Florida
|
|
65-0248866
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(IRS Employer
Identification Number)
|
Large accelerated filer ☐ |
Accelerated filer ☒
|
Non-accelerated filer ☐ | Smaller reporting company ☐ |
PART I: FINANCIAL INFORMATION
|
PAGE
|
|
ITEM 1
|
3
|
|
ITEM 2
|
34 | |
ITEM 3
|
50
|
|
ITEM 4
|
53
|
|
PART II: OTHER INFORMATION
|
||
ITEM 1
|
54
|
|
ITEM 1A
|
54
|
|
ITEM 2
|
54
|
|
ITEM 3
|
54
|
|
ITEM 4
|
54
|
|
ITEM 5
|
55
|
|
ITEM 6
|
56
|
|
57 |
Period Ending | ||||||||
March 31, 2015
|
December 31, 2014
|
|||||||
ASSETS
|
(Dollars in Thousands)
|
|||||||
Investments
|
||||||||
Debt maturities, available for sale, at fair value
|
$
|
288,193
|
$
|
284,099
|
||||
Debt maturities, held to maturity, at amortized cost
|
7,462
|
7,417
|
||||||
Equity securities, available for sale, at fair value
|
40,726
|
39,247
|
||||||
Total investments
|
336,381
|
330,763
|
||||||
Cash and short term investments
|
88,163
|
40,157
|
||||||
Prepaid reinsurance premiums
|
46,039
|
54,502
|
||||||
Premiums receivable, net of allowance for credit losses of $148 and $148, respectively
|
29,809
|
27,275
|
||||||
Reinsurance recoverable, net
|
13,034
|
12,534
|
||||||
Deferred policy acquisition costs
|
15,765
|
13,610
|
||||||
Income taxes receivable
|
2,090
|
1,810
|
||||||
Property, plant and equipment, net
|
1,720
|
1,749
|
||||||
Other assets
|
8,265
|
7,231
|
||||||
Contingent quota-share profit sharing
|
14,000
|
14,000
|
||||||
Total assets
|
$
|
555,266
|
$
|
503,631
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Unpaid losses and LAE
|
$
|
84,475
|
$
|
78,330
|
||||
Unearned premiums
|
203,433
|
192,424
|
||||||
Debt
|
5,000
|
-
|
||||||
Premiums deposits and customer credit balances
|
11,291
|
7,381
|
||||||
Deferred income taxes, net
|
1,897
|
1,341
|
||||||
Claims payments outstanding
|
9,653
|
10,152
|
||||||
Accounts payable and accrued expenses
|
8,967
|
10,924
|
||||||
Deferred quota-share profit sharing
|
8,750
|
10,500
|
||||||
Total liabilities
|
333,466
|
311,052
|
||||||
Shareholders' equity:
|
||||||||
Common stock, $0.01 par value. Authorized 25,000,000 shares; issued and outstanding
13,701,122 and 13,632,414, respectively
|
137 | 136 | ||||||
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued or outstanding
|
-
|
-
|
||||||
Additional paid-in capital
|
128,611
|
127,302
|
||||||
Accumulated other comprehensive income
|
||||||||
Unrealized net gains on investments, available for sale
|
8,925
|
7,718
|
||||||
Total accumulated other comprehensive income
|
8,925
|
7,718
|
||||||
Retained earnings
|
66,140
|
57,423
|
||||||
Total Federated National Holding Company equity
|
203,813
|
192,579
|
||||||
Non-controlling interest
|
17,987
|
-
|
||||||
Total shareholders' equity
|
221,800
|
192,579
|
||||||
Total liabilities and shareholders' equity
|
$
|
555,266
|
$
|
503,631
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Revenue:
|
||||||||
Gross premiums written
|
$
|
106,702
|
$
|
81,102
|
||||
Gross premiums ceded
|
(25,958
|
)
|
(3,306
|
)
|
||||
Net premiums written
|
80,744
|
77,796
|
||||||
Decrease in prepaid reinsurance premiums
|
(24,949
|
)
|
(16,795
|
)
|
||||
Increase in unearned premiums
|
(11,009
|
)
|
(16,997
|
)
|
||||
Net change in prepaid reinsurance premiums and unearned premiums
|
(35,958
|
)
|
(33,792
|
)
|
||||
Net premiums earned
|
44,786
|
44,004
|
||||||
Commission income
|
1,126
|
954
|
||||||
Finance revenue
|
427
|
311
|
||||||
Direct written policy fees
|
2,492
|
1,827
|
||||||
Net investment income
|
1,546
|
1,007
|
||||||
Net realized investment gains
|
1,704
|
1,331
|
||||||
Other income
|
1,378
|
281
|
||||||
Quota-share profit sharing, net
|
1,477
|
-
|
||||||
Total revenue
|
54,936
|
49,715
|
||||||
Expenses:
|
||||||||
Losses and LAE
|
23,949
|
20,828
|
||||||
Operating and underwriting expenses
|
6,322
|
3,667
|
||||||
Salaries and wages
|
5,137
|
3,050
|
||||||
Amortization of deferred policy acquisition costs
|
5,044
|
8,442
|
||||||
Total expenses
|
40,452
|
35,987
|
||||||
Income before provision for income tax expense
|
14,484
|
13,728
|
||||||
Provision for income tax expense
|
5,711
|
5,305
|
||||||
Income before non-controlling interest
|
8,773
|
8,423
|
||||||
Non-controlling interest
|
(511
|
)
|
-
|
|||||
Net income attributable to Federated National Holding Company common stockholders
|
$
|
9,284
|
$
|
8,423
|
||||
Net income per share - basic
|
$
|
0.68
|
$
|
0.77
|
||||
Net income per share - diluted
|
$
|
0.66
|
$
|
0.74
|
||||
Weighted average number of common shares outstanding - basic
|
13,656,190
|
10,948,646
|
||||||
Weighted average number of common shares outstanding - diluted
|
13,976,131
|
11,317,458
|
||||||
Dividends paid per share
|
$
|
0.04
|
$
|
0.03
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Net income
|
$
|
9,284
|
$
|
8,423
|
||||
Change in net unrealized gains on investments available for sale
|
1,965
|
880
|
||||||
Comprehensive income before tax
|
11,249
|
9,303
|
||||||
Income tax expense related to items of other comprehensive income
|
(758
|
)
|
(430
|
)
|
||||
Comprehensive income
|
$
|
10,491
|
$
|
8,873
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Cash flow from operating activities:
|
||||||||
Net income
|
$
|
9,284
|
$
|
8,423
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Amortization of investment premium or discount, net
|
1,253
|
844
|
||||||
Depreciation and amortization of property plant and equipment, net
|
152
|
76
|
||||||
Net realized investment gains
|
(1,704
|
)
|
(1,331
|
)
|
||||
Non-cash compensation
|
999
|
134
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Premiums receivable
|
(2,535
|
)
|
(1,537
|
)
|
||||
Prepaid reinsurance premiums
|
8,463
|
6,755
|
||||||
Reinsurance recoverable, net
|
(500
|
)
|
33
|
|||||
Income taxes recoverable
|
(280
|
)
|
-
|
|||||
Deferred income tax expense, net of other comprehensive income
|
(202
|
)
|
(574
|
)
|
||||
Policy acquisition costs, net of amortization
|
(2,156
|
)
|
(1,757
|
)
|
||||
Other assets
|
(1,034
|
)
|
(970
|
)
|
||||
Contingent quota-share profit sharing
|
(1,750
|
)
|
-
|
|||||
Unpaid losses and LAE
|
6,145
|
1,538
|
||||||
Unearned premiums
|
11,009
|
16,997
|
||||||
Debt
|
5,000
|
-
|
||||||
Premium deposits and customer credit balances
|
3,911
|
3,383
|
||||||
Income taxes payable
|
-
|
1,978
|
||||||
Claims payments outstanding
|
(499
|
)
|
(991
|
)
|
||||
Accounts payable and accrued expenses
|
(1,957
|
)
|
(383
|
)
|
||||
Net cash provided by operating activities
|
33,599
|
32,618
|
||||||
Cash flow used by investing activities:
|
||||||||
Proceeds from sale of investment securities
|
56,264
|
20,946
|
||||||
Purchases of investment securities available for sale
|
(59,466
|
)
|
(44,387
|
)
|
||||
Purchases of property and equipment
|
(122
|
)
|
(218
|
)
|
||||
Net cash used by investing activities
|
(3,324
|
)
|
(23,659
|
)
|
||||
Cash flow provided by financing activities:
|
||||||||
Exercised stock options
|
$
|
27
|
$
|
353
|
||||
Dividends paid
|
(566
|
)
|
(341
|
)
|
||||
Non-controlling interest
|
17,987
|
-
|
||||||
Tax benefit related to non-cash compensation
|
283
|
72
|
||||||
Net cash provided by financing activities
|
17,731
|
84
|
||||||
Net increase in cash and short term investments
|
48,006
|
9,043
|
||||||
Cash and short term investments at beginning of period
|
40,157
|
41,446
|
||||||
Cash and short term investments at end of period
|
$
|
88,163
|
$
|
50,489
|
Three Months Ended March 31,
|
||||||||
(continued)
|
2015
|
2014
|
||||||
(Dollars in Thousands)
|
||||||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during the period for:
|
||||||||
Income taxes
|
$
|
5,662
|
$
|
3,885
|
||||
Non-cash investing and finance activities:
|
||||||||
Accrued dividends payable
|
$
|
567
|
$
|
336
|
(1)
|
Organization and Business
|
(2) | Basis of Presentation |
(3) | Summary of Significant Accounting Policies and Practices |
(4) | Commitments and Contingencies |
Fiscal Year
|
Payments
|
|||
(Dollars in Thousands)
|
||||
2015
|
545
|
|||
2016
|
714
|
|||
2017
|
726
|
|||
2018
|
740
|
|||
Thereafter
|
502
|
|||
Total
|
$
|
3,227
|
(5) | Investments |
· | 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. |
(A)
|
Debt and Equity Securities
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||
Carrying
Amount
|
Percent
of Total
|
Carrying
Amount
|
Percent
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities, at market:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
59,551
|
17.70
|
%
|
$
|
62,323
|
18.84
|
%
|
||||||||
Obligations of states and political subdivisions
|
92,172
|
27.40
|
%
|
91,614
|
27.70
|
%
|
||||||||||
Corporate
|
125,020
|
37.18
|
%
|
119,024
|
35.99
|
%
|
||||||||||
International
|
11,450
|
3.40
|
%
|
11,138
|
3.37
|
%
|
||||||||||
288,193
|
85.68
|
%
|
284,099
|
85.90
|
%
|
|||||||||||
Debt securities, at amortized cost:
|
||||||||||||||||
United States government obligations and authorities
|
4,564
|
1.36
|
%
|
4,490
|
1.36
|
%
|
||||||||||
Corporate
|
2,701
|
0.80
|
%
|
2,681
|
0.81
|
%
|
||||||||||
International
|
197
|
0.06
|
%
|
246
|
0.07
|
%
|
||||||||||
7,462
|
2.22
|
%
|
7,417
|
2.24
|
%
|
|||||||||||
Total debt securities
|
295,655
|
87.90
|
%
|
291,516
|
88.14
|
%
|
||||||||||
Equity securities, at market:
|
40,726
|
12.10
|
%
|
39,247
|
11.86
|
%
|
||||||||||
Total investments
|
$
|
336,381
|
100.00
|
%
|
$
|
330,763
|
100.00
|
%
|
Three Months Ended March 31,
|
||||||||||||||||
2015
|
2014
|
|||||||||||||||
Gains
(Losses)
|
Fair Value
at Sale
|
Gains
(Losses)
|
Fair Value
at Sale
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities
|
$
|
515
|
$
|
34,860
|
$
