The following discussion and analysis of financial condition and results of operations for the three months endedMarch 31, 2022 is qualified by reference to and should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the related notes included herein and the audited consolidated financial statements and notes included in our 2021 Form 10-K. The discussion and analysis below are based on comparisons between our historical financial data for different periods and include certain forward-looking statements about our business, operations, and financial performance. These forward-looking statements are subject to risks, uncertainties, assumptions, and other factors described in Item 1A - "Risk Factors" in our 2021 Form 10-K. Our actual results may differ materially from those expressed in, or implied by, those forward-looking statements. See "Forward-Looking Statements." All references to "we," "us," "our," "the Company," "Trean ," or similar terms refer toTrean Insurance Group, Inc. and its subsidiaries, unless the context otherwise requires. The information contained in this quarterly report is not a complete description of our business or the risks associated with an investment in our common stock.
当社は、200％を超える増減を「NM」かどうかと定義しています。
意味のある。
将来の見通しに関する記述
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial performance or operating performance. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "would," "potential," or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. These forward-looking statements include, among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs, and other similar matters. Forward-looking statements are based on management's current expectations and assumptions about future events, which are inherently subject to uncertainties, risks, and changes in circumstances that are difficult to predict. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and assumptions, which in many cases are beyond our control, as described in "Item 1A - Risk Factors" in our 2021 Form 10-K and in this Quarterly Report on Form 10-Q. Our statements reflecting these risks and uncertainties are not exhaustive, and other risks and uncertainties may currently exist or may arise in the future that could have material effects on our business, operations, and financial condition. We cannot assure you that the results, events, and circumstances reflected in the forward looking statements reflected in this Quarterly Report on Form 10-Q and our other public statements and securities filings will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward looking statements. These forward-looking statements speak only as of the date on which such statements are made. We undertake no obligation, and do not intend, to update any forward looking statements after the date of this Quarterly Report on Form 10-Q or to conform such statements to actual results or revised expectations, except as required by applicable securities laws or the rules and regulations of theSecurities and Exchange Commission ("SEC").
概要
We are a provider of products and services to the specialty insurance market. We underwrite specialty casualty insurance products both through ourProgram Partners and also through our Owned MGAs. We also provide ourProgram Partners with a variety of services, including issuing carrier services, claims administration, and reinsurance brokerage, from which we generate recurring fee-based revenues. We have one reportable segment. We provide our insurance products and services to ourProgram Partners and Owned MGAs focused on specialty lines. We target a diversified portfolio of small to medium programs, typically with less than$30 million of premiums, that focus on niche segments of the specialty casualty insurance market and that we believe have strong underwriting track records. 25 -------------------------------------------------------------------------------- Table of Contents Coronavirus ("COVID-19") Impact We are monitoring the impact of the ongoing continuation of the COVID-19 pandemic on our business, including how it may impact our premium revenue, loss experience and loss expense, liquidity, and our regulatory capital and surplus, and operations. Workforce Operations Following the emergence of the COVID-19 pandemic in early 2020, we took a number of actions to protect the health of the public and our employees and to comply with directives and advice of governmental authorities and public health experts. We responded by developing a Preparedness Plan that outlined both corporate-wide and location-specific modifications to working conditions and operations in our offices. As state, city, and county guidelines progress, we have implemented new health and safety in-office procedures where necessary while continuing to monitor the progression of new COVID-19 variants and related developments that could impact us in the future.
プレミアム収益、請求および損失
We have not experienced a material impact to our premium revenue as a result of the COVID-19 pandemic. During the three months endedMarch 31, 2022 , compared to the three months endedMarch 31, 2021 , gross written premiums increased by 10.0% and gross earned premiums increased by 23.6%, primarily driven by significant growth in our existing Program Partner business. Because a majority of our gross written premiums are related to workers' compensation insurance, revenue trends could be impacted in future periods if the COVID-19 pandemic were to continue or significantly get worse. However, a significant portion of our workers' compensation premiums are pay-as-you-go programs, which reduces our downside risk from future premium audits or refunds. We also have not experienced a material impact in our reported claims or incurred losses in the first three months of 2022 as a specific result of the COVID-19 pandemic.
投資ポートフォリオ
With respect to our investment portfolio, we seek to hold a high-quality, diversified portfolio of investments, which are primarily in fixed maturity and available-for-sale investments and as such, our investment portfolio has limited exposure to equity market volatility. For the three months endedMarch 31, 2022 , we experienced a decrease of$23,804 in the fair value of our fixed maturities investment portfolio. The decline in the fair value of our fixed maturity investments is primarily attributable to the recent rise in interest rates driven primarily by changing conditions in the financial markets as compared to the comparatively lower rates that prevailed during the initial part of the COVID-19 pandemic in 2020 and 2021, rather than underlying credit risk within our investment portfolio. If there were to be continued debt market volatility, which in turn could create mark-to-market investment valuation decreases, we expect there could be additional or increased unrealized losses recorded or realized losses, if sold, in future reporting periods. In addition, if there were to be continued equity financial market volatility, which in turn could create mark-to-market investment valuation decreases, we expect there could be additional or increased unrealized losses on equity investments held, which are recorded through net investment income, in future reporting periods. However, given the conservative nature of our investment portfolio, we expect that any adverse impact on the value of our investment portfolio, as it relates to COVID-19, will be temporary, and we do not expect a long-term negative impact on our financial condition, results of operations or cash flows.
その他の懸念
Adverse events such as changes in the overall public health environment, changing infection patterns and new variants of COVID-19, health-related concerns about working in our offices, restrictions on travel, the potential impact on our business partners and customers, and other matters affecting our general work and business environment could harm our business and delay the implementation of our business strategy. We cannot anticipate all the ways in which the current global health crisis and financial market conditions could adversely impact our business in the future.
