National General Holdings Corp. (Nasdaq:NGHC) today reported third
quarter 2018 net income of $60.5 million or $0.55 per diluted
share, compared to net income of $49.8 million or $0.46 per
diluted share in the third quarter of 2017. Third quarter 2018
operating earnings(1) was $70.8 million or $0.65 per diluted
share, compared to $28.7 million or $0.26 per diluted share in
the third quarter of 2017.
Third Quarter 2018 Highlights Versus
Third Quarter 2017*
- Gross written premium grew $133.6 million or 12.1% to
$1,234.3 million, driven by continued organic growth in our P&C
segment of 11.3% and in our A&H segment of 18.7%.
- In the third quarter, our homeowners’ product experienced
organic growth of 24.6% 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
10.3% driven by continued rate increases and PIF growth.
- The overall combined ratio(9,13) was 91.3% compared to 96.8% in
the prior year’s quarter, excluding non-cash amortization of
intangible assets. The P&C segment reported a decrease in
combined ratio to 94.4% from 98.1% in the prior year’s quarter. The
combined ratio includes $35.0 million of losses, or 4.7
P&C loss ratio points, primarily related to Hurricane Florence
and the California Fires in the third quarter 2018, compared to
$52.4 million of losses, or 7.6 P&C loss ratio points,
from events in the third quarter 2017. The A&H segment reported
a combined ratio of 77.0% compared to 89.7% in the prior year’s
quarter.
- Loss trends in both of our segments remained strong in the
quarter. The P&C loss ratio reflects favorable loss
trends for accident year 2018 compared with prior accident years at
the same age, particularly on the shorter-tailed auto physical
damage claims, which improved our view of the current accident year
loss ratio. The A&H loss ratio reflects an improvement in
our view of the current accident year loss ratio for both small
group self-funded and individual products.
- Service and fee income grew 20.6% to $160.4 million, driven by
organic growth in both our Accident & Health and Property &
Casualty segments.
- Shareholders’ equity was $2.06 billion and fully diluted book
value per share was $14.66 at September 30, 2018, growth of 6.7%
and 5.8%, respectively, from December 31, 2017. Our trailing twelve
month operating return on average equity (ROE)(14) was 14.5% as of
September 30, 2018.
- Third quarter 2018 operating earnings exclude the following
material items, net of tax: $2.4 million or $0.02 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: “Our third
quarter results continue to demonstrate the underwriting results
that both our Property and Casualty and Accident and Health
segments are able to generate with the full integration of past
acquisitions. Despite another active catastrophe quarter, our
P&C segment was able to generate a 94% combined ratio, largely
driven by strong trends in our auto book. Our A&H segment
continues to grow profitably, and our suite of products and owned
distribution positions us well in the changing domestic healthcare
environment. I am pleased with the continued execution of our
strategy: continued profitable growth within the niches of the
insurance industry we serve.”
*NOTE: Unless specified otherwise, discussion
of our third 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 Third Quarter 2018 as
Compared to Third Quarter 2017 by Segment
- Property & Casualty - Gross written
premium grew by 11.3% to $1,090.4 million, net written premium
increased by 67.7% to $784.6 million, with net premiums
written for the third quarter of 2017 impacted by the unearned
premium transfer associated with the Quota Shares, and net earned
premium increased by 7.9% to $741.0 million. P&C gross
written premium growth was primarily driven by organic growth of
24.6% from our homeowners’ product and 10.3% from our personal auto
product. Service and fee income grew 13.3% to $114.0 million.
Excluding non-cash amortization of intangible assets, the combined
ratio(9,13) was 94.4% with a loss ratio of 73.5% and an expense
ratio(9,12) of 20.9%, versus a prior year combined ratio of 98.1%
with a loss ratio of 77.0% and an expense ratio of 21.1%. The loss
ratio reflects favorable loss trends for accident year 2018
compared with prior accident years at the same age, particularly on
the shorter-tailed auto physical damage claims, which improved our
view of the current accident year loss ratio. The loss ratio was
also impacted by pre-tax catastrophe losses of approximately
$35.0 million primarily related to Hurricane Florence and the
California Fires in the third quarter 2018.
- Accident & Health - Gross written premium
grew by 18.7% to $143.9 million, net written premium grew by
12.1% to $123.6 million, and net earned premium grew by 14.5%
to $155.3 million. The A&H gross written premium increase
was driven by the continued growth across the entire book. Service
and fee income was $46.5 million compared to
$32.5 million in the prior year’s quarter. Excluding non-cash
amortization of intangible assets, the combined ratio(9,13) was
77.0% with a loss ratio of 46.8% and an expense ratio(9,12) of
30.2%, versus a prior year combined ratio of 89.7% with a loss
ratio of 61.5% and an expense ratio of 28.2%. The loss ratio
reflects an improvement in our view of the current accident year
loss ratio for both small group self-funded and individual
products.
- Reciprocal Exchanges - Results for the
Reciprocal Exchanges are not included in net income available to
NGHC common stockholders. Gross written premium was
$121.4 million, net written premium was $14.8 million,
and net earned premium was $43.2 million. Reciprocal Exchanges
combined ratio(9,13) excluding non-cash amortization of intangible
assets was 129.3% with a loss ratio of 93.2% and an expense
ratio(9,12) of 36.1%.
Third quarter 2018 investment income grew to $31.0 million,
compared to $25.4 million in the third quarter of 2017, with
the increase partially driven by an improvement in the book yield
from the previous quarter’s re-balancing and new investments in the
quarter. Total investments and cash and cash equivalents (including
restricted cash) were $4.1 billion as of September 30, 2018.
Accumulated other comprehensive income (loss) increased to a
$68.6 million loss at September 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 was $12.6 million and debt was
$675.3 million at September 30, 2018, and $713.7 million
at December 31, 2017.
The third quarter of 2018 provision for income taxes was
$16.4 million and the effective tax rate for the quarter was
19.4%. The effective tax rate for the nine months ended September
30, 2018 was 19.7%.
Shareholders’ equity was $2,056.9 million at September 30, 2018,
growth of 6.7% from $1,928.6 million at December 31, 2017. Fully
diluted book value per share was $14.66 at September 30, 2018,
growth of 5.8% from $13.86 at December 31, 2017. Our trailing
twelve month operating return on average equity (ROE)(14) was 14.5%
as of September 30, 2018.
