XML 51 R7.htm IDEA: XBRL DOCUMENT v2.4.0.6
Significant Accounting Policies
 3 Months Ended
Mar. 31, 2013
Significant Accounting Policies [Abstract]  
Significant Accounting Policies
2.   Significant Accounting Policies

The Company reported Significant Accounting Policies in its Annual Report on Form 10-K for the year ended December 31, 2012. The following are new or revised disclosures or disclosures required on a quarterly basis.

Concentrations of Credit Risk. The Company is exposed to concentrations of credit risk, consisting principally of cash and cash equivalents, restricted cash and cash equivalents, debt securities, premiums receivable, prepaid reinsurance premiums, reinsurance receivable and reinsurance recoverable.

 

The Company maintains depository relationships with SunTrust Bank, Wells Fargo Bank N.A., and Deutsche Bank Securities, Inc. and invests excess cash with custodial institutions that invest primarily in money market accounts consisting of short-term U.S. Treasury securities. These accounts are held primarily by SunTrust Bank and Deutsche Bank Securities, Inc. The Company regularly evaluates the financial strength of the institutions with which it maintains depository relationships. SunTrust Bank has the following ratings from each of the rating agencies: BBB from Standard and Poor’s Rating Services and A3 from Moody’s Investors Service, Inc. Wells Fargo Bank N.A. has the following ratings from each of the rating agencies: AA- from Standard and Poor’s Rating Services and Aa3 from Moody’s Investors Service, Inc. Deutsche Bank Securities, Inc. has the following ratings from each of the rating agencies: A+ from Standard and Poor’s Rating Services and A2 from Moody’s Investors Service, Inc.

Restricted cash and cash equivalents are maintained in money market accounts consisting of U.S. Treasury and government agency securities.

The following table presents the amount of cash and cash equivalents as of the periods presented (in thousands):

 

                                                                 
    Cash and cash equivalents  
    As of March 31, 2013     As of December 31, 2012  

Institution

   Cash     Money
Market Funds		     Total     % by
institution		     Cash     Money
Market Funds		     Total     % by
institution		  

U. S. Bank IT&C

   $ —       $ —       $ —         —       $ —       $ 40,463     $ 40,463       11.6 % 

SunTrust Bank

     4,996       14,292       19,288       4.0 %      773       1,055       1,828       0.5 % 

SunTrust Bank Escrow Services

     —         449,928       449,928       93.1 %      —         300,843       300,843       86.6 % 

Wells Fargo Bank N.A.

     3,666       —         3,666       0.8 %      1,991       3       1,994       0.6 % 

Deutsche Bank Securities, Inc.

     433       9,561       9,994       2.1 %      1,796       468       2,264       0.7 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 9,095     $ 473,781     $ 482,876       100.0 %    $ 4,560     $ 342,832     $ 347,392       100.0 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The following table presents the amount of restricted cash and cash equivalents as of the periods presented (in thousands):

 

                                                                 
    Restricted cash and cash equivalents  
    As of March 31, 2013     As of December 31, 2012  

Institution

   Funds
held in
Trust		     State
Deposits		     Total     % by
institution		     Funds
held in
Trust		     State
Deposits		     Total     % by
institution		  

U. S. Bank IT&C

   $ —       $ 800     $ 800       30.2 %    $ —       $ 800     $ 800       2.4 % 

Bank of New York Mellon Trust Co.

     53       —         53       2.0 %      —         —         —         —    

Florida Department of Financial Services

     —         1,800       1,800       67.8 %      —         32,209       32,209       97.6 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

   $ 53     $ 2,600     $ 2,653       100.0 %    $ —       $ 33,009     $ 33,009       100.0 % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Concentrations of credit risk with respect to premiums receivable are limited due to the large number of individuals comprising the Company’s customer base. However, the majority of the Company’s revenues are currently derived from products and services offered to customers in Florida, which could be adversely affected by economic downturns, an increase in competition or other environmental changes.

