Book Value per Share Increased to $7.65 as of March 31, 2019
TAMPA, Fla.–(BUSINESS WIRE)–1347 Property Insurance Holdings, Inc. (Nasdaq: PIH) (the
“Company”), a property and casualty insurance holding company offering
specialty insurance to customers in Louisiana, Texas and Florida through
its wholly-owned subsidiary, Maison Insurance Company (“Maison”), today
announced financial results for its first quarter ended March 31, 2019.
First Quarter 2019 Financial and Operating Highlights
(unless noted all financial comparisons are to the prior-year
quarter)
-
Book value per share of $7.65 at March 31, 2019 versus $7.53 at
December 31, 2018. - Gross premiums written of $18.6 million, up 11.8% from $16.6 million.
-
Investment income increased $0.6 million, to $1.0 million from $0.4
million. -
Net premiums earned increased 23.6% to $15.6 million from $12.6
million. -
Pre-tax income of $0.1 million as compared to $2.3 million, as the net
loss ratio rose 25.8% compared with the prior year period. -
Net income was approximately $0.1 million, compared to net income of
$1.95 million. -
On a fully diluted per share basis, the Company had a net loss of
$(0.04) per diluted share after deducting dividends paid to our
preferred shareholders, compared to net income of $0.32 per diluted
share. -
Direct and assumed policy count at March 31, 2019 decreased to
approximately 68,700, down approximately 0.1% from approximately
68,800 at December 31, 2018.
|
Operating Review |
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| (Unaudited) | |||||||||||||
| ($ and share amounts in thousands) | Three Months Ended | ||||||||||||
| March 31, | |||||||||||||
| 2019 | 2018 | Change | |||||||||||
| Gross premiums written | $ | 18,579 | $ | 16,621 | 11.8 | % | |||||||
| Ceded premiums written | $ | 8,822 | $ | 6,085 | 45.0 | % | |||||||
| Gross premiums earned | $ | 24,619 | $ | 18,746 | 31.3 | % | |||||||
| Ceded premiums earned | $ | 9,030 | $ | 6,131 | 47.3 | % | |||||||
| Net premiums earned | $ | 15,589 | $ | 12,615 | 23.6 | % | |||||||
| Total revenues | $ | 17,394 | $ | 13,540 | 28.5 | % | |||||||
| Gross losses and loss adjustment expenses | $ | 21,382 | $ | 5,213 | 310.2 | % | |||||||
| Ceded losses and loss adjustment expenses | $ | 12,103 | $ | 954 | NMF | ||||||||
| Net losses and loss adjustment expenses | $ | 9,279 | $ | 4,259 | 117.9 | % | |||||||
| Amortization of deferred policy acquisition costs | $ | 4,269 | $ | 3,295 | 29.6 | % | |||||||
| General and administrative expenses | $ | 3,701 | $ | 3,021 | 22.5 | % | |||||||
| Total expenses | $ | 17,249 | $ | 11,220 | 53.7 | % | |||||||
| Income before tax expense | $ | 145 | $ | 2,320 | (93.8 | )% | |||||||
| Net income | $ | 98 | $ | 1,951 | (95.0 | )% | |||||||
| Weighted average diluted shares outstanding | 6,013 | 6,093 | (1.3 | )% | |||||||||
| Ratios to Gross Premiums Earned:(1) | |||||||||||||
| Ceded ratio | (12.5 | )% | 27.6 | % | (40.1) pts | ||||||||
| Gross loss ratio | 86.9 | % | 27.8 | % | 59.1 pts | ||||||||
| DPAC ratio | 17.3 | % | 17.6 | % | (0.3) pts | ||||||||
| G&A ratio | 15.0 | % | 16.1 | % | (1.1) pts | ||||||||
| Combined gross ratio | 106.7 | % | 89.1 | % | 17.6 pts | ||||||||
| Ratios to Net Premiums Earned:(1) | |||||||||||||
| Net loss ratio | 59.5 | % | 33.7 | % | 25.8 pts | ||||||||
| Net expense ratio | 51.1 | % | 50.1 | % | 1.0 pts | ||||||||
| Net combined ratio | 110.6 | % | 83.8 | % | 26.8 pts | ||||||||
(1) See “Definitions of Non-U.S. GAAP Financial Measures”
Section.
