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CST: 17/08/2019 07:31:52   

FedNat Holding Company Reports Second Quarter of 2019 Results

10 Days ago

SUNRISE, Fla., Aug. 06, 2019 (GLOBE NEWSWIRE) -- FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today reported results for the three and six months ended June 30, 2019.

Q2 2019 highlights (as measured against the same three-month period last year, except where noted):

  • Net income of $7.1 million or $0.55 per diluted share.
  • Adjusted operating income of $5.7 million or $0.44 per diluted share.
  • $9.3 million of claims, net of recoveries, from twelve catastrophe weather events impacting Texas, Louisiana and other states.
  • Gross written premiums of $169.2 million.
  • 10.5% increase in net premiums earned to $92.3 million, including 15.4% increase in Homeowners.
  • Quarter-end Florida homeowners in-force policies of approximately 240,000.
  • 59.0% increase in non-Florida homeowners in-force policies to approximately 60,000.
  • Book value per share increased 6.7% to $17.96 as compared to $16.84 as of December 31, 2018, despite $1.62 per share reduction due to significant weather-related events in the first half of 2019.

“FedNat made great progress toward achieving our strategies in the second quarter driven by our core fundamentals. We were pleased to generate strong performance in earnings sequentially, despite the impact of severe and unusual weather-related events during the quarter.” said Michael H. Braun, the Company’s Chief Executive Officer. “Our geographic diversification strategy is enhancing our operating metrics and our non-Florida business continued its strong growth in gross premiums earned and written. We believe that the recent AOB reform legislation, now in effect, will have a very positive impact on our Florida business, and create a much more favorable operating environment. Additionally, the pending acquisition of Maison will strengthen our core book of business and significantly accelerate our diversification strategy. The acquisition is scheduled to close in December 2019. In the second quarter, we also made the necessary steps needed to further wind down our non-core auto and commercial general liability businesses. Looking ahead, we believe we are well-positioned to benefit from the many positive developments as we enter the second half of the year and into 2020.”

Maison Update

The Company is also reporting the following recent developments related to the acquisition of the insurance operations of 1347 Property Insurance Holding, Inc. (“PIH”):

  • The Company understands that regulatory approvals for the acquisition of the insurance operations of PIH are in the process of being finalized and anticipates receiving documentation evidencing such approval in the next few days.
  • Pursuant to the provisions of the Equity Purchase Agreement with PIH, the transaction is expected, assuming satisfaction of all other conditions to closing, to close as soon as practicable after November 30, 2019, after the conclusion of hurricane season.

Consolidated

  • Net income of $7.1 million or $0.55 per diluted share during the second quarter of 2019, as compared to net income of $8.8 million or $0.69 per diluted share during the second quarter of 2018.
  • Adjusted operating income of $5.7 million or $0.44 per diluted share during the second quarter of 2019, as compared to adjusted operating income of $9.1 million or $0.71 per diluted share during the second quarter of 2018.
  • Comparing to December 31, 2018, book value per share increased $1.12 to $17.96 at June 30, 2019. The increase was predominantly driven by unrealized gains on our fixed-income portfolio of $1.01 per share and net income of $0.25 per share, slightly offset by dividends of $0.16 per share.

Revenues

  • Total revenue increased $9.6 million or 10.0%, to $105.3 million for the three months ended June 30, 2019, compared with $95.7 million for the three months ended June 30, 2018. The increase was primarily driven by higher Homeowners net premiums earned of $12.2 million, primarily as a result of decreased reinsurance spend, and higher recognized gains on our investments, partially offset by the planned reductions in net premiums earned from Automobile and commercial general liability.
  • Gross premiums written increased $2.5 million, or 1.5%, to $169.2 million in the quarter, compared with $166.7 million for the same three-month period last year. Gross premiums written increased due to the growth in homeowners non-Florida, partially offset by the decline in the non-core businesses we are exiting, Automobile and commercial general liability, as well as a decline in homeowners Florida. Our homeowners non-Florida business continues to show exceptional growth year over year, especially in the state of Texas, which has allowed us to leverage our infrastructure and diversify insurance risk. Overall, Homeowners grew 5.5%.
  • Gross premiums earned decreased $5.7 million, or 3.9%, to $141.2 million for the three months ended June 30, 2019, as compared to $146.9 million for the three months ended June 30, 2018. While gross premiums earned for Homeowners increased 1.9%, our decision to exit the Automobile and commercial general liability lines drove the overall decline.
  • Ceded premiums decreased $14.4 million, or 22.8%, to $48.9 million in the quarter, compared to $63.3 million the same three-month period last year. The decrease was primarily driven by lower excess of loss reinsurance spend in Homeowners and lower ceded premiums in Automobile, a direct result of reductions in premiums earned during the periods.
  • Net investment income increased $1.3 million, or 43%, to $4.3 million during the three months ended June 30, 2019, as compared to $3.0 million during the three months ended June 30, 2018. The increase was due to fixed income portfolio growth, and improvement in the yield as a result of rising interest rates during 2018 and portfolio repositioning.
  • Other income decreased $1.3 million, or 23.0%, to $4.4 million in the quarter, compared with $5.7 million in the same three-month period last year. The decline in other income was primarily driven by lower commission and brokerage revenue. The year over year decrease in commission income was driven by lower Automobile fee income from the reduction in premiums earned. The brokerage revenue decrease is the result of lower excess of loss reinsurance spend from the reinsurance programs in place during the second quarter of 2019 as compared to the second quarter of 2018.

