FG Financial (FGF) - 2022 Q4 - Annual Report

Investment Performance - As of December 31, 2022, the carrying value of the investment in FG Merchant Partners, LP was approximately $5.7 million, an increase from $3.8 million as of December 31, 2021[134] - For the twelve months ended December 31, 2022, the company recorded equity method gains from FGMP of approximately $4.0 million[134] - The carrying value of the investment in the Fund as of December 31, 2022, was approximately $16.8 million, compared to $9.7 million as of December 31, 2021[135] - The company’s total investments decreased from $14,495,000 in 2021 to $889,000 in 2022, primarily due to the sale of FedNat common stock[128] - The company’s total investment in companies without readily determinable fair value was approximately $2.3 million as of December 31, 2022, up from $0.5 million in 2021[138] - Distributions received from these investments were $230,000 in 2022, compared to $101,000 in 2021, reflecting a 128.7% increase[139] Reinsurance and Reserves - Total cash collateral on deposit to support all reinsurance treaties was approximately $9.3 million as of December 31, 2022, compared to $4.4 million in 2021, representing a 111.4% increase[144] - As of December 31, 2022, reinsurance balances receivable were $9.3 million, up from $3.9 million in 2021, indicating a 138.5% increase[147] - The balance of loss and loss adjustment expense reserves increased to $4.4 million as of December 31, 2022, from $2.1 million in 2021, marking a 106.5% increase[153] Financial Performance - Net premiums earned increased to approximately $13.0 million in 2022 from $4.9 million in 2021, primarily due to additional reinsurance agreements signed during the year[162] - Net investment income rose to $6.8 million in 2022 compared to $2.5 million in 2021, driven by improved equity method earnings[163] - Other income increased to approximately $320,000 in 2022 from $186,000 in 2021, reflecting fees earned under investment advisory agreements[164] - Net losses and loss adjustment expenses increased to $7.5 million in 2022 from $4.3 million in 2021, attributed to additional reinsurance agreements[165] - General and administrative expenses decreased to $8.4 million in 2022 from $9.2 million in 2021, mainly due to lower legal and professional fees[166] - The company reported a net income of approximately $1.1 million in 2022, a significant improvement from a net loss of $7.3 million in 2021[171] Cash Flow and Capital Structure - Cash and cash equivalents at the end of the period decreased to $3.0 million in 2022 from $15.5 million in 2021, with net cash used by operating activities of approximately $11.0 million[173] - The company issued common stock generating proceeds of approximately $3.7 million in 2022, offset by $1.8 million in dividends on Series A Preferred Shares[175] - The weighted average common shares outstanding increased to 8,030,106 in 2022 from 5,212,772 in 2021, impacting loss per share calculations[171] Tax and Deferred Assets - The company recorded gross deferred tax assets of $9.1 million and deferred tax liabilities of $3.6 million as of December 31, 2022, with a net deferred tax asset of $3.6 million[148] - The company has approximately $20.5 million of capital loss carryforward available to offset future capital gains, expiring in December 2026 if not utilized[148] - The company has net operating loss carryforwards of approximately $19.9 million for federal income tax purposes, with a portion expiring between 2039 and 2041[148] - The company recorded a valuation allowance of $252,000 against deferred tax assets in 2022, reducing the net deferred income tax asset to $0[171] Stock Transactions - The company sold its remaining FedNat common stock shares in October 2022, with the previous carrying amount being $1,421,000 as of December 31, 2021[130][128] - As of December 31, 2022, the company held Hagerty common stock with a carrying amount of $841,000[129] - The company completed a public offering of 2,750,000 shares of common stock in June 2022, raising approximately $3.8 million[158]