Year-to-Date P&C Segment Notable Large
Losses |
2018
Quarter |
|
|
P&C Notable Large Losses and LAE($
millions) |
|
P&C Loss Ratio Points* |
|
EPS Impact After Tax |
Q3 |
California Fires and
Hurricane Florence |
|
$35.0 |
|
4.7% |
|
$0.25 |
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
We expect Hurricane Michael, which impacted the Southeastern
U.S. in October 2018, to produce pre-tax losses of $7-10 million
($6-8 million after-tax) in Q4’18, net of quota share reinsurance
recoverables.
Conference Call
On Wednesday, October 31, 2018 at 8:30 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:
888-346-7359International Dial-in:
973-528-0008Conference Entry Code: 626384Webcast
Registration:
http://ir.nationalgeneral.com/events-and-presentations
A replay of the conference call will be accessible from 2:00 PM
ET on Wednesday, October 31, 2018 to 11:59 PM ET on Wednesday,
November 14, 2018 by dialing either 800-332-6854 (toll-free)
within the U.S. or 973-528-0005 outside the U.S. and entering
passcode 626384. 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 - Third
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended
September 30, |
|
|
2018 |
|
|
2017 |
|
|
|
NGHC |
|
Reciprocal
Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal
Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
1,234,320 |
|
|
$ |
121,351 |
|
|
$ |
1,355,671 |
|
|
|
$ |
1,100,706 |
|
|
$ |
104,406 |
|
|
$ |
1,204,311 |
|
(G) |
Net written premium |
|
908,210 |
|
|
14,814 |
|
|
923,024 |
|
|
|
578,021 |
|
|
43,533 |
|
|
621,554 |
|
|
Net earned premium |
|
896,376 |
|
|
43,151 |
|
|
939,527 |
|
|
|
822,323 |
|
|
41,978 |
|
|
864,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
44,513 |
|
|
14,587 |
|
|
59,100 |
|
|
|
30,901 |
|
|
19,201 |
|
|
50,102 |
|
|
Service and fee income |
|
160,425 |
|
|
1,575 |
|
|
142,690 |
|
(A) |
|
133,057 |
|
|
4,084 |
|
|
122,526 |
|
(H) |
Net investment income |
|
30,984 |
|
|
2,344 |
|
|
30,696 |
|
(B) |
|
25,426 |
|
|
2,189 |
|
|
25,150 |
|
(I) |
Net gain (loss) on investments |
|
(3,003 |
) |
|
(167 |
) |
|
(3,170 |
) |
|
|
47,659 |
|
|
(54 |
) |
|
47,605 |
|
|
Other income (expense) |
|
— |
|
|
— |
|
|
— |
|
|
|
(3,901 |
) |
|
— |
|
|
(3,901 |
) |
|
Total revenues |
|
$ |
1,129,295 |
|
|
$ |
61,490 |
|
|
$ |
1,168,843 |
|
(C) |
|
$ |
1,055,465 |
|
|
$ |
67,398 |
|
|
$ |
1,105,783 |
|
(J) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
617,098 |
|
|
$ |
40,212 |
|
|
$ |
657,310 |
|
|
|
$ |
612,289 |
|
|
$ |
26,856 |
|
|
$ |
639,145 |
|
|
Acquisition costs and other underwriting expenses |
|
180,180 |
|
|
11,290 |
|
|
191,470 |
|
|
|
146,469 |
|
|
17,116 |
|
|
163,585 |
|
|
General and administrative expenses |
|
234,626 |
|
|
20,417 |
|
|
235,733 |
|
(D) |
|
209,923 |
|
|
18,819 |
|
|
214,127 |
|
(K) |
Interest expense |
|
12,583 |
|
|
2,632 |
|
|
12,583 |
|
(E) |
|
11,495 |
|
|
2,465 |
|
|
11,495 |
|
(L) |
Total expenses |
|
$ |
1,044,487 |
|
|
$ |
74,551 |
|
|
$ |
1,097,096 |
|
(F) |
|
$ |
980,176 |
|
|
$ |
65,256 |
|
|
$ |
1,028,352 |
|
(M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for income taxes |
|
$ |
84,808 |
|
|
$ |
(13,061 |
) |
|
$ |
71,747 |
|
|
|
$ |
75,289 |
|
|
$ |
2,142 |
|
|
$ |
77,431 |
|
|
Provision (benefit) for income taxes |
|
16,426 |
|
|
(908 |
) |
|
15,518 |
|
|
|
17,644 |
|
|
831 |
|
|
18,475 |
|
|
Net
income (loss) before non-controlling interest and dividends on
preferred shares |
|
68,382 |
|
|
(12,153 |
) |
|
56,229 |
|
|
|
57,645 |
|
|
1,311 |
|
|
58,956 |
|
|
Less: net income (loss) attributable to
non-controlling interest |
|
— |
|
|
(12,153 |
) |
|
(12,153 |
) |
|
|
— |
|
|
1,311 |
|
|
1,311 |
|
|
Net
income before dividends on preferred shares |
|
68,382 |
|
|
— |
|
|
68,382 |
|
|
|
57,645 |
|
|
— |
|
|
57,645 |
|
|
Less: dividends on preferred shares |
|
7,875 |
|
|
— |
|
|
7,875 |
|
|
|
7,875 |
|
|
— |
|
|
7,875 |
|
|
Net income available to common
stockholders |
|
$ |
60,507 |
|
|
$ |
— |
|
|
$ |
60,507 |
|
|
|
$ |
49,770 |
|
|
$ |
— |
|
|
$ |
49,770 |
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(19,310), (B) $(2,632), (C)
$(21,942), (D) $(19,310), (E) $(2,632), (F) $(21,942), (G) $(801),
(H) $(14,615), (I) $(2,465), (J) $(17,080), (K) $(14,615), (L)
$(2,465) and (M) $(17,080).
