FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today
reported results for the three and twelve months ended
December 31, 2020.
Q4 2020 highlights (as measured against the same
three-month period last year, except where noted):
- Net loss of $32.9 million or $2.40 per diluted share
- Adjusted operating loss of $26.9 million or $1.96 per diluted
share.
- $31.1 million, pre-tax, net of recoveries, of claims related to
Hurricanes Delta, Zeta and Eta, which together impacted portions of
Texas, Florida, Louisiana and Alabama, as previously
communicated.
- $11.5 million, pre-tax, prior year reserve development, due
primarily to $16.5 million of reserve strengthening in the
discontinued commercial general liability line of business,
partially offset by $5.0 million of reserve redundancy in our
homeowners line.
- $11.7 million non-cash impairment of intangibles, representing
$11.0 million write-off of goodwill and $0.7 million impairment of
identifiable intangible assets from the Maison acquisition, as
previously communicated.
- Gross written premiums of $168.4 million, including $24.2
million from Maison.
- 14.1% decrease in Florida homeowners in-force policies to
approximately 207,000, reflecting continued execution of our
strategy to limit exposure in Florida until rates more accurately
reflect increased costs of claims and reinsurance.
- 15.8% increase in non-Florida homeowners in-force policies to
approximately 154,000, in-line with our diversification
strategy.
- Non-insurance company liquidity of $59 million at December 31,
2020.
- Compared to September 30, 2020, book value per share decreased
$2.79 to $11.90 at December 31, 2020.
- The Company's debt to capital ratio was 37.7% at December 31,
2020.
Michael H. Braun, FedNat's Chief Executive
Officer, said “FedNat’s fourth quarter and full year 2020 results
reflect the unprecedented impact of a record number of severe
weather events, with 30 named storms including 12 named storms that
made landfall in the U.S. I want to commend our staff,
over 95% of which continues to work remotely, for their dedication
and commitment to providing our policyholders and partner agents
with the highest quality service in their time of need.”
Mr. Braun continued, “In the face of these challenges, FedNat’s
management team took action at year end to maintain appropriate
capital positions at our insurance companies, while conserving
liquidity at the holding company. These actions
included purchasing additional reinsurance coverage to help provide
more protection and statutory surplus relief for our insurance
companies. As a result, we ended 2020 with RBC ratios in excess of
300% at our insurance companies and $59 million in liquidity at the
holding company. We have continued our initiatives to improve the
profitability of our homeowners business and build long-term value,
including shrinking our book of business in Florida until rates
more accurately reflect our increased costs of doing business as
well as implementing multiple rate increases in both our Florida
and non-Florida markets. These rate increases are expected to
contribute over $90 million in incremental gross earned premium in
2021 and over $230 million of cumulative incremental premium in
2021 and 2022 when fully earned out in the first quarter of
2022.”
Revenues
- Total revenue decreased $23.8 million, or 21.8%, to $85.2
million for the three months ended December 31, 2020, compared
with $109.0 million for the three months ended December 31,
2019. The decrease was driven by lower net premiums earned as
increases in ceded premiums outpaced the growth in gross premiums
earned, partially offset by higher investment gains.
- Gross written premiums increased $18.3 million, or 12.2%, to
$168.4 million in the quarter, compared with $150.1 million for the
same three-month period last year. Gross premiums written increased
by $17.6 million from Maison, which was acquired in December 2019,
and $2.5 million from FNIC's non-Florida business, which was
partially offset by a $4.1 million decrease in FNIC's Florida
business, as we reduce our exposures in this market.
- Gross premiums earned increased $24.8 million, or 15.8%, to
$182.0 million for the three months ended December 31, 2020,
as compared to $157.2 million for the three months ended
December 31, 2019. The higher gross premiums earned was
primarily driven by continued non-Florida growth, including $13.8
million from Maison's non-Florida business, which represents a full
quarters' worth of premium, as compared to only one month in the
three months ended December 31, 2019.
