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Transcript of Pih
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
SAFE HARBOR
This document contains forward-looking statements and management may make additional forward looking statements in
response to your questions. Forward-looking statements include statements regarding the intent, belief or current
expectations of the Company and its management about the Company’s business, financial condition and results of
operations, among other factors. In some cases you can identify these statements by forward-looking words such as
“may,” “might,” “will,” “will likely result,” “should,” “anticipates,” “expects,” “intends,” “plans,” “seeks,” “estimates,” “potential,”
“continue,” “believes” and similar expressions, although some forward-looking statements are expressed differently. These
forward-looking statements are based on the Company’s current expectations and assumptions that are subject to risks
and uncertainties that may cause its actual results, performance, or achievements to differ materially from any expected
future results, performance, or achievements expressed or implied by such forward-looking statements. All statements
other than statements of historical fact are statements that could be deemed forward-looking statements. These risks and
uncertainties include, but are not limited to the level of demand for the Company’s coverage and the incidence of
catastrophic events related to its coverage; the Company’s ability to grow and remain profitable in the competitive
insurance industry; its ability to access additional capital; its ability to attract and retain qualified personnel; changes in
general economic, business and industry conditions; and legal, regulatory, and tax developments.
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A homeowners’ insurance company in states where we believe there is a significant potential for generating high
returns on equity with controlled risk
Ticker (NASDAQ: PIH)
Stock Price $7.57 (as of 1/9/2015)
Shares Outstanding 6.36 million
Market Cap $48.2 million (as of 1/9/2-15)
Sector / Industry Insurance
AT A GLANCE
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Gordon G. PrattChairman
Douglas RaucyPresident and CEO
John Hill, CPAChief Financial Officer
Dean StroudVP of Underwriting
Bob GantleyVP and COO
• Over 20 years of executive insurance industry experience• Current or past director, investor, executive, or advisor to over two dozen
insurance enterprises• Chase Manhattan Bank, Conning & Company, Hales Group, Willis Group, Fund
Management Group
• President and CEO of Maison Insurance Co.• Founder of three homeowners’ insurance companies• Former head of Allstate’s national catastrophe team, over 20 years experience as an
Allstate employee in various positions
• CFO of Maison Insurance Co., previously CFO of three P/C insurance companies• Over 15 years experience in the Florida homeowners’ market• 10 years of experience at a “Big Four” accounting firm
• VP of underwriting for Maison Insurance Co.• Former President of Audubon Insurance Co. (AIG subsidiary)• Over 40 years of homeowner’ underwriting experience
• Over 35 years of experience in the industry, particularly in claims and underwriting• President of ClaimCor, a claim and underwriting technical solutions company
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MANAGEMENT BACKGROUNDOVER 100 YEARS OF COMBINED HOMEOWNERS’ INSURANCE EXPERIENCE IN COASTAL STATES
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Creating a homeowners’ insurance company in states where we believe there is a significant potential for generating high returns on equity with controlled risk
Market Criteria Includes:
Target states with high property premiums in U.S.
Seek favorable legislative environment
Areas where industry giants (State Farm, Allstate, Farmers) are looking to decrease coastalrisk exposure
Locations where management has experience in writing and managing wind-risk andindependent and captive agent contacts
Ability to grow to scale quickly in part due to an existing state-run depopulation program
– State-run insurer provides property insurance to marketplace and looks to shrink over time byallowing private insurers to “take out” policies and assume that risk
TARGETING THE CORRECT MARKETS
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Integrated Insurance Company Targeting High Potential Markets
Management Team with Experience Establishing and Managing Coastal Business
Favorable Reinsurance Market
Plan for Expansion into Coastal States
COMPELLING INVESTMENT OPPORTUNITY
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Announced Dec 1, 2014
500,000 shares of common stock over 12 month period
Repurchases will be made from time to timein open market transactions, privately-negotiated transactions, block purchases, orotherwise in accordance with Federalsecurities laws at the discretion of theCompany’s management.
STOCK REPURCHASE PROGRAM
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“While investing in the expansion of our
business operations remains our first priority,
the Board’s consent to initiate the program is
a sign of the importance we place in the
Company’s ability to create long-term
profitable growth.”