経営成績の重要な構成要素
Gross written premiums: Gross written premiums are the amounts received or to be
received for insurance policies written or assumed by us during a specific
period of time without reduction for general and administrative expenses
(including policy acquisition costs), reinsurance costs or other deductions. The
volume of our gross written premiums in any given period is generally influenced
by:
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目次
•の追加と保持
•私たちへの新規事業の提出
•新規事業の提出をポリシーに拘束する。
•既存のポリシーの更新。 と
•バインドされたポリシーの平均サイズとプレミアムレート。
Gross earned premiums: Gross earned premiums are the earned portion of gross written premiums. We earn insurance premiums on a pro rata basis over the term of the policy. Our insurance policies generally have a term of one year. Ceded earned premiums: Ceded earned premiums are the amount of gross earned premiums ceded to reinsurers. We enter into reinsurance contracts to limit our maximum losses and diversify our exposure and provide statutory surplus relief. The volume of our ceded earned premiums is affected by the level of our gross earned premiums and any decision we make to increase or decrease limits, retention levels, and co-participations. Net earned premiums: Net earned premiums represent the earned portion of our gross written premiums, less that portion of our gross written premiums that is earned and ceded to third-party reinsurers, including ourProgram Partners and professional reinsurers, under our reinsurance agreements. Net investment income: We earn investment income on our portfolio of cash and invested assets. Our cash and invested assets are primarily comprised of fixed maturities, equity securities, and short-term investments. Our net investment income includes interest income on our invested assets, income on funds held investments as well as unrealized gains and losses on our equity portfolio.
正味実現利益/損失：正味実現利益/損失は、
証券の売却で当社が受け取った金額と
セキュリティの記録された価値と「一時的でない減損」
収益に認識される満期固定投資に関連する。
Other revenue: Other revenue includes brokerage, third-party administrative, management, consulting, and other fee-based revenues, which are commonly based on written premiums. Loss and loss adjustment expenses (LAE): Losses and LAE are net of reinsurance and include claims paid, estimates of future claim payments, changes in those estimates from prior reporting periods and costs associated with investigating, defending, and servicing claims. In general, our losses and LAE are affected by:
•特定の種類の保険連絡先に関連する請求の頻度
私たちが書くこと;
•特定の種類の事業で発生した損失の平均サイズの傾向。
•私たちが書いたビジネスの組み合わせ。
•当社の事業に関連する法的または規制環境の変化
書きます;
•法的弁護費用の傾向。
•賃金インフレ。 と
•医療費のインフレ。
損失とLAEは、推定損失の数理分析に基づいています。
期間中に発生した損失および以前からの見積りの変更を含む
期間。 損失とLAEは、何年にもわたって支払われる可能性があります。
General and administrative expenses: General and administrative expenses include
net commissions, insurance-related expenses, and general and administrative
operating expenses. Net commissions consist of policy acquisition costs and
other underwriting expenses, net of ceding commissions. Policy acquisition costs
are principally comprised of the commissions we pay our brokers and program
managers. Policy acquisition costs that are directly related to the successful
acquisition or reinsurance of those policies are deferred. All policy
acquisition costs are charged to expense in proportion to premium earned over
the policy life. We receive ceding commissions on business ceded under our
reinsurance contracts. Insurance-
27
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related expenses largely consist of state premium taxes. General and
administrative operating expenses primarily include employee salaries and
benefits, corporate business insurance costs, technology costs, office rent, and
professional services fees such as legal, accounting, audit, tax, and actuarial
services.
Intangible asset amortization: Intangible asset amortization consists of
expenses incurred related to the amortization of intangible assets recorded as a
result of business acquisitions and consists of trade names, customer lists and
relationships, and non-compete agreements.
非現金株式報酬：非現金株式報酬には、関連する費用が含まれます
公正価値および制限付株式ユニットの発行（時間、市場および
パフォーマンスベース）およびストックオプション。
埋め込まれたデリバティブの利益：埋め込まれたデリバティブの利益は、
デリバティブの公正価値の変動、純投資収益の影響
保有するファンドへの投資、および保有するファンドに対する実現損益の影響
投資。
Interest expense: Interest expense consists primarily of interest paid on our term loan facility (See "Financial Condition, Liquidity and capital resources - Debt and Credit Agreements").
その他の収入：その他の収入は、主に転貸収入およびその他で構成されています。
雑収入項目。
主要な指標
以下に説明する、特定の主要な財務および運用指標について説明します。
当社の事業および運営上の要因に関する有用な情報を提供する
私たちの財務実績の根底にあります。
Underwriting income is a non-GAAP financial measure defined as income before taxes excluding net investment income, investment revaluation gains, net realized gains or losses, intangible asset amortization, noncash stock compensation, gains and losses on embedded derivatives, interest expense, other revenue, and other income and expenses. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of underwriting income to income before taxes in accordance with GAAP. Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of certain items, including noncash intangible asset amortization and stock compensation, noncash changes in the fair value of embedded derivatives, other expenses and gains or losses that we believe do not reflect our core operating performance, which items may have a disproportionate effect in a given period, affecting comparability of our results across periods. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of adjusted net income to net income in accordance with GAAP.
パーセンテージで表される損失率は、純額に対する損失とLAEの比率です。
獲得した保険料。
パーセンテージで表される経費率は、一般的なものと
純稼得保険料に対する管理費。
Combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.
株主資本利益率は、年率ベースでパーセンテージで表された純利益です。
期間中の平均的な開始株主資本と終了株主資本の割合。
Adjusted return on equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders' equity during the period. See "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of adjusted return on equity to return on equity in accordance with GAAP.