Expenses

  • Losses and loss adjustment expenses (“LAE”) increased $17.7 million, or 37.4%, to $65.3 million for the three months ended June 30, 2019, compared with $47.6 million for the same three-month period last year. The net loss ratio increased 13.9 percentage points, to 70.8% in the current quarter, as compared to 56.9% in the second quarter of 2018. The higher ratio was primarily the result of hail and wind related storms from twelve catastrophe events totaling $17.0 million in losses for the quarter ended June 30, 2019. Of these losses, $15.5 million related to non-Florida business, which is subject to a 50% profit-sharing agreement with the non-affiliated managing general underwriter that writes FNIC's non-Florida property business.
  • The net expense ratio decreased 11.4 percentage points to 30.7% in the second quarter of 2019, as compared to 42.1% in the second quarter of 2018. Commissions and other underwriting expenses decreased $7.3 million, or 24.5%, to $22.6 million for the three months ended June 30, 2019, compared with $29.9 million for the three months ended June 30, 2018. The decrease was driven by other underwriting expenses, specifically, the non-Florida profit share agreement, as a result of $15.5 million of weather-related losses (as discussed above), contributing to a $7.8 million reduction in our underwriting expenses.
  • Interest expense increased $0.9 million to $1.9 million for the three months ended June 30, 2019, compared with $1.0 million in the prior year period due to an increase in the outstanding debt.

Line of Business Results

  • Homeowners net income for the current quarter was $6.0 million, which included $9.3 million of pre-tax net losses related to twelve catastrophe events during the quarter, as mentioned above. Additionally, net premiums earned increased $12.2 million or 15.4% in the second quarter of 2019 as compared to the second quarter of 2018.
  • Automobile's net loss for the second quarter of 2019 was $0.9 million, which includes $1.1 million of pre-tax adverse development, as compared to a net loss of $0.2 million for the second quarter of 2018.
  • Other’s net income of $2.1 million in the second quarter of 2019, as compared to net income of $0.6 million in the second quarter of 2018. Other's adjusted operating income was $0.6 million and $0.5 million for these same periods, with the results primarily driven by investment gains and growth in net investment income this quarter partially offset by higher interest expense and $1.0 million of pre-tax adverse prior year development in our commercial general liability book of business.

Non-GAAP Performance Measures

Performance measures that are not United States generally accepted accounting principles ("GAAP") measures do not replace the most directly comparable GAAP measures and we have included detailed reconciliations thereof on pages 12 and 13.

We exclude the after-tax (using our statutory income tax rate) effects of the following items from GAAP net income (loss) to arrive at adjusted operating income (loss):

  • Net realized and unrealized gains (losses), including, but not limited to, gains (losses) associated with investments and early extinguishment of debt;
  • Acquisition, integration and other costs and the amortization of specifically identifiable intangibles (other than value of business acquired);
  • Impairment of intangibles;
  • Income (loss) from initial adoption of new regulations and accounting guidance; and
  • Income (loss) from discontinued operations.

We also exclude the pre-tax effect of the first bullet above from GAAP revenues to arrive at adjusted operating revenues.

Management believes these non-GAAP performance measures allow for a better understanding of the underlying trend in our business, as the excluded items are not necessarily indicative of our operating fundamentals or performance.

Similarly, we exclude accumulated other comprehensive income (loss) ("AOCI") from book value per share to arrive at book value per share, excluding AOCI.

