BETHESDA, Md., May 3, 2024 /PRNewswire/ -- Forge Group, Inc. (the "Company", "we", "us", "our", or "Forge") (OTC Pink: FIGP), a specialist commercial auto insurance business, recently announced its financial results for the twelve months ended December 31, 2023. For additional information, please refer to the Company's 2023 Annual Report on Form 1-K.
The Company has provided certain selected financial data in the table below for (i) the six months ended December 31, 2023 ("2H23") and 2022 ("2H22"), respectively and (ii) the twelve months ended December 31, 2023 ("2023") and 2022 ("2022"), respectively:
Selected Financial Data | |||||
For the 6 months ended | For the 12 months ended | ||||
December 31, | December 31, | December 31, | December 31, | ||
2023 | 2022 | 2023 | 2022 | ||
(dollars in thousands except for per-share items) | (unaudited) | (unaudited) | (audited) | (audited) | |
Gross premiums written | 11,664 | 7,451 | 20,210 | 12,150 | |
Net premiums written | 11,071 | 7,103 | 18,949 | 11,525 | |
Net premiums earned | 8,294 | 5,028 | 15,009 | 9,402 | |
Underwriting income (loss) 1 | (315) | (1,041) | (2,080) | (2,839) | |
Operating income (loss) before income taxes 2 | 435 | (341) | (605) | (1,682) | |
Operating ratios | |||||
Loss ratio 3 | 41.1 % | 44.1 % | 50.6 % | 48.0 % | |
Expense ratio 4 | 62.7 % | 76.6 % | 63.2 % | 82.2 % | |
Combined ratio 5 | 103.8 % | 120.7 % | 113.9 % | 130.2 % | |
Less: Investment ratio 6 | -9.0 % | -13.9 % | -9.8 % | -12.3 % | |
Operating ratio 7 | 94.8 % | 106.8 % | 104.0 % | 117.9 % | |
Adjusted book value per common share equivalent 8 | $19.76 | $19.79 | |||
Adjusted tangible book value per common share equivalent 9 | $17.46 | $17.44 |
Footnotes
2H23 financial highlights include:
2023 financial highlights include:
The Company commented:
2023 was another transformational year for Forge. With the mutual-to-stock conversion and related transactions in the rearview mirror, the Forge team was hard at work executing our long-term business plan. In mid-2023, we successfully launched our new fully integrated digital insurance operating platform. As of year-end 2023, all our "legacy" business (e.g., policies, claims, etc.) had been converted to the new platform. This project was a major undertaking, and the Forge team displayed incredible resilience and focus. Since the launch of the new platform, we have seen considerable productivity gains ? and we believe we are in the early innings of realizing a return on this investment. Toward the end of 2023, we began the rollout of our digital agent portal (Forge FIRE). The agent portal will make it easy for our distribution partners to quote business with Forge, allow us to "activate" a large pool of contracted distribution partners, and will be particularly helpful as we focus on growing in the "small business class" segment in 2024.
We continued to increase the number of individual insurance agencies with which we have a distribution contract ("contracted distribution partners") during 2023. The number of contracted distribution partners is an important metric that we track, as we believe it is a good leading indicator for prospective policy application submissions and, in turn, premium revenue. As we have grown our force of contracted distribution partners, we have worked to convert new contracted distribution partners to "active distribution partners". We define "active distribution partners" as those agencies that have submitted business that has been written by the Company. In 2023, we had 136 active distribution partners, compared to 54 active distribution partners in 2022, which represents an increase of 152%.
We expect the growth in the number of active distribution partners will continue to drive growth in premium revenue, as it did in 2023. During 2023, we generated gross premiums written of $20.2 million, which represents an increase of $8.0 million, or 66.3%, compared to 2022. Pursuant to GAAP, written premium is earned ratably over the term of the policy contract; however, this metric (written premium) provides a helpful indicator as to the increase in our overall business production in 2023. In short, we have meaningfully expanded the "top of the funnel" and expect the growth in business production to continue.
Importantly, our loss ratio remained well within our long-term targets and well-below that of the U.S. commercial auto industry generally. Our loss ratio for 2023 was 50.6% compared to that of the U.S. commercial auto industry of approximately 80%. We believe our two-pronged strategy (operating in certain selected states and certain selected business class segments) is sound and sustainable and, coupled with our evolving product sophistication, will allow us to continue to deliver loss ratios within our long-term targets.
