Discontinued Operations and Held for Sale Classification

9 Months Ended

Sep. 30, 2022

Discontinued Operations and Held for Sale Classification [Abstract]

Discontinued Operations and Held for Sale Classification

3. Discontinued Operations and Held for Sale Classification

On October 7, 2022 the Company consummated the sale of substantially all of its excess and surplus  lines operations to Core Specialty Insurance Holdings, Inc. (“Core Specialty”), a specialty property and casualty insurer, for $40.0 million cash consideration, plus an estimated $19.2 million consideration for the acquisition costs associated with certain net unearned premium reserves.  The Company retained the related loss and loss adjustment expenses (“LAE”) reserves of its excess and surplus lines businesses and will experience future cash outflows and change in estimates for these reserves until all claims have been settled. As of September 30, 2022 the expected net liability amount recorded related to these future outflows are  $209.5 million, which are included in reserves for unpaid losses and LAE and reinsurance recoverable in our Consolidated Balance Sheets. At this time, a date in which all claims will be settled is not known. The transaction was comprised of substantially all of nine business units within the Company’s former Specialty Commercial Segment, certain related assets and liabilities, and the immediate transition to Core Specialty of approximately 200 employees who produce and support these lines of businesses. This transaction met the criteria for held-for-sale and discontinued operations accounting. As a result, the  results of operations for the affected excess and surplus lines are included in discontinued operations in our Consolidated Statement of Operations for all periods shown and the corresponding assets and liabilities are presented separately as single line items in the asset and liability sections of the Consolidated Balance Sheet at September 30, 2022.

The following table summarizes income (loss) from discontinued operations (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Gross premiums written	$	113,502	$	113,976	$	331,190	$	316,100
Ceded premiums written		(70,088)		(56,552)		(203,861)		(170,882)
Net premiums written		43,414		57,424		127,329		145,218
Change in unearned premiums		(1,463)		(5,780)		859		(3,778)
Net premiums earned		41,951		51,644		128,188		141,440
Commission and fees		241		230		810		739
Total revenues		42,192		51,874		128,998		142,179
Losses and loss adjustment expenses		31,244		36,157		95,174		98,104
Operating expenses		8,028		9,324		22,894		26,074
Amortization of intangible assets		119		119		357		357
Total expenses		39,391		45,600		118,425		124,535
Income (loss) from discontinued operations before tax		2,801		6,274		10,573		17,644
Income tax expense (benefit) from discontinued operations		1,701		785		6,419		2,209
Net income (loss) from discontinued operations	$	1,100	$	5,489	$	4,154	$	15,435

The following table summarizes assets and liabilities held for sale (in thousands):

		September 30,		December 31,
		2022	2021
		(unaudited)		(unaudited)
ASSETS
Ceded unearned premiums	$	130,608	$	117,226
Prepaid expenses		985		216
Other assets		851		634
Total assets held-for-sale	$	132,444	$	118,076
LIABILITIES
Unearned premiums	$	214,216	$	201,691
Accounts payable and other liabilities		1,312		952
Total liabilities held-for-sale	$	215,528	$	202,643