Trean Insurance Group Reports Fourth Quarter and Full Year 2022 Results
Trean Insurance Group (Nasdaq: TIG) reported Q4 and full-year 2022 results, showcasing a significant rise in gross written premiums by 13.2% to $173.5 million. However, the company faced a net loss of $91.4 million for Q4, primarily due to a $76.1 million noncash goodwill impairment. Adjusted net loss was $11.4 million, contrasting with an adjusted net income of $2.0 million in Q4 2021. The combined ratio worsened to 121.8%, indicating increased underwriting losses. Total stockholders' equity dropped to $315 million from $421.9 million a year prior. A merger with Altaris is expected to finalize in H1 2023, pending shareholder and regulatory approvals.
- Gross written premiums increased by 13.2% to $173.5 million in Q4 2022.
- Net earned premiums rose by 44.1% to $83.1 million in Q4 2022.
- Q4 2022 net loss was $91.4 million, primarily due to a $76.1 million goodwill impairment.
- Full Year 2022 net loss was $66.0 million compared to a net income of $19.3 million in 2021.
- Combined ratio deteriorated to 121.8% in Q4 2022 from 100.3% in Q4 2021.
WAYZATA, Minn., March 09, 2023 (GLOBE NEWSWIRE) -- Trean Insurance Group, Inc. (Nasdaq: TIG) (“Trean” or the “Company”), a leading provider of products and services to the specialty insurance market, today reported results for the fourth quarter and full year ended December 31, 2022.
Fourth Quarter and Full Year 2022 Highlights
- Announced definitive merger agreement with affiliates of Altaris, LLC (collectively with its affiliates, “Altaris”), which currently owns approximately
47% of Trean’s outstanding common stock. The transaction is expected to close during the first half of 2023, subject to certain closing conditions, including obtaining approval of a majority of the outstanding shares of Trean common stock held by stockholders that are not affiliated with Altaris and receiving certain regulatory approvals. - Gross written premiums were
$173.5 million in the fourth quarter, a$20.3 million , or13.2% , increase compared to the same prior-year period. Full Year 2022 gross written premiums were$651.3 million , a$17.1 million , or2.7% , increase compared to the same prior-year period. - Net earned premiums were
$83.1 million in the fourth quarter, a$25.4 million , or44.1% , increase compared to the same prior-year period. Full Year 2022 net earned premiums were$284.6 million , a$85.9 million , or43.3% , increase compared to the same prior-year period. - Net loss was
$91.4 million , or$1.78 per diluted share, compared to net income of$1.2 million , or$0.02 per diluted share in the same prior-year period. Full Year 2022 net loss was$66.0 million , or$1.29 per diluted share, compared to net income of$19.3 million , or$0.38 per diluted share, in the same prior-year period. Net loss in the fourth quarter and Full Year 2022 was primarily driven by a$76.1 million noncash impairment to goodwill. - Adjusted net loss (1) was
$11.4 million in the fourth quarter, or$0.22 per diluted share, compared to adjusted net income of$2.0 million , or$0.04 per diluted share in the same prior-year period. Full Year 2022 adjusted net income was$7.9 million , or$0.15 per diluted share, compared to$22.1 million , or$0.43 per diluted share, in the same prior-year period. - Underwriting loss was
$18.1 million in the fourth quarter, compared to a loss of$0.1 million in the same prior-year period. Full Year 2022 underwriting loss was$5.5 million , compared to underwriting income of$13.2 million in the same prior-year period. - The Company’s fourth quarter loss and expense ratios were
94.1% and27.7% , respectively, compared to76.4% and23.9% , respectively, in the same prior-year period. Full Year 2022 loss and expense ratios were71.6% and30.3% , respectively, compared to65.8% and27.5% , respectively, in the same prior-year period. - Combined ratio was
121.8% for the fourth quarter, compared to100.3% for the same prior-year period. Full Year 2022 combined ratio was101.9% , compared to93.3% for the same prior-year period. - Fourth quarter return on equity of (101.8)%; adjusted return on equity (1) of (12.8)%; return on tangible equity of (195.6)%; and adjusted return on tangible equity(1) of (24.5)%. Full Year 2022 return on equity of (17.9)%; adjusted return on equity (1) of
2.1% ; return on tangible equity of (34.0)%; and adjusted return on tangible equity of4.1% .
(1) Adjusted net income (loss), adjusted diluted earnings per share, adjusted return on equity, adjusted return on tangible equity and underwriting income are non-GAAP financial measures. See discussion of “Key Metrics” below.
