Market Overview

FedNat Holding Company Reports Fourth Quarter and Full Year 2019 Results

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SUNRISE, Fla., Feb. 26, 2020 (GLOBE NEWSWIRE) -- FedNat Holding Company (the "Company") (NASDAQ:FNHC) today reported results for the three and twelve months ended December 31, 2019.

Q4 2019 highlights (as measured against the same three-month period last year, except where noted):

  • Net loss of $6.9 million or $0.51 per diluted share
  • Adjusted operating loss of $7.9 million of $0.59 per diluted share.
  • $4.5 million of claims, net of recoveries, pre-tax, from Tropical Storms Olga and Nestor as well as other severe weather events impacting Texas, Florida and other states, as previously communicated.
  • $12.0 million of claims, net of recoveries, pre-tax for adverse prior year reserve development, including $8.0 million of non-core losses, as previously communicated.
  • $5.0 million of claims, net of recoveries, pre-tax, for current year strengthening in homeowners Florida, as a result of continued impact from assignment of benefits and related litigation costs, as previously communicated.
  • Gross written premiums of $150.1 million, including $6.6 million from Maison.
  • Net premiums earned increased 4.5% to $95.2 million, including $4.1 million from Maison.
  • Combined ratio of 122.1%, up 3.8 points, representing 4.7 points of net catastrophe losses in the period, 12.6 points of adverse development and 5.3 points from current accident year reserve strengthening.
  • Quarter-end Florida homeowners in-force policies of approximately 241,000.
  • 202.3% increase in non-Florida homeowners in-force policies to approximately 133,000.
  • Book value per share increased 2.4% to $17.25 as compared to $16.84 as of December 31, 2018, due primarily to unrealized gains on our bond portfolio, partially offset by the acquisition of Maison and dividends declared.
  • Repurchased 238,000 shares of common stock at a total of $3.9 million during the fourth quarter of 2019.

"The claims environment in the Florida homeowners market remains challenging, even despite the enactment of AOB reform on July 1, 2019," said Mr. Michael H. Braun, the Company's Chief Executive Officer. "Increased litigation costs were a major factor in the reserve strengthening in our Florida homeowners line and also contributed to the adverse development in our non-core lines, which continue to be in run-off. While FedNat has been a leader in taking rate in Florida homeowners and ensuring stringent underwriting practices, nonetheless at this time we have a cautious near-term outlook in this market and do not expect our Florida policy count to grow in 2020."

Mr. Braun added, "Following the successful acquisition of Maison in 2019, we have expanded our presence in more stable and profitable coastal homeowners markets outside of Florida. Our non-Florida book of business was profitable in the fourth quarter, including Maison's contribution for the month of December. We believe our non-Florida growth opportunities position FedNat for improved financial performance in 2020, and long-term profitable growth. FedNat's balance sheet remains strong and will enable us to continue our commitment to returning value to shareholders through growth, as appropriate, and our dividend and share repurchases."

Consolidated

  • Net loss of $6.9 million or $0.51 per diluted share during the fourth quarter of 2019, as compared to net loss of $9.3 million or $0.73 per diluted share during the fourth quarter of 2018. The fourth quarter was significantly impacted by (all amounts on a pre-tax basis) $4.5 million of claims, net of recoveries from catastrophe severe weather events, $12.0 million of claims, net of recoveries, for adverse prior year reserve development, including $8.0 million of non-core losses, and $5.0 million of claims, net of recoveries, for current year strengthening, as previously communicated.
  • Compared to September 30, 2019, book value per share decreased $1.20 to $17.25 at December 31, 2019. The decrease was predominantly driven by the acquisition of Maison of $0.57 per share, a net loss of $0.51 per share, as noted above, and dividends declared of $0.09 per share.

