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EX-32 - EX-32 - UNIVERSAL INSURANCE HOLDINGS, INC.uve-ex32_7.htm
EX-31.2 - EX-31.2 - UNIVERSAL INSURANCE HOLDINGS, INC.uve-ex312_9.htm
EX-31.1 - EX-31.1 - UNIVERSAL INSURANCE HOLDINGS, INC.uve-ex311_6.htm
EX-15.1 - EX-15.1 - UNIVERSAL INSURANCE HOLDINGS, INC.uve-ex151_8.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 001-33251

 

UNIVERSAL INSURANCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

65-0231984

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer
Identification No.)

1110 W. Commercial Blvd., Fort Lauderdale, Florida 33309

(Address of principal executive offices)

(954) 958-1200

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)    Yes      No  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 35,072,667 shares of common stock, par value $0.01 per share, outstanding on April 27, 2017.

 

 

 

 

 


UNIVERSAL INSURANCE HOLDINGS, INC.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

 

 

 

 

 

Page No.

 

  

 

 

Item 1.

 

Financial Statements:

  

4

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 (unaudited)

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the three-month periods ended March 31, 2017 and 2016 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended March 31, 2017 and 2016 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2017 and 2016 (unaudited)

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

7

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosure about Market Risk

 

39

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

41

 

PART II – OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

41

 

 

 

 

 

Item 1A.

 

Risk Factors

 

42

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

42

 

 

 

 

 

Item 6.

 

Exhibits

 

43

 

 

 

 

 

Signatures

 

44

 

 

 

2


 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders of

Universal Insurance Holdings, Inc. and Subsidiaries

Fort Lauderdale, Florida

We have reviewed the accompanying condensed consolidated balance sheet of Universal Insurance Holdings, Inc. and its wholly-owned subsidiaries (the “Company”) as of March 31, 2017 and the related condensed consolidated statements of income, comprehensive income and cash flows for the three-month periods ended March 31, 2017 and 2016.  These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Universal Insurance Holdings, Inc. and Subsidiaries as of December 31, 2016 and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year then ended (not presented herein) and we expressed an unqualified audit opinion on those consolidated financial statements in our report dated February 23, 2017.  In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2016, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

/s/ Plante & Moran, PLLC

Chicago, Illinois

May 1, 2017

 

 

 

3


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands, except per share data)

 

 

As of

 

 

March 31,

 

 

December 31,

 

 

2017

 

 

2016

 

ASSETS

 

 

 

 

 

 

 

Fixed maturities, at fair value

$

597,675

 

 

$

584,361

 

Equity securities, at fair value

 

50,286

 

 

 

50,803

 

Short-term investments, at fair value

 

5,001

 

 

 

5,002

 

Investment real estate, net

 

13,104

 

 

 

11,435

 

Total invested assets

 

666,066

 

 

 

651,601

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

160,364

 

 

 

105,730

 

Restricted cash and cash equivalents

 

2,635

 

 

 

2,635

 

Prepaid reinsurance premiums

 

49,754

 

 

 

124,385

 

Reinsurance recoverable

 

605

 

 

 

106

 

Premiums receivable, net

 

56,224

 

 

 

53,833

 

Other receivables

 

5,388

 

 

 

5,824

 

Property and equipment, net

 

32,507

 

 

 

32,162

 

Deferred policy acquisition costs

 

66,524

 

 

 

64,912

 

Income taxes recoverable

 

 

 

 

3,262

 

Deferred income tax asset, net

 

15,389

 

 

 

10,674

 

Other assets

 

4,983

 

 

 

4,883

 

Total assets

$

1,060,439

 

 

$

1,060,007

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

LIABILITIES:

 

 

 

 

 

 

 

Unpaid losses and loss adjustment expenses

$

31,463

 

 

$

58,494

 

Unearned premiums

 

484,796

 

 

 

475,756

 

Advance premium

 

28,397

 

 

 

17,796

 

Accounts payable

 

3,317

 

 

 