|
135
|
$
|
9,668
|
||||||||
Equity securities
|
1,395
|
3,084
|
1,610
|
4,815
|
||||||||||||
Total realized gains
|
1,910
|
37,944
|
1,745
|
14,483
|
||||||||||||
Debt securities
|
(103
|
)
|
|
15,072
|
(70
|
)
|
3,699
|
|||||||||
Equity securities
|
(103
|
)
|
459
|
(344
|
)
|
1,338
|
||||||||||
Total realized losses
|
(206
|
)
|
15,531
|
(414
|
)
|
5,037
|
||||||||||
Net realized gains on investments
|
$
|
1,704
|
$
|
53,475
|
$
|
1,331
|
$
|
19,520
|
Amortized
Cost
|
Gross
Unrealized
|
Gross
Unrealized
|
Estimated
Fair Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
March 31, 2015
|
||||||||||||||||
Debt Securities - Available-For-Sale:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
58,136
|
$
|
1,466
|
$
|
53
|
$
|
59,549
|
||||||||
Obligations of states and political subdivisions
|
91,125
|
1,102
|
55
|
92,172
|
||||||||||||
Corporate
|
122,736
|
2,396
|
111
|
125,021
|
||||||||||||
International
|
11,340
|
118
|
7
|
11,451
|
||||||||||||
$
|
283,337
|
$
|
5,082
|
$
|
226
|
$
|
288,193
|
|||||||||
Debt Securities - Held-To-Maturity:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
4,564
|
$
|
54
|
$
|
131
|
$
|
4,487
|
||||||||
Corporate
|
2,701
|
52
|
1
|
2,752
|
||||||||||||
International
|
197
|
3
|
-
|
200
|
||||||||||||
$
|
7,462
|
$
|
109
|
$
|
132
|
$
|
7,439
|
|||||||||
Equity securities - common stocks
|
$
|
31,200
|
$
|
10,231
|
$
|
705
|
$
|
40,726
|
||||||||
December 31, 2014
|
||||||||||||||||
Debt Securities - Available-For-Sale:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
61,376
|
$
|
1,022
|
$
|
75
|
$
|
62,323
|
||||||||
Obligations of states and political subdivisions
|
90,728
|
956
|
70
|
91,614
|
||||||||||||
Corporate
|
117,778
|
1,578
|
332
|
119,024
|
||||||||||||
International
|
11,139
|
53
|
54
|
11,138
|
||||||||||||
$
|
281,021
|
$
|
3,609
|
$
|
531
|
$
|
284,099
|
|||||||||
Debt Securities - Held-To-Maturity:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
4,490
|
$
|
41
|
$
|
225
|
$
|
4,306
|
||||||||
Corporate
|
2,681
|
31
|
5
|
2,707
|
||||||||||||
International
|
246
|
1
|
1
|
246
|
||||||||||||
$
|
7,417
|
$
|
73
|
$
|
231
|
$
|
7,259
|
|||||||||
Equity securities - common stocks
|
$
|
29,908
|
$
|
9,836
|
$
|
497
|
$
|
39,247
|
Unrealized Losses
|
Less than 12 months
|
12 months or longer
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Debt securities:
|
||||||||||||
United States government obligations and authorities
|
$
|
54
|
$
|
49
|
$
|
5
|
||||||
Obligations of states and political subdivisions
|
55
|
55
|
-
|
|||||||||
Corporate
|
111
|
68
|
43
|
|||||||||
International
|
5
|
5
|
-
|
|||||||||
225
|
177
|
48
|
||||||||||
Equity securities:
|
||||||||||||
Common stocks
|
706
|
672
|
34
|
|||||||||
Total debt and equity securities
|
$
|
931
|
$
|
849
|
$
|
82
|
Unrealized Losses
|
Less than 12 months
|
12 months or longer
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Debt securities:
|
||||||||||||
United States government obligations and authorities
|
$
|
75
|
$
|
22
|
$
|
53
|
||||||
Obligations of states and political subdivisions
|
70
|
66
|
4
|
|||||||||
Corporate
|
332
|
260
|
72
|
|||||||||
International
|
54
|
54
|
-
|
|||||||||
531
|
402
|
129
|
||||||||||
Equity securities:
|
||||||||||||
Common stocks
|
497
|
461
|
36
|
|||||||||
Total debt and equity securities
|
$
|
1,028
|
$
|
863
|
$
|
165
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||
Amortized
Cost
|
Estimated
Fair Value
|
Amortized
Cost
|
Estimated
Fair Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Due in one year or less
|
$
|
17,357
|
$
|
17,355
|
$
|
16,777
|
$
|
16,797
|
||||||||
Due after one through five years
|
169,008
|
170,974
|
173,236
|
174,273
|
||||||||||||
Due after five through ten years
|
104,439
|
107,274
|
98,404
|
100,259
|
||||||||||||
Due after ten years
|
26
|
33
|
26
|
33
|
||||||||||||
Total
|
$
|
290,830
|
$
|
295,636
|
$
|
288,443
|
$
|
291,362
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Interest on debt securities
|
$
|
1,342
|
$
|
895
|
||||
Dividends on equity securities
|
106
|
111
|
||||||
Interest on cash and cash equivalents
|
98
|
1
|
||||||
Total investment income
|
$
|
1,546
|
$
|
1,007
|
||||
Net realized gains
|
$
|
1,704
|
$
|
1,331
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Net realized gains
|
||||||||
Debt securities
|
$
|
412
|
$
|
65
|
||||
Equity securities
|
1,292
|
1,266
|
||||||
Total
|
$
|
1,704
|
$
|
1,331
|
Unrealized Gains
|
||||||||
March 31, 2015
|
December 31, 2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Net unrealized gains
|
||||||||
Debt securities
|
$
|
4,856
|
$
|
3,078
|
||||
Equity securities
|
9,526
|
9,339
|
||||||
Total
|
$
|
14,382
|
$
|
12,417
|
(6) | Fair Value Disclosure |
As of March 31, 2015
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
39,419
|
$
|
20,130
|
$
|
-
|
$
|
59,549
|
||||||||
Obligations of states and political subdivisions
|
-
|
92,172
|
-
|
92,172
|
||||||||||||
Corporate
|
-
|
125,021
|
-
|
125,021
|
||||||||||||
International
|
-
|
11,451
|
-
|
11,451
|
||||||||||||
39,419
|
248,774
|
-
|
288,193
|
|||||||||||||
Equity securities:
|
||||||||||||||||
Common stocks
|
40,726
|
-
|
-
|
40,726
|
||||||||||||
40,726
|
-
|
-
|
40,726
|
|||||||||||||
Total debt and equity securities
|
$
|
80,145
|
$
|
248,774
|
$
|
-
|
$
|
328,919
|
As of December 31, 2014
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
46,002
|
$
|
16,321
|
$
|
-
|
$
|
62,323
|
||||||||
Obligations of states and political subdivisions
|
-
|
91,614
|
-
|
91,614
|
||||||||||||
Corporate
|
-
|
119,024
|
-
|
119,024
|
||||||||||||
International
|
-
|
11,138
|
-
|
11,138
|
||||||||||||
46,002
|
238,097
|
-
|
284,099
|
|||||||||||||
Equity securities:
|
||||||||||||||||
Common stocks
|
39,247
|
-
|
-
|
39,247
|
||||||||||||
39,247
|
-
|
-
|
39,247
|
|||||||||||||
Total debt and equity securities
|
$
|
85,249
|
$
|
238,097
|
$
|
-
|
$
|
323,346
|
(7) | Reinsurance Agreements |
|
Reinsurer
|
A.M. Best Rating
|
|
|
S&P Rating
|
||
|
|
||||||
UNITED STATES
|
|
||||||
|
American Agricultural Insurance Company
|
A-
|
NR
|
||||
|
American Standard Insurance Company of Wisconsin
|
A
|
NR
|
||||
|
AIG (National Union Fire Insurance Company of Pittsburgh, PA)
|
A
|
A+
|
||||
|
Everest Reinsurance Company
|
A+
|
A+
|
||||
|
Odyssey Reinsurance Company
|
A
|
A-
|
||||
|
QBE Reinsurance Corporation
|
A
|
A+
|
||||
|
RLI Insurance Company
|
A+
|
A+
|
||||
|
Transatlantic Reinsurance Company
|
A
|
A+
|
||||
|
|
||||||
BERMUDA
|
|
||||||
|
ACE Tempest Reinsurance Limited
|
A++
|
AA-
|
||||
|
Allied World Assurance Company, Limited
|
A
|
A
|
||||
|
Arch Reinsurance Limited
|
A+
|
A+
|
||||
|
Argo Reinsurance Limited
|
A
|
NR
|
||||
|
Ariel Reinsurance Bermuda Ltd for and on Behalf of Ariel Syndicate 1910 (ARE)
|
A-
|
A+
|
||||
|
Aspen Bermuda Limited
|
A
|
A
|
||||
|
AXIS Specialty Limited
|
A+
|
A+
|
||||
|
BGS Services (Bermuda) Limited/Lloyds Syndicate 2987
|
A
|
A+
|
||||
|
DaVinci Reinsurance Ltd
|
A
|
AA-
|
||||
|
Endurance Specialty Insurance Limited
|
A
|
A
|
||||
|
Hamilton Re, Limited
|
A-
|
NR
|
||||
|
Hiscox Insurance Company (Bermuda) Limited
|
A
|
NR
|
||||
|
Partner Reinsurance Company Limited
|
A+
|
A+
|
||||
|
Platinum Underwriters Bermuda Limited
|
A
|
A-
|
||||
|
Renaissance Reinsurance, Limited
|
A+
|
AA-
|
||||
|
Securis Re III Limited Bermuda
|
NR
|
*
|
**
|
NR
|
||
|
Securis Re IV Limited Bermuda
|
NR
|
*
|
**
|
NR
|
||
|
Tokio Millennium Re AG, Bermuda Branch
|
A++
|
AA-
|
||||
|
XL RE Limited
|
A
|
A+
|
||||
|
|
||||||
UNITED KINGDOM
|
|
||||||
|
A.F. Beazley Syndicate No. 623 (AFB)
|
A
|
A+
|
||||
|
A.F. Beazley Syndicate No. 2623 (AFB)
|
A
|
A+
|
||||
|
Amlin Syndicate No. 2001 (AML)
|
A
|
A+
|
||||
|
Antares Syndicate No. 1274 (AUL)
|
A
|
A+
|
||||
|
Ariel Syndicate No. 1910 (ARE)
|
A
|
A+
|
||||
|
ARK Syndicate No. 4020 (ARK)
|
A
|
A+
|
||||
|
Ascot Syndicate No. 1414 (ASC)
|
A
|
A+
|
||||
|
Barbican Syndication No. 1955 (BAR)
|
A
|
A+
|
||||
|
Canopius Syndicate No. 958 (CNP)
|
A
|
A+
|
||||
|
Canopius Syndicate No. 4444 (CNP)
|
A
|
A+
|
||||
|
Cathederal Syndicate No. 2010 (MMX)
|
A
|
A+
|
||||
|
Chaucer Syndicate No. 1084 (CSL)
|
A
|
A+
|
||||
|
Dale Underwriting Syndicate No. 1729 (DUW)
|
A
|
A+
|
||||
|
Faraday Syndicate No. 435 (FDY)
|
A
|
A+
|
||||
|
Hiscox Syndicate No. 0033 (HIS)
|
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)
|
A
|
A+
|
||||
|
MAP Underwriting Syndicate No. 2791 (MAP)
|
A
|
A+
|
||||
|
MAP Underwriting Syndicate No. 2791 (Parallel) (MAP)
|
A
|
A+
|
||||
|
Novae Syndicate No. 2007 (NVA)
|
A
|
A+
|
||||
|
S.J.O, Catlin & Others No. 2003 (SJC)
|
A
|
A+
|
||||
|
|
||||||
EUROPE
|
|
||||||
|
Amlin AG, Switzerland, Bermuda Branch
|
A
|
A
|
||||
|
Hannover Rueck SE (obo Pillar Capital Management)
|
NR
|
*
|
**
|
NR
|
||
|
Lansforsakringar Sak Forsakringsaktiebolag (publ)
|
NR
|
A
|
||||
|
SCOR Global P&C SE, Paris, Zurich Branch
|
A
|
A
|
||||
|
|
||||||
ASIA
|
|
||||||
|
China Reinsurance (Group) Corporation
|
A
|
NR
|
||||
|
Qatar Reinsurance Company LLC
|
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
|
A+
|
||||
|
Odyssey Reinsurance Company
|
A
|
A-
|
||||
|
|
||||||
BERMUDA
|
|
||||||
|
ACE Tempest Reinsurance Limited
|
A+
|
AA-
|
||||
|
Allied World Assurance Company Limited, Bermuda
|
A
|
A
|
||||
|
Arch Reinsurance Limited
|
A+
|
A+
|
||||
|
Argo Reinsurance Limited
|
A
|
NR
|
||||
|
Ariel Reinsurance Bermuda Ltd for and on Behalf of Ariel Syndicate 1910 (ARE)
|
A-
|
NR
|
||||
|
DaVinci Reinsurance Ltd
|
A
|
A+
|
||||
|
Endurance Specialty Insurance Limited
|
A
|
A
|
||||
|
JC Re Ltd. (aka Pillar Capital and fka Juniperus & Actua Re Ltd.)
