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Item 7.01.
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Regulation FD Information.
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Strategic Review Update
In November 2020, our Board of Directors formed a Strategic Review Committee, to oversee a review of the Company’s business plan, capital deployment, geographic footprint and long-term strategy to identify potential strategic initiatives that could enhance value for the Company’s stakeholders, in particular its shareholders.
The Company recently completed two capital raising transactions providing additional capital to increase holding company liquidity and strengthen the Company’s capital position as it seeks to realize the benefits of existing initiatives intended to improve the profitability of its homeowners business and build long-term value. Aggregate gross proceeds from these two recent capital raising transactions totaled $38.1 million.
The Strategic Review Committee continues to evaluate various strategic initiatives to enhance shareholder value including, among other things, changes in the Company’s strategy or operations, potential strategic business combinations, or continuing to execute on the Company’s current business plan. The Strategic Review Committee continues to work with its financial advisor, Piper Sandler & Co., on this process.
The Company does not intend to comment further about the strategic review process unless and until the Board has approved a specific course of action or the Company determines that additional disclosure is either appropriate or required. There can be no assurance that the strategic review will result in additional transactions or any other courses of action.
Reinsurance Update
The Company is providing certain updates to its reinsurance program, which was previously described in the Company’s Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).
MIC – Purchase of Aggregate Reinsurance Cover. As previously disclosed, effective January 1, 2021, the Company entered into a new Aggregate Excess of Loss program on its Maison book of business. This new program provides coverage, excluding named storms, of 65% of $15 million excess of $10 million with an $850,000 occurrence deductible and a $4.15 million occurrence limit at an approximate annual cost of $2.3 million. Catastrophe losses from Uri satisfied a portion of the annual aggregate retention subject to this treaty.
Additional Back-up Coverage. As previously disclosed, after Winter Storm Uri, the Company secured additional reinsurance limit of 50% of $70 million excess of $25 million and 100% of $15 million excess of $10 million, at an approximate cost $13 million which will be recognized as ceded premium over the period from March 1, 2021 through May 31, 2021. This limit is available for events occurring during this period for all carriers and all states, with a portion excluding named storms.
In aggregate, supplemental catastrophe reinsurance purchases and reinstatement premium co-participations during the current catastrophe treaty year drove approximately $13.6 million of incremental ceded premium in the first quarter of 2021, as compared to the baseline cost of the Company’s catastrophe reinsurance program incepted on July 1, 2020. For the second quarter of 2021, the incremental ceded premium above the baseline cost is projected to be approximately $20.6 million.
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This Current Report on Form 8-K contains statements that may be deemed forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are therefore entitled to the protection of the safe harbor provisions of these laws. Forward-looking statements generally may be identified by the use of forward-looking terminology such as "anticipate," "believe," "budget," "contemplate," "continue," "could," "envision," "estimate," "expect," "forecast," "guidance," "indicate," "intend," "may," "might," "outlook," "plan," "possibly," "potential," "predict," "probably," "pro-forma," "project," "seek," "should," "target," "will," "would," "will be," "will continue" or the negative thereof or other variations thereon or comparable terminology and, in this report includes our statements regarding estimated catastrophe losses, incremental ceded premiums from supplemental reinsurance purchases, and capacity to cede catastrophe losses into a quota-share treaty. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections. While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve a number of risks and uncertainties, many of which are beyond the Company's control. These and other important factors may cause our actual results, performance or achievements to differ
materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Management cautions that any such forward-looking statements are not guarantees of future performance, and readers cannot assume that such statements will be realized or that the forward-looking events and circumstances will occur. Factors that might cause such a difference include, without limitation, that final results regarding catastrophe losses, additional reinsurance purchases, loss ratio performance of business, as well as the risks and uncertainties discussed under “Risk Factors” in the Company's 2020 Form 10-K, and discussed from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company expressly disclaims any intent, obligation or undertaking to update or revise any forward-looking statements made herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based.