Revenues

  • Total revenue increased $12.6 million or 13.0%, to $109.0 million for the three months ended December 31, 2019, compared with $96.4 million for the three months ended December 31, 2018. The increase was primarily driven by $4.1 million of higher net premiums earned (as discussed further below) $7.1 million of additional investment gains in the current period as compared to the prior year as well as higher other income.
  • Gross written premiums increased $22.5 million, or 17.6%, to $150.1 million in the quarter, compared with $127.6 million for the same three-month period last year. Gross premiums written increased due to the growth in homeowners non-Florida, including $6.6 million from Maison. Our non-Florida business continues to show exceptional growth year over year, especially in the state of Texas, and now with Maison's book of business, will allow us to leverage our infrastructure and diversify insurance risk.
  • Gross premiums earned increased $15.4 million, or 10.9%, to $157.2 million for the three months ended December 31, 2019, as compared to $141.8 million for the three months ended December 31, 2018. The higher gross premiums earned was driven by a 12.5% increase in earned premiums in Homeowners, which includes $7.9 million from Maison, partially offset by the results of our decision to exit the Automobile and commercial general liability lines.
  • Ceded premiums increased $11.3 million, or 22.4%, to $62.0 million in the quarter, compared to $50.7 million the same three-month period last year. The increase was driven by $7.5 million higher excess of loss reinsurance spend in Homeowners, as this years' program became effective July 1, 2019 at a higher rate on-line than the program in the previous year and $3.8 million from Maison. These items were slightly offset by lower ceded premiums in Automobile as we have exited that line of business.

Expenses

  • Losses and loss adjustment expenses ("LAE") increased $6.5 million, or 9.0%, to $78.8 million for the three months ended December 31, 2019, compared with $72.3 million for the same three-month period last year. The net loss ratio increased 3.4 percentage points, to 82.8% in the current quarter, compared to 79.4% in the fourth quarter of 2018. The higher ratio was primarily the result of the increase in reinsurance spend, which reduces the net earned premium denominator of the loss ratio calculation. The fourth quarter of 2019 included $12.0 million of adverse prior year reserve development, including $8.0 million from non-core lines, as we exit these lines, as well as $6.0 million of catastrophe net losses from Tropical Storms Olga and Nestor and other catastrophe weather events ($3.0 million of these losses relate to non-Florida, which is subject to a 50% profit-sharing agreement) and $5.0 million of reserve strengthening in the current accident year. After a complete analysis of recent emerging trends, we recorded additional losses in current and prior accident years as a result of higher than expected tail trends in weather-related claims and higher litigation claims driving higher than expected severity in homeowners Florida. The adverse experience in our non-core lines was driven by claim reopenings across the remaining active claims in Automobile and high severity claims as well as late reported new claims across several accident years in our commercial general liability line of business. Additionally, higher homeowners gross premiums earned across periods drove additional losses of approximately $7.0 million. These items were offset by $23.7 million of net loss from Hurricane Michael and $6.5 million of non-core losses in the fourth quarter of 2018.
  • The net expense ratio increased 0.4 percentage points, to 39.3% in the current quarter, as compared to 38.9% in the fourth quarter of 2018. Commissions and other underwriting expenses increased $1.9 million, or 6.4%, to $31.5 million for the three months ended December 31, 2019, compared with $29.6 million for the three months ended December 31, 2018. The slight increase is made up of higher acquisition costs from overall higher premiums, which were partially offset by lower profit share costs because of higher catastrophe losses in FNIC's non-Florida book of business, as referenced above.
  • General and administrative expenses increased $0.1 million, or 0.5%, to $5.9 million for the three months ended December 31, 2019, compared with $5.8 million for the three months ended December 31, 2018. However, excluding deal costs, general and administrative expenses decreased $0.3 million to $5.2 million in the fourth quarter of 2019, compared with $5.5 million for the fourth quarter of 2018. The current quarter includes $0.7 million due diligence related costs related to the Maison acquisition, which was finalized in the quarter.
  • Interest expense increased $0.9 million to $1.9 million for the three months ended December 31, 2019, compared with $1.0 million in the prior year period, due to the Company having a higher outstanding debt in the current quarter as compared to the same quarter in the prior year.