有形株主資本は、株主資本からのれんを差し引いたものとして定義されます。
およびその他の無形資産。
Return on tangible equity is a non-GAAP financial measure defined as net income
expressed on an annualized basis as a percentage of average beginning and ending
tangible stockholders' equity during the period. See "Reconciliation of Non-GAAP
Financial Measures" for a reconciliation of return on tangible equity to return
on equity in accordance with GAAP.
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Adjusted return on tangible equity is a non-GAAP financial measure defined as
adjusted net income expressed on an annualized basis as a percentage of average
beginning and ending tangible stockholders' equity during the period. See
"Reconciliation of Non-GAAP Financial Measures" for a reconciliation of adjusted
return on tangible equity to return on tangible equity in accordance with GAAP.
Results of Operations
終了した3か月間の連結経営成績
に比べ
次の表は、3か月間の経営成績をまとめたものです。
終了しました
Three Months Ended March 31, Percentage Change (in thousands, except for percentages) 2022 2021 Change (1)
収益
Gross written premiums 161,403 146,730$ 14,673 10.0 % Increase in gross unearned premiums (2,864) (18,431) 15,567 (84.5) % Gross earned premiums 158,539 128,299 30,240 23.6 % Ceded earned premiums (94,362) (87,165) (7,197) 8.3 % Net earned premiums 64,177 41,134 23,043 56.0 % Net investment income 2,576 2,272 304 13.4 % Net realized gains (losses) (1,047) 13 (1,060) NM Other revenue 3,201 4,655 (1,454) (31.2) % Total revenue 68,907 48,074 20,833 43.3 % Expenses Losses and loss adjustment expenses 39,193 24,881 14,312 57.5 % General and administrative expenses 18,300 11,891 6,409 53.9 % Intangible asset amortization 1,499 1,414 85 6.0 % Noncash stock compensation 156 211 (55) (26.1) % Interest expense 408 427 (19) (4.4) % Total expenses 59,556 38,824 20,732 53.4 % Gains on embedded derivatives 6,236 2,676 3,560 133.0 % Other income 23 121 (98) (81.0) % Income before taxes 15,610 12,047 3,563 29.6 % Income tax expense 3,270 2,605 665 25.5 % Net income $ 12,340$ 9,442 $ 2,898 30.7 %
（1）当社は、200％を超える増減を「NM」または意味のないものと定義しています。
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目次
以下の表は、
それぞれの3か月の期間：
Three Months Ended March 31, (in thousands, except for percentages) 2022 2021 Key metrics: Underwriting income(1) $ 6,684$ 4,362 Adjusted net income(1) $ 8,304$ 8,109 Loss ratio 61.1 % 60.5 % Expense ratio 28.5 % 28.9 % Combined ratio 89.6 % 89.4 % Return on equity 11.8 % 9.2 % Adjusted return on equity(1) 7.9 % 7.9 % Return on tangible equity(1) 24.1 % 19.2 % Adjusted return on tangible equity(1) 16.2 % 16.5 % (1) This metric represents a non-GAAP financial measure. See 'Reconciliation of Non-GAAP Financial Measures' for a reconciliation of this metric to the applicable GAAP metric. Three Months Ended March 31, (in thousands, except for Percentage Change percentages) 2022 2021 Change (1) Revenues Gross written premiums$ 161,403 $ 146,730 $ 14,673 10.0 % Increase in gross unearned premiums (2,864) (18,431) 15,567 (84.5) % Gross earned premiums 158,539 128,299 30,240 23.6 % Ceded earned premiums (94,362) (87,165) (7,197) 8.3 % Net earned premiums$ 64,177 $ 41,134 $ 23,043 56.0 %
（1）当社は、200％を超える増減を「NM」または意味のないものと定義しています。
Gross written premiums: Gross written premiums increased$14,673 , or 10.0%, to$161,403 for the three months endedMarch 31, 2022 , compared to$146,730 for the three months endedMarch 31, 2021 . The increase is primarily attributable to the growth in our existing Program Partner business and the changes in gross written premiums were due to the following: Workers' compensation represented 61.1% of our gross written premiums for the three months endedMarch 31, 2022 , compared to 67.6% for the three months endedMarch 31, 2021 . For the three months endedMarch 31, 2022 , gross written premiums for workers' compensation decreased by$593 , or 0.6%, compared to the same period in 2021. The moderation in growth and shift in mix reflects our ongoing effort to diversify our lines of business and a strategic decrease in ourCalifornia worker's compensation business that resulted from the Company's measures undertaken to exit certain unfavorable risks in 2021. All other non-workers' compensation liability represented 38.9% of our gross written premiums for the three months endedMarch 31, 2022 , compared to 32.4% for the three months endedMarch 31, 2021 . For the three months endedMarch 31, 2022 , gross written premiums for all other non-workers' compensation liability increased$15,266 , or 32.1%, compared to the same period in 2021. The increase is due primarily to growth in our accident & health, commercial auto and commercial lines, a result of continued line of business diversification. Gross earned premiums: Gross earned premiums increased$30,240 , or 23.6%, to$158,539 for the three months endedMarch 31, 2022 , compared to$128,299 for the three months endedMarch 31, 2021 . The increase in gross earned premiums reflects the increase in gross written premiums of$14,673 net of a reduction in gross unearned premiums of$15,567 . Gross 30 -------------------------------------------------------------------------------- Table of Contents earned premiums as a percentage of gross written premiums increased to 98.2% for the three months endedMarch 31, 2022 , compared to 87.4% for the three months endedMarch 31, 2021 . Ceded earned premiums: Ceded earned premiums increased$7,197 , or 8.3%, to$94,362 for the three months endedMarch 31, 2022 , compared to$87,165 for the three months endedMarch 31, 2021 . The increase in ceded earned premiums is driven by the growth in gross earned premiums as described above, partially offset by an increase in our retention. Ceded earned premiums as a percentage of gross earned premiums decreased to 59.5% for the three months endedMarch 31, 2022 , compared to 67.9% for the three months endedMarch 31, 2021 , reflecting the Company's strategic decision to retain more gross written premiums. Net earned premiums: Net earned premiums increased$23,043 , or 56.0%, to$64,177 for the three months endedMarch 31, 2022 , compared to$41,134 for the three months endedMarch 31, 2021 . The increase is due to the growth in gross earned premiums