Technology Sector Trader’s Alert – 1347 Property Insurance Holdings Inc (NASDAQ:PIH)

On Thursday, Shares of 1347 Property Insurance Holdings Inc (NASDAQ:PIH) gained 0.69% to $7.25. Trading volume recorded for this company was about 8,749 shares as contrast to its average volume of 9,167 shares. The stock’s intraday range was $7.22 to $7.55. The company has the total of 5.96M outstanding shares, while its market capitalization is about $42.61M.

1347 Property Insurance Holdings, Inc. (PIH), a property and casualty insurance holding company offering specialty insurance to individual and commercial customers in Louisiana and Texas through its wholly-owned partner, Maison Insurance Company, recently declared financial results for its fourth quarter and fiscal year ended December 31, 2016. As formerly declared, Maison also recently secured a certificate of authority in the State of Florida.

Quarterly Financial Review:

Premiums

Gross premiums written remained flat at $11.80M for both the quarters ended December 31, 2016 and 2015, with growth in Texas offset by a reduction of business in Louisiana. Gross premiums earned raised 23.70% to $13.10M for the quarter ended December 31, 2016 contrast with $10.60M for the quarter ended December 31, 2015 as a result of the consistent increase in policies in force the Company has practiced throughout the year. As of December 31, 2016, about 74% of the Company’s 33,800 policies in force were from voluntary policies obtained from the Company’s independent agent network, with the remainder obtained from take-out policies from Louisiana Citizens Property Insurance Company. Moreover, the Company has assumed both commercial and personal lines wind/hail only business in Texas through agreements with Brotherhood Mutual Insurance Company and the Texas Windstorm Insurance Association (“TWIA”). This accounted for $0.70M and $0.20M in gross earned premium for the quarters ended December 31, 2016 and 2015, respectively.

Net premiums earned raised 4.3% to $7.60M for the quarter ended December 31, 2016 contrast with $7.30M for the quarter ended December 31, 2015.

Losses and Loss Adjustment Expenses

The gross loss ratio for the quarter ended December 31, 2016 was 26.40% contrast to 29.10% for the quarter ended December 31, 2015. The net loss ratio for the quarter ended December 31, 2016 was 19.20% contrast to 40.90% for the quarter ended December 31, 2015. The Company practiced a more typical and relatively calm fourth quarter 2016 as contrast with the same period a year ago, where the Company practiced a number of wind and hail events.

Amortization of Deferred Policy Acquisition Costs

Amortization of deferred policy acquisition costs for the fourth quarter of 2016 was $2.30M, a $0.50M increase over $1.80M in the fourth quarter of 2015. As a percentage of gross premiums earned this expense raised 100 basis points to 17.90% for the fourth quarter of 2016, contrast to 16.90% for the fourth quarter of 2015 because of a boost in the effective rate of the premium taxes paid in the State of Louisiana.

General and Administrative Expenses

General and administrative expenses for the fourth quarter of 2016 were $1.90M, relatively unchanged as compared to $1.80M in the fourth quarter of 2015. General and administrative expenses as a percentage of gross premiums earned declined to 14.80% for the fourth quarter of 2016 contrast to 17.30% for the prior year period, because of a one-time impairment charge on goodwill incurred in the fourth quarter of 2015 related to its acquisition of Claimcor, LLC.

Net Income (Loss)

In the fourth quarter of 2016, the Company stated net income of $1.60M, contrast to a net income of $0.60M in the prior year period. The Company stated net income of $0.27 per diluted share during the fourth quarter of 2016, based on about 6.0M weighted average shares outstanding, contrast to a net income of $0.09 per diluted share during the prior year period, based on about 6.20M weighted average shares outstanding.

Balance Sheet / Investment Portfolio Highlights

As of December 31, 2016, the Company held cash, cash equivalents and investments with a carrying value of about $71.0M. As of December 31, 2016, the Company’s investment in fixed maturities issued by the U.S. Government, government agencies and high quality corporate issuers, counting short-term investments comprised 94% of the investment portfolio.

Yearly Financial Review:

Premiums

Gross premiums written raised 17.0% to $51.30M for the year ended December 31, 2016 contrast with $43.90M for the year ended December 31, 2015. Gross premiums earned raised 28.4% to $48.90M for the year ended December 31, 2016 contrast to $38.10M for the year ended December 31, 2015. The year over year increase was due mainly to a boost in the number of policies written, as pricing remained relatively stable. Net premiums earned raised 17.4% to $30.4 million for the year ended December 31, 2016 contrast with $25.90M for the year ended December 31, 2015.

