Discontinued Operations and Disposal Groups

6 Months Ended

Jun. 30, 2024

Discontinued Operations and Disposal Groups [Abstract]

Disposal Groups, Income Statement Disclosure

3) DISCONTINUED OPERATIONS

On May 9, 2024, the Company entered into the Sale Agreement with Forza in which ACIC will sell and Forza will acquire 100% of the issued and outstanding stock of IIC. The aggregate purchase price for the shares will be equal to IIC's GAAP shareholders' equity on the closing date. Closing is subject to customary closing conditions, including NYDFS approval of Forza's application for acquisition of control, and NYDFS approval of a new rate and form filing.

The results from IIC's discontinued operations for the three and six months ended June 30, 2024 and 2023 are presented below.


IIC Results From Discontinued Operations
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
REVENUE:
Gross premiums written	$	6,002	$	7,063	$	18,859	$	17,545
Change in gross unearned premiums	2,756		1,299		(1,549)		(2,682)
Gross premiums earned	8,758		8,362		17,310		14,863
Ceded premiums earned	(2,316)		(3,207)		(4,769)		(7,025)
Net premiums earned	6,442		5,155		12,541		7,838
Net investment income	533		597		1,024		1,143
Net realized investment losses	(53)		(17)		(53)		(17)

Other revenue	15		18		31		34
Total revenue	6,937		5,753		13,543		8,998
EXPENSES:
Losses and loss adjustment expenses	5,887		4,670		9,319		7,181
Policy acquisition costs	1,984		2,019		4,182		3,825
Operating expenses	291		228		763		561
General and administrative expenses	134		169		792		351

Total expenses	8,296		7,086		15,056		11,918


Loss before income taxes	(1,359)		(1,333)		(1,513)		(2,920)
Provision (benefit) for income taxes (1)	(1,340)		(441)		(1,384)		(830)
Loss from discontinued operations, net of tax	$	(19)	$	(892)	$	(129)	$	(2,090)

(1) Includes $1,007,000 in tax benefit related to discontinued operations outside of IIC stand-alone results.

The major classes of IIC assets and liabilities as of June 30, 2024 and December 31, 2023 are presented below.


IIC Major Classes of Assets and Liabilities Disposed
	June 30, 2024		December 31, 2023
ASSETS
Fixed maturities, available-for-sale	$	38,428	$	42,316


Cash and cash equivalents	19,773		14,832

Accrued investment income	337		337
Premiums receivable, net	1,579		1,350
Reinsurance recoverable on paid and unpaid losses, net	289		282
Ceded unearned premiums	7,425		3,846
Deferred policy acquisition costs, net	3,555		3,892
Intangible assets, net	775		775
Other assets	1,544		1,418
Total assets	$	73,705	$	69,048

LIABILITIES
Unpaid losses and loss adjustment expenses	$	20,915	$	22,483
Unearned premiums	18,450		16,900
Reinsurance payable on premiums	7,069		2,312
Payments outstanding	2,380		1,410
Accounts payable and accrued expenses	423		501
Operating lease liability	20		37
Other liabilities	783		487

Total Liabilities	$	50,040	$	44,130

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 were 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.

The results from UPC's discontinued operations, including the supporting activities provided by SCS, SLS and UIM for the three and six months ended June 30, 2024 and 2023 are presented below.


UPC Results From Discontinued Operations
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		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	—		1,191		—		36,417
Policy acquisition costs	—		(170)		—		(1,522)
Operating expenses	—		507		—		4,503
General and administrative expenses	—		1,275		—		2,559
Interest expense	—		—		—		22
Total expenses	—		2,803		—		41,979


Loss before income taxes	—		(2,803)		—		(4,314)
Provision (benefit) for income taxes	—		(230)		—		(214)
Loss from discontinued operations, net of tax	$	—	$	(2,573)	$	—	$	(4,100)

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 UPC transaction as of the date of transfer are presented below.


UPC 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 the fact pattern, 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.

In addition, other than the item related to capitalized software noted above, there were no non-cash transactions during the six months ended June 30, 2024. During the three and six months ended June 30, 2023, amortization attributed to discontinued operations totaled $236,000 and $488,000, respectively.