Line of Business Results

  • Homeowners net loss for the current quarter was $2.3 million, which included 6.5% growth in net premiums earned compared to the fourth quarter of 2018. The combined ratio for the current quarter was 111.4%, which includes (all amounts on a pre-tax basis) $4.0 million, net, of prior year development, $5.0 million, net, of current year strengthening and $4.5 million of catastrophe losses, net of reinsurance and profit share recoveries.
  • Automobile's net loss for the fourth quarter of 2019 was $1.8 million, as compared with a loss of $4.0 million in the prior year quarter, primarily driven by lower adverse prior year development, as we exit this line of business.
  • Other's net loss of $2.8 million in the fourth quarter of 2019, was driven by (all amounts on a pre-tax basis) $5.4 million of prior year adverse development in our commercial general liability book of business, and $1.9 million of interest expense, partially offset by net investment income of $3.9 million and investment gains of $2.0 million.

2019 vs. 2018 Full Year Results

  • The Company reported net income of $1.0 million, or $0.08 per diluted share, for 2019 as compared to net income of $14.9 million, or $1.16 per diluted share, for 2018. The performance in 2019 is the result of higher losses from catastrophe events, adverse loss experience and higher reinsurance costs in the second half of 2019.
  • The Company's adjusted operating income (loss) was $(0.4) million or $(0.03) per diluted share in 2019, as compared to adjusted operating income of $20.0 million or $1.55 per diluted share in 2018.

Stock Repurchase Program

  • During the fourth quarter of 2019, the Company repurchased 238,000 shares of common stock for $3.9 million at an average price per share of $16.27. As of February 25, 2020, in the first quarter of 2020, the Company has repurchased 188,111 shares of common stock for $3.0 million at an average price per share of $15.74.

Subsequent Event/Premium Rate Activity

  • The Company applied for and was approved by the Florida Office of Insurance regulation ("OIR") for a state-wide average rate increase of 2.8% for Florida homeowners multiple-peril insurance policies, which is expected to become effective for new and renewal policies on March 15, 2020.
  • The Company applied for and is awaiting approval by the Florida OIR for a state-wide average rate increase of 7.4% for Florida homeowners multiple-peril insurance policies, which, subject to approval, would be expected to become effective for new and renewal policies on June 15, 2020.
  • There are other rate actions being taken across our books of business. For further detail and information related to these rate actions, please refer to the Form 8-K published with the U.S. Securities and Exchange Commission on February 19, 2020.

Conference Call Information

The Company will hold an investor conference call at 9:00 AM (ET) Thursday, February 27, 2020. The Company's CEO, Michael Braun and its CFO, Ronald Jordan will discuss the financial results and review the outlook for the Company. Messrs. Braun and Jordan invite interested parties to participate in the conference call.

Listeners interested in participating in the Q&A session may access the conference call as follows:

Toll-Free Dial-in: (877) 303-6913

Conference ID: 4880838

A live webcast of the call will be available online via the "Presentations and Events" section of the Company's website at FedNat.com or interested parties can click on the following link:

http://www.fednat.com/investor-relations/investor-presentations/

Please call at least five minutes in advance to ensure that you are connected prior to the presentation. A webcast replay of the conference call will be available shortly after the live webcast is completed and may be accessed via the Company's website.

About the Company

FedNat is a regional, insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through our subsidiaries and contractual relationships with independent agents and general agents. The Company, through our wholly owned subsidiaries, is authorized to underwrite, and/or place homeowners multi-peril, federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers' products and other services through a network of independent and general agents.

The Company's supplemental line of business information is designed to afford users greater transparency into our results. The "Homeowners" line of business consists of our homeowners and fire property and casualty insurance business, which currently operates in Florida, Alabama, Texas, Louisiana and South Carolina. The "Automobile" line of business consists of our nonstandard personal automobile insurance business which operated in Georgia, Texas, Alabama, and Florida. The "Other" line of business primarily consists of our commercial general liability and federal flood businesses, along with corporate and investment operations.

Forward-Looking Statements /Safe Harbor Statements

Safe harbor statement under the Private Securities Litigation Reform Act of 1995:

Statements that are not historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as "anticipate," "believe," "budget," "contemplate," "continue," "could," "envision," "estimate," "expect," "guidance," "indicate," "intend," "may," "might," "plan," "possibly," "potential," "predict," "probably," "pro-forma," "project," "seek," "should," "target," or "will" or the negative or other variations thereof, and similar words or phrases or comparable terminology, are intended to identify forward-looking statements.