as described above and the Company's strategic decision to retain more gross written premiums. Net investment income: Net investment income increased$304 , or 13.4%, to$2,576 for the three months endedMarch 31, 2022 , compared to$2,272 for the three months endedMarch 31, 2021 . The increase reflects the reinvestment of funds from lower yielding maturities, pay downs and redemptions into higher yielding investments and an increase in our average invested balance. During the first quarter of 2022, we purchased$33,288 higher-yielding equity securities, which we believe will improve the yield on our portfolio. Net realized gains (losses): Net realized losses were$1,047 for the three months endedMarch 31, 2022 , compared to net realized gains of$13 for the three months endedMarch 31, 2021 . We executed a repositioning strategy to sell some of our lower-yielding assets and purchased higher-yielding investments, prior to anticipated interest rate increases. This turnover in our portfolio resulted in realized losses recorded of$1,022 . Other revenue: Other revenue decreased$1,454 , or 31.2%, to$3,201 for the three months endedMarch 31, 2022 , compared to$4,655 for the three months endedMarch 31, 2021 . The decrease is largely driven by a reduction in brokerage revenue of$862 due to lower placement rates reflecting the Company's continued increase in retention year over year. In addition, there was a slight reduction in managing general agent fees, consulting and other fee-based revenue during the period. Losses and loss adjustment expenses: Losses and LAE increased$14,312 , or 57.5%, to$39,193 for the three months endedMarch 31, 2022 , compared to$24,881 for the three months endedMarch 31, 2021 . The increase is primarily attributable to the growth in earned premiums and increased retention during the three months endedMarch 31, 2022 . This resulted in a loss ratio of 61.1% for the three months endedMarch 31, 2022 compared to 60.5% for the three months endedMarch 31, 2021 . General and administrative expenses: General and administrative expenses increased$6,409 , or 53.9%, to$18,300 for the three months endedMarch 31, 2022 , compared to$11,891 for the three months endedMarch 31, 2021 . The expense ratio was 28.5% for the three months endedMarch 31, 2022 , compared to 28.9% for the three months endedMarch 31, 2021 . 31 -------------------------------------------------------------------------------- Table of Contents The table below shows the components of general and administrative expenses for the respective three-month periods: Three Months Ended March 31, 2022 2021 Change Direct commissions$ 27,908 $ 23,108 $ 4,800 Ceding commissions (26,997) (28,208) 1,211 Net commissions 911 (5,100) 6,011 Insurance-related expenses 5,771 4,276 1,495 General and administrative operating expenses 11,618 12,715 (1,097) Total general and administrative expenses$ 18,300
General and administrative expenses - % of gross written premiums 7.2 % 8.7 % Retention rate (1) 40.5 % 32.1 % Direct commission rate (2) 17.6 % 18.0 % Ceding commission rate (3) 28.6 % 32.4 %
（1）総稼得保険料のパーセンテージとしての純稼得保険料。
（2）総収入保険料のパーセンテージとしての直接手数料。
（3）譲渡された獲得保険料のパーセンテージとしての譲渡手数料。
Direct commissions increased$4,800 primarily due to an increase in gross earned premiums. Ceding commissions decreased$1,211 due to an increase in retention, partially offset by an increase in ceded earned premiums reflecting the increase in gross earned premiums. Insurance-related expenses increased$1,495 primarily as a result of an increase in gross earned premiums. General and administrative operating expenses decreased$1,097 . The decrease in general and administrative operating expense is primarily the result of a decrease in professional fees of$801 and depreciation of$89 . Intangible asset amortization: Intangible asset amortization increased$85 to$1,499 for the three months endedMarch 31, 2022 , compared to$1,414 for the three months endedMarch 31, 2021 . The increase is driven by the addition of intangible assets acquired in the acquisition of WIC in the third quarter of 2021. Noncash stock compensation: Noncash stock compensation was$156 for the three months endedMarch 31, 2022 , compared with$211 for the three months endedMarch 31, 2021 . Expenses incurred during both periods relates to the fair value of restricted stock units and stock options granted under the Company's 2020 Omnibus Plan amortized over appropriate and applicable vesting periods. Gains on embedded derivatives: The table below shows the components of gains on embedded derivatives for the respective three-month periods: Three Months
終了しました
2022 2021 Change Change in fair value of embedded derivatives$ 6,896 $ 3,356 $ 3,540 Effect of net investment income on funds held investments (668) (680) 12 Effect of realized gains on funds held investments 8 - 8 Total gains on embedded derivatives$ 6,236 $
2,676
Gains on embedded derivatives increased$3,560 to$6,236 for the three months endedMarch 31, 2022 , compared to$2,676 for the three months endedMarch 31, 2021 . The gain reflected an increase in the change in fair value of embedded derivatives of$3,540 , the effect of investment income on funds held investments of$12 and the effect of realized gains on 32 -------------------------------------------------------------------------------- Table of Contents funds held investments of$8 . The increase in the fair value of the embedded derivatives is a result of the recent increase in interest rates, which has reduced the value of the underlying funds held investments under reinsurance agreements. Income tax expense: Income tax expense was$3,270 for the three months endedMarch 31, 2022 , which resulted in an effective tax rate of 20.9%. The decrease in the effective tax rate from the statutory rate of 21% was primarily due to the impact of tax-exempt municipal income on the Company's investments, partially offset by the impact of state taxes. For the three months endedMarch 31, 2021 , income tax expense was$2,605 , which resulted in an effective tax rate of 21.6%. The increase in the effective tax rate from the statutory rate of 21% is due primarily to the impact of state taxes.
