Trean Insurance Group, Inc. (Nasdaq: TIG) (“Trean” or the
“Company”), a leading provider of products and services to the
specialty insurance market, today reported results for the second
quarter ended June 30, 2021.
“We have firmly established ourselves as a
‘growth company’,” stated Andrew M. O’Brien, Chief Executive
Officer of Trean. “We have developed a unique business model within
the multi-billion dollar specialty insurance market, bolstered by a
strong management team, which has provided us with a clear runway
to expand organically, as well as a strong pipeline of attractive
new opportunities to add to our first-class roster of programs.
Importantly, we are rapidly growing while still responsibly
managing our risk profile. By remaining disciplined with respect to
our underwriting, our premiums will ultimately flow to our bottom
line, creating long-term sustainable and profitable bottom line
expansion. We are positioned strongly to continue outperforming,
and believe we are well on pace to achieve our long-term goal of $1
billion in gross written premiums within the next five years.”
“For the second quarter and first half of 2021,
we performed superbly from a growth standpoint, including a high
double-digit year-over-year increase in gross written premium, as
we continue to strengthen the foundation to create additional
long-term value for our shareholders,” added Mr. O’Brien. “We also
delivered another quarter of significant net earned and unearned
premium growth – accumulating future potential earnings that should
contribute to and drive substantial increases in our longer-term
net income. In addition, we further expanded our non-workers’
compensation business and diversified our overall business to
reduce our concentration risk, while maintaining disciplined
underwriting standards.”
Second Quarter 2021
Highlights
- Gross
written premiums increased 42.8% to $156.6 million, compared to
$109.6 million in the second quarter of 2020
- Net
earned premiums more than doubled to $47.9 million, compared to
$21.4 million in the second quarter of 2020
- Loss
ratio of 62.0%, compared to 57.0% in the second quarter of
2020
- Expense
ratio of 31.8%, a 700 basis point improvement compared to 38.8% in
the second quarter of 2020
-
Combined ratio of 93.8%, a 200 basis point improvement versus 95.8%
in the prior-year period
- Net
income was $2.1 million and diluted earnings per share was
$0.04
- Adjusted
net income(1) was $4.3 million, and adjusted diluted earnings per
share was $0.08
-
Underwriting income(1) was $3.0 million, compared to $0.9 million
in the second quarter of 2020
- Return
on equity of 2.0%; Adjusted return on equity(1) of 4.2%; Adjusted
return on tangible equity was 8.6%(1)(1) Adjusted
net income, adjusted diluted earnings per share, adjusted return on
equity, adjusted return on tangible equity and underwriting income
are non-GAAP financial measures. See discussion of “Key Metrics”
below.
Underwriting Results
Gross written premiums increased 42.8% to $156.6
million for the second quarter of 2021, compared to $109.6 million
for the second quarter of 2020, primarily attributable to growth in
Trean’s existing program partner business, the addition of new
program partners, and the acquisition of 7710 Insurance Company in
the fourth quarter of 2020.
Increase in gross unearned premiums was $17.9
million in the second quarter of 2021, compared to $9.3 million in
the prior-year period. As of June 30, 2021, the Company had net
unearned premiums reflected on its balance sheet of $73.4 million,
an increase of $7.2 million compared to March 31, 2021 and an
increase of $23.4 million compared to year-end 2020. This continued
growth in net unearned premium represents significant deferred
premium revenue and, assuming stable loss ratios, future net income
to be recognized over subsequent quarters as these net premiums are
earned.
Net earned premiums of $47.9 million grew 124.3%
compared to the prior year’s second quarter, driven by the increase
in gross written and gross earned premiums, partially offset by an
increase in ceded earned premiums compared to the prior-year
period.
Underwriting income was $3.0 million, resulting
in a combined ratio of 93.8% for the second quarter of 2021,
compared to underwriting income of $0.9 million and a combined
ratio of 95.8% for the prior-year period. Losses and loss
adjustment expenses for the second quarter of 2021 were $29.7
million, which resulted in a 62.0% loss ratio, compared to 57.0% in
the prior-year period. The increase in the loss ratio during the
second quarter of 2021 versus the prior-year period was primarily
attributable to a number of unusually large losses experienced in
the first half of 2021.
