1347 Property Insurance Holdings, Inc. :PIH-US: Earnings Analysis: Q4, 2016 By the Numbers : March 22, 2017

1347 Property Insurance Holdings, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of 1347 Property Insurance Holdings, Inc. – Third Point Reinsurance Ltd., Allied World Assurance Company Holdings, AG, Erie Indemnity Company Class A and State Auto Financial Corporation (TPRE-US, AWH-US, ERIE-US and STFC-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 8.13 million, Net Earnings of USD 1.59 million.
  • Year-on-year change in operating cash flow of 179.45% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 8.13 7.63 7.89 8.6 7.56
Revenue Growth (%YOY) 7.62 14.1 21.71 34.36 39.23
Earnings (mil) 1.59 -1.81 1.34 -1.12 0.58
Earnings Growth (%YOY) 174.96 -1653.4 1172 44.91 -16.69
Net Margin (%) 19.58 -23.66 16.98 -12.97 7.66
EPS 0.27 -0.3 0.22 -0.18 0.09
Return on Equity (%) 13.9 -15.57 11.4 -9.49 4.87
Return on Assets (%) 6.8 -7.67 5.98 -5.26 2.8

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Market Share Versus Profits

Revenues History
Earnings History

PIH-US‘s change in revenue this period compared to the same period last year of 7.62% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PIH-US is holding onto its market share. Also, for comparison purposes, revenues changed by 6.55% and earnings by 188.15% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

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Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s premiums earned as a percent of total revenues showed no year-on-year improvement and went from 96.14% to 93.20%. In spite of this, the company’s earnings went up – influenced primarily by the improvement in loss ratio from 40.86% to 19.20%. For comparison, premiums earned as a percent of revenues were 93.50% and the loss ratio 90.29% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

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Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

PIH-US‘s change in operating cash flow of 179.45% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins after interest from 16.56% to 29.48% and (2) One-time items. The company’s pretax margins are now 28.34% compared to 11.42% for the same period last year.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for 1347 Property Insurance Holdings, Inc.

Company Profile

1347 Property Insurance Holdings, Inc. operates as a property and casualty insurance holding company. It offers homeowners insurance, manufactured home insurance and dwelling fire insurance. The company was founded on October 2, 2012 and is headquartered in Tampa, FL.

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