In 2023, we made considerable progress toward reaching our first financial "milestone", which is profitability on a pre-tax operating basis (i.e., an operating ratio of below 100%). We continue to focus on leveraging our fixed costs through profitable premium growth. Our expense ratio was 63.2% in 2023 compared to 82.2% in 2022, which represents a decline of 19.0%. We generated a pre-tax operating loss of $605 thousand in 2023 compared to a pre-tax operating loss of $1.7 million in 2022, which represents an improvement of $1.1 million. We generated a pre-tax operating profit of $435 thousand in 2H23 compared to a pre-tax operating loss of $341 thousand in 2H22, which represents an improvement of $775 thousand. Because we are a small company at this stage, our loss ratio, which is an important driver of our overall profitability, is less predictable, particularly over shorter measurement periods (e.g., 6 months). However, we are pleased to report that, due to the work done over the past 24 months, we have made tangible progress toward reaching our first financial "milestone" of sustainable operating profitability.
During 2023, we repurchased 6,768 of our outstanding shares of common stock at a price of $10.35 per share. Additionally, in December 2023, our Board of Directors approved a stock repurchase plan pursuant to which we may repurchase up to $1,000,000 of our outstanding shares of common stock during 2024 (the "2024 Stock Repurchase Plan"). Pursuant to our 2024 Stock Repurchase Plan, on February 27, 2024, we repurchased 16,000 of our outstanding shares of common stock at a price of $8.75 per share. Share repurchases at these prices are accretive to our adjusted book value per share, which was $19.76 as of December 31, 2023, and, we believe, per-share value. As a reminder, insiders, affiliates, and our employee stock ownership plan (the "ESOP") beneficially owned approximately 66% of our shares as of December 31, 2023.
In conclusion, we are very proud of the progress we made in 2023 and are excited to report financial results that are consistent with our long-term plan. We expect 2024 to be another exciting year for Forge and look forward to providing our shareholders with more updates as we move through the year.
About Forge
Forge Group, Inc. (the "Company", "we", or "Forge") is a commercial auto insurance specialist. We principally focus on delivering commercial auto insurance products to small business owners and operators that operate in (i) certain business class segments and (ii) certain geographic markets in the U.S. Additional information is available on the Company's website at: www.forgeinsurance.com.
Forward-Looking Statements
This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as the Company or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions, or goals are also forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements. Please review the risks factors and uncertainties identified in the Company's 2023 Annual Report on Form 1-K, Semi-Annual Reports on Form 1-SA and our other filings with the Securities and Exchange Commission. Any forward-looking statement made by the Company in this document speaks only as of the date of this release. Except as required by applicable law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or developments or otherwise.
Note Regarding Financial Measures
Investors should be aware that accounting principles generally accepted in the United States prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when we establish reserves for one or more contingencies. Also, our regular reserve reviews may result in adjustments of varying magnitude as additional information regarding claims activity becomes known. Reported results, therefore, may be volatile in certain accounting periods.
Special Note Regarding Non-GAAP Financial Measures
We believe that the non-GAAP financial measures in this report, including those in the Exhibits, provide important and useful information for our shareholders. We use these non-GAAP measures for internal planning purposes and to evaluate our ongoing operations and performance. These non-GAAP financial measures are presented as supplemental information and not as alternatives to any GAAP financial measures.
Exhibits
Exhibit 1: Summary Income Statement
The "Summary Income Statement" exhibit is a non-GAAP presentation of "Net income (loss) attributable to Forge Group, Inc." and is based on the Company's Consolidated Statements of Earnings and Comprehensive Earnings. This exhibit separates the Company's core insurance operations (including investment income earned on income-generating securities) from the following other activities and items: real estate operations, net realized and unrealized gains (losses) on investment securities, and certain non-recurring items (primarily related to the Company's conversion, offering and related transactions).
For the 6 months ended | For the 12 months ended | ||||
December 31, | December 31, | December 31, | December 31, | ||
2023 | 2022 | 2023 | 2022 | ||
(dollars in thousands) | (unaudited) | (unaudited) | (audited) | (audited) | |
Net premiums earned | 8,294 | 5,028 | 15,009 | 9,402 | |
Losses and loss adjustment expenses | 3,405 | 2,219 | 7,597 | 4,511 | |
Policy acquisition costs and other operating expenses | 4,581 | 3,579 | 8,822 | 7,011 | |
Related party commissions | (0) | - | (0) | 410 | |
Lease expense | 103 | 195 | 209 | 282 | |
Sublease income | (84) | (92) | (166) | (140) | |
Depreciation and amortization (excl. real estate) 1 | 134 | 164 | 267 | 273 | |
Service fee and other income (expense) | 469 | 4 | 359 | (106) | |
Underwriting expenses | 5,204 | 3,850 | 9,492 | 7,731 | |
Underwriting gain (loss) | (315) | (1,041) | (2,080) | (2,839) | |
Net investment income | 749 | 700 | 1,474 | 1,157 | |
Operating income (loss) before income taxes | 435 | (341) | (605) | (1,682) | |
Net realized and unrealized gains (losses) 2 | (724) | (105) | (245) | (1,973) | |
Income (loss) from real estate operations 3 | 70 | (89) | (14) | (176) | |
Non-recurring items 4 | - | (5) | - | (7,653) | |
Income (loss) before income taxes | (219) | (539) | (865) | (11,485) | |
Income tax expense (benefit) | (224) | 259 | (254) | 636 | |
Net income (loss) | 5 | (798) | (611) | (12,121) | |
Net loss (gain) attributable to noncontrolling interest | 13 | (3) | 7 | 13 | |
Net income (loss) attributable to Forge Group, Inc. | 19 | (801) | (604) | (12,108) |
Footnotes
Exhibit 2: Adjusted Book Value and Tangible Book Value Per Common Share Equivalent
"Adjusted book value per common share equivalent" and "adjusted tangible book value per common share equivalent" are non-GAAP metrics and are not intended to be an expression of the Company's opinion of the value of its common stock.
