Florida
|
65-0248866
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No)
|
|
3661 West Oakland Park Boulevard, Suite 300,
Lauderdale Lakes, Florida 33311
|
||
(Address
of principal executive
offices) (Zip
Code)
|
Title
of Each Class
|
Name
of Each Exchange on Which Registered
|
|
Common
Stock, par value $0.01 per share
|
NASDAQ
Global Market,
LLC
|
PART
I
|
3
|
|
ITEM
1
|
BUSINESS
|
3
|
ITEM
1A
|
RISK
FACTORS
|
25
|
ITEM
1B
|
UNRESOLVED
STAFF COMMENTS
|
36
|
ITEM
2
|
PROPERTIES
|
36
|
ITEM
3
|
LEGAL
PROCEEDINGS
|
36
|
ITEM
4
|
RESERVED
|
36
|
PART
II
|
36
|
|
ITEM
5
|
MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
|
36
|
ITEM
6
|
SELECTED
FINANCIAL DATA
|
37
|
ITEM
7
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
40
|
ITEM
7A
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|
70
|
ITEM
8
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
72
|
ITEM
9
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
112
|
ITEM
9A
|
CONTROLS
AND PROCEDURES
|
112
|
ITEM
9B
|
OTHER
INFORMATION
|
112
|
PART
III
|
113
|
|
ITEM
10
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
113
|
ITEM
11
|
EXECUTIVE
COMPENSATION
|
117
|
ITEM
12
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
123
|
ITEM
13
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
124
|
ITEM
14
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
125
|
PART
IV
|
126
|
|
ITEM
15
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K
|
126
|
SIGNATURES
|
129
|
|
·
|
the
quality of the insurable risks
underwritten;
|
|
·
|
the
nature and severity of the loss;
|
|
·
|
weather-related
patterns;
|
|
·
|
the
availability, cost and terms of
reinsurance;
|
|
·
|
underlying
settlement costs, including medical and legal
costs;
|
|
·
|
legal
and political factors such as legislative initiatives and public
opinion;
|
|
·
|
macroeconomic
issues.
|
|
·
|
continued
development of business initiatives introduced in 2009, such as the
commercial multi-peril and inland marine insurance in the State of Florida
and commercial automobile into various states as a supporting line of
business for our artisan commercial general liability
program;
|
|
·
|
improved
property analytical qualities such as a broader geographical dispersion of
risks throughout the state of Florida and avoiding risks that do not yield
an underwriting profit;
|
|
·
|
continued
territorial expansion of our commercial general liability, inland marine,
and private passenger automobile insurance products into additional
states;
|
|
·
|
employing
our business practices developed and used in Florida in our expansion to
other selected states;
|
|
·
|
maintaining
a commitment to provide high quality customer service to our agents and
insureds;
|
|
·
|
expansion
of our marketing efforts by retaining key personnel and implementing
direct marketing technologies;
|
|
·
|
offering
attractive incentives to our agents to place a high volume of quality
business with our companies;
|
|
·
|
offering
our employees continuing education classes appropriate to the respective
discipline employed within this
organization;
|
|
·
|
assumption
of existing risks from other carriers;
and
|
|
·
|
additional
strategies that may include possible acquisitions or further dispositions
of assets, and development of procedures to improve claims history and
mitigate losses from claims.
|
Years Ended December 31,
|
||||||||||||||||||||||||
2009
|
2008
|
2007
|
||||||||||||||||||||||
Premium
|
Percent
|
Premium
|
Percent
|
Premium
|
Percent
|
|||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||
Gross
written premiums:
|
||||||||||||||||||||||||
Automobile
|
$ | 836 | 0.8 | % | $ | 487 | 0.6 | % | $ | 1,867 | 1.4 | % | ||||||||||||
Federal
Flood
|
3,559 | 3.4 | % | 3,263 | 3.7 | % | - | 0.0 | % | |||||||||||||||
Homeowners'
|
84,705 | 81.2 | % | 60,708 | 68.7 | % | 99,502 | 74.5 | % | |||||||||||||||
Commercial
General Liability
|
15,279 | 14.6 | % | 23,790 | 27.0 | % | 32,222 | 24.1 | % | |||||||||||||||
Total
gross written premiums
|
$ | 104,379 | 100.0 | % | $ | 88,248 | 100.0 | % | $ | 133,591 | 100.0 | % | ||||||||||||
Ceded
premiums:
|
||||||||||||||||||||||||
Automobile
|
$ | 14 | 0.0 | % | $ | - | 0.0 | % | $ | - | 0.0 | % | ||||||||||||
Federal
Flood
|
3,559 | 6.3 | % | 3,263 | 9.4 | % | - | 0.0 | % | |||||||||||||||
Homeowners'
|
52,518 | 93.5 | % | 31,290 | 90.6 | % | 44,551 | 100.0 | % | |||||||||||||||
Commercial
General Liability
|
126 | 0.2 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Total
ceded premiums
|
$ | 56,217 | 100.0 | % | $ | 34,553 | 100.0 | % | $ | 44,551 | 100.0 | % | ||||||||||||
Net
written premiums
|
||||||||||||||||||||||||
Automobile
|
$ | 822 | 1.7 | % | $ | 487 | 0.9 | % | $ | 1,867 | 2.1 | % | ||||||||||||
Federal
Flood
|
- | 0.0 | % | - | 0.0 | % | - | 0.0 | % | |||||||||||||||
Homeowners'
|
32,187 | 66.8 | % | 29,418 | 54.8 | % | 54,952 | 61.7 | % | |||||||||||||||
Commercial
General Liability
|
15,153 | 31.5 | % | 23,790 | 44.3 | % | 32,222 | 36.2 | % | |||||||||||||||
Total
net written premiums
|
$ | 48,162 | 100.0 | % | $ | 53,695 | 100.0 | % | $ | 89,041 | 100.0 | % |
In-Force Policy Count
|
||||||||||||||||||||||||
Years Ended December 31,
|
||||||||||||||||||||||||
2009
|
2008
|
2007
|
||||||||||||||||||||||
County
|
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||||||||||
Dade
|
3,544 | 6.7 | % | 2,981 | 9.7 | % | 4,587 | 12.7 | % | |||||||||||||||
Broward
|
4,139 | 7.9 | % | 3,629 | 11.8 | % | 4,446 | 12.3 | % | |||||||||||||||
Pinellas
|
5,147 | 9.8 | % |
(a)
|
0.0 | % |
(a)
|
0.0 | % | |||||||||||||||
Hillsborough
|
4,505 | 8.6 | % |
(a)
|
0.0 | % |
(a)
|
0.0 | % | |||||||||||||||
West
Palm Beach
|
14,543 | 27.6 | % | 14,152 | 45.7 | % | 14,969 | 41.3 | % | |||||||||||||||
All
others
|
20,728 | 39.4 | % | 10,122 | 32.8 | % | 12,239 | 33.7 | % | |||||||||||||||
Total
|
52,606 | 100.0 | % | 30,884 | 100.0 | % | 36,241 | 100.0 | % |
Years Ended December 31,
|
||||||||||||||||||||||||
2009
|
2008
|
2007
|
||||||||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||
State
|
||||||||||||||||||||||||
Alabama
|
$ | 76 | 0.50 | % | $ | 117 | 0.49 | % | $ | 26 | 0.08 | % | ||||||||||||
Arkansas
|
4 | 0.03 | % | 12 | 0.05 | % | - | 0.00 | % | |||||||||||||||
California
|
49 | 0.32 | % | 269 | 1.13 | % | 23 | 0.07 | % | |||||||||||||||
Florida
|
12,341 | 80.77 | % | 16,011 | 67.30 | % | 21,192 | 65.77 | % | |||||||||||||||
Georgia
|
291 | 1.91 | % | 568 | 2.39 | % | 1,023 | 3.17 | % | |||||||||||||||
Kentucky
|
1 | 0.00 | % | 1 | 0.00 | % | 8 | 0.03 | % | |||||||||||||||
Louisiana
|
1,736 | 11.36 | % | 4,481 | 18.84 | % | 5,595 | 17.36 | % | |||||||||||||||
Maryland
|
- | 0.00 | % | 2 | 0.01 | % | - | 0.00 | % | |||||||||||||||
South
Carolina
|
2 | 0.01 | % | 70 | 0.29 | % | 182 | 0.57 | % | |||||||||||||||
Texas
|
778 | 5.09 | % | 2,252 | 9.47 | % | 4,127 | 12.81 | % | |||||||||||||||
Virginia
|
1 | 0.01 | % | 7 | 0.03 | % | 46 | 0.14 | % | |||||||||||||||
Total
|
$ | 15,279 | 100.00 | % | $ | 23,790 | 100.00 | % | $ | 32,222 | 100.00 | % |
Reinsurer
|
A.M. Best Rating
|
|||||
UNITED
STATES
|
||||||
Everest
Reinsurance Company
|
A+
|
**
|
||||
Munich
Reinsurance America, Inc.
|
A+
|
**
|
||||
QBE
Reinsurance Corporation
|
A
|
**
|
||||
BERMUDA
|
||||||
ACE
Tempest Reinsurance Limited
|
A+
|
*
|
||||
Amlin
Bermuda Limited
|
A
|
|||||
Ariel
Reinsurance Company Limited
|
A-
|
*
|
||||
DaVinci
Reinsurance Limited
|
A
|
*
|
||||
Flagstone
Reinsurance Limited
|
A-
|
|||||
Hiscox
Insurance Company Limited
|
A
|
*
|
||||
Montpelier
Reinsurance Limited
|
A-
|
|||||
Platinum
Underwriters Bermuda Limited
|
A
|
*
|
||||
Renaissance
Reinsurance Limited
|
A+
|
*
|
||||
Torus
Insurance (Bermuda) Limited
|
A-
|
*
|
||||
|
||||||
LONDON
& EUROPE
|
||||||
Amlin
Syndicate No. 2001 (AML)
|
A+
|
**
|
||||
Antares
Syndicate No. 1274 (AUL)
|
A
|
**
|
||||
Arrow
Syndicate No. 1910 (ARW)
|
A
|
*
|
**
|
|||
Broadgate
Syndicate No. 1301 (BGT)
|
A
|
**
|
||||
Liberty
Syndicates Services Limited, Paris for
and on behalf of Lloyd's Syndicate No. 4472 (LIB)
|
A
|
**
|
||||
Novae
Syndicate No. 2007 (NVA)
|
A
|
**
|
||||
SCOR
Switzerland AG
|
A-
|
|||||
|
||||||
HEDGE
FUNDS / COLLATERALIZED
|
||||||
Actua
Re Limited
|
NR
|
*
|
(1)
|
|||
Allianz
Risk Transfer AG (Bermuda Branch)
|
NR-5
|
*
|
(2)
|
Reinsurer
|
A.M. Best Rating
|
|||||
UNITED
STATES
|
||||||
Everest
Reinsurance Company
|
A+
|
**
|
||||
Munich
Reinsurance America, Inc.
|
A+
|
**
|
||||
QBE
Reinsurance Corporation
|
A
|
**
|
||||
BERMUDA
|
||||||
ACE
Tempest Reinsurance Limited
|
A+
|
*
|
||||
Amlin
Bermuda Limited
|
A
|
|||||
Ariel
Reinsurance Company Limited
|
A-
|
*
|
||||
DaVinci
Reinsurance Limited
|
A
|
*
|
||||
Flagstone
Reinsurance Limited
|
A-
|
|||||
Hiscox
Insurance Company Limited
|
A
|
*
|
||||
Montpelier
Reinsurance Limited
|
A-
|
|||||
Platinum
Underwriters Bermuda Limited
|
A
|
*
|
||||
Renaissance
Reinsurance Limited
|
A+
|
*
|
||||
Torus
Insurance (Bermuda) Limited
|
A-
|
*
|
||||
LONDON
& EUROPE
|
||||||
Amlin
Syndicate No. 2001 (AML)
|
A+
|
**
|
||||
Antares
Syndicate No. 1274 (AUL)
|
A
|
**
|
||||
Arrow
Syndicate No. 1910 (ARW)
|
A
|
*
|
**
|
|||
Broadgate
Syndicate No. 1301 (BGT)
|
A
|
**
|
||||
Liberty
Syndicates Services Limited, Paris for
and on behalf of Lloyd's Syndicate No. 4472 (LIB)
|
A
|
**
|
||||
Novae
Syndicate No. 2007 (NVA)
|
A
|
**
|
||||
SCOR
Switzerland AG
|
A-
|
|||||
|
||||||
HEDGE
FUNDS / COLLATERALIZED
|
|
|||||
Actua
Re Limited
|
NR
|
*
|
(1)
|
|||
Allianz
Risk Transfer AG (Bermuda Branch)
|
NR-5
|
*
|
(2)
|
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars
in Thousands)
|
||||||||||||
Balance
at January 1
|
$ | 64,775 | $ | 59,685 | $ | 39,615 | ||||||
Less
reinsurance recoverables
|
(12,713 | ) | (20,134 | ) | (12,382 | ) | ||||||
Net
balance at January 1
|
$ | 52,062 | $ | 39,551 | $ | 27,233 | ||||||
Incurred
related to
|
||||||||||||
Current
year
|
$ | 41,988 | $ | 37,398 | $ | 38,452 | ||||||
Prior
years
|
1,718 | 4,471 | 9,167 | |||||||||
Total
incurred
|
$ | 43,706 | $ | 41,869 | $ | 47,619 | ||||||
Paid
related to
|
||||||||||||
Current
year
|
$ | 18,478 | $ | 13,277 | $ | 15,628 | ||||||
Prior
years
|
18,274 | 16,080 | 19,673 | |||||||||
Total
paid
|
$ | 36,752 | $ | 29,357 | $ | 35,301 | ||||||
Net
balance at year-end
|
$ | 59,016 | $ | 52,062 | $ | 39,551 | ||||||
Plus
reinsurance recoverables
|
11,595 | 12,713 | 20,134 | |||||||||
Balance
at year-end
|
$ | 70,611 | $ | 64,775 | $ | 59,685 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
in Thousands)
|
||||||||
Transatlantic
Reinsurance Company (A+ A.M. Best rated)
|
||||||||
Reinsurance
recoverable on paid losses and LAE
|
$ | - | $ | 4 | ||||
Unpaid
losses and LAE
|
72 | 93 | ||||||
$ | 72 | $ | 97 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
in Thousands)
|
||||||||
Catastrophe
Excess of Loss (various participants) and FHCF
|
||||||||
Reinsurance
recoverable on paid losses and LAE
|
$ | 3,669 | $ | 4,262 | ||||
Unpaid
losses and LAE
|
11,666 | 12,613 | ||||||
$ | 15,335 | $ | 16,875 | |||||
Amounts
due from reinsurers consisted of amounts related to:
|
||||||||
Unpaid
losses and LAE
|
$ | 11,666 | $ | 12,613 | ||||
Reinsurance
recoverable on paid LAE
|
3,669 | 4,262 | ||||||
Reinsurance
payable
|
(16,468 | ) | (11,088 | ) | ||||
$ | (1,133 | ) | $ | 5,787 |
Years
Ended December 31,
|
||||||||||||||||||||||||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
2004
|
2003
|
2002
|
2001
|
2000
|
|||||||||||||||||||||||||||||||
Balance
Sheet Liability
|
$ | 59,016 | $ | 52,070 | $ | 39,551 | $ | 27,259 | $ | 25,733 | $ | 37,390 | $ | 15,314 | $ | 9,422 | $ | 6,207 | $ | 6,976 | ||||||||||||||||||||
Cumulative
paid as of:
|
||||||||||||||||||||||||||||||||||||||||
One
year later
|
(8,328 | ) | 17,019 | 19,347 | 25,238 | 35,433 | 10,908 | 8,629 | 5,280 | 8,139 | ||||||||||||||||||||||||||||||
Two
years later
|
8,692 | 27,740 | 33,863 | 48,406 | 12,938 | 10,417 | 7,211 | 9,463 | ||||||||||||||||||||||||||||||||
Three
years later
|
16,769 | 39,529 | 53,760 | 13,921 | 11,083 | 7,707 | 10,069 | |||||||||||||||||||||||||||||||||
Four
years later
|
27,304 | 57,794 | 14,644 | 11,994 | 7,949 | 10,327 | ||||||||||||||||||||||||||||||||||
Five
years later
|
56,509 | 14,964 | 12,355 | 8,167 | 10,451 | |||||||||||||||||||||||||||||||||||
Six
years later
|
16,474 | 12,523 | 8,292 | 10,616 | ||||||||||||||||||||||||||||||||||||
Seven
years later
|
13,711 | 8,997 | 10,724 | |||||||||||||||||||||||||||||||||||||
Eight
years later
|
9,001 | 11,422 | ||||||||||||||||||||||||||||||||||||||
Nine
years later
|
11,425 | |||||||||||||||||||||||||||||||||||||||
Re-estimated
net liability as of:
|
||||||||||||||||||||||||||||||||||||||||
End
of year
|
59,016 | 52,070 | 39,551 | 27,259 | 25,733 | 37,390 | 15,314 | 9,422 | 6,207 | 6,976 | ||||||||||||||||||||||||||||||
One
year later
|
35,764 | 44,402 | 35,370 | 35,625 | 44,690 | 14,594 | 11,014 | 6,954 | 9,445 | |||||||||||||||||||||||||||||||
Two
years later
|
30,720 | 38,962 | 41,280 | 52,324 | 14,784 | 10,885 | 7,842 | 10,200 | ||||||||||||||||||||||||||||||||
Three
years later
|
28,981 | 45,131 | 56,658 | 15,402 | 11,236 | 8,069 | 10,425 | |||||||||||||||||||||||||||||||||
Four
years later
|
34,707 | 59,583 | 16,320 | 12,116 | 8,312 | 10,616 | ||||||||||||||||||||||||||||||||||
Five
years later
|
60,413 | 16,304 | 12,365 | 8,542 | 10,782 | |||||||||||||||||||||||||||||||||||
Six
years later
|
18,509 | 12,410 | 8,621 | 10,945 | ||||||||||||||||||||||||||||||||||||
Seven
years later
|
14,610 | 8,458 | 11,241 | |||||||||||||||||||||||||||||||||||||
Eight
years later
|
8,439 | 10,644 | ||||||||||||||||||||||||||||||||||||||
Nine
years later
|
10,645 | |||||||||||||||||||||||||||||||||||||||
Cumulative
redundancy (deficiency)
|
16,305 | 8,831 | (1,722 | ) | (8,974 | ) | (23,023 | ) | (3,195 | ) | (5,188 | ) | (2,232 | ) | (3,669 | ) | ||||||||||||||||||||||||
Cumulative
redundancy (-) deficiency as a % of reserves originally
established
|
31.3 | % | 22.3 | % | -6.3 | % | -34.9 | % | -61.6 | % | -20.9 | % | -55.1 | % | -36.0 | % | -52.6 | % |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars
in Thousands)
|
||||||||||||
GAAP
basis Loss and LAE reserves
|
$ | 70,611 | $ | 64,775 | $ | 59,685 | ||||||
Less
unpaid Losses and LAE ceded
|
11,594 | 12,705 | 20,133 | |||||||||
Balance
Sheet Liability
|
59,017 | 52,070 | 39,552 | |||||||||
Add
Insurance Apportionment Plan
|
12 | 24 | 37 | |||||||||
SAP
basis Loss and LAE reserves
|
$ | 59,029 | $ | 52,094 | $ | 39,589 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars
in Thousands)
|
||||||||||||
GAAP
basis Loss and LAE incurred
|
$ | 43,706 | $ | 41,869 | $ | 47,619 | ||||||
Intercompany
adjusting and other expenses
|
4,239 | 4,312 | 7,361 | |||||||||
Insurance
apportionment plan
|
(7 | ) | 4 | 12 | ||||||||
SAP
basis Loss and LAE incurred
|
$ | 47,938 | $ | 46,185 | $ | 54,992 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Loss
Ratio
|
86.9 | % | 64.3 | % | 48.0 | % | ||||||
Expense
Ratio
|
44.0 | % | 38.2 | % | 26.1 | % | ||||||
Combined
Ratio
|
130.9 | % | 102.5 | % | 74.1 | % |
|
·
|
The
fund maintains a rating of “A” or better from Standard and Poor’s or a
rating of “A” or better from Moody’s Investor’s Services (“Moody’s”) or an
equivalent or better rating from another NAIC Acceptable Rating
Organizations (“ARO”);
|
|
·
|
The
fund maintains a constant net asset value of $1.00 at all
times;
|
|
·
|
The
fund allows a maximum of seven-day redemption of proceeds;
and
|
|
·
|
The
fund invests at least ninety-five percent (95%) of its total assets in any
combination of: the United States Government securities listed in Section
14 of the Appendix, securities rated in the highest short term rating
category by an NAIC ARO, unrated securities determined by the fund’s Board
to be of comparable quality, securities of money market funds that are
registered investment companies and collateralized repurchase agreements
comprised of such obligations at all times. The remaining five percent
(5%) may be invested in Second Tier Securities as that phrase is defined
by Rule 2a-7 of the Investment Company Act of 1940 (17 CFR
270.2a-7).