|
NR
|
*
|
**
|
NR
|
||
|
Partner Reinsurance Company Limited
|
A+
|
A+
|
||||
|
Platinum Underwriters Bermuda Limited
|
A
|
A-
|
||||
|
Renaissance Reinsurance Ltd
|
A+
|
AA-
|
||||
|
S.A.C. Re, Ltd.
|
A-
|
NR
|
||||
|
XL Re Limited
|
A
|
A
|
||||
|
|
||||||
UNITED KINGDOM
|
|
||||||
|
A.F. Beazley Syndicate No. 623 (AFB)
|
A
|
A+
|
||||
|
A.F. Beazley Syndicate No. 2623 (AFB)
|
A
|
A+
|
||||
|
Amlin Syndicate No. 2001 (AML)
|
A
|
A+
|
||||
|
Ariel Syndicate No. 1910 (ARE)
|
A
|
A+
|
||||
|
ARK Syndicate No. 3902 (NOA)
|
A
|
A+
|
||||
|
Ascot Syndicate No. 1414 (ASC)
|
A
|
A+
|
||||
|
Barbican Syndication No. 1955 (BAR)
|
A
|
A+
|
||||
|
Canopius Syndicate No. 958 (CNP)
|
A
|
A+
|
||||
|
Canopius Syndicate No. 4444 (CNP)
|
A
|
A+
|
||||
|
Cathederal Syndicate No. 2010 (MMX)
|
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 (MAP)
|
A
|
A+
|
||||
|
MAP Underwriting Syndicate No. 2791 (Parallel) (MAP)
|
A
|
A+
|
||||
|
Novae Syndicate No. 2007 (NVA)
|
A
|
A+
|
||||
|
Pembroke Syndicate No. 4000 (PEM)
|
A
|
A+
|
||||
|
Tokio Marine Kiln Syndicate No. 1880 (TMK)
|
A
|
A+
|
||||
|
|
||||||
EUROPE
|
|
||||||
|
Amlin Bermuda (Branch of Amlin AG)
|
A
|
A
|
||||
|
SCOR Global P&C SE
|
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. |
(8) | Unpaid losses and LAE |
Period Ending
|
||||||||
March 31, 2015
|
December 31, 2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Balance at January 1
|
$
|
78,330
|
$
|
61,016
|
||||
Less reinsurance recoverables
|
(12,534
|
)
|
(2,742
|
)
|
||||
Net balance at January 1
|
$
|
65,796
|
$
|
58,274
|
||||
Incurred related to
|
||||||||
Current year
|
$
|
28,180
|
$
|
79,932
|
||||
Prior years
|
(4,231
|
)
|
1,104
|
|||||
Total incurred
|
$
|
23,949
|
$
|
81,036
|
||||
Paid related to
|
||||||||
Current year
|
$
|
6,908
|
$
|
42,391
|
||||
Prior years
|
11,396
|
31,123
|
||||||
Total paid
|
$
|
18,304
|
$
|
73,514
|
||||
Net balance at period end
|
$
|
71,441
|
$
|
65,796
|
||||
Plus reinsurance recoverables
|
13,034
|
12,534
|
||||||
Balance as of period end
|
$
|
84,475
|
$
|
78,330
|
(9) | Stock Compensation Plans |
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
|
Fair Market
Value at Grant
|
|||||||||||||||||||
Outstanding at January 1, 2013
|
78,500
|
$
|
12.73
|
702,597
|
$
|
5.17
|
-
|
$
|
-
|
|||||||||||||||
Granted
|
-
|
$
|
-
|
-
|
$
|
-
|
250,000
|
$
|
5.54
|
|||||||||||||||
Exercised
|
(500
|
)
|
$
|
8.67
|
(165,577
|
)
|
$
|
7.15
|
-
|
$
|
-
|
|||||||||||||
Cancelled
|
(75,000
|
)
|
$
|
12.92
|
(13,499
|
)
|
$
|
5.41
|
(500
|
)
|
$
|
5.54
|
||||||||||||
Outstanding at January 1, 2014
|
3,000
|
$
|
8.67
|
523,521
|
$
|
4.54
|
249,500
|
$
|
5.54
|
|||||||||||||||
Granted
|
-
|
$
|
-
|
-
|
$
|
-
|
268,648
|
$
|
5.54
|
|||||||||||||||
Exercised
|
(3,000
|
)
|
$
|
8.67
|
(299,735
|
)
|
$
|
5.10
|
(68,988
|
)
|
$
|
-
|
||||||||||||
Cancelled
|
-
|
$
|
-
|
(4,501
|
)
|
$
|
3.49
|
(1,359
|
)
|
$
|
5.54
|
|||||||||||||
Outstanding at January 1, 2015
|
-
|
$
|
8.67
|
219,285
|
$
|
3.79
|
447,801
|
$
|
5.54
|
|||||||||||||||
Granted
|
-
|
$
|
-
|
-
|
$
|
-
|
66,140
|
$
|
28.79
|
|||||||||||||||
Exercised
|
-
|
$
|
-
|
(9,001
|
)
|
$
|
2.98
|
(59,707
|
)
|
$
|
10.47
|
|||||||||||||
Cancelled
|
-
|
$
|
-
|
-
|
$
|
-
|
-
|
$
|
-
|
|||||||||||||||
Outstanding at March 31, 2015
|
-
|
$
|
-
|
210,284
|
$
|
3.83
|
454,234
|
$
|
19.41
|
2002 Plan
|
||||||||
Options Exercisable at:
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
||||||
March 31, 2015
|
153,584
|
$
|
3.83
|
|||||
December 31, 2015
|
56,700
|
$
|
3.83
|
|||||
December 31, 2016
|
-
|
$
|
3.83
|
|||||
December 31, 2017
|
-
|
$
|
3.83
|
|||||
December 31, 2018
|
-
|
$
|
3.83
|
|||||
December 31, 2019
|
-
|
$
|
3.83
|
|||||
Thereafter
|
-
|
$
|
3.83
|
|||||
Total options exercisable
|
210,284
|
· | 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. |
Range of
Exercise Price
|
Outstanding at
March 31, 2015
|
Weighted Average
Contractual
|
Weighted
Average
|
Exercisable at
March 31, 2015
|
||||||||||||||||
2002 Plan
|
$
|
2.45 - $4.40
|
210,284
|
6.41
|
$
|
3.83
|
153,584
|
(10) | Stockholders’ Equity |
(11) | Subsequent Events |
· | Monarch Insurance entered into a Managing General Agent and Claims Administration Agreement (the “Monarch MGA Agreement”) with FNU, a wholly owned subsidiary of the Company, pursuant to which FNU provides underwriting, accounting, reinsurance placement and claims administration services to Monarch. For its services under the Monarch MGA Agreement, FNU will receive 4% of Monarch’s total written annual premium, excluding acquisition expenses payable to agents, for FNU’s managing general agent services; 3.6% of Monarch’s total earned annual premium for FNU’s claims administration services; and a per-policy administrative fee of $25 for each policy underwritten for Monarch. The Company will also receive an annual expense reimbursement for accounting and related services. |
· | Monarch Insurance, Monarch Holding and Monarch Delaware (collectively, the “Monarch Entities”) entered into an Investment Management Agreement (the “Monarch Investment Agreement”) with Crosswinds AUM LLC, a wholly owned subsidiary of Crosswinds (“Crosswinds AUM”), pursuant to which Crosswinds AUM will manage the investment portfolios of the Monarch Entities. The management fee, on an annual basis, is 0.75% of assets under management up to $100 million; 0.50% of assets under management of more than $100 million but less than $200 million; and 0.30% of assets under management of more than $200 million. |
· | Monarch Insurance also entered into a Reinsurance Capacity Right of First Refusal Agreement with TransRe, pursuant to which TransRe has a right of first refusal for all quota share and excess of loss reinsurance that Monarch Insurance deems necessary in its sole discretion for so long as TransRe remains a member of Monarch Delaware or the Monarch Holding debt remains outstanding. Pursuant to this agreement, TransRe has the right to provide, at market rates and terms, a maximum of 15% of any reinsurance coverage obtained by Monarch Delaware in any individual reinsurance contract. |
· | The Limited Liability Company Agreement of Monarch Delaware Holdings LLC dated as of March 17, 2015 (the “Monarch LLC Agreement”) provides that Monarch Delaware is managed by a seven-member Board of Managers, three of whom have been designated by the Company, three of whom have been designated by Crosswinds, and one who will be jointly selected by the Company and Crosswinds. The Company’s designees are Michael H. Braun, the Company’s President and Chief Executive Officer and a director of the Company; Peter J. Prygelski, III, the Company’s Chief Financial Officer and a director of the Company; and Jenifer G. Kimbrough, a director of the Company. Crosswinds’ designees are Colin King, Robert Wolf, and Charles S. Duncker. The Company and Crosswinds have agreed to identify the seventh member of the Board of Managers within six months. |
· | The LLC Agreement provides that certain material transactions must be approved by a supermajority of the managers, including a termination, amendment or non-renewal of the Monarch MGA Agreement or the Monarch Investment Agreement. The Company will be entitled to receive a termination fee equal to the aggregate fees paid under the Monarch MGA Agreement for the 12 calendar months prior to the date of termination, if the Monarch MGA Agreement is terminated other than for cause. The Monarch LLC Agreement also provides the members with certain redemption, tag-along, drag-along and buy-sell rights. In addition, the Monarch LLC Agreement provides the Company and Crosswinds with the right, for 24 months from the closing date, to participate in certain other transactions relating to the formation or acquisition of homeowners’ property and casualty insurers undertaken by the other. |
· | Monarch Insurance entered into a Managing General Agent and Claims Administration Agreement (the “Monarch MGA Agreement”) with FNU, a wholly owned subsidiary of the Company, pursuant to which FNU provides underwriting, accounting, reinsurance placement and claims administration services to Monarch. For its services under the Monarch MGA Agreement, FNU will receive 4% of Monarch’s total written annual premium, excluding acquisition expenses payable to agents, for FNU’s managing general agent services; 3.6% of Monarch’s total earned annual premium for FNU’s claims administration services; and a per-policy administrative fee of $25 for each policy underwritten for Monarch. The Company will also receive an annual expense reimbursement for accounting and related services. |
· | Monarch Insurance, Monarch Holding and Monarch Delaware (collectively, the “Monarch Entities”) entered into an Investment Management Agreement (the “Monarch Investment Agreement”) with Crosswinds AUM LLC, a wholly owned subsidiary of Crosswinds (“Crosswinds AUM”), pursuant to which Crosswinds AUM will manage the investment portfolios of the Monarch Entities. The management fee, on an annual basis, is 0.75% of assets under management up to $100 million; 0.50% of assets under management of more than $100 million but less than $200 million; and 0.30% of assets under management of more than $200 million. |