3,187

 

Reinsurance payable, net

 

42,270

 

 

 

80,891

 

Income taxes payable

 

19,150

 

 

 

 

Other liabilities and accrued expenses

 

38,310

 

 

 

37,665

 

Long-term debt

 

13,971

 

 

 

15,028

 

Total liabilities

 

661,674

 

 

 

688,817

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 12)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY:

 

 

 

 

 

 

 

Cumulative convertible preferred stock, $.01 par value

 

 

 

 

 

Authorized shares - 1,000

 

 

 

 

 

 

 

Issued shares - 10 and 10

 

 

 

 

 

 

 

Outstanding shares - 10 and 10

 

 

 

 

 

 

 

Minimum liquidation preference, $9.99 and $9.99 per share

 

 

 

 

 

 

 

Common stock, $.01 par value

 

454

 

 

 

453

 

Authorized shares - 55,000

 

 

 

 

 

 

 

Issued shares - 45,445 and 45,324

 

 

 

 

 

 

 

Outstanding shares - 35,073 and 35,052

 

 

 

 

 

 

 

Treasury shares, at cost - 10,372 and 10,272

 

(89,530

)

 

 

(86,982

)

Additional paid-in capital

 

83,657

 

 

 

82,263

 

Accumulated other comprehensive income (loss), net of taxes

 

(3,944

)

 

 

(6,408

)

Retained earnings

 

408,128

 

 

 

381,864

 

Total stockholders' equity

 

398,765

 

 

 

371,190

 

Total liabilities and stockholders' equity

$

1,060,439

 

 

$

1,060,007

 

 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

 

4


 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(in thousands, except per share data)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

PREMIUMS EARNED AND OTHER REVENUES

 

 

 

 

 

 

 

 

Direct premiums written

$

245,415

 

 

$

227,973

 

 

Change in unearned premium

 

(9,040

)

 

 

(6,721

)

 

Direct premium earned

 

236,375

 

 

 

221,252

 

 

Ceded premium earned

 

(74,816

)

 

 

(68,804

)

 

Premiums earned, net

 

161,559

 

 

 

152,448

 

 

Net investment income (expense)

 

2,704

 

 

 

1,605

 

 

Net realized gains (losses) on investments

 

(63

)

 

 

667

 

 

Commission revenue

 

4,598

 

 

 

4,113

 

 

Policy fees

 

4,483

 

 

 

4,114

 

 

Other revenue

 

1,593

 

 

 

1,499

 

 

Total premiums earned and other revenues

 

174,874

 

 

 

164,446

 

 

OPERATING COSTS AND EXPENSES

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

70,570

 

 

 

66,117

 

 

General and administrative expenses

 

56,933

 

 

 

57,230

 

 

Total operating costs and expenses

 

127,503

 

 

 

123,347

 

 

INCOME BEFORE INCOME TAXES

 

47,371

 

 

 

41,099

 

 

Income tax expense

 

16,172

 

 

 

15,873

 

 

NET INCOME

$

31,199

 

 

$

25,226

 

 

Basic earnings per common share

$

0.89

 

 

$

0.73

 

 

Weighted average common shares outstanding - Basic

 

35,140

 

 

 

34,527

 

 

Diluted earnings per common share

$

0.86

 

 

$

0.71

 

 

Weighted average common shares outstanding - Diluted

 

36,180

 

 

 

35,594

 

 

Cash dividend declared per common share

$

0.14

 

 

$

0.14

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2017

 

 

2016

 

 

Net income

$

31,199

 

 

$

25,226

 

 

Other comprehensive income (loss)

 

2,464

 

 

 

3,281

 

 

Comprehensive income

$

33,663

 

 

$

28,507

 

 

 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

 

 

5


 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

 

 

March 31,

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

$

71,998

 

 

$

43,737

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Proceeds from sale of property and equipment

 

8

 

 

 

 

Purchases of property and equipment

 

(1,255

)

 

 

(1,728

)

Purchases of equity securities

 

