AMERINST INSURANCE GROUP LTD – 10-K – Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's discussion and analysis of financial condition and results of
operations ("MD&A") provides supplemental information, which sets forth
management's views of the major factors that have affected our financial
condition and results of operations that should be read in conjunction with our
consolidated financial statements and notes thereto included in this Form 10-K.
The MD&A is divided into subsections entitled "Business Overview," "Critical
Accounting Policies," "Results of Operations," "Liquidity and Capital
Resources."
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including this MD&A section, contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, among
others, statements about our beliefs, plans, objectives, goals, expectations,
estimates and intentions that are subject to significant risks and uncertainties
and are subject to change based on various factors, many of which are beyond our
control. The words "may," "could," "should," "would," "believe," "anticipate,"
"estimate," "expect," "intend," "plan," "target," "goal," and similar
expressions are intended to identify forward-looking statements.
All forward-looking statements, by their nature, are subject to risks and
uncertainties. Our actual future results may differ materially from those set
forth in our forward-looking statements. Please see the Introductory Note and
Item 1A "Risk Factors" of this Form 10-K for a discussion of factors that could
cause our actual results to differ materially from those in the forward-looking
statements. However, the risk factors listed in Item 1A "Risk Factors" or
discussed in this Form 10-K should not be construed as exhaustive and should be
read in conjunction with other cautionary statements that are included herein.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our management's analysis only as of the date they are
made. We undertake no obligation to release publicly the results of any future
revisions we may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
The following discussion addresses our financial condition and results of
operations for the periods and as of the dates indicated.
Business Overview
We are an insurance holding company based in
accounting firms, persons associated with accounting firms, and individual CPA
practitioners. We were formed in response to concerns about the pricing and
availability of accountants' professional liability insurance in a difficult or
"hard" market. Our mission is to provide insurance protection for professional
service firms and engage in investment activities. Through Protexure, we act as
an agent for ISMIE for the purposes of soliciting, underwriting, quoting,
binding, issuing, cancelling, non-renewing and endorsing accountants'
professional liability and lawyers' professional liability insurance coverage in
42 states of
2020
all 50 states of
2021
terminates the C&F Agency Agreement effective
the signed addendum, Protexure will be permitted to issue new and renewal
professional liability policies on C&F paper with effective dates no later than
Agency Agreement. Protexure continues to transition the lawyers and accountants'
professional liability previously written with C&F to ISMIE under the ISMIE
Agency Agreement with the last policies scheduled to be transitioned by
31, 2023
AmerInst has two reportable segments: (1) reinsurance and corporate, previously
called the reinsurance segment, through which the company provided reinsurance
under the now commuted reinsurance agreements, conducted investment operations
and conducts other corporate activities and (2) insurance activity, through
which the Company offers professional liability solutions to professional
service firms under the Agency Agreements. See Note 14, Segment Information, of
the notes to the consolidated financial statements contained in Item 8 of this
annual report on Form 10-K for financial information concerning these segments.
Our reinsurance and corporate segment had revenues of
losses and expenses for this segment were
resulted in a segment loss of
AmerInst ceased insurance operations and following the cancellation of its
insurance license on
activities.
13
--------------------------------------------------------------------------------
Our insurance segment had revenues of
2022
management expenses were
of
respectively. Our results of operations for the years ended
and
We operate our business with no material long-term debt, no purchase
obligations, and no off-balance sheet arrangements required to be disclosed
under applicable rules of the
Critical Accounting Policies
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The major estimates reflected
in our financial statements include but are not limited to deferred tax assets.
Income Taxes
Our
Current and deferred income taxes are charged or credited to net income based
upon enacted tax laws and rates applicable in the relevant jurisdiction in the
period in which the tax becomes accruable or realizable. Deferred income taxes
are provided for all temporary differences between the bases of assets and
liabilities used in the financial statements and those used in the various
jurisdictional tax returns. When our assessment indicates that it is more likely
than not that all or some portion of deferred income tax assets will not be
realized, a valuation allowance is recorded against the deferred tax assets.
We recognize a tax benefit relating to uncertain tax positions only where the
position is more likely than not to be sustained assuming examination by tax
authorities. A liability is recognized for any tax benefit (along with any
interest and penalty, if applicable) claimed in a tax return in excess of the
amount allowed to be recognized.
Revenue Recognition
Our primary source of revenue is derived from commissions earned on the
placement of lawyers' and accountants' professional liability insurance under
the ISMIE Agency Agreement. We recognize revenue for most of these arrangements
as of a point in time at the later of the policy inception date or when the
policy placement is complete because this is viewed as the date when control is
transferred and all obligations are complete. We disclose our revenue
recognition policy for commission income in our financial statements, including
any significant assumptions or estimation methods used.
