Energy provider forms captive insurer
Energy provider Genie Energy has incorporated a captive insurance company and is creating insurance-related businesses to market to its customers.
Genie, which is based in Newark, New Jersey, said it had formed the captive in the fourth quarter of last year to enhance its risk management strategy.
Genie said it paid the single parent $51 million in premiums for insurance coverage of various risks.
"As required by GAAP, Genie will record a one-time, non-recurring, non-cash charge of approximately $45 million in the fourth quarter as an insurance loss reserve related to the coverage provided to Genie by the captive entity," the company said.
"While this loss reserve will be reflected in Genie’s financial results under GAAP, the Company does not expect this charge to impact its Adjusted EBITDA results for the fourth quarter or full year 2023."
Michael Stein (pictured), chief executive of Genie, said: “Building on our strong financial performance over the past two years, we’ve identified potential opportunities to create incremental shareholder value.
“We have built a large retail customer base through our traditional energy supply and solar sales organisations while, on a more modest level, cross-marketing other consumer products and services to this loyal base for enhanced returns.
"We are now expanding on this strategy by creating insurance-related businesses, including internally generated and third-party offerings, to distribute through our retail channels.
“Despite the initial impacts of these initiatives on our 2023 GAAP results related to the insurance loss reserve, we are excited about these initiatives and look forward to their positive contributions beginning in 2024,” added Stein.
The $51 million in premium payments to the “captive” insurance subsidiary will remain on Genie’s consolidated balance sheet within its reported measure of consolidated cash, restricted cash, and marketable equity securities. The funds will be available for investment as determined by Genie management to support the Company’s corporate strategic objectives.
Genie expects to report a year-end 2023 balance of approximately $165 million in consolidated cash, restricted cash, and marketable equity securities, compared to $121 million at year-end 2022 (including approximately $16 million in cash from discontinued operations). The expected figure is an estimate and is subject to change as Genie completes its fourth quarter and full-year financial statements and the audit of its annual statements.
Genie is a retail energy and renewable energy solutions provider which supplies electricity, including electricity from renewable resources, and natural gas to residential and small business customers in the US.
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