· | Monarch Insurance also entered into a Reinsurance Capacity Right of First Refusal Agreement with TransRe, pursuant to which TransRe has a right of first refusal for all quota share and excess of loss reinsurance that Monarch Insurance deems necessary in its sole discretion for so long as TransRe remains a member of Monarch Delaware or the Monarch Holding debt remains outstanding. Pursuant to this agreement, TransRe has the right to provide, at market rates and terms, a maximum of 15% of any reinsurance coverage obtained by Monarch Delaware in any individual reinsurance contract. |
· | The Limited Liability Company Agreement of Monarch Delaware Holdings LLC dated as of March 17, 2015 (the “Monarch LLC Agreement”) provides that Monarch Delaware is managed by a seven-member Board of Managers, three of whom have been designated by the Company, three of whom have been designated by Crosswinds, and one who will be jointly selected by the Company and Crosswinds. The Company’s designees are Michael H. Braun, the Company’s President and Chief Executive Officer and a director of the Company; Peter J. Prygelski, III, the Company’s Chief Financial Officer and a director of the Company; and Jenifer G. Kimbrough, a director of the Company. Crosswinds’ designees are Colin King, Robert Wolf, and Charles S. Duncker. The Company and Crosswinds have agreed to identify the seventh member of the Board of Managers within six months. |
· | The LLC Agreement provides that certain material transactions must be approved by a supermajority of the managers, including a termination, amendment or non-renewal of the Monarch MGA Agreement or the Monarch Investment Agreement. The Company will be entitled to receive a termination fee equal to the aggregate fees paid under the Monarch MGA Agreement for the 12 calendar months prior to the date of termination, if the Monarch MGA Agreement is terminated other than for cause. The Monarch LLC Agreement also provides the members with certain redemption, tag-along, drag-along and buy-sell rights. In addition, the Monarch LLC Agreement provides the Company and Crosswinds with the right, for 24 months from the closing date, to participate in certain other transactions relating to the formation or acquisition of homeowners’ property and casualty insurers undertaken by the other. |
· | 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. |
Unrealized Gains (Losses)
|
||||||||
March 31, 2015
|
December 31, 2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Debt securities:
|
||||||||
United States government obligations and authorities
|
$
|
1,413
|
$
|
945
|
||||
Obligations of states and political subdivisions
|
1,047
|
886
|
||||||
Corporate
|
2,284
|
1,249
|
||||||
International
|
111
|
(1
|
)
|
|||||
4,855
|
3,079
|
|||||||
Equity securities:
|
||||||||
Common stocks
|
9,527
|
9,338
|
||||||
Total debt and equity securities
|
$
|
14,382
|
$
|
12,417
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||
Carrying
Amount
|
Percent
of Total
|
Carrying
Amount
|
Percent
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities, at market:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
59,551
|
17.70
|
%
|
$
|
62,323
|
18.84
|
%
|
||||||||
Obligations of states and political subdivisions
|
92,172
|
27.40
|
%
|
91,614
|
27.70
|
%
|
||||||||||
Corporate
|
125,020
|
37.18
|
%
|
119,024
|
35.99
|
%
|
||||||||||
International
|
11,450
|
3.40
|
%
|
11,138
|
3.37
|
%
|
||||||||||
288,193
|
85.68
|
%
|
284,099
|
85.90
|
%
|
|||||||||||
Debt securities, at amortized cost:
|
||||||||||||||||
United States government obligations and authorities
|
4,564
|
1.36
|
%
|
4,490
|
1.36
|
%
|
||||||||||
Corporate
|
2,701
|
0.80
|
%
|
2,681
|
0.81
|
%
|
||||||||||
International
|
197
|
0.06
|
%
|
246
|
0.07
|
%
|
||||||||||
7,462
|
2.22
|
%
|
7,417
|
2.24
|
%
|
|||||||||||
Total debt securities
|
295,655
|
87.90
|
%
|
291,516
|
88.14
|
%
|
||||||||||
Equity securities, at market:
|
40,726
|
12.10
|
%
|
39,247
|
11.86
|
%
|
||||||||||
Total investments
|
$
|
336,381
|
100.00
|
%
|
$
|
330,763
|
100.00
|
%
|
March 31, 2015
|
December 31, 2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Accrued interest income receivable
|
$
|
2,559
|
$
|
2,600
|
||||
Commission receivable
|
3,454
|
2,077
|
||||||
Deposits
|
308
|
281
|
||||||
Prepaid expenses
|
1,318
|
1,496
|
||||||
Receivable for investments sold
|
-
|
31
|
||||||
Other
|
626
|
746
|
||||||
Total
|
$
|
8,265
|
$
|
7,231
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars in Thousands)
|
(Dollars in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$
|
15,416
|
$
|
38,604
|
$
|
54,020
|
$
|
14,223
|
$
|
35,192
|
$
|
49,415
|
||||||||||||
Commercial General Liability
|
5,803
|
12,487
|
18,290
|
5,646
|
12,505
|
18,151
|
||||||||||||||||||
Automobile
|
4,147
|
8,018
|
12,165
|
3,672
|
7,092
|
10,764
|
||||||||||||||||||
Total
|
$
|
25,366
|
$
|
59,109
|
$
|
84,475
|
$
|
23,541
|
$
|
54,789
|
$
|
78,330
|
Three Months Ended March 31,
|
||||||||||||||||
2015
|
2014
|
|||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Homeowners'
|
$
|
97,778
|
91.64
|
%
|
$
|
73,980
|
91.22
|
%
|
||||||||
Commercial General Liability
|
3,970
|
3.72
|
%
|
3,144
|
3.88
|
%
|
||||||||||
Federal Flood
|
1,492
|
1.40
|
%
|
1,518
|
1.87
|
%
|
||||||||||
Automobile
|
3,462
|
3.24
|
%
|
2,460
|
3.03
|
%
|
||||||||||
Gross written premiums
|
$
|
106,702
|
100.00
|
%
|
$
|
81,102
|
100.00
|
%
|
Three Months Ended March 31,
|
||||||||||||||||
2015
|
2014
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Homeowners'
|
$
|
41,034
|
91.62
|
%
|
$
|
40,926
|
93.01
|
%
|
||||||||
Commercial General Liability
|
3,001
|
6.70
|
%
|
2,453
|
5.57
|
%
|
||||||||||
Automobile
|
751
|
1.68
|
%
|
625
|
1.42
|
%
|
||||||||||
Net premiums earned
|
$
|
44,786
|
100.00
|
%
|
$
|
44,004
|
100.00
|
%
|
Three Months Ended March 31,
|
||||||||
2015
|
2014
|
|||||||
(Dollars in Thousands)
|
||||||||
Realized gains:
|
||||||||
Debt securities
|
$
|
515
|
$
|
135
|
||||
Equity securities
|
1,395
|
1,610
|
||||||
Total realized gains
|
1,910
|
1,745
|
||||||
Realized losses:
|
||||||||
Debt securities
|
(103
|
)
|
(70
|
)
|
||||
Equity securities
|
(103
|
)
|
(344
|
)
|
||||
Total realized losses
|
(206
|
)
|
(414
|
)
|
||||
Net realized gains on investments
|
$
|
1,704
|
$
|
1,331
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars in Thousands)
|
(Dollars in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$
|
15,416
|
$
|
38,604
|
$
|
54,020
|
$
|
14,223
|
$
|
35,192
|
$
|
49,415
|
||||||||||||
Commercial General Liability
|
5,803
|
12,487
|
18,290
|
5,646
|
12,505
|
18,151
|
||||||||||||||||||
Automobile
|
4,147
|
8,018
|
12,165
|
3,672
|
7,092
|
10,764
|
||||||||||||||||||
Total
|
$
|
25,366
|
$
|
59,109
|
$
|
84,475
|
$
|
23,541
|
$
|
54,789
|
$
|
78,330
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||
Carrying
Amount
|
Percent
of Total
|
Carrying
Amount
|
Percent
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt securities, at market:
|
||||||||||||||||
United States government obligations and authorities
|
$
|
59,551
|
17.70
|
%
|
$
|
62,323
|
18.84
|
%
|
||||||||
Obligations of states and political subdivisions
|
92,172
|
27.40
|
%
|
91,614
|
27.70
|
%
|
||||||||||
Corporate
|
125,020
|
37.18
|
%
|
119,024
|
35.99
|
%
|
||||||||||
International
|
11,450
|
3.40
|
%
|
11,138
|
3.37
|
%
|
||||||||||
288,193
|
85.68
|
%
|
284,099
|
85.90
|
%
|
|||||||||||
Debt securities, at amortized cost:
|
||||||||||||||||
United States government obligations and authorities
|
4,564
|
1.36
|
%
|
4,490
|
1.36
|
%
|
||||||||||
Corporate
|
2,701
|
0.80
|
%
|
2,681
|
0.81
|
%
|
||||||||||
International
|
197
|
0.06
|
%
|
246
|
0.07
|
%
|
||||||||||
7,462
|
2.22
|
%
|
7,417
|
2.24
|
%
|
|||||||||||
Total debt securities
|
295,655
|
87.90
|
%
|
291,516
|
88.14
|
%
|
||||||||||
Equity securities, at market:
|
40,726
|
12.10
|
%
|
39,247
|
11.86
|
%
|
||||||||||
Total investments
|
$
|
336,381
|
100.00
|
%
|
$
|
330,763
|
100.00
|
%
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||
Carrying
Amount
|
Percent
of Total
|
Carrying
Amount
|
Percent
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
AAA
|
$
|
33,828
|
11.45
|
%
|
$
|
40,119
|
13.76
|
%
|
||||||||
AA
|
123,529
|
41.78
|
%
|
125,385
|
43.01
|
%
|
||||||||||
A
|
75,162
|
25.42
|
%
|
67,818
|
23.26
|
%
|
||||||||||
BBB
|
62,812
|
21.24
|
%
|
58,172
|
19.96
|
%
|
||||||||||
Not rated
|
324
|
0.11
|
%
|
22
|
0.01
|
%
|
||||||||||
$
|
295,655
|
100.00
|
%
|
$
|
291,516
|
100.00
|
%
|
March 31, 2015
|
December 31, 2014
|
|||||||||||||||
Carrying
Amount
|
Percent
of Total
|
Carrying
Amount
|
Percent
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Matures In:
|
||||||||||||||||
One year or less
|
$
|
17,343
|
5.87
|
%
|
$
|
16,796
|
5.76
|
%
|
||||||||
One year to five years
|
170,942
|
57.82
|
%
|
174,260
|
59.78
|
%
|
||||||||||
Five years to 10 years
|
107,337
|
36.30
|
%
|
100,427
|
34.45
|
%
|
||||||||||
More than 10 years
|
33
|
0.01
|
%
|
33
|
0.01
|
%
|
||||||||||
Total debt securities
|
$
|
295,655
|
100.00
|
%
|
$
|
291,516
|
100.00
|
%
|
2015
|
2016
|
2017
|
2018
|
2019
|
Thereafter
|
Total
|
Carrying
Amount
|
|||||||||||||||||||||||||
