• Filing Date: 2020-03-06
  • Form Type: 10-K
  • Description: Annual report
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Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 26, 2020
Jun. 30, 2019
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Trading Symbol HCI    
Entity Registrant Name HCI Group, Inc.    
Entity Central Index Key 0001400810    
Current Fiscal Year End Date --12-31    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Title of 12(b) Security Common Shares    
Security Exchange Name NYSE    
Entity File Number 001-34126    
Entity Incorporation, State or Country Code FL    
Entity Tax Identification Number 20-5961396    
Entity Address, Address Line One 5300 West Cypress Street    
Entity Address, Address Line Two Suite 100    
Entity Address, City or Town Tampa    
Entity Address, State or Province FL    
Entity Address, Postal Zip Code 33607    
City Area Code 813    
Local Phone Number 849-9500    
Document Annual Report true    
Document Transition Report false    
Entity Common Stock, Shares Outstanding   7,962,414  
Entity Public Float     $ 263,602,883
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Documents Incorporated by Reference

The information required by Part III of this Form 10-K is incorporated by reference from the registrant’s definitive proxy statement which will be filed not later than 120 days after the end of the fiscal year covered by this Form 10-K.

   
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Assets    
Fixed-maturity securities, available for sale, at fair value (amortized cost: $199,954 and $184,670, respectively) $ 202,839 $ 182,723
Equity securities, at fair value (cost: $31,863 and $45,671, respectively) 35,285 41,143
Short-term investments 491 66,479
Limited partnership investments, at equity 28,346 32,293
Investment in unconsolidated joint venture, at equity 762 845
Assets held for sale   9,810
Real estate investments 73,763 54,490
Total investments 341,486 387,783
Cash and cash equivalents 229,218 239,458
Restricted cash 700 700
Accrued interest and dividends receivable 1,616 1,792
Income taxes receivable 1,040 971
Premiums receivable 20,255 16,667
Prepaid reinsurance premiums 17,983 17,932
Reinsurance recoverable:    
Paid losses and loss adjustment expenses 16,155 11,151
Unpaid losses and loss adjustment expenses 116,523 112,760
Deferred policy acquisition costs 21,663 16,507
Property and equipment, net 14,698 13,338
Intangible assets, net 4,192 4,800
Other assets 17,080 9,004
Total assets 802,609 832,863
Liabilities and Stockholders’ Equity    
Losses and loss adjustment expenses 214,697 207,586
Unearned premiums 181,163 157,729
Advance premiums 5,589 6,192
Assumed reinsurance balances payable 76 14
Accrued expenses 10,059 6,483
Deferred income taxes, net 4,008 1,068
Revolving credit facility 9,750  
Long-term debt 163,695 250,150
Other liabilities 28,029 22,200
Total liabilities 617,066 651,422
Commitments and contingencies (Note 23)
Stockholders’ equity:    
Preferred stock
Common stock (no par value, 40,000,000 shares authorized, 7,764,564 and 8,356,730 shares issued and outstanding in 2019 and 2018, respectively)
Additional paid-in capital
Retained income 183,365 182,894
Accumulated other comprehensive income (loss) , net of taxes 2,178 (1,453)
Total stockholders’ equity 185,543 181,441
Total liabilities and stockholders’ equity 802,609 832,863
7% Series A Cumulative Convertible Preferred Stock [Member]    
Stockholders’ equity:    
Preferred stock
Series B Preferred Stock [Member]    
Stockholders’ equity:    
Preferred stock
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Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Available-for-sale Debt securities, Amortized cost $ 199,954 $ 184,670
Equity Securities, Cost $ 31,863 $ 45,671
Preferred stock, no par value
Preferred stock, authorized 18,100,000 18,100,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
Common stock, no par value
Common stock, shares authorized 40,000,000 40,000,000
Common stock, shares issued 7,764,564 8,356,730
Common stock, outstanding 7,764,564 8,356,730
7% Series A Cumulative Convertible Preferred Stock [Member]    
Preferred stock, no par value
Preferred stock, authorized 1,500,000 1,500,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
Series B Preferred Stock [Member]    
Preferred stock, no par value
Preferred stock, authorized 400,000 400,000
Preferred stock, issued 0 0
Preferred stock, outstanding 0 0
v3.19.3.a.u2
Consolidated Statements of Income - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Revenue      
Gross premiums earned $ 342,079 $ 343,065 $ 358,253
Premiums ceded (125,765) (129,643) (133,635)
Net premiums earned 216,314 213,422 224,618
Net investment income 13,642 16,581 11,439
Net realized investment (losses) gains (254) 6,183 4,346
Net unrealized investment gains (losses) 7,950 (10,202) 92
Net other-than-temporary impairment losses recognized in income:      
Total other-than-temporary impairment losses (289) (80) (1,116)
Portion of loss recognized in other comprehensive income, before taxes     (351)
Net other-than-temporary impairment losses (289) (80) (1,467)
Policy fee income 3,229 3,389 3,622
Other 1,882 1,999 1,756
Total revenue 242,474 231,292 244,406
Expenses      
Losses and loss adjustment expenses 107,514 109,328 165,629
Policy acquisition and other underwriting expenses 42,497 38,943 39,663
General and administrative personnel expenses 31,112 25,908 25,127
Interest expense 13,055 18,096 16,767
Loss on repurchases of senior notes     743
Impairment loss     38
Other operating expenses 12,203 12,115 12,063
Total operating expenses 206,381 204,390 260,030
Income (loss) before income taxes 36,093 26,902 (15,624)
Income tax expense (benefit) 9,517 9,177 (8,731)
Net income (loss) $ 26,576 $ 17,725 $ (6,893)
Basic earnings (loss) per share $ 3.32 $ 2.34 $ (0.75)
Diluted earnings (loss) per share $ 3.31 $ 2.34 $ (0.75)
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Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement Of Income And Comprehensive Income [Abstract]      
Net income (loss) $ 26,576 $ 17,725 $ (6,893)
Change in unrealized gain (loss) on investments:      
Net unrealized gains (losses) arising during the period 4,902 (3,137) 5,996
Other-than-temporary impairment loss charged to investment income 289 80 1,467
Call and repayment (gains) losses charged to investment income (141) (18) 14
Reclassification adjustment for net realized gains (218) (723) (4,346)
Net change in unrealized gains (losses) 4,832 (3,798) 3,131
Deferred income taxes on above change (1,201) 963 (1,208)
Total other comprehensive income (loss), net of income taxes 3,631 (2,835) 1,923
Comprehensive income (loss) $ 30,207 $ 14,890 $ (4,970)
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Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Share Repurchase Plan [Member]
Common Stock [Member]
Common Stock [Member]
Share Repurchase Plan [Member]
Additional Paid-In Capital [Member]
Additional Paid-In Capital [Member]
Share Repurchase Plan [Member]
Retained Income [Member]
Accumulated Other Comprehensive (Loss) Income, Net of Tax [Member]
Beginning Balance at Dec. 31, 2016 $ 243,746       $ 8,139   $ 232,964 $ 2,643
Beginning Balance, shares at Dec. 31, 2016     9,662,761          
Net income (loss) (6,893)           (6,893)  
Total other comprehensive income (loss), net of income taxes 1,923             1,923
Issuance of restricted stock 0   $ 0   0   0 0
Issuance of restricted stock, shares     154,936          
Exercise of common stock options, value $ 75       75      
Exercise of common stock options, shares 30,000   30,000          
Forfeiture of restricted stock, value $ 0   $ 0   0   0 0
Forfeiture of restricted stock, shares     (23,766)          
Repurchase and retirement of common stock, value (21,318) $ (15,154)     (21,318) $ (15,154)    