Conference Call Information

The Company will hold an investor conference call at 9:00 AM (ET) Wednesday, August 7, 2019. 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: 7588547

A live webcast of the call will be available online via the “Conference Calls” section of the Company’s website at FedNat.com or interested parties can click on the following link:

  http://www.fednat.com/investors/conference-calls/

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

The Company is an insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims management processes through our subsidiaries and contractual relationships with independent agents and general agents. The Company, through our wholly owned subsidiaries, are 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 had been operating in Georgia, Texas, Alabama, and Florida and is being wound down. 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

Certain statements made by FedNat Holding Company or on its behalf may contain “forward-looking statements” within 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 and its ability to integrate the operations to be acquired; 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. The Company does 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 IR@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   Six Months Ended
    2019   2018   % Change   2019   2018   % Change
Net Income (Loss) Attributable to Common Shareholders                        
Net income (loss):                        
Homeowners   $ 6,006     $ 8,430     (28.8 )%   $ 4,583     $ 15,371     (70.2 )%
Automobile   (949 )   (211 )   349.8 %   (1,628 )   (252 )   546.0 %
Other   2,053     601     241.6 %   290     1,164     (75.1 )%
Consolidated   $ 7,110     $ 8,820     (19.4 )%   $ 3,245     $ 16,283     (80.1 )%
                         
Adjusted operating income (loss):                        
Homeowners   $ 6,020     $ 8,828     (31.8 )%   $ 4,633     $ 15,945     (70.9 )%
Automobile   (949 )   (200 )   374.5 %   (1,628 )   (220 )   640.0 %
Other   595     475     25.3 %   267     1,842     (85.5 )%
Consolidated   $ 5,666     $ 9,103     (37.8 )%   $ 3,272     $ 17,567     (81.4 )%
                         
Per Common Share                        
Net income (loss) - diluted   $ 0.55     $ 0.69     (19.6 )%   $ 0.25     $ 1.26     (80.1 )%
Adjusted operating income (loss) - diluted   0.44     0.71     (37.9 )%   0.25     1.36     (81.4 )%
Dividends declared   0.08     0.08     %   0.16     0.16     %
Book value   17.96     16.89     6.3 %   17.96     16.89     6.3 %
Book value, excluding AOCI   17.24     17.31     (0.4 )%   17.24     17.31     (0.4 )%
                         
Return to Shareholders                        
Repurchases of common stock   $     $ 61     (100.0 )%   $     $ 5,061     (100.0 )%
Dividends declared   1,046     1,036     1.0 %   2,087     2,079     0.4 %
    $ 1,046     $ 1,097     (4.6 )%   $ 2,087     $ 7,140     (70.8 )%
                         
Revenue                        
Total revenues   $ 105,301     $ 95,742     10.0 %   $ 206,498     $ 188,819     9.4 %
Adjusted operating revenues   103,346     95,534     8.2 %   202,242     189,663     6.6 %
Gross premiums written   169,170     166,734     1.5 %   301,403     301,129     0.1 %
Gross premiums earned   141,220     146,890     (3.9 )%   279,587     293,332     (4.7 )%
Net premiums earned   92,306     83,557     10.5 %   181,090     165,666     9.3 %
                         
Ratios to Net Premiums Earned                        
Net loss ratio   70.8 %   56.9 %       73.0 %   56.5 %    
Net expense ratio   30.7 %   42.1 %       34.7 %   43.1 %    
Combined ratio   101.5 %   99.0 %       107.7 %   99.6 %    
                         
In-Force Homeowners Policies                        
Florida   239,585     256,506     (6.6 )%   239,585     256,506     (6.6 )%
Non-Florida   60,251     37,904     59.0 %   60,251     37,904     59.0 %
    299,836     294,410     1.8 %   299,836     294,410     1.8 %



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

    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2019   2018   2019   2018
Revenues:                
Net premiums earned   $ 92,306     $ 83,557     $ 181,090     $ 165,666  
Net investment income   4,259     2,978     7,969     5,921  
Net realized and unrealized investment gains (losses)   1,955     208     4,256     (844 )
Direct written policy fees   2,403     3,313     4,794     6,889  
Other income   4,378     5,686     8,389     11,187  
Total revenues   105,301     95,742     206,498     188,819  
                