Underwriting Results
Gross written premiums were
Gross unearned premiums increased
Net earned premiums increased
General and administrative expenses were
Net loss was
Underwriting loss of
Investment Results
Net investment income was
Cash and invested assets consist primarily of fixed maturities, equity securities and cash equivalents. The Company’s investment portfolio totaled
Other
Other revenue was
Stockholders’ Equity and Returns
Total stockholders’ equity was
Conference Call and Guidance
Due to the pending transaction with Altaris announced on December 16, 2022, the Company will not host a conference call in conjunction with its fourth quarter 2022 earnings release. Please visit the Investor Relations section of the Company’s website at https://investors.trean.com for the latest releases and information. In addition, the Company will not provide guidance on its financial outlook for the first quarter 2023 or the full year 2023 as a result of the pending transaction.
Key Metrics
The Company discusses certain key financial and operating metrics, described below, which provide useful information about its business and the operational factors underlying its financial performance.
Underwriting income (loss) is a non-GAAP financial measure defined as income (loss) before taxes excluding net investment income, investment revaluation gains, net realized capital gains or losses, noncash intangible asset amortization, stock compensation and goodwill impairment, interest expense, other revenue and other income and expenses. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of underwriting income to income before taxes in accordance with GAAP.
Adjusted net income (loss) is a non-GAAP financial measure defined as net income excluding the impact of various specific events, noncash intangible asset amortization, stock compensation and goodwill impairment, other expenses and gains or losses that the Company does not believe reflect its core operating performance, which items may have a disproportionate effect in a given period, affecting comparability of the Company’s results across periods. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted net income to net income in accordance with GAAP.
Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to net earned premiums.
Expense ratio, expressed as a percentage, is the ratio of general and administrative expenses to net earned premiums.
Combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under
Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period.
Adjusted return on equity is a non-GAAP financial measured defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted return on equity to return on equity in accordance with GAAP.
Tangible stockholders’ equity is defined as stockholders’ equity less goodwill and other intangible assets.
Return on tangible equity is a non-GAAP financial measure defined as net income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity during the period.
Adjusted return on tangible equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted return on tangible equity to return on equity in accordance with GAAP.
Forward-Looking Statements
This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that are not historical or current facts. These statements may discuss the Company’s net income, cash flow, financial condition, impairments, expenditures, growth, strategies, plans, achievements, capital structure, organizational structure, market opportunities and general market and industry conditions. Such forward-looking statements can be identified by words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “predict,” “project,” “believe,” “seek,” “outlook,” “future,” “will,” “would,” “should,” “could,” “may,” “can have,” “likely” and similar terms. Forward-looking statements are based on management’s current expectations and assumptions about future events. These statements are only predictions and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements if the underlying assumptions prove to be incorrect or as a result of risks, uncertainties, and other factors, including the impact of the COVID-19 pandemic on the business and operations of the Company, our program partners and other business relations. Other factors that may cause such differences include the risks described in the Company’s filings with the U.S. Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. These forward-looking statements speak only as of the date on which they are made. Except as required by applicable securities laws, the Company disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, changes in assumptions or otherwise. Investors are cautioned not to place undue reliance on the forward-looking statements contained in this press release or in other filings and public statements of the Company.
About Trean Insurance Group, Inc.
Trean Insurance Group, Inc. (Nasdaq: TIG) provides products and services to the specialty insurance market. Trean underwrites specialty casualty insurance products both through its program partners and its own managing general agencies. Trean also provides its program partners with a variety of services including issuing carrier services, claims administration and reinsurance brokerage. Trean is licensed to write business across 49 states and the District of Columbia. For more information, please visit www.trean.com.
