NI Holdings, Inc. Unaudited Pro Forma Consolidated Financial Information Form 8 K
Unaudited Pro Forma Consolidated Financial Information
On
The Transaction constituted a significant disposition for purposes of Item 2.01 of Form 8-K. Based upon the magnitude of the disposition and because the Company is exiting the majority of its commercial insurance operations, the disposition represents a significant strategic shift that will have a material effect on the Company's operations and financial results. Accordingly, the Transaction meets the definition of a discontinued operation, as defined by Accounting Standards Codification 205-20 - Presentation of Financial Statements - Discontinued Operations, and, after the date of the Transaction, the historical financial results of Westminster will be reflected in our consolidated financial statements as discontinued operations under accounting principles generally accepted in
The following unaudited pro forma consolidated financial statements are intended to show how the transaction might have affected the historical financial statements of the Company if the transaction had been completed at an earlier time as indicated therein. The unaudited pro forma consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and were derived from the Company's historical consolidated financial statements and are being presented to give effect to the sale of Westminster. The unaudited pro forma consolidated financial statements are derived from and should be read in conjunction with:
| i. | The accompanying notes to the unaudited pro forma consolidated financial statements; |
| ii | The audited historical financial statements of the Company and its subsidiaries, the accompanying notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended |
| iii | The audited historical financial statements of the Company and its subsidiaries, the accompanying notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended |
| iv. | The audited historical financial statements of the Company and its subsidiaries, the accompanying notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended |
| v. | The unaudited interim historical consolidated financial statements of the Company and its subsidiaries, the accompanying notes, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Quarterly Report on Form 10-Q for the three months ended |
The unaudited pro forma consolidated financial statements are based on available information and assumptions that the Company's management believes are reasonable as of the date of this filing. The Unaudited Pro Forma Consolidated Statements of Operations for the three months ended
Article 11 of Regulation S-X requires that pro forma financial information include the following pro forma adjustments to the historical financial statements of the registrant:
| · | Transaction Accounting Adjustments - Adjustments that reflect only the application of required accounting to the acquisition, disposition, or other transaction. |
| · | Autonomous Entity Adjustments - Adjustments that are necessary to reflect the operations and financial position of the registrant if the registrant was previously part of another entity. There are no autonomous entity adjustments included in the pro forma financial information since the Company currently operates, and after the completion of the transaction will continue to operate, as an independent, standalone entity. |
In addition, Regulation S-X permits registrants to reflect adjustments that depict synergies and dis-synergies of the acquisitions and dispositions for which pro forma effect is being given in our disclosures as management adjustments. The unaudited pro forma consolidated financial statements do not include management adjustments to reflect any potential synergies that may be achievable, or dis-synergy costs that may occur, in connection with the sale of Westminster. The Company has determined not to reflect such adjustments because it does not believe presenting such adjustments would enhance an understanding of the pro forma effects of the transaction.
The unaudited pro forma consolidated financial statements are presented for informational purposes only and are based upon estimates by the Company's management, which are based upon available information and certain assumptions that the Company's management believes are reasonable as of the date of this filing. The unaudited pro forma consolidated financial statements are not intended to be indicative of the actual financial position or results of operations that would have been achieved had the transaction been consummated as of the periods indicated above, nor does it purport to indicate results which may be attained in the future. Actual amounts could differ materially from these estimates.
