Discontinued Operations and Disposal Groups

9 Months Ended

Sep. 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 nine months ended September 30, 2024 and 2023 are presented below.


IIC Results from Discontinued Operations
	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
REVENUE:
Gross premiums written	$	12,402	$	9,886	$	31,261	$	27,431
Change in gross unearned premiums	(3,140)		(1,903)		(4,689)		(4,585)
Gross premiums earned	9,262		7,983		26,572		22,846
Ceded premiums earned	(2,256)		(2,439)		(7,025)		(9,464)
Net premiums earned	7,006		5,544		19,547		13,382
Net investment income	539		622		1,563		1,765
Net realized investment losses	(13)		(2)		(66)		(19)

Other revenue	18		18		49		52
Total revenue	7,550		6,182		21,093		15,180
EXPENSES:
Losses and loss adjustment expenses	4,448		3,942		13,767		11,123
Policy acquisition costs	2,052		1,994		6,234		5,819
Operating expenses	328		718		1,091		1,279
General and administrative expenses	126		120		918		471

Total expenses	6,954		6,774		22,010		18,692
Income (loss) before other income	596		(592)		(917)		(3,512)
Other income	—		11		—		11
Income (loss) before income taxes	596		(581)		(917)		(3,501)
Provision (benefit) for income taxes (1)	146		61		(1,238)		(769)
Income (loss) from discontinued operations, net of tax	$	450	$	(642)	$	321	$	(2,732)

(1) 2024 year-to-date results include $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 September 30, 2024 and December 31, 2023 are presented below.


IIC Major Classes of Assets and Liabilities to be Sold
	September 30, 2024		December 31, 2023
ASSETS
Fixed maturities, available-for-sale	$	36,726	$	42,316

Other investments	969		—
Cash and cash equivalents	22,058		14,832

Accrued investment income	324		337
Premiums receivable, net	2,186		1,350
Reinsurance recoverable on paid and unpaid losses, net	260		282
Ceded unearned premiums	5,514		3,846
Deferred policy acquisition costs, net	3,942		3,892
Intangible assets, net	775		775
Other assets	1,783		1,418
Total assets	$	74,537	$	69,048

LIABILITIES
Unpaid losses and loss adjustment expenses	$	21,356	$	22,483
Unearned premiums	21,589		16,900
Reinsurance payable on premiums	2,376		2,312
Payments outstanding	2,344		1,410
Accounts payable and accrued expenses	757		501
Operating lease liability	13		37
Other liabilities	689		487

Total Liabilities	$	49,124	$	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 Florida Office of Insurance Regulation 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 nine months ended September 30, 2024 and 2023 are presented below.


UPC Results from Discontinued Operations
	Three Months Ended September 30,				Nine Months Ended September 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	—		851		—		37,268
Policy acquisition costs	—		—		—		(1,522)
Operating expenses	—		153		—		4,656
General and administrative expenses	—		2,872		—		5,431
Interest expense	—		—		—		22
Total expenses	—		3,876		—		45,855


Loss before income taxes	—		(3,876)		—		(8,190)
Provision (benefit) for income taxes	—		(71)		—		(285)
Loss from discontinued operations, net of tax	$	—	$	(3,805)	$	—	$	(7,905)

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 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 and equipment of $8,095,000 at December 31, 2023 was also reclassed at March 31, 2024, before current quarter amortization.

In addition to the item related to capitalized software noted above, there were no non-cash transactions during the nine months ended September 30, 2024. During the three and nine months ended September 30, 2023, amortization attributed to discontinued operations totaled $2,141,000 and $2,680,000, respectively.