所有するMGAおよびプログラムパートナープレミアム：
次の表は、
Three Months Ended March 31, 2022
Owned MGAs Program Partner Total
Gross written premiums $ 68,644 $ 92,759 $ 161,403
Increase in gross unearned premiums (5,259) 2,395 (2,864)
Gross earned premiums 63,385 95,154 158,539
Ceded earned premiums (25,389) (68,973) (94,362)
Net earned premiums $ 37,996 $ 26,181 $ 64,177
We utilize both quota share and catastrophe excess of loss ("XOL") contracts in
our reinsurance strategy for our Owned MGAs and Program Partners . For the three
months ended March 31, 2022 , the Company retained 59.9% of gross earned premiums
for Owned MGAs compared to 27.5% for Program Partners .
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Reconciliation of Non-GAAP Financial Measures
引受収入
We define underwriting income as income before taxes excluding net investment
income, investment revaluation gains, net realized gains or losses, intangible
asset amortization, noncash stock compensation, non-cash changes in fair value
of embedded derivatives, interest expense, other revenue, and other income and
expenses. Underwriting income represents the pre-tax profitability of our
underwriting operations and allows us to evaluate our underwriting performance
without regard to investment income, IPO-related expenses, intangible asset
amortization, noncash stock compensation, interest expense, other revenue, and
other income and expenses. We use this metric because we believe it gives our
management and other users of our financial information useful insight into our
underwriting business performance by adjusting for these expenses and sources of
income. Underwriting income should not be viewed as a substitute for net income
calculated in accordance with GAAP, and other companies may define underwriting
income differently.
Three Months Ended March 31, Percentage Change
(in thousands, except percentages) 2022 2021 (1)
Net income $ 12,340 $ 9,442 30.7 %
Income tax expense 3,270 2,605 25.5 %
Equity earnings in affiliates, net of tax - - NM
Income before taxes 15,610 12,047 29.6 %
Other revenue (3,201) (4,655) (31.2) %
Gains on embedded derivatives (6,236) (2,676) 133.0 %
Net investment income (2,576) (2,272) 13.4 %
Net realized (gains) losses 1,047 (13) NM
Interest expense 408 427 (4.4) %
Intangible asset amortization 1,499 1,414 6.0 %
Noncash stock compensation 156 211 (26.1) %
Other income (23) (121) (81.0) %
Underwriting income $ 6,684 $ 4,362 53.2 %
（1）当社は、200％を超える増減を「NM」または意味のないものと定義しています。
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Adjusted net income
We define adjusted net income as net income excluding the impact of certain
items, including noncash intangible asset amortization and stock compensation,
noncash changes in fair value of embedded derivatives, other expenses and gains
or losses that we believe do not reflect our core operating performance, which
items may have a disproportionate effect in a given period, affecting
comparability of our results across periods. We calculate the tax impact only on
adjustments that would be included in calculating our income tax expense using
the effective tax rate at the end of each period. We use adjusted net income as
an internal performance measure in the management of our operations because we
believe it gives our management and other users of our financial information
useful insight into our results of operations and our underlying business
performance by eliminating the effects of these items. Adjusted net income
should not be viewed as a substitute for net income calculated in accordance
with GAAP, and other companies may define adjusted net income differently.
Three Months Ended March 31,
(in thousands, except percentages) 2022 2021
Net income $ 12,340 $ 9,442
Intangible asset amortization 1,499 1,414
Noncash stock compensation 156 211
Change in fair value of embedded derivatives (6,896) (3,356)
Total adjustments (5,241) (1,731)
Tax impact of adjustments 1,205 398
Adjusted net income $ 8,304 $ 8,109
（1）当社は、200％を超える増減を「NM」または意味のないものと定義しています。
Adjusted return on equity
We define adjusted return on equity as adjusted net income expressed on an
annualized basis as a percentage of average beginning and ending stockholders'
equity during the period. We use adjusted return on equity as an internal
performance measure in the management of our operations because we believe it
gives our management and other users of our financial information useful insight
into our results of operations and our underlying business performance by
adjusting for items that we believe do not reflect our core operating
performance and that may diminish comparability across periods. Adjusted return
on equity should not be viewed as a substitute for return on equity calculated
in accordance with GAAP, and other companies may define adjusted return on
equity differently.
Three Months Ended March
31、
(in thousands, except percentages) 2022 2021 Adjusted return on equity calculation: Numerator: adjusted net income$ 8,304 $ 8,109 Denominator: average equity 419,153 411,541 Adjusted return on equity 7.9 % 7.9 % Return on equity 11.8 % 9.2 % 35
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Table of Contents
Return on tangible equity and adjusted return on tangible equity
We define tangible stockholders' equity as stockholders' equity less goodwill
and other intangible assets. We define return on tangible equity as net income
expressed on an annualized basis as a percentage of average beginning and ending
tangible stockholders' equity during the period. We define adjusted return on
tangible equity as adjusted net income expressed on an annualized basis as a
percentage of average beginning and ending tangible stockholders' equity during
the period. We regularly evaluate acquisition opportunities and have
historically made acquisitions that affect stockholders' equity. We use return
on tangible equity and adjusted return on tangible equity as internal
performance measures in the management of our operations because we believe they
give our management and other users of our financial information useful insight
into our results of operations and our underlying business performance by
adjusting for the effects of acquisitions on our stockholders' equity and, in
the case of adjusted return on tangible equity, by adjusting for the items that
we believe do not reflect our core operating performance and that may diminish
comparability across periods. Return on tangible equity and adjusted return on
tangible equity should not be viewed as a substitute for return on equity or
return on tangible equity, respectively, calculated in accordance with GAAP, and
other companies may define return on tangible equity and adjusted return on
tangible equity differently.