Pro Forma Consolidated Balance Sheet
As of
(Unaudited)
(dollar amounts in thousands, except par value)
| As Reported (a) |
Transaction Accounting Adjustments (b) |
Pro Forma | ||||||||||
| Assets: | ||||||||||||
| Cash and cash equivalents | $ | 68,518 | $ | (13,387 | ) | $ | 55,131 | |||||
| Fixed income securities, at fair value (net of allowance for expected credit losses of |
349,772 | (57,070 | ) | 292,702 | ||||||||
| Equity securities, at fair value | 29,650 | (6,146 | ) | 23,504 | ||||||||
| Other investments | 2,006 | - | 2,006 | |||||||||
| Total cash and investments | 449,946 | (76,603 | ) | 373,343 | ||||||||
| Premiums and agents' balances receivable (net of allowance for expected credit losses of |
79,706 | (19,728 | ) | 59,978 | ||||||||
| Deferred policy acquisition costs | 36,565 | (7,617 | ) | 28,948 | ||||||||
| Reinsurance premiums receivable | 2,985 | (3,441 | ) | (456 | ) | |||||||
| Reinsurance recoverables on losses (net of allowance for expected credit losses of |
49,484 | (43,138 | ) | 6,346 | ||||||||
| Accrued investment income | 2,923 | (522 | ) | 2,401 | ||||||||
| Property and equipment, net | 9,708 | (2,356 | ) | 7,352 | ||||||||
| Deferred income taxes | 8,313 | 837 | 9,150 | |||||||||
| Receivable from |
13,913 | - | 13,913 | |||||||||
| 9,933 | (7,205 | ) | 2,728 | |||||||||
| Other assets | 11,049 | (50 | ) | 10,999 | ||||||||
| Total assets | $ | 674,525 | $ | (159,823 | ) | $ | 514,702 | |||||
| Liabilities: | ||||||||||||
| Unpaid losses and loss adjustment expenses | $ | 225,006 | $ | (104,475 | ) | $ | 120,531 | |||||
| Unearned premiums | 171,418 | (37,690 | ) | 133,728 | ||||||||
| Income tax payable | 2,454 | (228 | ) | 2,226 | ||||||||
| Accrued expenses and other liabilities | 19,801 | (2,989 | ) | 16,812 | ||||||||
| Total liabilities | 418,679 | (145,382 | ) | 273,297 | ||||||||
| Shareholders' equity: | ||||||||||||
| Common stock, |
230 | - | 230 | |||||||||
| Additional paid-in capital | 96,320 | - | 96,320 | |||||||||
| Unearned employee stock ownership plan shares | (698 | ) | - | (698 | ) | |||||||
| Retained earnings | 218,451 | (18,696 | ) | 199,755 | ||||||||
| Accumulated other comprehensive loss, net of income taxes | (23,858 | ) | 4,255 | (19,603 | ) | |||||||
| (34,599 | ) | - | (34,599 | ) | ||||||||
| Non-controlling interest | - | - | - | |||||||||
| Total shareholders' equity | 255,846 | (14,441 | ) | 241,405 | ||||||||
| Total liabilities and shareholders' equity | $ | 674,525 | $ | (159,823 | ) | $ | 514,702 |
Pro Forma Consolidated Statement of Operations
For the three months ended
(Unaudited)
(dollar amounts in thousands, except per share data)
| As Reported (a) |
Transaction Accounting Adjustments (c) |
Pro Forma | ||||||||||
| Revenues: | ||||||||||||
| Net premiums earned | $ | 85,557 | $ | (15,673 | ) | $ | 69,884 | |||||
| Fee and other income | 412 | (8 | ) | 404 | ||||||||
| Net investment income | 3,553 | (798 | ) | 2,755 | ||||||||
| Net investment gains | 1,828 | (372 | ) | 1,456 | ||||||||
| Total revenues | 91,350 | (16,851 | ) | 74,499 | ||||||||
| Expenses: | ||||||||||||
| Losses and loss adjustment expenses | 52,209 | (12,065 | ) | 40,144 | ||||||||
| Amortization of deferred policy acquisition costs | 20,663 | (3,846 | ) | 16,817 | ||||||||
| Other underwriting and general expenses | 10,298 | (1,593 | ) | 8,705 | ||||||||
| Total expenses | 83,170 | (17,504 | ) | 65,666 | ||||||||