|
|
·
|
the
availability of sufficient reliable data and our ability to properly
analyze available data;
|
|
·
|
the
uncertainties that inherently characterize estimates and
assumptions;
|
|
·
|
our
selection and application of appropriate rating and pricing
techniques;
|
|
·
|
changes
in legal standards, claim settlement practices, medical care expenses and
restoration costs; and
|
|
·
|
legislatively
imposed consumer initiatives.
|
|
·
|
Our
board of directors is elected in classes, with only two or three of the
directors elected each year. As a result, shareholders would not be able
to change the membership of the board in its entirety in any one year.
Shareholders would also be unable to bring about, through the election of
a new board of directors, changes in our
officers.
|
|
·
|
Our
articles of incorporation prohibit shareholders from acting by written
consent, meaning that shareholders will be required to conduct a meeting
in order to vote on any proposals or take any
action.
|
|
·
|
Our
bylaws require at least 60 days' notice if a shareholder desires to submit
a proposal for a shareholder vote or to nominate a person for election to
our board of directors.
|
|
·
|
The
Florida Control Share Act provides that shares acquired in a "control
share acquisition" will not have voting rights unless the voting rights
are approved by a majority of the corporation's disinterested
shareholders. A "control share acquisition" is an acquisition, in whatever
form, of voting power in any of the following ranges: (a) at least 20% but
less than 33-1/3% of all voting power, (b) at least 33-1/3% but less than
a majority of all voting power; or (c) a majority or more of all voting
power.
|
|
·
|
The
Florida Affiliated Transactions Act requires supermajority approval by
disinterested shareholders of certain specified transactions between a
public company and holders of more than 10% of the outstanding voting
shares of the corporation (or their
affiliates).
|
Quarter Ended
|
High
|
Low
|
||||||
March
31, 2009
|
$ | 5.07 | $ | 1.63 | ||||
June
30, 2009
|
$ | 4.20 | $ | 2.86 | ||||
September
30, 2009
|
$ | 4.98 | $ | 3.03 | ||||
December
31, 2009
|
$ | 4.82 | $ | 3.78 | ||||
March
31, 2008
|
$ | 14.05 | $ | 10.98 | ||||
June
30, 2008
|
$ | 12.98 | $ | 8.17 | ||||
September
30, 2008
|
$ | 8.88 | $ | 5.19 | ||||
December
31, 2008
|
$ | 5.42 | $ | 3.62 |
Equity Compensation Plan Information
|
||||||||||||
Number of securities to
be issued upon exercise of
outstanding options,
warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
|
||||||||||
Plan category
|
(a)
|
(b)
|
(c)
|
|||||||||
Equity
compensation plans approved by stock holders*
|
861,550 | $ | 12.59 | 68,197 |
As of the years ended December 31,
|
||||||||||||||||||||
(Amounts in Thousands except Book Value Per Share)
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
Balance
Sheet Data
|
||||||||||||||||||||
Total
assets
|
$ | 202,889 | $ | 197,102 | $ | 219,361 | $ | 207,897 | $ | 290,155 | ||||||||||
Investments
|
114,219 | 26,065 | 136,224 | 124,834 | 100,086 | |||||||||||||||
Cash
and short term investments
|
28,197 | 124,577 | 22,524 | 17,917 | 6,071 | |||||||||||||||
Finance
contracts, consumer loans and pay advances receivable, net
|
- | - | 420 | 1,831 | 7,313 | |||||||||||||||
Total
liabilities
|
135,447 | 120,871 | 138,104 | 141,704 | 249,387 | |||||||||||||||
Unpaid
losses and LAE
|
70,611 | 64,775 | 59,685 | 39,615 | 154,039 | |||||||||||||||
Unearned
premiums
|
50,857 | 40,508 | 56,394 | 77,829 | 61,839 | |||||||||||||||
Total
shareholders' equity
|
67,442 | 76,231 | 81,257 | 66,193 | 40,767 | |||||||||||||||
Book
value per share
|
$ | 8.48 | $ | 9.51 | $ | 10.32 | $ | 8.38 | $ | 6.02 |
Years Ended December 31,
|
||||||||||||||||||||
(Amounts in Thousands except EPS and Dividends)
|
||||||||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
Operations
Data:
|
||||||||||||||||||||
Revenue:
|
||||||||||||||||||||
Gross
premiums written
|
$ | 104,379 | $ | 88,248 | $ | 133,591 | $ | 152,665 | $ | 119,440 | ||||||||||
Gross
premiums ceded
|
(56,217 | ) | (34,553 | ) | (44,550 | ) | (67,520 | ) | (31,414 | ) | ||||||||||
Net
premiums written
|
48,162 | 53,695 | 89,041 | 85,145 | 88,026 | |||||||||||||||
Increase
(Decrease) in prepaid reinsurance premiums
|
10,163 | (4,451 | ) | (11,251 | ) | 20,193 | 6,623 | |||||||||||||
(Increase)
Decrease in unearned premiums
|
(10,349 | ) | 15,886 | 21,435 | (15,990 | ) | (11,686 | ) | ||||||||||||
Net
change in prepaid reinsurance premiums and unearned
premiums
|
(186 | ) | 11,435 | 10,184 | 4,203 | (5,063 | ) | |||||||||||||
Net
premiums earned
|
47,976 | 65,130 | 99,224 | 89,348 | 82,963 | |||||||||||||||
Commission
income
|
1,362 | 1,612 | 7,214 | 1,679 | 409 | |||||||||||||||
Finance
revenue
|
294 | 350 | 545 | 1,686 | 3,567 | |||||||||||||||
Managing
general agent fees
|
1,620 | 1,745 | 2,035 | 2,625 | 2,420 | |||||||||||||||
Net
investment income
|
3,397 | 6,461 | 8,038 | 5,933 | 3,841 | |||||||||||||||
Net
realized investment gains (losses)
|
1,117 | (10,593 | ) | (145 | ) | 1,063 | 458 | |||||||||||||
Regulatory
assessments recovered
|
2,333 | 2,104 | 1,655 | 132 | - | |||||||||||||||
Other
income
|
755 | 655 | 642 | 1,449 | 1,010 | |||||||||||||||
Total
revenue
|
58,854 | 67,464 | 119,208 | 103,915 | 94,669 | |||||||||||||||
Expenses:
|
||||||||||||||||||||
Losses
and LAE
|
43,706 | 41,869 | 47,619 | 44,400 | 48,336 | |||||||||||||||
Operating
and underwriting expenses
|
9,681 | 7,209 | 12,758 | 13,160 | 8,219 | |||||||||||||||
Salaries
and wages
|
7,930 | 7,428 | 6,732 | 7,011 | 6,384 | |||||||||||||||
Interest
expense
|
- | - | 173 | 656 | 1,398 | |||||||||||||||
Policy
acquisition costs, net of amortization
|
13,747 | 14,760 | 19,420 | 17,395 | 14,561 | |||||||||||||||
Total
expenses
|
75,064 | 71,266 | 86,702 | 82,622 | 78,899 | |||||||||||||||
(Loss)
income from continuing operations before provision for income tax
(benefit) expense
|
(16,210 | ) | (3,802 | ) | 32,506 | 21,293 | 15,771 | |||||||||||||
Provision
for income tax (benefit) expense
|
(5,921 | ) | (1,324 | ) | 11,226 | 7,396 | 4,690 | |||||||||||||
Net
(loss) income from continuing operations
|
(10,289 | ) | (2,478 | ) | 21,280 | 13,896 | 11,081 | |||||||||||||
Discontinued
operations:
|
||||||||||||||||||||
Income
from discontinued operations (including 2005 and 2004 gain on disposal of
$1,630 and $5,384, respectively)
|
- | - | - | - | 1,630 | |||||||||||||||
Provision
for income tax expense
|
- | - | - | - | 595 | |||||||||||||||
Income
from discontinued operations
|
- | - | - | - | 1,035 | |||||||||||||||
Net
(loss) income
|
$ | (10,289 | ) | $ | (2,478 | ) | $ | 21,280 | $ | 13,896 | $ | 12,116 | ||||||||
Earnings
per share data
|
||||||||||||||||||||
Basic
net (loss) income per share from continuing operations
|
$ | (1.29 | ) | $ | (0.31 | ) | $ | 2.69 | $ | 1.84 | $ | 1.78 | ||||||||
Basic
net income per share from discontinued operations
|
$ | - | $ | - | $ | - | $ | - | $ | 0.17 | ||||||||||
Basic
net (loss) income per share
|
$ | (1.29 | ) | $ | (0.31 | ) | $ | 2.69 | $ | 1.84 | $ | 1.95 | ||||||||
Fully
diluted net (loss) income per share from continuing
operations
|
$ | (1.29 | ) | $ | (0.31 | ) | $ | 2.65 | $ | 1.72 | $ | 1.67 | ||||||||
Fully
diluted net income per share from discontinued operations
|
$ | - | $ | - | $ | - | $ | - | $ | 0.16 | ||||||||||
Fully
diluted net (loss) income per share
|
$ | (1.29 | ) | $ | (0.31 | ) | $ | 2.65 | $ | 1.72 | $ | 1.83 | ||||||||
Dividends
paid per share
|
$ | 0.36 | $ | 0.72 | $ | 0.72 | $ | 0.48 | $ | 0.32 |
|
·
|
the
quality of the insurable risks
underwritten;
|
|
·
|
the
nature and severity of the loss;
|
|
·
|
weather-related
patterns;
|
|
·
|
the
availability, cost and terms of
reinsurance;
|
|
·
|
underlying
settlement costs, including medical and legal
costs;
|
|
·
|
legal
and political factors such as legislative initiatives and public
opinion;
|
|
·
|
macroeconomic
issues.
|
|
·
|
Paid
and Incurred Loss Development
Method
|
|
·
|
Paid
and Incurred Cape Cod Method
|
|
·
|
Loss
trend factors which are used to establish expected loss ratios for
subsequent accident years based on the projected loss ratio for prior
accident years.
|
|
·
|
Expected
loss ratios for the latest accident year and, in some cases for accident
years prior to the latest accident year. The expected loss ratio generally
reflects the projected loss ratio from prior accident years, adjusted for
the loss trend and the effect of rate changes and other quantifiable
factors on the loss ratio.
|
Reserves for unpaid loss and
LAE net of reinsurance
recoverable as of
December 31, 2009
|
Case Loss
Reserves
|
Case LAE
Reserves
|
Total Case
Reserves
|
IBNR
Reserves
(Including
LAE)
|
Reinsurance
Recoverable
on Unpaid
Loss and
Loss
Expenses
|
Net
Reserves
|
||||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||||||
Homeowners'
|
$ | 7,489 | $ | 1,348 | $ | 8,837 | $ | 21,093 | $ | 11,666 | $ | 18,264 | ||||||||||||
Commercial
General Liability
|
6,312 | 1,573 | 7,885 | 29,578 | - | 37,463 | ||||||||||||||||||
Automobile
|
286 | 188 | 474 | 2,888 | 84 | 3,278 | ||||||||||||||||||
Fire
|
- | - | - | 11 | - | 11 | ||||||||||||||||||
Inland
Marine
|
- | - | - | - | - | - | ||||||||||||||||||
Total
|
$ | 14,087 | $ | 3,109 | $ | 17,196 | $ | 53,570 | $ | 11,750 | $ | 59,016 |
Reserves for unpaid loss and
LAE net of reinsurance
recoverable as of
December 31, 2008
|
Case Loss
Reserves
|
Case LAE
Reserves
|
Total Case
Reserves
|
IBNR
Reserves
(Including
LAE)
|
Reinsurance
Recoverable
on Unpaid
Loss and
Loss
Expenses
|
Net
Reserves
|
||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||
Homeowners'
|
$ | 7,132 | $ | 899 | $ | 8,031 | $ | 19,669 | $ | 12,613 | $ | 15,087 | ||||||||||||
Commercial
General Liability
|
6,166 | 1,364 | 7,530 | 27,323 | - | 34,853 | ||||||||||||||||||
Automobile
|
412 | 255 | 667 | 1,555 | 100 | 2,122 | ||||||||||||||||||
Total
|
$ | 13,710 | $ | 2,518 | $ | 16,228 | $ | 48,547 | $ | 12,713 | $ | 52,062 |
Years Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Change in loss and
LAE reserves, net of
reinsurance
|
Adjusted loss and
LAE reserves, net of
reinsurance
|
Percentage
change in
equity (1)
|
Adjusted loss and
LAE reserves, net of reinsurance
|
Percentage
change in
equity (1)
|
||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
-10.0
|
% | 53,115 | -15.2 | % | 46,856 | -12.8 | % | |||||||||
-7.5
|
% | 54,590 | -11.4 | % | 48,158 | -9.6 | % | |||||||||
-5.0
|
% | 56,066 | -7.6 | % | 49,459 | -6.4 | % | |||||||||
-2.5
|
% | 57,541 | -3.8 | % | 50,761 | -3.2 | % | |||||||||
Base
|
59,016 | - | 52,062 | - | ||||||||||||
2.5
|
% | 60,492 | 3.8 | % | 53,364 | 3.2 | % | |||||||||
5.0
|
% | 61,967 | 7.6 | % | 54,665 | 6.4 | % | |||||||||
7.5
|
% | 63,443 | 11.4 | % | 55,967 | 9.6 | % | |||||||||
10.0
|
% | 64,918 | 15.2 | % | 57,268 | 12.8 | % |
Unrealized Gains and (Losses)
|
||||||||
December 31, 2009
|
December 31, 2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Debt
securities:
|
||||||||
United
States government obligations
|
$ | (120 | ) | $ | - | |||
Obligations
of states and political subdivisions
|
500 | (148 | ) | |||||
Corporate
|
1,742 | (936 | ) | |||||
2,122 | (1,084 | ) | ||||||
Equity
securities:
|
||||||||
Common
stocks
|
1,128 | (819 | ) | |||||
Total
debt and equity securities
|
$ | 3,250 | $ | (1,903 | ) |
|
·
|
rating
downgrade or other credit event (eg., failure to pay interest when
due);
|
|
·
|
length
of time and the extent to which the fair value has been less than
amortized cost;
|
|
·
|
financial
condition and near term prospects of the issuer, including any specific
events which may influence the operations of the issuer such as changes in
technology or discontinuance of a business
segment;
|
|
·
|
prospects
for the issuer’s industry segment;
|
|
·
|
intent
and ability of the Company to retain the investment for a period of time
sufficient to allow for anticipated recovery in market
value;
|
|
·
|
historical
volatility of the fair value of the
security.