General and administrative expenses were $15.3
million for the second quarter of 2021, compared to $8.3 million
for the prior-year period. The increase was due to a rise in net
commissions driven by an increase in the Company’s retention rate
from 21.3% to 34.6% year-over-year, increased salaries and benefits
resulting primarily from acquisitions made in 2020 and an expanded
workforce, as well as an increase in business insurance and
insurance-related expenses, rent and office-related expenses. The
Company’s expense ratio was 31.8% for the second quarter of 2021, a
700 basis point improvement compared to 38.8% for the prior-year
period. The improvement in the expense ratio was primarily due to
the year-over-year increase in net earned premiums more than
offsetting the impact of the increase in general and administrative
expenses.
Net income was $2.1 million for the second
quarter of 2021, compared to net income of $1.4 million for the
prior-year period. Diluted earnings per share for the second
quarter of 2021 was $0.04. The second quarter of 2021 included
intangible asset amortization related to acquisitions, noncash
stock compensation and unrealized losses on embedded derivatives,
while the second quarter of 2020 included certain non-recurring
expenses related to the Company’s initial public offering. Adjusted
net income(1), which excludes these items and their related tax
impact, was $4.3 million for the second quarter of 2021, compared
to adjusted net income of $4.8 million for the prior-year period.
Adjusted diluted earnings per share for the second quarter of 2021
was $0.08.
Investment Results
Net investment income was $2.1 million for the
second quarter of 2021, compared to $2.5 million in the prior-year
period. Cash and invested assets consist of fixed maturities,
equity securities and cash equivalents. The majority of the
Company’s investment portfolio at June 30, 2021 was comprised of
$424.9 million of fixed maturity securities. Also included in
investments at June 30, 2021 were $3.0 million of equity securities
and $101.4 million of cash and cash equivalents. The Company’s
fixed maturities portfolio had an average rating of “AA” at both
June 30, 2021 and December 31, 2020.
Other
Other revenue was $1.2 million for the second
quarter of 2021, compared to $1.5 million for the prior-year
period, largely driven by a reduction in management fees due to the
expiration of a management contract at the end of the first quarter
2021.
During the second quarter of 2021, the Company
determined that its funds held agreements with reinsurers contain
embedded derivatives relating to a total return swap on the
underlying investments. As a result, the Company will now report
gains and losses on the embedded derivatives, along with related
investment earnings, in operations. While the correction was not
material to the previously reported condensed consolidated and
condensed combined financial statements, the prior period amounts
have been restated for comparability.
Stockholders’ Equity and
Returns
Total stockholders’ equity was $417.3 million at
June 30, 2021, compared to $410.1 million at December 31, 2020.
Return on equity was 2.0% for the second quarter of 2021, compared
to 3.8% for the prior-year period, and adjusted return on equity(1)
was 4.2% for the second quarter of 2021, compared to 13.2% for the
prior-year period. The change in return on equity reflected a
significant increase in the Company’s stockholders’ equity,
primarily resulting from the increases in additional paid-in
capital related to the IPO and retained earnings since June 2020.
Return on tangible equity was 4.2% for the second quarter of 2021,
compared to 3.8% for the prior-year period and adjusted return on
tangible equity was 8.6% for the second quarter of 2021, compared
to 13.6% for the prior-year period.
Full Year 2021 Gross Written Premium
Outlook
The Company is initiating its outlook for gross
written premiums for the full year 2021 to be between $605 million
and $615 million. This implies year-over-year growth of 25% on the
lower end and 27% on the upper end.
Webcast and Conference Call
A webcast and conference call to discuss the
Company’s results will be held today beginning at 5:00 p.m.
(Eastern Time). The audio webcast is accessible through the
investor relations section of the Company’s website at
https://investors.trean.com.
The dial-in number for the conference call is
(877) 300-8521 (toll-free) or (412) 317-6026 (international),
conference ID# 10159264. Any person interested in listening to the
call should dial in or access the website at least 10 minutes
before the call.
A replay of the call will be available at
https://investors.trean.com for one year following the call.
Key Metrics
The Company discusses certain key financial and
operating metrics, described below, which provide useful
information about its business and the operational factors
underlying its financial performance.
Underwriting income is a non-GAAP financial
measure defined as income before taxes excluding net investment
income, investment revaluation gains, net realized capital gains or
losses, IPO-related expenses, intangible asset amortization,
noncash stock compensation, 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 various
certain items, including the consummation of the reorganization
transactions in connection with our IPO, noncash intangible asset
amortization and stock compensation, unrealized losses on embedded
derivatives, other expenses and gains or losses that the Company
does not believe reflect its core operating performance, which
items may have a disproportionate effect in a given period,
affecting comparability of the Company’s results across periods.