Losses and Adjustment Expenses

The gross loss ratio for the year ended December 31, 2016 was 64.90%, up 37.60 points from the prior year period from 27.3%. The net loss ratio raised 15.50 points to 53.80% for the year ended December 31, 2016 contrast to 38.30% for the year ended December 31, 2015. The increase in annual loss ratios was driven by three CAT storms which the Company practiced in the first and third quarters of 2016. Catastrophe losses (net of recoveries from its reinsurers) accounted for about $9.80M or 32.20% of its net earned premium for the year ended December 31, 2016, as compared to $2.30M or 8.9% of its net earned premium for the year ended December 31, 2015.

Amortization of Deferred Policy Acquisition Costs

Amortization of deferred policy acquisition costs for the year ended December 31, 2016 was $8.50M, a $1.90M increase from $6.6 million for the year ended December 31, 2015. Expressed as a percentage of gross premiums earned amortization was relatively consistent at 17.30% and 17.20%, respectively.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2016 were $6.90M as compared to $7.30M for the year ended December 31, 2015. This decrease resulted from a decrease in the outside professional fees incurred year over year as a result of bringing in-house many of the services which the Company had formerly outsourced. Furthermore, the Company incurred a one-time charge in 2015 for $0.20M associated with the impairment of intangible assets related to its acquisition of Claimcor, for which there was no comparable charge in 2016.

Net Income (Loss)

For the year ended December 31, 2016, the Company stated net income of $11 thousand, contrast to a net loss of $1.7 million stated in the prior year.

Subsequent Activity:

As declared in a press release dated March 7, 2017, the Florida Office of Insurance Regulation approved the Company’s partner, Maison, to write property and casualty insurance in the State of Florida as an admitted carrier. Administration anticipates proceeding with entry into Florida by building the business organically, using a network of high-quality independent agents. Potential future opportunities related to take-out business will also be evaluated as recent challenges observed in the Florida market can be more fully analyzed.

Doug Raucy, Chief Executive Officer, stated, “2016 was a very challenging year as we dealt with severe weather events in both our first and third quarters. Regardless of these headwinds, we were able to record positive net income for the year as our sound claim servicing and well-structured reinsurance program enabled us to mitigate our losses through these severe weather events. When weather conditions were more encouraging in the second and fourth quarters, our business was able to produce solidly-profitable results. Although we expect to incur weather claims and even catastrophe events as a part of our business, we do look at 2016 as a year of extremely negative weather for us contrast with most historical models. Absent the three CAT events we saw during the year, our business would have produced net income of about $6.50M, or roughly $1.07 in earnings per share.”

Mr. Raucy continued, “We kept on growing our book of business through the year, finishing with about 33,800 policies in force at year-end, for a year over year gain of roughly 19%. Our book of business in Texas is a particular bright spot, as we are seeing an acceleration there, which is assisting to offset a temporary slowdown in the Louisiana market following a year that saw many homeowners displaced. As a result, general insurance activity in Louisiana remains subdued for the time being. Looking ahead to 2017 we look forward to see continued growth in Texas and are also hopeful that underwriting activity in Louisiana will begin to normalize. Also, as we declared on March 7, we have received approval to enter the Florida market. We plan to take an appropriate amount of time to build out our independent agent network there, while we work to structure the best insurance products and identify the areas and markets which offer the best opportunity for success. We don’t suppose to begin writing policies in Florida until the fourth quarter of 2017 at the earliest and thus do not anticipate that Florida will have a material contribution to 2017 results. We are strictly monitoring several factors in every market in which we have authority to write business, and following our recently re-evaluated planned plan are focused on maximizing risk adjusted return on deployed capital both in terms of our insurance operations and investment activities.”

Technical Analysis:

The stock price is going up to its 52-week low with 36.28% and lower from its 52-week high with -8.23%. The stock has shown its weekly performance of 2.11% and monthly performance stands at 8.21%. The stock price is moving up from its 200 days moving average with 4.88% and upward from 50 days moving average with 2.79%.

Analyst recommendation for this stock stands at 0.00.

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