Income Statement - Year to Date$
in thousands(Unaudited)
|
|
Nine Months Ended September
30, |
|
|
2018 |
|
|
2017 |
|
|
|
NGHC |
|
Reciprocal
Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal
Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
3,793,830 |
|
|
$ |
337,021 |
|
|
$ |
4,129,250 |
|
(A) |
|
$ |
3,308,226 |
|
|
$ |
285,779 |
|
|
$ |
3,591,603 |
|
(H) |
Net written premium |
|
2,787,402 |
|
|
132,240 |
|
|
2,919,642 |
|
|
|
2,602,130 |
|
|
136,477 |
|
|
2,738,607 |
|
|
Net earned premium |
|
2,646,962 |
|
|
141,009 |
|
|
2,787,971 |
|
|
|
2,641,271 |
|
|
123,266 |
|
|
2,764,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
119,453 |
|
|
39,523 |
|
|
158,976 |
|
|
|
37,047 |
|
|
54,557 |
|
|
91,604 |
|
|
Service and fee income |
|
463,293 |
|
|
4,466 |
|
|
415,313 |
|
(B) |
|
406,482 |
|
|
7,658 |
|
|
373,644 |
|
(I) |
Net investment income |
|
82,186 |
|
|
6,693 |
|
|
81,702 |
|
(C) |
|
81,614 |
|
|
7,220 |
|
|
81,725 |
|
(J) |
Net gain (loss) on investments |
|
(21,490 |
) |
|
(1,266 |
) |
|
(22,756 |
) |
|
|
37,885 |
|
|
6,133 |
|
|
44,018 |
|
|
Other income |
|
— |
|
|
— |
|
|
— |
|
|
|
(198 |
) |
|
— |
|
|
(198 |
) |
|
Total revenues |
|
$ |
3,290,404 |
|
|
$ |
190,425 |
|
|
$ |
3,421,206 |
|
(D) |
|
$ |
3,204,101 |
|
|
$ |
198,834 |
|
|
$ |
3,355,330 |
|
(K) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
1,835,383 |
|
|
$ |
126,421 |
|
|
$ |
1,961,804 |
|
|
|
$ |
1,880,380 |
|
|
$ |
88,776 |
|
|
$ |
1,969,156 |
|
|
Acquisition costs and other underwriting expenses |
|
509,088 |
|
|
32,952 |
|
|
542,040 |
|
|
|
480,264 |
|
|
46,836 |
|
|
527,100 |
|
|
General and administrative expenses |
|
681,581 |
|
|
62,032 |
|
|
691,167 |
|
(E) |
|
658,871 |
|
|
62,431 |
|
|
680,806 |
|
(L) |
Interest expense |
|
38,775 |
|
|
7,177 |
|
|
38,775 |
|
(F) |
|
34,590 |
|
|
7,109 |
|
|
34,590 |
|
(M) |
Total expenses |
|
$ |
3,064,827 |
|
|
$ |
228,582 |
|
|
$ |
3,233,786 |
|
(G) |
|
$ |
3,054,105 |
|
|
$ |
205,152 |
|
|
$ |
3,211,652 |
|
(N) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision (benefit) for income taxes |
|
$ |
225,577 |
|
|
$ |
(38,157 |
) |
|
$ |
187,420 |
|
|
|
$ |
149,996 |
|
|
$ |
(6,318 |
) |
|
$ |
143,678 |
|
|
Provision (benefit) for income taxes |
|
44,439 |
|
|
(6,178 |
) |
|
38,261 |
|
|
|
42,096 |
|
|
(1,345 |
) |
|
40,751 |
|
|
Net
income (loss) before non-controlling interest and dividends on
preferred shares |
|
181,138 |
|
|
(31,979 |
) |
|
149,159 |
|
|
|
107,900 |
|
|
(4,973 |
) |
|
102,927 |
|
|
Less: net income (loss) attributable to
non-controlling interest |
|
— |
|
|
(31,979 |
) |
|
(31,979 |
) |
|
|
— |
|
|
(4,973 |
) |
|
(4,973 |
) |
|
Net
income before dividends on preferred shares |
|
181,138 |
|
|
— |
|
|
181,138 |
|
|
|
107,900 |
|
|
— |
|
|
107,900 |
|
|
Less: dividends on preferred shares |
|
23,625 |
|
|
— |
|
|
23,625 |
|
|
|
23,625 |
|
|
— |
|
|
23,625 |
|
|
Net income available to common
stockholders |
|
$ |
157,513 |
|
|
$ |
— |
|
|
$ |
157,513 |
|
|
|
$ |
84,275 |
|
|
$ |
— |
|
|
$ |
84,275 |
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(1,601), (B) $(52,446), (C)
$(7,177), (D) $(59,623), (E) $(52,446), (F) $(7,177), (G)
$(59,623), (H) $(2,402), (I) $(40,496), (J) $(7,109), (K)
$(47,605), (L) $(40,496), (M) $(7,109) and (N) $(47,605).
Earnings and Per Share Data$ in
thousands, except shares and per share data(Unaudited)
|
|
Three Months
EndedSeptember 30, |
|
Nine Months
EndedSeptember 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income available to common stockholders |
|
$ |
60,507 |
|
|
$ |
49,770 |
|
|
$ |
157,513 |
|
|
$ |
84,275 |
|
Basic net income per common share |
|
$ |
0.56 |
|
|
$ |
0.47 |
|
|
$ |
1.47 |
|
|
$ |
0.79 |
|
Diluted net income per common share |
|
$ |
0.55 |
|
|
$ |
0.46 |
|
|
$ |
1.44 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
Operating earnings attributable to NGHC(1) |
|
$ |
70,798 |
|
|
$ |
28,653 |
|
|
$ |
197,905 |
|
|
$ |
88,091 |
|
Basic operating earnings per common share(1) |
|
$ |
0.66 |
|
|
$ |
0.27 |
|
|
$ |
1.85 |
|
|
$ |
0.83 |
|
Diluted operating earnings per common share(1) |
|
$ |
0.65 |
|
|
$ |
0.26 |
|
|
$ |
1.81 |
|
|
$ |
0.81 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
|
$ |
0.04 |
|
|
$ |
0.04 |
|
|
$ |
0.12 |
|
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of basic shares outstanding |
|
107,101,837 |
|
|
106,645,601 |
|
|
106,944,461 |
|
|
106,556,662 |
|
Weighted average number of diluted shares outstanding |
|
109,563,392 |
|
|
108,520,964 |
|
|
109,315,780 |
|
|
108,690,139 |
|
Shares outstanding, end of period |
|
107,132,560 |
|
|
106,670,768 |
|
|
|
|
|
Fully diluted shares outstanding, end of period |
|
109,594,115 |
|
|
108,546,131 |
|
|
|
|
|
Book value per share |
|
$ |
15.00 |
|
|
$ |
14.44 |