See “Reconciliation of Non-GAAP Financial Measures” for a
reconciliation of adjusted net income to net income in accordance
with GAAP.
Loss ratio, expressed as a percentage, is the
ratio of losses and loss adjustment expenses to net earned
premiums.
Expense ratio, expressed as a percentage, is the
ratio of general and administrative expenses to net earned
premiums.
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.
Return on equity is net income expressed on an
annualized basis as a percentage of average beginning and ending
stockholders’ equity during the period.
Adjusted return on equity is a non-GAAP
financial measured 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.
Tangible stockholders’ equity is defined as
stockholders’ equity less goodwill and other intangible assets.
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.
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
equity in accordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking
statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include
statements that are not historical or current facts. These
statements may discuss the Company’s net income, cash flow,
financial condition, impairments, expenditures, growth, strategies,
plans, achievements, capital structure, organizational structure,
market opportunities and general market and industry conditions.
Such forward-looking statements can be identified by words such as
“anticipate,” “estimate,” “expect,” “intend,” “plan,” “predict,”
“project,” “believe,” “seek,” “outlook,” “future,” “will,” “would,”
“should,” “could,” “may,” “can have,” “likely” and similar terms.
Forward-looking statements are based on management’s current
expectations and assumptions about future events. These statements
are only predictions and are not guarantees of future performance.
Forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from those in the
forward-looking statements if the underlying assumptions prove to
be incorrect or as a result of risks, uncertainties, and other
factors, including the impact of the COVID-19 pandemic on the
business and operations of the Company, our program partners and
other business relations. Other factors that may cause such
differences include the risks described in the Company’s filings
with the U.S. Securities and Exchange Commission, including the
Company’s Annual Report on Form 10-K for the year ended December
31, 2020. These forward-looking statements speak only as of the
date on which they are made. Except as required by applicable
securities laws, the Company disclaims any obligation to update or
revise any forward-looking statement, whether as a result of new
information, future developments, changes in assumptions or
otherwise. Investors are cautioned not to place undue reliance on
the forward-looking statements contained in this press release or
in other filings and public statements of the Company.
About Trean Insurance Group,
Inc.
Trean Insurance Group, Inc. (Nasdaq: TIG)
provides products and services to the specialty insurance market.
Trean underwrites specialty casualty insurance products both
through its program partners and its own managing general agencies.
Trean also provides its program partners with a variety of services
including issuing carrier services, claims administration and
reinsurance brokerage. Trean is licensed to write business across
49 states and the District of Columbia. For more information,
please visit www.trean.com.
Contacts
Investor Relationsinvestor.relations@trean.com(952) 974-2260
Trean Insurance Group, Inc. and
Subsidiaries