Forward-looking statements might also include, but are not limited to, one or more of the following:

  • Projections of revenues, income, earnings per share, dividends, capital structure or other financial items or measures;
  • Descriptions of plans or objectives of management for future operations, insurance products or services;
  • Forecasts of future insurable events, economic performance, liquidity, need for funding and income; and
  • Descriptions of assumptions or estimates underlying or relating to any of the foregoing.

The risks and uncertainties include, without limitation, risks and uncertainties related to estimates, assumptions and projections generally; the nature of the Company's business; the adequacy of its reserves for losses and loss adjustment expense; claims experience; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail) and other catastrophic losses; reinsurance costs and the ability of reinsurers to indemnify the Company; raising additional capital and our compliance with minimum capital and surplus requirements; potential assessments that support property and casualty insurance pools and associations; the effectiveness of internal financial controls; the effectiveness of our underwriting, pricing and related loss limitation methods; changes in loss trends, including as a result of insureds' assignment of benefits; court decisions and trends in litigation; our potential failure to pay claims accurately; ability to obtain regulatory approval applications for requested rate increases, or to underwrite in additional jurisdictions, and the timing thereof; the impact that the results of our subsidiaries' operations may have on our results of operations; inflation and other changes in economic conditions (including changes in interest rates and financial markets); pricing competition and other initiatives by competitors; legislative and regulatory developments; the outcome of litigation pending against the Company, and any settlement thereof; dependence on investment income and the composition of the Company's investment portfolio; insurance agents; ratings by industry services; the reliability and security of our information technology systems; reliance on key personnel; acts of war and terrorist activities; and other matters described from time to time by the Company in releases and publications, and in periodic reports and other documents filed with the United States Securities and Exchange Commission.

In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including claims and litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a contingency. Reported results may therefore appear to be volatile in certain accounting periods.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We do not undertake any obligation to update publicly or revise any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Contacts

Michael H. Braun, CEO (954) 308-1322,
Ronald Jordan, CFO (954) 308-1363,
Bernard Kilkelly, Investor Relations (954) 308-1409,
or investorrelations@fednat.com


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Financial Highlights
(Dollars in thousands, except per share data)
(Unaudited)

    As of or For the
    Three Months Ended   Twelve Months Ended
    2019   2018   % Change   2019   2018   % Change
Net Income (Loss) Attributable to Common Shareholders                        
Net income (loss):                        
Homeowners   $ (2,316 )     $ (1,354 )     71.0   %   $ 5,665       $ 22,175       (74.5 ) %
Automobile   (1,799 )     (3,980 )     (54.8 ) %   (4,040 )     (5,648 )     (28.5 ) %
Other   (2,778 )     (3,971 )     (30.0 ) %   (614 )     (1,599 )     (61.6 ) %
Consolidated   $ (6,893 )     $ (9,305 )     (25.9 ) %   $ 1,011       $ 14,928       (93.2 ) %
                         
Adjusted operating income (loss):                        
Homeowners   $ (2,306 )     $ (1,049 )     119.8   %   $ 5,912       $ 23,663       (75.0 ) %
Automobile   (1,799 )     (3,979 )     (54.8 ) %   (4,035 )     (5,578 )     (27.7 ) %
Other   (3,820 )     91       NCM   (2,238 )     1,905       (217.5 ) %
Consolidated   $ (7,925 )     $ (4,937 )     60.5   %   $ (361 )     $ 19,990       (101.8 ) %
                         
Per Common Share                        
Net income (loss) - diluted   $ (0.51 )     $ (0.73 )     (29.4 ) %   $ 0.08       $ 1.16       (93.3 ) %
Adjusted operating income (loss) - diluted   (0.59 )     (0.39 )     53.0   %   (0.03 )     1.55       (101.8 ) %
Dividends declared   0.09       0.08       12.5   %   0.33       0.24       37.5   %
Book value   17.25       16.84       2.4   %   17.25       16.84       2.4   %
Book value, excluding AOCI   16.54       17.13       (3.5 ) %   16.54       17.13       (3.5 ) %
                         
