National General Holdings Corp. (Nasdaq:NGHC) today reported second
quarter 2018 net income of $36.7 million or $0.34 per diluted
share, compared to net income of $5.5 million or $0.05 per
diluted share in the second quarter of 2017. Second quarter 2018
operating earnings(1) was $59.5 million or $0.54 per diluted
share, compared to $23.7 million or $0.22 per diluted share in
the second quarter of 2017. Second quarter 2018 net income was
impacted by an $18.7 million net realized loss on investments
related to a repositioning of the portfolio.
Second Quarter 2018 Highlights Versus
Second Quarter 2017*
- Gross written premium grew $186.9 million or 18.0% to
$1,222.5 million, driven by continued organic growth in our P&C
segment of 17.8% and in our A&H segment of 19.7%.
- In the second quarter, our homeowners’ product experienced
organic growth of 25.5% 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
22.8% driven by continued rate increases and PIF growth.
- The overall combined ratio(9,13) was 92.1% compared to 96.3% in
the prior year’s quarter, excluding non-cash amortization of
intangible assets. The P&C segment reported a decrease in
combined ratio to 92.9% from 96.8% in the prior year’s quarter. The
combined ratio includes $20.5 million of losses, or 2.8
P&C loss ratio points, primarily related to spring weather
events in the Midwestern and Northeastern parts of the U.S. and
hail in Texas in the second quarter 2018, compared to $16.1 million
of losses, or 2.0 P&C loss ratio points, from events in the
second quarter 2017. The A&H segment reported a combined ratio
of 88.6% compared to 93.7% in the prior year’s quarter.
- Service and fee income grew 7.7% to $148.1 million, driven by
organic growth in both our Accident & Health and Property &
Casualty segments.
- Shareholders’ equity was $1.98 billion and fully diluted book
value per share was $14.28 at June 30, 2018, growth of 2.8% and
3.0%, respectively, from December 31, 2017. Our trailing twelve
month operating return on average equity (ROE)(14) was 12.1% as of
June 30, 2018.
- Second quarter 2018 operating earnings exclude the following
material items, net of tax: $14.8 million or $0.14 net loss on
investments and $6.5 million or $0.06 per share of non-cash
amortization of intangible assets.
Barry Karfunkel, National General’s CEO, stated: “We are pleased
to report another quarter with both strong top line growth and
underwriting results, despite continued active catastrophe loss
activity for the industry. Our second quarter results reflect
the strength and stability of returns the platform we have built is
able to generate. We expect the opportunity for profitable
growth across the diversified niche lines of business we have
developed to continue as market dynamics in both our P&C and
A&H segments remain favorable.”
*NOTE: Unless specified otherwise, discussion
of our second 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 Second Quarter 2018 as
Compared to Second Quarter 2017 by Segment
- Property & Casualty - Gross written
premium grew by 17.8% to $1,065.6 million, net written premium
decreased by 16.9% to $683.9 million and net earned premium
decreased by 8.7% to $734.9 million. P&C gross written
premium growth was primarily driven by organic growth of 25.5% from
our homeowners’ product and 22.8% from our personal auto product.
The decrease in the net premiums written and earned were driven by
the home and auto quota shares entered after July 1, 2017.
Service and fee income grew 11.3% to $105.2 million. Excluding
non-cash amortization of intangible assets, the combined
ratio(9,13) was 92.9% with a loss ratio of 73.5% and an expense
ratio(9,12) of 19.4%, versus a prior year combined ratio of 96.8%
with a loss ratio of 73.6% and an expense ratio of 23.2%. The
decrease in the expense ratio was driven by the impact of the home
and auto quota shares. The loss ratio was impacted by pre-tax
catastrophe losses of approximately $20.5 million primarily
related to spring weather events in the Midwestern and Northeastern
parts of the U.S. and hail in Texas in the second quarter
2018.
- Accident & Health - Gross written premium
grew by 19.7% to $156.8 million, net written premium grew by
17.8% to $139.3 million, and net earned premium grew by 15.8%
to $156.2 million. The A&H gross written premium increase
was driven by the continued growth across the entire book. Service
and fee income was $42.9 million compared to
$43.0 million in the prior year’s quarter. Excluding non-cash
amortization of intangible assets, the combined ratio(9,13) was
88.6% with a loss ratio of 56.6% and an expense ratio(9,12) of
32.0%, versus a prior year combined ratio of 93.7% with a loss
ratio of 63.4% and an expense ratio of 30.3%.
- Reciprocal Exchanges - Results for the
Reciprocal Exchanges are not included in net income available to
NGHC common stockholders. Gross written premium was
$118.0 million, net written premium was $66.8 million,
and net earned premium was $51.8 million. Reciprocal Exchanges
combined ratio(9,13) excluding non-cash amortization of intangible
assets was 118.2% with a loss ratio of 80.5% and an expense
ratio(9,12) of 37.7%.
Second quarter 2018 investment income decreased to
$26.2 million, compared to $27.8 million in the second
quarter of 2017, reflecting our decision to increase credit quality
of the portfolio in the second half of 2017. Total investments and
cash and cash equivalents (including restricted cash) were
$3.8 billion as of June 30, 2018. Accumulated other
comprehensive income (loss) increased to a $55.7 million loss
at June 30, 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, which includes interest credited on funds held
balances, was $15.0 million and debt was $705.1 million at
June 30, 2018, and $713.7 million at December 31, 2017.
The second quarter of 2018 provision for income taxes was
$9.4 million and the effective tax rate for the quarter was
17.5%. The effective tax rate for the first half of 2018 was
19.9%.
Shareholders’ equity was $1,982.2 million at June 30, 2018,
growth of 2.8% from $1,928.6 million at December 31, 2017. Fully
diluted book value per share was $14.28 at June 30, 2018, growth of
3.0% from $13.86 at December 31, 2017. Our trailing twelve month
operating return on average equity (ROE)(14) was 12.1% as of June
30, 2018.
Year-to-Date P&C Segment Notable Large
Losses |
2018 Quarter |
|
|
P&C Notable Large Losses and
LAE($ millions) |
|
P&C Loss Ratio Points* |
|
EPS Impact After Tax |
Q2 |
Spring Weather-related
and Texas Hail Events |
|
$20.5 |
|
2.8 |
% |
|
$0.15 |
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. |
|
Additional Item
- National General Enters into Business Collaboration
Agreement with Aioi Nissay Dowa Insurance Co., Ltd. - On
July 11, 2018, we entered into a collaboration agreement among Aioi
Nissay Dowa Insurance Co., Ltd. (AD), part of MS&AD Insurance
Group and Aioi Nissay Dowa Insurance Services USA Corp. (AIS), a
subsidiary of AD. In conjunction with the collaboration agreement,
we issued AD $30 million aggregate liquidation preference of
our Series D Fixed/Floating Rate Non-Cumulative Convertible
Preferred Stock. Holders of the Preferred Stock will be entitled to
receive noncumulative cash dividends, if and when declared by the
board of directors, at a rate of 7% per annum, subject to
adjustment to a floating rate following July 15, 2023. The Series D
Preferred Stock is convertible at the holder’s option, on or after
July 15, 2023 to shares of the Company’s common stock at an initial
conversion price of $38 per share. We may, at our option, redeem
the Series D Preferred Stock on or after July 15, 2023, with the
redemption price being at the liquidation preference, unless
certain premium thresholds are met under the collaboration
agreement.