- Ceded premiums increased $56.8 million, or 91.5%, to $118.8
million in the quarter, compared to $62.0 million the same
three-month period last year. The increase was driven by $26.1
million higher excess of loss reinsurance spend, as property
exposures increased, including from the Maison acquisition, this
year as compared to last year. Additionally, there was $29.1
million of additional ceded premium related to higher quota-share
cession percentages in FNIC's Florida homeowners business (40% as
of December 31, 2020) and the quota share treaty in FNIC's
non-Florida homeowners business that was effective July 1, 2020 at
50% and was increased to 80% effective December 1, 2020. The
increase to ceded premium earned associated with the aforementioned
treaties is essentially offset by corresponding reductions in
losses and loss adjustment expenses ("LAE"), and commission and
other underwriting expenses when comparing across periods.
- Net realized and unrealized investment gains increased $7.2
million, to $9.2 million for the three months ended December 31,
2020, compared to $2.0 million in the prior year period. The 2020
quarter included $8.5 million in realized investment gains for debt
securities.
- Direct written policy fees increased $0.8 million, or 27.1%, to
$3.7 million for the three months ended December 31, 2020, as
compared to $2.9 million during the three months ended December 31,
2019. The increase is primarily driven by the policy fees generated
from Maison's policies in-force and higher fees as a result of
FNIC's non-Florida premium growth.
- Other income increased $2.0 million, or 40.2%, to $7.0 million
in the quarter, compared with $5.0 million in the same three-month
period last year. The increase in other income was primarily driven
by higher brokerage revenue. The brokerage revenue increase is the
result of higher excess of loss reinsurance spend from the
reinsurance programs in place during the fourth quarter of 2020 as
compared to the fourth quarter of 2019.
Expenses
- Losses and LAE increased $1.7 million, or 2.1%, to $80.5
million for the three months ended December 31, 2020, compared
with $78.8 million for the same three-month period last year. The
net loss ratio increased 44.5 percentage points, to 127.3% in the
current quarter, compared to 82.8% in the fourth quarter of 2019.
The higher ratio was the result of two main factors: higher ceded
premiums, as discussed earlier, which reduces net earned premium,
the denominator of the net loss ratio calculation, as well as
higher catastrophe net losses as compared to the prior year period.
The fourth quarter of 2020 catastrophe net losses were $27.9
million, related to losses from Hurricanes Delta, Zeta and Eta,
which together impacted portions of Louisiana, Florida, Alabama and
Texas. The $27.9 million represents $31.1 million of initial net
losses, as previously disclosed, less $3.2 million of benefit from
claims handling services. Additionally, we strengthened prior year
reserves by $11.5 million, representing $16.5 million of reserve
strengthening in the discontinued commercial general liability line
of business, as previously disclosed, partially offset by $5.0
million of reserve redundancy in our homeowners line. By
comparison, the fourth quarter of 2019 catastrophe net losses were
$6.0 million, net of reinsurance, which primarily included impacts
from Tropical Storms and other severe weather events, as well as
$12.0 million of prior year development from our discontinued
non-core lines of business. The remaining variances are driven by
higher benefit from catastrophe claims handling fee income, as a
result of the elevated levels of severe weather events throughout
2020, as discussed earlier, and higher ceded losses from
incremental quota shares in FNIC, in the quarter as compared to the
prior year period, as discussed above.
- Commissions and other underwriting expenses decreased $4.9
million, or (15.8)%, to $26.6 million for the three months ended
December 31, 2020, compared with $31.5 million for the three
months ended December 31, 2019. The net expense ratio
increased 12.5 percentage points, to 51.8% in the current quarter,
as compared to 39.3% in the fourth quarter of 2019. The decrease
was primarily driven by higher ceding commissions as a result of
higher quota-share cession percentages and new quota shares in
FNIC's Florida and non-Florida homeowners business, respectively as
discussed above. When comparing these periods, this decrease was
partially offset by higher non-Florida acquisition related costs as
a result of gross premium growth and higher other underwriting
expenses.
