National General Holdings Corp. (Nasdaq:NGHC) today reported first
quarter 2018 net income of $60.3 million or $0.55 per diluted
share, compared to net income of $29.0 million or $0.27 per
diluted share in the first quarter of 2017. First quarter 2018
operating earnings(1) was $67.6 million or $0.62 per diluted
share, compared to $35.7 million or $0.33 per diluted share in
the first quarter of 2017.
First Quarter 2018 Highlights Versus
First Quarter 2017*
- Gross written premium grew $165.1 million or 14.1% to
$1,337.0 million, driven by continued organic growth in our
P&C segment of 12.6% and in our A&H segment of 21.8%.
- In the first quarter, our homeowners’ product experienced
organic growth of 23.2% driven by strong results from strategic
partnerships and the continued expansion in the high net worth
market. Our personal auto product experienced organic growth
of 12.1%.
- The overall combined ratio(9,13) was 90.7% compared to 94.8% in
the prior year’s quarter, excluding non-cash amortization of
intangible assets. The P&C segment reported a decrease in
combined ratio to 90.9% from 96.2% in the prior year’s
quarter. The combined ratio includes $14.2 million of
losses, or 2.0 P&C loss ratio points, from weather-related
events from winter weather that impacted the Northeast in the first
quarter 2018, compared to $8.9 million of losses, or 1.2 P&C
loss ratio points, from events in the first quarter 2017. The
A&H segment reported a combined ratio of 90.0% compared to
86.8% in the prior year’s quarter.
- Service and fee income grew 13.9% to $154.8 million, driven by
organic growth in both our Accident & Health and Property &
Casualty segments.
- Shareholders’ equity was $1.96 billion and fully diluted book
value per share was $14.09 at March 31, 2018, growth of 1.5% and
1.7%, respectively, from December 31, 2017. Our trailing twelve
month operating return on average equity (ROE)(14) was 9.9% as of
March 31, 2018.
- First quarter 2018 operating earnings exclude the following
material items, net of tax: $5.5 million or $0.05 per share of
non-cash amortization of intangible assets and $1.2 million or
$0.01 per share from equity in (earnings) losses of equity method
investments.
- During today’s Board of Directors meeting, the Board appointed
Robert Karfunkel and Barry Karfunkel to serve as Co-Chairmen of the
Board. In addition, Robert Karfunkel will serve as President
of the Company while Barry Karfunkel will continue his position as
Chief Executive Officer of the Company, but no longer serve as
President.
Barry Karfunkel, National General’s CEO, stated: “This quarter
we reported the strongest operating results in the history of the
company and highlighted the earnings capabilities of the platform
that we have built.
I look forward to the dual leadership roles that Robert and I
will have at National General as Co-Chairmen. We have worked
alongside each other since the platform was acquired in 2010,
though in different areas of the business. I think our
diverse areas of expertise will complement each other and provide a
well-rounded perspective for the Company moving forward.
I would like to thank Barry Zyskind for his leadership as
National General’s Chairman of the Board of Directors. He
stepped into the position in a time of transition for the Company
and his guidance was and continues to be of great importance for
both myself and the entire organization.”
*NOTE: Unless specified otherwise, discussion
of our first quarter 2018 and 2017 results do not include financial
results from the Reciprocal Exchanges, which are presented within
our consolidated financial results within this release but are not
included in net income available to NGHC common stockholders.
Overview of First Quarter 2018 as
Compared to First Quarter 2017 by Segment
- Property & Casualty - Gross written
premium grew by 12.6% to $1,103.3 million, net written premium
decreased by 7.7% to $832.7 million and net earned premium
decreased by 6.0% to $705.6 million. P&C gross written premium
growth was primarily driven by organic growth of 23.2% from our
homeowners’ product and 12.1% from our personal auto product.
Service and fee income grew 5.8% to $109.6 million. Excluding
non-cash amortization of intangible assets, the combined
ratio(9,13) was 90.9% with a loss ratio of 70.6% and an expense
ratio(9,12) of 20.3%, versus a prior year combined ratio of 96.2%
with a loss ratio of 69.5% and an expense ratio of 26.7%.The loss
ratio was impacted by pre-tax catastrophe losses of approximately
$14.2 million related to winter weather events in the
Northeastern part of the U.S. in the first quarter 2018.
- Accident & Health - Gross written premium
grew by 21.8% to $233.8 million, net written premium grew by 23.3%
to $223.4 million, and net earned premium grew by 19.4% to
$153.9 million. The A&H gross written premium increase was
driven by the continued growth across the entire book. Service and
fee income was $45.2 million compared to $32.3 million in
the prior year’s quarter. Excluding non-cash amortization of
intangible assets, the combined ratio(9,13) was 90.0% with a loss
ratio of 59.3% and an expense ratio(9,12) of 30.7%, versus a prior
year combined ratio of 86.8% with a loss ratio of 53.8% and an
expense ratio of 33.0%.
- Reciprocal Exchanges - Results for the
Reciprocal Exchanges are not included in net income available to
NGHC common stockholders. Gross written premium was $97.7 million,
net written premium was $50.6 million, and net earned premium
was $46.1 million. Reciprocal Exchanges combined ratio(9,13)
excluding non-cash amortization of intangible assets was 131.4%
with a loss ratio of 96.7% and an expense ratio(9,12) of
34.7%. The increase in the combined ratio related to winter
weather events in the Northeastern part of the U.S.