|
|
|
|
|
Fully diluted book value per share |
|
$ |
14.66 |
|
|
$ |
14.19 |
|
|
|
|
|
Reconciliation of Net Income to Operating
Earnings (Non-GAAP)$ in thousands, except per share
data(Unaudited)
|
|
Three Months
EndedSeptember 30, |
|
Nine Months
EndedSeptember 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net income available to common stockholders |
|
$ |
60,507 |
|
|
$ |
49,770 |
|
|
$ |
157,513 |
|
|
$ |
84,275 |
|
Add (subtract): |
|
|
|
|
|
|
|
|
Net (gain) loss on investments |
|
3,003 |
|
|
(47,659 |
) |
|
21,490 |
|
|
(37,885 |
) |
Other expense |
|
— |
|
|
3,901 |
|
|
— |
|
|
198 |
|
Equity in (earnings) losses of equity method
investments |
|
676 |
|
|
1,997 |
|
|
2,979 |
|
|
1,258 |
|
Non-cash amortization of intangible assets |
|
8,260 |
|
|
9,274 |
|
|
23,397 |
|
|
42,301 |
|
Income tax expense (benefit) |
|
(1,648 |
) |
|
11,370 |
|
|
(7,474 |
) |
|
(2,056 |
) |
Operating earnings attributable to
NGHC (1) |
|
$ |
70,798 |
|
|
$ |
28,653 |
|
|
$ |
197,905 |
|
|
$ |
88,091 |
|
|
|
|
|
|
|
|
|
|
Operating earnings per common share: |
|
|
|
|
|
|
|
|
Basic operating earnings per common share |
|
$ |
0.66 |
|
|
$ |
0.27 |
|
|
$ |
1.85 |
|
|
$ |
0.83 |
|
Diluted operating earnings per common share |
|
$ |
0.65 |
|
|
$ |
0.26 |
|
|
$ |
1.81 |
|
|
$ |
0.81 |
|
Balance Sheet$ in thousands
|
|
September 30, 2018
(unaudited) |
|
|
December 31, 2017
(audited) |
|
ASSETS |
|
NGHC |
|
Reciprocal
Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal
Exchanges |
|
Consolidated |
|
Total investments (2) |
|
$ |
3,644,476 |
|
|
$ |
320,337 |
|
|
$ |
3,863,534 |
|
(A) |
|
$ |
3,411,730 |
|
|
$ |
327,213 |
|
|
$ |
3,649,788 |
|
(J) |
Cash and cash equivalents, including restricted cash |
|
434,667 |
|
|
263 |
|
|
434,930 |
|
|
|
351,433 |
|
|
6,051 |
|
|
357,484 |
|
|
Premiums and other receivables, net |
|
1,398,843 |
|
|
64,090 |
|
|
1,461,332 |
|
(B) |
|
1,268,330 |
|
|
56,792 |
|
|
1,324,321 |
|
(K) |
Reinsurance activity (3) |
|
1,951,021 |
|
|
256,773 |
|
|
2,207,794 |
|
|
|
1,616,103 |
|
|
195,184 |
|
|
1,811,287 |
|
|
Intangible assets, net |
|
379,652 |
|
|
3,550 |
|
|
383,202 |
|
|
|
400,385 |
|
|
3,685 |
|
|
404,070 |
|
|
Goodwill |
|
183,984 |
|
|
— |
|
|
183,984 |
|
|
|
174,153 |
|
|
— |
|
|
174,153 |
|
|
Other (4) |
|
704,870 |
|
|
32,350 |
|
|
714,312 |
|
(C) |
|
705,321 |
|
|
29,174 |
|
|
718,640 |
|
(L) |
Total assets |
|
$ |
8,697,513 |
|
|
$ |
677,363 |
|
|
$ |
9,249,088 |
|
(D) |
|
$ |
7,927,455 |
|
|
$ |
618,099 |
|
|
$ |
8,439,743 |
|
(M) |
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss adjustment expense reserves |
|
$ |
2,679,190 |
|
|
$ |
175,945 |
|
|
$ |
2,855,135 |
|
|
|
$ |
2,520,204 |
|
|
$ |
143,353 |
|
|
$ |
2,663,557 |
|
|
Unearned premiums and other revenue |
|
2,067,437 |
|
|
264,418 |
|
|
2,331,855 |
|
|
|
1,807,210 |
|
|
225,395 |
|
|
2,032,605 |
|
|
Reinsurance payable |
|
594,460 |
|
|
62,833 |
|
|
655,692 |
|
(E) |
|
329,772 |
|
|
69,076 |
|
|
398,047 |
|
(N) |
Accounts payable and accrued expenses (5) |
|
460,498 |
|
|
27,299 |
|
|
464,889 |
|
(F) |
|
423,054 |
|
|
24,682 |
|
|
431,881 |
|
(O) |
Debt |
|
675,263 |
|
|
101,279 |
|
|
675,263 |
|
(G) |
|
713,710 |
|
|
89,155 |
|
|
713,710 |
|
(P) |
Other |
|
163,731 |
|
|
59,544 |
|
|
223,275 |
|
|
|
204,936 |
|
|
41,582 |
|
|
246,518 |
|
|
Total liabilities |
|
$ |
6,640,579 |
|
|
$ |
691,318 |
|
|
$ |
7,206,109 |
|
(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) |
|
450,000 |
|
|
— |
|
|
450,000 |
|
|
|
420,000 |
|
|
— |
|
|
420,000 |
|
|
Additional paid-in capital |
|
923,124 |
|
|
— |
|
|
923,124 |
|
|
|
917,751 |
|
|
— |
|
|
917,751 |
|
|
Accumulated other comprehensive income (loss) |
|
(68,581 |
) |
|
— |
|
|
(68,581 |
) |
|
|
(8,112 |
) |
|
— |
|
|
(8,112 |
) |
|
Retained earnings |
|
751,320 |
|
|
— |
|
|
751,320 |
|
|
|
597,863 |
|
|
— |
|
|
597,863 |
|
|
Total National General Holdings Corp.
stockholders’ equity |
|
2,056,934 |
|
|
— |
|
|
2,056,934 |
|
|
|
1,928,569 |
|
|
— |
|
|
1,928,569 |
|
|
Non-controlling interest |
|
— |
|
|
(13,955 |
) |
|
(13,955 |
) |
|
|
— |
|
|
24,856 |
|
|
24,856 |
|
|
Total stockholders’ equity |
|
$ |
2,056,934 |
|
|
$ |
(13,955 |
) |
|
$ |
2,042,979 |
|
|
|
$ |
1,928,569 |
|
|
$ |
24,856 |
|
|
$ |
1,953,425 |
|
|
Total liabilities and stockholders’
equity |
|
$ |
8,697,513 |
|
|
$ |
677,363 |
|
|
$ |
9,249,088 |
|
(I) |
|
$ |
7,927,455 |
|
|
$ |
618,099 |
|
|
$ |
8,439,743 |
|
(R) |
NOTES: Consolidated column
includes eliminations as follows: (A) $(101,279), (B) $(1,601), (C)
$(22,908), (D) $(125,788), (E) $(1,601), (F) $(22,908), (G)
$(101,279), (H) $(125,788), (I) $(125,788), (J) $(89,155), (K)
$(801), (L) $(15,855), (M) $(105,811), (N) $(801), (O) $(15,855),
(P) $(89,155), (Q) $(105,811) and (R) $(105,811).