(243

)

 

 

(20,178

)

Purchases of fixed maturities

 

(26,610

)

 

 

(95,889

)

Purchases of investment real estate, net

 

(1,714

)

 

 

(2,021

)

Proceeds from sales of equity securities

 

2,500

 

 

 

13,210

 

Proceeds from sales of fixed maturities

 

914

 

 

 

16,152

 

Proceeds from sales of short-term investments

 

 

 

 

12,500

 

Maturities of fixed maturities

 

18,915

 

 

 

10,504

 

Net cash provided by (used in) investing activities

 

(7,485

)

 

 

(67,450

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Preferred stock dividend

 

(3

)

 

 

(3

)

Common stock dividend

 

(4,924

)

 

 

(4,915

)

Purchase of treasury stock

 

(2,548

)

 

 

(1,874

)

Payments related to tax withholding for share-based compensation

 

(1,337

)

 

 

(3,897

)

Excess tax benefits (shortfall) from share-based compensation

 

 

 

 

(1,510

)

Repayment of debt

 

(1,067

)

 

 

(1,068

)

Net cash provided by (used in) financing activities

 

(9,879

)

 

 

(13,267

)

Net increase (decrease) in cash and cash equivalents

 

54,634

 

 

 

(36,980

)

Cash and cash equivalents at beginning of period

 

105,730

 

 

 

197,014

 

Cash and cash equivalents at end of period

$

160,364

 

 

$

160,034

 

 

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

 

6


 

UNIVERSAL INSURANCE HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Nature of Operations and Basis of Presentation

Nature of Operations

Universal Insurance Holdings, Inc. (“UVE”) is a Delaware corporation incorporated in 1990. UVE with its wholly-owned subsidiaries (the “Company”) is a vertically integrated insurance holding company performing all aspects of insurance underwriting, distribution and claims. Through its wholly-owned subsidiaries, Universal Property & Casualty Insurance Company (“UPCIC”) and American Platinum Property and Casualty Insurance Company (“APPCIC”), together referred to as the “Insurance Entities,” the Company is principally engaged in the property and casualty insurance business offered primarily through a network of independent agents. Risk from catastrophic losses is managed through the use of reinsurance agreements. The Company’s primary product is homeowners’ insurance currently offered in fourteen states as of March 31, 2017, including Florida, which comprises the vast majority of the Company’s in-force policies. See “—Note 5 (Insurance Operations)” for more information regarding the Company’s insurance operations.

The Company generates revenues primarily from the collection of premiums and invests funds in excess of those retained for claims-paying obligations and insurance operations. Other significant sources of revenue include brokerage commissions collected from reinsurers on reinsurance programs placed by the Insurance Entities, policy fees collected from policyholders by our wholly-owned managing general agency subsidiary and payment plan fees charged to policyholders who choose to pay their premiums in installments.

Basis of Presentation

The Company has prepared the accompanying unaudited Condensed Consolidated Financial Statements (“Financial Statements”) in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, the Financial Statements do not include all of the information and footnotes required by United States Generally Accepted Accounting Principles (“GAAP”) for annual financial statements. Therefore, the Financial Statements should be read in conjunction with the audited Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed with the SEC on February 24, 2017. The condensed consolidated balance sheet at December 31, 2016, was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included in the Financial Statements. The results for interim periods do not necessarily indicate the results that may be expected for any other interim period or for the full year.

To conform to the current period presentation, certain amounts in the prior periods’ consolidated financial statements and notes have been reclassified. Such reclassifications were of an immaterial amount and had no effect on net income or stockholders’ equity.

The Financial Statements include the accounts of UVE and its wholly-owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Management must make estimates and assumptions that affect amounts reported in the Company’s Financial Statements and in disclosures of contingent assets and liabilities. Actual results could differ from those estimates.

 

 

7


 

2. Significant Accounting Policies

The Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2016. The following are new or revised disclosures or disclosures required on a quarterly basis.