First quarter 2018 investment income decreased to $25.0 million,
compared to $28.4 million in the first quarter of 2017, reflecting
results from equity in (earnings) losses from equity method
investments. Total investments and cash and cash equivalents were
$3.7 billion as of March 31, 2018. Accumulated other
comprehensive income decreased to a $45.7 million loss at
March 31, 2018 from a $8.1 million loss at December 31, 2017,
primarily due to the impact of higher interest rates which
negatively impacted bond valuations.
Interest expense was $11.2 million, from $11.5 million
in the prior year’s quarter. Debt was $713.9 million at March 31,
2018, and $713.7 million at December 31, 2017.
The first quarter of 2018 provision for income taxes was $18.6
million and the effective tax rate for the quarter was 21.4%.
Shareholders’ equity was $1,957.1 million at March 31, 2018,
growth of 1.5% from $1,928.6 million at December 31, 2017. Fully
diluted book value per share was $14.09 at March 31, 2018, growth
of 1.7% from $13.86 at December 31, 2017. Our trailing twelve month
operating return on average equity (ROE)(14) was 9.9% as of March
31, 2018.
Year-to-Date P&C Segment Notable Large
Losses |
2018 Quarter |
|
|
P&C Notable Large Losses and
LAE($ millions) |
|
P&C Loss Ratio Points* |
|
EPS Impact After Tax |
Q1 |
Northeastern Winter
Weather |
|
$14.2 |
|
2.0% |
|
$0.10 |
* Loss ratio points related to P&C net earned premium in
quarter the loss event was recorded.
Conference Call
On Tuesday, May 8, 2018 at 9:30 AM ET, Chief Executive
Officer Barry Karfunkel and Chief Financial Officer Mike Weiner
will review results and discuss business conditions via a
conference call that may be accessed as follows:
Toll-Free U.S.
Dial-in: |
888-267-2845 |
International
Dial-in: |
973-413-6102 |
Conference Entry
Code: |
565529 |
Webcast
Registration: |
http://ir.nationalgeneral.com/events-and-presentations |
A replay of the conference call will be accessible from 2:00 PM
ET on Tuesday, May 8, 2018 to 11:59 PM ET on Tuesday,
May 22, 2018 by dialing either 800-332-6854 (toll-free) within
the U.S. or 973-528-0005 outside the U.S. and entering passcode
565529. In addition, a replay of the webcast can also be retrieved
at http://ir.nationalgeneral.com/events-and-presentations.
About National General Holdings Corp.
National General Holdings Corp., headquartered in New York City,
is a specialty personal lines insurance holding company. National
General traces its roots to 1939, has a financial strength rating
of A- (excellent) from A.M. Best, and provides personal and
commercial automobile, homeowners, umbrella, recreational vehicle,
motorcycle, lender-placed, supplemental health and other niche
insurance products.
Forward Looking Statements
This news release contains “forward-looking statements” that are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. The forward-looking
statements are based on the Company’s current expectations and
beliefs concerning future developments and their potential effects
on the Company. Forward-looking statements can generally be
identified by the use of forward-looking terminology, such as
“may,” “will,” “plan,” “expect,” “project,” “intend,” “estimate,”
“anticipate” and “believe” or their variations or similar
terminology. There can be no assurance that actual developments
will be those anticipated by the Company. Actual results may differ
materially from those expressed or implied in these statements as a
result of significant risks and uncertainties, including, but not
limited to, non-receipt of expected payments from insureds or
reinsurers, changes in interest rates, a downgrade in the financial
strength ratings of our insurance subsidiaries, the effect of the
performance of financial markets on our investment portfolio, our
ability to accurately underwrite and price our products and to
maintain and establish accurate loss reserves, estimates of the
fair value of investments, development of claims and the effect on
loss reserves, large loss activity including hurricanes and
wildfires, the cost and availability of reinsurance coverage, the
effects of emerging claim and coverage issues, changes in the
demand for our products, our degree of success in integrating
acquired businesses, the effect of general economic conditions,
state and federal legislation, the effects of tax reform,
regulations and regulatory investigations into industry practices,
risks associated with conducting business outside the United
States, developments relating to existing agreements, disruptions
to our business relationships with third party or vendor agencies,
breaches in data security or other disruptions involving our
technology, heightened competition, changes in pricing
environments, and changes in asset valuations. The forward-looking
statements contained in this news release are made only as of the
date of this release. The Company undertakes no obligation to
publicly update any forward-looking statement except as may be
required by law. Additional information about these risks and
uncertainties, as well as others that may cause actual results to
differ materially from those projected is contained in the
Company’s filings with the Securities and Exchange Commission.