Conference Call
On Tuesday, August 7, 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: |
226472 |
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, August 7, 2018 to 11:59 PM ET on Tuesday,
August 21, 2018 by dialing either 800-332-6854 (toll-free)
within the U.S. or 973-528-0005 outside the U.S. and entering
passcode 226472. 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, the effect of
unpredictable catastrophic losses, 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 - Second
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
written premium |
|
$ |
1,222,468 |
|
|
$ |
117,981 |
|
|
$ |
1,340,449 |
|
|
|
$ |
1,035,552 |
|
|
$ |
99,157 |
|
|
$ |
1,133,909 |
|
(G) |
Net
written premium |
|
823,127 |
|
|
66,848 |
|
|
889,975 |
|
|
|
940,757 |
|
|
51,243 |
|
|
992,000 |
|
|
Net
earned premium |
|
891,103 |
|
|
51,803 |
|
|
942,906 |
|
|
|
939,495 |
|
|
42,256 |
|
|
981,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding
commission income |
|
41,982 |
|
|
13,426 |
|
|
55,408 |
|
|
|
3,399 |
|
|
18,109 |
|
|
21,508 |
|
|
Service
and fee income |
|
148,108 |
|
|
445 |
|
|
130,501 |
|
(A) |
|
137,562 |
|
|
1,494 |
|
|
125,176 |
|
(H) |
Net
investment income |
|
26,183 |
|
|
2,205 |
|
|
25,995 |
|
(B) |
|
27,765 |
|
|
2,147 |
|
|
27,531 |
|
(I) |
Net gain
(loss) on investments |
|
(18,736 |
) |
|
(968 |
) |
|
(19,704 |
) |
|
|
(8,362 |
) |
|
6,187 |
|
|
(2,175 |
) |
|
Other
income (expense) |
|
— |
|
|
— |
|
|
— |
|
|
|
(6,098 |
) |
|
— |
|
|
(6,098 |
) |
|
Total revenues |
|
$ |
1,088,640 |
|
|
$ |
66,911 |
|
|
$ |
1,135,106 |
|
(C) |
|
$ |
1,093,761 |
|
|
$ |
70,193 |
|
|
$ |
1,147,693 |
|
(J) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and
loss adjustment expense |
|
$ |
628,650 |
|
|
$ |
41,678 |
|
|
$ |
670,328 |
|
|
|
$ |
677,374 |
|
|
$ |
33,820 |
|
|
$ |
711,194 |
|
|
Acquisition costs and other underwriting expenses |
|
171,300 |
|
|
10,560 |
|
|
181,860 |
|
|
|
173,255 |
|
|
15,540 |
|
|
188,795 |
|
|
General
and administrative expenses |
|
219,662 |
|
|
22,819 |
|
|
224,429 |
|
(D) |
|
206,865 |
|
|
18,509 |
|
|
211,494 |
|
(K) |
Interest
expense |
|
15,038 |
|
|
2,393 |
|
|
15,038 |
|
(E) |
|
11,550 |
|
|
2,381 |
|
|
11,550 |
|
(L) |
Total expenses |
|
$ |
1,034,650 |
|
|
$ |
77,450 |
|
|
$ |
1,091,655 |
|
(F) |
|
$ |
1,069,044 |
|
|
$ |
70,250 |
|
|
$ |
1,123,033 |
|
(M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
provision (benefit) for income taxes |
|
$ |
53,990 |
|
|
$ |
(10,539 |
) |
|
$ |
43,451 |
|
|
|
$ |
24,717 |
|
|
$ |
(57 |
) |
|
$ |
24,660 |
|
|
Provision
(benefit) for income taxes |
|
9,442 |
|
|
(2,901 |
) |
|
6,541 |
|
|
|
11,415 |
|
|
72 |
|
|
11,487 |
|
|
Net income (loss)
before non-controlling interest and dividends on preferred
shares |
|
44,548 |
|
|
(7,638 |
) |
|
36,910 |
|
|
|
13,302 |
|
|
(129 |
) |
|
13,173 |
|
|
Less: net
income (loss) attributable to non-controlling interest |
|
— |
|
|
(7,638 |
) |
|
(7,638 |
) |
|
|
(30 |
) |
|
(129 |
) |
|
(159 |
) |
|
Net income before
dividends on preferred shares |
|
44,548 |
|
|
— |
|
|
44,548 |
|
|
|
13,332 |
|
|
— |
|
|
13,332 |
|
|
Less:
dividends on preferred shares |
|
7,875 |
|
|
— |
|
|
7,875 |
|
|
|
7,875 |
|
|
— |
|
|
7,875 |
|
|
Net income available to common stockholders |
|
$ |
36,673 |
|
|
$ |
— |
|
|
$ |
36,673 |
|
|
|
$ |
5,457 |
|
|
$ |
— |
|
|
$ |
5,457 |
|
|
|
NOTES: Consolidated column includes eliminations
as follows: (A) $(18,052), (B) $(2,393), (C) $(20,445), (D)
$(18,052), (E) $(2,393), (F) $(20,445), (G) $(800), (H) $(13,880),
(I) $(2,381), (J) $(16,261), (K) $(13,880), (L) $(2,381) and (M)
$(16,261). |
|
Income Statement - Year to Date$
in thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
written premium |
|
$ |
2,559,510 |
|
|
$ |
215,670 |
|
|
$ |
2,773,579 |
|
(A) |
|
$ |
2,207,520 |
|
|
$ |
181,373 |
|
|
$ |
2,387,292 |
|
(H) |
Net
written premium |
|
1,879,192 |
|
|
117,426 |
|
|
1,996,618 |
|
|
|
2,024,109 |
|
|
92,944 |
|
|
2,117,053 |
|
|
Net
earned premium |
|
1,750,586 |
|
|
97,858 |
|
|
1,848,444 |
|
|
|
1,818,948 |
|
|
81,288 |
|
|
1,900,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding
commission income |
|
74,940 |
|
|
24,936 |
|
|
99,876 |
|
|
|
6,146 |
|
|
35,356 |
|
|
41,502 |
|
|
Service
and fee income |
|
302,868 |
|
|
2,891 |
|
|
272,623 |
|
(B) |
|
273,425 |
|
|
3,574 |
|
|
251,118 |
|
(I) |
Net
investment income |
|
51,202 |
|
|
4,349 |
|
|
51,006 |
|
(C) |
|
56,188 |
|
|
5,031 |
|
|
56,575 |
|
(J) |
Net gain
(loss) on investments |
|
(18,487 |
) |
|
(1,099 |
) |
|
(19,586 |
) |
|
|
(9,774 |
) |
|