| Income before income taxes | 8,180 | 653 | 8,833 | |||||||||
| Income tax expense | 1,761 | 94 | 1,855 | |||||||||
| Net income | 6,419 | 559 | 6,978 | |||||||||
| Net income attributable to non-controlling interest | - | - | - | |||||||||
| Net income attributable to |
$ | 6,419 | $ | 559 | $ | 6,978 | ||||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.31 | $ | 0.02 | $ | 0.33 | ||||||
| Diluted | $ | 0.30 | $ | 0.03 | $ | 0.33 | ||||||
| Share data: | ||||||||||||
| Weighted average common shares outstanding used in basic per common share calculations | 20,932,774 | - | 20,932,774 | |||||||||
| Dilutive securities | 113,305 | - | 113,305 | |||||||||
| Weighted average common shares used in diluted per common share calculations | 21,046,079 | - | 21,046,079 |
Pro Forma Consolidated Statement of Operations
For the year ended
(Unaudited)
(dollar amounts in thousands, except per share data)
| As Reported (a) |
Transaction Accounting Adjustments (c) |
Pro Forma | ||||||||||
| Revenues: | ||||||||||||
| Net premiums earned | $ | 351,137 | $ | (59,020 | ) | $ | 292,117 | |||||
| Fee and other income | 1,978 | (38 | ) | 1,940 | ||||||||
| Net investment income | 10,456 | (2,422 | ) | 8,034 | ||||||||
| Net investment gains | 2,124 | (195 | ) | 1,929 | ||||||||
| Total revenues | 365,695 | (61,675 | ) | 304,020 | ||||||||
| Expenses: | ||||||||||||
| Losses and loss adjustment expenses | 244,412 | (57,896 | ) | 186,516 | ||||||||
| Amortization of deferred policy acquisition costs | 82,991 | (15,359 | ) | 67,632 | ||||||||
| Other underwriting and general expenses | 35,799 | (6,474 | ) | 29,325 | ||||||||
| 6,756 | (6,756 | ) | - | |||||||||
| Total expenses | 369,958 | (86,485 | ) | 283,473 | ||||||||
| Income (loss) before income taxes | (4,263 | ) | 24,810 | 20,547 | ||||||||
| Income tax expense | 963 | 3,352 | 4,315 | |||||||||
| Net income (loss) | (5,226 | ) | 21,458 | 16,232 | ||||||||
| Net income attributable to non-controlling interest | 250 | - | 250 | |||||||||
| Net income (loss) attributable to |
$ | (5,476 | ) | $ | 21,458 | $ | 15,982 | |||||
| Earnings (loss) per common share: | ||||||||||||
| Basic | $ | (0.26 | ) | $ | 1.02 | $ | 0.76 | |||||
| Diluted | $ | (0.26 | ) | $ | 1.01 | $ | 0.75 | |||||
| Share data: | ||||||||||||
| Weighted average common shares outstanding used in basic per common share calculations | 21,159,073 | - | 21,159,073 | |||||||||
| Dilutive securities | - | - | 76,532 | |||||||||
| Weighted average common shares used in diluted per common share calculations | 21,159,073 | - | 21,235,605 |
Pro Forma Consolidated Statement of Operations
For the year ended
(Unaudited)
(dollar amounts in thousands, except per share data)
| As Reported (a) |
Transaction Accounting Adjustments (c) |
Pro Forma | ||||||||||
| Revenues: | ||||||||||||
| Net premiums earned | $ | 328,290 | $ | (56,550 | ) | $ | 271,740 | |||||
| Fee and other income | 1,453 | (72 | ) | 1,381 | ||||||||
| Net investment income | 7,820 | (1,184 | ) | 6,636 | ||||||||
| Net investment gains | (13,126 | ) | 1,151 | (11,975 | ) | |||||||
| Total revenues | 324,437 | (56,655 | ) | 267,782 | ||||||||
| Expenses: | ||||||||||||
| Losses and loss adjustment expenses | 294,432 | (52,682 | ) | 241,750 | ||||||||
| Amortization of deferred policy acquisition costs | 66,803 | (13,199 | ) | 53,604 | ||||||||
| Other underwriting and general expenses | 32,231 | (6,927 | ) | 25,304 | ||||||||
