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 first
quarter ended March 31, 2022.
First Quarter 2022
Highlights
- Gross
written premiums were $161.4 million, a $14.7 million, or 10.0%,
increase compared to the same prior-year period.
- Net
earned premiums were $64.2 million, a $23.0 million, or 56.0%,
increase compared to the same prior-year period.
- Net
income was $12.3 million, or $0.24 per diluted share, compared to
$9.4 million, or $0.18 per diluted share in the same prior-year
period.
- Adjusted
net income(1) was $8.3 million, or $0.16 per diluted share,
compared to $8.1 million, or $0.16 per diluted share in the same
prior-year period.
-
Underwriting income was $6.7 million, a $2.3 million, or 53.2%,
increase compared to the same prior-year period
- Loss and
expense ratios were 61.1% and 28.5%, respectively, compared to
60.5% and 28.9%, respectively, in the same prior-year period.
- Combined
ratio was 89.6%, compared to 89.4% for the same prior-year
period.
- Return
on equity of 11.8%; adjusted return on equity(1) of 7.9%; return on
tangible equity of 24.1%; and adjusted return on tangible equity(1)
of 16.2%.(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.
“We are very pleased with our first quarter
performance,” said Andrew O’Brien, Chief Executive Officer of
Trean. “Our first quarter loss ratio exceeded our expectations,
leading to a solid double-digit adjusted return on tangible equity
for the quarter. We are continuing to focus on our strategic plan,
emphasizing strong partner relationships, efficient claims
processes and expense management.”
Underwriting Results
Gross written premiums increased 10.0% to $161.4
million for the first quarter of 2022, compared to $146.7 million
for the first quarter of 2021. The increase was attributable to
growth in our existing Program Partner business, primarily in the
accident & health, commercial auto and commercial lines as a
result of continuing our line of business diversification.
Gross unearned premiums increased $2.9 million
in the first quarter of 2022, compared to $18.4 million in the same
prior-year period. As of March 31, 2022, the Company had net
unearned premiums reflected on its balance sheet of $101.8 million,
an increase of $11.3 million, or 12.5%, compared to December 31,
2021 and up $35.7 million, or 53.9%, from March 31, 2021. This
continued growth in net unearned premium represents a material
source of deferred potential profit.
Net earned premiums increased 56.0% to $64.2
million for the first quarter of 2022, compared to $41.1 million
for the first quarter of 2021, driven by an increase in gross
earned premiums and the strategic decision to retain more gross
written premiums.
General and administrative expenses were $18.3
million for the first quarter of 2022, compared to $11.9 million
for the same prior-year period. The Company’s expense ratio was
28.5% for the first quarter of 2022, a 40 basis-point improvement
compared to 28.9% for the same prior-year period.
Net income was $12.3 million for the first
quarter of 2022, compared to net income of $9.4 million for the
same prior-year period. Diluted earnings per share for the first
quarter of 2022 was $0.24. Adjusted net income(1), which excludes
intangible asset amortization, noncash stock compensation and the
change in fair value of embedded derivatives and their related tax
impact, was $8.3 million for the first quarter of 2022, compared to
adjusted net income of $8.1 million for the same prior-year period.
Adjusted diluted earnings per share for the first quarter of 2022
was $0.16.
Underwriting income of $6.7 million resulted in
a combined ratio of 89.6% for the first quarter of 2022, compared
to underwriting income of $4.4 million and a combined ratio of
89.4% for the same prior-year period. Losses and loss adjustment
expenses for the first quarter of 2022 were $39.2 million, which
resulted in a 61.1% loss ratio, compared to 60.5% in the same
prior-year period. Prior period favorable loss development for the
first quarter 2022 totaled $0.4 million.
Investment Results
Net investment income was $2.6 million for the
first quarter of 2022, compared to $2.3 million in the same
prior-year period. Cash and invested assets consist primarily of
fixed maturities, equity securities and cash equivalents. The
Company’s investment portfolio totaled $481.5 million at March 31,
2022 and was primarily comprised of fixed maturity securities that
were classified as available-for-sale. The Company also had $103.9
million of cash and cash equivalents on its balance sheet as of
March 31, 2022. The Company’s fixed maturities portfolio had an
average rating of “AA” at both March 31, 2022 and December 31,
2021.