6,187 |
|
|
(3,587 |
) |
|
Other
income |
|
— |
|
|
— |
|
|
— |
|
|
|
3,703 |
|
|
— |
|
|
3,703 |
|
|
Total revenues |
|
$ |
2,161,109 |
|
|
$ |
128,935 |
|
|
$ |
2,252,363 |
|
(D) |
|
$ |
2,148,636 |
|
|
$ |
131,436 |
|
|
$ |
2,249,547 |
|
(K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and
loss adjustment expense |
|
$ |
1,218,285 |
|
|
$ |
86,209 |
|
|
$ |
1,304,494 |
|
|
|
$ |
1,268,091 |
|
|
$ |
61,920 |
|
|
$ |
1,330,011 |
|
|
Acquisition costs and other underwriting expenses |
|
328,908 |
|
|
21,662 |
|
|
350,570 |
|
|
|
333,795 |
|
|
29,720 |
|
|
363,515 |
|
|
General
and administrative expenses |
|
446,955 |
|
|
41,615 |
|
|
455,434 |
|
(E) |
|
448,948 |
|
|
43,612 |
|
|
466,679 |
|
(L) |
Interest
expense |
|
26,192 |
|
|
4,545 |
|
|
26,192 |
|
(F) |
|
23,095 |
|
|
4,644 |
|
|
23,095 |
|
(M) |
Total expenses |
|
$ |
2,020,340 |
|
|
$ |
154,031 |
|
|
$ |
2,136,690 |
|
(G) |
|
$ |
2,073,929 |
|
|
$ |
139,896 |
|
|
$ |
2,183,300 |
|
(N) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
provision (benefit) for income taxes |
|
$ |
140,769 |
|
|
$ |
(25,096 |
) |
|
$ |
115,673 |
|
|
|
$ |
74,707 |
|
|
$ |
(8,460 |
) |
|
$ |
66,247 |
|
|
Provision
(benefit) for income taxes |
|
28,013 |
|
|
(5,270 |
) |
|
22,743 |
|
|
|
24,452 |
|
|
(2,176 |
) |
|
22,276 |
|
|
Net income (loss)
before non-controlling interest and dividends on preferred
shares |
|
112,756 |
|
|
(19,826 |
) |
|
92,930 |
|
|
|
50,255 |
|
|
(6,284 |
) |
|
43,971 |
|
|
Less: net
income (loss) attributable to non-controlling interest |
|
— |
|
|
(19,826 |
) |
|
(19,826 |
) |
|
|
— |
|
|
(6,284 |
) |
|
(6,284 |
) |
|
Net income before
dividends on preferred shares |
|
112,756 |
|
|
— |
|
|
112,756 |
|
|
|
50,255 |
|
|
— |
|
|
50,255 |
|
|
Less:
dividends on preferred shares |
|
15,750 |
|
|
— |
|
|
15,750 |
|
|
|
15,750 |
|
|
— |
|
|
15,750 |
|
|
Net income available to common stockholders |
|
$ |
97,006 |
|
|
$ |
— |
|
|
$ |
97,006 |
|
|
|
$ |
34,505 |
|
|
$ |
— |
|
|
$ |
34,505 |
|
|
|
NOTES: Consolidated column includes eliminations
as follows: (A) $(1,601), (B) $(33,136), (C) $(4,545), (D)
$(37,681), (E) $(33,136), (F) $(4,545), (G) $(37,681), (H)
$(1,601), (I) $(25,881), (J) $(4,644), (K) $(30,525), (L)
$(25,881), (M) $(4,644) and (N) $(30,525). |
|
Earnings and Per Share Data$ in
thousands, except shares and per share data(Unaudited)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income available to
common stockholders |
|
$ |
36,673 |
|
|
$ |
5,457 |
|
|
$ |
97,006 |
|
|
$ |
34,505 |
|
Basic net
income per common share |
|
$ |
0.34 |
|
|
$ |
0.05 |
|
|
$ |
0.91 |
|
|
$ |
0.32 |
|
Diluted
net income per common share |
|
$ |
0.34 |
|
|
$ |
0.05 |
|
|
$ |
0.89 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
|
|
Operating earnings
attributable to NGHC(1) |
|
$ |
59,484 |
|
|
$ |
23,699 |
|
|
$ |
127,107 |
|
|
$ |
59,438 |
|
Basic
operating earnings per common share(1) |
|
$ |
0.56 |
|
|
$ |
0.22 |
|
|
$ |
1.19 |
|
|
$ |
0.56 |
|
Diluted
operating earnings per common share(1) |
|
$ |
0.54 |
|
|
$ |
0.22 |
|
|
$ |
1.16 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per
common share |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
Weighted average number
of basic shares outstanding |
|
106,969,134 |
|
|
106,560,000 |
|
|
106,864,469 |
|
|
106,514,396 |
|
Weighted average number
of diluted shares outstanding |
|
109,402,465 |
|
|
109,447,812 |
|
|
109,181,041 |
|
|
109,364,273 |
|
Shares outstanding, end
of period |
|
107,057,771 |
|
|
106,607,110 |
|
|
|
|
|
Fully diluted shares
outstanding, end of period |
|
109,374,343 |
|
|
109,507,711 |
|
|
|
|
|
Book value per
share |
|
$ |
14.59 |
|
|
$ |
14.24 |
|
|
|
|
|
Fully diluted book
value per share |
|
$ |
14.28 |
|
|
$ |
13.86 |
|
|
|
|
|
|
Reconciliation of Net Income to Operating
Earnings (Non-GAAP)$ in thousands, except per share
data(Unaudited)
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income
available to common stockholders |
|
$ |
36,673 |
|
|
$ |
5,457 |
|
|
$ |
97,006 |
|
|
$ |
34,505 |
|
Add (subtract): |
|
|
|
|
|
|
|
|
Net loss
on investments |
|
18,736 |
|
|
8,362 |
|
|
18,487 |
|
|
9,774 |
|
Other
(income) expense |
|
— |
|
|
6,098 |
|
|
— |
|
|
(3,703 |
) |
Equity in
(earnings) losses of equity method investments |
|
834 |
|
|
1,915 |
|
|
2,303 |
|
|
(739 |
) |
Non-cash
amortization of intangible assets |
|
8,217 |
|
|
11,690 |
|
|
15,137 |
|
|
33,027 |
|
Income
tax expense (benefit) |
|
(4,976 |
) |
|
(9,823 |
) |
|
(5,826 |
) |
|
(13,426 |
) |
Operating earnings attributable to NGHC (1) |
|
$ |
59,484 |
|
|
$ |