|
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt
securities, at market:
|
||||||||||||||||
United
States government agencies and authorities
|
$ | 12,802 | 11.21 | % | $ | 4,544 | 17.43 | % | ||||||||
Obligations
of states and political subdivisions
|
39,269 | 34.38 | % | 5,331 | 20.45 | % | ||||||||||
Corporate
|
42,092 | 36.85 | % | 13,050 | 50.07 | % | ||||||||||
Other
|
- | 0.00 | % | - | 0.00 | % | ||||||||||
Total
fixed maturities
|
94,163 | 82.44 | % | 22,925 | 87.95 | % | ||||||||||
Equity
securities, at market
|
20,056 | 17.56 | % | 3,140 | 12.05 | % | ||||||||||
Total
investments
|
$ | 114,219 | 100.00 | % | $ | 26,065 | 100.00 | % |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Allowance
for credit losses at beginning of year
|
$ | 122 | $ | 289 | ||||
Additions
charged to bad debt expense
|
92 | (300 | ) | |||||
Write-downs
charged against the allowance
|
(190 | ) | 133 | |||||
Allowance
for credit losses at end of year
|
$ | 24 | $ | 122 |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Balance,
beginning of year
|
$ | 6,558 | $ | 8,958 | ||||
Acquisition
costs deferred
|
15,456 | 12,360 | ||||||
Amortization
expense during year
|
(13,747 | ) | (14,760 | ) | ||||
Balance,
end of year
|
$ | 8,267 | $ | 6,558 |
|
Years Ended December 31,
|
|||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Deferred
tax assets
|
||||||||
Unpaid
losses and LAE
|
$ | 2,315 | $ | 2,187 | ||||
Unearned
premiums
|
1,785 | 1,771 | ||||||
Unrealized
loss on investment securities
|
- | 716 | ||||||
Allowance
for credit losses
|
- | 141 | ||||||
Allowance
for impairments
|
164 | 1,410 | ||||||
Regulatory
assessments
|
260 | 1,312 | ||||||
Unearned
agent commissions
|
8 | - | ||||||
Depreciation
& amortization
|
367 | 155 | ||||||
Reserve
for claims settlements
|
809 | - | ||||||
Capital
loss carryover
|
2,112 | 2,657 | ||||||
State
net operating loss carryforward
|
663 | - | ||||||
Deferred
gain on sale and leaseback
|
288 | 453 | ||||||
Stock
option expense per FASB 123R
|
305 | 237 | ||||||
Total
deferred tax assets
|
9,076 | 11,039 | ||||||
Deferred
tax liabilities
|
||||||||
Deferred
acquisition costs, net
|
(3,111 | ) | (2,468 | ) | ||||
Allowance
for credit losses
|
(60 | ) | - | |||||
Discount
on advance premiums
|
(7 | ) | (41 | ) | ||||
Unrealized
gain on investment securities
|
(1,223 | ) | - | |||||
Total
deferred tax liabilities
|
(4,401 | ) | (2,509 | ) | ||||
Net
deferred tax asset
|
$ | 4,675 | $ | 8,530 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Accrued
interest income receivable
|
$ | 1,162 | $ | 243 | ||||
Notes
receivable
|
599 | 703 | ||||||
Deposits
|
334 | 71 | ||||||
Prepaid
expenses
|
644 | 748 | ||||||
Revenue
sharing due from reinsurer
|
- | 282 | ||||||
Receivable
for investments sold
|
567 | - | ||||||
Other
|
365 | 425 | ||||||
Total
|
$ | 3,671 | $ | 2,472 |
December 31, 2009
|
December 31, 2008
|
|||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars in Thousands)
|
(Dollars in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$ | 8,705 | $ | 21,102 | $ | 29,807 | $ | 8,048 | $ | 19,678 | $ | 27,726 | ||||||||||||
Commercial
General Liability
|
7,885 | 29,346 | 37,231 | 7,531 | 26,998 | 34,529 | ||||||||||||||||||
Automobile
|
2,612 | 960 | 3,572 | 657 | 1,863 | 2,520 | ||||||||||||||||||
Total
|
$ | 19,202 | $ | 51,408 | $ | 70,610 | $ | 16,236 | $ | 48,539 | $ | 64,775 |
Years Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Homeowners'
|
$ | 84,705 | 81.15 | % | $ | 60,708 | 68.79 | % | ||||||||
Commercial
General Liability
|
15,279 | 14.64 | % | 23,790 | 26.96 | % | ||||||||||
Federal
Flood
|
3,559 | 3.41 | % | 3,263 | 3.70 | % | ||||||||||
Automobile
|
836 | 0.80 | % | 487 | 0.55 | % | ||||||||||
Gross
written premiums
|
$ | 104,379 | 100.00 | % | $ | 88,248 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
State
|
||||||||||||||||
Alabama
|
$ | 76 | 0.50 | % | $ | 117 | 0.49 | % | ||||||||
Arkansas
|
4 | 0.03 | % | 12 | 0.05 | % | ||||||||||
California
|
49 | 0.32 | % | 269 | 1.13 | % | ||||||||||
Florida
|
12,341 | 80.77 | % | 16,011 | 67.30 | % | ||||||||||
Georgia
|
291 | 1.91 | % | 568 | 2.39 | % | ||||||||||
Kentucky
|
1 | 0.00 | % | 1 | 0.00 | % | ||||||||||
Louisiana
|
1,736 | 11.36 | % | 4,481 | 18.84 | % | ||||||||||
Maryland
|
- | 0.00 | % | 2 | 0.01 | % | ||||||||||
South
Carolina
|
2 | 0.01 | % | 70 | 0.29 | % | ||||||||||
Texas
|
778 | 5.09 | % | 2,252 | 9.47 | % | ||||||||||
Virginia
|
1 | 0.01 | % | 7 | 0.03 | % | ||||||||||
Total
|
$ | 15,279 | 100.00 | % | $ | 23,790 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Homeowners'
|
$ | 28,474 | 59.35 | % | $ | 36,415 | 55.91 | % | ||||||||
Commercial
General Liability
|
19,076 | 39.76 | % | 27,784 | 42.66 | % | ||||||||||
Automobile
|
426 | 0.89 | % | 931 | 1.43 | % | ||||||||||
Net
premiums earned
|
$ | 47,976 | 100.00 | % | $ | 65,130 | 100.00 | % |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
in Thousands)
|
||||||||
Realized
gains:
|
||||||||
Debt
securities
|
$ | 485 | $ | 770 | ||||
Equity
securities
|
2,159 | 544 | ||||||
Total
realized gains
|
2,644 | 1,314 | ||||||
Realized
losses:
|
||||||||
Debt
securities
|
(825 | ) | (854 | ) | ||||
Equity
securities
|
(702 | ) | (11,053 | ) | ||||
Total
realized losses
|
(1,527 | ) | (11,907 | ) | ||||
Net
realized gains (losses) on investments
|
$ | 1,117 | $ | (10,593 | ) |
December 31, 2009
|
December 31, 2008
|
|||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars
in Thousands)
|
(Dollars
in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$ | 8,705 | $ | 21,102 | $ | 29,807 | $ | 8,048 | $ | 19,678 | $ | 27,726 | ||||||||||||
Commercial
General Liability
|
7,885 | 29,346 | 37,231 | 7,531 | 26,998 | 34,529 | ||||||||||||||||||
Automobile
|
2,612 | 960 | 3,572 | 657 | 1,863 | 2,520 | ||||||||||||||||||
Total
|
$ | 19,202 | $ | 51,408 | $ | 70,610 | $ | 16,236 | $ | 48,539 | $ | 64,775 |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
Homeowners'
|
92.0 | % | 56.2 | % | ||||
Commercial
General Liability
|
81.5 | % | 77.0 | % | ||||
Fire
|
18.7 | % | 0.0 | % | ||||
Inland
Marine
|
57.5 | % | 0.0 | % | ||||
Automobile
|
-1.1 | % | 1.8 | % | ||||
All
lines
|
86.9 | % | 64.3 | % |
Years Ended December 31,
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Homeowners'
|
$ | 60,708 | 68.79 | % | $ | 99,502 | 74.48 | % | ||||||||
Commercial
General Liability
|
23,790 | 26.96 | % | 32,222 | 24.12 | % | ||||||||||
Federal
Flood
|
3,263 | 3.70 | % | - | 0.00 | % | ||||||||||
Automobile
|
487 | 0.55 | % | 1,867 | 1.40 | % | ||||||||||
Gross
written premiums
|
$ | 88,248 | 100.00 | % | $ | 133,591 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
State
|
||||||||||||||||
Alabama
|
$ | 117 | 0.49 | % | $ | 26 | 0.08 | % | ||||||||
Arkansas
|
12 | 0.05 | % | - | 0.00 | % | ||||||||||
California
|
269 | 1.13 | % | 23 | 0.07 | % | ||||||||||
Florida
|
16,011 | 67.30 | % | 21,192 | 65.77 | % | ||||||||||
Georgia
|
568 | 2.39 | % | 1,023 | 3.17 | % | ||||||||||
Kentucky
|
1 | 0.00 | % | 8 | 0.03 | % | ||||||||||
Louisiana
|
4,481 | 18.84 | % | 5,595 | 17.36 | % | ||||||||||
Maryland
|
2 | 0.01 | % | - | 0.00 | % | ||||||||||
South
Carolina
|
70 | 0.29 | % | 182 | 0.57 | % | ||||||||||
Texas
|
2,252 | 9.47 | % | 4,127 | 12.81 | % | ||||||||||
Virginia
|
7 | 0.03 | % | 46 | 0.14 | % | ||||||||||
Total
|
$ | 23,790 | 100.00 | % | $ | 32,222 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
2008
|
2007
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Homeowners'
|
$ | 36,415 | 55.91 | % | $ | 63,121 | 63.62 | % | ||||||||
Commercial
General Liability
|
27,784 | 42.66 | % | 32,738 | 32.99 | % | ||||||||||
Automobile
|
931 | 1.43 | % | 3,365 | 3.39 | % | ||||||||||
Net
premiums earned
|
$ | 65,130 | 100.00 | % | $ | 99,224 | 100.00 | % |
Years Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
(Dollars
in Thousands)
|
||||||||
Realized
gains:
|
||||||||
Debt
securities
|
$ | 770 | $ | 18 | ||||
Equity
securities
|
544 | 2,115 | ||||||
Total
realized gains
|
1,314 | 2,133 | ||||||
Realized
losses:
|
||||||||
Debt
securities
|
(854 | ) | (0 | ) | ||||
Equity
securities
|
(11,053 | ) | (2,278 | ) | ||||
Total
realized losses
|
(11,907 | ) | (2,278 | ) | ||||
Net
realized losses on investments
|
$ | (10,593 | ) | $ | (145 | ) |
December 31, 2008
|
December 31, 2007
|
|||||||||||||||||||||||
Case
|
Bulk
|
Total
|
Case
|
Bulk
|
Total
|
|||||||||||||||||||
(Dollars
in Thousands)
|
(Dollars
in Thousands)
|
|||||||||||||||||||||||
Homeowners'
|
$ | 8,048 | $ | 19,678 | $ | 27,726 | $ | 7,776 | $ | 24,599 | $ | 32,375 | ||||||||||||
Commercial
General Liability
|
7,531 | 26,998 | 34,529 | 5,415 | 17,870 | 23,285 | ||||||||||||||||||
Automobile
|
657 | 1,863 | 2,520 | 530 | 3,495 | 4,025 | ||||||||||||||||||
Total
|
$ | 16,236 | $ | 48,539 | $ | 64,775 | $ | 13,721 | $ | 45,964 | $ | 59,685 |
Years Ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Homeowners'
|
56.2 | % | 37.4 | % | ||||
Commercial
General Liability
|
77.0 | % | 58.9 | % | ||||
Fire
|
34.0 | % | 0.0 | % | ||||
Automobile
|
1.8 | % | 140.0 | % | ||||
All
lines
|
64.3 | % | 48.0 | % |
(Dollars
in Thousands)
|
||||||||||||||||||||||||
Contractual
Obligations
|
Total
|
2010
|
2011
|
2012
|
2013
|
Thereafter
|
||||||||||||||||||
Unpaid
Losses and LAE
|
$ | 70,610 | $ | 41,914 | $ | 16,883 | $ | 7,767 | $ | 2,711 | $ | 1,335 | ||||||||||||
Operating
leases
|
1,288 | 638 | 650 | - | - | - | ||||||||||||||||||
Total
|
$ | 71,898 | $ | 42,552 | $ | 17,533 | $ | 7,767 | $ | 2,711 | $ | 1,335 |
Year Ended December 31,
2009
|
||||||||||||||||
(Dollars
in Thousands except EPS)
|
||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Revenue:
|
||||||||||||||||
Net
premiums earned
|
$ | 13,905 | $ | 14,264 | $ | 9,511 | $ | 10,296 | ||||||||
Other
revenue
|
1,719 | 2,864 | 3,368 | 2,927 | ||||||||||||
Total
revenue
|
15,624 | 17,128 | 12,879 | 13,223 | ||||||||||||
Expenses:
|
||||||||||||||||
Losses
and LAE
|
8,873 | 8,974 | 11,119 | 14,740 | ||||||||||||
Other
expenses
|
6,570 | 7,119 | 8,158 | 9,511 | ||||||||||||
Total
expenses
|
15,443 | 16,093 | 19,277 | 24,251 | ||||||||||||
Income
(loss) before provision for income tax (benefit) expense
|
181 | 1,035 | (6,398 | ) | (11,028 | ) | ||||||||||
Provision
for income tax (benefit) expense
|
(122 | ) | 250 | (2,403 | ) | (3,646 | ) | |||||||||
Net
income (loss)
|
$ | 303 | $ | 785 | $ | (3,995 | ) | $ | (7,382 | ) | ||||||
Basic
net income (loss) per share
|
$ | 0.04 | $ | 0.10 | $ | (0.50 | ) | $ | (0.93 | ) | ||||||
Fully
diluted net income (loss) per share
|
$ | 0.04 | $ | 0.10 | $ | (0.50 | ) | $ | (0.93 | ) | ||||||
Weighted
average number of common shares outstanding
|
8,014 | 8,014 | 8,014 | 7,968 | ||||||||||||
Weighted
average number of common shares outstanding (assuming
dilution)
|
8,014 | 8,014 | 8,014 | 7,968 |
Year Ended December 31,
2008
|
||||||||||||||||
(Dollars
in Thousands except EPS)
|
||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
|||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||||||
Revenue:
|
||||||||||||||||
Net
premiums earned
|
$ | 18,606 | $ | 15,459 | $ | 16,249 | $ | 14,816 | ||||||||
Other
revenue
|
1,436 | (32 | ) | (283 | ) | 1,213 | ||||||||||
Total
revenue
|
20,042 | 15,427 | 15,966 | 16,029 | ||||||||||||
Expenses:
|
||||||||||||||||
Losses
and LAE
|
7,874 | 12,493 | 9,888 | 11,614 | ||||||||||||
Other
expenses
|
7,150 | 7,024 | 7,927 | 7,296 | ||||||||||||
Total
expenses
|
15,024 | 19,517 | 17,815 | 18,910 | ||||||||||||
Income
(loss) before provision for income tax expense (benefit)
|
5,018 | (4,090 | ) | (1,849 | ) | (2,881 | ) | |||||||||
Provision
for income tax expense (benefit)
|
709 | (1,590 | ) | (336 | ) | (107 | ) | |||||||||
Net
income (loss)
|
$ | 4,309 | $ | (2,500 | ) | $ | (1,513 | ) | $ | (2,774 | ) | |||||
Basic
net income (loss) per share
|
$ | 0.54 | $ | (0.31 | ) | $ | (0.19 | ) | $ | (0.35 | ) | |||||
Fully
diluted net income (loss) per share
|
$ | 0.54 | $ | (0.31 | ) | $ | (0.19 | ) | $ | (0.35 | ) | |||||
Weighted
average number of common shares outstanding
|
7,913 | 7,974 | 8,014 | 8,014 | ||||||||||||
Weighted
average number of common shares outstanding (assuming
dilution)
|
7,960 | 7,974 | 8,014 | 8,014 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars
in Thousands)
|
||||||||||||
Interest
on debt securities
|
$ | 2,718 | $ | 4,619 | $ | 6,782 | ||||||
Dividends
on equity securities
|
466 | 770 | 565 | |||||||||
Interest
on cash and cash equivalents
|
213 | 1,072 | 691 | |||||||||
Total
investment income
|
$ | 3,397 | $ | 6,461 | $ | 8,038 | ||||||
Net
realized gains (losses)
|
$ | 1,117 | $ | (10,593 | ) | $ | (145 | ) |
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Debt
securities, at market:
|
||||||||||||||||
United
States government agencies and authorities
|
$ | 12,802 | 11.21 | % | $ | 4,544 | 17.43 | % | ||||||||
Obligations
of states and political subdivisions
|
39,269 | 34.38 | % | 5,331 | 20.45 | % | ||||||||||
Corporate
|
42,092 | 36.85 | % | 13,050 | 50.07 | % | ||||||||||
Other
|
- | 0.00 | % | - | 0.00 | % | ||||||||||
Total
fixed maturities
|
94,163 | 82.44 | % | 22,925 | 87.95 | % | ||||||||||
Equity
securities, at market
|
20,056 | 17.56 | % | 3,140 | 12.05 | % | ||||||||||
Total
investments
|
$ | 114,219 | 100.00 | % | $ | 26,065 | 100.00 | % |
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
AAA
|
$ | 40,390 | 42.90 | % | $ | 15,180 | 66.22 | % | ||||||||
AA
|
18,619 | 19.77 | % | 5,732 | 25.00 | % | ||||||||||
A
|
24,286 | 25.79 | % | 151 | 0.66 | % | ||||||||||
BBB
|
9,954 | 10.57 | % | 1,862 | 8.12 | % | ||||||||||
BB++
|
- | 0.00 | % | - | 0.00 | % | ||||||||||
Not
rated
|
914 | 0.97 | % | - | 0.00 | % | ||||||||||
$ | 94,163 | 100.00 | % | $ | 22,925 | 100.00 | % |
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||
Matures
In:
|
||||||||||||||||
One
year or less
|
$ | 1,615 | 1.72 | % | $ | 2,388 | 10.42 | % | ||||||||
One
year to five years
|
50,781 | 53.93 | % | 9,850 | 42.97 | % | ||||||||||
Five
years to 10 years
|
27,178 | 28.86 | % | 1,037 | 4.52 | % | ||||||||||
More
than 10 years
|
14,589 | 15.49 | % | 9,650 | 42.09 | % | ||||||||||
Total
debt securities
|
$ | 94,163 | 100.00 | % | $ | 22,925 | 100.00 | % |
Carrying
|
||||||||||||||||||||||||||||||||
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
Total
|
Amount
|
|||||||||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||||||||||
Principal
amount by expected maturity:
|
||||||||||||||||||||||||||||||||
U.S.