|
Income Statement - First Quarter$ in
thousands(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2018 |
|
|
2017 |
|
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
written premium |
|
$ |
1,337,042 |
|
|
$ |
97,689 |
|
|
$ |
1,433,130 |
|
(A) |
|
$ |
1,171,968 |
|
|
$ |
82,216 |
|
|
$ |
1,253,383 |
|
(H) |
Net
written premium |
|
1,056,065 |
|
|
50,578 |
|
|
1,106,643 |
|
|
|
1,083,352 |
|
|
41,701 |
|
|
1,125,053 |
|
|
Net
earned premium |
|
859,483 |
|
|
46,055 |
|
|
905,538 |
|
|
|
879,453 |
|
|
39,032 |
|
|
918,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding
commission income |
|
32,958 |
|
|
11,510 |
|
|
44,468 |
|
|
|
2,747 |
|
|
17,247 |
|
|
19,994 |
|
|
Service
and fee income |
|
154,760 |
|
|
2,446 |
|
|
142,122 |
|
(B) |
|
135,863 |
|
|
2,080 |
|
|
125,942 |
|
(I) |
Net
investment income |
|
25,019 |
|
|
2,144 |
|
|
25,011 |
|
(C) |
|
28,423 |
|
|
2,884 |
|
|
29,044 |
|
(J) |
Net gain
(loss) on investments |
|
249 |
|
|
(131 |
) |
|
118 |
|
|
|
(1,412 |
) |
|
— |
|
|
(1,412 |
) |
|
Other
income |
|
— |
|
|
— |
|
|
— |
|
|
|
9,801 |
|
|
— |
|
|
9,801 |
|
|
Total revenues |
|
$ |
1,072,469 |
|
|
$ |
62,024 |
|
|
$ |
1,117,257 |
|
(D) |
|
$ |
1,054,875 |
|
|
$ |
61,243 |
|
|
$ |
1,101,854 |
|
(K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and
loss adjustment expense |
|
$ |
589,635 |
|
|
$ |
44,531 |
|
|
$ |
634,166 |
|
|
|
$ |
590,717 |
|
|
$ |
28,100 |
|
|
$ |
618,817 |
|
|
Acquisition costs and other underwriting expenses |
|
157,608 |
|
|
11,102 |
|
|
168,710 |
|
|
|
160,540 |
|
|
14,180 |
|
|
174,720 |
|
|
General
and administrative expenses |
|
227,293 |
|
|
18,796 |
|
|
231,005 |
|
(E) |
|
242,083 |
|
|
25,103 |
|
|
255,185 |
|
(L) |
Interest
expense |
|
11,154 |
|
|
2,152 |
|
|
11,154 |
|
(F) |
|
11,545 |
|
|
2,263 |
|
|
11,545 |
|
(M) |
Total expenses |
|
$ |
985,690 |
|
|
$ |
76,581 |
|
|
$ |
1,045,035 |
|
(G) |
|
$ |
1,004,885 |
|
|
$ |
69,646 |
|
|
$ |
1,060,267 |
|
(N) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
provision (benefit) for income taxes |
|
$ |
86,779 |
|
|
$ |
(14,557 |
) |
|
$ |
72,222 |
|
|
|
$ |
49,990 |
|
|
$ |
(8,403 |
) |
|
$ |
41,587 |
|
|
Provision
(benefit) for income taxes |
|
18,571 |
|
|
(2,369 |
) |
|
16,202 |
|
|
|
13,037 |
|
|
(2,248 |
) |
|
10,789 |
|
|
Net income (loss)
before non-controlling interest and dividends on preferred
shares |
|
68,208 |
|
|
(12,188 |
) |
|
56,020 |
|
|
|
36,953 |
|
|
(6,155 |
) |
|
30,798 |
|
|
Less: net
income (loss) attributable to non-controlling interest |
|
— |
|
|
(12,188 |
) |
|
(12,188 |
) |
|
|
30 |
|
|
(6,155 |
) |
|
(6,125 |
) |
|
Net income before
dividends on preferred shares |
|
68,208 |
|
|
— |
|
|
68,208 |
|
|
|
36,923 |
|
|
— |
|
|
36,923 |
|
|
Less:
dividends on preferred shares |
|
7,875 |
|
|
— |
|
|
7,875 |
|
|
|
7,875 |
|
|
— |
|
|
7,875 |
|
|
Net income available to common stockholders |
|
$ |
60,333 |
|
|
$ |
— |
|
|
$ |
60,333 |
|
|
|
$ |
29,048 |
|
|
$ |
— |
|
|
$ |
29,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(1,601), (B) $(15,084), (C)
$(2,152), (D) $(17,236), (E) $(15,084), (F) $(2,152), (G)
$(17,236), (H) $(801), (I) $(12,001), (J) $(2,263), (K) $(14,264),
(L) $(12,001), (M) $(2,263) and (N) $(14,264).
|
Earnings and Per Share Data$ in
thousands, except shares and per share data(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
2018 |
|
2017 |
Net income available to
common stockholders |
|
$ |
60,333 |
|
|
$ |
29,048 |
|
Basic net
income per common share |
|
$ |
0.57 |
|
|
$ |
0.27 |
|
Diluted
net income per common share |
|
$ |
0.55 |
|
|
$ |
0.27 |
|
|
|
|
|
|
Operating earnings
attributable to NGHC(1) |
|
$ |
67,623 |
|
|
$ |
35,739 |
|
Basic
operating earnings per common share(1) |
|
$ |
0.63 |
|
|
$ |
0.34 |
|
Diluted
operating earnings per common share(1) |
|
$ |
0.62 |
|
|
$ |
0.33 |
|
|
|
|
|
|
Dividends declared per
common share |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
|
|
|
|
|
Weighted average number
of basic shares outstanding |
|
106,758,641 |
|
|
106,467,599 |
|
Weighted average number
of diluted shares outstanding |
|
108,950,984 |
|
|
109,166,681 |
|
Shares outstanding, end
of period |
|
106,887,566 |
|
|
106,502,250 |
|
Fully diluted shares
outstanding, end of period |
|
109,079,909 |
|
|
109,378,890 |
|
Book value per
share |
|
$ |
14.38 |
|
|
$ |
14.09 |
|
Fully diluted book
value per share |
|
$ |
14.09 |
|
|
$ |
13.72 |
|