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies several aspects of the accounting for share-based payment transactions. The new guidance requires excess income tax benefits (windfalls) and deficiencies (shortfalls) to be recognized in the income statement as income tax benefits or charges when the awards vest or are settled. The former guidance required the recognition of excess tax benefits or deficiencies in stockholders’ equity. In addition, all income tax-related cash flows resulting from share-based payments will be reported as operating activities in the statement of cash flows under the new guidance. The guidance also allows us to repurchase more of an employee's shares for tax withholding purposes without triggering liability accounting; clarifies that all cash payments for tax withholdings made on an employee’s behalf should be presented as a financing activity on the Company’s statement of cash flows; and provides an accounting policy election to account for forfeitures as they occur. The guidance is effective for fiscal years and interim periods beginning after December 15, 2016, with early adoption permitted. The Company adopted this guidance effective January 1, 2017.

The adoption of the new standard resulted in the recognition of excess tax benefits of $0.8 million reflected in the Company’s Condensed Consolidated Statements of Income as an income tax benefit for the three months ended March 31, 2017. Additionally, excess tax benefits on the Company’s Condensed Consolidated Statement of Cash Flows are presented as an operating activity on a prospective basis. The presentation requirement for cash flows related to employee taxes paid for withheld shares did not impact any of the periods presented in the Company’s Condensed Consolidated Statement of Cash Flows since these cash flows have historically been presented as a financing activity. The Company will continue to account for forfeitures as they occur. The standard also modifies the calculation of dilutive earnings per share to no longer use proceeds from tax benefits or deficiencies.

 

 

8


 

3. Investments

Securities Available for Sale

The following table provides the cost or amortized cost and fair value of securities available for sale as of the dates presented (in thousands):

 

 

March 31, 2017

 

 

Cost or

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Fixed Maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations and agencies

$

78,055

 

 

$

1

 

 

$

(587

)

 

$

77,469

 

Corporate bonds

 

194,289

 

 

 

727

 

 

 

(975

)

 

 

194,041

 

Mortgage-backed and asset-backed securities

 

215,670

 

 

 

128

 

 

 

(1,797

)

 

 

214,001

 

Municipal bonds

 

100,762

 

 

 

307

 

 

 

(3,177

)

 

 

97,892

 

Redeemable preferred stock

 

13,777

 

 

 

524

 

 

 

(29

)

 

 

14,272

 

Equity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

214

 

 

 

 

 

 

(119

)

 

 

95

 

Mutual funds

 

51,616

 

 

 

953

 

 

 

(2,378

)

 

 

50,191

 

Short-term investments

 

5,000

 

 

 

1

 

 

 

 

 

 

5,001

 

Total

$

659,383

 

 

$

2,641

 

 

$

(9,062

)

 

$

652,962

 

 

 

December 31, 2016

 

 

Cost or

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

 

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Fixed Maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations and agencies

$

74,937

 

 

$

 

 

$

(670

)

 

$

74,267

 

Corporate bonds

 

192,328

 

 

 

402

 

 

 

(1,300

)

 

 

191,430

 

Mortgage-backed and asset-backed securities

 

216,679

 

 

 

135

 

 

 

(2,038

)

 

 

214,776

 

Municipal bonds

 

94,794

 

 

 

130

 

 

 

(3,727

)

 

 

91,197

 

Redeemable preferred stock

 

12,723

 

 

 

125

 

 

 

(157

)

 

 

12,691

 

Equity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

214

 

 

 

 

 

 

(121

)

 

 

93

 

Mutual funds

 

53,900

 

 

 

407

 

 

 

(3,597

)

 

 

50,710

 

Short-term investments

 

5,000

 

 

 

2

 

 

 

 

 

 

5,002

 

Total

$

650,575

 

 

$

1,201

 

 

$

(11,610

)

 

$

640,166

 

 

The following table provides the credit quality of investment securities with contractual maturities or the issuer of such securities as of the dates presented (in thousands):

 

 

 

March 31, 2017

 

 