-CEO Doug Raucy
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
PIH is a holding company that owns an admitted propertyand casualty insurance company based in Louisiana, doingbusiness as Maison Insurance Company, a managing generalagency (MGA) doing business in Louisiana, Maison ManagersInc., and a claims handling company ClaimCor, LLC
Maison Insurance Company provides full coverage to personalresidential dwellings on a multi-peril form to single familystructures including manufactured housing units.Additionally it provides reduced coverage and wind/hailonly coverage
Company is currently writing in Louisiana, seeking entryinto other coastal markets
ClaimCor, LLC is a claims and underwriting technicalsolutions company, acquired in December 2014. Based in St.Petersburg, Florida, the Company provides turnkey,customized, client centric claim and underwriting technicalsolutions to its business partners
WHAT IS 1347 PIH
Corporate structure:
1347 Property
Insurance
Holdings, Inc
Maison
Insurance
Company
Maison
Managers, Inc
ClaimCor, LLC
(Dec 2014)
POLICY COUNT TOTAL ASSETS
18,200 at 9/30/14 $69.1 million
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
2012
MaisonInsurance
Company is Formed in October
2012
Completion of secondary
offering, raising $23 million, PIH expects to use proceeds for
growth into new markets
October 2012,Company
names Douglas Raucy
CEO
18,200 policies-in-force at
12/31/2014 compared to
11,500 at 12/31/2013
COMPANY HISTORY
201520142013
December 2012, Maison
participates in Louisiana
“wind/hail-only” depopulation from Citizens, LA’s state-run
insurer
Company reports
profitable operations in
2013 third quarter, begins
to achieve necessary scale
Completion of IPO raising
$17.4 million, Company
utilizes proceeds to
assume a larger number of policies in Louisiana
December 2012, Maison
assumes approx. 3,000 wind/hail-only policies from LA Citizens
December 2013, Maison assumes
approx. 3,500 wind/hail-only
policies from LA Citizens
Company reports profitable
operations in 2014 Third
Quarter; highlighted by $8.5 million in direct written
premiums
PIH signs definitive
agreement to acquire ClaimCor,
LLC
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Dec 1, 2014Company
announces stock
repurchase program
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Among the highest overall property insurance rates in the country
Low loss costs and attritional (non-catastrophe) loss ratios
Wind/hail-only policies are limited to providing coverage for these types of weather
Favorable regulatory environment
Significant opportunity to rapidly expand independent agent distribution network through ChiefUnderwriting Officer’s 40 years of experience in Louisiana homeowner market
Population 4.6 million
Total Number of Households Approximately 1.7 million
HomeownersDirect Premiums Written
$2.6 Billion*
3-year CAGR for Direct Premiums Written (2011-2013)
3.45%
Top Three in Market ShareState Farm / Allstate
LA Citizens
* Source: U.S. Census, SNL Financial (Louisiana Homeowners Lines of Business) December 31, 2013 Personal Property – Homeowner Multi-peril, fire, allied lines
LOUISIANA MARKET
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Louisiana Citizens Property Insurance Company(Citizens)
Citizens currently writes homeowners insurance for approximately 7% of Louisiana propertiesas an insurer of last resort
The state of Louisiana implemented an insurance “take-out” program to reduce the number ofproperties insured by Citizens
Under this take-out program, state-approved insurance companies, such as Maison, have theopportunity to assume insurance policies written by Citizens
Occurs annually, on December 1
Take-out company assumes risk / collects unearned premium immediately
LOUISIANA CITIZENSHOW IT WORKS
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Since its founding, the Company has established a network of agents throughout Louisiana
Focus on service and quality claims handling
Company has seen steady organic policy growth since entering independent agency market
Policies written through independent agents are all-peril, including the wind/hail
New Orleans, LA Baton Rouge, LA
Lafayette, LA Lake Charles, LA
Other Policy Acquisition Opportunities
Renewal rights transactions to gain access to niche markets
Establish partnerships as entry to geographies and property segments
Independent Agency Locations
EFFECTIVE DISTRIBUTIONINCREASING THE POLICY BASE
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Underwriting discipline to select quality risks for
wind/hail-only and full coverage policies
Develop products tailored for the market
Utilize technology to adequately assess insurance to value
