Discontinued Operations and Disposal Groups

3 Months Ended

Mar. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Income Statement Disclosure

3) DISCONTINUED OPERATIONS

On August 25, 2022, we announced that our former subsidiary UPC had filed plans for withdrawal in the states of Florida, Louisiana, and Texas and intended to file a plan for withdrawal in the state of New York. All filed plans entailed non-renewing personal lines policies in these states. Additionally, we announced that Demotech, an insurance rating agency, notified UPC of its intent to withdraw UPC's Financial Stability Rating. On December 5, 2022, the FLOIR issued Consent Order No. 303643-22- CO that provided for the administrative supervision and approval of the plan of run-off for UPC (the "Consent Order"). The Consent Order provided formal approval of UPC's Plan of Run-Off (the "Plan") to facilitate a solvent wind down of its affairs in an orderly fashion. On February 10, 2023, we announced that a solvent run-off of UPC was unlikely, driven by Hurricane Ian losses which exhausted UPC's reinsurance coverage. On February 27, 2023, UPC was placed into receivership with the DFS which divested our ownership of UPC.

In the first quarter of 2023, the assets and liabilities of UPC were divested of. The assets and liabilities for the balance sheet as of December 31, 2022 are reclassified as held for disposal retrospectively, and the results of UPC are presented as discontinued operations for all periods presented.

The results from discontinued operations for the three months ended March 31, 2023 and 2022 are presented below.


Results From Discontinued Operations
	Three Months Ended March 31,
	2023		2022
REVENUE:
Gross premiums written	$	(120,608)	$	146,828
Change in gross unearned premiums	198,154		59,726
Gross premiums earned	77,546		206,554
Ceded premiums earned	(48,203)		(163,443)
Net premiums earned	29,343		43,111
Net investment income	2,182		1,075
Net realized investment gains (losses)	1,343		(1,806)
Net unrealized gains (losses) on equity securities	2,080		(1,498)
Other revenue	71		170
Total revenue	35,019		41,052
EXPENSES:
Losses and loss adjustment expenses	33,978		64,691
Policy acquisition costs	8,361		24,070
Operating expenses	513		1,645
General and administrative expenses	240		570
Interest expense	22		20
Total expenses	43,114		90,996
Loss before other income	(8,095)		(49,944)
Other income (loss)	—		9
Loss before income taxes	(8,095)		(49,935)
Provision (benefit) for income taxes	(9,217)		(12,031)
Income (loss) from discontinued operations, net of tax	$	1,122	$	(37,904)

As of February 28, 2023, the Company completed the disposal of its former subsidiary, UPC. This divestiture resulted in a gain of $229,183,000 for the period. This gain was driven by the negative equity position of UPC.

The major classes of assets and liabilities transferred as a result of the transaction as of the date of transfer and December 31, 2022 are presented below.


Major Classes of Assets and Liabilities Disposed
	Closing (1)		December 31, 2022
ASSETS
Fixed maturities, available-for-sale	1,380		171,781
Equity securities	272		23,363
Other investments	12,882		12,952
Cash and cash equivalents	224,824		158,990
Restricted cash	7,758		7,730
Accrued investment income	875		1,457
Premiums receivable, net	22,733		46,736
Reinsurance recoverable on paid and unpaid losses, net	548,929		834,863
Ceded unearned premiums	75,262		122,533
Deferred policy acquisition costs, net	(89)		(2,046)
Other assets	53,675		33,548
Total assets	$	948,501	$	1,411,907

LIABILITIES
Unpaid losses and loss adjustment expenses	920,431		1,103,980
Unearned premiums	98,655		286,842
Reinsurance payable on premiums	12,612		29,394
Payments outstanding	144,238		213,058
Accounts payable and accrued expenses	1,361		(872)
Other liabilities	(3,731)		5,692
Notes payable, net	4,118		4,118
Total Liabilities	$	1,177,684	$	1,642,212

(1) The Company divested its ownership on February 27, 2023, the date the DFS was appointed as receiver of the entity.

The discontinued operations of the Company does not have any depreciation, amortization, capital expenditures or other noncash items for the periods in which the results of discontinued operations are presented.