Principal amount by expected maturity:
|
||||||||||||||||||||||||||||||||
United States government obligations and authorities
|
$
|
196
|
$
|
2,189
|
$
|
4,033
|
$
|
4,640
|
$
|
6,860
|
$
|
24,324
|
$
|
42,242
|
$
|
43,714
|
||||||||||||||||
Obligations of states and political subdivisions
|
3,935
|
9,380
|
17,730
|
9,805
|
13,140
|
27,895
|
81,885
|
92,172
|
||||||||||||||||||||||||
Corporate securities
|
3,320
|
16,109
|
19,889
|
18,527
|
14,837
|
38,050
|
110,732
|
118,274
|
||||||||||||||||||||||||
International securities
|
491
|
2,087
|
2,822
|
1,955
|
1,315
|
2,617
|
11,287
|
11,648
|
||||||||||||||||||||||||
Collateralized mortgage obligations
|
1,279
|
3,696
|
3,772
|
2,654
|
4,396
|
12,260
|
28,057
|
29,847
|
||||||||||||||||||||||||
Equity securities, at market
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
40,726
|
||||||||||||||||||||||||
All investments
|
$
|
9,221
|
$
|
33,461
|
$
|
48,246
|
$
|
37,581
|
$
|
40,548
|
$
|
105,146
|
$
|
274,203
|
$
|
336,381
|
||||||||||||||||
Weighted average interest rate by expected maturity:
|
||||||||||||||||||||||||||||||||
United States government obligations and authorities
|
0.38
|
%
|
1.87
|
%
|
0.70
|
%
|
1.31
|
%
|
1.70
|
%
|
2.31
|
%
|
1.92
|
%
|
||||||||||||||||||
Obligations of states and political subdivisions
|
4.27
|
%
|
4.72
|
%
|
4.57
|
%
|
4.99
|
%
|
5.04
|
%
|
4.84
|
%
|
4.79
|
%
|
||||||||||||||||||
Corporate securities
|
4.07
|
%
|
4.06
|
%
|
3.53
|
%
|
4.52
|
%
|
4.62
|
%
|
4.18
|
%
|
4.16
|
%
|
||||||||||||||||||
International securities
|
0.74
|
%
|
2.15
|
%
|
2.20
|
%
|
3.15
|
%
|
2.10
|
%
|
3.68
|
%
|
2.62
|
%
|
||||||||||||||||||
Collateralized mortgage obligations
|
5.28
|
%
|
5.56
|
%
|
3.93
|
%
|
4.03
|
%
|
4.02
|
%
|
3.85
|
%
|
4.19
|
%
|
||||||||||||||||||
Equity securities, at market
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
0.00
|
%
|
||||||||||||||||||
All investments
|
4.07
|
%
|
4.15
|
%
|
3.63
|
%
|
4.14
|
%
|
4.12
|
%
|
3.87
|
%
|
3.94
|
%
|
10.1
|
Managing General Agent and Claims Administration Agreement dated as of March 17, 2015 between Monarch National Insurance Company and FedNat Underwriters, Inc.*
|
|
10.2
|
Limited Liability Company Agreement of Monarch Delaware Holdings LLC dated as of March 17, 2015*
|
|
10.3
|
Amendment to Employment Agreement and Restrictive Covenant Agreement effective as of March 17, 2015 between Federated National Holding Company and Michael H. Braun*
|
|
10.4
|
Non-Competition, Non-Disclosure and Non-Solicitation Agreement effective as of March 17, 2015 between Monarch Delaware Holdings LLC and Michael H. Braun*
|
|
10.5
|
Amendment No. 1 to the Amended and Restated Non-Competition, Non-Disclosure and Non-Solicitation Agreement effective as of March 17, 2015 between Federated National Holding Company and Peter J. Prygelski, III*
|
|
10.6
|
Second Amendment to Insurance Agency Master Agreement dated January 1, 2015 between Federated National Underwriters, Inc. and Ivantage Select Agency, Inc.
*
|
|
10.7
|
Consulting Agreement dated as of May 6, 2015 between Bruce F. Simberg and Federated National Holding Company
*
|
|
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. **
|
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)
|
Managing General Agent and Claims Administration Agreement dated as of March 17, 2015 between Monarch National Insurance Company and FedNat Underwriters, Inc.*
|
||
Limited Liability Company Agreement of Monarch Delaware Holdings LLC dated as of March 17, 2015*
|
||
Amendment to Employment Agreement and Restrictive Covenant Agreement effective as of March 17, 2015 between Federated National Holding Company and Michael H. Braun*
|
||
Non-Competition, Non-Disclosure and Non-Solicitation Agreement effective as of March 17, 2015 between Monarch Delaware Holdings LLC and Michael H. Braun*
|
||
Amendment No. 1 to the Amended and Restated Non-Competition, Non-Disclosure and Non-Solicitation Agreement effective as of March 17, 2015 between Federated National Holding Company and Peter J. Prygelski, III*
|
||
Second Amendment to Insurance Agency Master Agreement dated January 1, 2015 between Federated National Underwriters, Inc. and Ivantage Select Agency, Inc.
*
|
||
Consulting Agreement dated as of May 6, 2015 between Bruce F. Simberg and Federated National Holding Company
*
|
||
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
*
|
||
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
*
|
||
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
*
|
||
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. **
|
a. | Negotiate, cede, purchase, or bind any reinsurance or retrocession, including but not limited to facultative or treaty, on behalf of the Company without prior approval by the Company. |
b. | Commit the Company to participate in insurance or reinsurance syndicates. |
c. | Appoint any Agent or producer without assuring that such Agent or producer is lawfully licensed to transact the type of insurance for which such Agent is appointed. |
d. | Collect any payment from a reinsurer without the Company's prior approval. If prior approval is given, a report must be promptly forwarded to the Company. |
e. | Without the prior approval of the Company, pay or commit the Company to pay a claim over a specified amount, net of reinsurance, which exceeds one (1%) percent of the Company’s policyholder’s surplus as of December 31 of the last completed calendar year. |
a. | Printing of proposals, policy jackets, contracts of insurance, endorsements, cancellation notices, premium notices, records and reports, and all other documents required to fulfill the obligations of MGA under this Agreement. |
b. | Advertising and public relations expenses authorized by MGA. The Company's prior written approval shall be required with respect to any advertising or public relations material that contains the Company's name or logo. |
c. | MGA's general office expenses, including rent, salaries, utilities, data processing performed by MGA, transportation, furniture, fixtures, equipment, supplies, telephone, postage, and other general overhead expenses. |
a. | the obligation to deposit, report and remit premiums to the Company; |
b. | the obligation to remit return premiums to the insureds when due; |
c. | the obligation to process all policies, endorsements and notices of cancellation and/or non-renewal pursuant to the Company's Underwriting Guidelines; |
d. | the obligation to observe and comply with Underwriting Guidelines and sub-agent appointment procedures; |
e. | the obligation to observe and comply with all statutes, regulations, rules and rates; |
f. | the obligation to comply with the requirements of Article III hereinabove; and |
g. | the obligation to administer and pay claims. |
a. | Utilize and enter the Company claims data into the claims administrative system as directed by the Company in a timely manner. |
b. | Dedicate sufficient and appropriate human, equipment and computer resources to provide the Company with the Claims Services enumerated in Schedule III to this Agreement. The Claims Services shall use only licensed adjusters (as defined in Chapter 626, Part VI, F.S. or the other laws and regulations of such other states in which the Company is licensed and authorized to transact insurance and does transact business (if applicable)), and licensed private investigators (as described in Chapter 493, F.S. or the laws and regulations of such other states in which the Company is licensed and authorized to transact insurance and does transact business (if applicable)), or catastrophic adjusters, where applicable, (as defined in Section 626.859, F.S. or the laws and regulations of such other states in which the Company is licensed and authorized and does transact insurance (if applicable)), and such adjusters and investigators shall comply with and conform to the Florida Statutes, and any applicable rules, orders, and written interpretations issued by the Department or such other laws and regulations of such other states in which the Company is licensed and authorized and does transact insurance. |
c.
|
Investigate, evaluate, handle, adjust and settle each claim assigned MGA within the authority established for claims as set forth in Schedule III, which authority is subject to termination for cause or upon termination of this agreement in accordance with Section 626.7451(7(d), F.S. or such other laws and regulations of such other states in which the Company is licensed and authorized and does transact insurance (if applicable).
|
d.
|
Designate an employee to act as liaison with the Company to facilitate the provision of the Claims Services.
|
e.
|
Maintain the confidentiality of data or information which is the property of the Company and which is accessible by MGA in the implementation and performance of the Claims Services.
|
f.
|
Maintain complete, accurate and orderly claims books, files, records and accounts of all transactions in accordance with GAAP and SAP, which files shall be the joint property of the Company and MGA. The data in any electronic claims files maintained by MGA shall be transmitted to the Company in a timely manner as reasonably directed by the Company.
|
g.