Costs and expenses:                
Losses and loss adjustment expenses   65,340     47,570     132,179     93,641  
Commissions and other underwriting expenses   22,562     29,873     50,796     60,094  
General and administrative expenses   5,779     5,260     12,090     11,345  
Interest expense   1,915     1,023     6,966     2,107  
Total costs and expenses   95,596     83,726     202,031     167,187  
                
Income (loss) before income taxes   9,705     12,016     4,467     21,632  
Income tax expense (benefit)   2,595     3,196     1,222     5,567  
    Net income (loss)   7,110     8,820     3,245     16,065  
Net income (loss) attributable to non-controlling interest               (218 )
        Net income (loss) attributable to FedNat Holding Company shareholders   $ 7,110     $ 8,820     $ 3,245     $ 16,283  
                
Net Income (Loss) Per Common Share                
Basic   $ 0.55     $ 0.69     $ 0.25     $ 1.27  
Diluted   $ 0.55     $ 0.69     $ 0.25     $ 1.26  
                
Weighted Average Number of Shares of Common Stock Outstanding                
Basic   12,844     12,726     12,820     12,788  
Diluted   12,883     12,846     12,876     12,889  
                
Dividends Declared Per Common Share   $ 0.08     $ 0.08     $ 0.16     $ 0.16  



FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)

   Three Months Ended   Six Months Ended
   June 30,   June 30,
   2019   2018   2019   2018
   (In thousands)
Gross premiums written:                
Homeowners Florida   $ 128,016     $ 133,006     $ 231,979     $ 241,377  
Homeowners non-Florida   36,212     22,590     61,532     37,034  
Automobile       5,322     (1 )   11,669  
Commercial general liability   (49 )   1,570     (102 )   4,084  
Federal flood   4,991     4,246     7,995     6,965  
Total gross premiums written   $ 169,170     $ 166,734     $ 301,403     $ 301,129  


   Three Months Ended   Six Months Ended
   June 30,   June 30,
   2019   2018   2019   2018
   (In thousands)
Gross premiums earned:                
Homeowners Florida   $ 112,747     $ 119,080     $ 225,419     $ 237,904  
Homeowners non-Florida   24,327     15,449     45,497     29,088  
Automobile   4     6,782     26     15,110  
Commercial general liability   500     2,393     1,536     5,022  
Federal flood   3,642     3,186     7,109     6,208  
Total gross premiums earned   $ 141,220     $ 146,890     $ 279,587     $ 293,332  


   Three Months Ended   Six Months Ended
   June 30,   June 30,
   2019   2018   2019   2018
   (In thousands)
Net premiums earned:                
Homeowners   $ 91,874     $ 79,647     $ 179,685     $ 157,052  
Automobile   1     1,640     6     3,851  
Commercial general liability   431     2,270     1,399     4,763  
Total net premiums earned   $ 92,306     $ 83,557     $ 181,090     $ 165,666  



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

   Three Months Ended   Six Months Ended
   June 30,   June 30,
   2019   2018   2019   2018
   (In thousands)
Commissions and other underwriting expenses:                
Homeowners Florida   $ 13,401     $ 14,175     $ 26,623     $ 28,538  
All others   5,920     4,987     11,187     9,643  
Ceding commissions   (2,906 )   (4,373 )   (5,690 )   (8,088 )
Total commissions   16,415     14,789     32,120     30,093  
                 
Automobile       1,296     3     2,763  
Homeowners non-Florida   759     432     1,435     762  
Total fees   759     1,728     1,438     3,525  
                 
Salaries and wages   3,072     4,369     6,394     8,135  
Other underwriting expenses   2,316     8,987     10,844     18,341  
Total commissions and other underwriting expenses   $ 22,562     $ 29,873     $ 50,796     $ 60,094  


   Three Months Ended   Six Months Ended
   June 30,   June 30,
   2019   2018   2019   2018
                 
Net loss ratio   70.8 %   56.9 %   73.0 %   56.5 %
Net expense ratio   30.7 %   42.1 %   34.7 %   43.1 %
Combined ratio   101.5 %   99.0 %   107.7 %   99.6 %
Gross loss ratio   60.8 %   151.1 %   135.3 %   137.3 %
Gross expense ratio   22.1 %   26.9 %   24.5 %   27.1 %



FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)