Contacts
Investor Relations
investor.relations@trean.com
(952) 974-2260
Trean Insurance Group, Inc. and Subsidiaries
Condensed Consolidated and Combined Statements of Operations
(in thousands, except for share and per share amounts)
(unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Revenues | |||||||||||||||
Gross written premiums | $ | 173,528 | $ | 153,259 | $ | 651,303 | $ | 634,164 | |||||||
(Increase) decrease in gross unearned premiums | (8,102 | ) | 2,925 | (9,074 | ) | (61,911 | ) | ||||||||
Gross earned premiums | 165,426 | 156,184 | 642,229 | 572,253 | |||||||||||
Ceded earned premiums | (82,370 | ) | (98,536 | ) | (357,605 | ) | (373,573 | ) | |||||||
Net earned premiums | 83,056 | 57,648 | 284,624 | 198,680 | |||||||||||
Net investment income | 4,951 | 2,159 | 10,087 | 8,721 | |||||||||||
Net realized gains (losses) | (26 | ) | (23 | ) | 285 | 49 | |||||||||
Other revenue | 1,101 | 1,557 | 8,246 | 10,240 | |||||||||||
Total revenue | 89,082 | 61,341 | 303,242 | 217,690 | |||||||||||
Expenses | |||||||||||||||
Losses and loss adjustment expenses | 78,150 | 44,037 | 203,877 | 130,772 | |||||||||||
General and administrative expenses | 22,975 | 13,760 | 86,210 | 54,706 | |||||||||||
Other expenses | 3,081 | - | 3,349 | 845 | |||||||||||
Intangible asset amortization | 1,500 | 1,500 | 5,998 | 5,826 | |||||||||||
Noncash stock compensation | 477 | 424 | 1,496 | 1,522 | |||||||||||
Interest expense | 1,464 | 414 | 3,270 | 1,685 | |||||||||||
Goodwill impairment | 76,053 | - | 76,053 | - | |||||||||||
Total expenses | 183,700 | 60,135 | 380,253 | 195,356 | |||||||||||
Gains (losses) on embedded derivatives | (2,439 | ) | 357 | 12,024 | 2,226 | ||||||||||
Other income | 30 | 28 | 106 | 219 | |||||||||||
Income (loss) before taxes | (97,027 | ) | 1,591 | (64,881 | ) | 24,779 | |||||||||
Income tax expense | (5,667 | ) | 347 | 1,074 | 5,449 | ||||||||||
Net income (loss) | $ | (91,360 | ) | $ | 1,244 | $ | (65,955 | ) | $ | 19,330 | |||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | (1.78 | ) | $ | 0.02 | $ | (1.29 | ) | $ | 0.38 | |||||
Diluted | $ | (1.78 | ) | $ | 0.02 | $ | (1.29 | ) | $ | 0.38 | |||||
Weighted average shares outstanding: | |||||||||||||||
Basic | 51,221,594 | 51,175,996 | 51,203,370 | 51,162,293 | |||||||||||
Diluted | 51,221,594 | 51,175,996 | 51,203,370 | 51,173,450 | |||||||||||
Key Metrics
(in thousands, except for percentages)
(unaudited)
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Key metrics: | |||||||||||||||
Underwriting income (loss) (1) | $ | (18,069 | ) | $ | (149 | ) | $ | (5,463 | ) | $ | 13,202 | ||||
Adjusted net income (loss) (1) | $ | (11,446 | ) | $ | 2,029 | $ | 7,860 | $ | 22,132 | ||||||
Loss ratio | 94.1 | % | 76.4 | % | 71.6 | % | 65.8 | % | |||||||
Expense ratio | 27.7 | % | 23.9 | % | 30.3 | % | 27.5 | % | |||||||
Combined ratio | 121.8 | % | 100.3 | % | 101.9 | % | 93.3 | % | |||||||
Return on equity | (101.8 | )% | 1.2 | % | (17.9 | )% | 4.6 | % | |||||||
Adjusted return on equity (1) | (12.8 | )% | 1.9 | % | 2.1 | % | 5.3 | % | |||||||
Return on tangible equity (1) | (195.6 | )% | 2.4 | % | (34.0 | )% | 9.7 | % | |||||||
Adjusted return on tangible equity (1) | (24.5 | )% | 3.9 | % | 4.1 | % | 11.0 | % | |||||||
(1) Adjusted net income, adjusted return on equity, return on tangible equity, adjusted return on tangible equity and underwriting income are non-GAAP financial measures. See “Reconciliation of Non-GAAP Financial Measures” below for a reconciliation to the applicable GAAP measure. | |||||||||||||||
Trean Insurance Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
December 31, 2022 | December 31, 2021 | ||||||
Assets | (unaudited) | ||||||
Fixed maturities, available for sale | $ | 552,243 | $ | 471,061 | |||
Equity securities, at fair value | 35,041 | 969 | |||||
Total investments | 587,284 | 472,030 | |||||
Cash and cash equivalents | 107,991 | 129,577 | |||||
Restricted cash | 1,083 | 407 | |||||