Physically inspect every insured risk written organically throughindependent agents
Manage catastrophe risks through reinsurance, periodic modeling of in-force exposures and individual policy characteristics, e.g., roofengineering
Address classes of risks and rate adequacy with annual rate filings
Responsive, highly efficient, and experienced claims operation
As a result of the acquisition of ClaimCor, PIH will begin to realizeefficiencies and a direct cost savings from internalizing claims servicesduring 2015
DISCIPLINED UNDERWRITING PRACTICES
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9.3%
24.8%21.3%
0%
10%
20%
30%
40%
50%
Q1 Q2 Q3
Loss Ratio
2014
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Reinsurance brokers predict increased reinsurance capacity and lower prices
“At July 1, we saw continued significant decreases in U.S. property catastrophe program pricing.” –David Flandor, Global Head of Business Intelligence at Guy Carpenter
“Capital available for reinsurance coverage hit a record $575 billion at the end of the third quarter, placing pressure on prices, according to broker Aon Benfield.” –Bloomberg News
Factors Influencing Global Supply of Reinsurance
+ Record levels of reinsurer capital
+ Increased investor interest in catastrophe bonds and similar collateralized facilities
- Continued low market valuations of reinsurers’ shares
= High reinsurance market supply
FAVORABLE REINSURANCE MARKET
The largest cost in homeowners’ insurance is reinsurance
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
Company has created a reinsurance program focused on preserving capital
Expects to utilize traditional reinsurance and the insurance-linked securities market to minimizereinsurance costs with 1-in-100 year event coverage and reinstatements
$1,000,000 xs $2,000,000Company Retention
Catastrophe Occurrence
$27,000,000 xs $3,000,000
RPP Cover
$92,000,000
$3,000,000
$30,000,000
Top & Aggregate*
$20,000,000 xs $72,000,000
1st Event 2nd Event
Top & Aggregate
$19,000,000 xs $0
3rd and
Subsequent
Events
Catastrophe Occurrence
$25,000,000 xs $30,000,000
RPP Cover
Catastrophe Occurrence
$17,000,000 xs $55,000,000
RPP Cover
$55,000,000
$72,000,000
Company Retention
Catastrophe Occurrence
$27,000,000 xs $3,000,000
Catastrophe Occurrence
$25,000,000 xs $30,000,000
Catastrophe Occurrence
$17,000,000 xs $55,000,000
Top & Aggregate
$19,000,000 xs $72,000,000
2014 Property Catastrophe Reinsurance Structure
6/1/2014 – 5/31/2015
REINSURNACE STRUCTURE
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
CURRENT PREMIUM GROWTH
$0.4
$2.8
$8.0
$16.0
$5.7
$14.6
$23.1
$0M
$5M
$10M
$15M
$20M
$25M
Q1 Q2 Q3 Q4
Cumulative Direct Premiums Written
2013 2014
$0.9 $1.6
$2.4
$7.2
$4.1
$8.9
$13.3
$0M
$2M
$4M
$6M
$8M
$10M
$12M
$14M
Q1 Q2 Q3 Q4
Cumulative Net Premiums Earned
2013 2014
Q3 2014 highlighted by $8.5 million in direct premiums written
(63.2% year-over-year increase)
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
HawaiiTexas Florida
EXPANSION INTO NEW MARKETS
PIH intends, either organically or through acquisition, to expand into other
coastal states that fit their selection criteria and when timing is appropriate
Possible first-ever depopulation from Texas Windstorm Insurance Association (TWIA) in 2015
Large market opportunity
Potential partnership opportunities
Company would seek homeowners and “wind-only” policies and other underserved markets
Favorable legislative environment
Large market opportunity
Florida Citizens monthly depopulations
Company would seek homeowners and “wind-only” policies and other underserved markets
Company would seek homeowners and “wind-only” policies and other underserved markets
Last hurricane to hit Hawaii was Inikiin 1992, hit only one island, Kauai
Potential partnership opportunities
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
StateAggregate Premium in
Targeted Markets% of Targeted
Market
Florida (personal property) $12,937 50.4%
Texas (commercial multi-peril) $9,745 38.0%
Louisiana (personal property) $2,461 9.6%
Hawaii (personal property) $531 2.1%
Total $25,674 100.0%
Source: SNL Financial
MARKET OPPORTUNITIES
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PIH’s goal is to capture between 2% and 3% of the
Louisiana market in its first three years of operation(approximately $61.5 M)
The following represents the approximate aggregate industry premiums for targeted markets in the states that PIH anticipates writing (in millions):
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
CLAIMCOR, LLC. (ACQUIRED DEC 2014)
Current Coverage Territory
“The ClaimCor acquisition is part of our continuing
effort to build a streamlined operation that
supports our growth and lowers our expense ratio.”