Condensed Consolidated and Combined
Statements of Operations
(in thousands, except for percentages, share and
per share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
Percentage |
|
Six Months Ended June 30, |
|
|
|
Percentage |
|
|
2021 |
|
|
|
2020 |
|
|
Change |
|
Change (1) |
|
|
2021 |
|
|
|
2020 |
|
|
Change |
|
Change (1) |
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premiums |
$ |
156,551 |
|
|
$ |
109,612 |
|
|
46,939 |
|
|
42.8 |
% |
|
$ |
303,281 |
|
|
$ |
217,471 |
|
|
85,810 |
|
|
39.5 |
% |
Increase in
gross unearned premiums |
|
(17,927 |
) |
|
|
(9,265 |
) |
|
(8,662 |
) |
|
93.5 |
% |
|
|
(36,358 |
) |
|
|
(16,638 |
) |
|
(19,720 |
) |
|
118.5 |
% |
Gross earned premiums |
|
138,624 |
|
|
|
100,347 |
|
|
38,277 |
|
|
38.1 |
% |
|
|
266,923 |
|
|
|
200,833 |
|
|
66,090 |
|
|
32.9 |
% |
Ceded earned
premiums |
|
(90,681 |
) |
|
|
(78,968 |
) |
|
(11,713 |
) |
|
14.8 |
% |
|
|
(177,846 |
) |
|
|
(156,995 |
) |
|
(20,851 |
) |
|
13.3 |
% |
Net earned premiums |
|
47,943 |
|
|
|
21,379 |
|
|
26,564 |
|
|
124.3 |
% |
|
|
89,077 |
|
|
|
43,838 |
|
|
45,239 |
|
|
103.2 |
% |
Net
investment income |
|
2,103 |
|
|
|
2,525 |
|
|
(422 |
) |
|
(16.7 |
)% |
|
|
4,375 |
|
|
|
6,770 |
|
|
(2,395 |
) |
|
(35.4 |
)% |
Net realized
capital gains |
|
10 |
|
|
|
(4 |
) |
|
14 |
|
|
NM |
|
|
23 |
|
|
|
3,230 |
|
|
(3,207 |
) |
|
(99.3 |
)% |
Other
revenue |
|
1,229 |
|
|
|
1,530 |
|
|
(301 |
) |
|
(19.7 |
)% |
|
|
5,884 |
|
|
|
5,922 |
|
|
(38 |
) |
|
(0.6 |
)% |
Total revenue |
|
51,285 |
|
|
|
25,430 |
|
|
25,855 |
|
|
101.7 |
% |
|
|
99,359 |
|
|
|
59,760 |
|
|
39,599 |
|
|
66.3 |
% |
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Losses and
loss adjustment expenses |
|
29,725 |
|
|
|
12,183 |
|
|
17,542 |
|
|
144.0 |
% |
|
|
54,606 |
|
|
|
25,117 |
|
|
29,489 |
|
|
117.4 |
% |
General and
administrative expenses |
|
15,267 |
|
|
|
8,293 |
|
|
6,974 |
|
|
84.1 |
% |
|
|
27,158 |
|
|
|
16,442 |
|
|
10,716 |
|
|
65.2 |
% |
Other
expenses |
|
845 |
|
|
|
- |
|
|
845 |
|
|
NM |
|
|
|
845 |
|
|
|
- |
|
|
845 |
|
|
NM |
|
Intangible
asset amortization |
|
1,413 |
|
|
|
23 |
|
|
1,390 |
|
|
NM |
|
|
|
2,827 |
|
|
|
34 |
|
|
2,793 |
|
|
NM |
|
Noncash
stock compensation |
|
419 |
|
|
|
- |
|
|
419 |
|
|
NM |
|
|
|
630 |
|
|
|
- |
|
|
630 |
|
|
NM |
|
Interest
expense |
|
425 |
|
|
|
501 |
|
|
(76 |
) |
|
(15.2 |
)% |
|
|
852 |
|
|
|
962 |
|
|
(110 |
) |
|
(11.4 |
)% |
Total expenses |
|
48,094 |
|
|
|
21,000 |
|
|
27,094 |
|
|
129.0 |
% |
|
|
86,918 |
|
|
|
42,555 |
|
|
44,363 |
|
|
104.2 |
% |
Losses on
embedded derivatives |
|
(686 |
) |
|
|
(3,991 |
) |
|
3,305 |
|
|
(82.8 |
)% |
|
|
1,990 |
|
|
|
(5,180 |
) |
|
7,170 |
|
|
(138.4 |
)% |
Other
income |
|
35 |
|
|
|
40 |
|
|
(5 |
) |
|
(12.5 |
)% |
|
|
156 |
|
|
|
54 |
|
|
102 |
|
|
188.9 |
% |
Income before taxes |
|
2,540 |
|
|
|
479 |
|
|
2,061 |
|
|
NM |
|
|
14,587 |
|
|
|
12,079 |
|
|
2,508 |
|
|
20.8 |
% |
Income tax
expense |
|
414 |
|
|
|
351 |
|
|
63 |
|
|
17.9 |
% |
|
|
3,019 |
|
|
|
3,218 |
|
|
(199 |
) |
|
(6.2 |
)% |
Equity
earnings in affiliates, net of tax |
|
- |
|
|
|
1,230 |
|
|
(1,230 |
) |
|
(100.0 |
)% |
|
|
- |
|
|
|
1,932 |
|
|
(1,932 |
) |
|
(100.0 |
)% |
Net
income |
$ |
2,126 |
|
|
$ |
1,358 |
|
|
768 |
|
|
56.6 |
% |
|
$ |
11,568 |
|
|
$ |
10,793 |
|
|
775 |
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.04 |
|
|
$ |
0.04 |
|
|
|
|
|
|
$ |
0.23 |
|
|
$ |
0.29 |
|
|
|
|
|
Diluted |
$ |
0.04 |
|
|
$ |
0.04 |
|
|
|
|
|
|
$ |
0.23 |
|
|
$ |
0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
51,152,979 |
|
|
|
37,386,394 |
|
|
|
|
|
|
|
51,150,881 |
|
|