Repurchase and retirement of common stock, shares     (437,240) (433,175)        
Repurchase of common stock under prepaid forward contract, value (9,400)       (9,400)      
Repurchase of common stock under prepaid forward contract, shares     (191,100)          
Equity component on 4.25% convertible senior notes (net of offering costs of $543) 15,151       15,151      
Deferred taxes on debt discount (5,845)       (5,845)      
Common stock dividends (12,833)           (12,833)  
Stock-based compensation 4,523       4,523      
Additional paid-in capital shortfall allocated to retained income         23,829   (23,829)  
Ending Balance at Dec. 31, 2017 193,975           189,409 4,566
Ending Balance, shares at Dec. 31, 2017     8,762,416          
Net income (loss) 17,725           17,725  
Total other comprehensive income (loss), net of income taxes (2,835)             (2,835)
Reclassification of after-tax net unrealized holding gains related to equity securities             4,168 (4,168)
Reclassification of stranded tax effects related to available-for-sale fixed-maturity and equity securities             (984) 984
Issuance of restricted stock $ 0   $ 0   0   0 0
Issuance of restricted stock, shares     189,860          
Exercise of common stock options, shares 0              
Forfeiture of restricted stock, value $ 0   $ 0   0   0 0
Forfeiture of restricted stock, shares     (56,637)          
Repurchase and retirement of common stock, value (1,151) (20,015)     (1,151) (20,015)    
Repurchase and retirement of common stock, shares     (27,281) (511,628)        
Purchase of noncontrolling interest (539)       (539)      
Common stock dividends (10,351)           (10,351)  
Stock-based compensation 4,632       4,632      
Additional paid-in capital shortfall allocated to retained income         17,073   (17,073)  
Ending Balance at Dec. 31, 2018 181,441       0   182,894 (1,453)
Ending Balance, shares at Dec. 31, 2018     8,356,730          
Net income (loss) 26,576           26,576  
Total other comprehensive income (loss), net of income taxes 3,631             3,631
Issuance of restricted stock 0   $ 0   0   0 0
Issuance of restricted stock, shares     180,404          
Exercise of common stock options, value $ 63       63      
Exercise of common stock options, shares 10,000   10,000          
Forfeiture of restricted stock, value $ 0   $ 0   0   0 0
Forfeiture of restricted stock, shares     (299,776)          
Repurchase and retirement of common stock, value (1,203) $ (18,851)     (1,203) $ (18,851)    
Repurchase and retirement of common stock, shares     (28,784) (454,010)        
Common stock dividends (12,706)           (12,706)  
Stock-based compensation 6,460       6,460      
Tax basis adjustment on equity method investment 132       132      
Additional paid-in capital shortfall allocated to retained income         $ 13,399   (13,399)  
Ending Balance at Dec. 31, 2019 $ 185,543           $ 183,365 $ 2,178
Ending Balance, shares at Dec. 31, 2019     7,764,564          
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Consolidated Statements of Stockholders' Equity (Parenthetical)
$ in Thousands
12 Months Ended
Dec. 31, 2017
USD ($)
$ / shares
Common stock dividends | $ / shares $ 1.40
Additional Paid-In Capital [Member]  
Stated interest rate on convertible senior notes 4.25%
Offering costs for convertible senior notes | $ $ 543
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:      
Net income (loss) $ 26,576 $ 17,725 $ (6,893)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Stock-based compensation 6,460 4,632 4,523
Net amortization of premiums on investments in fixed-maturity securities 50 761 1,252
Depreciation and amortization 8,942 10,996 9,591
Deferred income tax expense (benefit) 1,871 141 (4,913)
Net realized investment losses (gains) 254 (6,183) (4,346)
Net unrealized investment (gains) losses (7,950) 10,202 (92)
Other-than-temporary impairment losses 289 80 1,467
Loss (income) from unconsolidated joint venture 83 (304) 234
Distribution received from unconsolidated joint venture   68 147
Loss on repurchases of senior notes     743
Impairment loss     38
Net income from limited partnership interests (1,176) (4,430) (2,334)
Distributions received from limited partnership interests 4,176 2,345 881
Foreign currency remeasurement loss (gain) 57 135 (60)
Other non-cash items 290 72 134
Changes in operating assets and liabilities:      
Accrued interest and dividends receivable 176 191 (329)
Income taxes (69) 15,221 (13,381)
Premiums receivable (3,588) 1,140 (531)
Prepaid reinsurance premiums (51) 4,354 2,268
Reinsurance recoverable (8,767) (20,807) (103,104)
Deferred policy acquisition costs (5,156) 205 (73)
Other assets (7,837) 408 783
Losses and loss adjustment expenses 7,111 9,008 128,086
Unearned premiums 23,434 (7,167) (10,907)
Advance premiums (603) 1,244 297
Assumed reinsurance balances payable 62 (1) (3,279)
Reinsurance recovered in advance on unpaid losses   (13,885) 13,885
Accrued expenses and other liabilities 9,413 2,444 2,548
Net cash provided by operating activities 54,047 28,595 16,635
Cash flows from investing activities:      
Investments in limited partnership interests (1,174) (7,182) (4,226)
Distributions received from limited partnership interests 2,121 158 11,758
Distribution from unconsolidated joint venture   695 417
Purchase of property and equipment (2,887) (2,187) (2,340)
Purchase of intangible assets   (409) (637)
Purchase of real estate investments (11,481) (7,472) (11,878)
Purchase of fixed-maturity securities (82,662) (113,174) (114,743)
Purchase of equity securities (24,637) (52,250) (50,453)
Purchase of short-term and other investments (1,178) (201,538)  
Proceeds from sales of fixed-maturity securities 7,947 81,809 31,759
Proceeds from calls, repayments and maturities of fixed-maturity securities 59,343 82,177 14,897
Proceeds from sales of equity securities 37,669 66,439 45,282
Proceeds from sales, redemptions and maturities of short-term and other investments 67,398 135,256  
Net cash provided by (used in) investing activities 50,459 (17,678) (80,164)
Cash flows from financing activities:      
Cash dividends paid (13,012) (11,318) (13,906)
Cash dividends received under share repurchase forward contract 306 967 1,073
Proceeds from revolving credit facility 9,750    
Proceeds from exercise of common stock options 63   75
Proceeds from the issuance of long-term debt   6,000 143,859
Repurchases of senior notes     (40,250)
Repayment of long-term debt (91,318) (1,127) (974)
Repurchases of common stock (1,203) (1,151) (30,718)
Repurchases of common stock under share repurchase plan (18,851) (20,015) (15,154)
Purchase of non-controlling interest   (539)  
Debt issuance costs (459) (105) (4,975)
Net cash (used in) provided by financing activities (114,724) (27,288) 39,030
Effect of exchange rate changes on cash (22) (164) 61
Net decrease in cash, cash equivalents and restricted cash (10,240) (16,535) (24,438)
Cash, cash equivalents and restricted cash at beginning of year 240,158 256,693 281,131
Cash, cash equivalents and restricted cash at end of year 229,918 240,158 256,693
Supplemental disclosure of cash flow information:      
Cash paid for income taxes 7,713 3,655 11,506
Cash paid for interest 9,386 10,720 8,906
Non-cash investing and financing activities:      
Unrealized gain (loss) on investments in available-for-sale securities, net of tax 3,631 (2,835) 1,923
Conversion of revolving credit facility to long-term debt     9,441
Receivable from sales of available-for-sale securities     255
Payable on purchases of available-for-sale securities     $ 4
Addition to property and equipment under finance lease $ 18 $ 61  
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Nature of Operations
12 Months Ended
Dec. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Nature of Operations