Three Months Ended March
31,
(in thousands, except percentages) 2022 2021
Return on tangible equity calculation:
Numerator: net income $ 12,340 $ 9,442
Denominator:
Average stockholders' equity 419,153 411,541
Less: average goodwill and other intangible assets 214,712 215,250
Average tangible stockholders' equity 204,441 196,291
Return on tangible equity 24.1 % 19.2 %
Return on equity 11.8 % 9.2 %
Three Months Ended March 31,
(in thousands, except percentages) 2022 2021
Adjusted return on tangible equity calculation:
Numerator: adjusted net income 8,304 8,109
Denominator: average tangible equity 204,441 196,291
Adjusted return on tangible equity 16.2 % 16.5 %
Return on equity 11.8 % 9.2 %
財政状態、流動性および資本リソース
資金の出所と使用
We are organized as a holding company with our operations conducted through our subsidiaries, including our wholly owned insurance subsidiaries: Benchmark, which is domiciled inKansas and commercially domiciled inCalifornia ; ALIC, which is domiciled inUtah ; 7710, which is domiciled inSouth Carolina ; and BSIC, which is domiciled inArkansas . Accordingly, the holding company may receive cash through: (i) loans from banks, (ii) draws on a revolving loan agreement, (iii) issuance of equity and debt securities, (iv) corporate service fees from our operating subsidiaries, (v) payments from our subsidiaries pursuant to our consolidated tax allocation agreement and other transactions and (vi) dividends from our non-insurance subsidiaries and, subject to certain limitations discussed below, dividends from our insurance subsidiaries. We also may use the proceeds from these sources to contribute funds to the insurance subsidiaries in order to support premium growth, reduce our reliance on reinsurance, pay taxes, and for other general business purposes.
州の保険法は、保険会社が申告する能力を制限しています
事前の規制当局の承認なしの株主配当。 州の保険
規制当局は、保険会社に法定の特定のレベルを維持することを要求しています
資本と余剰。
36 -------------------------------------------------------------------------------- Table of Contents UnderKansas andCalifornia law, dividends payable from Benchmark without the prior approval of the applicable insurance commissioner must not exceed the greater of (i) 10% of Benchmark's surplus as shown on the last statutory financial statement on file with theKansas Insurance Department and theCalifornia Department of Insurance , respectively; or (ii) 100% of net income during the applicable twelve-month period (not including realized gains). Dividends shall not include pro rata distributions of any class of Benchmark's own securities. UnderUtah law, dividends payable from ALIC without the prior approval of the applicable insurance commissioner must not exceed the lesser of: (i) 10% of ALIC's surplus as shown on the last statutory financial statement on file with theUtah Insurance Department or (ii) 100% of net income during the applicable twelve- month period (not including realized gains). Dividends shall not include pro rata distributions of any class of ALIC's own securities. UnderSouth Carolina law, dividends payable from 7710 without the prior approval of the applicable insurance commissioner are limited to the following during the preceding twelve months: (a) when paid from other than earned surplus must not exceed the lesser of: (i) 10% of 7710's surplus as regards policyholders as shown in 7710's most recent annual statement; or (ii) the net income, not including net realized gains or losses as shown in 7710's most recent annual statement; or (b) when paid from earned surplus must not exceed the greater of: (i) 10% of 7710's surplus as regards policyholders as shown in 7710Insurance Company's most recent annual statement; or (ii) the net income, not including net realized gains or losses as shown in the 7710Insurance Company's most recent annual statement. Dividends shall not include pro rata distributions of any class of 7710's own securities. UnderArkansas law, dividends payable from BSIC without the prior approval of the applicable insurance commissioner must not exceed the lesser of (i) 10% of BSIC's surplus as shown on the last statutory financial statement on file with theArkansas Insurance Department ; or (ii) 100% of net income during the applicable twelve- month period (not including realized gains). Dividends shall not include pro rata distributions of any class of BSIC's own securities. The maximum amount of dividends the insurance subsidiaries can pay us during 2022 without regulatory approval is approximately$17,800 . Insurance regulators have broad powers to ensure that statutory surplus remains at adequate levels, and there is no assurance that dividends of the maximum amount calculated under any applicable formula would be permitted. In the future, state insurance regulatory authorities that have jurisdiction over the payment of dividends by the insurance subsidiaries may adopt statutory provisions more restrictive than those currently in effect. Our insurance subsidiaries are also required by state law to maintain a minimum level of policyholders' surplus.Kansas ,Utah ,Arkansas andSouth Carolina utilize a risk-based capital requirement as promulgated by theNational Association of Insurance Commissioners . Such requirements are designed to identify the various business risks (e.g., investment risk, underwriting profitability risk, etc.) of insurance companies and their subsidiaries. As ofMarch 31, 2022 andDecember 31, 2021 , the total adjusted capital of our insurance subsidiaries was in excess of their respective prescribed risk-based capital requirements.
現在
経営陣は、私たちが私たちを満たすのに十分な流動性を利用できると信じています
営業現金の必要性と義務およびコミットされた資本的支出
次の12ヶ月。
37
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目次
キャッシュフロー
Our most significant source of cash is from premiums received from insureds, net
of the related commission amount for the policies. Our most significant cash
outflow is for claims that arise when a policyholder incurs an insured loss.
Because the payment of claims occurs after the receipt of the premium, often
years later, we invest the cash in various investment securities that generally
earn interest and dividends. The table below summarizes our net cash flows.