Return to Shareholders                        
Repurchases of common stock   $ 3,867       $       NCM   $ 3,867       $ 5,061       (23.6 ) %
Dividends declared   1,176       1,043       12.8   %   4,309       3,120       38.1   %
    $ 5,043       $ 1,043       383.5   %   $ 8,176       $ 8,181       (0.1 ) %
                         
Revenue                        
Total revenues   $ 108,987       $ 96,442       13.0   %   $ 414,961       $ 396,093       4.8   %
Adjusted operating revenues   106,953       101,502       5.4   %   407,877       400,237       1.9   %
Gross premiums written   150,074       127,613       17.6   %   610,608       567,764       7.5   %
Gross premiums earned   157,201       141,781       10.9   %   582,334       580,020       0.4   %
Net premiums earned   95,188       91,098       4.5   %   363,652       355,257       2.4   %
                         
Ratios to Net Premiums Earned                        
Net loss ratio   82.8   %   79.4   %       75.1   %   64.3   %    
Net expense ratio   39.3   %   38.9   %       35.9   %   40.3   %    
Combined ratio   122.1   %   118.3   %       111.0   %   104.6   %    
                         
In-Force Homeowners Policies                        
Florida   241,000   247,000   (2.4 ) %   241,000   247,000   (2.4 ) %
Non-Florida   133,000   44,000   202.3   %   133,000   44,000   202.3   %
    374,000   291,000   28.5   %   374,000   291,000   28.5   %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)

    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2019   2018   2019   2018
Revenues:                
Net premiums earned   $ 95,188       $ 91,098       $ 363,652       $ 355,257    
Net investment income   3,864       3,402       15,901       12,460    
Net realized and unrealized investment gains (losses)   2,034       (5,060 )     7,084       (4,144 )  
Direct written policy fees   2,892       2,681       10,200       13,366    
Other income   5,009       4,321       18,124       19,154    
Total revenues   108,987       96,442       414,961       396,093    
                 
Costs and expenses:                
Losses and loss adjustment expenses   78,796       72,318       273,080       228,416    
Commissions and other underwriting expenses   31,539       29,642       107,189       121,109    
General and administrative expenses   5,867       5,838       23,203       22,183    
Interest expense   1,916       1,038       10,776       4,177    
Total costs and expenses   118,118       108,836       414,248       375,885    
                 
Income (loss) before income taxes   (9,131 )     (12,394 )     713       20,208    
Income tax expense (benefit)   (2,238 )     (3,089 )     (298 )     5,498    
Net income (loss)   (6,893 )     (9,305 )     1,011       14,710    
Net income (loss) attributable to non-controlling interest                     (218 )  
Net income (loss) attributable to FedNat Holding Company shareholders   $ (6,893 )     $ (9,305 )     $ 1,011       $ 14,928    
                 
Net Income (Loss) Per Common Share                
Basic   $ (0.51 )     $ (0.73 )     $ 0.08       $ 1.17    
Diluted   $ (0.51 )     $ (0.73 )     $ 0.08       $ 1.16    
                 
Weighted Average Number of Shares of Common Stock Outstanding                
Basic   13,409       12,777       12,977       12,775    
Diluted   13,409       12,777       13,023       12,867    
                 
Dividends Declared Per Common Share   $ 0.09       $ 0.08       $ 0.33       $ 0.24    


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)

    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2019   2018   2019   2018
    (In thousands)
Gross premiums written:                
Homeowners Florida   $ 104,536       $ 102,834       $ 451,856       $ 458,652  
Homeowners non-Florida   42,163       21,941       142,485       81,037  
Automobile         (25 )     (1 )     8,603  
Commercial general liability   (24 )     (135 )     (145 )     5,384  
Federal flood   3,399       2,998       16,413       14,088  
Total gross premiums written   $ 150,074       $ 127,613       $ 610,608       $ 567,764  


    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2019   2018   2019   2018
    (In thousands)
Gross premiums earned:                
Homeowners Florida   $ 114,249       $ 116,614     $ 452,730     $ 473,121  
Homeowners non-Florida   38,908       19,499     112,836     66,571  
Automobile         526     26     18,402  
Commercial general liability   (24 )     1,650     1,669     8,794  
Federal flood   4,068       3,492     15,073     13,132  
Total gross premiums earned   $ 157,201       $ 141,781     $ 582,334     $ 580,020  