Results of Operations
Year ended
We recorded a net loss of
compared to a net loss of
in net loss was mainly attributable to (i) the decrease in premiums earned from
the year ended
2022
adjustment expenses from
for the year ended
costs from
ended
expenses from
the year ended
below.
Our net premiums earned for the year ended
100%. Our net premiums earned were attributable to cessions from C&F under the
Reinsurance Agreement. As noted above, the Company entered into the Commutation
Agreement with C&F effective
to that date were ceded to the Company. Our net premium earned for the year
ended
months ended
insurance license was cancelled by the
14 --------------------------------------------------------------------------------
During the year ended
under the Agency Agreements of
decrease of
premiums written under the Agency Agreements during the year ended
2022
attributable to ceased business under the C&F agreement and lower premium
volumes under the new ISMIE Agency Agreement in 2022.
We recorded net investment income of
2022
net investment income was mainly attributable to a decrease in dividend income
and interest income from the
in fixed income securities and equity securities as a measure to fund our
commitment under the C&F Commutation Agreement. The annualized investment yield,
calculated as total interest and dividends divided by the net average amount of
total investments and cash and cash equivalents, was 0.3% for the year ended
31, 2021
We recorded net realized and unrealized gains on investments of
year ended
investments of
investment in fixed income securities to fund the commitment to C&F under the
C&F Commutation Agreement. A
investments.
Our losses and loss adjustment expenses for the year ended
were
of
reinsurance activity.
We recorded policy acquisition costs of
2022
costs were primarily ceding commissions paid to ceding reinsurers as a
percentage of premiums earned. There was no reinsurance business in 2022.
We incurred operating and management expenses of
ended
decrease of
a decrease in salaries and related costs associated with Protexure's reduction
in personnel in 2022; (ii) a decrease in sub commission's paid to brokers due to
a reduction in premium volumes, and (iii) a reduction in directors fees,
management fees and audit fees related to the reduction in business operations
of the reinsurance and corporate business.
We recorded income tax expense of
compared to
changes in Protexure's deferred tax asset position during the year, which was
primarily attributable to Protexure's usage of its loss carryforward from prior
years plus its state income taxes for the current year. See Note 8 to our
financial statements included in this Annual Report on Form 10-K for additional
details.
Liquidity and Capital Resources
Our cash needs consist of funding day-to-day operations. Our management expects
that our unrestricted cash balance will be sufficient to meet our cash needs and
fund our day-to-day operations over the next twelve-month period.
Prepaid expenses and other assets were
of
to (1) premiums due to Protexure under the Agency Agreements, (2) policy
acquisition costs, and (3) prepaid professional fees. This balance fluctuates
due to the timing of the prepayments and to the timing of the premium receipts
by Protexure.
Accrued expenses and other liabilities primarily represent premiums payable by
Protexure to C&F and other cedants under Agency Agreements and expenses accrued
relating largely to professional fees. The balance decreased from
18.0%. This balance fluctuates due to the timing of the premium payments to C&F
and payments of professional fees.
15 --------------------------------------------------------------------------------
During 2022 and 2021, we paid no ordinary cash dividends as a measure to
preserve the Company's capital base. Since we began paying dividends in 1995,
our original shareholders have received approximately
dividends per share. Dividend payments are subject to the Board of Directors'
continuing evaluation of our level of surplus compared to our capacity to accept
more business. No dividends were paid during 2022 as a measure to preserve the
Company's capital bases, as referred to above.
The BMA has authorized
who have died or retired from the practice of public accounting and on a
negotiated basis. Through
shares from shareholders who had died or retired for a total purchase price of
negotiated transactions. Through that date,
additional 75,069 common shares in such privately negotiated transactions for a
total purchase price of
Inflation
The impact of inflation on the insurance industry differs significantly from
that of other industries where large portions of total resources are invested in
fixed assets, such as property, plant and equipment. Assets and liabilities of
insurance companies, like other financial institutions, are virtually all
monetary in nature, and therefore are primarily impacted by interest rates
rather than changing prices. While the general level of inflation underlies most
interest rates, interest rates react more to changes in the expected rate of
inflation and to changes in monetary and fiscal policy. Therefore, we do not
believe that inflation has materially impacted our results of operations.
KINGSTONE COMPANIES, INC. – 10-K – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management Proxy Circular (for the Annual and Special Meeting of Shareholders 2023)
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