|
37,386,394 |
|
|
|
|
|
Diluted |
|
51,166,587 |
|
|
|
37,386,394 |
|
|
|
|
|
|
|
51,173,204 |
|
|
|
37,386,394 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company
defines increases or decreases greater than 200% as “NM” or not
meaningful. |
Key Metrics
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Key
metrics: |
|
|
|
|
|
|
|
Underwriting
income (1) |
$ |
2,951 |
|
|
$ |
903 |
|
|
$ |
7,313 |
|
|
$ |
2,279 |
|
Adjusted net
income (1) |
$ |
4,316 |
|
|
$ |
4,789 |
|
|
$ |
12,425 |
|
|
$ |
11,122 |
|
Loss
ratio |
|
62.0% |
|
|
|
57.0% |
|
|
|
61.3% |
|
|
|
57.3% |
|
Expense
ratio |
|
31.8% |
|
|
|
38.8% |
|
|
|
30.5% |
|
|
|
37.5% |
|
Combined
ratio |
|
93.8% |
|
|
|
95.8% |
|
|
|
91.8% |
|
|
|
94.8% |
|
Return on
equity |
|
2.0% |
|
|
|
3.8% |
|
|
|
5.6% |
|
|
|
15.4% |
|
Adjusted
return on equity (1) |
|
4.2% |
|
|
|
13.2% |
|
|
|
6.0% |
|
|
|
15.8% |
|
Return on
tangible equity (1) |
|
4.2% |
|
|
|
3.8% |
|
|
|
11.6% |
|
|
|
15.8% |
|
Adjusted
return on tangible equity (1) |
|
8.6% |
|
|
|
13.6% |
|
|
|
12.5% |
|
|
|
16.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Adjusted net
income, adjusted return on equity, return on tangible equity,
adjusted return on tangible equity and underwriting income
are non-GAAP financial measures. See “Reconciliation of
Non-GAAP Financial Measures” below for a reconciliation to the
applicable GAAP measure. |
|
Trean Insurance Group, Inc. and
Subsidiaries
Condensed Consolidated Balance
Sheets
(in thousands)
|
|
|
|
|
|
June 30, 2021 |
|
December 31, 2020 |
|
Assets |
(unaudited) |
|
|
|
Fixed maturities, available for sale |
$ |
424,943 |
|
$ |
405,604 |
|
Preferred
stock, at fair value |
|
235 |
|
|
240 |
|
Common
stock, at fair value |
|
2,741 |
|
|
3,534 |
|
Equity
method investments |
|
- |
|
|
232 |
|
Total investments |
|
427,919 |
|
|
409,610 |
|
|
|
|
|
|
Cash and
cash equivalents |
|
101,361 |
|
|
153,149 |
|
Restricted
cash |
|
12,469 |
|
|
4,085 |
|
Accrued
investment income |
|
2,329 |
|
|
2,458 |
|
Premiums and
other receivables |
|
131,930 |
|
|
109,217 |
|
Income taxes
receivable |
|
5,113 |
|
|
1,322 |
|
Reinsurance
recoverable |
|
361,943 |
|
|
343,213 |
|
Prepaid
reinsurance premiums |
|
121,004 |
|
|
107,971 |
|
Deferred
policy acquisition cost, net |
|
6,424 |
|
|
1,332 |
|
Property and
equipment, net |
|
7,780 |
|
|
8,254 |
|
Right of use
asset |
|
5,378 |
|
|
6,338 |
|
Goodwill |
|
140,640 |
|
|
140,640 |
|
Intangible
assets, net |
|
72,489 |
|
|
75,316 |
|
Other
assets |
|
8,410 |
|
|
6,878 |
|
Total assets |
$ |
1,405,189 |
|
$ |
1,369,783 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Unpaid loss
and loss adjustment expenses |
$ |
502,560 |
|
$ |
457,817 |
|
Unearned
premiums |
|
194,388 |
|
|
157,987 |
|
Funds held
under reinsurance agreements |
|
161,013 |
|
|
174,704 |
|
Reinsurance
premiums payable |
|
51,681 |
|
|
57,069 |
|
Accounts
payable and accrued expenses |
|
31,017 |
|
|
61,240 |
|
Lease
liability |
|
5,855 |
|
|
6,893 |
|
Deferred tax
liability |
|
10,229 |
|
|
12,329 |
|
Debt |
|
31,103 |
|
|
31,637 |
|
Total liabilities |
|
987,846 |
|
|
959,676 |
|
Commitments
and contingencies |
|
|
|
|
Stockholders' Equity |
|
|
|
|
Common
stock |
|
511 |
|
|
511 |
|
Additional
paid-in capital |
|
287,734 |
|
|
287,110 |
|
Retained
earnings |
|
120,628 |
|
|
109,060 |
|
Accumulated
other comprehensive income |
|
8,470 |
|
|
13,426 |
|
Total stockholders' equity |
|
417,343 |
|
|
410,107 |
|
Total liabilities and stockholders' equity |
$ |
1,405,189 |
|
$ |
1,369,783 |
|
|
|
|
|
|
Supplemental Table of Net G&A
Components
