TAMPA, Fla.--(BUSINESS WIRE)--1347 Property Insurance Holdings, Inc. (NASDAQ:PIH) (the “Company”), a property and casualty insurance holding company offering specialty insurance to individual and commercial customers in Louisiana and Texas through its wholly-owned subsidiary, Maison Insurance Company (“Maison”), today announced financial results for its third quarter ended September 30, 2016.
Management Comments
Doug Raucy, Chief Executive Officer, stated, “We continued to grow our policies in-force in both Louisiana and Texas demonstrating the strength of our brand and distribution strategy. Despite the occurrence of a CAT event which impacted earnings in the quarter, we are pleased with our business accomplishments and expect full year results to be more reflective of the value of our business. A slow-moving weather system delivered an immense amount of rain and wind over the course of several days in August, resulting in catastrophic flooding and wind damage in areas where many of our policyholders live. Many of our manufactured home policies carry flood coverage, and all of our policies carry wind coverage. We have worked expeditiously to process those claims. As of September 30, 2016, we had received more than 1,300 reported claims for this event and had closed more than 93% of them.” Mr. Raucy continued, “Excluding the impact of this catastrophe, our business would have been profitable during the quarter, reaffirming our confidence that our business plan is well-structured and will produce positive results over the long term. We maintained extensive focus on handling these catastrophe claims, yet we were also able to achieve growth of our policies in force during the quarter. We look forward to our continued managed growth as we wrap up the year and look ahead to 2017.”
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Operating Review |
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| (Unaudited) | (Unaudited) | |||||||||||||||||||||||||||
| (all amounts in thousands, except ratios) | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | |||||||||||||||||||||||
| Gross premiums written | $ | 13,966 | $ | 11,803 | 18.3 | % | $ | 39,484 | $ | 32,002 | 23.4 | % | ||||||||||||||||
| Ceded premiums written | $ | 5,973 | $ | 3,564 | 67.6 | % | $ | 15,414 | $ | 9,854 | 56.4 | % | ||||||||||||||||
| Gross premiums earned | $ | 12,546 | $ | 9,800 | 28.0 | % | $ | 35,822 | $ | 27,504 | 30.2 | % | ||||||||||||||||
| Ceded premiums earned | $ | 5,410 | $ | 3,399 | 59.2 | % | $ | 12,953 | $ | 8,834 | 46.6 | % | ||||||||||||||||
| Net premiums earned | $ | 7,136 | $ | 6,401 | 11.5 | % | $ | 22,869 | $ | 18,670 | 22.5 | % | ||||||||||||||||
| Total revenues | $ | 7,632 | $ | 6,689 | 14.1 | % | $ | 24,124 | $ | 19,574 | 23.2 | % | ||||||||||||||||
| Gross losses and loss adjustment expenses | $ | 12,845 | $ | 3,702 | 247.0 | % | $ | 28,325 | $ | 7,321 | 286.9 | % | ||||||||||||||||
| Ceded losses and loss adjustment expenses | $ | 6,402 | $ | 377 |
NMF(1) |
$ | 13,408 | $ | 350 | NMF | ||||||||||||||||||
| Net losses and loss adjustment expenses | $ | 6,443 | $ | 3,325 | 93.8 | % | $ | 14,917 | $ | 6,971 | 114.0 | % | ||||||||||||||||
| Amortization of deferred policy acquisition costs | $ | 2,095 | $ | 1,676 | 25.0 | % | $ | 6,148 | $ | 4,773 | 28.8 | % | ||||||||||||||||
| General and administrative expenses | $ | 1,658 | $ | 1,624 | 2.1 | % | $ | 4,982 | $ | 5,414 | (8.0 | )% | ||||||||||||||||
| Loss and amortization charges related to MSA termination | $ | 89 | $ | 85 | 4.7 | % | $ | 263 | $ | 5,615 | (95.3 | )% | ||||||||||||||||
| Loss before tax benefit | $ | (2,653 | ) | $ | (21 | ) | NMF | $ | (2,186 | ) | $ | (3,199 | ) | (31.7 | )% | |||||||||||||
| Net loss | $ | (1,806 | ) | $ | (103 | ) | NMF | $ | (1,581 | ) | $ | (2,252 | ) | 29.8 | % | |||||||||||||
| Weighted average diluted shares outstanding | 6,023 | 6,261 | (3.8 | )% | 6,077 | 6,325 | (3.9 | )% | ||||||||||||||||||||
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Ratios to Gross Premiums Earned:(2) |