Other
Other revenue was $3.2 million for the first
quarter of 2022, compared to $4.7 million for the same prior-year
period, due primarily to a year-over-year reduction in brokerage
revenue.
Stockholders’ Equity and
Returns
Total stockholders’ equity was $416.4 million at
March 31, 2022, compared to $421.9 million at December 31, 2021.
Return on equity was 11.8% for the first quarter of 2022, compared
to 9.2% for the same prior-year period, and adjusted return on
equity(1) was 7.9% for the first quarter of 2022, comparable with
the same prior-year period. Return on tangible equity was 24.1% for
the first quarter of 2022, compared to 19.2% for the same
prior-year period and adjusted return on tangible equity was 16.2%
for the first quarter of 2022, compared to 16.5% for the same
prior-year period.
Full Year 2022 Outlook
The Company is updating its outlook for the full year 2022,
including raising its outlook for net earned premium and total
revenue, to the following:
- Gross written
premium is still expected to be between $655 million and $670
million
- Net earned premium
outlook has been raised to be between $255 million and $265
million, from the previous range of between $240 million and $250
million. The new outlook represents year-over-year growth of 28% on
the lower end and 33% on the upper end, and reflects an expected
increased retention rate throughout 2022 based on current contracts
in-force
- Total revenue has
been raised to be between $268 million and $278 million, from the
previous range of between $253 million and $263 million
- Expense ratio
between 32% and 33% of net earned premium. Expense ratio reflects
the aforementioned expected increase in retention, which would
reduce the Company’s ceding commission offset to general and
administrative expenses, as well as additional reductions in ceding
commissions resulting from adding more short-tail lines of
business, which typically have lower front fees, and expected
continued operational investments in the Company.
Second Quarter 2022 Outlook
The company is providing the following outlook
for the second quarter 2022:
- Gross written
premium between $158 million and $163 million
- Adjusted net income between $4.3 million and $5.3 million,
which implies flat to 23% growth on a year-over-year basis.
The Company reminds investors that its outlook
is forward-looking information and is based on management’s
assumptions and expectations as of the date of this release and is
inherently subject to a number of risks and uncertainties,
including as to the Company’s level of losses and loss development,
many of which are beyond the Company’s immediate control.
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) 407-3982 (toll-free) or (201) 493-6780 (international),
conference ID# 13728756. 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, 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
specific events, including the consummation of the reorganization
transactions in connection with our IPO, noncash intangible asset
amortization and stock compensation, 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, 2021. 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
SubsidiariesCondensed Consolidated and Combined
Statements of Operations(in thousands, except for
percentages, share and per share amounts)(unaudited)
|
Three Months Ended March 31, |
|
|
|
Percentage |
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
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 |
% |
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 |
% |
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.24 |
|
|
$ |
0.18 |
|
|
|
|
|
Diluted |
$ |
0.24 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
51,177,908 |
|
|
|
51,148,782 |
|
|
|
|
|
Diluted |
|
51,177,908 |
|
|
|
51,179,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) The Company defines increases or decreases greater than 200% as