Note 1 -- Nature of Operations

HCI Group, Inc., together with its subsidiaries (“HCI” or the “Company”), is primarily engaged in the property and casualty insurance business through two Florida domiciled insurance companies, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TypTap”). HCPCI is authorized to underwrite various homeowners’ property and casualty insurance products and allied lines business in the state of Florida. HCPCI also offers flood-endorsed and wind-only policies to Florida customers and has regulatory approval to underwrite residential property and casualty insurance in the states of Arkansas, California, Maryland, North Carolina, New Jersey, Ohio, Pennsylvania, South Carolina and Texas. However, Florida is still HCPCI’s primary market. TypTap offers standalone flood and homeowners multi-peril policies to Florida homeowners. The operations of both insurance subsidiaries are supported by HCI Group, Inc. and certain HCI subsidiaries. In particular, the Company is developing technologies to collect and analyze claims and other supplemental data to generate savings and efficiency for the operations of the insurance subsidiaries.

In addition, Greenleaf Capital, LLC, the Company’s real estate subsidiary, is primarily engaged in the businesses of owning and leasing real estate and operating marina facilities and one restaurant. See Note 16 -- “Segment Information.”

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Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2 -- Summary of Significant Accounting Policies

Basis of Presentation. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Adoption of New Accounting Standards.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842). The guidance establishes new principles that lessees and lessors will apply to report useful information to users of financial statements about the amount, timing, and uncertainty of cash flows arising from a lease. ASU 2016-02 is effective for the Company January 1, 2019 and supersedes accounting for leases prescribed in Topic 840, Leases. ASU 2016-02 leaves lessor accounting substantially unchanged. The key change affecting the Company is the requirement that operating leases be recorded on the balance sheet. Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; ASU No. 2018-11, Targeted Improvements; ASU No. 2018-20, Narrow-Scope Improvements for Lessors; and ASU No. 2019-01, Codification Improvements to Topic 842. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company was initially required to use a modified retrospective method and apply this standard at the beginning of the earliest comparative period presented in the financial statements. Subsequently, the FASB permitted the application of this standard at the beginning of the adoption period as an alternative.

 

Effective January 1, 2019, the Company adopted the new standard using the effective date as its date of initial application. As a result, financial information is not updated and the disclosures required under the new standard are not provided for dates and periods prior to January 1, 2019. The Company elected a package of practical expedients, which permits the Company to not reassess under the new standard its prior conclusions about lease identification, lease classification, and initial direct costs. Upon adoption, the Company, as a lessee, recognized ROU assets of approximately $771 and lease liabilities of approximately $812 for all operating leases except for those that have a lease term of 12 months or less.

 

Principles of Consolidation. The accompanying consolidated financial statements include the accounts of HCI Group, Inc. and its majority-owned and controlled subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, the Company evaluates its relationships or investments for consolidation pursuant to authoritative accounting guidance related to the consolidation of variable interest entities under the Variable Interest Model prescribed by the FASB. A variable interest entity is consolidated when the Company has the power to direct activities that most significantly impact the economic performance of the variable interest entity and has the obligation to absorb losses or the right to receive benefits from the variable interest entity that could potentially be significant to the variable interest entity. When a variable interest entity is not consolidated, the Company uses the equity method to account for the investment. Under this method, the carrying value is generally the Company’s share of the net asset value of the unconsolidated entity, and changes in the Company’s share of the net asset value are recorded in net investment income.