government agencies and authorities
|
$ | - | $ | 4,325 | $ | 3,350 | $ | 2,500 | $ | 500 | $ | 2,190 | $ | 12,865 | $ | 12,802 | ||||||||||||||||
Obligations
of states and political subdivisions
|
1,225 | 3,605 | 6,670 | 5,005 | 4,161 | 15,440 | 36,106 | 39,269 | ||||||||||||||||||||||||
Corporate
securities
|
350 | 4,100 | 8,140 | 1,280 | 4,529 | 15,878 | 34,277 | 42,092 | ||||||||||||||||||||||||
Collateralized
mortgage obligations
|
- | - | - | - | - | 5,154 | 5,154 | - | ||||||||||||||||||||||||
Equity
securities, at market
|
- | - | - | - | - | - | - | 20,056 | ||||||||||||||||||||||||
Mortgage
notes receivable
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||
All
investments
|
$ | 1,575 | $ | 12,030 | $ | 18,160 | $ | 8,785 | $ | 9,190 | $ | 38,662 | $ | 88,402 | $ | 114,219 | ||||||||||||||||
Weighted
average interest rate by expected maturity:
|
||||||||||||||||||||||||||||||||
U.S.
government agencies and authorities
|
0.00 | % | 1.18 | % | 3.17 | % | 3.66 | % | 1.75 | % | 3.24 | % | 2.55 | % | ||||||||||||||||||
Obligations
of states and political subdivisions
|
4.96 | % | 3.68 | % | 5.22 | % | 5.25 | % | 5.00 | % | 5.27 | % | 5.06 | % | ||||||||||||||||||
Corporate
securities
|
6.07 | % | 4.23 | % | 2.84 | % | 5.32 | % | 5.50 | % | 6.45 | % | 5.16 | % | ||||||||||||||||||
Collateralized
mortgage obligations
|
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 5.50 | % | 5.50 | % | ||||||||||||||||||
Equity
securities, at market
|
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||||
Mortgage
notes receivable
|
0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||||
All
investments
|
5.21 | % | 2.97 | % | 3.78 | % | 4.81 | % | 5.07 | % | 5.67 | % | 4.76 | % |
PAGE
|
||
Report
of Independent Registered Accounting Firm
|
73
|
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
74
|
|
Consolidated
Statements of Operations For the years ended December 31, 2009, 2008 and
2007
|
75
|
|
Consolidated
Statements of Changes in Shareholders' Equity and Comprehensive Income
(Loss) For the years ended December 31, 2009, 2008 and
2007
|
76
|
|
Consolidated
Statements of Cash Flows For the years ended December 31, 2009, 2008 and
2007
|
|
77
|
Notes
to Consolidated Financial Statements
|
79
|
Period Ending
|
||||||||
December 31, 2009
|
December 31, 2008
|
|||||||
|
(Dollars
in Thousands)
|
|||||||
ASSETS
|
||||||||
Investments
|
||||||||
Debt
maturities, available for sale, at fair value
|
$ | 91,513 | $ | 9,429 | ||||
Debt
maturities, held to maturity, at amortized cost
|
2,650 | 13,496 | ||||||
Equity
securities, available for sale, at fair value
|
20,056 | 3,140 | ||||||
Total
investments
|
114,219 | 26,065 | ||||||
Cash
and short term investments
|
28,197 | 124,577 | ||||||
Prepaid
reinsurance premiums
|
10,319 | 5,537 | ||||||
Premiums
receivable, net of allowance for credit losses of $24 and $122,
respectively
|
10,311 | 3,353 | ||||||
Reinsurance
recoverable, net of allowance for credit losses of $0 and $226,
respectively
|
15,302 | 16,880 | ||||||
Deferred
policy acquisition costs
|
8,267 | 6,558 | ||||||
Deferred
income taxes, net
|
4,675 | 8,530 | ||||||
Income
taxes receivable
|
7,069 | 2,275 | ||||||
Property,
plant and equipment, net
|
859 | 855 | ||||||
Other
assets
|
3,671 | 2,472 | ||||||
Total
assets
|
$ | 202,889 | $ | 197,102 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Unpaid
losses and LAE
|
$ | 70,611 | $ | 64,775 | ||||
Unearned
premiums
|
50,857 | 40,508 | ||||||
Premiums
deposits and customer credit balances
|
2,129 | 1,700 | ||||||
Bank
overdraft
|
8,251 | 8,694 | ||||||
Deferred
gain from sale of property
|
1,006 | 1,495 | ||||||
Accounts
payable and accrued expenses
|
2,593 | 3,699 | ||||||
Total
liabilities
|
135,447 | 120,871 | ||||||
Shareholders'
equity:
|
||||||||
Common
stock, $0.01 par value. Authorized 25,000,000 shares; issued and
outstanding 7,953,384 and 8,013,894, respectively.
|
80 | 80 | ||||||
Preferred
stock, $0.01 par value. Authorized 1,000,000 shares; none issued or
outstanding
|
- | - | ||||||
Additional
paid-in capital
|
50,185 | 49,979 | ||||||
Accumulated
other comprehensive income (deficit)
|
2,026 | (1,187 | ) | |||||
Retained
earnings
|
15,151 | 27,359 | ||||||
Total
shareholders' equity
|
67,442 | 76,231 | ||||||
Total
liabilities and shareholders' equity
|
$ | 202,889 | $ | 197,102 |
Twelve Months Ended December
31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars
in Thousands except EPS and dividend data)
|
||||||||||||
Revenue:
|
||||||||||||
Gross
premiums written
|
$ | 104,379 | $ | 88,248 | $ | 133,591 | ||||||
Gross
premiums ceded
|
(56,217 | ) | (34,553 | ) | (44,550 | ) | ||||||
Net
premiums written
|
48,162 | 53,695 | 89,041 | |||||||||
Increase
(Decrease) in prepaid reinsurance premiums
|
10,163 | (4,451 | ) | (11,251 | ) | |||||||
(Increase)
Decrease in unearned premiums
|
(10,349 | ) | 15,886 | 21,435 | ||||||||
Net
change in prepaid reinsurance premiums and unearned
premiums
|
(186 | ) | 11,435 | 10,184 | ||||||||
Net
premiums earned
|
47,976 | 65,130 | 99,224 | |||||||||
Commission
income
|
1,362 | 1,612 | 7,214 | |||||||||
Finance
revenue
|
294 | 350 | 545 | |||||||||
Managing
general agent fees
|
1,620 | 1,745 | 2,035 | |||||||||
Net
investment income
|
3,397 | 6,461 | 8,038 | |||||||||
Net
realized investment gains (losses)
|
1,117 | (10,593 | ) | (145 | ) | |||||||
Regulatory
assessments recovered
|
2,333 | 2,104 | 1,655 | |||||||||
Other
income
|
755 | 655 | 642 | |||||||||
Total
revenue
|
58,854 | 67,464 | 119,208 | |||||||||
Expenses:
|
||||||||||||
Losses
and LAE
|
43,706 | 41,869 | 47,619 | |||||||||
Operating
and underwriting expenses
|
9,681 | 7,209 | 12,758 | |||||||||
Salaries
and wages
|
7,930 | 7,428 | 6,732 | |||||||||
Interest
expense
|
- | - | 173 | |||||||||
Policy
acquisition costs, net of amortization
|
13,747 | 14,760 | 19,420 | |||||||||
Total
expenses
|
75,064 | 71,266 | 86,702 | |||||||||
(Loss)
Income before provision for income tax (benefit) expense
|
(16,210 | ) | (3,802 | ) | 32,506 | |||||||
Provision
for income tax (benefit) expense
|
(5,921 | ) | (1,324 | ) | 11,226 | |||||||
Net
(loss) income
|
$ | (10,289 | ) | $ | (2,478 | ) | $ | 21,280 | ||||
Basic
net (loss) income per share
|
$ | (1.29 | ) | $ | (0.31 | ) | $ | 2.69 | ||||
Fully
diluted net (loss) income per share
|
$ | (1.29 | ) | $ | (0.31 | ) | $ | 2.65 | ||||
Weighted
average number of common shares outstanding
|
8,002,365 | 7,979,436 | 7,922,542 | |||||||||
Weighted
average number of common shares outstanding (assuming
dilution)
|
8,002,365 | 7,979,436 | 8,030,205 | |||||||||
Dividends
paid per share
|
$ | 0.36 | $ | 0.72 | $ | 0.72 |
Accumulated
|
||||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||||
Comprehensive
|
Common
|
Paid-in
|
Comprehensive
|
Retained
|
Shareholder's
|
|||||||||||||||||||
Income
|
Stock
|
Capital
|
Deficit
|
Earnings
|
Equity
|
|||||||||||||||||||
(Dollars
in Thousands)
|
||||||||||||||||||||||||
Balance
as of December 31, 2006
|
$ | 79 | $ | 47,070 | $ | (967 | ) | $ | 20,011 | $ | 66,193 | |||||||||||||
Net
Income
|
$ | 21,280 | 21,280 | 21,280 | ||||||||||||||||||||
Cash
Dividends
|
(5,757 | ) | (5,757 | ) | ||||||||||||||||||||
Stock
issued in lieu of cash payment for principal and interest associated with
our notes
|
1 | 2,192 | 2,193 | |||||||||||||||||||||
Treasury
stock acquired
|
(3 | ) | (3,819 | ) | (3,823 | ) | ||||||||||||||||||
Stock
options exercised
|
176 | 176 | ||||||||||||||||||||||
Warrants
exercised
|
2 | 2,033 | 2,035 | |||||||||||||||||||||
Shares
based compensation
|
589 | 589 | ||||||||||||||||||||||
Net
unrealized change in investments, net of tax effect of
$927
|
(1,629 | ) | (1,629 | ) | (1,629 | ) | ||||||||||||||||||
Comprehensive
income
|
$ | 19,651 | ||||||||||||||||||||||
Balance
as of December 31, 2007
|
$ | 79 | $ | 48,240 | $ | (2,596 | ) | $ | 35,534 | $ | 81,256 | |||||||||||||
Net
(Loss)
|
$ | (2,478 | ) | (2,478 | ) | (2,478 | ) | |||||||||||||||||
Cash
Dividends
|
(5,697 | ) | (5,697 | ) | ||||||||||||||||||||
Treasury
stock acquired
|
(144 | ) | (144 | ) | ||||||||||||||||||||
Stock
options exercised
|
1 | 1,335 | 1,337 | |||||||||||||||||||||
Shares
based compensation
|
547 | 547 | ||||||||||||||||||||||
Net
unrealized change in investments, net of tax effect of
$794
|
1,409 | 1,409 | 1,409 | |||||||||||||||||||||
Comprehensive
income
|
$ | (1,069 | ) | |||||||||||||||||||||
Balance
as of December 31, 2008
|
$ | 80 | $ | 49,979 | $ | (1,187 | ) | $ | 27,359 | $ | 76,231 | |||||||||||||
Net
(Loss)
|
$ | (10,289 | ) | (10,289 | ) | (10,289 | ) | |||||||||||||||||
Cash
Dividends
|
(1,920 | ) | (1,920 | ) | ||||||||||||||||||||
Treasury
stock acquired
|
(1 | ) | (288 | ) | (288 | ) | ||||||||||||||||||
Shares
based compensation
|
493 | 493 | ||||||||||||||||||||||
Net
unrealized change in investments, net of tax effect of
$1,939
|
3,214 | 3,214 | 3,214 | |||||||||||||||||||||
Comprehensive
income
|
$ | (7,075 | ) | |||||||||||||||||||||
Balance
as of December 31, 2009
|
$ | 80 | $ | 50,185 | $ | 2,026 | $ | 15,151 | $ | 67,442 |
For
the Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars
in Thousands)
|
||||||||||||
Cash
flow from operating activities:
|
||||||||||||
Net
(loss) income
|
$ | (10,289 | ) | $ | (2,478 | ) | $ | 21,280 | ||||
Adjustments
to reconcile net (loss) income to net cash (used) provided by operating
activities:
|
||||||||||||
Amortization
of investment discount, net
|
642 | 223 | 360 | |||||||||
Depreciation
and amortization of property plant and equipment,
net
|
188 | 290 | 317 | |||||||||
Net
realized investment (gains) losses
|
(1,117 | ) | 10,593 | 188 | ||||||||
Common
Stock issues for interest on Notes
|
- | - | 109 | |||||||||
Provision
(Recovery) for credit losses, net
|
30 | (2 | ) | (31 | ) | |||||||
Provision
for uncollectible premiums receivable
|
97 | 157 | 222 | |||||||||
Non-cash
compensation
|
333 | 365 | 405 | |||||||||
Changes
in operating assets and liabilities:
|
- | - | - | |||||||||
Premiums
receivable
|
(7,055 | ) | 287 | 3,203 | ||||||||
Prepaid
reinsurance premiums
|
(4,783 | ) | 2,934 | 5,990 | ||||||||
Reinsurance
recoverable, net
|
1,578 | 6,055 | (2,712 | ) | ||||||||
Income
taxes recoverable
|
(4,794 | ) | (2,275 | ) | 787 | |||||||
Deferred
income taxes, net of other comprehensive
income
|
1,916 | (3,685 | ) | (2,400 | ) | |||||||
Policy
acquisition costs, net of amortization
|
(1,709 | ) | 2,400 | 2,195 | ||||||||
Premium
finance contracts receivable
|
- | 222 | 1,442 | |||||||||
Other
assets
|
(1,710 | ) | 144 | 1,169 | ||||||||
Unpaid
losses and LAE
|
5,835 | 5,098 | 20,068 | |||||||||
Unearned
premiums
|
10,343 | (15,886 | ) | (21,435 | ) | |||||||
Premium
deposits and customer credit balances
|
429 | (1,061 | ) | (1,032 | ) | |||||||
Income
taxes payable
|
- | (4,226 | ) | 4,226 | ||||||||
Bank
overdraft
|
(442 | ) | (1 | ) | 588 | |||||||
Accounts
payable and accrued expenses
|
(1,106 | ) | (646 | ) | (1,379 | ) | ||||||
Net
cash (used) provided by operating
activities
|
(11,614 | ) | (1,494 | ) | 33,560 | |||||||
Cash
flow (used) provided by investing
activities:
|
||||||||||||
Proceeds
from sale of investment securities
|
59,227 | 156,674 | 202,233 | |||||||||
Purchases
of investment securities available for sale
|
(141,753 | ) | (48,707 | ) | (221,879 | ) | ||||||
Purchases
of property and equipment
|
(193 | ) | (99 | ) | (67 | ) | ||||||
Net
cash (used) provided by investing activities
|
(82,719 | ) | 107,869 | (19,713 | ) | |||||||
Cash
flow used by financing activities:
|
||||||||||||
Subordinated
debt
|
- | - | (2,083 | ) | ||||||||
Exercised
stock options
|
- | 1,337 | 177 | |||||||||
Dividends
paid
|
(1,920 | ) | (5,697 | ) | (5,759 | ) | ||||||
Exercised
warrants, net
|
- | - | 2,035 | |||||||||
Acquisition
of Common Stock
|
(288 | ) | (144 | ) | (3,823 | ) | ||||||
Tax
benefit provision related to non-cash
compensation
|
160 | 182 | 214 | |||||||||
Net
cash used by financing activities
|
(2,048 | ) | (4,322 | ) | (9,239 | ) | ||||||
Net
(decrease) increase in cash and short term
investments
|
(96,380 | ) | 102,053 | 4,607 | ||||||||
Cash
and short term investments at beginning of
period
|
124,577 | 22,524 | 17,917 | |||||||||
Cash
and short term investments at end of period
|
$ | 28,197 | $ | 124,577 | $ | 22,524 |
For the Years Ended December
31,
|
||||||||||||
(continued)
|
2009
|
2008
|
2007
|
|||||||||
(Dollars
in Thousands)
|
||||||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Cash
paid during the period for:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | 44 | ||||||
Income
taxes
|
$ | 178 | $ | 8,800 | $ | 7,300 | ||||||
Non-cash
investing and finance activities:
|
||||||||||||
Accrued
dividends payable
|
$ | 477 | $ | 1,443 | $ | 1,475 | ||||||
Retirement
of subordinated debt by Common Stock issuance
|
$ | - | $ | - | $ | 2,193 | ||||||
Stock
issued to pay interest on subordinated debt
|
$ | - | $ | - | $ | 109 |
|
·
|
the
quality of the insurable risks
underwritten;
|
|
·
|
the
nature and severity of the loss;
|
|
·
|
weather-related
patterns;
|
|
·
|
the
availability, cost and terms of
reinsurance;
|
|
·
|
underlying
settlement costs, including medical and legal
costs;
|
|
·
|
legal
and political factors such as legislative initiatives and public
opinion;
|
|
·
|
macroeconomic
issues.