Accrued investment income | 3,726 | 2,344 | |||||
Premiums and other receivables | 160,282 | 141,920 | |||||
Income taxes receivable | 5,841 | 460 | |||||
Reinsurance recoverable | 408,522 | 377,241 | |||||
Prepaid reinsurance premiums | 124,269 | 129,411 | |||||
Deferred policy acquisition cost, net | 18,858 | 13,344 | |||||
Property and equipment, net | 7,151 | 7,632 | |||||
Right of use asset | 2,764 | 4,530 | |||||
Deferred tax asset | 5,958 | - | |||||
Goodwill | 66,294 | 142,347 | |||||
Intangible assets, net | 67,117 | 73,114 | |||||
Other assets | 14,799 | 8,658 | |||||
Total assets | $ | 1,581,939 | $ | 1,503,015 | |||
Liabilities | |||||||
Unpaid loss and loss adjustment expenses | $ | 632,910 | $ | 544,320 | |||
Unearned premiums | 229,112 | 219,940 | |||||
Funds held under reinsurance agreements | 241,291 | 199,410 | |||||
Reinsurance premiums payable | 50,861 | 45,130 | |||||
Accounts payable, accrued expenses and other liabilities | 32,609 | 29,448 | |||||
Lease liability | 3,063 | 4,976 | |||||
Deferred tax liability | - | 7,520 | |||||
Debt | 77,074 | 30,362 | |||||
Total liabilities | 1,266,920 | 1,081,106 | |||||
Commitments and contingencies | |||||||
Stockholders' Equity | |||||||
Preferred stock, | - | - | |||||
Common stock, | 512 | 512 | |||||
Additional paid-in capital | 290,095 | 288,623 | |||||
Retained earnings | 62,435 | 128,390 | |||||
Accumulated other comprehensive income (loss) | (38,023 | ) | 4,384 | ||||
Total stockholders' equity | 315,019 | 421,909 | |||||
Total liabilities and stockholders' equity | $ | 1,581,939 | $ | 1,503,015 | |||
Supplemental Table of Other Revenue Components
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Other Revenue | |||||||||||||||
Brokerage | $ | 309 | $ | 822 | $ | 5,705 | $ | 7,036 | |||||||
Managing general agent fees | 75 | 196 | 326 | 603 | |||||||||||
Third-party administrator fees | 520 | 417 | 1,358 | 1,608 | |||||||||||
Consulting and other fee-based revenue | 197 | 122 | 857 | 993 | |||||||||||
Total other revenue | $ | 1,101 | $ | 1,557 | $ | 8,246 | $ | 10,240 | |||||||
Supplemental Table of Net Investment Income Components
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Fixed maturities | $ | 3,127 | $ | 1,597 | $ | 9,316 | $ | 6,331 | ||||||||
Income on funds held investments | 1,273 | 555 | 3,668 | 2,338 | ||||||||||||
Equity securities | 677 | 7 | 1,708 | 48 | ||||||||||||
Unrealized losses on equity securities | (255 | ) | - | (4,797 | ) | - | ||||||||||
Interest on cash and short-term investments | 129 | - | 192 | 4 | ||||||||||||
Total net investment income | $ | 4,951 | $ | 2,159 | $ | 10,087 | $ | 8,721 | ||||||||
Supplemental Table of Gains (Losses) on Embedded Derivative Components
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Change in fair value of embedded derivatives | $ | (1,166 | ) | $ | 905 | $ | 15,682 | $ | 4,666 | |||||||
Effect of net investment income on funds held investments | (1,273 | ) | (555 | ) | (3,668 | ) | (2,338 | ) | ||||||||
Effect of realized (gains) losses on funds held investments | - | 7 | 10 | (102 | ) | |||||||||||
Total gains (losses) on embedded derivatives | $ | (2,439 | ) | $ | 357 | $ | 12,024 | $ | 2,226 | |||||||
Supplemental Table of Net G&A Components
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
Direct commissions | $ | 29,175 | $ | 27,660 | $ | 114,866 | $ | 105,965 | ||||||||
Ceding commissions | (25,218 | ) | (31,140 | ) | (102,759 | ) | (120,688 | ) | ||||||||
Net commissions | 3,957 | (3,480 | ) | 12,107 | (14,723 | ) | ||||||||||
Insurance-related expense | 5,092 | 5,936 | 22,790 | 20,732 | ||||||||||||
G&A operating expenses | 13,926 | 11,304 | 51,313 | 48,697 | ||||||||||||
Total G&A expense | $ | 22,975 | $ | 13,760 | $ | 86,210 | $ | 54,706 | ||||||||
G&A operating expense - % of GWP | 8.0 | % | 7.4 | % | 7.9 | % | 7.7 | % | ||||||||
Retention rate(1) | 50.2 | % | 36.9 | % | 44.3 | % | 34.7 | % | ||||||||