|
Maintain during the term of this Agreement copies of all claims and correspondence related to the claims for a period of six (6) years after the date of closure of such claim. MGA shall not destroy these copies without the written permission of the Company. MGA may, with permission from Company, use magnetic, optical, and other types of technology to store such data. At the end of such six (6) year period relevant to any claim, the Company shall authorize MGA to either (a) destroy the closed file or (b) return such file to the Company at the Company’s expense. Upon an order of liquidation of the Company, the claims files shall become the sole property of the Company or its estate once MGA has been paid for the services rendered. MGA shall have reasonable access to and the right to copy all files, books and records on a timely basis.
|
h.
|
MGA shall adjust and handle through completion all claims still open upon termination or cancellation of this Agreement for an agreed upon fee per claim. The Company shall continue to be responsible for the payment and reimbursement of expenses for such claims as provided in this Article VII. Notwithstanding the foregoing, any settlement authority granted to MGA may be terminated for cause upon the Company’s written notice to MGA or upon termination of this Agreement. The Company may suspend MGA’s settlement authority during the pendency of any dispute regarding the cause for termination.
|
i.
|
MGA agrees that all claims occurring during the Term of this Agreement will be reported to the Company and will be assigned to properly licensed persons.
|
j.
|
MGA agrees that Notice shall be sent by MGA to the Company as soon as it becomes known that a claim:
|
a.
|
Exceeds the limit set by the insurer;
|
b.
|
Involves a coverage dispute;
|
c.
|
Exceeds the managing general agent's claims settlement authority;
|
d.
|
Is open for more than 6 months; or
|
e.
|
Is closed by payment of an amount set by the Department or an amount set by the insurer, whichever is less;
|
a.
|
The Company agrees that all claims occurring during the Term of, and under, this Agreement will be reported and assigned to MGA, unless the Company otherwise notifies MGA. The Company will provide all information, in its possession, relevant to particular claims assigned to MGA in order for MGA to fulfill its duties and obligations as set out in Schedule III. MGA shall notify the Company, in writing, should the Company fail to provide any relevant information requested by MGA regarding any specific claim.
|
b.
|
The Company shall appoint an individual with sufficient authority within the Company’s organization to facilitate MGA’s performance of the Claims Services enumerated in Schedule III.
|
c.
|
The Company and MGA acknowledge and agree that no claims payment and settlement of One Hundred Thousand Dollars ($100,000) or greater may be effected by MGA without the Company’s prior written consent.
|
d.
|
MGA shall provide to the Company at no cost to the Company access to the policy or claims administrator system of MGA on a twenty-four (24) hours a day, seven (7) days a week basis.
|
a.
|
The Company agrees to pay Service Fees and Rates as specified in Schedule III A through Schedule III D of this Agreement. Schedule III A shall govern the Service Fees and Rates payable to MGA by the Company on all new and renewal business written by the Company. Schedule III B shall govern the Services Fees and Rates payable to MGA by the Company for subrogation and salvage activities. Schedule III C shall govern the Services Fees and Rates payable to MGA by the Company under those special circumstances as agreed to in writing by the parties. Schedule III D shall govern the Services Fees and Rates payable to MGA by the Company for catastrophic management services.
|
b.
|
The Service Fees and Rates may increase or decrease by mutual written agreement, if changes in the Claims Services mutually agreed to in writing substantially alter the servicing personnel, equipment, or result in the servicing being done on a different system.
|
c.
|
The Company agrees to pay all tariffs and taxes that are now or may become applicable to the Claims Services rendered.
|
d.
|
Service Fees and Rates for Claims Services will be due and payable fifteen (15) days after the close of the month in which Claims Services are performed in amounts pursuant to Schedules III A through III D attached to this Agreement.
|
e.
|
MGA and the Company will renegotiate, in good faith, the Claims Services Fees in the event of statutory, regulatory, or judicial changes that require additional activities not contemplated at the inception of this Agreement. Should the parties be unable to reach an agreement within thirty (30) days of such changes, such disagreement will be resolved by binding arbitration in accordance with Article IX of this Agreement.
|
a.
|
Reasonable out-of-pocket attorney’s fees and disbursements incurred in connection with the determination of coverage and/or the adjustment, defense, negotiation or settlement of any Claim; reasonable out-of-pocket attorney’s fees incurred for representation at depositions, hearings, pretrial conferences and/or trials;
|
b.
|
Costs incurred in handling any Alternative Dispute resolution proceeding (“ADR”), legal actions, including trials or appeals, or in pursuing any declaratory judgment action, including deposition fees, cost of appeal bonds, court reporter or stenographic service fees, filing fees, and other court costs, fees and expenses, transcript or printing costs and all discovery expenses; fees for service of process; fees for witnesses’ testimony, opinions, or attendance at hearings or trial;
|
c.
|
Statutory fines or penalties; pre- and post-judgment interest paid as a result of litigation, unless legal requirements define such interest as indemnity payments;
|
d.
|
Subcontractors fees and travel expenses, including independent adjusters, automobile and property appraisers, to the extent that same are incurred in the adjustment, negotiation, settlement or defense of any Claim (excluding MGA’s employees);
|
e.
|
Experts’ fees including reconstruction experts, engineers, cause and origin reports, photographers, accountants, economists, metallurgists, cartographers, architects, hand-writing experts, physicians, appraisers and other natural and physical science experts, plus the costs associated with preparation of expert reports, depositions, and testimony;
|
f.
|
Fees for surveillance, undercover operative and detective services or any other investigations;
|
g.
|
Costs for medical examinations, or autopsies, including diagnostic services, and related transportation costs, fees for medical reports and rehabilitation evaluations;
|
h.
|
Costs for any public records, medical records, credit bureau reports, and other like reports;
|
i.
|
Costs and expenses incurred in pursuit of the rights of contribution, indemnification or subrogation of the Company and/or its insured, including reasonable out-of-pocket attorney and collection agency fees and/or expenses;
|
j.
|
Medical or vocational rehabilitation expenses, and all other medical cost containment services, including, but not limited to, utilization review, pre-audit admission authorization, hospital bill audit or adjudication, provider bill audit or adjudication, and review of medical case management;
|
k.
|
Extraordinary travel and related expenses incurred by MGA at the express written request and approval of the Board of Directors of the Company, which are not otherwise payable under this Agreement; and
|
l.
|
With respect to MGA’s determination that an expense(s) incurred pursuant to this Agreement is an Allocated Loss Adjustment Expense, MGA makes no representation or warranty and assumes no responsibility that such determination (i) is in compliance with or meets the requirements of any statistical plan filing, statutory, regulatory, or insurance industry reporting scheme or the definition of the Allocated Loss Adjustment Expense thereunder; (ii) is or could be characterized as payment of loss or indemnity; or (iii) is or is not subject to insurance or reinsurance coverage or limits. The Company agrees that it is responsible for making all such judgments and for complying with any and all such requirements.
|
a.
|
In providing the Claims Services hereunder, MGA shall have a duty to act with a reasonable due care and caution, in good faith, and in a prudent manner. MGA shall be liable to the Company for any loss or damage sustained by the Company as a result of, or related in whole or part to, the bad faith, gross negligence or other intentional misconduct on the part of MGA, or its officers, directors, employees or agents.
|
b.
|
MGA agrees to indemnify, defend and hold harmless the Company, its shareholder, officers, directors, employees, agents, designees and affiliates and any of such affiliates’ officers, directors, employees, agents and designees (collectively “MGA-Indemnified Parties”), from and against any and all claims, causes of action, liabilities, liens, fines, penalties, demands, costs, fees, expenses (including reasonable attorney’s fees), suits, judgments, adjudications and losses of whatever kind or nature incurred by, or claimed against, any of the MGA-Indemnified Parties by reason of any bad faith, negligence, or other misconduct by MGA, or any of its officers, directors, employees or agents, or by reason of any breach of this Agreement by MGA.
|
c.
|
MGA shall have no indemnity obligation under this Agreement for any act or omission of MGA taken or omitted to be taken at the express direction of the Company.
|
d.
|
All indemnity obligations of MGA under this Agreement shall survive the termination or expiration of this Agreement.
|
e.
|
MGA warrants that it now has and shall maintain during the term of this Agreement for the protection and benefit of the Company and MGA liability insurance coverage and errors and omissions coverage in an amount of not less than One Million Dollars ($1,000,000) for any one event and in an amount of not less than Two Million Dollars ($2,000,000) in the aggregate. Such coverages shall be in a form and with a company acceptable to the Company and proof of such coverages shall be provided to the Company upon request.
|
a.
|
Automatically and immediately at the written election of the Company, if any public authority cancels or declines to renew any of the licenses of MGA necessary to fulfill the terms of this Agreement.
|
b.
|
Automatically and immediately in the event of a transfer, sale or pledge of the majority of the stock or a substantial portion of the assets of MGA, unless this Agreement is assigned with the express written consent of the Company, or unless the pledge of stock is to a federal or state charted bank to secure loans from the bank to MGA, provided in the event of such permitted pledge that this Agreement shall terminate if the pledged stock is foreclosed upon or otherwise acquired by the pledgee.
|
c.
|
At the election of the Company upon MGA's material violation of any provision of this Agreement; provided, however, that MGA will be allowed thirty (30) days, after written notice, to cure any non-monetary breach or default.
|
d.
|
Immediately, at the election of the Company for any failure by MGA to comply with the provisions of Section 6.3 a. or b.
|
e.
|
Sixty (60) days after delivery of written notice to terminate to MGA at the election of the Company for any reason.
|
f.
|
Sixty (60) days after any Change of Control. For purposes of this Agreement, a “Change of Control” means, with respect to the Company, (i) the sale of all or substantially all of the Company’s assets, (ii) the acquisition of a beneficial ownership interest of more than fifty percent (50%) of the outstanding voting equity interests of the Company or of Monarch National Holding Company by any person (except FNHC and Crosswinds and their respective affiliates in the case of a holding company affiliate transaction in which the ultimate direct or indirect beneficial ownership remains unchanged), or (iii) the acquisition of a beneficial ownership interest of twenty percent (20%) of the outstanding voting equity interests of FNIC or Federated National Holding Company (“FNHC”) by any person (other than any existing holder of voting equity interests of FNIC or FNHC, including Crosswinds and its affiliates) engaged in, or whose affiliate is engaged in, the business of providing property and casualty insurance in the United States of America.
|
a. | Except as set forth in Section 7.2.h. herein, the obligations of MGA and the Company under this Agreement shall be discharged promptly; |
b. | No party shall have a claim upon the other for loss of prospective profit or damage to the business arising therefrom; and |
c. | All records pertaining to the Policies shall remain the property of the Company. MGA shall be entitled to retain copies of any such records. This provision shall survive termination of this Agreement. |
a. | The Company shall, concurrent with its notice of termination or within thirty (30) days of MGA's notice of termination, notify MGA of whether the Company intends to have MGA service the Policies through their run-off, or whether it intends to manage the run-off itself. Except as set forth in Section 7.2.h. herein, MGA's compensation in either event is set forth in Schedule II to this Agreement. For purposes of this Agreement, the term "run-off" shall mean confirming coverage under the Polices to claims adjusters, administering the in-force Policies and any required renewals and endorsement thereof, providing reports to the Company as elsewhere required by this Agreement, paying premium to the Company and return premium to the insureds, collecting all sums due from Agents, including return commissions, and such other activities of MGA specifically required by this Agreement. |
b. | MGA shall upon demand return to the Company any Policies, forms or other supplies imprinted with the Company's name regardless of who incurred the cost for same, or any Policies, forms or other supplies furnished to MGA by the Company, with the exception of any forms which in MGA's reasonable opinion are required to complete an orderly run-off of operations; but any forms so retained by MGA will be promptly returned to the Company upon completion of run-off operations. Following termination of this Agreement, neither FNHC nor any affiliate of FNHC may use the Company’s name in connection with any advertisement, circular, pamphlet or other publication related to insurance products. |
c. | In the event this Agreement terminates and/or MGA refuses or is unable to administer and run-off business produced under this Agreement, then in that event MGA shall immediately provide the Company with an electronic back-up of all programs and data libraries, including updated source code and data files, used in the production and administration of business hereunder (the "Data"). The Company agrees that it shall utilize the Data solely for the purpose of administering and running off the business produced hereunder. |
d. | MGA hereby grants, at no cost to the Company, a limited license to the Company to use MGA's software in connection with the administration and run-off of the business produced hereunder. MGA shall deliver the software, together with the source and object code for the software, as well as all available related manuals, immediately upon delivery of the Data to the Company as provided in the preceding Section. |
e. | In the event that the Company elects to manage the run-off itself or through a third party, MGA will reasonably cooperate with the transfer of its administrative duties, including by returning originals (or copies to the extent originals are unavailable despite best efforts) of all records to the Company. |
For MGA:
|
FedNat Underwriters, Inc.