|
|
1.
|
the
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial
statements,
|
|
2.
|
the
circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial
statements, and,
|
|
3.
|
the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet
date.
|
|
·
|
Our
financial condition could be adversely affected by the occurrence of
natural and man-made disasters.
|
|
·
|
We
have used 99.2% of the reinsurance coverage available for Hurricane Wilma
and if any claims exceed this coverage amount, it could adversely impact
our business, results of operations and/or financial
condition.
|
|
·
|
Although
we follow the industry practice of reinsuring a portion of our risks, our
costs of obtaining reinsurance fluctuates and we may not be able to
successfully alleviate risk through reinsurance
arrangements.
|
|
·
|
We
face a risk of non-collectibility of reinsurance, which could materially
and adversely affect our business, results of operations and/or financial
condition.
|
|
·
|
We
may experience financial exposure from climate
change.
|
|
·
|
Our
loss reserves may be inadequate to cover our actual liability for losses,
causing our results of operations to be adversely
affected.
|
|
·
|
Our
revenues and operating performance may fluctuate due to statutorily
approved assessments that support property and casualty insurance pools
and associations.
|
|
·
|
Our
investment portfolio may suffer reduced returns or losses, which would
significantly reduce our earnings.
|
|
·
|
We
may experience a loss due to the concentration of credit
risk.
|
|
·
|
We
face risks in connection with potential material weakness resulting from
our Sarbanes-Oxley Section 404 management report and any related remedial
measures that we undertake.
|
|
·
|
The
failure of any of the loss limitation methods we employ could have a
material adverse effect on our financial condition or our results of
operations.
|
|
·
|
The
effects of emerging claim and coverage issues on our business are
uncertain.
|
|
·
|
Our
failure to pay claims accurately could adversely affect our business,
financial results and capital
requirements.
|
|
·
|
If
we are unable to continue our growth because our capital must be used to
pay greater than anticipated claims, our financial results may
suffer.
|
|
·
|
We
may require additional capital in the future which may not be available or
only available on unfavorable
terms.
|
|
·
|
Our
business is heavily regulated, and changes in regulation may reduce our
profitability and limit our growth.
|
|
·
|
Our
insurance companies are subject to minimum capital and surplus
requirements, and our failure to meet these requirements could subject us
to regulatory action.
|
|
·
|
Our
revenues and operating performance may fluctuate with business cycles in
the property and casualty insurance
industry.
|
|
·
|
We
may not obtain the necessary regulatory approvals to expand the types of
insurance products we offer or the states in which we
operate.
|
|
·
|
Adverse
ratings by insurance rating agencies may adversely impact our ability to
write new policies, renew desirable policies or obtain adequate insurance,
which could limit or halt our growth and harm our
business.
|
|
·
|
We
rely on independent and general agents to write our insurance policies,
and if we are not able to attract and retain independent and general
agents, our revenues would be negatively
affected.
|
|
·
|
We
rely on our information technology and telecommunications systems, and the
failure of these systems could disrupt our
operations.
|
|
·
|
Nonstandard
automobile insurance historically has a higher frequency of claims than
standard automobile insurance, thereby increasing our potential for loss
exposure beyond what we would be likely to experience if we offered only
standard automobile insurance.
|
|
·
|
Florida's
personal injury protection insurance statute contains provisions that
favor claimants, causing us to experience a higher frequency of claims
than might otherwise be the case if we operated only outside of
Florida.
|
|
·
|
Our
success depends on our ability to accurately price the risks we
underwrite.
|
|
·
|
Current
operating resources are necessary to develop future new insurance
products.
|
|
·
|
Increased
competition, competitive pressures, industry developments and market
conditions could affect the growth of our business and adversely impact
our financial results.
|
|
·
|
Our
senior management team is critical to the strategic direction of our
company. If there were an unplanned loss of service by any of our officers
our business could be harmed.
|
|
·
|
We
have authorized but unissued preferred stock, which could affect rights of
holders of common stock.
|
|
·
|
Our
articles of incorporation, bylaws and Florida law may discourage takeover
attempts and may result in entrenchment of
management.
|
|
·
|
As
a holding company, we depend on the earnings of our subsidiaries and their
ability to pay management fees and dividends to the holding company as the
primary source of our income.
|
|
·
|
We
may not continue making dividend payments on our common
stock.
|
|
·
|
Compensation
cost for all share-based payments granted prior to, but not yet vested as
of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of FASB issued guidance,
and
|
|
·
|
Compensation
cost for all share-based payments granted subsequent to January 1, 2006,
based on the grant-date fair-value estimated in accordance with the
provisions of FASB issued guidance. Results for prior periods have not
been restated, as not required to be by the
pronouncement.
|
|
·
|
rating
downgrade or other credit event (eg., failure to pay interest when
due);
|
|
·
|
length
of time and the extent to which the fair value has been less than
amortized cost;
|
|
·
|
financial
condition and near term prospects of the issuer, including any specific
events which may influence the operations of the issuer such as changes in
technology or discontinuance of a business
segment;
|
|
·
|
prospects
for the issuer’s industry segment;
|
|
·
|
intent
and ability of the Company to retain the investment for a period of time
sufficient to allow for anticipated recovery in market
value;
|
|
·
|
historical
volatility of the fair value of the
security.
|
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Carrying
|
Percent
|
Carrying
|
Percent
|
|||||||||||||
Amount
|
of Total
|
Amount
|
of Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt
securities, at market:
|
||||||||||||||||
United
States government agencies and authorities
|
$ | 12,802 | 11.21 | % | $ | 4,544 | 17.43 | % | ||||||||
Obligations
of states and political subdivisions
|
39,269 | 34.38 | % | 5,331 | 20.45 | % | ||||||||||
Corporate
|
42,092 | 36.85 | % | 13,050 | 50.07 | % | ||||||||||
Other
|
- | 0.00 | % | - | 0.00 | % | ||||||||||
Total
fixed maturities
|
94,163 | 82.44 | % | 22,925 | 87.95 | % | ||||||||||
Equity
securities, at market
|
20,056 | 17.56 | % | 3,140 | 12.05 | % | ||||||||||
Total
investments
|
$ | 114,219 | 100.00 | % | $ | 26,065 | 100.00 | % |
Years Ended December 31,
|
||||||||||||||||
Gains (Losses)
|
Fair Value
|
Gains (Losses)
|
Fair Value
|
|||||||||||||
2009
|
at Sale
|
2008
|
at Sale
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt
securities
|
$ | 485 | $ | 28,882 | $ | 770 | $ | 64,258 | ||||||||
Equity
securities
|
2,159 | 12,463 | 544 | 8,745 | ||||||||||||
Total
realized gains
|
2,644 | 41,345 | 1,314 | 73,003 | ||||||||||||
Debt
securities
|
(825 | ) | 9,637 | (854 | ) | 61,775 | ||||||||||
Equity
securities
|
(702 | ) | 5,780 | (11,053 | ) | 1,901 | ||||||||||
Total
realized losses
|
(1,527 | ) | 15,417 | (11,907 | ) | 63,677 | ||||||||||
Net
realized gains (losses) on investments
|
$ | 1,117 | $ | 56,762 | $ | (10,593 | ) | $ | 136,680 |
Gross
|
Gross
|
|||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Fair Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
December
31, 2009
|
||||||||||||||||
Debt
Securities - Available For Sale:
|
||||||||||||||||
Obligations
of states and political subdivisions
|
$ | 49,041 | $ | 695 | $ | 315 | $ | 49,421 | ||||||||
Corporate
securities
|
40,350 | 1,798 | 56 | 42,092 | ||||||||||||
$ | 89,391 | $ | 2,493 | $ | 371 | $ | 91,513 | |||||||||
Debt
Securities - Held To Maturity:
|
||||||||||||||||
U.S.
government and agency obligations
|
$ | 2,650 | $ | 148 | $ | 5 | $ | 2,793 | ||||||||
Corporate
securities
|
- | - | - | - | ||||||||||||
$ | 2,650 | $ | 148 | $ | 5 | $ | 2,793 | |||||||||
Equity
securities - common stocks
|
$ | 18,927 | $ | 1,840 | $ | 711 | $ | 20,056 | ||||||||
December
31, 2008
|
||||||||||||||||
Debt
Securities - Available For Sale:
|
||||||||||||||||
Obligations
of states and political subdivisions
|
$ | 5,479 | $ | 66 | $ | 214 | $ | 5,331 | ||||||||
Corporate
securities
|
5,035 | 13 | 950 | 4,098 | ||||||||||||
$ | 10,514 | $ | 79 | $ | 1,164 | $ | 9,429 | |||||||||
Debt
Securities - Held To Maturity:
|
||||||||||||||||
U.S.
government and agency obligations
|
$ | 4,544 | $ | 416 | $ | - | $ | 4,960 | ||||||||
Corporate
securities
|
8,952 | 1 | 3 | 8,950 | ||||||||||||
$ | 13,496 | $ | 417 | $ | 3 | $ | 13,910 | |||||||||
Equity
securities - common stocks
|
$ | 3,958 | $ | - | $ | 818 | $ | 3,140 |
Unrealized net
gains (losses)
|
Less than 12
months
|
12 months or
longer
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Debt
securities:
|
||||||||||||
U.S.