Direct commission rate(2) | 17.6 | % | 17.7 | % | 17.9 | % | 18.5 | % | ||||||||
Ceding commission rate(3) | 30.6 | % | 31.6 | % | 28.7 | % | 32.3 | % | ||||||||
(1) Net earned premiums as a percentage of gross earned premiums. | ||||||||||||||||
(2) Direct commissions as a percentage of gross earned premiums. | ||||||||||||||||
(3) Ceding commissions as a percentage of ceded earned premiums. | ||||||||||||||||
Reconciliation of Non-GAAP Financial Measures
Underwriting income (loss)
The Company defines underwriting income (loss) as income (loss) before taxes excluding net investment income, noncash changes in fair value of embedded derivatives, investment revaluation gains, net realized capital gains or losses, noncash intangible asset amortization, stock compensation and goodwill impairment, interest expense, other revenue and other income and expenses. Underwriting income (loss) represents the pre-tax profitability of the Company’s underwriting operations and allows management to evaluate the Company’s underwriting performance without regard to investment income, intangible asset amortization, noncash stock compensation, interest expense, other revenue and other income and expenses. The Company uses this metric because the Company believes it gives management and other users of the Company’s financial information useful insight into the Company’s underwriting business performance by adjusting for these expenses and sources of income. Underwriting income (loss) should not be viewed as a substitute for net income (loss) calculated in accordance with GAAP, and other companies may define underwriting income differently.
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Net income (loss) | $ | (91,360 | ) | $ | 1,244 | $ | (65,955 | ) | $ | 19,330 | |||||
Income tax expense | (5,667 | ) | 347 | 1,074 | 5,449 | ||||||||||
Income (loss) before taxes | (97,027 | ) | 1,591 | (64,881 | ) | 24,779 | |||||||||
Other revenue | (1,101 | ) | (1,557 | ) | (8,246 | ) | (10,240 | ) | |||||||
Change in fair value of embedded derivatives | 2,439 | (357 | ) | (12,024 | ) | (2,226 | ) | ||||||||
Net investment income | (4,951 | ) | (2,159 | ) | (10,087 | ) | (8,721 | ) | |||||||
Net realized losses (gains) | 26 | 23 | (285 | ) | (49 | ) | |||||||||
Other expenses | 3,081 | - | 3,349 | 845 | |||||||||||
Goodwill impairment | 76,053 | - | 76,053 | - | |||||||||||
Interest expense | 1,464 | 414 | 3,270 | 1,685 | |||||||||||
Intangible asset amortization | 1,500 | 1,500 | 5,998 | 5,826 | |||||||||||
Noncash stock compensation | 477 | 424 | 1,496 | 1,522 | |||||||||||
Other income | (30 | ) | (28 | ) | (106 | ) | (219 | ) | |||||||
Underwriting income (loss) | $ | (18,069 | ) | $ | (149 | ) | $ | (5,463 | ) | $ | 13,202 | ||||
Adjusted net income (loss)
The Company defines adjusted net income (loss) as net income (loss) excluding the impact of certain items, including noncash intangible asset amortization, stock compensation and goodwill impairment, noncash changes in fair value of embedded derivatives, other expenses and gains or losses that the Company believes do not reflect its core operating performance, which items may have a disproportionate effect in a given period, affecting comparability the Company’s results across periods. The Company calculates the tax impact only on adjustments that would be included in calculating the Company’s income tax expense using an expected effective tax rate for the applicable years. The Company uses adjusted net income (loss) as an internal performance measure in the management of its operations because the Company believes it gives its management and other users of its financial information useful insight into the Company’s results of operations and underlying business performance by eliminating the effects of these items. Adjusted net income (loss) should not be viewed as a substitute for net income (loss) calculated in accordance with GAAP, and other companies may define adjusted net income (loss) differently.