14050 NW 14
th
Street, Suite 180
Sunrise, FL 33323
|
For the Company:
|
Monarch National Insurance Company
14050 NW 14
th
Street, Suite 180
Sunrise, FL 33323
|
With a copy to:
|
Monarch National Holding Company
14050 NW 14
th
Street, Suite 180
Sunrise, FL 33323
|
And:
|
Dechert LLP
US Bank Tower
633 West 5
th
Street, 37
th
Floor
Los Angeles, CA 90071
|
And:
|
Broad and Cassel
7777 Glades Road, Suite 300
Boca Raton, FL 33434
|
FEDNAT UNDERWRITERS, INC.
|
|||||
BY: |
/s/ James G. Jennings, III
|
Date: |
March 17, 2015
|
||
Name: |
James G. Jennings, III
|
||||
Its: |
President
|
||||
MONARCH NATIONAL INSURANCE COMPANY
|
|||||
BY: |
/s/ Michael H. Braun
|
Date: |
March 17, 2015
|
||
Name: |
Michael H. Braun
|
||||
Its: |
President
|
A.
|
SERVICES
|
B.
|
LOCATION OF PROVISION OF SERVICES
:
|
Claim Range
|
Fee
|
|||
Erroneous Assignment
|
$
|
50.00
|
||
Claim Withdrawn
|
$
|
50.00
|
||
Claim Closed Without Payment
|
$
|
225.00
|
||
Re-opens (no additional loss payments)
|
T&E (max $225)
|
|||
Re-opens (with additional loss payment)
|
Gross amount of written
|
$
|
01 - 1,000
|
$
|
325.00
|
|||
$
|
1,000.01 - $2,500
|
$
|
450.00
|
|||
$
|
2,500.01 - $5,000
|
$
|
525.00
|
|||
$
|
5,000.01 - $7,500
|
$
|
600.00
|
|||
$
|
7,500.01 - $10,000
|
$
|
675.00
|
|||
$
|
10,000.01 - $15,000
|
$
|
775.00
|
|||
$
|
15,000.01 - $25,000
|
$
|
875.00
|
|||
$
|
25,000.01 - $35,000
|
$
|
1,025.00
|
|||
$
|
35,000.01 - $50,000
|
$
|
1,275.00
|
|||
$
|
50,000.01 - $100,000
|
$
|
1,625.00
|
|||
$
|
100,000.01 - $250,000
|
2.3% but not less than $3,000
|
||||
$
|
250,000.01 and up |
2.1% but not less than $5,750
|
||||
Sinkholes
|
T&E
|
Page
|
|||
ARTICLE 1 DEFINITIONS
|
1 | ||
Section 1.1
|
Definitions
|
1
|
|
Section 1.2
|
Terms Generally
|
14
|
|
Section 1.3
|
Other Definitions
|
15
|
|
ARTICLE 2 FORMATION; OPERATING GUIDELINES
|
15 | ||
Section 2.1
|
Formation of Company
|
15
|
|
Section 2.2
|
Company Name
|
15
|
|
Section 2.3
|
Term
|
15
|
|
Section 2.4
|
Scope of Members’ Authority
|
15
|
|
Section 2.5
|
Registered Office and Agent
|
15
|
|
Section 2.6
|
Outside Activities
|
16
|
|
Section 2.7
|
Principal Office
|
16
|
|
Section 2.8
|
Purpose
|
16
|
|
ARTICLE 3 CAPITAL CONTRIBUTIONS
|
16 | ||
Section 3.1
|
Authorization and Issuance of Interests
|
16
|
|
Section 3.2
|
Capital Contributions of the Members
|
17
|
|
Section 3.3
|
Company Capital.
|
17
|
|
Section 3.4
|
Liability of Members.
|
18
|
|
Section 3.5
|
Loans by Members or Affiliates
|
18
|
|
Section 3.6
|
Capital Accounts
|
19
|
|
Section 3.7
|
Limitation on Issuance of New Interests
|
20
|
|
ARTICLE 4 ALLOCATIONS AND DISTRIBUTIONS
|
20 | ||
Section 4.1
|
Allocations of Net Profits and Net Losses
|
20
|
|
Section 4.2
|
Loss Limitation
|
21
|
|
Section 4.3
|
Tax Allocations
|
21
|
|
Section 4.4
|
Special Allocations
|
21
|
|
Section 4.5
|
704(c) Allocations
|
22
|
|
Section 4.6
|
Distributions
|
22
|
|
Section 4.7
|
Tax Withholding
|
23
|
|
Section 4.8
|
Tax Distributions
|
24
|
|
Section 4.9
|
Prohibited Distributions
|
24
|
|
ARTICLE 5 ADMINISTRATIVE PROVISIONS; REPORTS
|
25 | ||
Section 5.1
|
Books of Account
|
25
|
|
Section 5.2
|
Availability of Books of Account
|
25
|
|
Section 5.3
|
Bank Accounts
|
25
|
|
Section 5.4
|
Tax Elections
|
25
|
|
Section 5.5
|
Designation of Tax Matters Partner
|
25
|
|
Section 5.6
|
Independent Accountant
|
25
|
|
Section 5.7
|
Cooperation Regarding Public Reporting Obligations
|
26
|
ARTICLE 6 MANAGEMENT OF THE COMPANY
|
26 | ||
Section 6.1
|
Management of the Company
|
26
|
|
Section 6.2
|
Powers and Duties of the Board
|
30
|
|
Section 6.3
|
Liability for Conduct
|
35
|
|
Section 6.4
|
Indemnity of Officers and Managers.
|
35
|
|
Section 6.5
|
[Reserved]
|
37
|
|
Section 6.6
|
Other Matters Concerning the Board
|
37
|
|
ARTICLE 7 MEMBERS
|
38 | ||
Section 7.1
|
Member Management Rights
|
38
|
|
Section 7.2
|
Investment Representations by Members
|
39
|
|
Section 7.3
|
Additional Representations
|
40
|
|
Section 7.4
|
[Reserved]
|
40
|
|
Section 7.5
|
Withdrawals or Resignations
|
40
|
|
Section 7.6
|
Transactions between the Company and Members
|
40
|
|
Section 7.7
|
Remuneration to Members
|
41
|
|
Section 7.8
|
Covenant Not to Withdraw, Transfer or Dissolve
|
41
|
|
Section 7.9
|
Class C Preemptive Rights
|
41
|
|
Section 7.10
|
Class B Preemptive Rights
|
42
|
|
ARTICLE 8 SALE OR TRANSFER OF INTERESTS IN COMPANY OR SUBSIDIARY; TRANSFER RESTRICTIONS
|
43 | ||
Section 8.1
|
Disposition and Assignment of Interests
|
43
|
|
Section 8.2
|
Transfer in Violation of Agreement
|
43
|
|
Section 8.3
|
Rights in Connection with a Conveyance Triggering Event.
|
43
|
|
Section 8.4
|
Bankruptcy of Member
|
44
|
|
Section 8.5
|
Change of Control Call Right
|
44
|
|
Section 8.6
|
Tag-Along Rights
.
|
46
|
|
Section 8.7
|
Drag-Along Rights
|
47
|
|
Section 8.8
|
Sales Price and Terms of Sale
|
49
|
|
ARTICLE 9 ADDITIONAL MEMBER RIGHTS
|
49 | ||
Section 9.1
|
Company Valuation
|
49
|
|
Section 9.2
|
Board Meeting to Determine Exit Strategy
|
49
|
|
Section 9.3
|
[Reserved]
|
49
|
|
Section 9.4
|
FNHC Right of First Offer
|
50
|
|
Section 9.5
|
Participation Rights
|
51
|
|
Section 9.6
|
Buy-Sell Rights
|
52
|
|
Section 9.7
|
TransRe Sale Rights
|
54
|
|
Section 9.8
|
Subsidiary Management Rights and Obligations
|
56
|
|
Section 9.9
|
Termination of FNHC Services Agreement other than for Cause
|
57
|
|
Section 9.10
|
Debt Participation Right
|
57
|
ARTICLE 10 DISSOLUTION AND LIQUIDATION
|
58 | ||
Section 10.1
|
Dissolution
|
58
|
|
Section 10.2
|
Involuntary Dissolution
|
58
|
|
Section 10.3
|
Reformation of Company
|
58
|
|
Section 10.4
|
Liquidation Procedures
|
59
|
|
Section 10.5
|
Distributions in Liquidation
|
59
|
|
Section 10.6
|
Distributions In Kind
|
60
|
|
ARTICLE 11 AMENDMENT OF AGREEMENT; MEETINGS
|
60 | ||
Section 11.1
|
Amendments.
|
60
|
|
Section 11.2
|
Meetings of Members.