government obligations
|
$ | (120 | ) | $ | (120 | ) | $ | - | ||||
Obligations
of states and political subdivisions
|
500 | 504 | (4 | ) | ||||||||
Corporate
|
1,742 | 1,734 | 8 | |||||||||
2,122 | 2,118 | 4 | ||||||||||
Equity
securities:
|
||||||||||||
Common
stocks
|
1,128 | 1,365 | (237 | ) | ||||||||
Total
debt and equity securities
|
$ | 3,250 | $ | 3,483 | $ | (233 | ) |
December 31, 2009
|
December 31, 2008
|
|||||||||||||||
Amortized
|
Estimated
|
Amortized
|
Estimated
|
|||||||||||||
Cost
|
Fair Value
|
Cost
|
Fair Value
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Due
in one year or less
|
$ | 1,602 | $ | 1,615 | $ | 2,379 | $ | 2,388 | ||||||||
Due
after one through five years
|
49,821 | 50,885 | 10,402 | 9,850 | ||||||||||||
Due
after five through ten years
|
26,177 | 27,217 | 1,009 | 1,037 | ||||||||||||
Due
after ten years
|
14,441 | 14,589 | 10,220 | 9,650 | ||||||||||||
Total
|
$ | 92,041 | $ | 94,306 | $ | 24,010 | $ | 22,925 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Interest
on debt securities
|
$ | 2,718 | $ | 4,619 | $ | 6,782 | ||||||
Dividends
on equity securities
|
466 | 770 | 565 | |||||||||
Interest
on cash and cash equivalents
|
213 | 1,072 | 691 | |||||||||
Total
investment income
|
$ | 3,397 | $ | 6,461 | $ | 8,038 | ||||||
Net
realized gains (losses)
|
$ | 1,117 | $ | (10,593 | ) | $ | (145 | ) |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Net
realized gains (losses)
|
||||||||||||
Debt
securities
|
$ | (340 | ) | $ | (84 | ) | $ | 17 | ||||
Equity
securities
|
1,457 | (10,509 | ) | (162 | ) | |||||||
Total
|
$ | 1,117 | $ | (10,593 | ) | $ | (145 | ) | ||||
Net
unrealized gains (losses)
|
||||||||||||
Debt
securities
|
$ | 2,122 | $ | (1,084 | ) | $ | (117 | ) | ||||
Equity
securities
|
1,128 | (819 | ) | (3,989 | ) | |||||||
Total
|
$ | 3,250 | $ | (1,903 | ) | $ | (4,106 | ) |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Finance
contracts receivable
|
$ | 300 | $ | 233 | ||||
Less:
|
||||||||
Unearned
income
|
(8 | ) | (7 | ) | ||||
Allowance
for credit losses
|
(29 | ) | (25 | ) | ||||
Finance
contracts, net of allowance for credit losses
|
$ | 263 | $ | 201 |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Allowance
for credit losses at beginning of year
|
$ | 25 | $ | 38 | ||||
Recoveries
credited against the allowance
|
(26 | ) | (11 | ) | ||||
Additions
charged to bad debt expense
|
30 | (2 | ) | |||||
Allowance
for credit losses at end of year
|
$ | 29 | $ | 25 |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Building
and improvements
|
$ | 602 | $ | 602 | ||||
Furniture
and fixtures
|
3,314 | 3,121 | ||||||
Property,
plant and equipment, gross
|
3,916 | 3,723 | ||||||
Accumulated
depreciation
|
(3,057 | ) | (2,868 | ) | ||||
Property,
plant and equipment, net
|
$ | 859 | $ | 855 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Premium
written
|
||||||||||||
Direct
|
$ | 104,379 | $ | 88,248 | $ | 133,591 | ||||||
Ceded
|
(56,217 | ) | (34,553 | ) | (44,550 | ) | ||||||
$ | 48,162 | $ | 53,695 | $ | 89,041 | |||||||
Premiums
earned
|
||||||||||||
Direct
|
$ | 94,030 | $ | 104,135 | $ | 155,026 | ||||||
Ceded
|
(46,054 | ) | (39,005 | ) | (55,802 | ) | ||||||
$ | 47,976 | $ | 65,130 | $ | 99,224 | |||||||
Losses
and LAE incurred
|
||||||||||||
Direct
|
$ | 54,204 | $ | 46,762 | $ | 71,517 | ||||||
Ceded
|
(10,498 | ) | (4,893 | ) | (23,898 | ) | ||||||
$ | 43,706 | $ | 41,869 | $ | 47,619 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Unpaid
losses and LAE, net
|
||||||||
Direct
|
$ | 70,611 | $ | 64,775 | ||||
Ceded
|
(11,594 | ) | (12,713 | ) | ||||
$ | 59,017 | $ | 52,062 | |||||
Unearned
premiums
|
||||||||
Direct
|
$ | 50,857 | $ | 40,508 | ||||
Ceded
|
(26,788 | ) | (16,625 | ) | ||||
$ | 24,069 | $ | 23,883 |
As of December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Transatlantic
Reinsurance Company (A+ A.M. Best rated)
|
||||||||
Reinsurance
recoverable on paid losses and LAE
|
$ | - | $ | 4 | ||||
Unpaid
losses and LAE
|
72 | 93 | ||||||
$ | 72 | $ | 97 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Balance
at January 1
|
$ | 64,775 | $ | 59,685 | $ | 39,615 | ||||||
Less
reinsurance recoverables
|
(12,713 | ) | (20,134 | ) | (12,382 | ) | ||||||
Net
balance at January 1
|
$ | 52,062 | $ | 39,551 | $ | 27,233 | ||||||
Incurred
related to
|
||||||||||||
Current
year
|
$ | 41,988 | $ | 37,398 | $ | 38,452 | ||||||
Prior
years
|
1,718 | 4,471 | 9,167 | |||||||||
Total
incurred
|
$ | 43,706 | $ | 41,869 | $ | 47,619 | ||||||
Paid
related to
|
||||||||||||
Current
year
|
$ | 18,478 | $ | 13,277 | $ | 15,628 | ||||||
Prior
years
|
18,274 | 16,080 | 19,673 | |||||||||
Total
paid
|
$ | 36,752 | $ | 29,357 | $ | 35,301 | ||||||
Net
balance at year-end
|
$ | 59,016 | $ | 52,062 | $ | 39,551 | ||||||
Plus
reinsurance recoverables
|
11,595 | 12,713 | 20,134 | |||||||||
Balance
at year-end
|
$ | 70,611 | $ | 64,775 | $ | 59,685 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Federal
|
||||||||||||
Current
|
$ | (7,906 | ) | $ | 2,032 | $ | 10,712 | |||||
Deferred
|
2,358 | (3,091 | ) | (1,248 | ) | |||||||
Provision
for Federal income tax (benefit) expense
|
(5,548 | ) | (1,059 | ) | 9,464 | |||||||
State
|
||||||||||||
Current
|
- | 264 | 1,895 | |||||||||
Deferred
|
(373 | ) | (529 | ) | (133 | ) | ||||||
Provision
for state income tax (benefit) expense
|
(373 | ) | (265 | ) | 1,762 | |||||||
Provision
for income tax (benefit) expense
|
$ | (5,921 | ) | $ | (1,324 | ) | $ | 11,226 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Computed
expected tax (benefit) provision, at federal rate
|
$ | (5,512 | ) | $ | (1,303 | ) | $ | 11,051 | ||||
State
tax, net of federal deduction benefit
|
(588 | ) | (139 | ) | 1,180 | |||||||
Tax-exempt
interest
|
(398 | ) | (212 | ) | (360 | ) | ||||||
Dividend
received deduction
|
(94 | ) | (156 | ) | (114 | ) | ||||||
Valuation
allowance for capital loss carry forward
|
- | - | 72 | |||||||||
Interest
expense not requiring cash
|
- | - | 23 | |||||||||
Stock
option expense and other permanent differences
|
173 | (15 | ) | - | ||||||||
Interest
rate differential
|
- | 313 | - | |||||||||
Other
net
|
498 | 188 | (626 | ) | ||||||||
Provision
for income tax (benefit) expense
|
$ | (5,921 | ) | $ | (1,324 | ) | $ | 11,226 |
Years Ended December 31,
|
||||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
Deferred
tax assets
|
||||||||
Unpaid
losses and LAE
|
$ | 2,315 | $ | 2,187 | ||||
Unearned
premiums
|
1,785 | 1,771 | ||||||
Unrealized
loss on investment securities
|
- | 716 | ||||||
Allowance
for credit losses
|
- | 141 | ||||||
Allowance
for impairments
|
164 | 1,410 | ||||||
Regulatory
assessments
|
260 | 1,312 | ||||||
Unearned
agent commissions
|
8 | - | ||||||
Depreciation
& amortization
|
367 | 155 | ||||||
Capital
loss carryover
|
2,112 | 2,657 | ||||||
State
net operating loss carryforward
|
663 | - | ||||||
Deferred
gain on sale and leaseback
|
288 | 453 | ||||||
Stock
option expense per FASB 123R
|
305 | 237 | ||||||
Total
deferred tax assets
|
8,267 | 11,039 | ||||||
Deferred
tax liabilities
|
||||||||
Deferred
acquisition costs, net
|
(2,302 | ) | (2,468 | ) | ||||
Allowance
for credit losses
|
(60 | ) | - | |||||
Discount
on advance premiums
|
(7 | ) | (41 | ) | ||||
Unrealized
gain on investment securities
|
(1,223 | ) | - | |||||
Total
deferred tax liabilities
|
(3,592 | ) | (2,509 | ) | ||||
Net
deferred tax asset
|
$ | 4,675 | $ | 8,530 |
IRIS Ratios
|
Unusual Values Equal to Or
|
Federated National
|
American Vehicle
|
|||||||||||||||||||||
Over
|
Under
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||
Gross
Premiums to Policyholders' Surplus
|
900 | 0 | 426 | 206 | 64 | 100 | ||||||||||||||||||
Net
Premium to Policyholders' Surplus
|
300 | 0 | 159 | 96 | 63 | 100 | ||||||||||||||||||
Change
in Net Writings
|
33 | (33 | ) | 10 | (46 | )* | (35 | )* | (26 | ) | ||||||||||||||
Surplus
Aid to Policyholders' Surplus
|
15 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Two-year
Overall Operating Ratio
|
100 | 0 | 126 | * | 78 | 117 | * | 105 | * | |||||||||||||||
Investment
Yield
|
7 | 3 | 2 | * | 4 | 3 | * | 4 | ||||||||||||||||
Gross
Change in Policyholders' Surplus
|
50 | (10 | ) | (33 | )* | (3 | ) | 3 | (9 | ) | ||||||||||||||
Net
Change in Adjusted Policyholders' Surplus
|
25 | (10 | ) | (33 | )* | (3 | ) | 3 | (9 | ) | ||||||||||||||
Liabilities
to Liquid Assets
|
105 | 0 | 101 | 68 | 68 | 70 | ||||||||||||||||||
Gross
Agents' Balance to Policyholders' Surplus
|
40 | 0 | 17 | 5 | 4 | 6 | ||||||||||||||||||
One-Year
Reserve Development to Policyholders' Surplus
|
20 | 0 | (5 | ) | 5 | 8 | 15 | |||||||||||||||||
Two-Year
Reserve Development to Policyholders' Surplus
|
20 | 0 | 8 | 27 | * | 19 | 28 | * | ||||||||||||||||
Estimated
Current Reserve Deficiency to Policyholders' Surplus
|
25 | 0 | (44 | ) | (16 | ) | (66 | ) | (68 | ) |
Fiscal Year
|
Lease payments
|
|||
(Dollars in Thousands)
|
||||
2010
|
638 | |||
2011
|
650 | |||
Total
|
$ | 1,288 |
(Loss) Income
|
Shares Outstanding
|
Per-share
|
||||||||||
(Numerator)
|
(Denominator)
|
Amount
|
||||||||||
(Amounts in Thousands)
|
||||||||||||
For
the year ended December 31, 2009
|
||||||||||||
Basic
net (loss) per share
|
$ | (10,289 | ) | 8,002 | $ | (1.29 | ) | |||||
Fully
diluted (loss) per share
|
$ | (10,289 | ) | 8,002 | $ | (1.29 | ) | |||||
For
the year ended December 31, 2008
|
||||||||||||
Basic
net (loss) per share
|
$ | (2,478 | ) | 7,979 | $ | (0.31 | ) | |||||
Fully
diluted (loss) per share
|
$ | (2,478 | ) | 7,979 | $ | (0.31 | ) | |||||
For
the year ended December 31, 2007
|
||||||||||||
Basic
net income per share
|
$ | 21,280 | 7,923 | $ | 2.69 | |||||||
Fully
diluted income per share
|
$ | 21,280 | 8,030 | $ | 2.65 |
|
·
|
Revenue,
including unaffiliated and inter-segment sales or transfers, is 10% or
more of total revenue of all operating
segments.
|
|
·
|
Operating
profit or loss is 10% or more of the greater, in absolute amount, of the
combined operating profit (or loss) of all industry segments with
operating profits (or losses).
|
|
·
|
Identifiable
assets are 10% or more of total assets of all operating
segments.
|
1998 Plan
|
2002 Plan
|
|||||||||||||||
Number of Shares
|
Weighted
Average
Option
Exercise Price
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
|||||||||||||
Outstanding
at January 1, 2007
|
44,750 | $ | 18.47 | 637,358 | $ | 13.80 | ||||||||||
Granted
|
109,849 | $ | 13.32 | 57,151 | $ | 13.18 | ||||||||||
Exercised
|
(2,000 | ) | $ | 6.67 | (16,300 | ) | $ | 10.02 | ||||||||
Cancelled
|
- | $ | - | (17,900 | ) | $ | 15.82 | |||||||||
Outstanding
at January 1, 2008
|
152,599 | $ | 14.92 | 660,309 | $ | 13.78 | ||||||||||
Granted
|
4,500 | $ | 8.67 | 162,500 | $ | 8.92 | ||||||||||
Exercised
|
(13,500 | ) | $ | 6.67 | (141,458 | ) | $ | 8.81 | ||||||||
Cancelled
|
(13,500 | ) | $ | 10.03 | (23,200 | ) | $ | 12.60 | ||||||||
Outstanding
at January 1, 2009
|
130,099 | $ | 16.07 | 658,151 | $ | 13.69 | ||||||||||
Granted
|
- | $ | - | 147,000 | $ | 4.37 | ||||||||||
Exercised
|
- | $ | - | - | $ | - | ||||||||||
Cancelled
|
(5,500 | ) | $ | 20.23 | (68,200 | ) | $ | 11.58 | ||||||||
Outstanding
at December 31, 2009
|
124,599 | $ | 15.88 | 736,951 | $ | 12.03 |
1998 Plan
|
2002 Plan
|
|||||||||||||||
|
Number of Shares
|
Weighted
Average
Option
Exercise Price
|
Number of
Shares
|
Weighted
Average
Option
Exercise Price
|
||||||||||||
Options Exercisable at:
|
||||||||||||||||
December
31, 2009
|
64,889 | $ | 15.88 | 380,745 | $ | 12.03 | ||||||||||
December
31, 2010
|
19,670 | $ | 15.88 | 137,566 | $ | 12.03 | ||||||||||
December
31, 2011
|
19,670 | $ | 15.88 | 96,751 | $ | 12.03 | ||||||||||
December
31, 2012
|
19,670 | $ | 15.88 | 70,189 | $ | 12.03 | ||||||||||
December
31, 2013
|
700 | $ | 15.88 | 36,300 | $ | 12.03 | ||||||||||
Thereafter
|
- | $ | 15.88 | 15,400 | $ | 12.03 | ||||||||||
Total
options exercisable
|
124,599 | 736,951 |
|
·
|
Compensation
cost for all share-based payments granted prior to, but not yet vested as
of January 1, 2006, based on the grant date fair value estimated in
accordance with the original provisions of FASB issued guidance,
and
|
|
·
|
Compensation
cost for all share-based payments granted subsequent to January 1, 2006,
based on the grant-date fair-value estimated in accordance with the
provisions of FASB issued guidance. Results for prior periods have not
been restated, as not required to be by the
pronouncement.