Reconciliation of Net Income to Operating
Earnings (Non-GAAP)$ in thousands, except per share
data(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
2018 |
|
2017 |
Net income
available to common stockholders |
|
$ |
60,333 |
|
|
$ |
29,048 |
|
Add (subtract): |
|
|
|
|
Net
(gain) on investments |
|
(249 |
) |
|
1,412 |
|
Other
income |
|
— |
|
|
(9,801 |
) |
Equity in
(earnings) losses of equity method investments |
|
1,469 |
|
|
(2,654 |
) |
Non-cash
amortization of intangible assets |
|
6,920 |
|
|
21,337 |
|
Income
tax expense (benefit) |
|
(850 |
) |
|
(3,603 |
) |
Operating earnings attributable to NGHC (1) |
|
$ |
67,623 |
|
|
$ |
35,739 |
|
|
|
|
|
|
Operating
earnings per common share: |
|
|
|
|
Basic
operating earnings per common share |
|
$ |
0.63 |
|
|
$ |
0.34 |
|
Diluted
operating earnings per common share |
|
$ |
0.62 |
|
|
$ |
0.33 |
|
Balance Sheet$ in thousands |
|
|
|
March 31, 2018 (unaudited) |
|
|
December 31, 2017 (audited) |
|
ASSETS |
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Total investments
(2) |
|
$ |
3,406,943 |
|
|
$ |
332,565 |
|
|
$ |
3,650,316 |
|
(A) |
|
$ |
3,411,730 |
|
|
$ |
327,213 |
|
|
$ |
3,649,788 |
|
(K) |
Cash and cash
equivalents |
|
316,057 |
|
|
5,880 |
|
|
321,937 |
|
|
|
286,840 |
|
|
5,442 |
|
|
292,282 |
|
|
Premiums and other
receivables, net |
|
1,449,891 |
|
|
49,581 |
|
|
1,497,871 |
|
(B) |
|
1,268,330 |
|
|
56,792 |
|
|
1,324,321 |
|
(L) |
Reinsurance recoverable
(3) |
|
1,227,476 |
|
|
107,250 |
|
|
1,334,726 |
|
|
|
1,199,961 |
|
|
94,204 |
|
|
1,294,165 |
|
|
Intangible assets,
net |
|
393,766 |
|
|
3,640 |
|
|
397,406 |
|
|
|
400,385 |
|
|
3,685 |
|
|
404,070 |
|
|
Goodwill |
|
174,153 |
|
|
— |
|
|
174,153 |
|
|
|
174,153 |
|
|
— |
|
|
174,153 |
|
|
Other (4) |
|
1,182,896 |
|
|
128,612 |
|
|
1,292,737 |
|
(C) |
|
1,186,056 |
|
|
130,763 |
|
|
1,300,964 |
|
(M) |
Total assets |
|
$ |
8,151,182 |
|
|
$ |
627,528 |
|
|
$ |
8,669,146 |
|
(D) |
|
$ |
7,927,455 |
|
|
$ |
618,099 |
|
|
$ |
8,439,743 |
|
(N) |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss
adjustment expense reserves |
|
$ |
2,520,121 |
|
|
$ |
158,796 |
|
|
$ |
2,678,917 |
|
|
|
$ |
2,520,204 |
|
|
$ |
143,353 |
|
|
$ |
2,663,557 |
|
|
Unearned premiums and
other revenue |
|
2,003,147 |
|
|
228,198 |
|
|
2,230,544 |
|
(E) |
|
1,807,210 |
|
|
225,395 |
|
|
2,032,605 |
|
|
Reinsurance
payable |
|
378,517 |
|
|
60,155 |
|
|
437,071 |
|
(F) |
|
329,772 |
|
|
69,076 |
|
|
398,047 |
|
(O) |
Accounts payable and
accrued expenses (5) |
|
401,407 |
|
|
28,110 |
|
|
411,547 |
|
(G) |
|
423,054 |
|
|
24,682 |
|
|
431,881 |
|
(P) |
Debt |
|
713,893 |
|
|
89,192 |
|
|
713,893 |
|
(H) |
|
713,710 |
|
|
89,155 |
|
|
713,710 |
|
(Q) |
Other |
|
177,008 |
|
|
55,513 |
|
|
232,521 |
|
|
|
204,936 |
|
|
41,582 |
|
|
246,518 |
|
|
Total liabilities |
|
$ |
6,194,093 |
|
|
$ |
619,964 |
|
|
$ |
6,704,493 |
|
(I) |
|
$ |
5,998,886 |
|
|
$ |
593,243 |
|
|
$ |
6,486,318 |
|
(R) |
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock (6) |
|
$ |
1,069 |
|
|
$ |
— |
|
|
$ |
1,069 |
|
|
|
$ |
1,067 |
|
|
$ |
— |
|
|
$ |
1,067 |
|
|
Preferred stock
(7) |
|
420,000 |
|
|
— |
|
|
420,000 |
|
|
|
420,000 |
|
|
— |
|
|
420,000 |
|
|
Additional paid-in
capital |
|
919,029 |
|
|
— |
|
|
919,029 |
|
|
|
917,751 |
|
|
— |
|
|
917,751 |
|
|
Accumulated other
comprehensive income (loss) |
|
(45,722 |
) |
|
— |
|
|
(45,722 |
) |
|
|
(8,112 |
) |
|
— |
|
|
(8,112 |
) |
|
Retained earnings |
|
662,713 |
|
|
— |
|
|
662,713 |
|
|
|
597,863 |
|
|
— |
|
|
597,863 |
|
|
Total National General Holdings Corp. stockholders’
equity |
|
1,957,089 |
|
|
— |
|
|
1,957,089 |
|
|
|
1,928,569 |
|
|
— |
|
|
1,928,569 |
|
|
Non-controlling
interest |
|
— |
|
|
7,564 |
|
|
7,564 |
|
|
|
— |
|
|
24,856 |
|
|
24,856 |
|
|
Total stockholders’ equity |
|
$ |
1,957,089 |
|
|
$ |
7,564 |
|
|
$ |
1,964,653 |
|
|
|
$ |
1,928,569 |
|
|
$ |
24,856 |
|
|
$ |
1,953,425 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
8,151,182 |
|
|
$ |
627,528 |
|
|
$ |
8,669,146 |
|
(J) |
|
$ |
7,927,455 |
|
|
$ |
618,099 |
|
|
$ |
8,439,743 |
|
(S) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(89,192), (B) $(1,601), (C)
$(18,771), (D) $(109,564), (E) $(801), (F) $(1,601), (G) $(17,970),
(H) $(89,192), (I) $(109,564), (J) $(109,564), (K) $(89,155), (L)
$(801), (M) $(15,855), (N) $(105,811), (O) $(801), (P) $(15,855),
(Q) $(89,155), (R) $(105,811) and (S) $(105,811).