- For the three months ended December 31, 2020, the Company
recorded a non-cash impairment charge of $11.7 million representing
$11.0 million of goodwill and $0.7 million of identifiable
intangible assets from the Maison acquisition, as previously
disclosed. The Company's impairment conclusion coincided with the
preparation of the financial statements required to be included in
this year's Form 10-K. The impairment analysis considered the
earnings and share price of the Company and comparable companies,
among other factors, which ultimately resulted in the impairment
conclusion. Refer to our Form 8-K, dated February 12, 2021 for
further information on this topic.
2020 vs. 2019 Full Year Results
- The Company reported net income (loss) of $(73.0) million, or
$(5.27) per diluted share, for 2020 as compared to net income of
$1.0 million, or $0.08 per diluted share, for 2019. The performance
in 2020 is the result of higher losses from catastrophe events,
higher reinsurance costs and the adverse claims environment in the
state of Florida throughout the year.
- The Company's adjusted operating income (loss) was $(72.2)
million or $(5.21) per diluted share in 2020, as compared to
adjusted operating income (loss) of $(0.4) million or $(0.03) per
diluted share in 2019.
Subsequent Events
- Effective January 1, 2021, the Company entered into a new
Aggregate Excess of Loss program on its Maison Insurance Company
("Maison") book of business. This new program provides coverage,
excluding named storms, of 65% of $15 million excess of $10 million
with an $850,000 occurrence deductible and a $4.15 million
occurrence limit at an approximate annual cost of $2.3
million.
- Effective March 1, 2021, the Company secured additional
reinsurance limit of 50% of $70 million excess of $25 million and
100% of $15 million excess of $10 million at an approximate cost of
$13 million. This limit is available for any subsequent events
through May 31, 2021 for all carriers and all states, with a
portion excluding named storms.
- The Company applied for and was approved by the Louisiana
Department of Insurance for a state-wide average rate increase of
9.9% for FedNat Insurance Company's ("FNIC") Louisiana homeowners
multiple-peril insurance policies, which became effective for new
and renewal policies in January 2021.
- The Company applied for and was approved by the Texas
Department of Insurance for a state-wide average rate increase of
12.3% for Maison's Texas homeowners multiple-peril insurance
policies, which became effective for new and renewal policies in
February 2021.
- The Company applied for and was approved by the Florida Office
of Insurance Regulation (“OIR”) for a state-wide average rate
increase of 6.7% for Florida homeowners multiple-peril insurance
policies, which is expected to become effective for new and renewal
policies in March 2021.
- The Company applied for a "use and file" rate filing with the
Florida OIR to implement a state-wide average increase of 7.0% for
Florida homeowners multiple-peril insurance policies and 6.0% for
dwelling fire insurance policies, which is expected to become
effective for new and renewal policies in April 2021.
Winter Storm Uri
- On approximately February 13, 2021, Winter Storm Uri ("Uri")
hit the Southern Plains causing heavy residential damage in Texas,
primarily associated with freezing temperatures causing widespread
instances of burst water pipes. The Company expects to incur claims
in excess of its aggregate reinsurance retention, which is
approximately $23 million for this event. In addition, the Company
has a co-participation within its reinsurance tower which arose in
early February 2021 when, in conjunction with year end 2020
financial reporting, we strengthened ultimate loss and LAE reserves
for the five hurricane events that occurred in 2020. Due to this
increase in hurricane reserves, the Company has a co-participation
of approximately $18 million in excess of $61 million, which
results from the portion of our reinsurance program that does not
embody the cascading feature where unused limit drops down for
subsequent events. Combined with the $23 million retention, the
Company's total exposure to Uri is currently estimated to be $41
million, pre-tax.
- The Company has an 80% quota-share reinsurance treaty in place
with Anchor Re, Inc. ("Anchor Re"), an Arizona captive reinsurance
entity that is an affiliate of SageSure Insurance Managers LLC
("SageSure"). The quota-share treaty extends from July 1, 2020 to
June 30, 2021 and includes limits on the net loss that Anchor Re
can incur during the treaty year. As a result of catastrophe losses
experienced during the second half of 2020, under the current terms
of the treaty the Company will be limited in its ability to cede
losses from Uri, or subsequent storms, into the treaty. Absent
these limitations, the Company would expect to recover $25 million
of Uri losses from Anchor Re. Depending on the profitability of the
business ceded into the treaty over the remainder of its term, the
Company may be able to recover a portion of these losses, though
not necessarily in the same period in which Uri occurred. The
Company is in continuing discussions with SageSure and Anchor Re to
increase the reinsurance limit in the treaty or to add additional
reinsurance coverage.