    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2019   2018   2019   2018
    (In thousands)
Net premiums earned:                
Homeowners   $ 95,212       $ 89,390     $ 362,183     $ 342,247  
Automobile         132     6     4,658  
Commercial general liability   (24 )     1,576     1,463     8,352  
Total net premiums earned   $ 95,188       $ 91,098     $ 363,652     $ 355,257  


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics (continued)
(Unaudited)

    Three Months Ended   Twelve Months Ended
   December 31,   December 31,
   2019   2018   2019   2018
   (In thousands)
Commissions and other underwriting expenses:                
Homeowners Florida   $ 13,152       $ 13,897       $ 52,962       $ 56,693    
All others   7,695       5,460       25,491       19,948    
Ceding commissions   (3,235 )     (3,966 )     (12,128 )     (12,743 )  
Total commissions   17,612       15,391       66,325       63,898    
                 
Automobile         93       3       4,322    
Homeowners non-Florida   1,028       793       3,365       2,147    
Total fees   1,028       886       3,368       6,469    
                 
Salaries and wages   3,024       2,997       12,114       14,279    
Other underwriting expenses   9,875       10,368       25,382       36,463    
Total commissions and other underwriting expenses   $ 31,539       $ 29,642       $ 107,189       $ 121,109    


    Three Months Ended   Twelve Months Ended
    December 31,   December 31,
    2019   2018   2019   2018
                 
Net loss ratio   82.8 %   79.4 %   75.1 %   64.3 %
Net expense ratio   39.3 %   38.9 %   35.9 %   40.3 %
Combined ratio   122.1 %   118.3 %   111.0 %   104.6 %
Gross loss ratio   100.8 %   277.6 %   120.5 %   149.8 %
Gross expense ratio   25.9 %   27.8 %   24.5 %   26.9 %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)

    December 31,
    2019   2018
ASSETS   (In thousands)
Investments:        
Debt securities, available-for-sale, at fair value (amortized cost of $512,645 and $433,664, respectively)   $ 526,265     $ 428,641    
Debt securities, held-to-maturity, at amortized cost   4,337     5,126    
Equity securities, at fair value   20,039     17,758    
Total investments   550,641     451,525    
Cash and cash equivalents   133,361     64,423    
Prepaid reinsurance premiums   145,659     108,577    
Premiums receivable, net of allowance of $159 and $77, respectively   41,422     29,791    
Reinsurance recoverable, net   209,615     211,424    
Deferred acquisition costs and value of business acquired, net   56,136     39,436    
Income taxes, net   2,552     5,220    
Goodwill   10,997        
Other assets   28,633     14,975    
Total assets   $ 1,179,016     $ 925,371    
        
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities        
Loss and loss adjustment expense reserves   $ 324,362     $ 296,230    
Unearned premiums   360,870     281,992    
Reinsurance payable   102,467     63,599    
Long-term debt, net of deferred financing costs of $1,478 and $596, respectively   98,522     44,404    
Deferred revenue   6,856     4,585    
Other liabilities   37,246     19,302    
Total liabilities   930,323     710,112    
Shareholders' Equity        
Preferred stock, $0.01 par value: 1,000,000 shares authorized          
Common stock, $0.01 par value: 25,000,000 shares authorized; 14,414,821 and 12,784,444 shares issued and outstanding, respectively   144     128    
Additional paid-in capital   167,677     141,128    
Accumulated other comprehensive income (loss)   10,281     (3,750 )  
Retained earnings   70,591     77,753    
Total shareholders' equity attributable to FedNat Holding Company shareholders   248,693     215,259    
Non-controlling interest          
Total shareholders' equity   248,693     215,259    
Total liabilities and shareholders' equity   $ 1,179,016     $ 925,371    


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)

