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CST: 20/11/2019 18:39:33   

FedNat Holding Company Reports Third Quarter of 2019 Results

15 Days ago

SUNRISE, Fla., Nov. 05, 2019 (GLOBE NEWSWIRE) -- FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today reported results for the three and nine months ended September 30, 2019.

Q3 2019 highlights (as measured against the same three-month period last year, except where noted):

  • Net income of $4.7 million or $0.36 per diluted share.
  • Adjusted operating income of $4.3 million or $0.33 per diluted share.
  • $7.0 million of claims, net of recoveries, from Hurricane Dorian, Hurricane Barry and Tropical Storm Imelda impacting South Carolina, Florida and other states.
  • 14.5% increase in gross written premiums to $159.1 million, including FedNat Insurance Company ("FNIC") growth of 2% in Florida.
  • Net premiums earned decreased to $87.4 million, including $8 million quarter over quarter reduction primarily due to incremental costs from the new excess of loss reinsurance program.
  • Combined ratio of 105.5%, up 5.2 points driven upward by 3.4 points of higher net catastrophe losses in the period and 6.8 points from higher catastrophe reinsurance ceded premiums, partially offset by 5.0 points from improved underwriting margins as a result of our decision to focus on Homeowners and continued discipline over operating expenses.
  • Quarter-end Florida homeowners in-force policies of approximately 237,000.
  • 90.2% increase in non-Florida homeowners in-force policies to approximately 78,000.
  • As a result of recent growth in the size of our homeowners book of business, our 2019-2020 excess of loss reinsurance program annual costs increased $14 million to $179 million, pursuant to its annual exposure adjustment.
  • Book value per share increased 9.6% to $18.45 as compared to $16.84 as of December 31, 2018, despite $2.05 per share reduction due to significant weather-related events in the first nine months of 2019.

“FedNat delivered solid third quarter results and made significant progress on our strategies to improve profitability and enhance shareholder value,” said Michael H. Braun, Chief Executive Officer. “We’re encouraged by the performance of our core homeowners line of business, and continued earnings growth in our non-Florida book as we continue to expand our presence in select coastal states where we see opportunity. To this end, FedNat is set to continue our operational growth in these coastal states upon the completion of our Maison acquisition, which is set to close in December. Consistent with our core focus, this acquisition is in the homeowners line of business and is in markets where we already have operations, including Texas and Louisiana. Further, we have a more optimistic outlook in our home, Florida market with Assignment of Benefits (AOB) reform in effect, which should pave the way for an improved operating environment as we enter the new year. With this backdrop, we remain focused on strengthening our homeowners business throughout the southeast of the United States. This strategic roadmap sets the stage to unlock value and enhance shareholder value for years to come.”

Excess of Loss Reinsurance Update

  • The Company’s Homeowners book of business has increased in terms of premiums in-force and related exposures in both Florida and Non-Florida, which has strengthened our long-term earnings profile.
  • Accordingly, during the current quarter, FNHC’s 2019-2020 expected excess of loss reinsurance annual program costs increased from our preliminary estimate of $165 million to $179 million, an increase of $14 million or $3.5 million, on a quarterly basis. This adjustment relates to the annual September 30 risk exposure adjustment.
  • This larger book of business was driven by improved retention levels on renewals, and an increase in new business production, as competitors’ rate increases became effective. Thus, our book of business, which reflects cumulative rate increases of 21% over the past 3 years, including our 2019 rate increase of 4.6%, has become more competitive in Florida’s evolving environment.

Consolidated

  • Net income of $4.7 million or $0.36 per diluted share during the third quarter of 2019, as compared to net income of $8.0 million or $0.62 per diluted share during the third quarter of 2018.
  • Adjusted operating income of $4.3 million or $0.33 per diluted share during the third quarter of 2019, as compared to adjusted operating income of $7.4 million or $0.57 per diluted share during the third quarter of 2018.
  • Comparing to December 31, 2018, book value per share increased $1.61 to $18.45 at September 30, 2019. The increase was predominantly driven by unrealized gains on our fixed-income portfolio of $1.20 per share and net income of $0.61 per share, slightly offset by dividends of $0.24 per share.