23,699 |
|
|
$ |
127,107 |
|
|
$ |
59,438 |
|
|
|
|
|
|
|
|
|
|
Operating
earnings per common share: |
|
|
|
|
|
|
|
|
Basic
operating earnings per common share |
|
$ |
0.56 |
|
|
$ |
0.22 |
|
|
$ |
1.19 |
|
|
$ |
0.56 |
|
Diluted
operating earnings per common share |
|
$ |
0.54 |
|
|
$ |
0.22 |
|
|
$ |
1.16 |
|
|
$ |
0.54 |
|
|
Balance Sheet$ in thousands
|
|
June 30, 2018
(unaudited) |
|
|
December 31, 2017
(audited) |
|
ASSETS |
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Total investments
(2) |
|
$ |
3,415,421 |
|
|
$ |
322,114 |
|
|
$ |
3,636,306 |
|
(A) |
|
$ |
3,411,730 |
|
|
$ |
327,213 |
|
|
$ |
3,649,788 |
|
(J) |
Cash and cash
equivalents, including restricted cash |
|
399,484 |
|
|
1,844 |
|
|
401,328 |
|
|
|
351,433 |
|
|
6,051 |
|
|
357,484 |
|
|
Premiums and other
receivables, net |
|
1,634,837 |
|
|
59,426 |
|
|
1,692,662 |
|
(B) |
|
1,268,330 |
|
|
56,792 |
|
|
1,324,321 |
|
(K) |
Reinsurance activity
(3) |
|
1,856,515 |
|
|
200,967 |
|
|
2,057,482 |
|
|
|
1,616,103 |
|
|
195,184 |
|
|
1,811,287 |
|
|
Intangible assets,
net |
|
386,258 |
|
|
3,595 |
|
|
389,853 |
|
|
|
400,385 |
|
|
3,685 |
|
|
404,070 |
|
|
Goodwill |
|
181,827 |
|
|
— |
|
|
181,827 |
|
|
|
174,153 |
|
|
— |
|
|
174,153 |
|
|
Other (4) |
|
718,608 |
|
|
31,994 |
|
|
730,276 |
|
(C) |
|
705,321 |
|
|
29,174 |
|
|
718,640 |
|
(L) |
Total assets |
|
$ |
8,592,950 |
|
|
$ |
619,940 |
|
|
$ |
9,089,734 |
|
(D) |
|
$ |
7,927,455 |
|
|
$ |
618,099 |
|
|
$ |
8,439,743 |
|
(M) |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss
adjustment expense reserves |
|
$ |
2,560,233 |
|
|
$ |
167,256 |
|
|
$ |
2,727,489 |
|
|
|
$ |
2,520,204 |
|
|
$ |
143,353 |
|
|
$ |
2,663,557 |
|
|
Unearned premiums and
other revenue |
|
2,055,260 |
|
|
246,763 |
|
|
2,302,023 |
|
|
|
1,807,210 |
|
|
225,395 |
|
|
2,032,605 |
|
|
Reinsurance
payable |
|
546,300 |
|
|
36,455 |
|
|
581,154 |
|
(E) |
|
329,772 |
|
|
69,076 |
|
|
398,047 |
|
(N) |
Accounts payable and
accrued expenses (5) |
|
659,704 |
|
|
25,456 |
|
|
664,834 |
|
(F) |
|
423,054 |
|
|
24,682 |
|
|
431,881 |
|
(O) |
Debt |
|
705,077 |
|
|
101,229 |
|
|
705,077 |
|
(G) |
|
713,710 |
|
|
89,155 |
|
|
713,710 |
|
(P) |
Other |
|
84,160 |
|
|
43,722 |
|
|
127,882 |
|
|
|
204,936 |
|
|
41,582 |
|
|
246,518 |
|
|
Total liabilities |
|
$ |
6,610,734 |
|
|
$ |
620,881 |
|
|
$ |
7,108,459 |
|
(H) |
|
$ |
5,998,886 |
|
|
$ |
593,243 |
|
|
$ |
6,486,318 |
|
(Q) |
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock (6) |
|
$ |
1,071 |
|
|
$ |
— |
|
|
$ |
1,071 |
|
|
|
$ |
1,067 |
|
|
$ |
— |
|
|
$ |
1,067 |
|
|
Preferred stock
(7) |
|
420,000 |
|
|
— |
|
|
420,000 |
|
|
|
420,000 |
|
|
— |
|
|
420,000 |
|
|
Additional paid-in
capital |
|
921,744 |
|
|
— |
|
|
921,744 |
|
|
|
917,751 |
|
|
— |
|
|
917,751 |
|
|
Accumulated other
comprehensive income (loss) |
|
(55,698 |
) |
|
— |
|
|
(55,698 |
) |
|
|
(8,112 |
) |
|
— |
|
|
(8,112 |
) |
|
Retained earnings |
|
695,099 |
|
|
— |
|
|
695,099 |
|
|
|
597,863 |
|
|
— |
|
|
597,863 |
|
|
Total National General Holdings Corp. stockholders’
equity |
|
1,982,216 |
|
|
— |
|
|
1,982,216 |
|
|
|
1,928,569 |
|
|
— |
|
|
1,928,569 |
|
|
Non-controlling
interest |
|
— |
|
|
(941 |
) |
|
(941 |
) |
|
|
— |
|
|
24,856 |
|
|
24,856 |
|
|
Total stockholders’ equity |
|
$ |
1,982,216 |
|
|
$ |
(941 |
) |
|
$ |
1,981,275 |
|
|
|
$ |
1,928,569 |
|
|
$ |
24,856 |
|
|
$ |
1,953,425 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
8,592,950 |
|
|
$ |
619,940 |
|
|
$ |
9,089,734 |
|
(I) |
|
$ |
7,927,455 |
|
|
$ |
618,099 |
|
|
$ |
8,439,743 |
|
(R) |
|
NOTES: Consolidated column includes eliminations
as follows: (A) $(101,229), (B) $(1,601), (C) $(20,326), (D)
$(123,156), (E) $(1,601), (F) $(20,326), (G) $(101,229), (H)
$(123,156), (I) $(123,156), (J) $(89,155), (K) $(801), (L)
$(15,855), (M) $(105,811), (N) $(801), (O) $(15,855), (P)
$(89,155), (Q) $(105,811) and (R) $(105,811). |
Segment Information - Second
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Gross written
premium |
|
$ |
1,065,632 |
|
|
$ |
156,836 |
|
|
$ |
1,222,468 |
|
|
|
$ |
117,981 |
|
|
|
$ |
904,578 |
|
|
$ |
130,974 |
|
|
$ |
1,035,552 |
|
|
|
$ |
99,157 |
|
Net written
premium |
|
683,869 |
|
|
139,258 |
|
|
823,127 |
|
|
|
66,848 |
|
|
|
822,508 |
|
|
118,249 |
|
|
940,757 |
|
|
|
51,243 |
|
Net earned premium |
|
734,934 |
|
|
156,169 |
|
|
891,103 |
|
|
|
51,803 |
|
|
|
804,643 |
|
|
134,852 |
|
|
939,495 |
|
|
|
42,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission
income |
|
41,720 |
|
|
262 |
|
|
41,982 |
|
|
|
13,426 |
|
|
|
3,128 |
|