   June 30,   December 31,
   2019   2018
ASSETS   (In thousands)
Investments:        
Debt securities, available-for-sale, at fair value   $ 451,124     $ 428,641  
Debt securities, held-to-maturity, at amortized cost   4,499     5,126  
Equity securities, at fair value   22,112     17,758  
Total investments   477,735     451,525  
Cash and cash equivalents   133,787     64,423  
Prepaid reinsurance premiums   82,781     108,577  
Premiums receivable, net of allowance   31,239     29,791  
Reinsurance recoverable, net   199,313     211,424  
Deferred acquisition costs, net   45,539     39,436  
Income taxes, net   2,369     5,220  
Other assets   23,520     14,975  
Total assets   $ 996,283     $ 925,371  
        
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Liabilities        
Loss and loss adjustment expense reserves   $ 268,735     $ 296,230  
Unearned premiums   303,808     281,992  
Reinsurance payable   52,760     63,599  
Long-term debt, net of deferred financing costs   98,442     44,404  
Deferred revenue   5,122     4,585  
Other liabilities   36,631     19,302  
Total liabilities   765,498     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; 12,849,319 and 12,784,444 shares issued and outstanding, respectively   128     128  
Additional paid-in capital   142,486     141,128  
Accumulated other comprehensive income (loss)   9,260     (3,750 )
Retained earnings   78,911     77,753  
Total shareholders’ equity attributable to FedNat Holding Company shareholders   230,785     215,259  
Non-controlling interest        
Total shareholders’ equity   230,785     215,259  
   Total liabilities and shareholders' equity   $ 996,283     $ 925,371  



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

 Three Months Ended June 30,
 2019   2018
 Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
 (Dollars in thousands)
Revenues:                              
Gross premiums written $ 164,228     $     $ 4,942     $ 169,170     $ 155,596     $ 5,322     $ 5,816     $ 166,734  
Gross premiums earned 137,074     4     4,142     141,220     134,529     6,782     5,579     146,890  
Ceded premiums (45,200 )   (3 )   (3,711 )   (48,914 )   (54,882 )   (5,142 )   (3,309 )   (63,333 )
Net premiums earned 91,874     1     431     92,306     79,647     1,640     2,270     83,557  
Net investment income         4,259     4,259             2,978     2,978  
Net realized and unrealized investment gains (losses)         1,955     1,955             208     208  
Direct written policy fees 2,331         72     2,403     1,857     1,296     160     3,313  
Other income 3,094     2     1,282     4,378     3,970     405     1,311     5,686  
Total revenues 97,299     3     7,999     105,301     85,474     3,341     6,927     95,742  
                               
Costs and expenses:                              
Losses and loss adjustment expenses 62,482     1,208     1,650     65,340     42,617     1,932     3,021     47,570  
Commissions and other underwriting expenses 21,796     16     750     22,562     27,281     1,616     976     29,873  
General and administrative expenses 4,976     50     753     5,779     4,285     75     900     5,260  
Interest expense         1,915     1,915             1,023     1,023  
Total costs and expenses 89,254     1,274     5,068     95,596     74,183     3,623     5,920     83,726  
                               
Income (loss) before income taxes 8,045     (1,271 )   2,931     9,705     11,291     (282 )   1,007     12,016  
Income tax expense (benefit) 2,039     (322 )   878     2,595     2,861     (71 )   406     3,196  
   Net income (loss) $ 6,006     $ (949 )   $ 2,053     $ 7,110     $ 8,430     $ (211 )   $ 601     $ 8,820  
                               
Ratios to net premiums earned:                              
Net loss ratio 68.0 %     NCM     382.8 %   70.8 %   53.5 %   117.8 %   133.1 %   56.9 %
Net expense ratio 29.1 %           30.7 %   39.6 %           42.1 %
Combined ratio 97.1 %           101.5 %   93.1 %           99.0 %



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

 Six Months Ended June 30,
 2019   2018
 Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
 (Dollars in thousands)
Revenues:                              
Gross premiums written $ 293,511     $ (1 )   $ 7,893     $ 301,403     $ 278,411     $ 11,669     $ 11,049     $ 301,129  
Gross premiums earned 270,916     26     8,645     279,587     266,992     15,110     11,230     293,332  
Ceded premiums (91,231 )   (20 )   (7,246 )   (98,497 )   (109,940 )   (11,259 )   (6,467 )   (127,666 )
Net premiums earned 179,685     6     1,399     181,090     157,052     3,851     4,763     165,666  
Net investment income         7,969     7,969             5,921     5,921  
Net realized and unrealized investment gains (losses)         4,256     4,256             (844 )   (844 )
Direct written policy fees 4,629     3     162     4,794     3,780     2,763     346     6,889  
Other income 6,636     14     1,739     8,389     7,947     893     2,347     11,187  
Total revenues 190,950     23     15,525     206,498     168,779     7,507     12,533     188,819  
                               