In order to reduce credit risk for amounts due from reinsurers, the Insurance Entities seek to do business with financially sound reinsurance companies and regularly evaluate the financial strength of all reinsurers used. Everest Reinsurance Company, the reinsurer to which the Insurance Entities ceded the most risk through May 31, 2012, has the following ratings from each of the rating agencies: A+ from A.M. Best Company; A+ from Standard and Poor’s Rating Services; and A1 from Moody’s Investors Service, Inc. Odyssey Reinsurance Company, the reinsurer to which the Insurance Entities cede the most risk effective June 1, 2012, has the following ratings from each of the rating agencies: A from A.M. Best Company; A- from Standard and Poor’s Rating Services; and A3 from Moody’s Investors Service, Inc.

 

The following table presents the unsecured amounts due from the Company’s reinsurers whose aggregate balance exceeded 3% of the Company’s stockholders’ equity as of the periods presented (in thousands):

 

                 
    As of  
    March 31,     December 31,  

Reinsurer

   2013     2012  

Everest Reinsurance Company

   $ 35,812     $ 44,392  

Florida Hurricane Catastrophe Fund

     13,043       31,970  

Odyssey Reinsurance Company

     196,311       192,096  
   

 

 

    

 

 

  

Total (1)

   $ 245,166     $ 268,458  
   

 

 

    

 

 

  

 

(1) Amounts represent prepaid reinsurance premiums, reinsurance receivables, and net recoverables for paid and unpaid losses, including incurred but not reported (“IBNR”) reserves, loss adjustment expenses, and offsetting reinsurance payables.

Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) updated its guidance to the Comprehensive Income Topic 220 of the FASB Accounting Standards Codification (“ASC”) and in February 2013, the FASB further amended such topic. This February 2013 guidance requires disclosure about amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement of operations or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This guidance is to be applied prospectively to interim and annual reporting periods beginning after December 15, 2012. The Company adopted this guidance effective January 1, 2013. The adoption of this guidance will result in additional disclosure but did not impact the Company’s results of operations, cash flows or financial position. The updated guidance provided by the FASB in June 2011 increases the prominence of items reported in other comprehensive income by eliminating the option of presenting components of other comprehensive income as part of the statement of changes in stockholders’ equity. The guidance requires that total comprehensive income (including both the net income components and other comprehensive income components) be reported in either a single continuous statement of comprehensive income (the approach currently used in the Company’s financial statements), or two separate but consecutive statements. This guidance is to be applied retrospectively to fiscal years (and interim periods within those years) beginning after December 15, 2011. The Company adopted this guidance effective January 1, 2012. The adoption did not have an impact on the presentation of the Company’s financial statements and notes herein, as the Company has presented amounts of other comprehensive income consistent with this updated guidance.

In May 2011, the FASB updated its guidance related to the Fair Value Measurement, Topic 820 of the ASC, to achieve common fair value measurement and disclosure requirements with International Financial Reporting Standards. The amendments change the wording used to describe many of the requirements under GAAP, to clarify the intent of application of existing fair value measurement and disclosure requirements, and to change particular principles or requirements for measuring and disclosing fair value measurements. The amendments are to be applied prospectively to interim and annual reporting periods beginning after December 15, 2011. The Company adopted this guidance effective January 1, 2012. The adoption of this guidance resulted in additional disclosure but did not impact the Company’s results of operations, cash flows or financial position.

In September 2010, the FASB issued guidance related to accounting for costs associated with acquiring or renewing insurance contracts. This guidance defines allowable deferred policy acquisition costs as costs incurred by insurance entities for the successful acquisition of new and renewal contracts. Such costs result directly from and are essential to the contract transaction(s) and would not have been incurred by the insurance entity had the contract(s) not occurred. This guidance is effective for periods beginning after December 15, 2011, with early adoption permitted. The Company adopted this guidance prospectively effective January 1, 2012. Under the new guidance, the Company’s net deferred policy acquisition costs were reduced from $13.0 million to $11.4 million, a difference of 13% at December 31, 2011. The resulting $1.6 million difference was charged directly to earnings during the three months ended March 31, 2012. This charge represents a charge-off of capitalized costs existing at December 31, 2011, which would have been amortized to earnings within a twelve-month period under the old guidance.