|
271 |
|
|
3,399 |
|
|
|
18,109 |
|
Service
and fee income |
|
105,167 |
|
|
42,941 |
|
|
148,108 |
|
|
|
445 |
|
|
|
94,519 |
|
|
43,043 |
|
|
137,562 |
|
|
|
1,494 |
|
Total
underwriting revenues |
|
$ |
881,821 |
|
|
$ |
199,372 |
|
|
$ |
1,081,193 |
|
|
|
$ |
65,674 |
|
|
|
$ |
902,290 |
|
|
$ |
178,166 |
|
|
$ |
1,080,456 |
|
|
|
$ |
61,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense |
|
540,216 |
|
|
88,434 |
|
|
628,650 |
|
|
|
41,678 |
|
|
|
591,844 |
|
|
85,530 |
|
|
677,374 |
|
|
|
33,820 |
|
Acquisition costs and
other |
|
123,183 |
|
|
48,117 |
|
|
171,300 |
|
|
|
10,560 |
|
|
|
126,496 |
|
|
46,759 |
|
|
173,255 |
|
|
|
15,540 |
|
General
and administrative |
|
172,530 |
|
|
47,132 |
|
|
219,662 |
|
|
|
22,819 |
|
|
|
168,023 |
|
|
38,842 |
|
|
206,865 |
|
|
|
18,509 |
|
Total
underwriting expenses |
|
$ |
835,929 |
|
|
$ |
183,683 |
|
|
$ |
1,019,612 |
|
|
|
$ |
75,057 |
|
|
|
$ |
886,363 |
|
|
$ |
171,131 |
|
|
$ |
1,057,494 |
|
|
|
$ |
67,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
45,892 |
|
|
15,689 |
|
|
61,581 |
|
|
|
(9,383 |
) |
|
|
15,927 |
|
|
7,035 |
|
|
22,962 |
|
|
|
(6,010 |
) |
Non-cash
amortization of intangible assets |
|
6,179 |
|
|
2,038 |
|
|
8,217 |
|
|
|
(26 |
) |
|
|
10,278 |
|
|
1,412 |
|
|
11,690 |
|
|
|
(91 |
) |
Underwriting income
(loss) before amortization and impairment |
|
$ |
52,071 |
|
|
$ |
17,727 |
|
|
$ |
69,798 |
|
|
|
$ |
(9,409 |
) |
|
|
$ |
26,205 |
|
|
$ |
8,447 |
|
|
$ |
34,652 |
|
|
|
$ |
(6,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense ratio (8) |
|
73.5 |
% |
|
56.6 |
% |
|
70.5 |
% |
|
|
80.5 |
% |
|
|
73.6 |
% |
|
63.4 |
% |
|
72.1 |
% |
|
|
80.0 |
% |
Operating
expense ratio (Non-GAAP) (9,10) |
|
20.3 |
% |
|
33.3 |
% |
|
22.5 |
% |
|
|
37.7 |
% |
|
|
24.5 |
% |
|
31.4 |
% |
|
25.5 |
% |
|
|
34.2 |
% |
Combined ratio
(Non-GAAP) (9,11) |
|
93.8 |
% |
|
89.9 |
% |
|
93.0 |
% |
|
|
118.2 |
% |
|
|
98.1 |
% |
|
94.8 |
% |
|
97.6 |
% |
|
|
114.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios
(before amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense ratio (8) |
|
73.5 |
% |
|
56.6 |
% |
|
70.5 |
% |
|
|
80.5 |
% |
|
|
73.6 |
% |
|
63.4 |
% |
|
72.1 |
% |
|
|
80.0 |
% |
Operating
expense ratio (Non-GAAP) (9,12) |
|
19.4 |
% |
|
32.0 |
% |
|
21.6 |
% |
|
|
37.7 |
% |
|
|
23.2 |
% |
|
30.3 |
% |
|
24.2 |
% |
|
|
34.4 |
% |
Combined ratio before
amortization and impairment (Non-GAAP) (9,13) |
|
92.9 |
% |
|
88.6 |
% |
|
92.1 |
% |
|
|
118.2 |
% |
|
|
96.8 |
% |
|
93.7 |
% |
|
96.3 |
% |
|
|
114.4 |
% |
|
NOTE: Loss and loss adjustment expenses for the
three months ended June 30, 2018 included $5,383 of favorable
development on prior accident year loss and loss adjustment expense
reserves in the P&C segment, and $8,040 of favorable
development in the A&H segment, versus $6,570 of unfavorable
development in the P&C segment, and $4,524 of favorable
development in the A&H segment for the three months ended June
30, 2017. |
|
Segment Information - Year to
Date$ in thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Gross written
premium |
|
$ |
2,168,898 |
|
|
$ |
390,612 |
|
|
$ |
2,559,510 |
|
|
|
$ |
215,670 |
|
|
|
$ |
1,884,591 |
|
|
$ |
322,929 |
|
|
$ |
2,207,520 |
|
|
|
$ |
181,373 |
|
Net written
premium |
|
1,516,581 |
|
|
362,611 |
|
|
1,879,192 |
|
|
|
117,426 |
|
|
|
1,724,746 |
|
|
299,363 |
|
|
2,024,109 |
|
|
|
92,944 |
|
Net earned premium |
|
1,440,541 |
|
|
310,045 |
|
|
1,750,586 |
|
|
|
97,858 |
|
|
|
1,555,170 |
|
|
263,778 |
|
|
1,818,948 |
|
|
|
81,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission
income |
|
74,420 |
|
|
520 |
|
|
74,940 |
|
|
|
24,936 |
|
|
|
5,588 |
|
|
558 |
|
|
6,146 |
|
|
|
35,356 |
|
Service
and fee income |
|
214,740 |
|
|
88,128 |
|
|
302,868 |
|
|
|
2,891 |
|
|
|
198,109 |
|
|
75,316 |
|
|
273,425 |
|
|
|
3,574 |
|
Total
underwriting revenues |
|
$ |
1,729,701 |
|
|
$ |
398,693 |
|
|
$ |
2,128,394 |
|
|
|
$ |
125,685 |
|
|
|
$ |
1,758,867 |
|
|
$ |
339,652 |
|
|
$ |
2,098,519 |
|
|
|
$ |
120,218 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense |
|
1,038,573 |
|
|
179,712 |
|
|
1,218,285 |
|
|
|
86,209 |
|
|
|
1,113,178 |
|
|
154,913 |
|
|
1,268,091 |
|
|
|
61,920 |
|
Acquisition costs and
other |
|
237,183 |
|
|
91,725 |
|
|
328,908 |
|
|
|
21,662 |
|
|
|
255,546 |
|
|
78,249 |
|
|
333,795 |
|
|
|
29,720 |
|
General
and administrative |
|
349,215 |
|
|
97,740 |
|
|
446,955 |
|
|
|
41,615 |
|
|
|
364,893 |
|
|
84,055 |
|
|
448,948 |
|
|
|
43,612 |
|
Total
underwriting expenses |
|
$ |
1,624,971 |
|
|
$ |
369,177 |
|