|
61
|
|
ARTICLE 12 GENERAL PROVISIONS
|
62 | ||
Section 12.1
|
Further Assurances
|
62
|
|
Section 12.2
|
Notices
|
62
|
|
Section 12.3
|
Headings and Captions
|
63
|
|
Section 12.4
|
Counterparts
|
63
|
|
Section 12.5
|
Governing Law; Submission to Jurisdiction; Waiver of Jury Trial
|
63
|
|
Section 12.6
|
Partition
|
64
|
|
Section 12.7
|
Invalidity
|
64
|
|
Section 12.8
|
Successors and Assigns
|
64
|
|
Section 12.9
|
Entire Agreement
|
64
|
|
Section 12.10
|
Additional or Substituted Members
|
64
|
|
Section 12.11
|
No Third Party Beneficiaries
|
64
|
|
Section 12.12
|
Maintenance as a Separate Entity
|
64
|
|
Section 12.13
|
Construction of Agreement
|
64
|
|
Section 12.14
|
Confidentiality
|
65
|
|
Section 12.15
|
Additional Default Remedies
|
65
|
|
Section 12.16
|
Legal Representation
|
65
|
|
ARTICLE 13 POWER OF ATTORNEY
|
66 | ||
Section 13.1
|
Company as Attorney-In-Fact
|
66
|
|
Section 13.2
|
Nature as Special Power
|
66
|
|
SCHEDULE 1
|
1
|
||
SCHEDULE 2
|
1
|
||
SCHEDULE 3
|
1
|
||
EXHIBIT A
|
1
|
|
Class of Units
|
Number of Units Authorized | |
|
Class A Units
|
280
|
|
|
|
|
|
|
Class B Units
|
500 | |
|
|
|
|
|
Class C Units
|
2,000 |
COMPANY : | ||
MONARCH DELAWARE HOLDINGS LLC , | ||
a Delaware limited liability company | ||
|
By:
|
/s/ Colin King |
Name: Colin King | ||
Title: Manager |
MEMBER : | |
CROSSWINDS INVESTOR MONARCH LP , | |
a Delaware limited partnership |
By: | Crosswinds Monarch GP LLC, | |
a Delaware limited liability company | ||
its General Partner |
|
By:
|
/s/ Colin King |
Name: Colin King | ||
Title: Chief Executive Officer |
MEMBER : | ||
FEDERATED NATIONAL HOLDING COMPANY , | ||
a Florida corporation | ||
|
By:
|
/s/ Michael H. Braun |
Name: Michael H. Braun | ||
Title: Chief Executive Officer & President |
MEMBER : | ||
TRANSATLANTIC REINSURANCE COMPANY , | ||
a New York corporation | ||
|
By:
|
/s/ Thomas Cholnoky |
Name: Thomas Cholnoky | ||
Title: Executive Vice President |
Member Name and Address for
Notice
|
Capital Contribution
|
Class A Units
|
Class B Units
|
Crosswinds Investor Monarch LP
1325 Avenue of the Americas, 28
th
Floor
New York, New York 10019
Attn: Chief Executive Officer
Phone:
(212) 521-1005
E-mail: colin@crosswindsinc.com
|
US$14,000,000.00
|
140
|
0
|
Federated National Holding Company
14050 Northwest 14
th
Street, Suite 180
Sunrise, Florida 33323
Attn: Chief Executive Officer
Phone:
(954) 308-1322
E-mail: mbraun@fednat.com
|
US$14,000,000.00
|
140
|
0
|
Transatlantic Reinsurance Company
One Liberty Plaza, 165 Broadway
New York, NY 10006
Attn: Vice-President and Assistant General Counsel
Phone:
(212) 365-2294
E-mail: kyapp@transre.com
|
US$5,000,000.00
|
0
|
50
|
TOTAL
|
US$33,000,000.00
|
280
|
50
|
a)
|
The FNHC Services Agreement.
|
b)
|
That certain Investment Management Services Agreement, dated March 17, 2015, by and among the Company, Monarch National, Monarch National Holdings, and Crosswinds AUM LLC, a Delaware limited liability company.
|
c)
|
That certain Reinsurance Capacity Right of First Refusal Agreement, dated March 17, 2015, by and between Monarch National and TransRe.
|
d)
|
That certain Promissory Note, dated March 17, 2015, issued by Monarch National Holdings to TransRe.
|
e)
|
That certain Funds Flow Memorandum, dated March 17, 2015, by and among Crosswinds, FNHC, TransRe, the Company, Monarch National, Monarch National Holdings, Charles S. Duncker, an individual U.S. investor (“
Duncker
”), and Crosswinds Holdings Inc., an Alberta corporation (“
Crosswinds Parent
”).
|
f)
|
That certain Income Tax Allocation Agreement, dated March 17, 2015, by and between Monarch National and Monarch National Holdings.
|
g)
|
That certain Broker Services Letter Agreement, dated March 17, 2015, by and between Monarch National and Century Risk Insurance Services, Inc., a Florida corporation.
|
h)
|
That certain Cost Sharing Agreement, dated March 17, 2015, by and between Monarch National and Monarch National Holdings.
|
i)
|
That certain Cost Sharing Agreement, dated March 17, 2015, by and between Monarch National and FedNat Underwriters, Inc., a Florida corporation.
|
j)
|
That certain Management Agreement, dated March 17, 2015, by and between Monarch National and Monarch National Holdings.
|
k)
|
That certain Assignment and Assumption Agreement, dated March 17, 2015, by and between Crosswinds Parent and Crosswinds.
|
l)
|
That certain Subscription and Contribution Agreement, dated March 17, 2015, by and between the Company and Monarch National Holdings.
|
m)
|
That certain Subscription and Contribution Agreement, dated March 17, 2015, by and between Monarch National Holdings and Monarch National.
|
n)
|
That certain License Agreement, dated March 17, 2015, by and among FNHC, Monarch National, and Monarch National Holdings.
|
o)
|
That certain Amendment to Employment Agreement and Restrictive Covenant Agreement, dated March 17, 2015, by and between Michael H. Braun and FNHC.
|
p)
|
That certain Non-Competition, Non-Disclosure and Non-Solicitation Agreement, dated March 17, 2015, by and between Michael H. Braun and the Company.
|
Name of Member (full legal name)
|
|
Member Interest
|
|
Units
|
|
Capital Contribution
|
|
Applicant 's Postal Address
|
|
Telephone
|
|
Facsimile
|
|
Taxation Identification number of Applicant
|
|
Bank Account Details for distributions
|
Bank
Branch
Account Number
|
·
|
The representations and warranties set forth in
Section
7.2
and
Section
7.3
of the Limited Liability Company Agreement of Monarch Delaware Holdings LLC are hereby incorporated,
mutatis mutandis,
and Member hereby declares, represents and warrants to the Company, the Tax Matters Partner and each other Members that such representations and warranties are true and correct.
|
·
|
Member will provide the Tax Matters Partner with such information as the Tax Matters Partner reasonably requests from time to time with respect to Member’s identity, citizenship, residency, ownership, tax status, business or control so as to permit the Tax Matters Partner to evaluate and comply with any regulatory and tax requirements applicable to the Partnership,
but
any confidential information so provided shall be kept confidential by the Tax Matters Partner and shall not be disclosed to any third party unless required by law or by any court of law or by any regulatory authority.
|
·
|
Member hereby authorizes the Tax Matters Partner to disclose to Members (including prospective Members) its name, the balance of its Capital Account, if any, and the number of Units held by Member.
|
|
|
State of
|
|
§
|
|||
§ | |||||
County/Parrish of
|
|
§
|
|
Notary Public in and for the State of
|
|
|||
|
and the County of
|
|
|
|
|
|
Name:
|
|
|
|
|
|
My Commission Expires:
|
|
|
||
|
[Affix Notary Seal, if required by law]
|
(i) | Michael H. Braun (the “Employee”); and |
(ii) | FEDERATED NATIONAL HOLDING COMPANY, a Florida corporation (the “Company”). |
|
|
|
|
|
|
|
FEDERATED NATIONAL HOLDING COMPANY
|
|
|||
|
|
|
|
|
|
|
By:
|
/s/ Peter J. Prygelski, III
|
|
||
|
Name:
|
Peter J. Prygelski, III
|
|
||
|
Title:
|
Chief Financial Officer and Treasurer
|
|
||
|
|
|
|
|
|
|
EMPLOYEE
|
|
|||
|
|
|
|
|
|
|
/s/ Michael H. Braun
|
|
|||
Michael H. Braun
|
(i) | Michael H. Braun, an individual residing at 19331 NW 3 Street, Pembroke Pines, FL 33029 (the "Executive"); and |
(ii) | MONARCH DELAWARE HOLDINGS LLC, a Delaware limited liability company (the "Company"). |
MONARCH DELAWARE HOLDINGS LLC
|
|||
By:
|
/s/ Colin King
|
||
Name:
|
Colin King
|
||
Title:
|
Manager
|
||
EXECUTIVE
|
|||
/s/ Michael H. Braun
|
|||
Michael H. Braun
|
(i) | Peter J. Prygelski, III (the “Employee”); and |
(ii) | FEDERATED NATIONAL HOLDING COMPANY, a Florida corporation (the “Company”). |
|
|
|
|
|
|
|
FEDERATED NATIONAL HOLDING COMPANY
|
|
|||
|
|
|
|
|
|
|
By:
|
/s/ Michael H. Braun |
|
||
|
Name:
|
Michael H. Braun |
|
||
|
Title:
|
Chief Executive Officer and President
|
|
||
|
|
|
|
|
|
|
EMPLOYEE
|
|
|||
|
|
|
|
|
|
|
/s/ Peter J. Prygelski, III
|
|
|||
Peter J. Prygelski, III
|
1. | COMPANY and ISA agree to replace the First Revised Schedule A of the Agreement with Second Revised Schedule A, attached hereto and made a part of the Agreement. COMPANY and ISA further agree that Second Revised Schedule A supersedes First Revised Schedule A. |
2. | Capitalized terms used but not otherwise defined herein shall have the respective meaning ascribed to them in the Agreement. |
3. | Unless expressly modified by this Second Amendment, the terms and conditions of the Agreement remain unchanged and in full force and effect. |
4. | This Second Amendment may be signed in multiple counterparts, which together shall constitute a single instrument. |
FEDERATED NATIONAL
|
IVANTAGE SELECT AGENCY, INC.
|
|||
UNDERWRITERS, INC.
|
||||
By:
|
/s/ J.G. Jennings
|
By:
|
/s/ William B. Burst, III
|
|
Name:
|
J.G. Jennings
|
Name:
|
William B. Burst, III
|
|
Title:
|
President
|
Title:
|
Vice President Ivantage
|
|
Date:
|
3/10/15
|
Date:
|
3/12/15
|
FEDERATED NATIONAL
|
IVANTAGE SELECT AGENCY, INC.
|
|||
UNDERWRITERS, INC.
|
||||
By:
|
/s/ J.G. Jennings
|
By:
|
/s/ William B. Burst, III
|
|
Name:
|
J.G. Jennings
|
Name:
|
William B. Burst, III
|
|
Title:
|
President
|
Title:
|
Vice President Ivantage
|
|
Date:
|
3/10/15
|
Date:
|
3/12/15
|
(i) | BRUCE F. SIMBERG, an individual residing at 488 Addison Park Ln., Boca Raton, Florida 33432 (the " Consultant "); and |
(ii) | FEDERATED NATIONAL HOLDING COMPANY, a Florida corporation (the " Company "). |
FEDERATED NATIONAL HOLDING COMPANY:
|
|||
By:
|
/s/ Michael H. Braun
|
||
Name:
|
Michael H. Braun
|
||
Title:
|
CEO and President
|
||
CONSULTANT:
|
|||
/s/ Bruce F. Simberg
|
|||
Bruce F. Simberg
|
/s/ Michael H. Braun
|
Michael H. Braun
|
Chief Executive Officer
|
(Principal Executive Officer)
|
Dated: May 11, 2015
|
/s/ Peter J. Prygelski, III
|
Peter J. Prygelski, III
|
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
Dated: May 11, 2015
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Federated National Holding Company.
|
By:
/s/ Michael H. Braun
|
Michael H. Braun, Chief Executive Officer (Principal Executive Officer)
|
May 11, 2015
|
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Federated National Holding Company. |
By: /
s/ Peter J. Prygelski, III
|
Peter J. Prygelski, III, Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
May 11, 2015
|