|
Segment Information - First Quarter$
in thousands(Unaudited) |
|
|
Three Months Ended March 31, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Gross written
premium |
|
$ |
1,103,266 |
|
|
$ |
233,776 |
|
|
$ |
1,337,042 |
|
|
|
$ |
97,689 |
|
|
|
$ |
980,013 |
|
|
$ |
191,955 |
|
|
$ |
1,171,968 |
|
|
|
$ |
82,216 |
|
Net written
premium |
|
832,712 |
|
|
223,353 |
|
|
1,056,065 |
|
|
|
50,578 |
|
|
|
902,238 |
|
|
181,114 |
|
|
1,083,352 |
|
|
|
41,701 |
|
Net earned premium |
|
705,607 |
|
|
153,876 |
|
|
859,483 |
|
|
|
46,055 |
|
|
|
750,527 |
|
|
128,926 |
|
|
879,453 |
|
|
|
39,032 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission
income |
|
32,700 |
|
|
258 |
|
|
32,958 |
|
|
|
11,510 |
|
|
|
2,460 |
|
|
287 |
|
|
2,747 |
|
|
|
17,247 |
|
Service
and fee income |
|
109,573 |
|
|
45,187 |
|
|
154,760 |
|
|
|
2,446 |
|
|
|
103,590 |
|
|
32,273 |
|
|
135,863 |
|
|
|
2,080 |
|
Total
underwriting revenues |
|
$ |
847,880 |
|
|
$ |
199,321 |
|
|
$ |
1,047,201 |
|
|
|
$ |
60,011 |
|
|
|
$ |
856,577 |
|
|
$ |
161,486 |
|
|
$ |
1,018,063 |
|
|
|
$ |
58,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense |
|
498,357 |
|
|
91,278 |
|
|
589,635 |
|
|
|
44,531 |
|
|
|
521,334 |
|
|
69,383 |
|
|
590,717 |
|
|
|
28,100 |
|
Acquisition costs and
other |
|
114,000 |
|
|
43,608 |
|
|
157,608 |
|
|
|
11,102 |
|
|
|
129,050 |
|
|
31,490 |
|
|
160,540 |
|
|
|
14,180 |
|
General
and administrative |
|
176,685 |
|
|
50,608 |
|
|
227,293 |
|
|
|
18,796 |
|
|
|
196,870 |
|
|
45,213 |
|
|
242,083 |
|
|
|
25,103 |
|
Total
underwriting expenses |
|
$ |
789,042 |
|
|
$ |
185,494 |
|
|
$ |
974,536 |
|
|
|
$ |
74,429 |
|
|
|
$ |
847,254 |
|
|
$ |
146,086 |
|
|
$ |
993,340 |
|
|
|
$ |
67,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
58,838 |
|
|
13,827 |
|
|
72,665 |
|
|
|
(14,418 |
) |
|
|
9,323 |
|
|
15,400 |
|
|
24,723 |
|
|
|
(9,024 |
) |
Non-cash
amortization of intangible assets |
|
5,400 |
|
|
1,520 |
|
|
6,920 |
|
|
|
(27 |
) |
|
|
19,734 |
|
|
1,603 |
|
|
21,337 |
|
|
|
7,069 |
|
Underwriting income
(loss) before amortization and impairment |
|
$ |
64,238 |
|
|
$ |
15,347 |
|
|
$ |
79,585 |
|
|
|
$ |
(14,445 |
) |
|
|
$ |
29,057 |
|
|
$ |
17,003 |
|
|
$ |
46,060 |
|
|
|
$ |
(1,955 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense ratio (8) |
|
70.6 |
% |
|
59.3 |
% |
|
68.6 |
% |
|
|
96.7 |
% |
|
|
69.5 |
% |
|
53.8 |
% |
|
67.2 |
% |
|
|
72.0 |
% |
Operating
expense ratio (Non-GAAP) (9,10) |
|
21.0 |
% |
|
31.7 |
% |
|
22.9 |
% |
|
|
34.6 |
% |
|
|
29.3 |
% |
|
34.2 |
% |
|
30.0 |
% |
|
|
51.1 |
% |
Combined ratio
(Non-GAAP) (9,11) |
|
91.6 |
% |
|
91.0 |
% |
|
91.5 |
% |
|
|
131.3 |
% |
|
|
98.8 |
% |
|
88.0 |
% |
|
97.2 |
% |
|
|
123.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios
(before amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense ratio (8) |
|
70.6 |
% |
|
59.3 |
% |
|
68.6 |
% |
|
|
96.7 |
% |
|
|
69.5 |
% |
|
53.8 |
% |
|
67.2 |
% |
|
|
72.0 |
% |
Operating
expense ratio (Non-GAAP) (9,12) |
|
20.3 |
% |
|
30.7 |
% |
|
22.1 |
% |
|
|
34.7 |
% |
|
|
26.7 |
% |
|
33.0 |
% |
|
27.6 |
% |
|
|
33.0 |
% |
Combined ratio before
amortization and impairment (Non-GAAP) (9,13) |
|
90.9 |
% |
|
90.0 |
% |
|
90.7 |
% |
|
|
131.4 |
% |
|
|
96.2 |
% |
|
86.8 |
% |
|
94.8 |
% |
|
|
105.0 |
% |
NOTE: Loss and loss adjustment
expenses for the three months ended March 31, 2018 included $15,169
of favorable development on prior accident year loss and loss
adjustment expense reserves in the P&C segment, and $3,383 of
favorable development in the A&H segment, versus $4,354 of
favorable development in the P&C segment, and $8,320 of
favorable development in the A&H segment for the three months
ended March 31, 2017.