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| Ceded ratio | (7.9 | )% | 30.8 | % | (38.7) pts | (1.3 | )% | 30.8 | % | (32.1) pts | ||||||||||||||||||
| Gross loss ratio | 102.4 | % | 37.8 | % | 64.6 pts | 79.1 | % | 26.6 | % | 52.5 pts | ||||||||||||||||||
| DPAC ratio | 16.7 | % | 17.1 | % | (0.4) pts | 17.2 | % | 17.4 | % | (0.2) pts | ||||||||||||||||||
| G&A ratio | 13.2 | % | 16.6 | % | (3.4) pts | 13.9 | % | 19.7 | % | (5.8) pts | ||||||||||||||||||
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Combined gross ratio |
124.4 | % | 102.3 | % | 22.1 pts | 108.9 | % | 94.5 | % | 14.4 pts | ||||||||||||||||||
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Ratios to Net Premiums Earned:(2) |
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| Net loss ratio | 90.3 | % | 51.9 | % | 38.4 pts | 65.2 | % | 37.3 | % | 27.9 pts | ||||||||||||||||||
| Net expense ratio | 53.8 | % | 52.9 | % | 0.9 pts | 49.8 | % | 84.6 | % | (34.8) pts | ||||||||||||||||||
| Net combined ratio | 144.1 | % | 104.8 | % | 39.3 pts | 115.0 | % | 121.9 | % | (6.9) pts | ||||||||||||||||||
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(1) NMF = Not Meaningful (2) See “Definition of Non-U.S. GAAP Financial Measures” Section below |
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Quarterly Financial Review
Premiums
Gross premiums written increased 18.3% to $14.0 million for the quarter ended September 30, 2016 compared with $11.8 million for the quarter ended September 30, 2015. Gross premiums earned increased 28.0% to $12.5 million for the quarter ended September 30, 2016 compared with $9.8 million for the quarter ended September 30, 2015. The increase for the three-month period was largely due to organic growth in voluntary production from the Company’s independent agents. As of September 30, 2016, approximately 74% of the Company’s 31,900 policies in force were from voluntary policies obtained from the Company’s independent agent network, with the remainder obtained from take-out policies from Louisiana Citizens Property Insurance Company.
Net premiums earned increased 11.5% to $7.1 million for the quarter ended September 30, 2016 compared with $6.4 million for the quarter ended September 30, 2015.
Losses and Loss Adjustment Expenses
The gross loss ratio for the quarter ended September 30, 2016 was 102.4% compared to 37.8% for the quarter ended September 30, 2015. The net loss ratio for the quarter ended September 30, 2016 was 90.3% compared to 51.9% for the quarter ended September 30, 2015. The Company experienced significant claims activity resulting from storm-related wind and flooding damage in Louisiana during the quarter. As of September 30, 2016, the Company had received approximately 1,300 claims which resulted in the company meeting its $5 million reinsurance retention in the third quarter. Approximately 93% of the claims have been closed as of the end of the third quarter.
Amortization of Deferred Policy Acquisition Costs
Amortization of deferred policy acquisition costs for the third quarter of 2016 was $2.1 million, a $0.4 million increase over $1.7 million in the third quarter of 2015. As a percentage of gross premiums earned this expense improved modestly to 16.7% for the third quarter of 2016, compared to 17.1% for the third quarter of 2015.
General and Administrative Expenses
General and administrative expenses for the third quarter of 2016 were $1.7 million, relatively unchanged versus $1.6 million in the third quarter of 2015. General and administrative expenses as a percentage of gross premiums earned declined to 13.2% for the third quarter of 2016 compared to 16.6% for the prior year period.
Net Income (Loss)
In the third quarter of 2016, the Company reported net loss of $1.8 million, compared to a net loss of $0.1 million in the prior year period. The Company reported net loss of $0.30 per diluted share during the third quarter of 2016, based on approximately 6.0 million weighted average shares outstanding, compared to a net loss of $0.02 per diluted share during the prior year period, based on approximately 6.3 million weighted average shares outstanding.
