FEDNAT HOLDING COMPANY
Overview
We are an insurance holding
company that controls substantially all steps in the insurance underwriting, distribution and claims processes through our subsidiaries and our contractual relationships with our independent agents and general agents.
We, through our wholly owned subsidiaries, are authorized to underwrite, and/or place, homeowners multi-peril (which we refer to as
homeowners), 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.
Federated National Insurance Company, or FNIC, one of our wholly owned insurance subsidiaries, is licensed as an admitted
carrier, to write specific lines of insurance by the states insurance departments, in Florida, Louisiana, Texas, Georgia, South Carolina and Alabama. Monarch National Insurance Company, or MNIC, our other insurance subsidiary, is licensed as
an admitted carrier in Florida. Admitted carriers are bound by rate and form regulations, and are strictly regulated to protect policyholders. Admitted carriers are also required to financially contribute to the state guarantee fund used to pay for
losses if an insurance carrier becomes insolvent or unable to pay loss amounts due to their policyholders.
Through our wholly owned
subsidiary, FedNat Underwriters, Inc., we serve as managing general agent for FNIC and MNIC.
Recent Events
We organized MNIC in 2015 to write homeowners property and casualty insurance in Florida through a joint venture with Crosswinds Investor
Monarch LP, or Crosswinds Investor, a wholly owned subsidiary of Crosswinds Holdings Inc., or Crosswinds Holdings, a private equity firm and asset manager, and Transatlantic Reinsurance Company, or TransRe, an international property and casualty
reinsurance company. Crosswinds Investor and we each invested $14.0 million for a 42.4% interest in Monarch Delaware Holdings LLC, or Monarch Delaware, with each holding 50% of the voting interests. TransRe invested $5.0 million for a
15.2% non-voting interest in Monarch Delaware and loaned an additional $5.0 million.
On
February 21, 2018, FNIC closed its acquisition of the Monarch Delaware interests held by Crosswinds Investor and TransRe pursuant to the purchase and sale agreement dated November 27, 2017. FNIC purchased Crosswinds
Investors interest for $12.3 million, and TransRes interest for $4.4 million. The $5.0 million loan from TransRe was paid in full. With the completion of this purchase and the merger of Monarch Delaware and an
intermediate subsidiary, FNIC owns 100% of MNIC.
Also in connection with the Companys purchase of the Monarch Delaware interests, a
subsidiary of Crosswinds Holdings will continue to serve as a consultant to FNHC for a quarterly fee of $75,000 through December 31, 2018. In addition, subsidiaries of Crosswinds Holdings and TransRe will each have a right of first refusal
through December 31, 2018 to participate in FNICs catastrophe excess of loss reinsurance program, at market rates and terms, up to a placement of $10.0 million in reinsurance limit in the aggregate from Crosswinds Holdings and to a
placement of $10.0 million in reinsurance limit in excess of its placement on FNICs current catastrophe excess of loss reinsurance program from TransRe.
Although we have in the past offered personal automobile and commercial general liability insurance, we have determined to undertake orderly
withdrawals from these lines of business and have begun the appropriate steps to do so, including submitting all required regulatory filings and obtaining regulatory approvals. Subject to such approvals, we expect our personal automobile line of
business to materially cease by the fourth quarter of 2018 and our commercial general liability line of business to materially cease thereafter.
We remain focused on our core competencies, which are to write and service our homeowners insurance business in select coastal states,
including our home state of Florida. We intend to capitalize on our strengths by growing our business in both our existing states and into new states located on the Gulf Coast and throughout the eastern seaboard of the United States. Our
initiatives may include, without limitation, expanding our presence either organically or through partnerships, mergers, acquisitions or other opportunities that we may identify from time to time and may include agents, brokers, insurers, reinsures,
private equity, pension funds, and other sources of capital. There can be no assurances, however, that we will be able to complete any such transactions or, if completed, as to the outcome of any such transactions.
On May 31, 2018, we changed our name to FedNat Holding Company from Federated National Holding Company, and on June 7, 2018 our
primary insurance subsidiary changed its name to FedNat Insurance Company from Federated National Insurance Company. Both were part of our efforts to rebrand FNHC and FNIC with our FedNat registered trademark.
1