|
Reconciliation of Operating Expense Ratio
(Non-GAAP)$ in thousands(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Total underwriting
expenses |
|
$ |
789,042 |
|
|
$ |
185,494 |
|
|
$ |
974,536 |
|
|
|
$ |
74,429 |
|
|
|
$ |
847,254 |
|
|
$ |
146,086 |
|
|
$ |
993,340 |
|
|
|
$ |
67,383 |
|
Less: Loss and loss
adjustment expense |
|
498,357 |
|
|
91,278 |
|
|
589,635 |
|
|
|
44,531 |
|
|
|
521,334 |
|
|
69,383 |
|
|
590,717 |
|
|
|
28,100 |
|
Less: Ceding commission
income |
|
32,700 |
|
|
258 |
|
|
32,958 |
|
|
|
11,510 |
|
|
|
2,460 |
|
|
287 |
|
|
2,747 |
|
|
|
17,247 |
|
Less:
Service and fee income |
|
109,573 |
|
|
45,187 |
|
|
154,760 |
|
|
|
2,446 |
|
|
|
103,590 |
|
|
32,273 |
|
|
135,863 |
|
|
|
2,080 |
|
Operating expense |
|
148,412 |
|
|
48,771 |
|
|
197,183 |
|
|
|
15,942 |
|
|
|
219,870 |
|
|
44,143 |
|
|
264,013 |
|
|
|
19,956 |
|
Net earned premium |
|
$ |
705,607 |
|
|
$ |
153,876 |
|
|
$ |
859,483 |
|
|
|
$ |
46,055 |
|
|
|
$ |
750,527 |
|
|
$ |
128,926 |
|
|
$ |
879,453 |
|
|
|
$ |
39,032 |
|
Operating expense ratio (Non-GAAP) |
|
21.0 |
% |
|
31.7 |
% |
|
22.9 |
% |
|
|
34.6 |
% |
|
|
29.3 |
% |
|
34.2 |
% |
|
30.0 |
% |
|
|
51.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
789,042 |
|
|
$ |
185,494 |
|
|
$ |
974,536 |
|
|
|
$ |
74,429 |
|
|
|
$ |
847,254 |
|
|
$ |
146,086 |
|
|
$ |
993,340 |
|
|
|
$ |
67,383 |
|
Less: Loss and loss
adjustment expense |
|
498,357 |
|
|
91,278 |
|
|
589,635 |
|
|
|
44,531 |
|
|
|
521,334 |
|
|
69,383 |
|
|
590,717 |
|
|
|
28,100 |
|
Less: Ceding commission
income |
|
32,700 |
|
|
258 |
|
|
32,958 |
|
|
|
11,510 |
|
|
|
2,460 |
|
|
287 |
|
|
2,747 |
|
|
|
17,247 |
|
Less: Service and fee
income |
|
109,573 |
|
|
45,187 |
|
|
154,760 |
|
|
|
2,446 |
|
|
|
103,590 |
|
|
32,273 |
|
|
135,863 |
|
|
|
2,080 |
|
Less:
Non-cash amortization of intangible assets |
|
5,400 |
|
|
1,520 |
|
|
6,920 |
|
|
|
(27 |
) |
|
|
19,734 |
|
|
1,603 |
|
|
21,337 |
|
|
|
7,069 |
|
Operating expense
before amortization and impairment |
|
143,012 |
|
|
47,251 |
|
|
190,263 |
|
|
|
15,969 |
|
|
|
200,136 |
|
|
42,540 |
|
|
242,676 |
|
|
|
12,887 |
|
Net earned premium |
|
$ |
705,607 |
|
|
$ |
153,876 |
|
|
$ |
859,483 |
|
|
|
$ |
46,055 |
|
|
|
$ |
750,527 |
|
|
$ |
128,926 |
|
|
$ |
879,453 |
|
|
|
$ |
39,032 |
|
Operating expense ratio before amortization and impairment
(Non-GAAP) |
|
20.3 |
% |
|
30.7 |
% |
|
22.1 |
% |
|
|
34.7 |
% |
|
|
26.7 |
% |
|
33.0 |
% |
|
27.6 |
% |
|
|
33.0 |
% |
Premiums by Business Line$ in
thousands(Unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
Property &
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Auto |
|
$ |
725,212 |
|
|
$ |
647,181 |
|
|
12.1 |
% |
|
|
$ |
553,997 |
|
|
$ |
596,879 |
|
|
(7.2 |
)% |
|
|
$ |
454,216 |
|
|
$ |
450,552 |
|
|
0.8 |
% |
Homeowners |
|
141,287 |
|
|
114,725 |
|
|
23.2 |
% |
|
|
92,596 |
|
|
104,545 |
|
|
(11.4 |
)% |
|
|
82,195 |
|
|
66,968 |
|
|
22.7 |
% |
RV/Packaged |
|
49,464 |
|
|
44,754 |
|
|
10.5 |
% |
|
|
49,189 |
|
|
44,519 |
|
|
10.5 |
% |
|
|
45,689 |
|
|
46,182 |
|
|
(1.1 |
)% |
Small
Business Auto |
|
86,244 |
|
|
86,376 |
|
|
(0.2 |
)% |
|
|
64,727 |
|
|
79,208 |
|
|
(18.3 |
)% |
|
|
58,562 |
|
|
57,998 |
|
|
1.0 |
% |
Lender-placed insurance |
|
84,934 |
|
|
76,270 |
|
|
11.4 |
% |
|
|
63,214 |
|
|
72,832 |
|
|
(13.2 |
)% |
|
|
60,469 |
|
|
80,005 |
|
|
(24.4 |
)% |
Other |
|
16,125 |
|
|
10,707 |
|
|
50.6 |
% |
|
|
8,989 |
|
|
4,255 |
|
|
111.3 |
% |
|
|
4,476 |
|
|
7,551 |
|
|
(40.7 |
)% |
Property &