As of | ||||
June 30, | December 31, | June 30, | December 31, | |
(dollars in thousands except for per-share items) | 2022 | 2022 | 2023 | 2023 |
Calculation of Numerators | ||||
Total equity | 47,495 | 45,932 | 45,504 | 45,874 |
Less: Noncontrolling interest | (705) | (708) | (713) | (700) |
GAAP book value | 46,791 | 45,224 | 44,791 | 45,174 |
Less: Accumulated other comprehensive (income) loss (AOCI) | 1,993 | 2,810 | 2,644 | 2,152 |
GAAP book value excluding AOCI | 48,783 | 48,035 | 47,434 | 47,326 |
Add: Theoretical proceeds from exercise of options 1 | 1,800 | 1,800 | 2,014 | 1,228 |
Add: Non-GAAP real estate adjustments, net 2 | 3,217 | 3,663 | 3,834 | 3,828 |
Adjusted book value (numerator) | 53,800 | 53,497 | 53,283 | 52,383 |
Less: Goodwill and other intangibles | (6,507) | (6,343) | (6,210) | (6,076) |
Adjusted tangible book value (numerator) | 47,293 | 47,154 | 47,073 | 46,307 |
Calculation of Denominator | ||||
Common shares outstanding | 2,050 | 2,050 | 2,050 | 2,050 |
Common shares issuable upon conversion of Series A Preferred Stock 3 | 458 | 458 | 458 | 458 |
Common shares underlying restricted stock awards outstanding 4 | 15 | 15 | 30 | 23 |
Common shares issuable upon exercise of outstanding options 5 | 180 | 180 | 200 | 120 |
Common share equivalents (denominator) | 2,703 | 2,703 | 2,738 | 2,652 |
Non-GAAP Measures | ||||
Adjusted book value per common share equivalent 6 | $19.90 | $19.79 | $19.46 | $19.76 |
Adjusted tangible book value per common share equivalent 7 | $17.49 | $17.44 | $17.19 | $17.46 |
Footnotes
Exhibit 3: Non-GAAP Real Estate Adjustments
The "Non-GAAP Real Estate Adjustments" contains certain non-GAAP adjustments and metrics intended to present the value of the Company's interest in its real estate investments at historical cost. These non-GAAP adjustments and metrics are not intended to be an expression of the Company's opinion of the value of its real estate investments.
As of | ||||
June 30, | December 31, | June 30, | December 31, | |
(dollars in thousands) | 2022 | 2022 | 2023 | 2023 |
Real estate held for the production of income, net | 30,539 | 30,181 | 29,849 | 29,543 |
Add: Leases in place | 2,916 | 2,767 | 2,635 | 2,512 |
Add: Deferred rent 1 | 2,120 | 2,215 | 2,294 | 2,356 |
Real assets (GAAP) | 35,575 | 35,164 | 34,779 | 34,411 |
Add: Accumulated depreciation 2 | 4,905 | 5,288 | 5,620 | 5,926 |
Add: Accumulated amortization 3 | 1,915 | 2,064 | 1,950 | 1,652 |
Less: Deferred rent | (2,120) | (2,215) | (2,294) | (2,356) |
Real assets (Non-GAAP) 4 | 40,275 | 40,300 | 40,054 | 39,633 |
Notes payable, net (GAAP) | 27,249 | 26,961 | 26,650 | 26,325 |
Add: Unamortized finance costs | 1,216 | 1,168 | 1,121 | 1,074 |
Notes payable (Non-GAAP) 5 | 28,465 | 28,129 | 27,771 | 27,399 |
Net real assets (Non-GAAP) 6 | 11,811 | 12,171 | 12,283 | 12,234 |
Less: Net real assets (GAAP) 7 | (8,325) | (8,203) | (8,129) | (8,086) |
Non-GAAP adjustments 8 | 3,485 | 3,968 | 4,154 | 4,148 |
Less: Noncontrolling interest 9 | (268) | (306) | (320) | (319) |
Non-GAAP real estate adjustments, net | 3,217 | 3,663 | 3,834 | 3,828 |
Footnotes
SOURCE Forge Group Inc.
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