 

Use of Estimates. The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from these estimates. Material estimates that are particularly susceptible to significant change in the near term are primarily related to losses and loss adjustment expenses, reinsurance with retrospective provisions, reinsurance recoverable, deferred income taxes, and stock-based compensation expense.

 

Cash and Cash Equivalents. The Company considers all short-term highly liquid investments with original maturities of less than three months to be cash and cash equivalents. At December 31, 2019 and 2018, cash and cash equivalents consisted of cash on deposit with financial institutions and securities brokerage firms, commercial paper, and certificates of deposit.

Available-for-Sale Fixed-Maturity Securities. Fixed-maturity securities include debt securities and redeemable preferred stock. The Company’s available-for-sale securities are carried at fair value. Temporary changes in the fair value of available-for-sale securities are excluded from net investment income and reported in stockholders’ equity as a component of accumulated other comprehensive income, net of deferred income taxes. Realized investment gains and losses from sales are recorded on the trade date and are determined using the first-in first-out (FIFO) method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest method over the estimated remaining term of the security. Gains and losses from call redemptions and repayments are charged to investment income.

 

The Company reviews fixed-maturity securities for other-than-temporary impairment on a monthly basis. When the fair value of any investment is lower than its cost, an assessment is made to determine whether the decline is temporary or other-than-temporary. If the decline is determined to be other-than-temporary, the investment is written down to fair value and an impairment loss is recognized in income in the period in which the Company makes such determination.

 

When reviewing impaired securities, the Company considers its ability and intent to hold these securities and whether it is probable that the Company will be required to sell these securities prior to their anticipated recovery or maturity. For the fixed-maturity securities that the Company intends to sell or it is probable that the Company will have to sell before recovery or maturity, the unrealized losses are recognized as other-than-temporary losses in income. In instances where there are credit related losses associated with the impaired fixed-maturity securities for which the Company asserts that it does not have the intent to sell, and it is probable that the Company will not be required to sell until a market price recovery or maturity, the amount of the other-than-temporary impairment loss related to credit losses is recognized in income, and the amount of the other-than-temporary impairment loss related to other non-credit factors such as changes in interest rates or market conditions is recorded as a component of accumulated other comprehensive income.

 

When determining impairment due to a credit related loss, the Company carefully considers factors such as the issuer’s financial ratios and condition, the security’s current ratings and maturity date, and overall market conditions in estimating the cash flows expected to be collected. The expected cash flows discounted at the effective interest rate of the security implicit at the date of acquisition is then compared with the security’s amortized cost at the measurement date. A credit loss is incurred when the present value of the expected cash flows is less than the security’s amortized cost. The Company considers various factors in determining whether an individual security is other-than-temporarily impaired (see Available-for-Sale Fixed-Maturity Securities in Note 5 -- “Investments”).

 

Equity Securities. Equity securities represent ownership interests held by the Company in entities for investment purposes.  Unrealized holding gains and losses related to equity securities are reported in the consolidated statement of income as net unrealized investment gains and losses. Realized investment gains and losses from sales are recorded on the trade date and are determined using the first-in first-out method (see Equity Securities in Note 5 -- “Investments”). Prior to January 1, 2018, these equity securities were classified as either available-for-sale or trading and were carried at fair value on the Company’s consolidated balance sheet. Unrealized holding gains and losses from the changes in the fair values of available-for-sale equity securities were reported in accumulated other comprehensive income.

Short-Term Investments. Short-term investments include certificates of deposit issued by financial institutions and commercial paper with original maturities of more than three months but less than one year at date of acquisition. These short-term investments are carried at cost or amortized cost, which approximates fair value.

 

Limited Partnership Investments. The Company has interests in limited partnerships that are not registered under the United Stated Securities Act of 1933, as amended, the securities laws of any state or the securities laws of any other jurisdictions. The partnership interests cannot be resold in the public market and any withdrawal is subject to the terms and conditions of the partnership agreement. The Company has no influence over partnership operating and financial policies. The Company did not elect the fair value option and, therefore, uses the equity method to account for these investments (see Limited Partnership Investments in Note 5 -- “Investments”). The Company generally recognizes its share of the limited partnership’s earnings or losses on a three-month lag.

 

Pursuant to U.S. GAAP, these limited partnerships which are private equity funds must measure their investments at fair value and reflect the unrealized gains and losses in the fair value of their investments on their statement of income. As a result, the carrying value of limited partnership investments at each reporting date approximates their estimated fair value.

 

Investment in Unconsolidated Joint Venture. The Company has a 90% equity interest in a limited liability company (treated as a joint venture under U.S. GAAP) that owns land for lease or for sale. The joint venture was determined to be a variable interest entity as it lacks sufficient equity to finance its activities without additional subordinated financial support. Despite having a majority equity interest, the Company does not have the power to direct the activities that most significantly impact the economic performance of the joint venture and, accordingly, is not required to consolidate the joint venture as its primary beneficiary. As a result, the Company uses the equity method to account for this investment.

 

When evidence indicates an impairment may occur, the Company evaluates whether a decline in value is other than temporary. Evidence may include continuing operating losses of the joint venture, a declining occupancy rate, a decrease in real estate value, and an oversupply of rental property in close vicinity to the investment property. Should available evidence indicate the recovery of the initial investment is less likely, the Company would compare the carrying value of the investment with its expected residual value and recognize an impairment loss in earnings.

 

Assets Held for Sale. Assets held for sale are valued at the lower of the carrying value or fair value less costs to sell. Assets are classified as held for sale when the following criteria are met: (i) management has the authority and commits to a plan to sell the asset; (ii) the asset is available for immediate sale in its present condition; (iii) there is an active program to locate a buyer and the plan to sell the asset has been initiated; (iv) the sale of the asset is probable within one year; (v) the property is being actively marketed at a reasonable sale price relative to its current fair value; and (vi) it is unlikely that the plan to sell will be withdrawn or that significant changes to the plan will be made.

 

In determining the fair value of the assets less costs to sell, the Company primarily relies on the value determined by an independent appraiser. If the estimated fair value less costs to sell is less than the carrying value of the asset, the asset is written down to its estimated fair value less costs to sell and an impairment loss is recognized in the consolidated statement of income. Depreciation is not recorded while assets are classified as held for sale.