Strategic Review Committee
As part of its ongoing work, the Strategic Review Committee of
the Board of Directors, which was established in November 2020, is
actively exploring options to strengthen the Company's capital
position. Any such potential capital raising would be subject to
market and other conditions, and there can be no assurance
regarding the timing or certainty of such a transaction.
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
page 10.
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;
- Merger and acquisition, integration and other strategic 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, March 3, 2021. 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: 5264749
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
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 presents users with data related to different
aspects of our business to afford users greater transparency into
our results. Homeowners Florida consists of data related to our
homeowners and fire property and casualty insurance business, which
currently operates in Florida. Homeowners non-Florida consists of
data related to our homeowners and fire property and casualty
insurance business, which currently operates in Alabama, Louisiana,
South Carolina, Texas and Mississippi. Non-core consists of
financial information related to nonstandard personal automobile
insurance business which operated in Florida, Georgia, Texas and
Alabama and our commercial general liability insurance
business.
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, terms and availability, and
the ability of reinsurers to indemnify the Company; our ability to
raise 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
rate increases already in use, 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 and debt rating agencies; 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 SUBSIDIARIESSelected
Financial Highlights(Dollars in thousands, except per share
data)(Unaudited)
|
|
As of or For the |
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
|
2020 |
|
2019 |
|
% Change |
|
2020 |
|
2019 |
|
% Change |
Net Income (Loss)
Attributable to Common Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(32,943 |
) |
|
|
$ |
(6,893 |
) |
|
|
377.9 |
|
% |
|
$ |
(73,034 |
) |
|
|
$ |
1,011 |
|
|
|
(7323.9 |
) |
% |
Adjusted operating income
(loss) |
|
(26,854 |
) |
|
|
(7,925 |
) |
|
|
238.9 |
|
% |
|
(72,157 |
) |
|
|
(361 |
) |
|
|
19888.1 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common
Share |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) -
diluted |
|
$ |
(2.40 |
) |
|
|
$ |
(0.51 |
) |
|
|
367.2 |
|
% |
|
$ |
(5.27 |
) |
|
|
$ |
0.08 |
|
|
|
(6894.5 |
) |
% |
Adjusted operating income
(loss) - diluted |
|
(1.96 |
) |
|
|
(0.59 |
) |
|
|
231.2 |
|
% |
|
(5.21 |
) |
|
|
(0.03 |
) |
|
|
18700.0 |