December 31, 2016

 

 

 

 

 

 

 

% of Total

 

 

 

 

 

 

% of Total

 

Comparable Ratings

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

 

Fair Value

 

AAA

 

$

129,495

 

 

 

21.5

%

 

$

131,260

 

 

 

22.3

%

AA

 

 

282,340

 

 

 

46.9

%

 

 

275,480

 

 

 

46.7

%

A

 

 

111,734

 

 

 

18.5

%

 

 

107,418

 

 

 

18.2

%

BBB

 

 

70,754

 

 

 

11.7

%

 

 

67,263

 

 

 

11.4

%

BB+ and Below

 

 

3,706

 

 

 

0.6

%

 

 

3,444

 

 

 

0.6

%

No Rating Available

 

 

4,647

 

 

 

0.8

%

 

 

4,498

 

 

 

0.8

%

Total

 

$

602,676

 

 

 

100.0

%

 

$

589,363

 

 

 

100.0

%

 

The tables above include comparable credit quality ratings by Standard and Poor’s Rating Services, Inc., Moody’s Investors Service, Inc. and Fitch Ratings, Inc.

 

9


 

The following table summarizes the cost or amortized cost and fair value of mortgage-backed and asset-backed securities as of the dates presented (in thousands):

 

 

March 31, 2017

 

 

December 31, 2016

 

 

Cost or

 

 

 

 

 

 

Cost or

 

 

 

 

 

 

Amortized

 

 

 

 

 

 

Amortized

 

 

 

 

 

 

Cost

 

 

Fair Value

 

 

Cost

 

 

Fair Value

 

Mortgage-backed Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency

$

111,148

 

 

$

109,720

 

 

$

110,724

 

 

$

109,022

 

Non-agency

 

18,247

 

 

 

18,128

 

 

 

19,408

 

 

 

19,265

 

Asset-backed Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auto loan receivables

 

36,900

 

 

 

36,857

 

 

 

37,390

 

 

 

37,429

 

Credit card receivables

 

38,617

 

 

 

38,553

 

 

 

38,640

 

 

 

38,568

 

Other receivables

 

10,758

 

 

 

10,743

 

 

 

10,517

 

 

 

10,492

 

Total

$

215,670

 

 

$

214,001

 

 

$

216,679

 

 

$

214,776

 

 

The following table summarizes the fair value and gross unrealized losses on securities available for sale, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position as of the dates presented (dollars in thousands):

 

 

March 31, 2017

 

 

Less Than 12 Months

 

 

12 Months or Longer

 

 

Number of

 

 

 

 

 

 

Unrealized

 

 

Number of

 

 

 

 

 

 

Unrealized

 

 

Issues

 

 

Fair Value

 

 

Losses

 

 

Issues

 

 

Fair Value

 

 

Losses

 

Fixed Maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations and agencies

 

12

 

 

$

72,345

 

 

$

(540

)

 

 

2

 

 

$

3,511

 

 

$

(47

)

Corporate bonds

 

92

 

 

 

76,775

 

 

 

(934

)

 

 

2

 

 

 

289

 

 

 

(41

)

Mortgage-backed and asset-backed securities

 

86

 

 

 

148,308

 

 

 

(1,651

)

 

 

8

 

 

 

14,521

 

 

 

(146

)

Municipal bonds

 

65

 

 

 

76,343

 

 

 

(3,177

)

 

 

 

 

 

 

 

 

 

Redeemable preferred stock

 

14

 

 

 

1,606

 

 

 

(29

)

 

 

 

 

 

 

 

 

 

Equity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

1

 

 

 

20

 

 

 

(5

)

 

 

2

 

 

 

75

 

 

 

(114

)

Mutual funds

 

1

 

 

 

16,685

 

 

 

(116

)

 

 

1

 

 

 

9,090

 

 

 

(2,262

)

Total

 

271

 

 

$

392,082

 

 

$

(6,452

)

 

 

15

 

 

$

27,486

 

 

$

(2,610

)