 

Real Estate Investments. Real estate investments include real estate and the related assets purchased for investment purposes (see Note 5 -- “Investments”). Real estate and the related depreciable assets are carried at cost, net of accumulated depreciation, which is included in net investment income and allocated over the estimated useful life of the asset using the straight-line method of depreciation. Land is not depreciated. Real estate is evaluated for impairment when events or circumstances indicate the carrying value of the real estate may not be recoverable.

 

Deferred policy acquisition costs. Deferred policy acquisition costs (“DAC”) represent direct costs to acquire insurance contracts and consist of premium taxes and commissions paid to outside agents at the time of collection of the policy premium. DAC is amortized over the life of the related policy in relation to the amount of gross premiums earned.

 

The method followed in computing DAC limits the amount of such deferred costs to their estimated realizable value, which gives effect to the gross premium earned, related investment income, unpaid losses and loss adjustment expenses and certain other costs expected to be incurred as the premium is earned.

 

DAC is reviewed to determine if it is recoverable from future premium income, including investment income. If such costs are determined to be unrecoverable, they are expensed at the time of determination. The amount of DAC considered recoverable could be reduced in the near term if the estimates of total revenues discussed above are reduced or permanently impaired as a result of the disposition of a line of business. The amount of amortization of DAC could be revised in the near term if any of the estimates discussed above are revised.

 

Property and Equipment. Property and equipment is stated at cost less accumulated depreciation and amortization, which is included in other operating expenses. Depreciation is calculated on a straight-line basis over the estimated useful lives as follows: building, 39 years; computer hardware and software, 3 years; and office and furniture equipment, 3 to 7 years. Leasehold improvements are amortized over the shorter of the lease term or the asset’s useful life. Land is not depreciated. Expenditures for improvements are capitalized to the property accounts. Replacements and maintenance and repairs that do not improve or extend the life of the respective assets are expensed as incurred. The Company capitalizes both internal and external costs for internally developed software during the application development stage. During the preliminary project and post-implementation stage, internal-use software development costs are expensed as incurred. Capitalized software costs are depreciated on a straight-line basis over the estimated useful life of 7 years.

 

Impairment of Long-Lived Assets. Long-lived assets, such as property and equipment, are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of long-lived assets by determining whether the assets can be recovered from undiscounted future cash flows. Recoverability of long-lived assets is dependent upon, among other things, the Company’s ability to maintain profitability, so as to be able to meet its obligations when they become due. In the opinion of management, based upon current information and projections, long-lived assets will be recovered over the period of benefit.

 

Intangible Assets. Intangibles consist of the value attributable to the acquired in-place leases and the primary, or anchor, tenant relationships. The value attributable to the anchor tenant relationship represents the economic benefits of having a nationally recognized retailer as the lead tenant, which draws consumer traffic and other tenants to the retail center. These intangibles are amortized to expense over the related lease term. Amortization of the intangibles related to real estate investments is reflected in net investment income in the consolidated statement of income. The Company reviews these intangible assets for impairment annually or when events or changes in circumstances indicate the carrying value may not be recoverable. In the event the Company determines the carrying value is not recoverable, an impairment loss is recorded in the Company’s consolidated statement of income.

 

Leases. The Company leases office equipment, storage units, and office space from non-affiliates under terms ranging from one month up to ten years. In assessing whether a contract is or contains a lease, the Company first determines whether there is an identified asset in the contract. The Company then determines whether the contract conveys the right to obtain substantially all of the economic benefits from use of the identified asset or the right to direct the use of the identified asset. The Company elects not to record any lease with a term of 12 months or less on the consolidated balance sheet. For such short-term leases, the Company recognizes the lease payments in expense on a straight-line basis over the lease term.

 

If the contract is or contains a lease and the Company has the right to control the use of the identified asset, the ROU asset and the lease liability is measured from the lease component of the contract and recognized on the consolidated balance sheet. In measuring the lease liability, the Company uses its incremental borrowing rate for a loan secured by a similar asset that has a term similar to the lease term to discount the lease payments. The contract is further evaluated to determine the classification of the lease as to whether it is finance or operating. If the lease is a finance lease, the ROU asset is depreciated to depreciation expense over the shorter of the useful life of the asset or the lease term. Interest expense is recorded in connection with the lease liability using the effective interest method. If the lease is an operating lease, the ROU asset is amortized to lease expense on a straight-line basis over the lease term. For the presentation of finance leases on the Company’s consolidated balance sheet, ROU assets and corresponding lease liabilities are included with property and equipment, net, and long-term debt, respectively. For the presentation of operating leases on the Company’s consolidated balance sheet, ROU assets and corresponding lease liabilities are included with other assets and other liabilities, respectively.

 

The Company as a lessor leases its commercial and retail properties, boat slips, and docks to non-affiliates at various terms. If the contract gives the Company’s customer the right to control the use of the identified asset, revenue is recognized on a straight-line basis over the lease term. Initial direct costs incurred by the Company are deferred and amortized on a straight-line basis over the lease term. The Company also records an unbilled receivable, which is the amount by which straight-line revenue exceeds the amount billed in accordance with the lease.

 

Lease Acquisition Costs. Lease acquisition costs represent capitalized costs of finding and acquiring tenants such as leasing commissions, legal, and marketing expenses. The costs are included in other assets in the consolidated balance sheet. The Company amortizes these costs in other operating expenses on a straight-line basis over the term of a lease.

 

Long-Term Debt. Long-term debt includes debt instruments and finance lease obligations. A debt instrument is generally classified as a liability and carried at amortized cost, net of any discount and issuance costs. At issuance, a debt instrument with embedded features such as conversion and redemption options is evaluated to determine whether bifurcation and derivative accounting is applicable. If such instrument is not subject to derivative accounting, it is further evaluated to determine if the Company is required to separately account for the liability and equity components.

 

To determine the carrying values of the liability and equity components at issuance, the Company measures the fair value of a similar liability, including any embedded features other than the conversion option, and assigns such value to the liability component. The liability component’s fair value is then subtracted from the initial proceeds to determine the carrying value of the debt instrument’s equity component, which is included in additional paid-in capital.

 

Any embedded feature other than the conversion option is evaluated at issuance to determine if it is probable that such embedded feature will be exercised. If the Company concludes that the exercisability of that embedded feature is not probable, the embedded feature is considered to be non-substantive and would not impact the initial measurement and expected life of the debt instrument’s liability component.