|
% |
Dividends declared |
|
0.09 |
|
|
|
0.09 |
|
|
|
— |
|
% |
|
0.36 |
|
|
|
0.33 |
|
|
|
9.1 |
|
% |
Book value |
|
11.90 |
|
|
|
17.25 |
|
|
|
(31.0 |
) |
% |
|
11.90 |
|
|
|
17.25 |
|
|
|
(31.0 |
) |
% |
Book value, excluding
AOCI |
|
11.07 |
|
|
|
16.54 |
|
|
|
(33.1 |
) |
% |
|
11.07 |
|
|
|
16.54 |
|
|
|
(33.1 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return to
Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common
stock |
|
$ |
— |
|
|
|
$ |
3,867 |
|
|
|
NCM |
|
|
|
$ |
10,000 |
|
|
|
$ |
3,867 |
|
|
|
158.6 |
|
% |
Dividends declared |
|
1,258 |
|
|
|
1,176 |
|
|
|
7.0 |
|
% |
|
5,077 |
|
|
|
4,309 |
|
|
|
17.8 |
|
% |
|
|
$ |
1,258 |
|
|
|
$ |
5,043 |
|
|
|
(75.1 |
) |
% |
|
$ |
15,077 |
|
|
|
$ |
8,176 |
|
|
|
84.4 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
85,196 |
|
|
|
$ |
108,987 |
|
|
|
(21.8 |
) |
% |
|
$ |
432,230 |
|
|
|
$ |
414,961 |
|
|
|
4.2 |
|
% |
Adjusted operating
revenues |
|
76,046 |
|
|
|
106,953 |
|
|
|
(28.9 |
) |
% |
|
414,198 |
|
|
|
407,877 |
|
|
|
1.5 |
|
% |
Gross premiums written |
|
168,393 |
|
|
|
150,074 |
|
|
|
12.2 |
|
% |
|
726,885 |
|
|
|
610,608 |
|
|
|
19.0 |
|
% |
Gross premiums earned |
|
181,979 |
|
|
|
157,201 |
|
|
|
15.8 |
|
% |
|
720,967 |
|
|
|
582,334 |
|
|
|
23.8 |
|
% |
Net premiums earned |
|
63,200 |
|
|
|
95,188 |
|
|
|
(33.6 |
) |
% |
|
364,134 |
|
|
|
363,652 |
|
|
|
0.1 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Net Premiums
Earned |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio |
|
127.3 |
|
% |
|
82.8 |
|
% |
|
|
|
103.9 |
|
% |
|
75.1 |
|
% |
|
|
Net expense ratio |
|
51.8 |
|
% |
|
39.3 |
|
% |
|
|
|
38.5 |
|
% |
|
35.9 |
|
% |
|
|
Combined ratio |
|
179.1 |
|
% |
|
122.1 |
|
% |
|
|
|
142.4 |
|
% |
|
111.0 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-Force Homeowners
Policies |
|
|
|
|
|
|
|
|
|
|
|
|
Florida |
|
207,000 |
|
|
|
241,000 |
|
|
|
(14.1 |
) |
% |
|
207,000 |
|
|
|
241,000 |
|
|
|
(14.1 |
) |
% |
Non-Florida |
|
154,000 |
|
|
|
133,000 |
|
|
|
15.8 |
|
% |
|
154,000 |
|
|
|
133,000 |
|
|
|
15.8 |
|
% |
|
|
361,000 |
|
|
|
374,000 |
|
|
|
(3.5 |
) |
% |
|
361,000 |
|
|
|
374,000 |
|
|
|
(3.5 |
) |
% |
FEDNAT HOLDING COMPANY AND
SUBSIDIARIESConsolidated Statement of Operations(In thousands,
except per share data)(Unaudited)
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues: |
|
|
|
|
|
|
|
|
Net premiums earned |
|
$ |
63,200 |
|
|
|
$ |
95,188 |
|
|
|
$ |
364,134 |
|
|
|
$ |
363,652 |
|
|
Net investment income |
|
2,149 |
|
|
|
3,864 |
|
|
|
11,786 |
|
|
|
15,901 |
|
|
Net realized and unrealized investment gains (losses) |
|
9,150 |
|
|
|
2,034 |
|
|
|
18,032 |
|
|
|
7,084 |
|
|
Direct written policy fees |
|
3,675 |
|
|
|
2,892 |
|
|
|
14,337 |
|
|
|
10,200 |
|
|
Other income |
|
7,022 |
|
|
|
5,009 |
|
|
|
23,941 |
|
|
|
18,124 |
|
|