Segment Information - Third
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended
September 30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal
Exchanges |
Gross written premium |
|
$ |
1,090,372 |
|
|
$ |
143,948 |
|
|
$ |
1,234,320 |
|
|
|
$ |
121,351 |
|
|
|
$ |
979,440 |
|
|
$ |
121,266 |
|
|
$ |
1,100,706 |
|
|
|
$ |
104,406 |
|
Net
written premium |
|
784,634 |
|
|
123,576 |
|
|
908,210 |
|
|
|
14,814 |
|
|
|
467,824 |
|
|
110,197 |
|
|
578,021 |
|
|
|
43,533 |
|
Net
earned premium |
|
741,030 |
|
|
155,346 |
|
|
896,376 |
|
|
|
43,151 |
|
|
|
686,596 |
|
|
135,727 |
|
|
822,323 |
|
|
|
41,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
44,244 |
|
|
269 |
|
|
44,513 |
|
|
|
14,587 |
|
|
|
30,675 |
|
|
226 |
|
|
30,901 |
|
|
|
19,201 |
|
Service and fee income |
|
113,967 |
|
|
46,458 |
|
|
160,425 |
|
|
|
1,575 |
|
|
|
100,565 |
|
|
32,492 |
|
|
133,057 |
|
|
|
4,084 |
|
Total underwriting revenues |
|
$ |
899,241 |
|
|
$ |
202,073 |
|
|
$ |
1,101,314 |
|
|
|
$ |
59,313 |
|
|
|
$ |
817,836 |
|
|
$ |
168,445 |
|
|
$ |
986,281 |
|
|
|
$ |
65,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
544,446 |
|
|
72,652 |
|
|
617,098 |
|
|
|
40,212 |
|
|
|
528,875 |
|
|
83,414 |
|
|
612,289 |
|
|
|
26,856 |
|
Acquisition costs and other |
|
135,406 |
|
|
44,774 |
|
|
180,180 |
|
|
|
11,290 |
|
|
|
112,643 |
|
|
33,826 |
|
|
146,469 |
|
|
|
17,116 |
|
General and administrative |
|
184,101 |
|
|
50,525 |
|
|
234,626 |
|
|
|
20,417 |
|
|
|
171,460 |
|
|
38,463 |
|
|
209,923 |
|
|
|
18,819 |
|
Total underwriting expenses |
|
$ |
863,953 |
|
|
$ |
167,951 |
|
|
$ |
1,031,904 |
|
|
|
$ |
71,919 |
|
|
|
$ |
812,978 |
|
|
$ |
155,703 |
|
|
$ |
968,681 |
|
|
|
$ |
62,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income (loss) |
|
35,288 |
|
|
34,122 |
|
|
69,410 |
|
|
|
(12,606 |
) |
|
|
4,858 |
|
|
12,742 |
|
|
17,600 |
|
|
|
2,472 |
|
Non-cash amortization of intangible assets |
|
6,546 |
|
|
1,714 |
|
|
8,260 |
|
|
|
(14 |
) |
|
|
7,994 |
|
|
1,280 |
|
|
9,274 |
|
|
|
(69 |
) |
Underwriting income (loss) before amortization and impairment |
|
$ |
41,834 |
|
|
$ |
35,836 |
|
|
$ |
77,670 |
|
|
|
$ |
(12,620 |
) |
|
|
$ |
12,852 |
|
|
$ |
14,022 |
|
|
$ |
26,874 |
|
|
|
$ |
2,403 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense ratio (8) |
|
73.5 |
% |
|
46.8 |
% |
|
68.8 |
% |
|
|
93.2 |
% |
|
|
77.0 |
% |
|
61.5 |
% |
|
74.5 |
% |
|
|
64.0 |
% |
Operating expense ratio (Non-GAAP) (9,10) |
|
21.8 |
% |
|
31.3 |
% |
|
23.4 |
% |
|
|
36.0 |
% |
|
|
22.3 |
% |
|
29.2 |
% |
|
23.4 |
% |
|
|
30.1 |
% |
Combined ratio (Non-GAAP) (9,11) |
|
95.3 |
% |
|
78.1 |
% |
|
92.2 |
% |
|
|
129.2 |
% |
|
|
99.3 |
% |
|
90.7 |
% |
|
97.9 |
% |
|
|
94.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense ratio (8) |
|
73.5 |
% |
|
46.8 |
% |
|
68.8 |
% |
|
|
93.2 |
% |
|
|
77.0 |
% |
|
61.5 |
% |
|
74.5 |
% |
|
|
64.0 |
% |
Operating expense ratio (Non-GAAP) (9,12) |
|
20.9 |
% |
|
30.2 |
% |
|
22.5 |
% |
|
|
36.1 |
% |
|
|
21.1 |
% |
|
28.2 |
% |
|
22.3 |
% |
|
|
30.3 |
% |
Combined ratio before amortization and impairment (Non-GAAP)
(9,13) |
|
94.4 |
% |
|
77.0 |
% |
|
91.3 |
% |
|
|
129.3 |
% |
|
|
98.1 |
% |
|
89.7 |
% |
|
96.8 |
% |
|
|
94.3 |
% |
NOTE: Loss and loss adjustment
expenses for the three months ended September 30, 2018 included
$7,234 of unfavorable development on prior accident year loss and
loss adjustment expense reserves in the P&C segment, and
$13,200 of favorable development in the A&H segment, versus
$4,961 of unfavorable development in the P&C segment, and
$2,738 of unfavorable development in the A&H segment for the
three months ended September 30, 2017.