Balance Sheet / Investment Portfolio Highlights
As of September 30, 2016, the Company held cash, cash equivalents and investments with a carrying value of $70.4 million. As of September 30, 2016, 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.
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Conference Call Details |
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Date: |
Tuesday, November 15, 2016 |
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Time: |
10:00 a.m. Eastern Time |
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| Participant Dial-In Numbers: | |||
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Domestic callers: |
(877) 407-0619 |
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International callers: |
(412) 902-1012 |
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Access by Webcast
The call will also be simultaneously webcast over the Internet via the “Investor Relations” section of PIH’s website at www.1347pih.com or by clicking on the conference call link: http://1347pih.equisolvewebcast.com/q3-2016. An audio recording of the call will be archived on the Company’s website.
Termination of Management Services Agreement
As previously communicated, on February 11, 2014, the Company entered into a Management Services Agreement (“MSA”) with 1347 Advisors, LLC (“Advisors”), a wholly owned subsidiary of Kingsway Financial Services, Inc., under which Advisors provided certain services to the Company, including forecasting, analysis of capital structure and reinsurance programs, and consultation in corporate development initiatives. Under the MSA, the Company was required to pay Advisors a monthly fee equal to 1% of direct written premiums. On February 24, 2015 the Company entered into an agreement which terminated the MSA, resulting in a one-time pre-tax charge of $5.4 million for the quarter ended March 31, 2015. By terminating the MSA, the Company is no longer required to pay the monthly fee to Advisors.
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.
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 plus loss and amortization charges related to MSA termination | 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 property and casualty insurance holding company incorporated in Delaware. The Company provides property and casualty insurance in Louisiana and Texas through its wholly-owned subsidiary Maison Insurance Company. The Company’s insurance offerings for personal and commercial customers currently include homeowners, wind and hail only, manufactured home and dwelling fire policies.
Forward Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. Words such as "expects", "believes", "anticipates", "intends", "estimates", "seeks" and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect Company management's current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
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1347 PROPERTY INSURANCE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (in thousands, except share and per share data) (Unaudited) |
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| Three months ended |
Nine months ended |
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| September 30, |
September 30, |
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| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Net premiums earned | $ | 7,136 | $ | 6,401 | $ | 22,869 | $ | 18,670 | ||||||||||||
| Net investment income | 151 | 45 | 393 | 202 | ||||||||||||||||
| Other income | 345 | 243 | 862 | 702 | ||||||||||||||||
| Total revenue | 7,632 | 6,689 | 24,124 | 19,574 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Net losses and loss adjustment expenses | 6,443 | 3,325 | 14,917 | 6,971 | ||||||||||||||||
| Amortization of deferred policy acquisition costs | 2,095 | 1,676 | 6,148 | 4,773 | ||||||||||||||||
| General and administrative expenses | 1,658 | 1,624 | 4,982 | 5,414 | ||||||||||||||||
| Loss on termination of Management Services Agreement (MSA) | — | — | — | 5,421 | ||||||||||||||||
| Accretion of discount on Series B Preferred Shares | 89 | 85 | 263 | 194 | ||||||||||||||||
| Total expenses | 10,285 | 6,710 | 26,310 | 22,773 | ||||||||||||||||
| Loss before income tax (benefit) expense | (2,653 | ) | (21 | ) | (2,186 | ) | (3,199 | ) | ||||||||||||
| Income tax (benefit) expense | (847 | ) | 82 | (605 | ) | (947 | ) | |||||||||||||