Revenues

  • Total revenue decreased $11.3 million or 10.2%, to $99.5 million for the three months ended September 30, 2019, compared with $110.8 million for the three months ended September 30, 2018. The decrease was primarily driven by higher ceded premiums due to increased reinsurance spend, a decline in Automobile direct written policy fees, and lower investment gains, partially offset by increases in gross premiums earned and other income, all of which is discussed below.
  • Gross premiums written increased $20.1 million, or 14.5%, to $159.1 million in the quarter, compared with $139.0 million for the same three-month period last year. Gross premiums written increased due to the growth in homeowners non-Florida and 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. Our homeowners Florida FNIC premiums grew $2.2 million or 2% this quarter as compared to last year, which represents the first quarter showing premium growth since the third quarter of 2017. Overall, Homeowners grew 12.9%.
  • Gross premiums earned increased $0.6 million, or 0.4%, to $145.5 million for the three months ended September 30, 2019, as compared to $144.9 million for the three months ended September 30, 2018. The higher gross premiums earned was driven by a 3.6% increase in earned premiums in Homeowners, partially offset by the results of our decision to exit the Automobile and commercial general liability lines.
  • Ceded premiums increased $11.8 million, or 25.3%, to $58.2 million in the quarter, compared to $46.4 million the same three-month period last year. The increase was driven by $8.1 million higher excess of loss reinsurance spend in Homeowners, as the new program became effective July 1, 2019 at a higher rate on-line than the program in the previous year and $6.1 million from the homeowners Florida quota share being set at 10% in the third quarter of 2019 as compared to 2% in the prior year quarter. These items were offset by $2.1 million lower ceded premiums in Automobile as we have exited that line of business.
  • Net investment income increased $1.0 million, or 29.7%, to $4.1 million during the three months ended September 30, 2019, as compared to $3.1 million during the three months ended September 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 as well as from portfolio repositioning.
  • Other income increased $1.1 million, or 29.6%, to $4.7 million in the quarter, compared with $3.6 million in the same three-month period last year. The increase in other income was primarily driven by higher brokerage revenue, partially offset by lower financing and commission income. The brokerage revenue increase is the result of higher excess of loss reinsurance spend from the reinsurance programs in place during the third quarter of 2019 as compared to the third quarter of 2018. The year over year decreases in financing and commission income were driven by lower automobile fee income from our decision to exit this line of business.

Expenses

  • Losses and loss adjustment expenses (“LAE”) decreased $0.4 million, or 0.6%, to $62.1 million for the three months ended September 30, 2019, compared with $62.5 million for the same three-month period last year. The net loss ratio increased 7.7 percentage points, to 71.1% in the current quarter, as compared to 63.4% in the third 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 third quarter of 2019 included $11.0 million of losses, related to catastrophe losses from Hurricane Dorian, Hurricane Barry and Tropical Storm Imelda ($8.0 million of these losses relate to non-Florida, which is subject to a 50% profit-sharing agreement, as discussed earlier), compared to the prior year quarter which included $6.1 million of catastrophe losses arising from Hurricane Florence and Tropical Storm Gordon. The remaining variance is driven by lower losses in the quarter in Automobile and commercial general liability lines as we exit those lines and higher ceded losses from homeowners Florida quota share in the quarter due to the higher percentage (as discussed earlier), partially offset by increased losses related to higher gross premiums earned in Homeowners.
  • The net expense ratio decreased 2.5 percentage points to 34.4% in the third quarter of 2019, as compared to 36.9% in the third quarter of 2018. Commissions and other underwriting expenses decreased $6.5 million, or 20.8%, to $24.9 million for the three months ended September 30, 2019, compared with $31.4 million for the three months ended September 30, 2018. The decrease was driven by higher ceding commissions from homeowners Florida quota share in the quarter due to the higher percentage (as discussed earlier), lower automobile fees due to reduced premiums earned and a reduction in other underwriting expenses as there was a benefit in the non-Florida profit-share calculation this quarter, a direct result of $8.0 million of non-Florida weather-related losses, resulting in a $4.0 million reduction. These decreases were partially offset by higher homeowners acquisition related costs as a result of premium growth across periods.
  • Interest expense increased $0.9 million to $1.9 million for the three months ended September 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 $3.4 million, which included $8.1 million pre-tax of higher excess of loss reinsurance spend in Homeowners (as discussed earlier) and $7.0 million, after profit share benefit, of pre-tax net losses related to impacts from the catastrophe weather events in the quarter, as mentioned above. Additionally, gross premiums earned increased 4.9 million, or 3.6%, in the third quarter of 2019 as compared to the third quarter of 2018.
  • Automobile's net loss for the third quarter of 2019 was $0.6 million, which includes $0.6 million of pre-tax adverse development, as compared to a net loss of $1.4 million for the third quarter of 2018.
  • Other’s net income of $1.9 million in the third quarter of 2019, as compared to net income of $1.2 million in the third quarter of 2018. Other's adjusted operating income was $1.3 million in the current quarter and breakeven for the prior year period, with the results primarily driven by growth in net investment income, income tax benefit from a lower tax rate and lower net losses from our commercial general liability book of business this quarter, partially offset by higher interest expense.