|
$ |
1,994,148 |
|
|
|
$ |
149,486 |
|
|
|
$ |
1,733,617 |
|
|
$ |
317,217 |
|
|
$ |
2,050,834 |
|
|
|
$ |
135,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
104,730 |
|
|
29,516 |
|
|
134,246 |
|
|
|
(23,801 |
) |
|
|
25,250 |
|
|
22,435 |
|
|
47,685 |
|
|
|
(15,034 |
) |
Non-cash
amortization of intangible assets |
|
11,579 |
|
|
3,558 |
|
|
15,137 |
|
|
|
(53 |
) |
|
|
30,012 |
|
|
3,015 |
|
|
33,027 |
|
|
|
6,978 |
|
Underwriting income
(loss) before amortization and impairment |
|
$ |
116,309 |
|
|
$ |
33,074 |
|
|
$ |
149,383 |
|
|
|
$ |
(23,854 |
) |
|
|
$ |
55,262 |
|
|
$ |
25,450 |
|
|
$ |
80,712 |
|
|
|
$ |
(8,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting
ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense ratio (8) |
|
72.1 |
% |
|
58.0 |
% |
|
69.6 |
% |
|
|
88.1 |
% |
|
|
71.6 |
% |
|
58.7 |
% |
|
69.7 |
% |
|
|
76.2 |
% |
Operating
expense ratio (Non-GAAP) (9,10) |
|
20.6 |
% |
|
32.5 |
% |
|
22.7 |
% |
|
|
36.2 |
% |
|
|
26.8 |
% |
|
32.8 |
% |
|
27.7 |
% |
|
|
42.3 |
% |
Combined ratio
(Non-GAAP) (9,11) |
|
92.7 |
% |
|
90.5 |
% |
|
92.3 |
% |
|
|
124.3 |
% |
|
|
98.4 |
% |
|
91.5 |
% |
|
97.4 |
% |
|
|
118.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios
(before amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss
adjustment expense ratio (8) |
|
72.1 |
% |
|
58.0 |
% |
|
69.6 |
% |
|
|
88.1 |
% |
|
|
71.6 |
% |
|
58.7 |
% |
|
69.7 |
% |
|
|
76.2 |
% |
Operating
expense ratio (Non-GAAP) (9,12) |
|
19.8 |
% |
|
31.4 |
% |
|
21.9 |
% |
|
|
36.3 |
% |
|
|
24.9 |
% |
|
31.6 |
% |
|
25.8 |
% |
|
|
33.7 |
% |
Combined ratio before
amortization and impairment (Non-GAAP) (9,13) |
|
91.9 |
% |
|
89.4 |
% |
|
91.5 |
% |
|
|
124.4 |
% |
|
|
96.5 |
% |
|
90.3 |
% |
|
95.5 |
% |
|
|
109.9 |
% |
|
NOTE: Loss and loss adjustment expenses for the
six months ended June 30, 2018 included $20,552 of favorable
development on prior accident year loss and loss adjustment expense
reserves in the P&C segment, and $11,423 of favorable
development in the A&H segment, versus $2,216 of unfavorable
development in the P&C segment, and $12,844 of favorable
development in the A&H segment for the six months ended June
30, 2017. |
|
Reconciliation of Operating Expense Ratio
(Non-GAAP)$ in thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Total underwriting
expenses |
|
$ |
835,929 |
|
|
$ |
183,683 |
|
|
$ |
1,019,612 |
|
|
|
$ |
75,057 |
|
|
|
$ |
886,363 |
|
|
$ |
171,131 |
|
|
$ |
1,057,494 |
|
|
|
$ |
67,869 |
|
Less: Loss and loss
adjustment expense |
|
540,216 |
|
|
88,434 |
|
|
628,650 |
|
|
|
41,678 |
|
|
|
591,844 |
|
|
85,530 |
|
|
677,374 |
|
|
|
33,820 |
|
Less: Ceding commission
income |
|
41,720 |
|
|
262 |
|
|
41,982 |
|
|
|
13,426 |
|
|
|
3,128 |
|
|
271 |
|
|
3,399 |
|
|
|
18,109 |
|
Less:
Service and fee income |
|
105,167 |
|
|
42,941 |
|
|
148,108 |
|
|
|
445 |
|
|
|
94,519 |
|
|
43,043 |
|
|
137,562 |
|
|
|
1,494 |
|
Operating expense |
|
148,826 |
|
|
52,046 |
|
|
200,872 |
|
|
|
19,508 |
|
|
|
196,872 |
|
|
42,287 |
|
|
239,159 |
|
|
|
14,446 |
|
Net earned premium |
|
$ |
734,934 |
|
|
$ |
156,169 |
|
|
$ |
891,103 |
|
|
|
$ |
51,803 |
|
|
|
$ |
804,643 |
|
|
$ |
134,852 |
|
|
$ |
939,495 |
|
|
|
$ |
42,256 |
|
Operating expense ratio (Non-GAAP) |
|
20.3 |
% |
|
33.3 |
% |
|
22.5 |
% |
|
|
37.7 |
% |
|
|
24.5 |
% |
|
31.4 |
% |
|
25.5 |
% |
|
|
34.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
835,929 |
|
|
$ |
183,683 |
|
|
$ |
1,019,612 |
|
|
|
$ |
75,057 |
|
|
|
$ |
886,363 |
|
|
$ |
171,131 |
|
|
$ |
1,057,494 |
|
|
|
$ |
67,869 |
|
Less: Loss and loss
adjustment expense |
|
540,216 |
|
|
88,434 |
|
|
628,650 |
|
|
|
41,678 |
|
|
|
591,844 |
|
|
85,530 |
|
|
677,374 |
|
|
|
33,820 |
|
Less: Ceding commission
income |
|
41,720 |
|
|
262 |
|
|
41,982 |
|
|
|
13,426 |
|
|
|
3,128 |
|
|
271 |
|
|
3,399 |
|
|
|
18,109 |
|
Less: Service and fee
income |
|
105,167 |
|
|
42,941 |
|
|
148,108 |
|
|
|
445 |
|
|
|
94,519 |
|
|
43,043 |
|
|
137,562 |
|
|
|
1,494 |
|
Less:
Non-cash amortization of intangible assets |
|
6,179 |
|
|
2,038 |
|
|
8,217 |
|
|
|
(26 |
) |
|
|
10,278 |
|
|
1,412 |
|
|
11,690 |
|
|
|
(91 |
) |
Operating expense
before amortization and impairment |
|
142,647 |
|
|
50,008 |
|
|
192,655 |
|
|
|
19,534 |
|
|
|
186,594 |
|
|
40,875 |
|
|
227,469 |
|
|
|
14,537 |
|
Net earned premium |
|
$ |
734,934 |
|
|
$ |
156,169 |
|
|
$ |
891,103 |
|
|
|
$ |
51,803 |
|
|
|
$ |
804,643 |
|
|
$ |
134,852 |
|
|
$ |
939,495 |
|
|
|
$ |
42,256 |
|
Operating expense ratio before amortization and impairment
(Non-GAAP) |
|
19.4 |
% |