| Net loss | $ | (1,806 | ) | $ | (103 | ) | $ | (1,581 | ) | $ | (2,252 | ) | ||||||||
| Net loss per share: | ||||||||||||||||||||
| Basic | $ | (0.30 | ) | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.36 | ) | ||||||||
| Diluted | $ | (0.30 | ) | $ | (0.02 | ) | $ | (0.26 | ) | $ | (0.36 | ) | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||||||
| Basic | 6,022,983 | 6,261,378 | 6,076,838 | 6,324,638 | ||||||||||||||||
| Diluted | 6,022,983 | 6,261,378 | 6,076,838 | 6,324,638 | ||||||||||||||||
| Consolidated Statements of Comprehensive Loss | ||||||||||||||||||||
| Net loss | $ | (1,806 | ) | $ | (103 | ) | $ | (1,581 | ) | $ | (2,252 | ) | ||||||||
| Unrealized (losses) gains on investments available for sale, net of income taxes | (11 | ) | 66 | 310 | 60 | |||||||||||||||
| Comprehensive loss | $ | (1,817 | ) | $ | (37 | ) | $ | (1,271 | ) | $ | (2,192 | ) | ||||||||
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1347 PROPERTY INSURANCE HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheets (in thousands, except share and per share data) |
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| September 30, 2016 (unaudited) | December 31, 2015 | |||||||||
| ASSETS | ||||||||||
| Investments: | ||||||||||
| Fixed income securities, at fair value (amortized cost of $27,756 and $20,332, respectively) | $ | 28,081 | $ | 20,238 | ||||||
| Equity investments, at fair value (cost of $1,000 and $0, respectively) | 1,050 | – | ||||||||
| Short-term investments, at cost which approximates fair value | 1,933 | 1,149 | ||||||||
| Limited liability investments, at cost which approximates fair value | 387 | 248 | ||||||||
| Total investments | 31,451 | 21,635 | ||||||||
| Cash and cash equivalents | 38,926 | 47,957 | ||||||||
| Deferred policy acquisition costs, net | 4,369 | 4,030 | ||||||||
| Premiums receivable, net of allowance for credit losses of $35 and $3, respectively | 2,102 | 2,395 | ||||||||
| Ceded unearned premiums | 4,451 | 2,805 | ||||||||
| Reinsurance recoverable on paid losses | 2,620 | – | ||||||||
| Reinsurance recoverable on loss and loss adjustment expense reserves | 5,366 | 120 | ||||||||
| Funds deposited with reinsured companies | – | 725 | ||||||||
| Current income taxes recoverable | 1,571 | 965 | ||||||||
| Net deferred income taxes | 555 | 506 | ||||||||
| Property and equipment, net | 266 | 234 | ||||||||
| Intangible assets, net of accumulated amortization of $5 and $3, respectively | 4 | 6 | ||||||||
| Other assets | 774 | 705 | ||||||||
| Total assets | $ | 92,455 | $ | 82,083 | ||||||
| LIABILITIES | ||||||||||
| Loss and loss adjustment expense reserves | $ | 8,627 | $ | 2,123 | ||||||
| Unearned premium reserves | 26,344 | 23,442 | ||||||||
| Ceded reinsurance premiums payable | 5,616 | 3,283 | ||||||||
| Agency commissions payable | 542 | 403 | ||||||||
| Premiums collected in advance | 1,689 | 870 | ||||||||
| Accrued expenses and other liabilities | 1,778 | 1,863 | ||||||||
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Series B Preferred Shares, $25.00 par value, 1,000,000 shares authorized, 120,000 shares issued and outstanding for both periods |
2,616 | 2,593 | ||||||||
| Total liabilities | $ | 47,212 | $ | 34,577 | ||||||
| SHAREHOLDERS’ EQUITY | ||||||||||
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Common stock, $0.001 par value; 10,000,000 shares authorized; 6,108,125 and 6,358,125 issued and outstanding at September 30, 2016 and December 31, 2015, respectively |
$ | 6 | $ | 6 | ||||||
| Additional paid-in capital | 46,801 | 48,688 | ||||||||
| Retained (loss) earnings | (976 | ) | 605 | |||||||
| Accumulated other comprehensive income (loss) | 248 | (62 | ) | |||||||
| 46,079 | 49,237 | |||||||||
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Less: treasury stock at cost; 127,756 and 223,851 shares as of September 30, 2016 and December 31, 2015, respectively |
(836 | ) | (1,731 | ) | ||||||
| Total shareholders’ equity | 45,243 | 47,506 | ||||||||
| Total liabilities and shareholders’ equity | $ | 92,455 | $ | 82,083 | ||||||
Additional Information
Additional information about 1347 Property Insurance Holding, Inc., including its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016 and its Annual Report on Form 10-K for the fiscal year ended December 31, 2015, can be found at the U.S. Securities and Exchange Commission's website at www.sec.gov, or at PIH’s corporate website: www.1347pih.com.