Costs and expenses:                              
Losses and loss adjustment expenses 125,812     2,052     4,315     132,179     84,572     4,168     4,901     93,641  
Commissions and other underwriting expenses 49,163     51     1,582     50,796     54,637     3,476     1,981     60,094  
General and administrative expenses 9,836     100     2,154     12,090     9,174     200     1,971     11,345  
Interest expense         6,966     6,966     100         2,007     2,107  
Total costs and expenses 184,811     2,203     15,017     202,031     148,483     7,844     10,860     167,187  
                               
Income (loss) before income taxes 6,139     (2,180 )   508     4,467     20,296     (337 )   1,673     21,632  
Income tax expense (benefit) 1,556     (552 )   218     1,222     5,143     (85 )   509     5,567  
   Net income (loss) 4,583     (1,628 )   290     3,245     15,153     (252 )   1,164     16,065  
Net income (loss) attributable to non-controlling interest                 (218 )           (218 )
      Net income (loss) attributable to FNHC shareholders $ 4,583     $ (1,628 )   $ 290     $ 3,245     $ 15,371     $ (252 )   $ 1,164     $ 16,283  
                               
Ratios to net premiums earned:                              
Net loss ratio 70.0 %     NCM     308.4 %   73.0 %   53.8 %   108.2 %   102.9 %   56.5 %
Net expense ratio 32.9 %           34.7 %   40.7 %           43.1 %
Combined ratio 102.9 %           107.7 %   94.5 %           99.6 %



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

    As of or For the Three Months Ended June 30,
    2019   2018
    Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
Revenue                                
Total revenues   $ 97,299     $ 3     $ 7,999     $ 105,301     $ 85,474     $ 3,341     $ 6,927     $ 95,742  
Less:                                
Net realized and unrealized investment gains (losses)           1,955     1,955             208     208  
Adjusted operating revenues   $ 97,299     $ 3     $ 6,044     $ 103,346     $ 85,474     $ 3,341     $ 6,719     $ 95,534  
                                 
Net Income (Loss)                                
Net income (loss)   $ 6,006     $ (949 )   $ 2,053     $ 7,110     $ 8,430     $ (211 )   $ 601     $ 8,820  
Less:                                
Net realized and unrealized investment gains (losses)           1,460     1,460             155     155  
Acquisition and other costs   (14 )       (2 )   (16 )   (398 )   (11 )   (29 )   (438 )
Adjusted operating income (loss)   $ 6,020     $ (949 )   $ 595     $ 5,666     $ 8,828     $ (200 )   $ 475     $ 9,103  
                                 
Income tax rate assumed for reconciling items above   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %
                                 
Per Common Share                                
Book value               $ 17.96                 $ 16.89  
Less:                                
AOCI               0.72                 (0.42 )
Book value, excluding AOCI               $ 17.24                 $ 17.31  



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

    As of or For the Six Months Ended June 30,
    2019   2018
    Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
Revenue                                
Total revenues   $ 190,950     $ 23     $ 15,525     $ 206,498     $ 168,779     $ 7,507     $ 12,533     $ 188,819  
Less:                                
Net realized and unrealized investment gains (losses)           4,256     4,256             (844 )   (844 )
Adjusted operating revenues   $ 190,950     $ 23     $ 11,269     $ 202,242     $ 168,779     $ 7,507     $ 13,377     $ 189,663  
                                 
Net Income (Loss)                                
Net income (loss)   $ 4,583     $ (1,628 )   $ 290     $ 3,245     $ 15,371     $ (252 )   $ 1,164     $ 16,283  
Less:                                
Net realized and unrealized investment gains (losses)           3,178     3,178             (630 )   (630 )
Acquisition and other costs   (50 )       (486 )   (536 )   (574 )   (32 )   (48 )   (654 )
Gain (loss) on early extinguishment of debt           (2,669 )   (2,669 )                
Adjusted operating income (loss)   $ 4,633     $ (1,628 )   $ 267     $ 3,272     $ 15,945     $ (220 )   $ 1,842     $ 17,567  
                                 
Income tax rate assumed for reconciling items above   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %   25.35 %
                                 
Per Common Share                                
Book value               $ 17.96                 $ 16.89  
Less:                                
AOCI               0.72                 (0.42 )
Book value, excluding AOCI               $ 17.24                 $ 17.31  

 

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