Quarterly Financial Review
Premiums
Gross premiums written grew 11.8% to $18.6 million for the quarter ended
March 31, 2019, versus $16.6 million in the prior year quarter. The
increase in gross written premiums was primarily the result of organic
growth in voluntary production from our independent agencies in Texas
and Florida. In Texas, our homeowners’ book of business in the southern
portion of the state accounted for the majority of our growth, along
with a state-wide rate increase which became effective in January 2019
for renewal business. Furthermore, we have discontinued writing new
business in areas of Texas which we have determined to be less
profitable. In Florida, our wind only product has grown due, in part, to
our depopulation of policies from FL Citizens along with the
aforementioned increase in voluntary production. Gross premiums earned
increased 31.3% to $24.6 million for the quarter ended March 31, 2019
compared with $18.7 million for the quarter ended March 31, 2018. As of
March 31, 2019, approximately 75% of the Company’s direct and assumed
policies were from voluntary business obtained from the Company’s
independent agent network with the remaining 25% of the policy total
consisting of take-out policies from Louisiana Citizens Property
Insurance Company, Florida Citizens Property Insurance Corporation and
the Texas Windstorm Insurance Association.
Net premiums earned increased 23.6% to $15.6 million for the quarter
ended March 31, 2019 compared with $12.6 million for the quarter ended
March 31, 2018.
Net Investment Income
Net investment income increased $0.6 million, to $1.0 million for the
quarter ended March 31, 2019, from $0.4 million for the quarter ended
March 31, 2018. The primary drivers for this increase were the increased
size of our investment portfolio, which grew from approximately $66.6
million as of March 31, 2018, to $90.9 million as of March 31, 2019, as
well as a gain of approximately $0.4 million recorded as our equity
method gain in our investment in a limited partnership.
Losses and Loss Adjustment Expenses
The gross loss ratio for the quarter ended March 31, 2019 was 86.9%
compared to 27.8% for the quarter ended March 31, 2018. The net loss
ratios for the same periods were 59.5% and 33.7%, respectively. Gross
and net loss ratios for the first quarter of 2019 were negatively
impacted by weather losses. The Company experienced a catastrophe hail
loss event in the State of Texas in late March. This single event is
expected to result in $12.5 million of gross incurred loss however, due
to our external reinsurance program, this event is estimated to cost the
Company zero in net incurred losses. All other weather events, for which
we received no ceded reinsurance benefit, aggregated to 24.0% gross loss
ratio for the first quarter 2019 as compared to 16.5% for the first
quarter 2018. The Company has also released reserves from prior accident
years for both the quarters ended March 31, 2019 and 2018, resulting in
a benefit to both our gross and net loss ratios in the current quarter.
The following table reflects the four major components to our gross and
net loss ratios which we use to analyze the Company’s loss experience
for the quarters ended March 31, 2019 and 2018.
| Three months ended March 31, | ||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
|
Gross ($) |
Gross |
Gross ($) |
Gross |
Net |
Net |
Net |
Net |
|||||||||||||||||||||
| Catastrophe losses(1) | $ | 12,493 | 50.8 | % | $ | – | – | % | $ | – | – | % | $ | – | – | % | ||||||||||||
| Weather-related non-catastrophe losses | 5,918 | 24.0 | % | 3,092 | 16.5 | % | 5,918 | 38.0 | % | 2,527 | 20.0 | % | ||||||||||||||||
| Non-weather related losses | 3,474 | 14.1 | % | 2,298 | 12.2 | % | 3,474 | 22.2 | % | 2,298 | 18.2 | % | ||||||||||||||||
| Total current accident year losses | 21,885 | 88.9 | % | 5,390 | 28.7 | % | 9,392 | 60.2 | % | 4,825 | 38.2 | % | ||||||||||||||||
| Prior period development (redundancy)(2) | (503 | ) | (2.0 | )% | (177 | ) | (0.9 | )% | (113 | ) | (0.7 | )% | (566 | ) | (4.5 | )% | ||||||||||||
| Total net losses and LAE incurred | $ | 21,382 | 86.9 | % | $ | 5,213 | 27.8 | % | $ |
9,279 |
59.5 | % | $ | 4,259 | 33.7 | % | ||||||||||||
|
(1) |
Property Claims Services (PCS) defines a catastrophic event as an event where the insurance industry is estimated to incur over $25,000 of insured property damage that also impacts a significant number of insureds. For purposes of the above table, we have defined a Catastrophe as a PCS event where our estimated cost exceeds $2,500. In prior periods, we had defined a Catastrophe loss as an event where our estimated gross incurred loss exceeded $1,500. Due to the general increase in the premiums we write year over year, we have determined $2,500 gross incurred losses to be a better indicator of a catastrophic event with respect to the exposures we currently insure. Prior year loss data has been restated to reflect this new definition. |
|
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(2) |
Prior Period Development is the amount of ultimate actual loss settlement value which is more than the estimated reserves recorded for a particular liability or loss, while redundancy represents the ultimate actual loss settlement value which is less than the estimated and determined reserves recorded for a particular liability or loss. |
|
Amortization of Deferred Policy Acquisition Costs
Amortization of deferred policy acquisition costs for the first quarter
of 2019 was $4.3 million, a $1.0 million increase over $3.3 million in
the first quarter of 2018. As a percentage of gross premiums earned,
this expense declined 30 basis points to 17.3% for the first quarter of
2019, compared to 17.6% for the first quarter of 2018.