Three
終了した月
2022 2021 Cash, cash equivalents and restricted cash provided by (used in): Operating activities $ 8,748$ (2,964) Investing activities (33,969) (17,128) Financing activities (420) (206) Net increase (decrease) in cash, cash equivalents and restricted cash$ (25,641) $ (20,298) Operating Activities: Net cash provided by operating activities for the three months endedMarch 31, 2022 was$8,748 , compared to net cash used in operating activities of$2,964 for the same period in 2021. Net cash provided by operating activities includes net income as adjusted for depreciation and amortization, stock compensation, unrealized gains on embedded derivatives, net realized gains and losses, bond amortization and accretion, the change in deferred income taxes, and amortization of deferred financing costs. Net cash provided by operating activities for the three months endedMarch 31, 2022 primarily reflects decreased prepaid reinsurance premiums of$8,339 , increased unpaid loss and loss adjustment expenses of$6,661 , increased unearned premiums of$2,962 , increased funds held under reinsurance agreements of$3,511 ; increases in reinsurance premiums payable of$1,765 and increased income taxes payable of$1,013 , partially offset by increases in premiums and other receivables of$11,133 , a decrease in accounts payable and accrued expenses of$7,025 , an increase in reinsurance recoverables of$3,346 , and an increase in other assets of$3,718 . The decrease in prepaid reinsurance premiums was the result of increased retention, partially offset by the increase in ceded premiums. Unpaid loss and loss adjustment expenses and unearned premiums increased primarily due to an increase in gross written premiums and an increase in our retention. Funds held under reinsurance agreements decreased due a reduction in the fair value of the embedded derivatives, partially offset by an increase in ceded premiums. The increases in premiums and other receivables and reinsurance recoverables were primarily a result of an increase in gross written premiums during the period. The decrease in accounts payable and accrued expenses is due to reductions in accrued bonuses, accrued 401(k) match and accrued premium taxes, all paid in the first quarter of 2022. Other assets increased as a result of increases in our deferred acquisition costs and contract asset balances. Net cash provided by operating activities for the three months endedMarch 31, 2021 reflects incremental cash used for operating assets and liabilities. Investing Activities: Net cash used in investing activities for the three months endedMarch 31, 2022 was$33,969 compared to net used in investing activities of$17,128 for the same period in 2021. Net cash used in investing activities for the three months endedMarch 31, 2022 includes$33,737 net cash used in the purchase and sale of investments and$232 in capital expenditures. Net cash provided by investing activities for the three months endedMarch 31, 2021 includes$17,287 net cash used in the purchase and sale of investments and$73 in capital expenditures, partially offset by$232 in cash received for the sale of equity method investments. Financing Activities: Net cash used in financing activities for the three months endedMarch 31, 2022 was$420 compared to net cash used in financing activities of$206 for the same period in 2021. Net cash used in financing activities for the three months endedMarch 31, 2022 and 2021 primarily includes the principal payments made on the Company's debt. 38 -------------------------------------------------------------------------------- Table of Contents Debt and Credit Agreements
最初のホライゾンクレジット契約
OnJuly 16, 2020 , the Company entered into an Amended and Restated Credit Agreement withFirst Horizon Bank , which, among other things, extended the Company's credit facility for a period of five years throughMay 26, 2025 and increased its term loan facility by$11,707 , resulting in a total term loan debt amount of$33,000 and a revolving credit facility of$2,000 . Borrowings under the facility are secured by substantially all of the assets of the Company other thanBenchmark Holding Company and its subsidiaries. The loan has a variable interest rate of 3-month LIBOR plus 4.50%, which was 4.73% as ofMarch 31, 2022 and 4.64% as ofDecember 31, 2021 (under the 2018 First Horizon Credit Agreement). The outstanding principal balance of the loan is to be repaid in quarterly installments that escalate from approximately$206 to$825 untilMarch 2025 . All equity securities of the subsidiaries of the Company (other thanBenchmark Holding Company and its subsidiaries) have been pledged as collateral.
再保険
We cede a portion of the risk we accept on our balance sheet to third-party reinsurers through a variety of reinsurance arrangements. We manage these arrangements to align risks with ourProgram Partners , optimize our net retention relative to our financial objectives, balance sheet size and ratings requirements, as well as to limit our maximum loss resulting from a single program or a single event. We utilize both quota share and XOL reinsurance as tools in our overall risk management strategy to achieve these goals, usually in conjunction with each other. Quota share reinsurance involves the proportional sharing of premiums and losses of each defined program. We utilize quota share reinsurance for several purposes, including (i) to cede risk toProgram Partners , which allows us to share economics and align incentives and (ii) to cede risk to third-party reinsurers in order to manage our net written premiums appropriately based on our financial objectives, capital base,A.M. Best financial strength rating, and risk appetite. It is a core pillar of our underwriting philosophy thatProgram Partners retain a portion of the underwriting risk of their program. We believe this best aligns interests, attracts higher quality programs, and leads to better underwriting results. Under XOL reinsurance, losses in excess of a retention level are paid by the reinsurer, subject to a limit, and are customized per program or across multiple programs. We utilize XOL reinsurance to protect against catastrophic or other unforeseen extreme loss activity that could otherwise negatively impact our profitability and capital base. The majority of our exposure to catastrophe risk stems from the workers' compensation premium we retain. Potential catastrophic events include an earthquake, terrorism, or another event that could cause more than one covered employee working at the same location to be injured in the event. We believe we mitigate this risk by our focus on small- to mid-sized accounts, which means that we generally do not have concentrated employee counts at single locations that could be exposed to a catastrophic loss. The cost and limits of the reinsurance coverage we purchase vary from year to year based on the availability of quality reinsurance at an acceptable price and our desired level of retention. Ratings We have a financial strength rating of "A" (Excellent) fromA.M. Best .A.M. Best assigns 16 ratings to insurance companies, which currently range from "A++" (Superior) to "S" (Rating Suspended). "A" (Excellent) is the third highest rating issued byA.M. Best . The "A" (Excellent) rating is assigned to insurers that have, inA.M. Best's opinion, an excellent ability to meet their ongoing obligations to policyholders. This rating is intended to provide an independent opinion of an insurer's ability to meet its obligation to policyholders and is not an evaluation directed at investors. See also "Risk factors - Risks related to our business and industry - A downgrade in theA.M. Best financial strength ratings of our insurance company subsidiaries may negatively affect our business." in our 2021 Form 10-K. The financial strength ratings assigned byA.M. Best have an impact on the ability of the insurance companies to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that the insurance companies receive. The "A" (Excellent) rating obtained by us is consistent with our business plan and allows us to actively pursue relationships with the agents and brokers identified in our marketing plan.