“NM” or not meaningful. |
|
|
|
|
|
|
|
|
|
|
Key Metrics(in thousands, except
for percentages)(unaudited)
|
Three Months Ended March 31, |
|
|
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) 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
SubsidiariesCondensed Consolidated Balance
Sheets(in thousands)
|
March 31, 2022 |
|
December 31, 2021 |
|
Assets |
|
|
|
|
Fixed maturities, available for sale |
$ |
447,349 |
|
|
$ |
471,061 |
|
Equity securities, at fair value |
|
34,162 |
|
|
|
969 |
|
Total investments |
|
481,511 |
|
|
|
472,030 |
|
|
|
|
|
|
Cash and cash equivalents |
|
103,865 |
|
|
|
129,577 |
|
Restricted cash |
|
478 |
|
|
|
407 |
|
Accrued investment income |
|
2,610 |
|
|
|
2,344 |
|
Premiums and other receivables |
|
153,053 |
|
|
|
141,920 |
|
Income taxes receivable |
|
- |
|
|
|
460 |
|
Reinsurance recoverable |
|
380,587 |
|
|
|
377,241 |
|
Prepaid reinsurance premiums |
|
121,072 |
|
|
|
129,411 |
|
Deferred policy acquisition cost, net |
|
15,547 |
|
|
|
13,344 |
|
Property and equipment, net |
|
7,689 |
|
|
|
7,632 |
|
Right of use asset |
|
4,167 |
|
|
|
4,530 |
|
Goodwill |
|
142,347 |
|
|
|
142,347 |
|
Intangible assets, net |
|
71,615 |
|
|
|
73,114 |
|
Other assets |
|
10,173 |
|
|
|
8,658 |
|
Total assets |
$ |
1,494,714 |
|
|
$ |
1,503,015 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
Unpaid loss and loss adjustment expenses |
$ |
550,981 |
|
|
$ |
544,320 |
|
Unearned premiums |
|
222,902 |
|
|
|
219,940 |
|
Funds held under reinsurance agreements |
|
196,025 |
|
|
|
199,410 |
|
Reinsurance premiums payable |
|
46,895 |
|
|
|
45,130 |
|
Accounts payable and accrued expenses |
|
22,424 |
|
|
|
29,448 |
|
Lease liability |
|
4,554 |
|
|
|
4,976 |
|
Income Taxes Payable |
|
553 |
|
|
|
- |
|
Deferred tax liability |
|
3,991 |
|
|
|
7,520 |
|
Debt |
|
29,992 |
|
|
|
30,362 |
|
Total liabilities |
|
1,078,317 |
|
|
|
1,081,106 |
|
Commitments and contingencies |
|
|
|
|
Stockholders' Equity |
|
|
|
|
Common stock, $0.01 par value per share (600,000,000 authorized;
51,192,196 and 51,176,877 issued and outstanding as of
March 31, 2022 and December 31, 2021, respectively) |
|
512 |
|
|
|
512 |
|
Additional paid-in capital |
|
288,771 |
|
|
|
288,623 |
|
Retained earnings |
|
140,730 |
|
|
|
128,390 |
|
Accumulated other comprehensive income |
|
(13,616 |
) |
|
|
4,384 |
|
Total stockholders' equity |
|
416,397 |
|
|
|
421,909 |
|
Total liabilities and stockholders'
equity |
$ |
1,494,714 |
|
|
$ |
1,503,015 |
|
|
|
|
|
|
Supplemental Table of Other Revenue
Components
|
Three Months Ended March 31, |
(unaudited, in thousands) |
|
2022 |
|
|
|
2021 |
|
Other Revenue |
|
|
|
Brokerage |
$ |
2,593 |
|
|
$ |
3,455 |
|
Managing general agent fees |
|
84 |
|
|
|
289 |
|
Third-party administrator fees |
|
323 |
|
|
|
378 |
|
Consulting and other fee-based revenue |
|
201 |
|
|
|
533 |
|
Total Other Revenue |
|
3,201 |
|
|
|
4,655 |
|
|
|
|
|
(1) Includes a $2.2 million brokerage revenue increase related to
an increase in estimated premiums and the timing of effective dates
on brokered reinsurance contracts recognized in the third quarter
of 2020. |
|
Supplemental Table of Net Investment Income
Components
|
|
Three Months Ended March 31, |
(unaudited, in thousands) |
|
|
2022 |
|
|
|
2021 |
|
Fixed maturities |
|
$ |
1,754 |
|
|
$ |
1,560 |
|
Income on funds held investments |
|
|
668 |
|
|
|
680 |
|
Equity securities |
|
|
154 |
|
|
|
30 |
|
Interest on cash and short-term investments |
|
|
- |
|
|
|
2 |
|
Total net investment income |
|
$ |
2,576 |
|
|
$ |
2,272 |
|
|
|
|
|
|
Supplemental Table of Gains (Losses) on
Embedded Derivative Components
|
|
Three Months Ended March 31, |
(unaudited, in thousands) |
|
|
2022 |
|
|
|
2021 |
|
Change in fair value of embedded derivatives |
|
$ |
6,896 |
|
|
$ |
3,356 |
|
Effect of net investment income on funds held investments |
|
|
(668 |
) |
|
|
(680 |
) |