General and Administrative Expenses
General and administrative expenses for the first quarter of 2019 were
$3.7 million versus $3.0 million in the first quarter of 2018. The
increase was primarily related to costs associated with the proposed
Asset Sale to FedNat Holding Company, Inc. General and administrative
expenses as a percentage of gross premiums earned decreased to 15.0% for
the first quarter of 2019 compared to 16.1% for the prior year period.
Excluding expenses associated with the Asset Sale, general and
administrative costs for the quarter ended March 31, 2019 were $3.2
million or 12.8% of gross premiums earned.
Net Income
In the first quarter of 2019, the Company reported net income of $0.1
million, compared to net income of $2.0 million in the prior year
period. The Company reported a net loss of $(0.04) per diluted share
during the first quarter of 2019, based on approximately 6.01 million
weighted average shares outstanding, after deducting dividends paid to
our preferred shareholders, compared to a net income of $0.33 per
diluted share during the prior year period, based on approximately 6.09
million weighted average shares outstanding.
Balance Sheet / Investment Portfolio Highlights
As of March 31, 2019, the Company held cash, cash equivalents and
investments with a carrying value of approximately $117.2 million, up
from $114.2 million as of December 31, 2018. As of March 31, 2019, the
Company’s investment in fixed maturities issued by the U.S. Government,
government agencies and high quality corporate issuers, including
short-term investments, comprised 95% of the investment portfolio.
Asset Sale to FedNat
As previously announced on February 25, 2019, the Company, together with
three of its wholly-owned subsidiaries, Maison, Maison Managers Inc.
(“MMI”) and ClaimCor, LLC (“ClaimCor”), entered into an Equity Purchase
Agreement (the “Purchase Agreement”) with FedNat Holding Company, a
Florida corporation (“Purchaser”), providing for the sale of all of the
issued and outstanding equity of Maison, MMI and ClaimCor to Purchaser,
on the terms and subject to the conditions set forth in the Purchase
Agreement (the “Asset Sale”). As consideration for the sale of Maison,
MMI and ClaimCor, Purchaser has agreed to pay the Company $51.0 million,
consisting of $25.5 million in cash (the “Cash Consideration”) and $25.5
million in Purchaser’s common stock (the “Equity Consideration”) to be
issued to the Company. In addition, upon closing of the Asset Sale (the
“Closing”), up to $18.0 million of outstanding surplus note obligations
payable by Maison to the Company, plus all accrued but unpaid interest,
will be repaid to the Company.
The Purchase Agreement contains customary representations, warranties
and covenants of the parties, including covenants concerning the conduct
of business by Maison, MMI and ClaimCor prior to Closing. In addition,
the Company and Purchaser have agreed to use their commercially
reasonable best efforts to consummate the Asset Sale and other
transactions contemplated by the Purchase Agreement. Subject to certain
limitations, the Company and Purchaser have also agreed to indemnify the
other party against certain losses, including losses arising out of
breaches of representations, warranties and covenants set forth in the
Purchase Agreement.
The Company and Purchaser anticipate closing the Asset Sale on or before
June 30, 2019, subject to the timely receipt of regulatory approvals and
the satisfaction or waiver of the closing conditions, including approval
of the Purchase Agreement and the transactions contemplated therein by
the stockholders of the Company at a special meeting of stockholders to
be held on June 10, 2019.
DEFINITION OF NON-U.S. GAAP FINANCIAL MEASURES
The Company assesses its results of operations using certain non-U.S.
GAAP financial measures, in addition to U.S. GAAP financial measures.
These non-U.S. GAAP financial measures are defined below. The Company
believes these non-U.S. GAAP financial measures provide useful
information to investors and others in understanding and evaluating its
operating performance in the same manner as management does, and are
also consistent with those ratios used across the insurance industry.