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Net income (loss) | $ | (91,360 | ) | $ | 1,244 | $ | (65,955 | ) | $ | 19,330 | |||||
Intangible asset amortization | 1,500 | 1,500 | 5,998 | 5,826 | |||||||||||
Noncash stock compensation | 477 | 424 | 1,496 | 1,522 | |||||||||||
Change in fair value of embedded derivatives | 1,166 | (905 | ) | (15,682 | ) | (4,666 | ) | ||||||||
Unrealized losses on equity securities | 255 | - | 4,797 | - | |||||||||||
Realized (gain) loss on sale of investment | (15 | ) | - | (1,415 | ) | 112 | |||||||||
Other expenses | 3,081 | - | 3,349 | 845 | |||||||||||
Goodwill impairment | 76,053 | - | 76,053 | - | |||||||||||
Total adjustments | 82,517 | 1,019 | 74,596 | 3,639 | |||||||||||
Tax impact of adjustments | $ | (2,603 | ) | (234 | ) | $ | (781 | ) | (837 | ) | |||||
Adjusted net income (loss) | $ | (11,446 | ) | $ | 2,029 | $ | 7,860 | $ | 22,132 | ||||||
Adjusted return on equity
The Company defines adjusted return on equity as adjusted net income (loss) expressed on an annualized basis as a percentage of average beginning and ending stockholders’ equity during the period. The Company uses adjusted return on equity as an internal performance measure in the management of its operations because the Company believes it gives management and other users of the Company’s financial information useful insight into the Company’s results of operations and underlying business performance by adjusting for items that the Company believes do not reflect its core operating performance and that may diminish comparability across periods. Adjusted return on equity should not be viewed as a substitute for return on equity calculated in accordance with GAAP, and other companies may define adjusted return on equity differently.
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Adjusted return on equity calculation: | |||||||||||||||
Numerator: adjusted net income (loss) | $ | (11,446 | ) | $ | 2,029 | $ | 7,860 | $ | 22,132 | ||||||
Denominator: average stockholders' equity | 359,038 | 422,101 | 368,464 | 416,008 | |||||||||||
Adjusted return on equity | (12.8 | )% | 1.9 | % | 2.1 | % | 5.3 | % | |||||||
Return on equity | (101.8 | )% | 1.2 | % | (17.9 | )% | 4.6 | % | |||||||
Return on tangible equity and adjusted return on tangible equity
The Company defines tangible stockholders’ equity as stockholders’ equity less goodwill and other intangible assets. The Company defines return on tangible equity as net income (loss) expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity during the period. The Company defines adjusted return on tangible equity as adjusted net income (loss) expressed on an annualized basis as a percentage of average beginning and ending tangible stockholders’ equity during the period. The Company regularly evaluates acquisition opportunities and have historically made acquisitions that affect stockholders’ equity. The Company uses return on tangible equity and adjusted return on tangible equity as internal performance measures in the management of the Company’s operations because the Company believes they give management and other users of its financial information useful insight into the Company’s results of operations and underlying business performance by adjusting for the effects of acquisitions on the Company’s stockholders’ equity and, in the case of adjusted return on tangible equity, by adjusting for items that the Company believes do not reflect its core operating performance and that may diminish comparability across periods. Return on tangible equity and adjusted return on tangible equity should not be viewed as substitutes for return on equity calculated in accordance with GAAP, and other companies may define return on tangible equity and adjusted return on tangible equity differently.
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Return on tangible equity calculation: | |||||||||||||||
Numerator: net income (loss) | $ | (91,360 | ) | $ | 1,244 | $ | (65,955 | ) | $ | 19,330 | |||||
Denominator: | |||||||||||||||
Average stockholders' equity | 359,038 | 422,101 | 368,464 | 416,008 | |||||||||||
Less: Average goodwill and other intangible assets | 172,187 | 216,108 | 174,436 | 215,709 | |||||||||||
Average tangible stockholders' equity | 186,851 | 205,993 | 194,028 | 200,299 | |||||||||||
Return on tangible equity | (195.6 | )% | 2.4 | % | (34.0 | )% | 9.7 | % | |||||||
Return on equity | (101.8 | )% | 1.2 | % | (17.9 | )% | 4.6 | % | |||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
(unaudited, in thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||
Adjusted return on tangible equity calculation: | |||||||||||||||
Numerator: adjusted net income (loss) | $ | (11,446 | ) | $ | 2,029 | $ | 7,860 | $ | 22,132 | ||||||
Denominator: average tangible stockholders' equity | 186,851 | 205,993 | 194,028 | 200,299 | |||||||||||
Adjusted return on tangible equity | (24.5 | )% | 3.9 | % | 4.1 | % | 11.0 | % | |||||||
Return on equity | (101.8 | )% | 1.2 | % | (17.9 | )% | 4.6 | % | |||||||
FAQ
What were Trean Insurance Group's Q4 2022 premiums?
What caused the net loss for Trean Insurance Group in Q4 2022?
What is the expected timeline for Trean's merger with Altaris?
How did Trean Insurance Group's combined ratio change in Q4 2022?