Effect of realized gains on funds held investments |
|
|
8 |
|
|
|
- |
|
Total gains on embedded derivatives |
|
$ |
6,236 |
|
|
$ |
2,676 |
|
|
|
|
|
|
Supplemental Table of Net G&A
Components
|
|
Three Months Ended March 31, |
(unaudited, in thousands) |
|
|
2022 |
|
|
|
2021 |
|
Direct commissions |
|
$ |
27,908 |
|
|
$ |
23,108 |
|
Ceding commissions |
|
|
(26,997 |
) |
|
|
(28,208 |
) |
Net commissions |
|
|
911 |
|
|
|
(5,100 |
) |
Insurance-related expense |
|
|
5,771 |
|
|
|
4,276 |
|
G&A operating expenses |
|
|
11,618 |
|
|
|
12,715 |
|
Total G&A expense |
|
$ |
18,300 |
|
|
$ |
11,891 |
|
|
|
|
|
|
G&A operating expense - % of GWP |
|
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) Net earned premiums as a percentage of gross earned
premiums. |
(2) Direct commissions as a percentage of gross earned
premiums. |
(3) Ceding commissions as a percentage of ceded earned
premiums. |
|
|
|
|
|
Reconciliation of Non-GAAP Financial
Measures
Underwriting income
The Company defines underwriting income as
income before taxes excluding net investment income, non-cash
changes in fair value of embedded derivatives, investment
revaluation gains, net realized capital gains or losses, intangible
asset amortization, noncash stock compensation, 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,
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 March 31, |
|
(unaudited, in thousands) |
2022 |
|
|
2021 |
|
Net income |
$ |
12,340 |
|
|
$ |
9,442 |
|
Income tax expense |
3,270 |
|
|
2,605 |
|
Income before taxes |
15,610 |
|
|
12,047 |
|
Other revenue |
(3,201 |
) |
|
(4,655 |
) |
Change in fair value of embedded derivatives |
(6,236 |
) |
|
(2,676 |
) |
Net investment income |
(2,576 |
) |
|
(2,272 |
) |
Net realized (gains) losses |
1,047 |
|
|
(13 |
) |
Interest expense |
408 |
|
|
427 |
|
Intangible asset amortization |
1,499 |
|
|
1,414 |
|
Noncash stock compensation |
156 |
|
|
211 |
|
Other income |
(23 |
) |
|
(121 |
) |
Underwriting income |
$ |
6,684 |
|
|
$ |
4,362 |
|
|
|
|
|
|
|
Adjusted net income and adjusted net income
outlook
The Company defines adjusted net income as net
income excluding the impact of certain items, including noncash
intangible asset amortization and stock compensation, non-cash
changes in fair value of 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 March 31, |
(unaudited, in thousands) |
|
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 |
|
|
|
|
|
The Company’s outlook for second quarter 2022
adjusted net income constitutes forward-looking information and the
Company believes that it cannot reconcile such forward-looking
information to the most comparable GAAP measure without
unreasonable efforts. Certain of the GAAP components cannot be
reliably quantified due to the combination of variability and
volatility of such components and may, depending on the size of the
components, have a significant impact on the reconciliation.
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 March 31, |
(unaudited, in thousands) |
|
2022 |
|
|
|
2021 |
|
Adjusted return on equity calculation: |
|
|
|
Numerator: adjusted net income |
$ |
8,304 |
|
|
$ |
8,109 |
|
Denominator: average stockholders' equity |
|
419,153 |
|
|
|
411,541 |
|
Adjusted return on equity |
|
7.9 |
% |
|
|
7.9 |
% |
Return on equity |
|
11.8 |
% |
|
|
9.2 |
% |
|
|
|
|
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 March 31, |
(unaudited, in thousands) |
|
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, |
(unaudited, in thousands) |
|
2022 |
|
|
|
2021 |
|
Adjusted return on tangible equity
calculation: |
|
|
|
Numerator: adjusted net income |
$ |
8,304 |
|
|
$ |
8,109 |
|
Denominator: average tangible stockholders' equity |
|
204,441 |
|
|
|
196,291 |
|
Adjusted return on tangible equity |
|
16.2 |
% |
|
|
16.5 |
% |
Return on equity |
|
11.8 |
% |
|
|
9.2 |
% |
|
|
|
|
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