当社の契約上の義務に重要な変更はありません。
の
39 --------------------------------------------------------------------------------
Table of Contents Financial condition Stockholders' Equity
現在
期間中の株主資本は、主に
包括的な損失。
我々は持っていた
権利が確定していない株式報酬が付与されました。 当社は認識しました
終了した3ヶ月間の補償
投資ポートフォリオ
Our invested asset portfolio consists of fixed maturities, equity securities, other investments, and short-term investments. The majority of the investment portfolio was comprised of fixed maturity securities of$447,349 atMarch 31, 2022 , that were classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses on these securities, net of applicable taxes, reported as a separate component of accumulated other comprehensive income. Our investment portfolio objectives are to maintain liquidity, facilitating financial strength and stability and ensuring regulatory and legal compliance. Our investment portfolio consists of available-for-sale fixed maturities and other equity investments, all of which are carried at fair value. We seek to hold a high-quality portfolio of investments that is managed by a professional investment advisory management firm in accordance with the Company's investment policy and routinely reviewed by our management team. Our investments, however, are subject to general economic conditions and market risks as well as risks inherent to particular securities. The Company's investment portfolio has the following objectives:
•以下の投資に関する保険規制要件を満たします。
適用される保険法;
•の現金要件を満たすために適切なレベルの流動性を維持する
現在の業務と長期的な義務。
•投資リスクを調整して、当社に基づいて保険リスクを相殺または補完します。
総企業リスク許容度; と
•可能な限り最高レベルの投資収益と税引き後の合計を実現する
収益率。
当社の投資ポートフォリオの構成は、次の表に次のように示されています。
の
March 31, 2022
Cost or
Amortized Cost Fair Value
Fixed maturities:
U.S. government and government securities $ 42,026 $ 40,610
Foreign governments 400 393
States, territories and possessions 11,388 10,822
Political subdivisions of states, territories and
possessions 39,166 37,419
Special revenue and special assessment obligations 98,436 94,078
Industrial and public utilities 107,816 106,298
Commercial mortgage-backed securities 104,291 97,267
Residential mortgage-backed securities 19,040 18,800
Other loan-backed securities 41,939 41,662
Hybrid securities - -
Total fixed maturities 464,502 447,349
Equity securities 34,119 34,162
Total investments $ 498,621 $ 481,511
40
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Table of Contents
December 31, 2021
Cost or
Amortized Cost Fair Value
Fixed maturities:
U.S. government and government securities $ 41,490 $ 41,434
Foreign governments 2,500 2,490
States, territories and possessions 10,593 10,766
Political subdivisions of states, territories and
possessions 39,170 40,002
Special revenue and special assessment obligations 93,664 95,991
Industrial and public utilities 100,774 103,257
Commercial mortgage-backed securities 119,378 118,218
Residential mortgage-backed securities 16,549 17,368
Other loan-backed securities 41,236 41,425
Hybrid securities 105 110
Total fixed maturities 465,459 471,061
Equity securities 984 969
Total investments $ 466,443 $ 472,030
The following table shows the percentage of the total estimated fair value of
our fixed maturity securities as of March 31, 2022 and December 31, 2021 by
credit rating category, using the lower of ratings assigned by Moody's Investor
Service or S&P.
March 31, 2022
(in thousands, except percentages) Fair Value % of Total
AAA $ 76,317 17.1 %
AA 254,759 56.9 %
A 77,351 17.3 %
BBB 34,308 7.7 %
BB 4,588 1.0 %
Below investment grade 26 - %
Total fixed maturities $ 447,349 100.0 %
December 31, 2021
(in thousands, except percentages) Fair Value % of Total
AAA $ 80,455 17.1 %
AA 278,557 59.1 %
A 77,097 16.4 %
BBB 33,959 7.2 %
BB 947 0.2 %
Below investment grade 46
-％
Total fixed maturities$ 471,061 100.0 % 41
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Table of Contents Critical Accounting Policies and Estimates The unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q include amounts based on the use of estimates and judgments of management. We identified the accounting estimates that are critical to the understanding of our financial position and results of operations. Critical accounting estimates are defined as those estimates that are both important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. We use significant judgment concerning future results and developments in applying these critical accounting estimates and in preparing our condensed consolidated financial statements. These judgments and estimates affect our reported amounts of assets, liabilities, revenues and expenses and the disclosure of our material contingent assets and liabilities. Actual results may differ materially from the estimates and assumptions used in preparing the condensed consolidated financial statements. We evaluate our estimates regularly using information that we believe to be relevant. The estimates and judgments that are most critical to the preparation of the condensed consolidated financial statements include: (i) reserves for unpaid loss and LAE; (ii) reinsurance recoveries; (iii) investment fair value measurements; (iv) goodwill and intangible assets; and (v) business combinations. For a detailed discussion of our accounting policies, see the "Notes to the Consolidated and Combined Financial Statements" included in our 2021 Form 10-K.