effective July 1, 2012, between Federated National Insurance Company and subscribing reinsurers (incorporated by reference to Exhibit 10.3 in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC on November 14, 2012).
|
10.14
|
Second Amended and Restated Employment Agreement dated January 18, 2012 between the Company and Michael H. Braun (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K filed with the SEC on January 20, 2012).+
|
10.15
|
Second Amended and Restated Employment Agreement dated January 18, 2012 between the Company and Peter J. Prygelski, III (incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on January 20, 2012).+
|
10.16
|
Reimbursement Contract between Federated National Insurance Company and The State Board of Administration of Florida (SBA) which administers the Florida Hurricane Catastrophe Fund (FHCF) and Addendum No. 1 effective June 1, 2013 (incorporated by reference to Exhibits 10.1 – 10.2 in the Company’s Current Report on Form 8-K filed with the SEC on February 21, 2013).
|
21.1
|
Subsidiaries of the Company *
|
23.1
|
Consent of De Meo, Young, McGrath, Independent Certified Public Accountants *
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act *
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act *
|
32.1
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act *
|
32.2
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act *
|
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-XBRL Taxonomy Extension Presentation Linkbase Document. **
|
+ Management Compensation Plan or Arrangement
|
* Filed herewith
|
** In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
FEDERATED NATIONAL HOLDING COMPANY
|
|||
By:
|
/s/ Michael H. Braun
|
||
Michael H. Braun, Chief Executive Officer
|
|||
(Principal Executive Officer)
|
|||
/s/ Peter J. Prygelski, III
|
|||
Peter J. Prygelski, III, Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
Signature
|
Title
|
Date
|
||
/s/ Michael H. Braun
|
Chief Executive Officer
|
April 1, 2013
|
||
Michael H. Braun
|
(Principal Executive Officer)
|
|||
/s/ Peter J. Prygelski, III
|
Chief Financial Officer
|
April 1, 2013
|
||
Peter J. Prygelski, III
|
(Principal Financial and Accounting Officer)
|
|||
/s/ Carl Dorf
|
Director
|
April 1, 2013
|
||
Carl Dorf
|
||||
/s/ Bruce F. Simberg
|
Director
|
April 1, 2013
|
||
Bruce F. Simberg
|
Chairman of the Board
|
|||
/
s/ Charles B. Hart, Jr.
|
Director
|
April 1, 2013
|
||
Charles B. Hart, Jr.
|
||||
/s/ Richard W. Wilcox, Jr.
|
Director
|
April 1, 2013
|
||
Richard W. Wilcox, Jr.
|
||||
/s/ Jenifer G. Kimbrough
|
Director
|
April 1, 2013
|
||
Jenifer G. Kimbrough
|
Amended and Restated 2012 Stock Incentive Plan
|
|
Subsidiaries
|
|
Consent of DeMeo, Young, McGrath, Independent Certified Public Accountants
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
|
/s/ DeMeo, Young, McGrath
|
|
Boca Raton, Florida
|
|
April 1, 2013
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Michael H. Braun
|
|
Michael H. Braun
|
|
Chief Executive Officer
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Peter J. Prygelski, III
|
|
|
|
Peter J. Prygelski, III
|
|
Chief Financial Officer
|
|
/s/ Michael H. Braun
|
||
Michael H. Braun
|
/s/ Peter J. Prygelski, III
|
||
Peter J. Prygelski, III
|