Casualty |
|
1,103,266 |
|
|
980,013 |
|
|
12.6 |
% |
|
|
832,712 |
|
|
902,238 |
|
|
(7.7 |
)% |
|
|
705,607 |
|
|
709,256 |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident &
Health |
|
233,776 |
|
|
191,955 |
|
|
21.8 |
% |
|
|
223,353 |
|
|
181,114 |
|
|
23.3 |
% |
|
|
153,876 |
|
|
133,778 |
|
|
15.0 |
% |
Total National General |
|
$ |
1,337,042 |
|
|
$ |
1,171,968 |
|
|
14.1 |
% |
|
|
$ |
1,056,065 |
|
|
$ |
1,083,352 |
|
|
(2.5 |
)% |
|
|
$ |
859,483 |
|
|
$ |
843,034 |
|
|
2.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal
Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Auto |
|
$ |
34,297 |
|
|
$ |
28,159 |
|
|
21.8 |
% |
|
|
$ |
13,495 |
|
|
$ |
17,106 |
|
|
(21.1 |
)% |
|
|
$ |
12,997 |
|
|
$ |
18,042 |
|
|
(28.0 |
)% |
Homeowners |
|
62,521 |
|
|
53,327 |
|
|
17.2 |
% |
|
|
36,808 |
|
|
24,216 |
|
|
52.0 |
% |
|
|
32,771 |
|
|
28,115 |
|
|
16.6 |
% |
Other |
|
871 |
|
|
730 |
|
|
19.3 |
% |
|
|
275 |
|
|
379 |
|
|
(27.4 |
)% |
|
|
287 |
|
|
448 |
|
|
(35.9 |
)% |
Reciprocal Exchanges |
|
$ |
97,689 |
|
|
$ |
82,216 |
|
|
18.8 |
% |
|
|
$ |
50,578 |
|
|
$ |
41,701 |
|
|
21.3 |
% |
|
|
$ |
46,055 |
|
|
$ |
46,605 |
|
|
(1.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total (A) |
|
$ |
1,433,130 |
|
|
$ |
1,253,383 |
|
|
14.3 |
% |
|
|
$ |
1,106,643 |
|
|
$ |
1,125,053 |
|
|
(1.6 |
)% |
|
|
$ |
905,538 |
|
|
$ |
889,639 |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES: (A) Consolidated Total
includes eliminations between National General and the Reciprocal
Exchanges of $(567) in Personal Auto and $(1,034) in Homeowners
Gross Written Premium in 2018, respectively, and $(277) in Personal
Auto and $(524) in Homeowners Gross Written Premium in 2017,
respectively.
Additional Disclosures
(1) References to operating earnings and basic and diluted
operating earnings per share (“EPS”) are non-GAAP financial
measures defined by the Company as net income/loss and basic and
diluted earnings per share excluding after-tax net gain or loss on
investments (including foreign exchange gain or loss),
other-than-temporary impairment losses, bargain purchase gains,
earnings or losses of equity method investments (related parties),
deferred tax asset impairment, non-cash impairment of goodwill and
non-cash amortization of intangible assets. The Company believes
operating earnings and basic and diluted operating EPS are relevant
measures of the Company’s profitability because operating earnings
and basic and diluted operating EPS contain the components of net
income upon which the Company’s management has the most influence
and excludes factors outside management’s direct control and
non-recurring items. Other companies may calculate these measures
differently, and therefore, their measures may not be comparable to
those used by National General. Please see the Non-GAAP Financial
Measures table within this release for the reconciliation of these
non-GAAP measures to the most directly comparable GAAP measure.
(2) Total investments includes $241,801 and $347,548 in related
parties at March 31, 2018 and December 31, 2017, respectively.
(3) Reinsurance recoverable includes $11,399 and $15,688 from
related parties at March 31, 2018 and December 31, 2017,
respectively.
(4) Other includes $1,174 and $2,334 from related parties at
March 31, 2018 and December 31, 2017, respectively.
(5) Accounts payable and accrued expenses includes $72,641 and
$140,057 to related parties at March 31, 2018 and December 31,
2017, respectively.
