• Filing Date: 2017-02-22
  • Form Type: 10-K
  • Description: Annual report
v3.6.0.2
Commitments and Contingencies
12 Months Ended
Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 22 — Commitments and Contingencies

Obligations under Multi-Year Reinsurance Contracts

As of December 31, 2016, the Company had contractual obligations related to multi-year reinsurance contracts. These contracts have effective dates of June 1, 2016 and may be cancelled only with the other party’s consent. The future minimum aggregate premiums payable to the reinsurers is $19,400 due in 2017 and 2018.

Lease Commitments

The Company currently leases 15,000 square feet of office space in Noida, India. The lease commenced January 15, 2013 and has an initial term of nine years with monthly rental payments of approximately $10 plus applicable service tax for the first year. Thereafter the monthly rental payment will increase by five percent every year. In addition, the Company has a three-year lease for 2,819 square feet of office space in Miami, Florida. The lease commenced February 15, 2015 with monthly rental payments of approximately $5 plus applicable sales tax.

Provided the leases are not early terminated, minimum future rental payments under operating leases after December 31, 2016 are as follows:

 

Year

   Amount  

2017

   $ 191   

2018

     126   

2019

     132   

2020

     139   

2021

     146   
  

 

 

 

Total minimum future payments

   $ 734   
  

 

 

 

Rental expense under all facility leases was $333, $304 and $222, respectively, during the years ended December 31, 2016, 2015 and 2014.

Service Agreement

In connection with the lease for office space in India as described in the “Lease Commitments” above, the Company signed a long-term contract with the landlord to receive maintenance and facility services. The agreement has the same initial term of nine years with monthly payments of approximately $2 plus applicable service tax for the first year. Thereafter, the monthly payment will increase by five percent every year.

Provided the agreement is not early terminated, minimum future payments under the service agreement after December 31, 2016 are as follows:

 

Year

   Amount  

2017

   $ 22   

2018

     22   

2019

     24   

2020

     25   

2021

     26   
  

 

 

 

Total minimum future payments

   $ 119   
  

 

 

 

Rental Income

The Company’s headquarters is located on real estate that consists of 3.5 acres of land, a three-story building with gross area of 122,000 square feet, and a four-level parking garage. This facility is used by the Company and its subsidiaries. In addition, the Company has rental income from two recently acquired retail shopping centers (See Note 6 — “Business Acquisitions”). The Company leases available space at the Company’s headquarters and at three of its investment properties to non-affiliates at various terms.

Expected annual rental income due under non-cancellable operating leases for all properties and other investments owned at December 31, 2016 is as follows:

 

Year

   Amount  

2017

   $ 2,669   

2018

     2,603   

2019

     2,496   

2020

     2,263   

2021

     1,819   

Thereafter

     11,983   
  

 

 

 

Total

   $ 23,833   
  

 

 

 

Insurance Assessments and Surcharges

As a direct premium writer in the state of Florida, HCPCI was subject to mandatory assessments by Citizens and the Florida Hurricane Catastrophe Fund (“FHCF”). These assessments were paid based on a percentage of the Company’s direct written premium by line of business. Effective January 1, 2015, the FHCF assessment imposed on all property insurance policies was removed. For the year ended December 31, 2014, HCPCI paid assessments to FHCF amounting to $4,481. In addition, the Citizens assessment was eliminated effective July 1, 2015. HCPCI paid assessments to Citizens of $2,756 and $3,447, respectively, for the years ended December 31, 2015 and 2014. These assessments were recorded as a surcharge in premium billings to insureds. The Citizens surcharge rate in effect during the first five-months of 2015 was 1.0%. As of December 31, 2014, the surcharge rates in effect for FHCF and Citizens were 1.3% and 1.0%, respectively.

 

Capital Commitment

As described in Note 4 — “Investments” under Limited Partnership Investments, the Company is contractually committed to capital contributions for limited partnership interests. At December 31, 2016, there was an aggregate unfunded balance of $13,554.

Premium Tax

During the period from September 2013 to December 2015, the Company worked with the Florida Department of Revenue (“the Department”) in connection with the Department’s audit of and proposed adjustments to the Company’s premium tax returns for the three-year period ended December 31, 2012. In December 2015, the Department issued its Notice of Decision indicating the Company owed approximately $38 in full settlement of the premium tax and related interest, which the Company paid in February 2016. As part of the negotiated settlement, the Company was also required to file and pay reemployment taxes with respect to certain subsidiaries. These filings resulted in net refunds to the Company totaling $57. Thus, the Company realized a net benefit of $19. Management believes this matter is fully resolved.

Litigation

In December 2014, the company received two nearly identical letters from a single law firm representing two individual shareholders demanding the Company take action against its directors to remedy alleged damages to the Company. The Company, each of the directors and the two shareholders agreed to a settlement. The directors agreed to cancel portions of their restricted stock awards aggregating 160,000 restricted shares, including 100,000 restricted shares issued to the Company’s chief executive officer. Those restricted shares were cancelled March 2, 2016. As a result, the Company’s results of operations for the year ended December 31, 2015 included $936 of expense related to this settlement, primarily expense related to the reclassification from retained earnings of dividends paid through December 2015 and expense related to the acceleration and recognition of the unamortized portion of accounting expense determined at the grant date. The board members and the Company also agreed to implement certain non-financial corporate governance changes. During 2016, the board had consulted an independent compensation expert in determining the chief executive’s equity based compensation for 2017. The Company is not aware of any other pending shareholder demands.