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
G&A Expenses |
|
|
|
|
|
|
|
|
Direct
Commissions |
|
$ |
27,602 |
|
|
$ |
21,463 |
|
|
$ |
50,710 |
|
|
$ |
43,938 |
|
Ceding
Commission Income |
|
|
(29,684 |
) |
|
|
(26,052 |
) |
|
|
(57,892 |
) |
|
|
(52,761 |
) |
Net Commissions |
|
|
(2,082 |
) |
|
|
(4,589 |
) |
|
|
(7,182 |
) |
|
|
(8,823 |
) |
Insurance-Related Expense* |
|
|
5,149 |
|
|
|
3,624 |
|
|
|
9,425 |
|
|
|
7,561 |
|
G&A
Operating Expenses |
|
|
12,200 |
|
|
|
9,258 |
|
|
|
24,915 |
|
|
|
17,704 |
|
Total G&A Expense |
|
$ |
15,267 |
|
|
$ |
8,293 |
|
|
$ |
27,158 |
|
|
$ |
16,442 |
|
|
|
|
|
|
|
|
|
|
G&A Operating Expense - % of GWP |
|
|
7.8 |
% |
|
|
8.4 |
% |
|
|
8.2 |
% |
|
|
8.1 |
% |
|
|
|
|
|
|
|
|
|
Retention Percentage |
|
|
34.6 |
% |
|
|
21.3 |
% |
|
|
33.4 |
% |
|
|
21.8 |
% |
Direct Commission rate |
|
|
19.9 |
% |
|
|
20.7 |
% |
|
|
19.0 |
% |
|
|
21.4 |
% |
Ceding Commission rate |
|
|
32.7 |
% |
|
|
31.8 |
% |
|
|
32.6 |
% |
|
|
33.1 |
% |
|
|
|
|
|
|
|
|
|
* Primarily premium taxes and other state assessments
and fees. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial
Measures
Underwriting income
The Company defines underwriting income as
income before taxes excluding net investment income, investment
revaluation gains, net realized capital gains or losses,
IPO-related expenses, intangible asset amortization, noncash stock
compensation, losses on embedded derivatives, interest expense,
other revenue and other income and expenses. Underwriting income
represents the pre-tax profitability of the Company’s underwriting
operations and allows management to evaluate the Company’s
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. The Company uses this metric because the Company believes
it gives management and other users of the Company’s financial
information useful insight into the Company’s 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 June 30, |
|
Percentage |
|
Six Months Ended June 30, |
|
Percentage |
(in
thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
Change (1) |
|
|
2021 |
|
|
|
2020 |
|
|
Change (1) |
Net income |
$ |
2,126 |
|
|
$ |
1,358 |
|
|
56.6 |
% |
|
$ |
11,568 |
|
|
$ |
10,793 |
|
|
7.2 |
% |
Income tax
expense |
|
414 |
|
|
|
351 |
|
|
17.9 |
% |
|
|
3,019 |
|
|
|
3,218 |
|
|
(6.2 |
)% |
Equity
earnings in affiliates, net of tax |
|
- |
|
|
|
(1,230 |
) |
|
(100.0 |
)% |
|
|
- |
|
|
|
(1,932 |
) |
|
(100.0 |
)% |
Income
before taxes |
|
2,540 |
|
|
|
479 |
|
|
NM |
|
|
|
14,587 |
|
|
|
12,079 |
|
|
20.8 |
% |
Other
revenue |
|
(1,229 |
) |
|
|
(1,530 |
) |
|
(19.7 |
)% |
|
|
(5,884 |
) |
|
|
(5,922 |
) |
|
(0.6 |
)% |
Losses on
embedded derivatives |
|
686 |
|
|
|
3,991 |
|
|
(82.8 |
)% |
|
|
(1,990 |
) |
|
|
5,180 |
|
|
(138.4 |
)% |
Net
investment income |
|
(2,103 |
) |
|
|
(2,525 |
) |
|
(16.7 |
)% |
|
|
(4,375 |
) |
|
|
(6,770 |
) |
|
(35.4 |
)% |
Net realized
capital gains (losses) |
|
(10 |
) |
|
|
4 |
|
|
NM |
|
|
|
(23 |
) |
|
|
(3,230 |
) |
|
(99.3 |
)% |
Other
expenses |
|
845 |
|
|
|
- |
|
|
NM |
|
|
|
845 |
|
|
|
- |
|
|
NM |
|
Interest
expense |
|
425 |
|
|
|
501 |
|
|
(15.2 |
)% |
|
|
852 |
|
|
|
962 |
|
|
(11.4 |
)% |
Intangible
asset amortization |
|
1,413 |
|
|
|
23 |
|
|
NM |
|
|
|
2,827 |
|
|
|
34 |
|
|
NM |
|
Noncash
stock compensation |
|
419 |
|
|
|
- |
|
|
NM |
|
|
|
630 |
|
|
|
- |
|
|
NM |
|
Other
income |
|
(35 |
) |
|
|
(40 |
) |
|
(12.5 |
)% |
|
|
(156 |
) |
|
|
(54 |
) |
|
188.9 |
% |
Underwriting income |
$ |
2,951 |
|
|
$ |
903 |
|
|
NM |
|
|
$ |
7,313 |
|
|
$ |
2,279 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company