Segment Information - Year to
Date$ in thousands(Unaudited)
|
|
Nine Months Ended September
30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal
Exchanges |
Gross written premium |
|
$ |
3,259,270 |
|
|
$ |
534,560 |
|
|
$ |
3,793,830 |
|
|
|
$ |
337,021 |
|
|
|
$ |
2,864,031 |
|
|
$ |
444,195 |
|
|
$ |
3,308,226 |
|
|
|
$ |
285,779 |
|
Net
written premium |
|
2,301,215 |
|
|
486,187 |
|
|
2,787,402 |
|
|
|
132,240 |
|
|
|
2,192,570 |
|
|
409,560 |
|
|
2,602,130 |
|
|
|
136,477 |
|
Net
earned premium |
|
2,181,571 |
|
|
465,391 |
|
|
2,646,962 |
|
|
|
141,009 |
|
|
|
2,241,766 |
|
|
399,505 |
|
|
2,641,271 |
|
|
|
123,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
118,664 |
|
|
789 |
|
|
119,453 |
|
|
|
39,523 |
|
|
|
36,263 |
|
|
784 |
|
|
37,047 |
|
|
|
54,557 |
|
Service and fee income |
|
328,707 |
|
|
134,586 |
|
|
463,293 |
|
|
|
4,466 |
|
|
|
298,674 |
|
|
107,808 |
|
|
406,482 |
|
|
|
7,658 |
|
Total underwriting revenues |
|
$ |
2,628,942 |
|
|
$ |
600,766 |
|
|
$ |
3,229,708 |
|
|
|
$ |
184,998 |
|
|
|
$ |
2,576,703 |
|
|
$ |
508,097 |
|
|
$ |
3,084,800 |
|
|
|
$ |
185,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
1,583,019 |
|
|
252,364 |
|
|
1,835,383 |
|
|
|
126,421 |
|
|
|
1,642,053 |
|
|
238,327 |
|
|
1,880,380 |
|
|
|
88,776 |
|
Acquisition costs and other |
|
372,589 |
|
|
136,499 |
|
|
509,088 |
|
|
|
32,952 |
|
|
|
368,189 |
|
|
112,075 |
|
|
480,264 |
|
|
|
46,836 |
|
General and administrative |
|
533,316 |
|
|
148,265 |
|
|
681,581 |
|
|
|
62,032 |
|
|
|
536,353 |
|
|
122,518 |
|
|
658,871 |
|
|
|
62,431 |
|
Total underwriting expenses |
|
$ |
2,488,924 |
|
|
$ |
537,128 |
|
|
$ |
3,026,052 |
|
|
|
$ |
221,405 |
|
|
|
$ |
2,546,595 |
|
|
$ |
472,920 |
|
|
$ |
3,019,515 |
|
|
|
$ |
198,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income (loss) |
|
140,018 |
|
|
63,638 |
|
|
203,656 |
|
|
|
(36,407 |
) |
|
|
30,108 |
|
|
35,177 |
|
|
65,285 |
|
|
|
(12,562 |
) |
Non-cash amortization of intangible assets |
|
18,125 |
|
|
5,272 |
|
|
23,397 |
|
|
|
(67 |
) |
|
|
38,006 |
|
|
4,295 |
|
|
42,301 |
|
|
|
6,909 |
|
Underwriting income (loss) before amortization and impairment |
|
$ |
158,143 |
|
|
$ |
68,910 |
|
|
$ |
227,053 |
|
|
|
$ |
(36,474 |
) |
|
|
$ |
68,114 |
|
|
$ |
39,472 |
|
|
$ |
107,586 |
|
|
|
$ |
(5,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense ratio (8) |
|
72.6 |
% |
|
54.2 |
% |
|
69.3 |
% |
|
|
89.7 |
% |
|
|
73.2 |
% |
|
59.7 |
% |
|
71.2 |
% |
|
|
72.0 |
% |
Operating expense ratio (Non-GAAP) (9,10) |
|
21.0 |
% |
|
32.1 |
% |
|
23.0 |
% |
|
|
36.2 |
% |
|
|
25.4 |
% |
|
31.5 |
% |
|
26.3 |
% |
|
|
38.2 |
% |
Combined ratio (Non-GAAP) (9,11) |
|
93.6 |
% |
|
86.3 |
% |
|
92.3 |
% |
|
|
125.9 |
% |
|
|
98.6 |
% |
|
91.2 |
% |
|
97.5 |
% |
|
|
110.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense ratio (8) |
|
72.6 |
% |
|
54.2 |
% |
|
69.3 |
% |
|
|
89.7 |
% |
|
|
73.2 |
% |
|
59.7 |
% |
|
71.2 |
% |
|
|
72.0 |
% |
Operating expense ratio (Non-GAAP) (9,12) |
|
20.2 |
% |
|
31.0 |
% |
|
22.1 |
% |
|
|
36.2 |
% |
|
|
23.7 |
% |
|
30.5 |
% |
|
24.7 |
% |
|
|
32.6 |
% |
Combined ratio before amortization and impairment (Non-GAAP)
(9,13) |
|
92.8 |
% |
|
85.2 |
% |
|
91.4 |
% |
|
|
125.9 |
% |
|
|
96.9 |
% |
|
90.2 |
% |
|
95.9 |
% |
|
|
104.6 |
% |
NOTE: Loss and loss adjustment
expenses for the nine months ended September 30, 2018 included
$13,318 of favorable development on prior accident year loss and
loss adjustment expense reserves in the P&C segment, and
$24,623 of favorable development in the A&H segment, versus
$7,177 of unfavorable development in the P&C segment, and
$10,106 of favorable development in the A&H segment for the
nine months ended September 30, 2017.