 

Transaction costs related to issuing a debt instrument that embodies both liability and equity components are allocated to the liability and equity components in proportion to the allocation of the proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. Debt issuance costs are capitalized and presented as a deduction from the carrying value of the debt. Both debt discount and deferred debt issuance costs are amortized to interest expense over the expected life of the debt instrument using the effective interest method. Equity issuance costs are a reduction to the proceeds allocated to the equity component.

 

Prepaid Share Repurchase Forward Contract. A prepaid share repurchase forward contract is generally a contract that allows the Company to buy from the counterparty a specified number of common shares at a specific time at a given forward price. The Company entered into such a contract and evaluated the characteristics of the forward contract to determine whether it met the definition of a derivative financial instrument pursuant to U.S. GAAP. The Company determined the forward contract is an equity contract on the Company’s common shares requiring physical settlement in common shares of the Company. As such, the transaction is recognized as a component of stockholders’ equity with a charge to additional paid-in capital equal to the prepayment amount, which represents the cash paid to the counterparty. There will be no recognition in earnings for changes in fair value in subsequent periods.

 

Losses and Loss Adjustment Expenses. Reserves for losses and loss adjustment expenses (“LAE”) are determined by establishing liabilities in amounts estimated to cover incurred losses and LAE. Such reserves are determined based on the assessment of claims reported and the development of pending claims. These reserves are based on individual case estimates for the reported losses and LAE and estimates of such amounts that are incurred but not reported. Changes in the estimated liability are charged or credited to income as the losses and LAE are settled.

 

The estimates of unpaid losses and LAE are subject to trends in claim severity and frequency and are continually reviewed. As part of the process, the Company reviews historical data and considers various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the existing unpaid losses and LAE. Adjustments are reflected in the results of operations in the period in which they are made and the liabilities may deviate substantially from prior estimates. Losses and LAE ceded to or recovered from reinsurers are recorded as a reduction to losses and LAE on the consolidated statement of income.

 

Advance Premiums. Premium payments received prior to the policy effective date are recorded as advance premiums. Once the policy is in force, the premiums are recorded as described under “Premium Revenue” below.

 

Reinsurance. In the normal course of business, the Company seeks to reduce the loss that may arise from catastrophes or other events by reinsuring certain levels of risk in various areas of exposure with other insurance enterprises or reinsurers. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions. Amounts recoverable from reinsurers are estimated in a manner consistent with the applicable reinsurance contract or contracts. Reinsurance premiums and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums ceded to other companies have been reported as a reduction of gross premiums earned. Prepaid reinsurance premiums represent the unexpired portion of premiums ceded to reinsurers.

 

One of the Company’s current reinsurance contracts contains retrospective provisions including terms and conditions that adjust premiums based on the loss experience under the contracts. In such cases, a with-and-without method is used to estimate the asset or liability amount to be recognized at each reporting date. The amount of the estimate is the difference between the net contract costs before and after the loss experience under the contract. Estimates related to premium adjustments are recognized in ceded premiums earned. These estimates are reviewed monthly based on the loss experience to date and as adjustments become necessary. Such adjustments are reflected in the Company’s current operations and recorded in other assets until received upon the expiration of the contracts.

 

The Company receives ceding commissions from ceding gross written premiums to a third-party reinsurer under one flood quota share reinsurance contract. The ceding commissions represent the reimbursement of the Company’s policy acquisition, underwriting and other operating expenses. Ceding commissions received cover a portion of premium taxes and agent commissions capitalized by the Company and a portion of non-capitalized acquisition costs and other underwriting expenses. Ceding commissions are recognized to income on a pro-rata basis over the terms of the policies reinsured, the amount of which is included in policy acquisition and other underwriting expenses in the consolidated statement of income. The unearned portion of ceding commissions that represents recovery of capitalized acquisition costs is classified as a reduction of deferred policy acquisition costs whereas the remaining unearned balance is classified as deferred revenue in other liabilities.

 

Premium Revenue. Premium revenue is earned on a daily pro-rata basis over the term of the policies and is included in gross premiums earned. Unearned premiums represent the portion of the premiums attributable to the unexpired policy term. The Company reviews its policy detail and establishes an allowance for any amount outstanding for more than 90 days. At December 31, 2019 and 2018, allowances for uncollectible premiums were $528 and $558, respectively.

 

Policy Fees. Policy fees represent nonrefundable fees for insurance coverage, which are intended to reimburse a portion of the costs incurred to underwrite the policy. Policy fees are recognized ratably over the policy coverage period.

 

Florida Insurance Guaranty Association Assessments. The Company’s Florida insurance subsidiaries may be assessed by the state guaranty association. The assessments are intended to be used for the payment of covered claims of insolvent insurance entities. The assessments are generally based on a percentage of premiums written during or following the year of insolvency. Liabilities are recognized when the assessments are probable to be imposed on the premiums on which they are expected to be based and the amounts can be reasonably estimated. The insurer is permitted by Florida statutes to recover the entire amount of assessments from in-force and future policyholders through policy surcharges. U.S. GAAP provides that the Company should record an asset based on the amount of written or obligated-to-write premiums and limited to the amounts recoverable over the life of the in-force policies.

 

Foreign Currency. The functional currency of the Company’s Indian subsidiary is the U.S. dollar. As such, the monetary assets and liabilities of this subsidiary are remeasured into U.S. dollars at the exchange rate in effect on the balance sheet date. Non-monetary assets and liabilities are remeasured using historical rates. Expenses recorded in the local currency are remeasured at the prevailing exchange rate. Exchange gains and losses resulting from these remeasurements are included in other operating expenses.

 

Income Taxes. The Company files consolidated federal and state income tax returns and allocates taxes among its wholly owned subsidiaries in accordance with a written tax-allocation agreement.

 

The Company accounts for income taxes in accordance with U.S. GAAP, resulting in two components of income tax expense: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over revenues. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax bases of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur.

 

Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred tax assets are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term “more likely than not” means a likelihood of more than fifty percent; the terms “examined” and “upon examination” also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information. The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized. As of December 31, 2019, management is not aware of any uncertain tax positions that would have a material effect on the Company’s consolidated financial statements.