| Total expenses | 393,466 | (72,808 | ) | 320,658 | ||||||||
| Loss before income taxes | (69,029 | ) | 16,153 | (52,876 | ) | |||||||
| Income tax benefit | (15,254 | ) | 4,150 | (11,104 | ) | |||||||
| Net loss | (53,775 | ) | 12,003 | (41,772 | ) | |||||||
| Net loss attributable to non-controlling interest | (679 | ) | - | (679 | ) | |||||||
| Net loss attributable to |
$ | (53,096 | ) | $ | 12,003 | $ | (41,093 | ) | ||||
| Loss per common share: | ||||||||||||
| Basic | $ | (2.49 | ) | $ | 0.56 | $ | (1.93 | ) | ||||
| Diluted | $ | (2.49 | ) | $ | 0.56 | $ | (1.93 | ) | ||||
| Share data: | ||||||||||||
| Weighted average common shares outstanding used in basic per common share calculations | 21,333,389 | - | 21,333,389 | |||||||||
| Dilutive securities | - | - | - | |||||||||
| Weighted average common shares used in diluted per common share calculations | 21,333,389 | - | 21,333,389 |
Pro Forma Consolidated Statement of Operations
For the year ended
(Unaudited)
(dollar amounts in thousands, except per share data)
| As Reported (a) |
Transaction Accounting Adjustments (c) |
Pro Forma | ||||||||||
| Revenues: | ||||||||||||
| Net premiums earned | $ | 299,589 | $ | (52,875 | ) | $ | 246,714 | |||||
| Fee and other income | 1,775 | (80 | ) | 1,695 | ||||||||
| Net investment income | 7,131 | (767 | ) | 6,364 | ||||||||
| Net investment gains | 15,479 | (1,289 | ) | 14,190 | ||||||||
| Total revenues | 323,974 | (55,011 | ) | 268,963 | ||||||||
| Expenses: | ||||||||||||
| Losses and loss adjustment expenses | 216,379 | (32,787 | ) | 183,592 | ||||||||
| Amortization of deferred policy acquisition costs | 64,574 | (11,386 | ) | 53,188 | ||||||||
| Other underwriting and general expenses | 31,715 | (6,209 | ) | 25,506 | ||||||||
| Total expenses | 312,668 | (50,382 | ) | 262,286 | ||||||||
| Income before income taxes | 11,306 | (4,629 | ) | 6,677 | ||||||||
| Income tax expense | 2,974 | (1,572 | ) | 1,402 | ||||||||
| Net income | 8,332 | (3,057 | ) | 5,275 | ||||||||
| Net loss attributable to non-controlling interest | (84 | ) | - | (84 | ) | |||||||
| Net income attributable to |
$ | 8,416 | $ | (3,057 | ) | $ | 5,359 | |||||
| Earnings per common share: | ||||||||||||
| Basic | $ | 0.39 | $ | (0.14 | ) | $ | 0.25 | |||||
| Diluted | $ | 0.39 | $ | (0.14 | ) | $ | 0.25 | |||||
| Share data: | ||||||||||||
| Weighted average common shares outstanding used in basic per common share calculations | 21,424,060 | - | 21,424,060 | |||||||||
| Dilutive securities | 232,366 | - | 232,366 | |||||||||
| Weighted average common shares used in diluted per common share calculations | 21,656,426 | - | 21,656,426 |
Notes to the Unaudited Pro Forma Consolidated Financial Statements
(dollar amounts in thousands)
The following is a description of the Transaction Accounting Adjustments reflected in the unaudited pro forma consolidated financial statements based on preliminary estimates, which may change as additional information is obtained.
| (a) | Represents the Company's Consolidated Balance Sheet as of |
| (b) |
Represents adjustments to record the cash proceeds from the Transaction of |
| (c) | Represents adjustments for the deconsolidation of Westminster's revenues and expenses on a pre-pooling basis to reflect the sale. The income tax effect of the pro forma adjustments was calculated using the enacted statutory rates. |
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