Reconciliation of Operating Expense Ratio
(Non-GAAP)$ in thousands(Unaudited)
|
|
Three Months Ended
September 30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal
Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal
Exchanges |
Total underwriting expenses |
|
$ |
863,953 |
|
|
$ |
167,951 |
|
|
$ |
1,031,904 |
|
|
|
$ |
71,919 |
|
|
|
$ |
812,978 |
|
|
$ |
155,703 |
|
|
$ |
968,681 |
|
|
|
$ |
62,791 |
|
Less: Loss and loss adjustment expense |
|
544,446 |
|
|
72,652 |
|
|
617,098 |
|
|
|
40,212 |
|
|
|
528,875 |
|
|
83,414 |
|
|
612,289 |
|
|
|
26,856 |
|
Less: Ceding commission income |
|
44,244 |
|
|
269 |
|
|
44,513 |
|
|
|
14,587 |
|
|
|
30,675 |
|
|
226 |
|
|
30,901 |
|
|
|
19,201 |
|
Less: Service and fee income |
|
113,967 |
|
|
46,458 |
|
|
160,425 |
|
|
|
1,575 |
|
|
|
100,565 |
|
|
32,492 |
|
|
133,057 |
|
|
|
4,084 |
|
Operating expense |
|
161,296 |
|
|
48,572 |
|
|
209,868 |
|
|
|
15,545 |
|
|
|
152,863 |
|
|
39,571 |
|
|
192,434 |
|
|
|
12,650 |
|
Net
earned premium |
|
$ |
741,030 |
|
|
$ |
155,346 |
|
|
$ |
896,376 |
|
|
|
$ |
43,151 |
|
|
|
$ |
686,596 |
|
|
$ |
135,727 |
|
|
$ |
822,323 |
|
|
|
$ |
41,978 |
|
Operating expense ratio (Non-GAAP) |
|
21.8 |
% |
|
31.3 |
% |
|
23.4 |
% |
|
|
36.0 |
% |
|
|
22.3 |
% |
|
29.2 |
% |
|
23.4 |
% |
|
|
30.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting expenses |
|
$ |
863,953 |
|
|
$ |
167,951 |
|
|
$ |
1,031,904 |
|
|
|
$ |
71,919 |
|
|
|
$ |
812,978 |
|
|
$ |
155,703 |
|
|
$ |
968,681 |
|
|
|
$ |
62,791 |
|
Less: Loss and loss adjustment expense |
|
544,446 |
|
|
72,652 |
|
|
617,098 |
|
|
|
40,212 |
|
|
|
528,875 |
|
|
83,414 |
|
|
612,289 |
|
|
|
26,856 |
|
Less: Ceding commission income |
|
44,244 |
|
|
269 |
|
|
44,513 |
|
|
|
14,587 |
|
|
|
30,675 |
|
|
226 |
|
|
30,901 |
|
|
|
19,201 |
|
Less: Service and fee income |
|
113,967 |
|
|
46,458 |
|
|
160,425 |
|
|
|
1,575 |
|
|
|
100,565 |
|
|
32,492 |
|
|
133,057 |
|
|
|
4,084 |
|
Less: Non-cash amortization of intangible
assets |
|
6,546 |
|
|
1,714 |
|
|
8,260 |
|
|
|
(14 |
) |
|
|
7,994 |
|
|
1,280 |
|
|
9,274 |
|
|
|
(69 |
) |
Operating expense before amortization and impairment |
|
154,750 |
|
|
46,858 |
|
|
201,608 |
|
|
|
15,559 |
|
|
|
144,869 |
|
|
38,291 |
|
|
183,160 |
|
|
|
12,719 |
|
Net
earned premium |
|
$ |
741,030 |
|
|
$ |
155,346 |
|
|
$ |
896,376 |
|
|
|
$ |
43,151 |
|
|
|
$ |
686,596 |
|
|
$ |
135,727 |
|
|
$ |
822,323 |
|
|
|
$ |
41,978 |
|
Operating expense ratio before amortization and
impairment (Non-GAAP) |
|
20.9 |
% |
|
30.2 |
% |
|
22.5 |
% |
|
|
36.1 |
% |
|
|
21.1 |
% |
|
28.2 |
% |
|
22.3 |
% |
|
|
30.3 |
% |
Reconciliation of Operating Expense Ratio
(Non-GAAP)$ in thousands(Unaudited)
|
|
Nine Months Ended September
30, |
|
|
2018 |
|
|
2017 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal
Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal
Exchanges |
Total underwriting expenses |
|
$ |
2,488,924 |
|
|
$ |
537,128 |
|
|
$ |
3,026,052 |
|
|
|
$ |
221,405 |
|
|
|
$ |
2,546,595 |
|
|
$ |
472,920 |
|
|
$ |
3,019,515 |
|
|
|
$ |
198,043 |
|
Less: Loss and loss adjustment expense |
|
1,583,019 |
|
|
252,364 |
|
|
1,835,383 |
|
|
|
126,421 |
|
|
|
1,642,053 |
|
|
238,327 |
|
|
1,880,380 |
|
|
|
88,776 |
|
Less: Ceding commission income |
|
118,664 |
|
|
789 |
|
|
119,453 |
|
|
|
39,523 |
|
|
|
36,263 |
|
|
784 |
|
|
37,047 |
|
|
|
54,557 |
|
Less: Service and fee income |
|
328,707 |
|
|
134,586 |
|
|
463,293 |
|
|
|
4,466 |
|
|
|
298,674 |
|
|
107,808 |
|
|
406,482 |
|
|
|
7,658 |
|
Operating expense |
|
458,534 |
|
|
149,389 |
|
|
607,923 |
|
|
|
50,995 |
|
|
|
569,605 |
|
|
126,001 |
|
|
695,606 |
|
|
|
47,052 |
|
Net
earned premium |
|
$ |
2,181,571 |
|
|
$ |
465,391 |
|
|
$ |
2,646,962 |
|
|
|
$ |
141,009 |
|
|
|
$ |
2,241,766 |
|
|
$ |
399,505 |
|
|
$ |
2,641,271 |
|
|
|
$ |
123,266 |
|
Operating expense ratio (Non-GAAP) |
|
21.0 |
% |
|
32.1 |
% |
|
23.0 |
% |
|
|
36.2 |
% |
|
|
25.4 |
% |
|
31.5 |
% |
|
26.3 |
% |
|
|
38.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting expenses |
|
$ |
2,488,924 |
|
|
$ |
537,128 |
|
|
$ |
3,026,052 |
|
|
|
$ |
221,405 |
|
|
|
$ |
2,546,595 |
|
|
$ |
472,920 |
|
|
$ |
3,019,515 |
|
|
|
$ |
198,043 |
|
Less: Loss and loss adjustment expense |
|
1,583,019 |
|
|
252,364 |
|
|
1,835,383 |
|
|
|
126,421 |
|
|
|
1,642,053 |
|
|
238,327 |
|
|
1,880,380 |
|
|
|
88,776 |
|
Less: Ceding commission income |
|
118,664 |
|
|
789 |
|
|
119,453 |
|
|
|