|
32.0 |
% |
|
21.6 |
% |
|
|
37.7 |
% |
|
|
23.2 |
% |
|
30.3 |
% |
|
24.2 |
% |
|
|
34.4 |
% |
|
Reconciliation of Operating Expense Ratio
(Non-GAAP)$ in thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Total underwriting
expenses |
|
$ |
1,624,971 |
|
|
$ |
369,177 |
|
|
$ |
1,994,148 |
|
|
|
$ |
149,486 |
|
|
|
$ |
1,733,617 |
|
|
$ |
317,217 |
|
|
$ |
2,050,834 |
|
|
|
$ |
135,252 |
|
Less: Loss and loss
adjustment expense |
|
1,038,573 |
|
|
179,712 |
|
|
1,218,285 |
|
|
|
86,209 |
|
|
|
1,113,178 |
|
|
154,913 |
|
|
1,268,091 |
|
|
|
61,920 |
|
Less: Ceding commission
income |
|
74,420 |
|
|
520 |
|
|
74,940 |
|
|
|
24,936 |
|
|
|
5,588 |
|
|
558 |
|
|
6,146 |
|
|
|
35,356 |
|
Less:
Service and fee income |
|
214,740 |
|
|
88,128 |
|
|
302,868 |
|
|
|
2,891 |
|
|
|
198,109 |
|
|
75,316 |
|
|
273,425 |
|
|
|
3,574 |
|
Operating expense |
|
297,238 |
|
|
100,817 |
|
|
398,055 |
|
|
|
35,450 |
|
|
|
416,742 |
|
|
86,430 |
|
|
503,172 |
|
|
|
34,402 |
|
Net earned premium |
|
$ |
1,440,541 |
|
|
$ |
310,045 |
|
|
$ |
1,750,586 |
|
|
|
$ |
97,858 |
|
|
|
$ |
1,555,170 |
|
|
$ |
263,778 |
|
|
$ |
1,818,948 |
|
|
|
$ |
81,288 |
|
Operating expense ratio (Non-GAAP) |
|
20.6 |
% |
|
32.5 |
% |
|
22.7 |
% |
|
|
36.2 |
% |
|
|
26.8 |
% |
|
32.8 |
% |
|
27.7 |
% |
|
|
42.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
1,624,971 |
|
|
$ |
369,177 |
|
|
$ |
1,994,148 |
|
|
|
$ |
149,486 |
|
|
|
$ |
1,733,617 |
|
|
$ |
317,217 |
|
|
$ |
2,050,834 |
|
|
|
$ |
135,252 |
|
Less: Loss and loss
adjustment expense |
|
1,038,573 |
|
|
179,712 |
|
|
1,218,285 |
|
|
|
86,209 |
|
|
|
1,113,178 |
|
|
154,913 |
|
|
1,268,091 |
|
|
|
61,920 |
|
Less: Ceding commission
income |
|
74,420 |
|
|
520 |
|
|
74,940 |
|
|
|
24,936 |
|
|
|
5,588 |
|
|
558 |
|
|
6,146 |
|
|
|
35,356 |
|
Less: Service and fee
income |
|
214,740 |
|
|
88,128 |
|
|
302,868 |
|
|
|
2,891 |
|
|
|
198,109 |
|
|
75,316 |
|
|
273,425 |
|
|
|
3,574 |
|
Less:
Non-cash amortization of intangible assets |
|
11,579 |
|
|
3,558 |
|
|
15,137 |
|
|
|
(53 |
) |
|
|
30,012 |
|
|
3,015 |
|
|
33,027 |
|
|
|
6,978 |
|
Operating expense
before amortization and impairment |
|
285,659 |
|
|
97,259 |
|
|
382,918 |
|
|
|
35,503 |
|
|
|
386,730 |
|
|
83,415 |
|
|
470,145 |
|
|
|
27,424 |
|
Net earned premium |
|
$ |
1,440,541 |
|
|
$ |
310,045 |
|
|
$ |
1,750,586 |
|
|
|
$ |
97,858 |
|
|
|
$ |
1,555,170 |
|
|
$ |
263,778 |
|
|
$ |
1,818,948 |
|
|
|
$ |
81,288 |
|
Operating expense ratio before amortization and impairment
(Non-GAAP) |
|
19.8 |
% |
|
31.4 |
% |
|
21.9 |
% |
|
|
36.3 |
% |
|
|
24.9 |
% |
|
31.6 |
% |
|
25.8 |
% |
|
|
33.7 |
% |
|
Premiums by Business Line$ in
thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
Property &
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Auto |
|
$ |
632,225 |
|
|
$ |
514,990 |
|
|
22.8 |
% |
|
|
$ |
485,724 |
|
|
$ |
471,372 |
|
|
3.0 |
% |
|
|
$ |
486,438 |
|
|
$ |
495,225 |
|
|
(1.8 |
)% |
Homeowners |
|
190,706 |
|
|
151,984 |
|
|
25.5 |
% |
|
|
50,304 |
|
|
131,926 |
|
|
(61.9 |
)% |
|
|
79,658 |
|
|
110,570 |
|
|
(28.0 |
)% |
RV/Packaged |
|
59,999 |
|
|
52,598 |
|
|
14.1 |
% |
|
|
59,118 |
|
|
52,190 |
|
|
13.3 |
% |
|
|
48,993 |
|
|
43,314 |
|
|
13.1 |
% |
Small
Business Auto |
|
84,986 |
|
|
80,890 |
|
|
5.1 |
% |
|
|
63,432 |
|
|
72,864 |
|
|
(12.9 |
)% |
|
|
60,104 |
|
|
70,324 |
|
|
(14.5 |
)% |
Lender-placed insurance |
|
80,599 |
|
|
90,374 |
|
|
(10.8 |
)% |
|
|
14,887 |
|
|
86,525 |
|
|
(82.8 |
)% |
|
|
53,694 |
|
|
79,201 |
|
|
(32.2 |
)% |
Other |
|
17,117 |
|
|
13,742 |
|
|
24.6 |
% |
|
|
10,404 |
|
|
7,631 |
|
|
36.3 |
% |
|
|
6,047 |
|
|
6,009 |
|
|
0.6 |
% |
Property &
Casualty |
|
1,065,632 |
|
|
904,578 |
|
|
17.8 |
% |
|
|
683,869 |
|
|
822,508 |
|
|
(16.9 |
)% |
|
|
734,934 |
|
|
804,643 |
|
|
(8.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident &
Health |
|
156,836 |
|
|
130,974 |
|
|
19.7 |
% |
|
|
139,258 |
|
|
118,249 |
|
|
17.8 |
% |
|
|
156,169 |
|
|
134,852 |
|
|
15.8 |
% |
Total National General |
|
$ |
1,222,468 |
|
|
$ |
1,035,552 |
|
|
18.0 |
% |
|
|
$ |
823,127 |
|
|
$ |
940,757 |
|
|
(12.5 |
)% |
|
|
$ |
891,103 |
|
|
$ |
939,495 |
|
|
(5.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal
Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Auto |
|
$ |
42,065 |
|
|
$ |
35,221 |
|
|
19.4 |
% |
|
|
$ |
14,520 |
|
|
$ |
21,601 |
|
|
(32.8 |
)% |
|
|
$ |
12,462 |
|
|
$ |
17,239 |
|
|
(27.7 |
)% |
Homeowners |
|
74,895 |
|
|
63,049 |
|
|
18.8 |
% |
|
|
52,016 |
|
|
29,174 |
|
|
78.3 |
% |
|
|
39,109 |
|
|
24,613 |
|
|
58.9 |
% |
Other |
|