- CEO Doug Raucy
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Based in St. Petersburg, FL
Established in 2013
Services include:
• Claim investigations
• Re-inspection services
• Litigation management and alternate
dispute resolution matters
• Flood claim handling
• Commercial and personal lines
underwriting inspections
Benefits to PIH
Compliments the company’s strategic plan and growth objectives
Additional source of revenue, complimentary to other subsidiaries
Will help PIH become a fully-integrated insurance provider
Reduces costs by internalizing services previously contracted to others
1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
2014 2013
(in thousands, expect per-share amounts)
3rd
Quarter2nd
Quarter1st
Quarter4th
Quarter 3rd
Quarter2nd
Quarter1st
Quarter2013 Year
Total Revenues $ 4,536 $ 4,829 $ 4,173 $ 2,562 $ 1,060 $ 533 $ 936 $ 5,091
Total Expenses 3,484 3,775 1,866 1,531 979 1,319 2,406 6,235
Income (loss) before income tax 1,052 1,054 2,307 1,031 81 (786) (1,470) (1,144 )
Income tax expense (benefit) 420 438 604 342 29 (263) (504) (396
Net Income (Loss) $ 632 $ 616 $ 1,703 $ 689 $ 52 $ (523) $ (966) $ (748 )
* This use of cash was driven primarily by the purchase of fixed income securities.
QUARTERLY P & L DATA
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
(figures in millions, except per share data)
Company TickerPrice
@ 1 / 9 / 2015Market Cap
Price/Book Value
(LTM)
P/E(LTM)
Universal Insurance Holdings Inc. UVE $20.18 $691.7 3.57 x 10.83 x
HCI Group, Inc. HCI $44.13 $491.3 2.57 8.32
United Insurance Holdings Corp. UIHC $21.68 $441.3 2.35 10.82
Federated National Holding Company FNHC $25.76 $367.0 1.95 9.51
Heritage Insurance Holdings, Inc. HRTG $19.15 $564.3 2.46 15.20
MEAN 2.58 x 10.94 x
1347 Property Insurance Holdings, Inc. PIH $7.57 $48.6 0.98 7.71
Source: Bloomberg and Wall Street Research Note: LTM = Latest Twelve Months
PEER COMPARISON
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0M 200M 400M 600M 800M
Price / Book
MarketCap
PIH
FNHC
UIHCHCI
HRTG
UVE
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
A homeowners’ insurance company focused on market geographies withaddressable needs
Dedicated management team with experience launching and rapidly expandingcoastal insurance companies
Remaining focused on the markets we know
Clean balance sheet with no legacy issues
IPO and follow-on capital raises placed company in strong financial position tosafely expand
Opportunities for growth through partnerships with agency organizations andexpansion into other states
INVESTMENTS CONSIDERATIONS
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
(in thousands) September 30, 2014 December 31, 2013
Assets (unaudited)
Investments:
Fixed income securities, at fair value (amortized cost of $7,258 and $301, respectively) 7,241 301
Short-term investments pledged, at cost which approximates value $ 201 $ 100
Total investments 7,442 401
Cash and cash equivalents 54,529 15,007
Premiums receivable, net allowance for doubtful accounts of $2 and $0, respectively 1,707 3,805
Ceded unearned premiums 1,608 1,126
Deferred policy acquisition costs 2,886 1,925
Net deferred federal income taxes 395 571
Other assets 491 343
Total Assets $ 69,058 $ 23,178
Liabilities and Shareholders’ Equity
Liabilities:
Loss and loss adjustment expense reserves $ 662 $ 354
Unearned premium reserves 15,902 11,004
Ceded reinsurance premiums payable — 50
Agent commissions payable 397 254
Premiums collected in advance 909 213
Payable to related party 193 2,668
Current income taxes payable 287 —
Accrued expenses and other liabilities 1,508 753
Total Liabilities 19,858 15,296
Shareholders’ Equity:
Common stock, $0.001 par value; authorized 10,000,000 shares; 6,538,125 and 1,000,000