 

Fair Value of Financial Instruments. The carrying amounts for the Company’s cash and cash equivalents approximate their fair values at December 31, 2019 and 2018. Fair values for securities or financial instruments are based on the framework for measuring fair value established by U.S. GAAP (see Note 7 -- “Fair Value Measurements”).

 

Stock-Based Compensation. The Company accounts for stock-based compensation under the fair value recognition provisions of U.S. GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors based on estimated fair values. In accordance with U.S. GAAP, the fair value of stock-based awards is generally recognized as compensation expense over the requisite service period, which is defined as the period during which a recipient is required to provide service in exchange for an award. Forfeitures of the Company’s stock-based awards are accounted for as they occur. The Company uses a straight-line attribution method for all grants that include only a service condition. The Company’s outstanding stock-based awards include stock options and restricted stock awards with service conditions. Compensation expense related to all awards is included in general and administrative personnel expenses. The Company receives a windfall tax benefit for certain stock option exercises and for restricted stock awards if these awards vest at a higher value than the value used to recognize compensation expense. In the event the restricted stock awards vest at a lower value than the value used to recognize compensation expense, the Company experiences a tax shortfall. The Company recognizes tax windfalls and shortfalls in the consolidated statement of income.

 

Basic and diluted earnings (loss) per common share. Basic earnings (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period. U.S. GAAP requires the inclusion of restricted stock as participating securities since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. In addition, the intrinsic value of restricted stock declines when the Company experiences operating losses. As a result, holders of the Company’s restricted stock are allocated a proportional share of net income and loss determined by dividing total weighted-average shares of restricted stock by the sum of total weighted-average common shares and shares of restricted stock (the “two-class method”). Diluted earnings (loss) per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted as well as participating equities. During loss periods, common stock equivalents such as stock options and convertible debt are excluded from the calculation of diluted loss per share, as the inclusion would have an anti-dilutive effect. See Note 19 -- “Earnings Per Share” for potentially dilutive securities at December 31, 2019, 2018 and 2017.

 

Statutory Accounting Practices. The Company’s U.S. insurance subsidiaries comply with statutory accounting practices prescribed by the National Association of Insurance Commissioners. There are no state prescribed or permitted practices that have been adopted by the Company’s U.S. subsidiaries. In addition, the Company’s Bermuda insurance subsidiary prepares and files financial statements in accordance with the prescribed regulatory accounting practices of the Bermuda Monetary Authority.

v3.19.3.a.u2
Recent Accounting Pronouncements
12 Months Ended
Dec. 31, 2019
Accounting Changes And Error Corrections [Abstract]  
Recent Accounting Pronouncements

Note 3 -- Recent Accounting Pronouncements

Accounting Standards Update No.  2019-12. In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. It eliminates certain exceptions to the guidance in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill, along with other clarifications. ASU 2019-12 is effective for the Company beginning with the first quarter of 2021. Early adoption is permitted. This guidance will not have a material impact on the Company’s consolidated financial statements. However, it will impact the Company’s future income tax disclosures in its notes to the consolidated financial statements.

Accounting Standard to be Adopted in Fiscal Year 2020

In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (“ASU 2016-13”), Financial Instruments - Credit Losses (Topic 326), effective January 1, 2020. This update amends guidance on the recognition and measurement of credit losses for assets held at amortized cost and available-for-sale debt securities. For assets held at amortized cost, ASU 2016-13 eliminates the probable initial recognition threshold and, instead, requires credit losses to be measured using the Current Expected Credit Loss (“CECL”) model. The CECL model requires the measurement of all expected credit losses based on historical experience, current conditions, and reasonable and supportable forecasts which incorporate forward-looking information. For available-for-sale debt securities, credit losses will continue to be measured in a manner similar to the current standard. ASU 2016-13 requires a valuation allowance, rather than a write-down, to be recognized for the Company’s expected credit losses. The valuation allowance account is a deduction from the amortized cost basis of the financial assets to reflect the net amount expected to be collected. Any subsequent changes to the expected credit losses of the financial assets will be recorded in earnings. The Company is required to use the modified-retrospective method by recognizing a cumulative-effect adjustment to the beginning retained income of fiscal year 2020. As for debt securities in which an other-than-temporary impairment had been recognized before the effective date, the prospective transition method will be used. On January 1, 2020, a cumulative-effect adjustment of $453 related to reinsurance recoverable was recognized to beginning retained income with a corresponding entry to an allowance for credit losses account.

v3.19.3.a.u2
Cash, Cash Equivalents, and Restricted Cash
12 Months Ended
Dec. 31, 2019
Cash And Cash Equivalents [Abstract]  
Cash, Cash Equivalents, and Restricted Cash

Note 4 -- Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company’s consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Cash and cash equivalents

 

$

229,218

 

 

$

239,458

 

Restricted cash

 

 

700

 

 

 

700

 

Total

 

$

229,918

 

 

$

240,158

 

 

Restricted cash primarily represents funds held by certain states in which the Company’s insurance subsidiaries conduct business to meet regulatory requirements.

v3.19.3.a.u2
Investments
12 Months Ended
Dec. 31, 2019
Investments Debt And Equity Securities [Abstract]  
Investments

Note 5 -- Investments

a) Available-for-Sale Fixed-Maturity Securities

The Company holds investments in fixed-maturity securities that are classified as available-for-sale. At December 31, 2019 and 2018, the cost or amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:

 

 

 

Cost or

Amortized

 

 

Gross

Unrealized

 

 

Gross

Unrealized

 

 

Estimated

Fair

 

 

 

Cost

 

 

Gain

 

 

Loss

 

 

Value

 

As of December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government agencies

 

$

26,220

 

 

$

78

 

 

$

(3

)

 

$

26,295

 

Corporate bonds

 

 

157,155

 

 

 

2,212

 

 

 

(3

)

 

 

159,364

 

State, municipalities, and political subdivisions

 

 

7,763

 

 

 

149

 

 

 

 

 

 

7,912

 

Exchange-traded debt

 

 

8,698

 

 

 

462

 

 

 

(15

)

 

 

9,145

 

Redeemable preferred stock

 

 

118

 

 

 

5

 

 

 

 

 

 

123

 

Total

 

$

199,954

 

 

$

2,906

 

 

$

(21

)

 