1,021 |
|
|
887 |
|
|
15.1 |
% |
|
|
312 |
|
|
468 |
|
|
(33.3 |
)% |
|
|
232 |
|
|
404 |
|
|
(42.6 |
)% |
Reciprocal Exchanges |
|
$ |
117,981 |
|
|
$ |
99,157 |
|
|
19.0 |
% |
|
|
$ |
66,848 |
|
|
$ |
51,243 |
|
|
30.5 |
% |
|
|
$ |
51,803 |
|
|
$ |
42,256 |
|
|
22.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total (A) |
|
$ |
1,340,449 |
|
|
$ |
1,133,909 |
|
|
18.2 |
% |
|
|
$ |
889,975 |
|
|
$ |
992,000 |
|
|
(10.3 |
)% |
|
|
$ |
942,906 |
|
|
$ |
981,751 |
|
|
(4.0 |
)% |
|
NOTES: (A) Consolidated Total includes
eliminations between National General and the Reciprocal Exchanges
of $(287) in Personal Auto and $(513) in Homeowners Gross Written
Premium in 2017, respectively. |
|
Premiums by Business Line$ in
thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
Property &
Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Auto |
|
$ |
1,357,437 |
|
|
$ |
1,162,171 |
|
|
16.8 |
% |
|
|
$ |
1,039,721 |
|
|
$ |
1,068,251 |
|
|
(2.7 |
)% |
|
|
$ |
940,654 |
|
|
$ |
949,640 |
|
|
(0.9 |
)% |
Homeowners |
|
331,993 |
|
|
266,709 |
|
|
24.5 |
% |
|
|
142,900 |
|
|
236,471 |
|
|
(39.6 |
)% |
|
|
161,853 |
|
|
214,699 |
|
|
(24.6 |
)% |
RV/Packaged |
|
109,463 |
|
|
97,352 |
|
|
12.4 |
% |
|
|
108,307 |
|
|
96,709 |
|
|
12.0 |
% |
|
|
94,682 |
|
|
83,964 |
|
|
12.8 |
% |
Small
Business Auto |
|
171,230 |
|
|
167,266 |
|
|
2.4 |
% |
|
|
128,159 |
|
|
152,072 |
|
|
(15.7 |
)% |
|
|
118,666 |
|
|
133,565 |
|
|
(11.2 |
)% |
Lender-placed insurance |
|
165,533 |
|
|
166,644 |
|
|
(0.7 |
)% |
|
|
78,101 |
|
|
159,357 |
|
|
(51.0 |
)% |
|
|
114,163 |
|
|
162,942 |
|
|
(29.9 |
)% |
Other |
|
33,242 |
|
|
24,449 |
|
|
36.0 |
% |
|
|
19,393 |
|
|
11,886 |
|
|
63.2 |
% |
|
|
10,523 |
|
|
10,360 |
|
|
1.6 |
% |
Property &
Casualty |
|
2,168,898 |
|
|
1,884,591 |
|
|
15.1 |
% |
|
|
1,516,581 |
|
|
1,724,746 |
|
|
(12.1 |
)% |
|
|
1,440,541 |
|
|
1,555,170 |
|
|
(7.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident &
Health |
|
390,612 |
|
|
322,929 |
|
|
21.0 |
% |
|
|
362,611 |
|
|
299,363 |
|
|
21.1 |
% |
|
|
310,045 |
|
|
263,778 |
|
|
17.5 |
% |
Total National General |
|
$ |
2,559,510 |
|
|
$ |
2,207,520 |
|
|
15.9 |
% |
|
|
$ |
1,879,192 |
|
|
$ |
2,024,109 |
|
|
(7.2 |
)% |
|
|
$ |
1,750,586 |
|
|
$ |
1,818,948 |
|
|
(3.8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal
Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal
Auto |
|
$ |
76,362 |
|
|
$ |
63,380 |
|
|
20.5 |
% |
|
|
$ |
28,015 |
|
|
$ |
38,707 |
|
|
(27.6 |
)% |
|
|
$ |
25,459 |
|
|
$ |
33,356 |
|
|
(23.7 |
)% |
Homeowners |
|
137,416 |
|
|
116,376 |
|
|
18.1 |
% |
|
|
88,824 |
|
|
53,390 |
|
|
66.4 |
% |
|
|
71,880 |
|
|
47,151 |
|
|
52.4 |
% |
Other |
|
1,892 |
|
|
1,617 |
|
|
17.0 |
% |
|
|
587 |
|
|
847 |
|
|
(30.7 |
)% |
|
|
519 |
|
|
781 |
|
|
(33.5 |
)% |
Reciprocal Exchanges |
|
$ |
215,670 |
|
|
$ |
181,373 |
|
|
18.9 |
% |
|
|
$ |
117,426 |
|
|
$ |
92,944 |
|
|
26.3 |
% |
|
|
$ |
97,858 |
|
|
$ |
81,288 |
|
|
20.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total (A) |
|
$ |
2,773,579 |
|
|
$ |
2,387,292 |
|
|
16.2 |
% |
|
|
$ |
1,996,618 |
|
|
$ |
2,117,053 |
|
|
(5.7 |
)% |
|
|
$ |
1,848,444 |
|
|
$ |
1,900,236 |
|
|
(2.7 |
)% |
|
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 $(564) in Personal Auto and
$(1,037) 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 $233,092 and $347,548 in related
parties at June 30, 2018 and December 31, 2017, respectively.
(3) Reinsurance activity includes $9,891 and $15,688 from
related parties at June 30, 2018 and December 31, 2017,
respectively.
(4) Other includes $2,348 and $2,334 from related parties at
June 30, 2018 and December 31, 2017, respectively.
(5) Accounts payable and accrued expenses includes $72,415 and
$140,057 to related parties at June 30, 2018 and December 31, 2017,
respectively.
(6) Common stock: $0.01 par value - authorized 150,000,000
shares, issued and outstanding 107,057,771 shares - June 30, 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 - June 30, 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 Q2’18
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 $20.5 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.
|
|
Q2’18 Combined Ratio |
|
Impact of Q2’18 Weather-related
Events |
|
Q2’18 Combined Ratio Excluding Weather-related
Events |
P&C
Segment |
|
92.9% |
|
2.8% |
|
90.1% |
|
|
|
|
|
|
|
Overall
NGHC |
|
92.1% |
|
2.3% |
|
89.8% |
Investor Contact
Christine WorleyDirector of Investor RelationsPhone:
212-380-9462Email: Christine.Worley@NGIC.com
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