issued and outstanding at September 30, 2014 and December 31, 2013, respectively $ 6 $ 1
Additional paid-in capital 47,622 8,749
Retained earnings (accumulated deficit) 1,583 (868)
Accumulated other comprehensive loss (11) —
Total Shareholders’ Equity 49,200 7,882
Total Liabilities and Shareholders’ Equity $ 69,058 $ 23,178
BALANCE SHEET
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
(in thousands, unaudited) Three months ended September 30, Nine months ended September 30,
2014 2013 2014 2013
Revenues:
Net premiums earned $ 4,427 $ 829 $ 13,281 $ 2,438
Net investment income 48 193 76 47
Other income 61 39 181 45
Total revenues 4,536 1,061 13,538 2,530
Expenses:
Net losses and loss adjustment expenses 944 150 2,503 2,639
Amortization of deferred policy acquisition costs 1,111 312 3,054 704
General and administrative expenses 1,429 517 3,568 1,361
Total expenses 3,484 979 9,125 4,704
Income (loss) before income tax expense (benefit) 1,052 82 4,413 (2,174)
Income tax expense (benefit) 420 29 1,462 (738)
Net income (loss) $ 632 $ 53 $ 2,951 $ (1,438)
Less: Beneficial conversion feature on convertible preferred shares — — 500 —
Net income (loss) attributable to common shareholders $ 632 $ 53 $ 2,451 $ (1,436 )
Earnings (loss) per share – net income (loss) attributable to common
shareholders:
Basic: $ 0.10 $ 0.05 $ 0.64 $ (1.44)
Diluted: $ 0.10 $ 0.05 $ 0.63 $ (1.44)
Weighted average shares outstanding (in ‘000s):
Basic: 6,358 1,000 3,832 1,000
Diluted: 6,433 1,000 3,888 1,000
Consolidated Statements of Comprehensive Income (Loss)
Net income (loss) $ 632 $ 53 $ 2,951 $ (1,436)
Other comprehensive loss, net of taxes(1):
Unrealized gains on fixed income securities:
Unrealized gains arising during the period (21 ) — (11 ) —
Other comprehensive loss (21 ) — (11 ) —
Comprehensive income (loss) $ 611 $ 53 $ 2,940 $ (1,436)
1) Net of income tax expense of $11 and $0 for three months ended September 30, 2014 and
September 30, 2013, respectively ($5 and $0 for nine months ended September 30, 2014 and
September 30, 2013, respectively)
CONSOLIDATED STATEMENT OF INCOME
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1347 PROPERTY INSURANCE HOLDINGS NASDAQ: PIH
(in thousands, unaudited) Nine months ended September 30,
2014 2013
Cash provided by (used in):
Operating activities:
Net income (loss) $ 2,951 $ (1,436)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net deferred income taxes 182 (738)
Stock based compensation expense 116 —
Changes in operating assets and liabilities:
Premiums receivable 2,098 1,252
Ceded unearned premiums (482) (692)
Deferred policy acquisition costs (961) (744)
Loss and loss adjustment expense reserves 308 219
Premiums collected in advance 696 270
Due to related party (2,475) 1,595
Unearned premium reserves 4,898 4,227
Ceded reinsurance premiums payable (50) (74)
Current income taxes payable 287 —
Other, net 766 681
Net cash provided by operating activities 8,334 4,560
Investing activities:
Proceeds from sales of equity investments — 1,875
Purchase of fixed income securities (6,971) —
Net purchases of short-term investments (103) —
Net cash used in investing activities (7,074) 1,875
Financing activities:
Proceeds from issuance of preferred stock, net 2,000 —
Proceeds from issuance of common stock, net 36,262 —
Proceeds from capital contribution — 1,200
Net cash provided by financing activities 38,262 1,200
Net increase in cash and cash equivalents 39,522 7,635
Cash and cash equivalents at beginning of period 15,007 5,525
Cash and cash equivalents at end of period $ 54,529 $ 13,160
CONSOLIDATED STATEMENT OF CASH FLOWS
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For Additional Information
At The Company
Doug RaucyChief Executive [email protected]
Investor Relations
The Equity Group
Forrest HuntAssociate
CONTACT US