(6) Common stock: $0.01 par value - authorized 150,000,000
shares, issued and outstanding 106,887,566 shares - March 31, 2018;
authorized 150,000,000 shares, issued and outstanding 106,697,648
shares - December 31, 2017.
(7) Preferred stock: $0.01 par value - authorized 10,000,000
shares, issued and outstanding 2,565,000 shares - March 31, 2018;
authorized 10,000,000 shares, issued and outstanding 2,565,000
shares - December 31, 2017.
(8) Loss and loss adjustment expense ratio is calculated by
dividing loss and loss adjustment expense by net earned
premium.
(9) Operating expense ratio and combined ratio are considered
non-GAAP financial measures under applicable SEC rules because a
component of those ratios, operating expense, is calculated by
offsetting acquisition and other underwriting costs and general and
administrative expenses by ceding commission income and service and
fee income. Management uses operating expense ratio (non-GAAP) and
combined ratio (non-GAAP) to evaluate financial performance against
historical results and establish targets on a consolidated basis.
The Company believes this presentation enhances the understanding
of our results by eliminating what we believe are volatile and
unusual events and presenting the ratios with what we believe are
the underlying run rates of the business. Other companies may
calculate these measures differently, and, therefore, their
measures may not be comparable to those used by National General.
Please see the Non-GAAP Financial Measures table within this
release for the reconciliation of these non-GAAP measures to the
most directly comparable GAAP measure.
(10) Operating expense ratio is a non-GAAP measure defined by
the Company, that is commonly used in the insurance industry. The
Company calculates the ratio by dividing operating expense by net
earned premium. Operating expense consists of the sum of
acquisition and other underwriting costs and general and
administrative expenses less ceding commission income and service
and fee income. The ratio is used as an indicator of the Company’s
efficiency in acquiring and servicing its business. Other companies
may calculate these measures differently, and therefore, their
measures may not be comparable to those used by National General.
Please see the Non-GAAP Financial Measures table within this
release for the reconciliation of these non-GAAP measures to the
most directly comparable GAAP measure.
(11) Combined ratio is a non-GAAP measure defined by the
Company, that is commonly used in the insurance industry. The
Company calculates the ratio by adding the loss and loss adjustment
expense ratio and the operating expense ratio (non-GAAP) together.
The ratio is used as an indicator of the Company’s underwriting
discipline, efficiency in acquiring and servicing its business, and
overall underwriting profit. A combined ratio under 100% generally
indicates an underwriting profit, while over 100% an underwriting
loss. Other companies may calculate these measures differently, and
therefore, their measures may not be comparable to those used by
National General.
(12) Operating expense ratio before amortization and impairment
is a non-GAAP measure defined by the Company, that is commonly used
in the insurance industry. The Company calculates the ratio by
dividing the operating expense before amortization and impairment
by net earned premium. Operating expense before amortization and
impairment consists of the sum of acquisition and other
underwriting costs and general and administrative expenses less
ceding commission income and service and fee income less non-cash
amortization of intangible assets and non-cash impairment of
goodwill. The ratio is used as an indicator of the Company’s
efficiency in acquiring and servicing its business. Other companies
may calculate these measures differently, and therefore, their
measures may not be comparable to those used by National General.
Please see the Non-GAAP Financial Measures table within this
release for the reconciliation of these non-GAAP measures to the
most directly comparable GAAP measure.
(13) Combined ratio before amortization and impairment is a
non-GAAP measure defined by the Company, that is commonly used in
the insurance industry. The Company calculates the ratio by adding
the loss and loss adjustment expense ratio and the operating
expense ratio before amortization and impairment (non-GAAP)
together. The ratio is used as an indicator of the Company’s
underwriting discipline, efficiency in acquiring and servicing its
business, and overall underwriting profit. A combined ratio under
100% generally indicates an underwriting profit, while over 100% an
underwriting loss. Other companies may calculate these measures
differently, and therefore, their measures may not be comparable to
those used by National General. Please see the Non-GAAP Financial
Measures table within this release for the reconciliation of these
non-GAAP measures to the most directly comparable GAAP measure.
(14) Trailing twelve month operating return on average equity is
the ratio of the previous twelve months operating earnings to
average shareholders’ equity for the periods presented. Average
shareholders’ equity is the sum of the shareholders’ equity
excluding preferred stock at the beginning and end of the period
presented divided by two. In the opinion of the Company’s
management this ratio is an important indicator of how well
management creates value for its shareholders through its operating
activities and capital management. Other companies may calculate
these measures differently, and therefore, their measures may not
be comparable to those used by National General. Please see the
Non-GAAP Financial Measures table within this release for the
reconciliation of net income to operating earnings, which is the
Non-GAAP component of the operating return on average equity.
(15) Combined ratio excluding losses from various Q1’18
weather-related events, and is calculated by taking the combined
ratio as defined in Note 13, and adjusting it to exclude the total
net losses of $14.2 million from these events. The company
believes this measure enhances investors’ understanding of our
results by eliminating what we believe are volatile and unusual
events.
|
|
Q1’18 Combined Ratio |
|
Impact of Q1’18 Weather-related Events |
|
Q1’18 Combined Ratio Excluding Weather-related
Events |
P&C
Segment |
|
90.9% |
|
2.0% |
|
88.9% |
|
|
|
|
|
|
|
Overall
NGHC |
|
90.7% |
|
1.7% |
|
89.0% |
Investor Contact
Christine WorleyDirector of Investor RelationsPhone:
212-380-9462Email: Christine.Worley@NGIC.com
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