|
December 31, 2009
|
December 31, 2008
|
December 31, 2007
|
||||
Dividend
yield
|
5.90%
- 17.30%
|
5.50%
- 17.30%
|
3.20%
- 6.70%
|
|||
Expected
volatility
|
57.54%
- 82.65%
|
54.65%
- 58.20%
|
42.87%
- 54.77%
|
|||
Risk-free
interest rate
|
1.22%
- 1.50%
|
0.98%
- 2.95%
|
2.90%
- 4.86%
|
|||
Expected
life (in years)
|
3.45
- 4.16
|
2.69
- 4.16
|
2.58
-
3.17
|
Weighted Average
|
Weighted
|
||||||||||||||||||
Range of
|
Outstanding at
|
Contractual
|
Average
|
Exercisable at
|
|||||||||||||||
Exercise Price
|
December 31, 2009
|
Periods in Years
|
Exercise Price
|
December 31, 2009
|
|||||||||||||||
1998
Plan
|
$6.67 - $27.79
|
124,599 | 3.36 | $ | 15.88 | 64,889 | |||||||||||||
2002
Plan
|
$3.03 - $18.21
|
736,951 | 2.99 | $ | 12.03 | 380,745 |
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Net
(loss) income
|
$ | (10,289 | ) | $ | (2,478 | ) | $ | 21,280 | ||||
Change
in net unrealized gains on investments available for sale
|
5,153 | 2,203 | (2,556 | ) | ||||||||
Comprehensive
(loss) income, before tax
|
(5,136 | ) | (275 | ) | 18,724 | |||||||
Income
tax (expense) benefit related to items of other comprehensive
income
|
(1,939 | ) | (794 | ) | 927 | |||||||
Comprehensive
(loss) income
|
$ | (7,075 | ) | $ | (1,069 | ) | $ | 19,651 |
Condensed Balance Sheets
|
Period Ending December 31,
|
|||||||
2009
|
2008
|
|||||||
(Dollars in Thousands)
|
||||||||
ASSETS
|
||||||||
Cash
and short term investments
|
$ | 6,188 | $ | 2,489 | ||||
Investments
and advances to subsidiaries
|
54,684 | 54,854 | ||||||
Deferred
income taxes receivable
|
4,675 | 10,443 | ||||||
Income
taxes receivable
|
4,256 | - | ||||||
Property,
plant and equipment, net
|
466 | 488 | ||||||
Other
assets
|
4,617 | 12,827 | ||||||
Total
assets
|
$ | 74,886 | $ | 81,101 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Income
taxes payable
|
- | 8,695 | ||||||
Dividends
payable
|
477 | 1,443 | ||||||
Other
liabilities
|
1,588 | 2,361 | ||||||
Total
liabilities
|
2,065 | 12,499 | ||||||
Shareholders'
equity:
|
||||||||
Common
stock
|
80 | 81 | ||||||
Additional
paid-in capital
|
45,250 | 45,537 | ||||||
Accumulated
other comprehensive income
|
(968 | ) | 2,391 | |||||
Retained
earnings
|
28,459 | 20,593 | ||||||
Total
shareholders' equity
|
72,821 | 68,602 | ||||||
Total
liabilities and shareholders' equity
|
$ | 74,886 | $ | 81,101 |
Condensed Statements of Operations
|
Years Ended December 31,
|
|||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Revenue:
|
||||||||||||
Management
fees from subsidiaries
|
$ | 1,628 | $ | 1,615 | $ | 1,683 | ||||||
Equity
in income of subsidiaries
|
(13,934 | ) | 2,938 | 33,846 | ||||||||
Net
investment income
|
(75 | ) | (3,623 | ) | 492 | |||||||
Other
income
|
623 | 600 | 588 | |||||||||
Total
revenue
|
(11,758 | ) | 1,530 | 36,609 | ||||||||
Expenses:
|
||||||||||||
Advertising
|
1 | 3 | 11 | |||||||||
Salaries
and wages
|
1,892 | 2,424 | 1,854 | |||||||||
Legal
fees
|
387 | 697 | 180 | |||||||||
Interest
expense and amortization of loan costs
|
- | - | 171 | |||||||||
Other
expenses
|
2,172 | 2,208 | 1,887 | |||||||||
Total
expenses
|
4,452 | 5,332 | 4,103 | |||||||||
(Loss)
Income before provision for income tax (benefit) expense
|
(16,210 | ) | (3,802 | ) | 32,506 | |||||||
Provision
for income tax (benefit) expense
|
(5,921 | ) | (1,324 | ) | (11,226 | ) | ||||||
Net
(loss) income
|
$ | (10,289 | ) | $ | (2,478 | ) | $ | 21,280 |
Condensed Statements of Cash Flow
|
||||||||||||
Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
(Dollars in Thousands)
|
||||||||||||
Cash
flow from operating activities:
|
||||||||||||
Net
(loss) income
|
$ | (10,289 | ) | $ | (2,478 | ) | $ | 21,280 | ||||
Adjustments
to reconcile net (loss) income to net cash provided by (used in) operating
activities:
|
||||||||||||
Equity
in loss of subsidiaries
|
13,934 | (3,012 | ) | (33,846 | ) | |||||||
Depreciation
and amortization of property plant and equipment, net
|
22,305 | 30 | 32 | |||||||||
Common
Stock issued for interest on Notes
|
- | - | 109 | |||||||||
Deferred
income tax (benefit) expense
|
(5,769 | ) | 2,890 | 6,766 | ||||||||
Income
tax (payable) recoverable
|
(8,695 | ) | 2,069 | (2,043 | ) | |||||||
Change
in dividends payable
|
(966 | ) | (32 | ) | 30 | |||||||
Non-cash
compensation
|
333 | 365 | 405 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Property,
plant and equipment
|
- | - | - | |||||||||
Deferred
gain on sale of assets
|
(488 | ) | (503 | ) | (469 | ) | ||||||
Other
assets
|
(8,210 | ) | (24 | ) | (105 | ) | ||||||
Other
liabilities
|
(773 | ) | (718 | ) | 399 | |||||||
Net
cash provided by (used in) operating activities
|
1,382 | (1,413 | ) | (7,442 | ) | |||||||
Cash
flow provided by (used in) investing
activities:
|
||||||||||||
Proceeds
from property, plant and equipment
|
- | - | - | |||||||||
Proceeds
from (purchases of) investment securities available for
sale
|
170 | 3,892 | (134 | ) | ||||||||
Increased
capital of subsidiaries
|
- | (75 | ) | - | ||||||||
Cash
flow provided by (used in) investing activities:
|
170 | 3,817 | (134 | ) | ||||||||
Net
cash provided by (used in) financing
activities:
|
||||||||||||
Dividends
paid
|
(1,920 | ) | (5,697 | ) | (5,758 | ) | ||||||
Payments
against subordinated debt
|
- | - | (2,083 | ) | ||||||||
Exercised
warrants, net
|
- | - | 2,035 | |||||||||
Stock
options exercised
|
- | 1,337 | 177 | |||||||||
Tax
benefit related to non-cash compensation
|
160 | 182 | 214 | |||||||||
Acquisition
of common stock
|
(288 | ) | (144 | ) | (3,823 | ) | ||||||
Advances
from subsidiaries
|
4,196 | 2,075 | 12,808 | |||||||||
Net
cash provided by (used in) financing
activities:
|
2,148 | (2,247 | ) | 3,570 | ||||||||
Net
increase (decrease) in cash and short term investments
|
3,700 | 157 | (4,006 | ) | ||||||||
Cash
and short term investments at beginning of year
|
2,489 | 2,332 | 6,338 | |||||||||
Cash
and short term investments at end of year
|
$ | 6,189 | $ | 2,489 | $ | 2,332 |
Quarterly payment due date
|
2009
|
2008
|
2007
|
|||||||||
January
31,
|
n/a | n/a | 54,211 | |||||||||
April
30,
|
n/a | n/a | 63,114 | |||||||||
July
31,
|
n/a | n/a | - | |||||||||
October
31,
|
n/a | n/a | n/a | |||||||||
Total
common stock issued
|
- | - | 117,325 |
Loss and LAE
|
Loss and LAE
|
Amortization of
deferred policy
acquisition
|
Paid losses and
LAE
|
Net premiums
|
||||||||||||||||
- Current Year
|
- Prior year
|
expenses
|
expenses
|
written
|
||||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||
2009
|
$ | 41,988 | $ | 1,718 | $ | 13,747 | $ | 18,478 | $ | 48,162 | ||||||||||
2008
|
$ | 37,397 | $ | 4,471 | $ | 14,760 | $ | 13,277 | $ | 53,695 | ||||||||||
2007
|
$ | 38,452 | $ | 9,166 | $ | 19,420 | $ | 15,628 | $ | 89,041 |
Affiliation
with
registrant
|
Deferred policy
acquisition
costs
|
Reserves for
losses and LAE
|
Discount, if any,
deducted from
previous column
|
Unearned
premiums
|
Net premiums
earned
|
|||||||||||||||
(Dollars in Thousands)
|
||||||||||||||||||||
Consolidated
Property and Casualty Subsidiaries
|
||||||||||||||||||||
2009
|
$ | 8,267 | $ | 70,611 | $ | - | $ | 50,857 | $ | 47,976 | ||||||||||
2008
|
$ | 6,558 | $ | 64,775 | $ | - | $ | 40,508 | $ | 65,130 | ||||||||||
2007
|
$ | 8,958 | $ | 59,685 | $ | - | $ | 56,394 | $ | 99,224 |
As of December 31, 2009
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
(Dollars in Thousands)
|
||||||||||||||||
Debt
securities:
|
||||||||||||||||
US
government obligations
|
$ | - | $ | 49,421 | $ | - | $ | 49,421 | ||||||||
Corporate
|
42,092 | - | - | 42,092 | ||||||||||||
42,092 | 49,421 | - | 91,513 | |||||||||||||
Equity
securities:
|
||||||||||||||||
Common
stocks
|
20,056 | - | - | 20,056 | ||||||||||||
20,056 | - | - | 20,056 | |||||||||||||
Total
debt and equity securities
|
$ | 62,148 | $ | 49,421 | $ | - | $ | 111,569 |
ITEM
9
|
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
ITEM
9A
|
CONTROLS AND
PROCEDURES
|
ITEM
9B
|
OTHER
INFORMATION
|
ITEM
10
|
DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE
GOVERNANCE
|
Name
|
Age
|
Position with the
Company
|
||
Michael
H. Braun
|
42
|
Chief
Executive Officer, President, Class I Director
|
||
|
||||
Peter
J. Prygelski, III (2)
|
41
|
Chief
Financial Officer, Treasurer, Class I Director
|
||
|
||||
Stephen
C. Young
|
35
|
Vice
President of Operations
|
||
Bruce
F. Simberg (2) (3) (4)*
|
61
|
Chairman,
Class II Director
|
||
Richard
W. Wilcox, Jr. (1) (3)*(4)
|
68
|
Class
II Director
|
||
Carl
Dorf (1) (2)*(3) (4)
|
69
|
Class
III Director
|
||
Charles
B. Hart, Jr. (2) (4)
|
71
|
Class
III Director
|
||
Jenifer
G. Kimbrough (1)*(4)
|
|
38
|
|
Class
I Director
|
*
|
Current
Committee Chairman
|
(1)
|
Audit
Committee Member
|
(2)
|
Investment
Committee Member
|
(3)
|
Compensation
Committee Member
|
(4)
|
Nominating
Committee Member
|
ITEM
11
|
EXECUTIVE
COMPENSATION
|
SUMMARY COMPENSATION
|
||||||||||||||||||||||||||||||||||
Name and Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
(1)
|
Non-Equity
Incentive Plan
Compensation
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compensation
(2)
|
Total
|
|||||||||||||||||||||||||
Michael
H. Braun
|
2009
|
$ | 214,000 | 12,500 | — | $ | 24,444 | — | — | $ | 17,601 | $ | 268,545 | |||||||||||||||||||||
Chief
Executive Officer, President
(3)
|
2008
|
$ | 186,863 | — | — | $ | 94,964 | — | — | $ | 10,655 | $ | 245,965 | |||||||||||||||||||||
Peter
J. Prygelski, III
|
2009
|
$ | 180,000 | 10,500 | — | $ | 0 | — | — | $ | 25,727 | $ | 216,227 | |||||||||||||||||||||
Chief
Financial Officer, Treasurer
(4)
|
2008
|
$ | 169,539 | — | — | $ | 35,594 | — | — | $ | 13,414 | $ | 206,649 | |||||||||||||||||||||
Stephen
C. Young
|
2009
|
$ | 151,657 | 500 | — | $ | 0 | — | — | $ | 15,435 | $ | 167,592 | |||||||||||||||||||||
President
(5)
|
2008
|
$ | 129,962 | — | — | $ | 35,884 | — | — | $ | 27,267 | $ | 175,739 |
(1)
|
This
amount reflects the aggregate grant date fair value computed in accordance
with FASB ASC Topic 718. Assumptions used in the
calculation of this amount are included in footnote 16 to the Company’s
audited financial statements for fiscal year ended December 31,
2009.
|
(2)
|
See
table "All Other Compensation" for an itemized disclosure of this element
of compensation.
|
(3)
|
Mr.
Braun has served as our Chief Executive Officer since July 1, 2008,
President since June 2, 2009 and the President of Federated National since
September 2003.
|
(4)
|
Mr.
Prygelski has served as our Chief Financial Officer since June 25, 2007
and Treasurer since February 20, 2008. Prior to this time, he
served as an outside director of the Company from January 2004 through
June 25, 2007.
|
(5)
|
Mr.
Young served as the Company’s President from June 2007 to June 2009 and as
President of Federated Premium since January 1998, and is currently the
Company’s Vice President of
Operations.
|
ALL OTHER COMPENSATION
|
||||||||||||||||||||||||||
Name
|
Year
|
Auto
|
Club
Member
Fees
|
Insurance
Benefits
(1)
|
Contribution
to 401(k)
(2)
|
All Other
Compensation
|
Total
|
|||||||||||||||||||
Michael
H. Braun
|
2009
|
$ | 8,853 | $ | 2,128 | $ | 6,620 | $ | 17,601 | |||||||||||||||||
2008
|
$ | 5,000 | $ | 0 | $ | 4,599 | $ | 1,056 | (3) | $ | 10,655 | |||||||||||||||
Peter
J. Prygelski, III
|
2009
|
$ | 6,000 | $ | 8,575 | $ | 5,280 | $ | 5,872 | $ | 25,727 | |||||||||||||||
2008
|
$ | 5,000 | $ | 4,992 | $ | 0 | $ | 3,422 | $ | 13,414 | ||||||||||||||||
Stephen
C. Young
|
2009
|
$ | 2,769 | $ | 7,988 | $ | 4,678 | $ | 15,435 | |||||||||||||||||
2008
|
$ | 6,000 | $ | 18,178 | $ | 3,089 | $ | 27,267 |
(1)
|
Represents
premiums for life, medical and dental
insurance.
|
(2)
|
Represents
matching contributions made by the Company to the Named Executive
Officer's 401(k) plan.
|
(3)
|
Represents
profits that Named Executive Officers received upon the exercise of stock
options.
|
GRANTS
OF PLAN-BASED AWARDS
|
||||||||||||||
Name
|
Grant Date
|
All Other Option Awards Number
of Securities Underlying Options
|
Exercise or Base Price
of Option Awards
|
Grant Date Fair Value of
Stock and Option Awards(1)
|
||||||||||
Michael
H. Braun
|
01/02/2009
|
40,000 | $ | 4.73 | $ | 24,444 |
(1)
|
This
amount reflects the aggregate grant date fair value computed in accordance
with FASB ASC Topic 718. Assumptions used in the calculation of this
amount are included in footnote 16 to the Company’s audited financial
statements for fiscal year ended December 31,
2009.
|
Vesting Schedule
|
||||
From the Grant Date
|
Portion of Grant Vested
|
|||
Less
than 1 year
|
0 | % | ||
1
year
|
20 | % | ||
2
years
|
40 | % | ||
3
years
|
60 | % | ||
4
years
|
80 | % | ||
5
years
|
100 | % |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
||||||||||||||
Option Awards
|
||||||||||||||
Name
|
Number of Securities
Underlying Unexercised
Options Exercisable
|
Number of Securities
Underlying Unexercised
Options Unexercisable
|
Option
Exercise
Price
|
Option
Expiration
Date
|
||||||||||
Michael
H. Braun
|
4,000 | 1,000 | 16.00 |
09/14/2011
|
(1) | |||||||||
16,000 | 4,000 | 15.79 |
12/05/2011
|
(2)
|
||||||||||
2,000 | 3,000 | 16.59 |
10/25/2013
|
(3) | ||||||||||
8,000 | 12,000 | 14.36 |
11/08/2013
|
(4) | ||||||||||
200 | 300 | 13.17 |
12/06/2013
|
(5) | ||||||||||
900 | 3,600 | 12.58 |
01/30/2014
|
(6) | ||||||||||
8,000 | 32,000 | 8.32 |
07/01/2014
|
(7) | ||||||||||
167 | 333 | 4.59 |
12/12/2018
|
(8) | ||||||||||
0 | 40,000 | 4.73 |
01/02/2015
|
(9) | ||||||||||
Peter
J. Prygelski, III
|
15,000 | 0 | 15.413 |
01/26/2010
|
||||||||||
8,000 | 2,000 | 15.79 |
12/05/2011
|
(2) | ||||||||||
8,000 | 12,000 | 11.11 |
06/25/2013
|
(10) | ||||||||||
200 | 300 | 13.17 |
12/06/2013
|
(5) | ||||||||||
900 | 3,600 | 12.58 |
01/30/2014
|
(6) | ||||||||||
2,000 | 8,000 | 8.32 |
07/01/2014
|
(7) | ||||||||||
167 | 333 | 4.59 |
12/12/2014
|
(8) | ||||||||||
Stephen
C. Young
|
400 | 100 | 16.00 |
12/05/2011
|
(2) | |||||||||
3,000 | 2,000 | 15.75 |
09/01/2012
|
(11) | ||||||||||
2,000 | 3,000 | 11.33 |
05/22/2013
|
(12) | ||||||||||
2,000 | 3,000 | 16.59 |
10/25/2013
|
(3) | ||||||||||
200 | 300 | 13.17 |
12/06/2013
|
(5) | ||||||||||
2,000 | 8,000 | 13.07 |
03/04/2014
|
(13) | ||||||||||
167 | 333 | 4.59 |
12/12/2018
|
(8) |
(1)
|
Options
vested as to 80% of the underlying shares on December 31, 2009, the
remaining 20% vest on
9/14/2010.
|
(2)
|
Options
vested as to 80% of the underlying shares on December 31, 2009, the
remaining 20% vest on
12/5/2010.
|
(3)
|
Options
vested as to 40% of the underlying shares on December 31, 2009, the
remaining 60% vest as follows:
20%
on 10/25/2010, 20% on 10/25/2011 and
10/25/2012.
|
(4)
|
Options
vested as to 40% of the underlying shares on December 31, 2009, the
remaining 60% vest as follows:
20% on
11/8/2009, 20% on 11/8/2010 and 20% on
11/8/2011.
|
(5)
|
Options
vested as to 40% of the underlying shares on December 31, 2009, the
remaining 60% vest as follows:
20% on 12/6/2010, 20%
on 12/6/2011 and 20% on
12/6/2012.
|
(6)
|
Options
vested as to 20% of the underlying shares on December 31, 2009, the
remaining 80% vest as follows:
20%
on 1/30/2010, 20% on 1/30/2011, 20% on 1/30/2012 and 20% on
1/30/2013.
|
(7)
|
Options
vested as to 20% of the underlying shares on December 31, 2009, the
remaining 80% vest as follows:
20%
on 7/1/2010, 20% on 7/1/2011, 20% on 7/1/2012 and 20% on
7/1/2013.
|
(8)
|
Options
vested as to 33 1/3% of the underlying shares on December 31, 2009, the
remaining 66 2/3% vest as follows:
33
1/3% on 12/12/2010 and 33 1/3% on
12/12/2011.
|
(9)
|
Options
vested as to 0% of the underlying shares on December 31, 2009, the
remaining 100% vest as follows:
20%
on 1/2/2010, 20% on 1/2/2011, 20% on 1/2/2012, 20% on 1/2/2013 and 20% on
1/2/2014.
|
(10)
|
Options
vested as to 40% of the underlying shares on December 31, 2009, the
remaining 60% vest as follows:
20%
on 6/25/2010, 20% on 6/25/2011 and 20% on
6/15/2012.
|
(11)
|
Options
vested as to 60% of the underlying shares on December 31, 2009, the
remaining 40% vest as follows:
20%
on 9/1/2010 and 20% on
9/1/2011.
|
(12)
|
Options
vested as to 40% of the underlying shares on December 31, 2009, the
remaining 60% vest as follows:
20%
on 5/22/2010, 20% on 5/22/2011 and 20% on
5/22/2012.
|
(13)
|
Options
vested as to 20% of the underlying shares on December 31, 2009, the
remaining 80% vest as follows:
20%
on 3/4/2010, 20% on 3/4/2011, 20% on 3/4/2012 and 20% on
3/4/2013.
|
NON-EMPLOYEE DIRECTORS' COMPENSATION SUMMARY
|
||||||||||||||||||||||||||||
Name
|
Fees
Earned
or Paid
in Cash
|
Stock
Awards
|
Option
Awards(1)(5)
|
Non-Equity
Incentive Plan
Compensation
|
Change in
Pension Value
and Non-
qualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||||||||
Carl
Dorf
|
$ | 40,000 | — | $ | 9,167 | — | — | — | $ | 49,167 | ||||||||||||||||||
Charles
B. Hart, Jr.
|
$ | 40,000 | — | $ | 9,167 | — | — | $ | 12,481 | (2) | $ | 61,648 | ||||||||||||||||
Bruce
F. Simberg
|
$ | 40,000 | — | $ | 15,278 | — | — | — | $ | 55,278 | ||||||||||||||||||
Richard
W. Wilcox, Jr.
|
$ | 40,000 | — | $ | 9,167 | — | — | $ | 8,031 | (3) | $ | 57,198 | ||||||||||||||||
Jenifer
G. Kimbrough (4)
|
$ | 30,000 | — | $ | 11,257 | — | — | — | $ | 41,257 |
(1)
|
This
amount reflects the aggregate grant date fair value computed in accordance
with FASB ASC Topic 718. Assumptions used in the
calculation of this amount are included in footnote 16 to the Company’s
audited financial statements for fiscal year ended December 31,
2009.
|
(2)
|
Includes
$5,781 paid for country club membership and $6,700 for events attended by
director and/or family in 2009.
|
(3)
|
Includes
$5,781 paid for country club membership and $2,250 for events attended by
director and/or family in 2009.
|
(4)
|
Ms.