Non-GAAP Performance Measures

Non 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, November 6, 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: 3063798

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 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 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

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
  Nine Months Ended
  2019   2018   % Change
  2019   2018   % Change
Net Income (Loss) Attributable to Common Shareholders                              
Net income (loss):                              
Homeowners $ 3,398     $ 8,158     (58.3) %   $ 7,981     $ 23,529     (66.1) %
Automobile (613)     (1,416)     (56.7) %   (2,241)     (1,668)     34.4 %
Other 1,874     1,208     55.1 %   2,164     2,372     (8.8) %
Consolidated $ 4,659     $ 7,950     (41.4) %   $ 7,904     $ 24,233     (67.4) %
                               
Adjusted operating income (loss):                              
Homeowners $ 3,585     $ 8,767     (59.1) %   $ 8,218     $ 24,712     (66.7) %
Automobile (608)     (1,379)     (55.9) %   (2,236)     (1,599)     39.8 %
Other 1,315     (28)     (4,796.4) %   1,582     1,814     (12.8) %
Consolidated $ 4,292     $ 7,360     (41.7) %   $ 7,564     $ 24,927     (69.7) %
                               
Per Common Share                              
Net income (loss) - diluted $ 0.36     $ 0.62     (41.5) %   $ 0.61     $ 1.88     (67.4) %
Adjusted operating income (loss) - diluted 0.33     0.57     (41.8) %   0.59     1.94     (69.7) %
Dividends declared 0.08         NCM   0.24     0.16     50.0 %
Book value 18.45     17.45     5.7 %   18.45     17.45     5.7 %
Book value, excluding AOCI 17.54     17.91     (2.1) %   17.54     17.91     (2.1) %
                               
Return to Shareholders                              
Repurchases of common stock $     $     NCM   $     $ 5,061     (100.0) %
Dividends declared 1,046     (2)     NCM   3,133     2,077     50.8 %
  $ 1,046     $ (2)     NCM   $ 3,133     $ 7,138     (56.1) %
                               
Revenue                              
Total revenues $ 99,476     $ 110,832     (10.2) %   $ 305,974     $ 299,651     2.1 %
Adjusted operating revenues 98,682     109,072     (9.5) %   300,924     298,735     0.7 %
Gross premiums written 159,131     139,022     14.5 %   460,534     440,151     4.6 %
Gross premiums earned 145,546     144,907     0.4 %   425,133     438,239     (3.0) %
Net premiums earned 87,374     98,493     (11.3) %   268,464     264,159     1.6 %
                               
Ratios to Net Premiums Earned                              
Net loss ratio 71.1 %   63.4 %       72.4 %   59.1 %    
Net expense ratio 34.4 %   36.9 %       34.6 %   40.8 %    
Combined ratio 105.5 %   100.3 %       107.0 %   99.9 %    
                               
In-Force Homeowners Policies                              
Florida 237,000     249,000     (4.8) %   237,000     249,000     (4.8) %
Non-Florida 78,000     41,000     90.2 %   78,000     41,000     90.2 %
  315,000     290,000     8.6 %   315,000     290,000     8.6 %
                                   

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

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
Revenues:              
Net premiums earned $ 87,374   $ 98,493   $ 268,464   $ 264,159  
Net investment income 4,068   3,137   12,037   9,058  
Net realized and unrealized investment gains (losses) 794   1,760   5,050   916  
Direct written policy fees 2,514   3,796   7,308   10,685  
Other income 4,726   3,646   13,115   14,833  
Total revenues 99,476   110,832   305,974   299,651  
              