defines increases or decreases greater than 200% as “NM” or not
meaningful. |
Adjusted net income
The Company defines adjusted net income as net
income excluding the impact of certain items, including the
consummation of the reorganization transactions in connection with
the IPO, noncash intangible asset amortization and stock
compensation, unrealized losses on embedded derivatives, other
expenses and gains or losses that the Company believes do not
reflect its core operating performance, which items may have a
disproportionate effect in a given period, affecting comparability
the Company’s results across periods. The Company calculates the
tax impact only on adjustments that would be included in
calculating the Company’s income tax expense using the effective
tax rate at the end of each period. The Company uses adjusted net
income as an internal performance measure in the management of its
operations because the Company believes it gives its management and
other users of its financial information useful insight into the
Company’s results of operations and 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 June 30, |
|
Percentage |
(in
thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
Change (1) |
Net
income |
$ |
2,126 |
|
|
$ |
1,358 |
|
|
56.6 |
% |
Intangible
asset amortization |
|
1,413 |
|
|
|
23 |
|
|
NM |
|
Noncash
stock compensation |
|
419 |
|
|
|
- |
|
|
NM |
|
Unrealized
losses on embedded derivatives |
|
167 |
|
|
|
2,990 |
|
|
(94.4 |
)% |
Other
expenses |
|
845 |
|
|
|
- |
|
|
NM |
|
Expenses
associated with Altaris management fee, including cash bonuses paid
to unitholders |
|
- |
|
|
|
442 |
|
|
(100.0 |
)% |
Expenses
associated with IPO and other one-time legal and consulting
expenses |
|
- |
|
|
|
788 |
|
|
(100.0 |
)% |
Expenses
related to debt issuance costs |
|
- |
|
|
|
135 |
|
|
(100.0 |
)% |
Total
adjustments |
|
2,844 |
|
|
|
4,378 |
|
|
(35.0 |
)% |
Tax impact
of adjustments |
|
(654 |
) |
|
|
(947 |
) |
|
(30.9 |
)% |
Adjusted net income |
$ |
4,316 |
|
|
$ |
4,789 |
|
|
(9.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company
defines increases or decreases greater than 200% as “NM” or not
meaningful. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
Percentage |
(in
thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
Change (1) |
Net
income |
$ |
11,568 |
|
|
$ |
10,793 |
|
|
7.2 |
% |
Intangible
asset amortization |
|
2,827 |
|
|
|
34 |
|
|
NM |
|
Noncash
stock compensation |
|
630 |
|
|
|
- |
|
|
NM |
|
Unrealized
losses on embedded derivatives |
|
(3,189 |
) |
|
|
3,206 |
|
|
(199.5 |
)% |
Other
expenses |
|
845 |
|
|
|
- |
|
|
NM |
|
Expenses
associated with Altaris management fee, including cash bonuses paid
to unitholders |
|
- |
|
|
|
883 |
|
|
(100.0 |
)% |
Expenses
associated with IPO and other one-time legal and consulting
expenses |
|
- |
|
|
|
1,200 |
|
|
(100.0 |
)% |
Expenses
related to debt issuance costs |
|
- |
|
|
|
135 |
|
|
(100.0 |
)% |
FMV
adjustment of remaining investment in subsidiary |
|
- |
|
|
|
(2,000 |
) |
|
(100.0 |
)% |
Net gain on
purchase & disposal of subsidiaries |
|
- |
|
|
|
(3,115 |
) |
|
(100.0 |
)% |
Total
adjustments |
|
1,113 |
|
|
|
343 |
|
|
NM |
|
Tax impact
of adjustments |
|
(256 |
) |
|
|
(14 |
) |
|
NM |
|
Adjusted net income |
$ |
12,425 |
|
|
$ |
11,122 |
|
|
11.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company
defines increases or decreases greater than 200% as “NM” or not
meaningful. |
Adjusted return on equity
The Company defines 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. The Company uses adjusted return on equity as an