Kimbrough was appointed as a non-employee director effective as of April
1, 2009.
|
(5)
|
The
following table provides certain additional information concerning the
option awards of our non-employee directors for fiscal
2009:
|
Name
|
Total Stock Option
Awards Outstanding at
2009 Fiscal Year End
(Shares)
|
Option Awards
Granted During Fiscal
Year 2009(a)
(Shares)
|
Grant Date Fair Value
of Option Awards
Granted During Fiscal
Year 2009 ($)
|
|||||||||
Carl
Dorf
|
30,000 | (b) | 15,000 | $ | 9,167 | |||||||
Charles
B. Hart, Jr.
|
30,000 | (b) | 15,000 | $ | 9,167 | |||||||
Bruce
F. Simberg
|
40,000 | (c) | 25,000 | $ | 15,278 | |||||||
Richard
W. Wilcox, Jr.
|
30,000 | (b) | 15,000 | $ | 9,167 | |||||||
Jenifer
G. Kimbrough
|
10,000 | (d) | 10,000 | $ | 11,257 |
(a)
|
The
stock options reported in this column were granted in January 2009, and
vest 33 1/2% per year over three years on each anniversary of the date of
grant.
|
(b)
|
Includes
10,000 options granted on 12/5/2005 with an exercise price of $15.79, vest
20% per year, and expire on 12/5/2011; 500 options granted on 12/6/2007
with an exercise price of $13.17, vest 20% per year, and expire on
12/6/2013; 4,500 options granted on 1/30/2008 with an exercise price of
$12.58, vest 20% per year and expire on 1/30/2014; and 15,000 options
granted on 1/2/2009 with an exercise price of $4.73, vest 33 1/3% per year
and expire on 1/2/2015.
|
(c)
|
Includes
10,000 options granted on 12/5/2005 with an exercise price of $15.79, vest
20% per year, and expire on 12/5/2011; 500 options granted on 12/6/2007
with an exercise price of $13.17, vest 20% per year, and expire on
12/6/2013; 4,500 options granted on 1/30/2008 with an exercise price of
$12.58, vest 20% per year and expire on 1/30/2014; and 25,000 options
granted on 1/2/2009 with an exercise price of $4.73, vest 33 1/3% per year
and expire on 1/2/2015.
|
(d)
|
Includes
10,000 options granted on 4/1/2009 with an exercise price of $3.30, vest
20% per year and expire on
4/1/2015.
|
For Good
|
Involuntary Not
|
|||||||||||||||||||||||
Executive Benefits and
|
Voluntary
|
Reason
|
for Cause
|
Change in Control
|
||||||||||||||||||||
Payments Upon Termination
|
Termination
|
Termination
|
Termination (1)
|
Death
|
Disability
|
(1)(2)
|
||||||||||||||||||
Michael
H. Braun
|
$ | 0 | $ | 0 | $ | 428,000 | $ | 0 | $ | 0 | $ | 452,610 | ||||||||||||
Peter
J. Prygelski, III
|
$ | 0 | $ | 0 | $ | 360,000 | $ | 0 | $ | 0 | $ | 382,610 |
(1)
|
All
amounts are calculated using the Executive's base salary as of December
31, 2009 and the value of unvested options which were accelerated as of
the termination date It has been the Company's practice,
if an Executive is terminated without cause, to accelerate any unvested
options and the value of these accelerated options for Executive as of the
termination date was $0.
|
(2)
|
If
a change in control occurs (as described in his employment agreement) and
the Executive is terminated during the remaining term of his employment
agreement, he will receive the severance payment set forth in this
table. Includes the value of vested stock options which were
accelerated as of the termination date, actual bonus earned in the fiscal
year preceding the termination and a medical insurance premium payment
equal to two years premium at the rate paid by the Company for such
coverage as of the termination
date.
|
|
21st Century Holding
Company and Subsidiaries
|
ITEM
12
|
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
Number of Shares
|
Percent of
|
|||||||
Beneficially
|
Class
|
|||||||
Name and Address of Beneficial Owner
(1)
|
Owned (2)
|
Outstanding
|
||||||
Bruce
F. Simberg (1)
|
212,113 | 2.66 | % | |||||
Richard
W. Wilcox, Jr. (2)
|
133,250 | 1.67 | % | |||||
Carl
Dorf (3)
|
130,288 | 1.63 | % | |||||
Michael
H. Braun (4)
|
66,067 | * | ||||||
Stephen
C. Young (5)
|
47,767 | * | ||||||
Peter
J. Prygelski, III (6)
|
23,167 | * | ||||||
Charles
B. Hart, Jr. (7)
|
15,000 | * | ||||||
Jenifer
G. Kimbrough (8)
|
2,000 | * | ||||||
All
directors and executive officers as a group (8 persons)
(9)
|
629,652 | 7.78 | % | |||||
5%
or greater holders:
|
||||||||
Edward
J. Lawson and Michele V. Lawson (combined) (10)
|
632,450 | 7.95 | % | |||||
3661
West Oakland Park Blvd, Suite 300
|
||||||||
Lauderdale
Lakes, FL 33311
|
||||||||
Dimensional
Fund Advisors LP (11)
|
574,809 | 7.23 | % | |||||
Palisades
West, Building One
|
||||||||
6300
Bee Cave Road
|
||||||||
Austin,
TX 78746
|
||||||||
Lloyd
I. Miller, III (12)
|
406,671 | 5.11 | % | |||||
4550
Gordon Drive
|
||||||||
Naples,
FL 34102
|
*
|
Less
than 1%.
|
(1)
|
Includes
18,334 shares of common stock issuable upon the exercise of stock options
held by Mr. Simberg.
|
(2)
|
Includes
3,000 shares of common stock held in Mr. Wilcox’s IRA, 40,000 shares of
common stock held by Mr. Wilcox’s spouse and 15,000 shares of common stock
issuable upon the exercise of stock options held by Mr.
Wilcox.
|
(3)
|
Includes
59,624 shares of common stock held by Carl Dorf Rollover IRA, 54,164
shares of common stock held by Dorf Trust and 15,000 shares of common
stock issuable upon the exercise of stock options held by Mr.
Dorf.
|
(4)
|
Includes
48,167 shares of common stock issuable upon the exercise of stock options
held by Mr. Braun.
|
(5)
|
Includes
12,767 shares of common stock issuable upon the exercise of stock options
held by Mr. Young.
|
(6)
|
Includes
2,000 shares of common stock held in Mr. Prygelski’s IRA and 20,167 shares
of common stock issuable upon the exercise of stock options held by Mr.
Prygelski.
|
(7)
|
Includes
15,000 shares of common stock issuable upon the exercise of stock options
held by Mr. Hart.
|
(8)
|
Includes
2,000 shares of common stock issuable upon the exercise of stock options
held by Ms. Kimbrough.
|
(9)
|
Includes
162,668 shares of common stock issuable upon the exercise of stock
options.
|
(10)
|
Represents
275,000 shares of common stock held of record by Edward J. Lawson, 250,000
shares of common stock held of record by Michele V. Lawson, the wife of
Mr. Lawson, and 107,450 shares of common stock issuable upon the exercise
of stock options held by Mr. Lawson. This information is based
on the Schedule 13G/A Amendment No. 10 filings made by Michele Lawson and
Edward Lawson with the SEC, pursuant to Rule 13d-1(d), on February 3, 2010
and the Company's records with respect to Mr. Lawson's stock
options.
|
(11)
|
Includes
574,809 shares of common stock beneficially held on behalf of various
clients of Dimensional Fund Advisors LP ("Dimension"). This
information is based on Dimension's Schedule 13G Amendment No. 1 filed
with the SEC, pursuant to Rule 13d-1(b), on February 10,
2010.
|
(12)
|
Includes
174,521 shares of common stock that Lloyd I. Miller, III has shared voting
and dispositive power as (i) an investment advisor to the trustee of a
certain family trust and (ii) co-trustee of a certain
trust. This information is based on Mr. Miller's Schedule 13G
filing made with the SEC, pursuant to Rule 13d-1(c), on February 16,
2010.
|
ITEM
13
|
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
ITEM
14
|
PRINCIPAL ACCOUNTING
FEES AND SERVICES
|
DeMeo
|
DeMeo
|
|||||||
Fiscal 2009
|
Fiscal 2008
|
|||||||
Audit
Fees (1)
|
$ | 404,701 | $ | 362,432 | ||||
Audit-Related
Fees (2)
|
$ | 13,815 | $ | 7,904 | ||||
Tax
Fees (3)
|
$ | 22,245 | $ | 26,891 | ||||
Total
|
$ | 440,761 | $ | 397,227 |
(1)
|
Audit
fees consisted of audit work performed in the preparation of financial
statements, as well as work generally only the independent auditor can
reasonably be expected to provide, such as statutory
audits.
|
(2)
|
Audit-related
fees consisted primarily of audits of employee benefit plans and special
procedures related to regulatory filings in
2009.
|
(3)
|
Tax
fees consisted primarily of assistance with tax compliance and
reporting.
|
ITEM
15
|
EXHIBITS, FINANCIAL
STATEMENT SCHEDULES, AND REPORTS ON FORM
10-K
|
(a)
|
The
following documents are filed as part of this
report:
|
(1)
|
Financial
Statements
|
(2)
|
Financial
Statement Schedules.
|
(3)
|
Exhibits
|
Exhibit
|
Description
|
|
3.1
|
Amended
and Restated Articles of Incorporation (incorporated by reference to
Exhibit 3.1 in the Company’s Registration Statement on Form SB-2 filed
with the SEC on September 17, 1998 [File No.
333-63623]).
|
|
3.2
|
Amended
and Restated Bylaws of the Company (incorporated by reference to Exhibit
10.1 in the Company’s Current Report on Form 8-K filed with the SEC on
November 28, 2007).
|
|
4.1
|
Specimen
of Common Stock Certificate (incorporated by reference to Exhibit 4.1 in
Amendment No. 1 to the Company’s Registration Statement on Form SB-2 filed
with the SEC on October 7, 1998 [File No. 333-63623]).
|
|
10.1
|
21st
Century Holding Company 2002 Stock Option Plan, as amended, and Stock Plan
Acknowledgment (incorporated by reference to Annex A in the Company’s
Definitive Proxy Statement for its 2009 Annual Meeting of Stockholders
filed with the SEC on April 2, 2009 and Exhibit 10.2 in the Company’s
Annual Report on Form 10-K for 2007 filed with the Sec on March 17, 2008).
+
|
|
10.2
|
21st
Century Holding Company 1998 Stock Option Plan, as amended, and Stock Plan
Acknowledgment (incorporated by reference to Annex A in the Company’s
Definitive Proxy Statement filed with the SEC on May 12, 2000 and Exhibit
10.4 in the Company’s Annual Report on Form 10-K for its year ended
December 31, 2007 filed with the SEC on March 17, 2008).
+
|
|
10.3
|
Amended
and Restated Employment Agreement dated June 22, 2009 between the Company
and Michael H. Braun (incorporated by reference to Exhibit 10.8 in the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2009 filed with the SEC on August 10, 2009).+
|
|
10.4
|
Amended
and Restated Employment Agreement dated June 22, 2009 between the Company
and Peter J. Prygelski, III (incorporated by reference to Exhibit 10.9 in
the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2009 filed with the SEC on August 10, 2009).+
|
|
10.5
|
Transition
Agreement dated as of May 6, 2008 between the Company and Edward J. Lawson
(incorporated by reference from Exhibit 10.1 in the Company’s Form 8-K/A
filed with the SEC on May 9, 2008).+
|
|
10.6
|
Form
of Indemnification Agreement between the Company and its directors and
executive officers (incorporated by reference from Exhibit 10.15 in the
Company’s Annual Report on Form 10-K for its year ended December 31, 1007
filed with the SEC on March 17, 2008.
|
|
10.7
|
Non-Compete
Agreement between the Company and Peter J. Prygelski, effective June 25,
2007 (incorporated by reference to Exhibit 10.3 contained in the Company's
Form 8-K filed on June 19, 2007).+
|
|
|
||
10.8
|
Non-Compete
Agreement dated December 19, 2005 between the Company and Michael Braun
dated December 19, 2005 (incorporated by reference to Exhibit 10.2 in the
Company’s Current Report on Form 8-K filed with the SEC on December 29,
2005).+
|
|
10.9
|
Reimbursement
Contract between Federated National Insurance Company and The State Board
of Administration of Florida (SBA) which administers the Florida Hurricane
Catastrophe Fund (FHCF) and Addendum Nos. 1 and 2 effective June 1, 2009
(incorporated by reference to Exhibits 10.1 – 10.3 in the Company’s
Current Report on Form 8-K filed with the SEC on June 4,
2009).
|
|
10.10
|
Amended
Addendum No. 2 and Addendum Nos. 4 and 5 to the Reimbursement Contract
between Federated National Insurance Company and The State Board of
Administration of Florida (SBA) which administers the Florida Hurricane
Catastrophe Fund (FHCF) effective June 1, 2009 (incorporated by reference
to Exhibits 10.1 – 10.3 in the Company’s Current Report on Form 8-K filed
with the SEC on June 16, 2009)
|
|
10.11
|
Excess
Catastrophe Reinsurance Contract effective July 1, 2009 issued to
Federated National Insurance Company and certain Subscribing Reinsurer(s)
executing the Agreement (incorporated by reference to Exhibit 10.1 in the
Company’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2009 filed with the SEC on November 9, 2009).
|
|
10.12
|
|
Reinstatement
Premium Protection Reinsurance Contract effective July 1, 2009 issued to
Federated National Insurance Company and certain Subscribing
Reinsurance(s) executing the Agreement (incorporated by reference to
Exhibit 10.2 in the Company’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2009 as filed with the SEC on November 9,
2009).
|
21.1
|
Subsidiaries
of the Company **
|
23.1
|
Consent
of De Meo, Young, McGrath, Independent Certified Public Accountants
**
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act **
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act **
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act **
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act **
|
+
|
Management
Compensation Plan or Arrangement.
|
**
|
Filed
herewith.
|
21st
CENTURY HOLDING COMPANY
|
|||
By:
|
/s/ Michael H. Braun
|
||
Michael
H. Braun, Chief Executive Officer
|
|||
(Principal
Executive Officer)
|
|||
/s/ Peter J. Prygelski, III
|
|||
Peter
J. Prygelski, III, Chief Financial Officer
|
|||
(Principal
Financial Officer)
|
Signature
|
Title
|
Date
|
||
/s/ Michael H. Braun
|
Chief
Executive Officer
|
March
26, 2010
|
||
Michael
H. Braun
|
(Principal
Executive Officer)
|
|||
/s/ Peter J. Prygelski, III
|
Chief
Financial Officer
|
March
26, 2010
|
||
Peter
J. Prygelski, III
|
(Principal
Financial Officer)
|
|||
/s/ Carl Dorf
|
Director
|
March
26, 2010
|
||
Carl
Dorf
|
||||
/s/ Bruce F. Simberg
|
Director
|
March
26, 2010
|
||
Bruce
F. Simberg
|
Chairman
of the Board
|
|||
/s/ Charles B. Hart, Jr.
|
Director
|
March
26, 2010
|
||
Charles
B. Hart, Jr.
|
||||
/s/ Richard W. Wilcox, Jr.
|
Director
|
March
26, 2010
|
||
Richard
W. Wilcox, Jr.
|
||||
/s/ Jenifer G. Kimbrough
|
Director
|
March
26, 2010
|
||
Jenifer
G. Kimbrough
|
|
|
21.1
|
Subsidiaries
|
23.1
|
Consent
of DeMeo, Young, McGrath, Independent Certified Public
Accountants
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act
|
32.1
|
Certification
of the Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act
|
32.2
|
Certification
of the Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act
|