Costs and expenses:              
Losses and loss adjustment expenses 62,105   62,457   194,284   156,098  
Commissions and other underwriting expenses 24,854   31,373   75,650   91,467  
General and administrative expenses 5,246   5,000   17,336   16,345  
Interest expense 1,894   1,032   8,860   3,139  
Total costs and expenses 94,099   99,862   296,130   267,049  
              
Income (loss) before income taxes 5,377   10,970   9,844   32,602  
Income tax expense (benefit) 718   3,020   1,940   8,587  
Net income (loss) 4,659   7,950   7,904   24,015  
Net income (loss) attributable to non-controlling interest       (218 )
Net income (loss) attributable to FedNat Holding Company shareholders $ 4,659   $ 7,950   $ 7,904   $ 24,233  
              
Net Income (Loss) Per Common Share              
Basic $ 0.36   $ 0.62   $ 0.62   $ 1.90  
Diluted $ 0.36   $ 0.62   $ 0.61   $ 1.88  
              
Weighted Average Number of Shares of Common Stock Outstanding              
Basic 12,854   12,749   12,831   12,775  
Diluted 12,897   12,870   12,880   12,866  
              
Dividends Declared Per Common Share $ 0.08   $   $ 0.24   $ 0.16  
                         

FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)

  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
  (In thousands)
Gross premiums written:              
Homeowners Florida $ 115,341   $ 114,441   $ 347,320   $ 355,818
Homeowners non-Florida 38,790   22,062   100,322   59,096
Automobile   (3,041)   (1)   8,628
Commercial general liability (19)   1,435   (121)   5,519
Federal flood 5,019   4,125   13,014   11,090
Total gross premiums written $ 159,131   $ 139,022   $ 460,534   $ 440,151
                       


  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
  (In thousands)
Gross premiums earned:              
Homeowners Florida $ 113,062   $ 118,603   $ 338,481   $ 356,507
Homeowners non-Florida 28,431   17,984   73,928   47,072
Automobile   2,766   26   17,876
Commercial general liability 157   2,122   1,693   7,144
Federal flood 3,896   3,432   11,005   9,640
Total gross premiums earned $ 145,546   $ 144,907   $ 425,133   $ 438,239
                       


  Three Months Ended   Nine Months Ended
  September 30,   September 30,
  2019   2018   2019   2018
  (In thousands)
Net premiums earned:              
Homeowners $ 87,286   $ 95,805   $ 266,971   $ 252,857
Automobile   675   6   4,526
Commercial general liability 88   2,013   1,487   6,776
Total net premiums earned $ 87,374   $ 98,493   $ 268,464   $ 264,159
                       

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

 Three Months Ended   Nine Months Ended
 September 30,   September 30,
 2019   2018   2019   2018
 (In thousands)
Commissions and other underwriting expenses:              
Homeowners Florida $ 13,187   $ 14,258   $ 39,810   $ 42,796
All others 6,610   4,866   17,796   14,488
Ceding commissions (3,203)   (689)   (8,893)   (8,777)
Total commissions 16,594   18,435   48,713   48,507
               
Automobile   1,466   3   4,229
Homeowners non-Florida 902   571   2,337   1,354
Total fees 902   2,037   2,340   5,583
               
Salaries and wages 2,696   3,147   9,090   11,282
Other underwriting expenses 4,662   7,754   15,507   26,095
Total commissions and other underwriting expenses $ 24,854   $ 31,373   $ 75,650   $ 91,467
                       


 Three Months Ended   Nine Months Ended
 September 30,   September 30,
 2019   2018   2019   2018
               
Net loss ratio 71.1 %   63.4 %   72.4 %   59.1 %
Net expense ratio 34.4 %   36.9 %   34.6 %   40.8 %
Combined ratio 105.5 %   100.3 %   107.0 %   99.9 %
Gross loss ratio 113.1 %   50.1 %   127.7 %   108.5 %
Gross expense ratio 22.9 %   25.6 %   24.0 %   26.6 %
                       

FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)

 September 30,   December 31,
 2019   2018
ASSETS (In thousands)
Investments:      
Debt securities, available-for-sale, at fair value $ 468,130   $ 428,641
Debt securities, held-to-maturity, at amortized cost 4,369   5,126
Equity securities, at fair value 19,014   17,758
Total investments 491,513   451,525
Cash and cash equivalents 121,418   64,423
Prepaid reinsurance premiums 170,294   108,577
Premiums receivable, net of allowance 39,932   29,791
Reinsurance recoverable, net 202,875   211,424
Deferred acquisition costs, net 48,539   39,436
Income taxes, net 1,056   5,220
Other assets 25,602   14,975
Total assets $ 1,101,229   $ 925,371
      