  Three Months Ended December 31,
  2019   2018
  Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
  (Dollars in thousands)
Revenues:                              
Gross premiums written $ 146,699       $       $ 3,375       $ 150,074       $ 124,775       $ (25 )     $ 2,863       $ 127,613    
Gross premiums earned 153,157             4,044       157,201       136,113       526       5,142       141,781    
Ceded premiums (57,945 )           (4,068 )     (62,013 )     (46,723 )     (394 )     (3,566 )     (50,683 )  
Net premiums earned 95,212             (24 )     95,188       89,390       132       1,576       91,098    
Net investment income             3,864       3,864                   3,402       3,402    
Net realized and unrealized investment gains (losses)             2,034       2,034                   (5,060 )     (5,060 )  
Direct written policy fees 2,833             59       2,892       2,506       93       82       2,681    
Other income 4,570       1       438       5,009       3,461       64       796       4,321    
Total revenues 102,615       1       6,371       108,987       95,357       289       796       96,442    
                               
Costs and expenses:                              
Losses and loss adjustment expenses 70,777       2,334       5,685       78,796       64,634       4,840       2,844       72,318    
Commissions and other underwriting expenses 30,799             740       31,539       27,819       730       1,093       29,642    
General and administrative expenses 4,498       50       1,319       5,867       4,718       50       1,070       5,838    
Interest expense             1,916       1,916                   1,038       1,038    
Total costs and expenses 106,074       2,384       9,660       118,118       97,171       5,620       6,045       108,836    
                               
Income (loss) before income taxes (3,459 )     (2,383 )     (3,289 )     (9,131 )     (1,814 )     (5,331 )     (5,249 )     (12,394 )  
Income tax expense (benefit) (1,143 )     (584 )     (511 )     (2,238 )     (460 )     (1,351 )     (1,278 )     (3,089 )  
Net income (loss) $ (2,316 )     $ (1,799 )     $ (2,778 )     $ (6,893 )     $ (1,354 )     $ (3,980 )     $ (3,971 )     $ (9,305 )  
                               
Ratios to net premiums earned:                              
Net loss ratio 74.3   %   NCM   NCM   82.8   %   72.3   %   NCM   180.5   %   79.4   %
Net expense ratio 37.1   %           39.3   %   36.4   %           38.9   %
Combined ratio 111.4   %           122.1   %   108.7   %           118.3   %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business (continued)
(Unaudited)

  Year Ended December 31,
  2019   2018
  Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
  (Dollars in thousands)
Revenues:                              
Gross premiums written $ 594,341       $ (1 )     $ 16,268       $ 610,608       $ 539,689       $ 8,603       $ 19,472       $ 567,764    
Gross premiums earned 565,566       26       16,742       582,334       539,692       18,402       21,926       580,020    
Ceded premiums (203,383 )     (20 )     (15,279 )     (218,682 )     (197,445 )     (13,744 )     (13,574 )     (224,763 )  
Net premiums earned 362,183       6       1,463       363,652       342,247       4,658       8,352       355,257    
Net investment income             15,901       15,901                   12,460       12,460    
Net realized and unrealized investment gains (losses)             7,084       7,084                   (4,144 )     (4,144 )  
Direct written policy fees 9,915       3       282       10,200       8,484       4,322       560       13,366    
Other income 15,202       19       2,903       18,124       14,021       1,148       3,985       19,154    
Total revenues 387,300       28       27,633       414,961       364,752       10,128       21,213       396,093    
                               
Costs and expenses:                              
Losses and loss adjustment expenses 257,297       5,128       10,655       273,080       206,062       11,617       10,737       228,416    
Commissions and other underwriting expenses 104,071       51       3,067       107,189       111,103       5,751       4,255       121,109    
General and administrative expenses 18,818       200       4,185       23,203       18,079       325       3,779       22,183    
Interest expense             10,776       10,776       100             4,077       4,177    
Total costs and expenses 380,186       5,379       28,683       414,248       335,344       17,693       22,848       375,885    
                               
Income (loss) before income taxes 7,114       (5,351 )     (1,050 )     713       29,408       (7,565 )     (1,635 )     20,208    
Income tax expense (benefit) 1,449       (1,311 )     (436 )     (298 )     7,451       (1,917 )     (36 )     5,498    
Net income (loss) 5,665       (4,040 )     (614 )     1,011       21,957       (5,648 )     (1,599 )     14,710    
Net income (loss) attributable to non-controlling interest                         (218 )                 (218 )  
Net income (loss) attributable to FNHC shareholders $ 5,665       $ (4,040 )     $ (614 )     $ 1,011       $ 22,175       $ (5,648 )     $ (1,599 )     $ 14,928    
                               