The non-U.S. GAAP financial measures should be considered in addition
to, and not as a substitute for or superior to, any financial measures
prepared in accordance with U.S. GAAP. The Company’s non-U.S. GAAP
financial measures may be defined differently from time to time and may
be defined differently than similar terms used by other companies, and
accordingly, care should be exercised in understanding how the Company
defines its non-U.S. GAAP financial measures.
The Company analyzes performance based on ratios common in the insurance
industry such as loss ratio, expense ratio and combined ratio. The
Company’s ratios are calculated as shown in the following table.
| Ratio | Numerator | Divisor | ||||
| Ceded ratio | Ceded premium earned minus ceded losses and loss adjustment expenses | Gross premium earned | ||||
| Gross loss ratio | Gross losses and loss adjustment expenses | Gross premium earned | ||||
| DPAC ratio | Amortization of deferred policy acquisition costs | Gross premium earned | ||||
| G&A ratio | General and administrative expenses | Gross premium earned | ||||
| Net loss ratio | Net losses and loss adjustment expenses | Net premium earned | ||||
| Net expense ratio |
Deferred policy acquisition costs plus general and administrative expenses |
Net premium earned | ||||
The gross combined ratio is calculated as the sum of the ceded ratio,
gross loss ratio, DPAC ratio, and G&A ratio. The net combined ratio is
calculated as the sum of the net loss ratio and the net expense ratio. A
combined ratio below 100% demonstrates underwriting profit whereas a
combined ratio over 100% demonstrates an underwriting loss.
About 1347 Property Insurance Holdings, Inc.
1347 Property Insurance Holdings, Inc. is a specialized property and
casualty insurance holding company incorporated in Delaware. The Company
provides property and casualty insurance in Louisiana, Texas and Florida
through its wholly-owned subsidiary Maison Insurance Company. The
Company’s insurance offerings for customers currently include
homeowners, wind and hail only, manufactured home and dwelling fire
policies.
Forward Looking Statements
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). These statements are therefore
entitled to the protection of the safe harbor provisions of these laws.
These statements may be identified by the use of forward-looking
terminology such as “anticipate,” “believe,” “budget,” “can,”
“contemplate,” “continue,” “could,” “envision,” “estimate,” “expect,”
“evaluate,” “forecast,” “goal,” “guidance,” “indicate,” “intend,”
“likely,” “may,” “might,” “outlook,” “plan,” “possibly,” “potential,”
“predict,” “probable,” “probably,” “pro-forma,” “project,” “seek,”
“should,” “target,” “view,” “will,” “would,” “will be,” “will continue,”
“will likely result” or the negative thereof or other variations thereon
or comparable terminology. We have based these forward-looking
statements on our current expectations, assumptions, estimates, and
projections. While we believe these to be reasonable, such
forward-looking statements are only predictions and involve a number of
risks and uncertainties, many of which are beyond our control. These and
other important factors may cause our actual results, performance, or
achievements to differ materially from any future results, performance
or achievements expressed or implied by these forward-looking
statements. Management cautions that the forward-looking statements in
this press release are not guarantees of future performance, and we
cannot assume that such statements will be realized or the
forward-looking events and circumstances will occur. Factors that might
cause such a difference include, without limitation: our limited
operating history as a publicly traded company and status as an emerging
growth company; our ability to obtain market share; our ability to
access capital; changes in economic, business and industry conditions;
legal, regulatory and tax developments; our ability to comply with
regulations imposed by the states of Louisiana, Texas and Florida and
the other states where we may do business in the future; the ability of
our insurance subsidiary, Maison Insurance Company, to meet minimum
capital and surplus requirements; our ability to participate in take-out
programs; our ability to expand our business to other states; the level
of demand for our coverage and the incidence of catastrophic events
related to our coverage; our ability to compete with other insurance
companies; inadequate loss and loss adjustment expense reserves; effects
of emerging claim and coverage issues; the failure of third party
adjusters to properly evaluate claims or the failure of our claims
handling administrator to pay claims fairly; investment losses; climate
change and increasing occurrences of weather-related events; increased
litigation in the insurance industry; non-availability of reinsurance;
our ability to recover amounts due from reinsurers; the accuracy of
models used to predict future losses; failure of risk mitigation
strategies and/or loss limitation methods; Maison Insurance Company’s
failure to maintain certain rating levels; our ability to establish and
maintain an effective system of internal controls; any potential
conflicts of interest between us and our controlling stockholders;
different interests of controlling stockholders; failure of our
information technology systems, data breaches and cyber-attacks; the
ability of our third-party policy administrator to properly handle our
policy administration process; the requirements of being a public
company; our ability to develop and implement new technologies; our