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Liabilities      
Loss and loss adjustment expense reserves $ 286,948   $ 296,230
Unearned premiums 317,393   281,992
Reinsurance payable 122,802   63,599
Long-term debt, net of deferred financing costs 98,482   44,404
Deferred revenue 6,239   4,585
Other liabilities 31,976   19,302
Total liabilities 863,840   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; 12,869,366 and 12,784,444 shares issued and outstanding, respectively 129   128
Additional paid-in capital 143,088   141,128
Accumulated other comprehensive income (loss) 11,648   (3,750)
Retained earnings 82,524   77,753
Total shareholders’ equity 237,389   215,259
Total liabilities and shareholders' equity $ 1,101,229   $ 925,371
           

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

  Three Months Ended September 30,
  2019   2018
  Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
  (Dollars in thousands)
Revenues:                              
Gross premiums written $ 154,131     $   $ 5,000     $ 159,131     $ 136,503     $ (3,041)     $ 5,560     $ 139,022  
Gross premiums earned 141,493       4,053     145,546     136,587     2,766     5,554     144,907  
Ceded premiums (54,207)       (3,965)     (58,172)     (40,782)     (2,091)     (3,541)     (46,414)  
Net premiums earned 87,286       88     87,374     95,805     675     2,013     98,493  
Net investment income       4,068     4,068             3,137     3,137  
Net realized and unrealized investment gains (losses)       794     794             1,760     1,760  
Direct written policy fees 2,453       61     2,514     2,198     1,466     132     3,796  
Other income 3,996     4   726     4,726     2,613     191     842     3,646  
Total revenues 93,735     4   5,737     99,476     100,616     2,332     7,884     110,832  
                               
Costs and expenses:                              
Losses and loss adjustment expenses 60,708     742   655     62,105     56,856     2,609     2,992     62,457  
Commissions and other underwriting expenses 24,109       745     24,854     28,647     1,545     1,181     31,373  
General and administrative expenses 4,484     50   712     5,246     4,187     75     738     5,000  
Interest expense       1,894     1,894             1,032     1,032  
Total costs and expenses 89,301     792   4,006     94,099     89,690     4,229     5,943     99,862  
                               
Income (loss) before income taxes 4,434     (788)   1,731     5,377     10,926     (1,897)     1,941     10,970  
Income tax expense (benefit) 1,036     (175)   (143)     718     2,768     (481)     733     3,020  
Net income (loss) $ 3,398     $ (613)   $ 1,874     $ 4,659     $ 8,158     $ (1,416)     $ 1,208     $ 7,950  
                               
Ratios to net premiums earned:                                                            
Net loss ratio 69.6 %   NCM   744.3 %   71.1 %   59.3 %   386.5 %   148.6 %   63.4 %
Net expense ratio 32.7 %           34.4 %   34.3 %           36.9 %
Combined ratio 102.3 %           105.5 %   93.6 %           100.3 %
                                                             

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

 Nine Months Ended September 30,
 2019   2018
 Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
  (Dollars in thousands)
Revenues:                              
Gross premiums written $ 447,642     $ (1)   $ 12,893   $ 460,534     $ 414,914     $ 8,628     $ 16,609     $ 440,151  
Gross premiums earned 412,409     26   12,698   425,133     403,579     17,876     16,784     438,239  
Ceded premiums (145,438)     (20)   (11,211)   (156,669)     (150,722)     (13,350)     (10,008)     (174,080)  
Net premiums earned 266,971     6   1,487   268,464     252,857     4,526     6,776     264,159  
Net investment income       12,037   12,037             9,058     9,058  
Net realized and unrealized investment gains (losses)       5,050   5,050             916     916  
Direct written policy fees 7,082     3   223   7,308     5,978     4,229     478     10,685  
Other income 10,632     18   2,465   13,115     10,560     1,084     3,189     14,833  
Total revenues 284,685     27   21,262   305,974     269,395     9,839     20,417     299,651  
                               