Ratios to net premiums earned:                              
Net loss ratio 71.0   %   NCM   NCM   75.1   %   60.2   %   249.4   %   128.6   %   64.3   %
Net expense ratio 34.0   %           35.9   %   37.8   %           40.3   %
Combined ratio 105.0   %           111.0   %   98.0   %           104.6   %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliations
(Dollars in thousands)
(Unaudited)

    As of or For the Three Months Ended December 31,
    2019   2018
    Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
Revenue                                
Total revenues   $ 102,615       $ 1       $ 6,371       $ 108,987       $ 95,357       $ 289       $ 796       $ 96,442    
Less:                                
Net realized and unrealized investment gains (losses)               2,034       2,034                   (5,060 )     (5,060 )  
Adjusted operating revenues   $ 102,615       $ 1       $ 4,337       $ 106,953       $ 95,357       $ 289       $ 5,856       $ 101,502    
                                 
Net Income (Loss)                                
Net income (loss)   $ (2,316 )     $ (1,799 )     $ (2,778 )     $ (6,893 )     $ (1,354 )     $ (3,980 )     $ (3,971 )     $ (9,305 )  
Less:                                
Net realized and unrealized investment gains (losses)               1,535       1,535                   (3,778 )     (3,778 )  
Acquisition and other costs               (493 )     (493 )     (305 )     (1 )     (284 )     (590 )  
Amortization of identifiable intangibles   (10 )                 (10 )                          
Gain (loss) on early extinguishment of debt                                                
Adjusted operating income (loss)   $ (2,306 )     $ (1,799 )     $ (3,820 )     $ (7,925 )     $ (1,049 )     $ (3,979 )     $ 91       $ (4,937 )  
                                 
Income tax rate assumed for reconciling items above   24.52   %   24.52   %   24.52   %   24.52   %   25.35   %   25.35   %   25.35   %   25.35   %
                                 
Per Common Share                                
Book value               $ 17.25                   $ 16.84    
Less:                                
AOCI               0.71                   (0.29 )  
Book value, excluding AOCI               $ 16.54                   $ 17.13    


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliations (continued)
(Dollars in thousands)
(Unaudited)

    As of or For the Year Ended
    2019   2018
    Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
Revenue                                
Total revenues   $ 387,300       $ 28       $ 27,633       $ 414,961       $ 364,752       $ 10,128       $ 21,213       $ 396,093    
Less:                                
Net realized and unrealized investment gains (losses)               7,084       7,084                   (4,144 )     (4,144 )  
Adjusted operating revenues   $ 387,300       $ 28       $ 20,549       $ 407,877       $ 364,752       $ 10,128       $ 25,357       $ 400,237    
                                 
Net Income (Loss)                                
Net income (loss)   $ 5,665       $ (4,040 )     $ (614 )     $ 1,011       $ 22,175       $ (5,648 )     $ (1,599 )     $ 14,928    
Less:                                
Net realized and unrealized investment gains (losses)               5,347       5,347                   (3,094 )     (3,094 )  
Acquisition and other costs   (237 )     (5 )     (1,025 )     (1,267 )     (1,488 )     (70 )     (410 )     (1,968 )  
Amortization of identifiable intangibles   (10 )                 (10 )                          
Gain (loss) on early extinguishment of debt               (2,698 )     (2,698 )                          
Adjusted operating income (loss)   $ 5,912       $ (4,035 )     $ (2,238 )     $ (361 )     $ 23,663       $ (5,578 )     $ 1,905       $ 19,990    
                                 
Income tax rate assumed for reconciling items above   24.52   %   24.52   %   24.52   %   24.52   %   25.35   %   25.35   %   25.35   %   25.35   %
                                 
Per Common Share                                
Book value               $ 17.25                   $ 16.84    
Less:                                
AOCI               0.71                   (0.29 )  
Book value, excluding AOCI               $ 16.54                   $ 17.13    
                                             

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