internal performance measure in the management of its operations
because the Company believes it gives management and other users of
the Company’s financial information useful insight into the
Company’s results of operations and underlying business performance
by adjusting for items that the Company believes do not reflect its
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 June 30, |
|
Six Months Ended June 30, |
(in thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Adjusted return on equity calculation: |
|
|
|
|
|
|
|
Numerator:
adjusted net income |
$ |
4,316 |
|
|
$ |
4,789 |
|
|
$ |
12,425 |
|
|
$ |
11,122 |
|
Denominator:
average stockholders' equity |
|
415,159 |
|
|
|
144,733 |
|
|
|
413,725 |
|
|
|
140,450 |
|
Adjusted return on equity |
|
4.2 |
% |
|
|
13.2 |
% |
|
|
6.0 |
% |
|
|
15.8 |
% |
Return on
equity |
|
2.0 |
% |
|
|
3.8 |
% |
|
|
5.6 |
% |
|
|
15.4 |
% |
|
|
|
|
|
|
|
|
Return on tangible equity and adjusted return on
tangible equity
The Company defines tangible stockholders’
equity as stockholders’ equity less goodwill and other intangible
assets. The Company defines 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. The Company defines 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. The Company regularly evaluates
acquisition opportunities and have historically made acquisitions
that affect stockholders’ equity. The Company uses return on
tangible equity and adjusted return on tangible equity as internal
performance measures in the management of the Company’s operations
because the Company believes they give management and other users
of its financial information useful insight into the Company’s
results of operations and underlying business performance by
adjusting for the effects of acquisitions on the Company’s
stockholders’ equity and, in the case of adjusted return on
tangible equity, by adjusting for items that the Company believes
do not reflect its 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
substitutes for return on equity calculated in accordance with
GAAP, and other companies may define return on tangible equity and
adjusted return on tangible equity differently.
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Return on tangible equity calculation: |
|
|
|
|
|
|
|
Numerator:
net income |
$ |
2,126 |
|
|
$ |
1,358 |
|
|
$ |
11,568 |
|
|
$ |
10,793 |
|
Denominator: |
|
|
|
|
|
|
|
Average stockholders' equity |
|
415,159 |
|
|
|
144,733 |
|
|
|
413,725 |
|
|
|
140,450 |
|
Less: Average goodwill and other intangible
assets |
|
213,836 |
|
|
|
3,453 |
|
|
|
214,543 |
|
|
|
3,459 |
|
Average
tangible stockholders' equity |
|
201,323 |
|
|
|
141,280 |
|
|
|
199,182 |
|
|
|
136,991 |
|
Return on tangible equity |
|
4.2 |
% |
|
|
3.8 |
% |
|
|
11.6 |
% |
|
|
15.8 |
% |
Return on
equity |
|
2.0 |
% |
|
|
3.8 |
% |
|
|
5.6 |
% |
|
|
15.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in
thousands, except percentages) |
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Adjusted return on tangible equity
calculation: |
|
|
|
|
|
|
|
Numerator:
adjusted net income |
$ |
4,316 |
|
|
$ |
4,789 |
|
|
$ |
12,425 |
|
|
$ |
11,122 |
|
Denominator:
average tangible stockholders' equity |
|
201,323 |
|
|
|
141,280 |
|
|
|
199,182 |
|
|
|
136,991 |
|
Adjusted return on tangible equity |
|
8.6 |
% |
|
|
13.6 |
% |
|
|
12.5 |
% |
|
|
16.2 |
% |
Return on
equity |
|
2.0 |
% |
|
|
3.8 |
% |
|
|
5.6 |
% |
|
|
15.4 |
% |
|
|
|
|
|
|
|
|
Trean Insurance (NASDAQ:TIG)
Historical Stock Chart
From Aug 2024 to Sep 2024
Trean Insurance (NASDAQ:TIG)
Historical Stock Chart
From Sep 2023 to Sep 2024