$

202,839

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and U.S. government agencies

 

$

61,979

 

 

$

24

 

 

$

(206

)

 

$

61,797

 

Corporate bonds

 

 

103,580

 

 

 

134

 

 

 

(1,809

)

 

 

101,905

 

State, municipalities, and political subdivisions

 

 

10,567

 

 

 

98

 

 

 

(3

)

 

 

10,662

 

Exchange-traded debt

 

 

8,426

 

 

 

82

 

 

 

(261

)

 

 

8,247

 

Redeemable preferred stock

 

 

118

 

 

 

 

 

 

(6

)

 

 

112

 

Total

 

$

184,670

 

 

$

338

 

 

$

(2,285

)

 

$

182,723

 

Expected maturities will differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities at December 31, 2019 and 2018 are as follows:

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

Cost or

 

 

Estimated

 

 

Cost or

 

 

Estimated

 

 

 

Amortized

 

 

Fair

 

 

Amortized

 

 

Fair

 

 

 

Cost

 

 

Value

 

 

Cost

 

 

Value

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due in one year or less

 

$

63,135

 

 

$

63,429

 

 

$

50,659

 

 

$

50,574

 

Due after one year through five years

 

 

125,833

 

 

 

127,660

 

 

 

117,826

 

 

 

116,498

 

Due after five years through ten years

 

 

6,896

 

 

 

7,350

 

 

 

11,602

 

 

 

11,253

 

Due after ten years

 

 

4,090

 

 

 

4,400

 

 

 

4,583

 

 

 

4,398

 

 

 

$

199,954

 

 

$

202,839

 

 

$

184,670

 

 

$

182,723

 

 

Sales of Available-for-Sale Fixed-Maturity Securities

Proceeds received, and the gross realized gains and losses from sales of available-for-sale fixed-maturity securities, for the years ended December 31, 2019, 2018 and 2017 were as follows:

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Realized

 

 

Realized

 

 

 

Proceeds

 

 

Gains

 

 

Losses

 

Year ended December 31, 2019

 

$

7,947

 

 

$

221

 

 

$

(3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2018

 

$

81,809

 

 

$

1,293

 

 

$

(570

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2017

 

$

31,759

 

 

$

2,176

 

 

$

(181

)

 

Other-than-temporary Impairment

The Company regularly reviews its individual investment securities for other-than-temporary impairment. The Company considers various factors in determining whether each individual security is other-than-temporarily impaired, including-

 

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

 

the length of time and the extent to which the market value of the security has been below its cost or amortized cost;

 

general market conditions and industry or sector specific factors and other qualitative factors;

 

nonpayment by the issuer of its contractually obligated interest and principal payments; and

 

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

The Company recognized $289 of credit-related impairment loss on one fixed-maturity security for the year ended December 31, 2019 in the consolidated statement of income compared with $80 of non-credit related impairment loss pertaining to one fixed-maturity security for the year ended December 31, 2018. For the year ended December 31, 2017, the Company recognized impairment losses of $428 related to the sale of four intent-to-sell fixed-maturity securities.

The following table presents a rollforward of the cumulative credit losses in other-than-temporary impairments recognized in income for available-for-sale fixed-maturity securities:

 

 

 

2019

 

 

2018

 

 

2017

 

Balance at January 1

 

$

 

 

$

 

 

$

475

 

Credit impairments on impaired securities

 

 

289

 

 

 

 

 

 

 

Credit impaired security fully disposed of for which

   there was no prior intent or requirement to sell

 

 

 

 

 

 

 

 

(475

)

Balance at December 31

 

$

289

 

 

$

 

 

$

 

 

There was no activity related to cumulative credit losses during 2018. During 2017, the Company sold two fixed-maturity securities with cumulative credit losses totaling $475.

Securities with gross unrealized loss positions at December 31, 2019 and 2018, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:

 

 

 

Less Than Twelve Months

 

 

Twelve Months or Longer

 

 

Total

 

As of December 31, 2019

 

Gross

Unrealized

Loss

 

 

Estimated

Fair

Value

 

 

Gross

Unrealized

Loss

 

 

Estimated

Fair

Value

 

 

Gross

Unrealized

Loss

 

 

Estimated

Fair

Value

 

U.S. Treasury and U.S. government agencies

 

$

(3

)

 

$

2,292

 

 

$

 

 

$

 

 

$

(3

)

 

$

2,292

 

Corporate bonds

 

 

(3

)

 

 

4,597

 

 

 

 

 

 

 

 

 

(3

)

 

 

4,597

 

Exchange-traded debt

 

 

(15

)

 

 

345

 

 

 

 

 

 

 

 

 

(15

)

 

 

345

 

Total available-for-sale securities

 

$

(21

)

 

$

7,234

 

 

$

 

 

$

 

 

$

(21

)

 

$

7,234

 

 

At December 31, 2019, there were eight securities in an unrealized loss position. Of these securities, none had been in an unrealized loss position for 12 months or longer.

 

 

 

Less Than Twelve Months

 

 

Twelve Months or Longer

 

 

Total

 

As of December 31, 2018

 

Gross

Unrealized

Loss

 

 

Estimated

Fair

Value

 

 

Gross

Unrealized

Loss

 

 

Estimated

Fair

Value

 

 

Gross

Unrealized

Loss

 

 

Estimated

Fair

Value

 

U.S. Treasury and U.S. government agencies

 

$

(59

)

 

$

21,031

 

 

$

(147

)

 

$

35,393

 

 

$

(206

)

 

$

56,424

 

Corporate bonds

 

 

(542

)

 

 

19,932

 

 

 

(1,267

)

 

 

36,682

 

 

 

(1,809

)

 

 

56,614

 

State, municipalities, and political subdivisions

 

 

(3

)

 

 

715

 

 

 

 

 

 

 

 

 

(3

)

 

 

715

 

Exchange-traded debt

 

 

(261

)

 

 

5,275

 

 

 

 

 

 

 

 

 

(261

)

 

 

5,275

 

Redeemable preferred stock

 

 

(6

)

 

 

112

 

 

 

 

 

 

 

 

 

(6

)

 

 

112

 

Total available-for-sale securities

 

$

(871

)

 

$

47,065

 

 

$

(1,414

)

 

$

72,075

 

 

$

(2,285