Total revenues |
|
85,196 |
|
|
|
108,987 |
|
|
|
432,230 |
|
|
|
414,961 |
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
|
80,473 |
|
|
|
78,796 |
|
|
|
378,335 |
|
|
|
273,080 |
|
|
Commissions and other underwriting expenses |
|
26,563 |
|
|
|
31,539 |
|
|
|
116,768 |
|
|
|
107,189 |
|
|
General and administrative expenses |
|
6,179 |
|
|
|
5,867 |
|
|
|
23,420 |
|
|
|
23,203 |
|
|
Interest expense |
|
1,916 |
|
|
|
1,916 |
|
|
|
7,661 |
|
|
|
10,776 |
|
|
Impairment of intangibles |
|
11,699 |
|
|
|
— |
|
|
|
11,699 |
|
|
|
— |
|
|
Total costs and expenses |
|
126,830 |
|
|
|
118,118 |
|
|
|
537,883 |
|
|
|
414,248 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
(41,634 |
) |
|
|
(9,131 |
) |
|
|
(105,653 |
) |
|
|
713 |
|
|
Income tax expense
(benefit) |
|
(8,691 |
) |
|
|
(2,238 |
) |
|
|
(32,619 |
) |
|
|
(298 |
) |
|
Net income (loss) |
|
$ |
(32,943 |
) |
|
|
$ |
(6,893 |
) |
|
|
$ |
(73,034 |
) |
|
|
$ |
1,011 |
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Per
Common Share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(2.40 |
) |
|
|
$ |
(0.51 |
) |
|
|
$ |
(5.27 |
) |
|
|
$ |
0.08 |
|
|
Diluted |
|
(2.40 |
) |
|
|
(0.51 |
) |
|
|
(5.27 |
) |
|
|
0.08 |
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Number of Shares of Common Stock Outstanding |
|
|
|
|
|
|
|
|
Basic |
|
13,718 |
|
|
|
13,409 |
|
|
|
13,846 |
|
|
|
12,977 |
|
|
Diluted |
|
13,718 |
|
|
|
13,409 |
|
|
|
13,846 |
|
|
|
13,023 |
|
|
|
|
|
|
|
|
|
|
|
Dividends Declared Per
Common Share |
|
$ |
0.09 |
|
|
|
$ |
0.09 |
|
|
|
$ |
0.36 |
|
|
|
$ |
0.33 |
|
|
FEDNAT HOLDING COMPANY AND SUBSIDIARIESSelected
Operating Metrics(Unaudited)
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
Gross premiums written: |
|
|
|
|
|
|
|
|
Homeowners Florida |
|
$ |
104,777 |
|
|
|
$ |
104,536 |
|
|
|
$ |
444,576 |
|
|
|
$ |
451,856 |
|
|
Homeowners non-Florida |
|
59,637 |
|
|
|
42,163 |
|
|
|
263,534 |
|
|
|
142,485 |
|
|
Federal flood |
|
4,055 |
|
|
|
3,399 |
|
|
|
19,022 |
|
|
|
16,413 |
|
|
Non-core |
|
(76 |
) |
|
|
(24 |
) |
|
|
(247 |
) |
|
|
(146 |
) |
|
Total gross premiums written |
|
$ |
168,393 |
|
|
|
$ |
150,074 |
|
|
|
$ |
726,885 |
|
|
|
$ |
610,608 |
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
Gross premiums earned: |
|
|
|
|
|
|
|
|
Homeowners Florida |
|
$ |
112,274 |
|
|
|
$ |
114,249 |
|
|
|
$ |
459,511 |
|
|
|
$ |
452,730 |
|
Homeowners non-Florida |
|
65,121 |
|
|
|
38,908 |
|
|
|
244,192 |
|
|
|
112,836 |
|
Federal flood |
|
4,660 |
|
|
|
4,068 |
|
|
|
17,511 |
|
|
|
15,073 |
|
Non-core |
|
(76 |
) |
|
|
(24 |
) |
|
|
(247 |
) |
|
|
1,695 |
|
Total gross premiums earned |
|
$ |
181,979 |
|
|
|
$ |
157,201 |
|
|
|
$ |
720,967 |
|
|
|
$ |
582,334 |
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
Net premiums earned: |
|
|
|
|
|
|
|
|
Homeowners Florida |
|
$ |
39,940 |