Costs and expenses:                              
Losses and loss adjustment expenses 186,520     2,794   4,970   194,284     141,428     6,777     7,893     156,098  
Commissions and other underwriting expenses 73,272     51   2,327   75,650     83,284     5,021     3,162     91,467  
General and administrative expenses 14,320     150   2,866   17,336     13,361     275     2,709     16,345  
Interest expense       8,860   8,860     100         3,039     3,139  
Total costs and expenses 274,112     2,995   19,023   296,130     238,173     12,073     16,803     267,049  
                               
Income (loss) before income taxes 10,573     (2,968)   2,239   9,844     31,222     (2,234)     3,614     32,602  
Income tax expense (benefit) 2,592     (727)   75   1,940     7,911     (566)     1,242     8,587  
Net income (loss) 7,981     (2,241)   2,164   7,904     23,311     (1,668)     2,372     24,015  
Net income (loss) attributable to non-controlling interest             (218)             (218)  
Net income (loss) attributable to FNHC shareholders $ 7,981     $ (2,241)   $ 2,164   $ 7,904     $ 23,529     $ (1,668)     $ 2,372     $ 24,233  
                               
Ratios to net premiums earned:                              
Net loss ratio 69.9 %   NCM   NCM   72.4 %   55.9 %   149.7 %   116.5 %   59.1 %
Net expense ratio 32.8 %           34.6 %   38.3 %           40.8 %
Combined ratio 102.7 %           107.0 %   94.2 %           99.9 %
                                                           

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

  As of or For the Three Months Ended September 30,
  2019
  2018
  Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
Revenue                                              
Total revenues $ 93,735     $ 4     $ 5,737     $ 99,476     $ 100,616     $ 2,332     $ 7,884     $ 110,832  
Less:                                              
Net realized and unrealized investment gains (losses)         794     794             1,760     1,760  
Adjusted operating revenues $ 93,735     $ 4     $ 4,943     $ 98,682     $ 100,616     $ 2,332     $ 6,124     $ 109,072  
                                               
Net Income (Loss)                                              
Net income (loss) $ 3,398     $ (613)     $ 1,874     $ 4,659     $ 8,158     $ (1,416)     $ 1,208     $ 7,950  
Less:                                              
Net realized and unrealized investment gains (losses)         634     634             1,314     1,314  
Acquisition and other costs (187)     (5)     (46)     (238)     (609)     (37)     (78)     (724)  
Gain (loss) on early extinguishment of debt         (29)     (29)                  
Adjusted operating income (loss) $ 3,585     $ (608)     $ 1,315     $ 4,292     $ 8,767     $ (1,379)     $ (28)     $ 7,360  
                                               
Income tax rate assumed for reconciling items above 18.26 %   18.26 %   18.26 %   18.26 %   25.35 %   25.35 %   25.35 %   25.35 %
                                               
Per Common Share                                              
Book value                   $ 18.45                       $ 17.45  
Less:                                              
AOCI                   0.91                       (0.46)  
Book value, excluding AOCI                   $ 17.54                       $ 17.91  
                                               

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

  As of or For the Nine Months Ended September 30,
  2019   2018
  Homeowners   Automobile   Other   Consolidated   Homeowners   Automobile   Other   Consolidated
Revenue                              
Total revenues $ 284,685     $ 27     $ 21,262     $ 305,974     $ 269,395     $ 9,839     $ 20,417     $ 299,651  
Less:                              
Net realized and unrealized investment gains (losses)         5,050     5,050             916     916  
Adjusted operating revenues $ 284,685     $ 27     $ 16,212     $ 300,924     $ 269,395     $ 9,839     $ 19,501     $ 298,735  
                               
Net Income (Loss)                              
Net income (loss) $ 7,981     $ (2,241 )   $ 2,164     $ 7,904     $ 23,529     $ (1,668 )   $ 2,372     $ 24,233  
Less:                              
Net realized and unrealized investment gains (losses)         3,812     3,812             684     684  
Acquisition and other costs (237 )   (5 )   (532 )   (774 )   (1,183 )   (69 )   (126 )   (1,378 )
Gain (loss) on early extinguishment of debt         (2,698 )   (2,698 )                
Adjusted operating income (loss) $ 8,218     $ (2,236 )   $ 1,582     $ 7,564     $ 24,712     $ (1,599 )   $ 1,814     $ 24,927  
                               
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             $ 18.45                 $ 17.45  
Less:                              
AOCI             0.91                 (0.46 )
Book value, excluding AOCI             $ 17.54                 $ 17.91  
                                                               

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