 

 

December 31, 2016

 

 

Less Than 12 Months

 

 

12 Months or Longer

 

 

Number of

 

 

 

 

 

 

Unrealized

 

 

Number of

 

 

 

 

 

 

Unrealized

 

 

Issues

 

 

Fair Value

 

 

Losses

 

 

Issues

 

 

Fair Value

 

 

Losses

 

Fixed Maturities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government obligations and agencies

 

11

 

 

$

70,453

 

 

$

(608

)

 

 

2

 

 

$

3,504

 

 

$

(62

)

Corporate bonds

 

116

 

 

 

96,379

 

 

 

(1,219

)

 

 

4

 

 

 

3,250

 

 

 

(80

)

Mortgage-backed and asset-backed securities

 

73

 

 

 

149,928

 

 

 

(1,923

)

 

 

5

 

 

 

9,660

 

 

 

(115

)

Municipal bonds

 

69

 

 

 

79,402

 

 

 

(3,726

)

 

 

 

 

 

 

 

 

 

Redeemable preferred stock

 

50

 

 

 

6,340

 

 

 

(158

)

 

 

 

 

 

 

 

 

 

Equity Securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

1

 

 

 

18

 

 

 

(7

)

 

 

2

 

 

 

75

 

 

 

(115

)

Mutual funds

 

3

 

 

 

28,020

 

 

 

(774

)

 

 

2

 

 

 

11,529

 

 

 

(2,823

)

Total

 

323

 

 

$

430,540

 

 

$

(8,415

)

 

 

15

 

 

$

28,018

 

 

$

(3,195

)

 

Evaluating Investments for Other Than Temporary Impairment (“OTTI”)

 

At March 31, 2017, the Company held fixed maturity, equity securities and short-term investments that were in an unrealized loss position as presented in the table above. For fixed maturity securities with significant declines in value, the Company performs quarterly fundamental credit analysis on a security-by-security basis, which includes consideration of credit quality and credit ratings, review of relevant industry analyst reports and other available market data. For fixed maturity, equity securities and short-term investments, the Company considers whether it has the intent and ability to hold the securities for a period of time sufficient to recover its cost basis. Where the Company lacks the intent and ability to hold to recovery, or believes the recovery period is extended, the security’s decline in fair value is considered other than temporary and is recorded in earnings. Based on our analysis, we believe that

10


 

our fixed income portfolio is of high quality and that we will recover the amortized cost basis of our fixed income securities.  We continually monitor the credit quality of our fixed income investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest. Additionally, the Company considers management’s intent and ability to hold the securities until recovery and its credit analysis of the individual issuers of the securities. Based on this process and analysis, management has no reason to believe the unrealized losses for securities available for sale at March 31, 2017 are other than temporary.

 

As of March 31, 2017, the Company held approximately $9.2 million equity securities that were in an unrealized loss position twelve months or longer. The unrealized loss on these securities was $2.4 million. Based on our analysis, the Company believes each security will recover in a reasonable period of time and the Company has the intent and ability to hold them until recovery. There were no OTTI losses recognized in the periods presented on the equity portfolio.  

The following table presents the amortized cost and fair value of investments with contractual maturities as of the date presented (in thousands):

 

 

March 31, 2017

 

 

Cost or

 

 

 

 

 

 

Amortized Cost

 

 

Fair Value

 

Due in one year or less

$

53,558

 

 

$

53,570

 

Due after one year through five years

 

229,273

 

 

 

228,831

 

Due after five years through ten years

 

38,207

 

 

 

37,658

 

Due after ten years

 

57,068

 

 

 

54,344

 

Mortgage-backed and asset-backed securities

 

215,670

 

 

 

214,001

 

Perpetual maturity securities

 

13,777

 

 

 

14,272

 

Total

$

607,553

 

 

$

602,676

 

 

Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay with or without penalty.

The following table provides certain information related to securities available for sale during the periods presented (in thousands):

 

 

Three Months Ended

 

 

March 31,