|
|
|
$ |
65,922 |
|
|
|
$ |
230,567 |
|
|
|
$ |
273,779 |
|
Homeowners non-Florida |
|
23,336 |
|
|
|
29,290 |
|
|
|
133,814 |
|
|
|
88,404 |
|
Non-core |
|
(76 |
) |
|
|
(24 |
) |
|
|
(247 |
) |
|
|
1,469 |
|
Total net premiums earned |
|
$ |
63,200 |
|
|
|
$ |
95,188 |
|
|
|
$ |
364,134 |
|
|
|
$ |
363,652 |
|
FEDNAT HOLDING COMPANY AND SUBSIDIARIESSelected
Operating Metrics (continued)(Unaudited)
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
Commissions and other
underwriting expenses: |
|
|
|
|
|
|
|
|
Homeowners Florida |
|
$ |
12,862 |
|
|
|
$ |
13,152 |
|
|
|
$ |
54,043 |
|
|
|
$ |
52,962 |
|
|
All others |
|
13,397 |
|
|
|
7,695 |
|
|
|
51,186 |
|
|
|
25,491 |
|
|
Ceding commissions |
|
(15,417 |
) |
|
|
(3,235 |
) |
|
|
(29,386 |
) |
|
|
(12,128 |
) |
|
Total commissions |
|
10,842 |
|
|
|
17,612 |
|
|
|
75,843 |
|
|
|
66,325 |
|
|
|
|
|
|
|
|
|
|
|
Fees |
|
1,385 |
|
|
|
1,028 |
|
|
|
5,079 |
|
|
|
3,368 |
|
|
Salaries and wages |
|
3,723 |
|
|
|
3,024 |
|
|
|
13,791 |
|
|
|
12,114 |
|
|
Other underwriting expenses |
|
10,613 |
|
|
|
9,875 |
|
|
|
22,055 |
|
|
|
25,382 |
|
|
Total commissions and other underwriting expenses |
|
$ |
26,563 |
|
|
|
$ |
31,539 |
|
|
|
$ |
116,768 |
|
|
|
$ |
107,189 |
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Net loss ratio |
|
127.3 |
% |
|
82.8 |
% |
|
103.9 |
% |
|
75.1 |
% |
Net expense ratio |
|
51.8 |
% |
|
39.3 |
% |
|
38.5 |
% |
|
35.9 |
% |
Combined ratio |
|
179.1 |
% |
|
122.1 |
% |
|
142.4 |
% |
|
111.0 |
% |
Gross loss ratio |
|
150.6 |
% |
|
100.8 |
% |
|
144.2 |
% |
|
120.5 |
% |
Gross expense ratio |
|
26.5 |
% |
|
25.9 |
% |
|
23.5 |
% |
|
24.5 |
% |
FEDNAT HOLDING COMPANY AND
SUBSIDIARIESConsolidated Balance Sheet(Unaudited)
|
|
December 31, |
|
|
2020 |
|
2019 |
|
|
|
|
|
ASSETS |
|
(In thousands) |
Investments: |
|
|
|
|
Debt securities, available-for-sale, at fair value (amortized cost
of $473,126 and $512,645, respectively) |
|
$ |
488,210 |
|
|
|
$ |
526,265 |
|
Debt securities, held-to-maturity, at amortized cost |
|
— |
|
|
|
4,337 |
|
Equity securities, at fair value |
|
3,157 |
|
|
|
20,039 |
|
Total investments |
|
491,367 |
|
|
|
550,641 |
|
Cash and cash equivalents |
|
103,026 |
|
|
|
133,361 |
|
Prepaid reinsurance
premiums |
|
278,272 |
|
|
|
145,659 |
|
Premiums receivable, net of
allowance of $233 and $159, respectively |
|
56,026 |
|
|
|
41,422 |
|
Reinsurance recoverable, net
of allowance of $65 and $0, respectively |
|
410,398 |
|
|
|
209,615 |
|
Deferred acquisition costs and
value of business acquired, net |
|
27,869 |
|
|
|
56,136 |
|
Current and deferred income
taxes, net |
|
33,981 |
|
|
|
2,552 |
|
Goodwill |
|
— |
|
|
|
10,997 |
|
Other assets |
|
32,448 |
|
|
|
28,633 |
|
Total assets |
|
$ |
1,433,387 |
|
|
|
$ |
1,179,016 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Liabilities |
