Discontinued Operations and Disposal Groups

3 Months Ended

Mar. 31, 2024

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. In addition, activities provided by our entities, SCS, SLS and UIM, related directly to supporting the business conducted by UPC have been included. The remaining assets for the balance sheet as of December 31, 2023 are presented as held for disposal, and the results of UPC and activities related directly to supporting the business conducted by UPC are presented as discontinued operations for all periods presented.

The results from discontinued operations for the three months ended March 31, 2024 and 2023 are presented below.


Results From Discontinued Operations
	Three Months Ended March 31,
		2024		2023
REVENUE:
Gross premiums written		$	—	$	(120,608)
Change in gross unearned premiums		—		198,154
Gross premiums earned		—		77,546
Ceded premiums earned		—		(48,203)
Net premiums earned		—		29,343
Net investment income		—		2,182
Net realized investment gains		—		1,343
Net unrealized gains on equity securities		—		2,080
Other revenue		—		2,717
Total revenue		—		37,665
EXPENSES:
Losses and loss adjustment expenses		—		35,226
Policy acquisition costs		—		(1,352)
Operating expenses		—		3,996
General and administrative expenses		—		1,284
Interest expense		—		22
Total expenses		—		39,176
Loss before other income		—		(1,511)
Other income		—		—
Loss before income taxes		—		(1,511)
Provision (benefit) for income taxes		—		16
Loss from discontinued operations, net of tax		$	—	$	(1,527)

As of February 28, 2023, the Company completed the disposal of its former subsidiary, UPC. This divestiture resulted in a gain of $238,440,000 for the three months ended March 31, 2023. This gain was driven by the negative equity position of UPC prior to the divestiture.

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


Major Classes of Assets and Liabilities Disposed
	Closing (1)
ASSETS
Fixed maturities, available-for-sale	$	1,380
Equity securities	272
Other investments	12,882
Cash and cash equivalents	224,824
Restricted cash	7,758
Accrued investment income	875
Premiums receivable, net	22,733
Reinsurance recoverable on paid and unpaid losses, net	548,929
Ceded unearned premiums	75,262
Deferred policy acquisition costs, net	(89)
Other assets	51,625
Total assets	$	946,451

LIABILITIES
Unpaid losses and loss adjustment expenses	$	920,431
Unearned premiums	98,655
Reinsurance payable on premiums	12,612
Payments outstanding	144,238
Accounts payable and accrued expenses	1,361
Other liabilities	3,476
Notes payable, net	4,118
Total Liabilities	$	1,184,891

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

During the first quarter of 2024, due to a change in circumstances, the Company evaluated its capitalized software, previously classified as held for disposal at December 31, 2023. As a result of this evaluation, it was determined that the use case of the software by the Company has shifted. The Company has reclassified this asset and the associated amortization expense in the current period presented within this footnote in accordance with GAAP guidance, resulting in amortization expense for the capitalized software being captured in continuing operations prospectively. Property & equipment of $8,095,000 at December 31, 2023 was also reclassed at March 31, 2024, before current quarter amortization.

As a result of the reclassification in the first quarter of 2024, described above, the Company held no assets or liabilities for disposal at March 31, 2024. At December 31, 2023, assets held for disposal consisted of property & equipment totaling $8,095,000. There were no liabilities held for disposal at December 31, 2023. In addition, other than the item related to capitalized software noted above, there were no non-cash transactions during the three months ended March 31, 2024. During the three months ended March 31, 2023, amortization attributed to discontinued operations totaled $252,000.