ability to accurately price the risks that we underwrite; the amount of
operating resources necessary to develop future new insurance policies;
assumptions related to the rate at which our existing policies will
renew; our status as an insurance holding company; the ability of our
subsidiaries to pay dividends to us; our ability to attract and retain
qualified personnel, including independent agents; the impact of tax
reform; and risks or disruptions to our business as a result of the
proposed sale of three of the Company’s subsidiaries, which constitutes
the sale of substantially all of our assets (the “Asset Sale”); the
occurrence of any event, change or other circumstance that could give
rise to the termination of the Equity Purchase Agreement governing the
terms of the Asset Sale; an inability to complete the Asset Sale due to
a failure to obtain the approval of our stockholders or a failure of any
condition to the closing of the Asset Sale to be satisfied or waived by
the applicable party; the extent of, and the time necessary to obtain,
the regulatory approvals required for the Asset Sale; our ability to
spend or invest the net proceeds from the Asset Sale in a manner that
yields a favorable return; potential conflicts of interest of certain of
our executive officers in the Asset Sale; the outcome of any litigation
we may become subject to relating to the Asset Sale; an increase in the
amount of costs, fees and expenses and other charges related to the
Equity Purchase Agreement or the Asset Sale; risks arising from the
diversion of management’s attention from our ongoing business
operations; a decline in the market price for our common shares if the
Asset Sale is not completed; a lack of alternative potential
transactions if the Asset Sale is not completed; volatility or decline
of the shares of FedNat Holding Company common stock to be received by
us as consideration in the Asset Sale or limitations on our ability to
sell or otherwise dispose of such shares; risks of being a minority
stockholder of FedNat Holding Company if the Asset Sale is completed;
disruptions in our operations from the Asset Sale that prevent us from
realizing intended benefits of the Asset Sale; risks associated with our
inability to identify and realize business opportunities, and
undertaking of any new such opportunities, following the Asset Sale; our
inability to execute on our reinsurance, investment and investment
management strategy; potential loss of value of investments; risk of
becoming an investment company; risks of being unable to attract and
retain qualified management and personnel to implement and execute on
our growth strategy following completion of the Asset Sale; and risks of
our inability to continue to satisfy the continued listing standards of
the Nasdaq following completion of the Asset Sale.
Our expectations may not be realized. If one of these risks or
uncertainties materialize, or if our underlying assumptions prove
incorrect, actual results may vary materially from those expected,
estimated or projected. You are cautioned not to place undue reliance on
forward-looking statements. The forward-looking statements included in
this press release are made only as of the date hereof and do not
necessarily reflect our outlook at any other point in time. We do not
undertake and specifically decline any obligation to update any such
statements or to publicly announce the results of any revisions to any
such statements to reflect new information, future events or
developments.
Additional Information about the Asset Sale and Where to Find It
In connection with the Asset Sale, the Company has filed on April 22,
2019, with the Securities and Exchange Commission (“SEC”) and furnished
to the Company’s stockholders a definitive proxy statement and other
relevant documents pertaining to the Asset Sale. Stockholders of the
Company are urged to read the definitive proxy statement and other
relevant documents carefully and in their entirety because they contain
important information about the Asset Sale. Stockholders of the Company
may obtain the definitive proxy statement and other relevant documents
filed with the SEC free of charge at the SEC’s website at www.sec.gov
or by directing a request to 1347 Property Insurance Holdings, Inc.,
1511 N. Westshore Blvd., Suite 870, Tampa, FL 33607, Attn: John S. Hill.
Participants in the Solicitation
The directors, executive officers and certain other members of
management and employees of the Company may be deemed “participants” in
the solicitation of proxies from stockholders of the Company in favor of
the Asset Sale. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of the
stockholders of the Company in connection with the Asset Sale is set
forth in the definitive proxy statement and the other relevant documents
filed by the Company with the SEC. You can find information about the
Company’s executive officers and directors in its Annual Report on Form
10-K for the fiscal year ended December 31, 2018 and in subsequent
Section 16 reports.
Additional Information
Additional information about 1347 Property Insurance Holdings, Inc.,
including its Quarterly Report on Form 10-Q for the fiscal first quarter
ended March 31, 2019 and its Annual Report on Form 10-K for the fiscal
year ended December 31, 2018, can be found at the SEC’s website at www.
Contacts
1347 Property Insurance Holdings, Inc.
John S Hill
Chief
Financial Officer
(813) 579-6213 / [email protected]
-OR-
INVESTOR
RELATIONS:
The Equity Group Inc.
Jeremy Hellman, CFA
Senior
Associate
(212) 836-9626 / [email protected]