|
|
|
|
Loss and loss adjustment
expense reserves |
|
$ |
540,761 |
|
|
|
$ |
324,362 |
|
Unearned premiums |
|
366,789 |
|
|
|
360,870 |
|
Reinsurance payable and funds
withheld liabilities |
|
201,522 |
|
|
|
102,467 |
|
Long-term debt, net of
deferred financing costs of $1,317 and $1,478, respectively |
|
98,683 |
|
|
|
98,522 |
|
Deferred revenue |
|
6,820 |
|
|
|
6,856 |
|
Other liabilities |
|
55,528 |
|
|
|
37,246 |
|
Total liabilities |
|
1,270,103 |
|
|
|
930,323 |
|
Shareholders'
Equity |
|
|
|
|
Preferred stock, $0.01 par
value: 1,000,000 shares authorized |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value: 25,000,000 shares authorized;
13,717,908 and 14,414,821 shares issued and outstanding,
respectively |
|
137 |
|
|
|
144 |
|
Additional paid-in
capital |
|
169,298 |
|
|
|
167,677 |
|
Accumulated other
comprehensive income (loss) |
|
11,386 |
|
|
|
10,281 |
|
Retained earnings |
|
(17,537 |
) |
|
|
70,591 |
|
Total shareholders’ equity |
|
163,284 |
|
|
|
248,693 |
|
Total liabilities and shareholders' equity |
|
$ |
1,433,387 |
|
|
|
$ |
1,179,016 |
|
FEDNAT HOLDING COMPANY AND SUBSIDIARIESGAAP to
Non-GAAP Reconciliations(Dollars in thousands)(Unaudited)
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
85,196 |
|
|
|
$ |
108,987 |
|
|
|
$ |
432,230 |
|
|
|
$ |
414,961 |
|
|
Less: |
|
|
|
|
|
|
|
|
Net realized and unrealized investment gains (losses) |
|
9,150 |
|
|
|
2,034 |
|
|
|
18,032 |
|
|
|
7,084 |
|
|
Adjusted operating revenues |
|
$ |
76,046 |
|
|
|
$ |
106,953 |
|
|
|
$ |
414,198 |
|
|
|
$ |
407,877 |
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(32,943 |
) |
|
|
$ |
(6,893 |
) |
|
|
$ |
(73,034 |
) |
|
|
$ |
1,011 |
|
|
Less: |
|
|
|
|
|
|
|
|
Net realized and unrealized investment gains (losses) |
|
5,481 |
|
|
|
1,535 |
|
|
|
10,801 |
|
|
|
5,347 |
|
|
Acquisition and strategic costs |
|
(130 |
) |
|
|
(493 |
) |
|
|
(171 |
) |
|
|
(1,267 |
) |
|
Amortization of identifiable intangibles |
|
(23 |
) |
|
|
(10 |
) |
|
|
(90 |
) |
|
|
(10 |
) |
|
Gain (loss) on early extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,698 |
) |
|
Impairment of intangibles |
|
(11,417 |
) |
|
|
— |
|
|
|
(11,417 |
) |
|
|
— |
|
|
Adjusted operating income (loss) |
|
$ |
(26,854 |
) |
|
|
$ |
(7,925 |
) |
|
|
$ |
(72,157 |
) |
|
|
$ |
(361 |
) |
|
|
|
|
|
|
|
|
|
|
Income tax rate assumed for
reconciling items above |
|
40.10 |
|
% |
|
24.52 |
|
% |
|
40.10 |
|
% |
|
24.52 |
|
% |
|
|
|
|
|
|
|
|
|
Per Common
Share |
|
|
|
|
|
|
|
|
Book value |
|
$ |
11.90 |
|
|
|
$ |
17.25 |
|
|
|
$ |
11.90 |
|
|
|
$ |
17.25 |
|
|
Less: |
|
|
|
|
|
|
|
|
AOCI |
|
0.83 |
|
|
|
0.71 |
|
|
|
0.83 |
|
|
|
0.71 |
|
|
Book value, excluding AOCI |
|
$ |
11.07 |
|
|
|
$ |
16.54 |
|
|
|
$ |
11.07 |
|
|
|
$ |
16.54 |
|
|
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