Workflow
FG Financial (FGF) - 2019 Q4 - Annual Report
FGFFG Financial (FGF)2020-03-30 20:07

Business Sale and Transition - The company completed the sale of its Maison Business to FedNat Holding Company for a total consideration of 51.0million,consistingof51.0 million, consisting of 25.5 million in cash and 25.5millioninFedNat′scommonstock[121][122].−Followingthesale,thecompanyplanstooperateasadiversifiedholdingcompanyfocusingonreinsuranceandinvestmentmanagement,withaproposednamechangeto"FundamentalGlobalFinancialCorporation"pendingstockholderapproval[123].−ThecompanyhasclassifiedtheoperationsofMaison,MMI,andClaimCorasdiscontinuedoperationsinitsfinancialstatementsduetothesalecompletedonDecember2,2019[147].−Thecompanycompletedthesaleofitsthreeformerwholly−ownedsubsidiariesonDecember2,2019,classifyingtheMaisonBusinessasdiscontinuedoperations[199].−Thepre−taxgainonthesaleoftheMaisonBusinesswas25.5 million in FedNat's common stock[121][122]. - Following the sale, the company plans to operate as a diversified holding company focusing on reinsurance and investment management, with a proposed name change to "Fundamental Global Financial Corporation" pending stockholder approval[123]. - The company has classified the operations of Maison, MMI, and ClaimCor as discontinued operations in its financial statements due to the sale completed on December 2, 2019[147]. - The company completed the sale of its three former wholly-owned subsidiaries on December 2, 2019, classifying the Maison Business as discontinued operations[199]. - The pre-tax gain on the sale of the Maison Business was 9,083, with a net gain of 7,066aftertax[200].−TotalcashconsiderationreceivedfromthesaleoftheMaisonBusinessamountedto7,066 after tax[200]. - Total cash consideration received from the sale of the Maison Business amounted to 25,500, with additional cash of 18,728forsurplusnotesrepayment[211].−Thecompanyincurredtotalpre−taxreductionsof18,728 for surplus notes repayment[211]. - The company incurred total pre-tax reductions of 41,917 related to the sale of the Maison Business[200]. Financial Performance - Net income for the year ended December 31, 2019, was 311,comparedto311, compared to 804 in 2018, reflecting a decrease of 61.2%[202]. - The net loss from discontinued operations for 2019 was 2,072,contrastingwithagainof2,072, contrasting with a gain of 2,078 in 2018[202]. - Diluted earnings per share from continuing operations for 2019 were 0.16,comparedtoalossof0.16, compared to a loss of 0.40 in 2018[202]. - The company had a net loss attributable to common shareholders of 0.18persharein2019,comparedtoalossof0.18 per share in 2019, compared to a loss of 0.05 per share in 2018[202]. Tax and Deferred Tax - As of December 31, 2019, the company reported a net deferred tax liability of 106,withnovaluationallowanceestablishedfordeferredtaxassets[138].−Thecompany′snetdeferredtaxassetdecreasedfrom106, with no valuation allowance established for deferred tax assets[138]. - The company's net deferred tax asset decreased from 265 million in 2018 to a net deferred liability of 106millionin2019,primarilyduetothesaleoftheMaisonBusiness[164].−Currentincometaxesrecoverableincreasedto106 million in 2019, primarily due to the sale of the Maison Business[164]. - Current income taxes recoverable increased to 1,265 million as of December 31, 2019, compared to a payable of 932millionin2018[163].−Thecompanyrecordedanincometaxexpenseof932 million in 2018[163]. - The company recorded an income tax expense of 267 for the year ended December 31, 2019, compared to an income tax benefit of (518)in2018[197].InvestmentsandSecurities−Thecompanyhassignificantownershipinterests,withKFSIandaffiliatesholdingapproximately20(518) in 2018[197]. Investments and Securities - The company has significant ownership interests, with KFSI and affiliates holding approximately 20% and Fundamental Global Investors, LLC holding about 45% of outstanding shares as of December 31, 2019[120]. - The estimated fair value of the company's 1,773,102 shares of FedNat common stock was 20,320 million as of March 26, 2020[152]. - As of December 31, 2019, the company held 33,492millionintotalequitysecurities,adecreasefrom33,492 million in total equity securities, a decrease from 82,560 million in 2018, reflecting a shift in investment strategy[154]. - The carrying amount of FNHC common stock was 29,487millionasofDecember31,2019,representing88.029,487 million as of December 31, 2019, representing 88.0% of total equity securities[154]. - The company has recorded critical accounting estimates related to loss reserves and the valuation of securities, which could impact reported financial results[129]. - The company’s fixed income and equity securities are recorded at fair value, and any changes in estimated fair value could affect unrealized gains or losses[131]. - The company recorded a write-down of 215 million for an other-than-temporary impairment on a single equity investment for the year ended December 31, 2018, with no write-downs for 2019[161]. Cash Flow and Liquidity - The company reported a net cash outflow from operating activities of 20,638fortheyearendedDecember31,2019,comparedtoaninflowof20,638 for the year ended December 31, 2019, compared to an inflow of 24,794 in 2018[214]. - Cash and cash equivalents at the end of the period were 28,509,downfrom28,509, down from 30,902 at the end of 2018[214]. - The company had a total potential commitment of 935millionrelatedtolimitedliabilityinvestments,withapproximately935 million related to limited liability investments, with approximately 776 million drawn down as of December 31, 2019[155]. - The company received profit distributions of 91millionfromitslimitedliabilityinvestmentsfortheyearendedDecember31,2019[155].ExpensesandDividends−Generalandadministrativeexpensesincreasedby91 million from its limited liability investments for the year ended December 31, 2019[155]. Expenses and Dividends - General and administrative expenses increased by 1,331 to 2,476fortheyearendedDecember31,2019,comparedto2,476 for the year ended December 31, 2019, compared to 1,145 in 2018[193]. - The company declared dividends totaling 1,400fortheSeriesAPreferredStockfortheyearendedDecember31,2019,comparedto1,400 for the Series A Preferred Stock for the year ended December 31, 2019, compared to 1,108 in 2018[183]. - The Series A Preferred Stock has a cumulative dividend rate of 8.00% per annum, equating to 2.00pershareperyear[183].COVID−19Impact−ThecompanyisactivelymonitoringtheimpactoftheCOVID−19pandemiconitsoperations,althoughitdoesnotanticipateanymaterialimpactatthistime[126][128].CorporateGovernance−Thecompanyintendstochangeitstickersymbolsto"FGI"forcommonstockand"FGIPP"forpreferredstockfollowingthenamechange[123].−ThecompanyhasenteredintoanInvestmentAdvisoryAgreementwithanannualfeeof2.00 per share per year[183]. COVID-19 Impact - The company is actively monitoring the impact of the COVID-19 pandemic on its operations, although it does not anticipate any material impact at this time[126][128]. Corporate Governance - The company intends to change its ticker symbols to "FGI" for common stock and "FGIPP" for preferred stock following the name change[123]. - The company has entered into an Investment Advisory Agreement with an annual fee of 100 to provide investment advisory services[181]. - The company increased its non-revolving line of credit to $17,000 as of November 29, 2019[210].