39,523 |
|
|
|
36,263 |
|
|
784 |
|
|
37,047 |
|
|
|
54,557 |
|
Less: Service and fee income |
|
328,707 |
|
|
134,586 |
|
|
463,293 |
|
|
|
4,466 |
|
|
|
298,674 |
|
|
107,808 |
|
|
406,482 |
|
|
|
7,658 |
|
Less: Non-cash amortization of intangible
assets |
|
18,125 |
|
|
5,272 |
|
|
23,397 |
|
|
|
(67 |
) |
|
|
38,006 |
|
|
4,295 |
|
|
42,301 |
|
|
|
6,909 |
|
Operating expense before amortization and impairment |
|
440,409 |
|
|
144,117 |
|
|
584,526 |
|
|
|
51,062 |
|
|
|
531,599 |
|
|
121,706 |
|
|
653,305 |
|
|
|
40,143 |
|
Net
earned premium |
|
$ |
2,181,571 |
|
|
$ |
465,391 |
|
|
$ |
2,646,962 |
|
|
|
$ |
141,009 |
|
|
|
$ |
2,241,766 |
|
|
$ |
399,505 |
|
|
$ |
2,641,271 |
|
|
|
$ |
123,266 |
|
Operating expense ratio before amortization and
impairment (Non-GAAP) |
|
20.2 |
% |
|
31.0 |
% |
|
22.1 |
% |
|
|
36.2 |
% |
|
|
23.7 |
% |
|
30.5 |
% |
|
24.7 |
% |
|
|
32.6 |
% |
Premiums by Business Line$ in
thousands(Unaudited)
|
|
Three Months Ended
September 30, |
|
|
Gross Written
Premium |
|
|
Net Written
Premium |
|
|
Net Earned
Premium |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
|
$ |
661,126 |
|
|
$ |
599,608 |
|
|
10.3 |
% |
|
|
$ |
502,964 |
|
|
$ |
318,773 |
|
|
57.8 |
% |
|
|
$ |
496,139 |
|
|
$ |
428,112 |
|
|
15.9 |
% |
Homeowners |
|
192,349 |
|
|
154,352 |
|
|
24.6 |
% |
|
|
112,390 |
|
|
(18,881 |
) |
|
nm |
|
|
80,308 |
|
|
68,042 |
|
|
18.0 |
% |
RV/Packaged |
|
54,964 |
|
|
49,928 |
|
|
10.1 |
% |
|
|
54,627 |
|
|
49,547 |
|
|
10.3 |
% |
|
|
51,229 |
|
|
45,742 |
|
|
12.0 |
% |
Small Business Auto |
|
75,218 |
|
|
79,296 |
|
|
(5.1 |
)% |
|
|
53,155 |
|
|
43,505 |
|
|
22.2 |
% |
|
|
59,636 |
|
|
60,013 |
|
|
(0.6 |
)% |
Lender-placed insurance |
|
94,462 |
|
|
84,447 |
|
|
11.9 |
% |
|
|
56,529 |
|
|
70,581 |
|
|
(19.9 |
)% |
|
|
48,466 |
|
|
79,048 |
|
|
(38.7 |
)% |
Other |
|
12,253 |
|
|
11,809 |
|
|
3.8 |
% |
|
|
4,969 |
|
|
4,299 |
|
|
15.6 |
% |
|
|
5,252 |
|
|
5,639 |
|
|
(6.9 |
)% |
Property & Casualty |
|
1,090,372 |
|
|
979,440 |
|
|
11.3 |
% |
|
|
784,634 |
|
|
467,824 |
|
|
67.7 |
% |
|
|
741,030 |
|
|
686,596 |
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
143,948 |
|
|
121,266 |
|
|
18.7 |
% |
|
|
123,576 |
|
|
110,197 |
|
|
12.1 |
% |
|
|
155,346 |
|
|
135,727 |
|
|
14.5 |
% |
Total National General |
|
$ |
1,234,320 |
|
|
$ |
1,100,706 |
|
|
12.1 |
% |
|
|
$ |
908,210 |
|
|
$ |
578,021 |
|
|
57.1 |
% |
|
|
$ |
896,376 |
|
|
$ |
822,323 |
|
|
9.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
|
$ |
40,240 |
|
|
$ |
39,040 |
|
|
3.1 |
% |
|
|
$ |
12,845 |
|
|
$ |
12,533 |
|
|
2.5 |
% |
|
|
$ |
13,353 |
|
|
$ |
15,167 |
|
|
(12.0 |
)% |
Homeowners |
|
80,070 |
|
|
64,240 |
|
|
24.6 |
% |
|
|
2,002 |
|
|
30,497 |
|
|
(93.4 |
)% |
|
|
29,698 |
|
|
26,382 |
|
|
12.6 |
% |
Other |
|
1,041 |
|
|
1,126 |
|
|
(7.5 |
)% |
|
|
(33 |
) |
|
503 |
|
|
nm |
|
|
100 |
|
|
429 |
|
|
(76.7 |
)% |
Reciprocal Exchanges |
|
$ |
121,351 |
|
|
$ |
104,406 |
|
|
16.2 |
% |
|
|
$ |
14,814 |
|
|
$ |
43,533 |
|
|
(66.0 |
)% |
|
|
$ |
43,151 |
|
|
$ |
41,978 |
|
|
2.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total (A) |
|
$ |
1,355,671 |
|
|
$ |
1,204,311 |
|
|
12.6 |
% |
|
|
$ |
923,024 |
|
|
$ |
621,554 |
|
|
48.5 |
% |
|
|
$ |
939,527 |
|
|
$ |
864,301 |
|
|
8.7 |
% |
NOTES: (A) Consolidated Total
includes eliminations between National General and the Reciprocal
Exchanges of $(302) in Personal Auto and $(499) in Homeowners Gross
Written Premium in 2017, respectively.
nm - not meaningful
Premiums by Business Line$ in
thousands(Unaudited)
|
|
Nine Months Ended September
30, |
|
|
Gross Written
Premium |
|
|
Net Written
Premium |
|
|
Net Earned
Premium |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
|
|
2018 |
|
2017 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
|
$ |
2,018,563 |
|
|
$ |
1,761,779 |
|
|
14.6 |
% |
|
|
$ |
1,542,685 |
|
|
$ |
1,387,024 |
|
|
11.2 |
% |
|
|
$ |
1,436,793 |
|
|
$ |
1,377,752 |
|
|
4.3 |
% |
Homeowners |
|
524,342 |
|
|
421,061 |
|
|
24.5 |
% |
|
|
255,290 |
|
|
217,590 |
|
|
17.3 |
% |
|
|
242,161 |
|
|
282,741 |
|
|
(14.4 |
)% |
RV/Packaged |
|
164,427 |
|
|
147,280 |
|
|
11.6 |
% |
|
|
162,934 |
|
|
146,256 |
|
|
11.4 |
% |
|
|
145,911 |
|
|
129,706 |
|
|
12.5 |
% |
Small Business Auto |
|
246,448 |
|
|
246,562 |
|
|
— |
% |
|
|
181,314 |
|
|
195,577 |
|
|
(7.3 |
)% |
|
|
178,302 |
|
|
193,578 |
|
|
(7.9 |
)% |
Lender-placed insurance |
|
259,995 |
|
|
251,091 |
|
|
3.5 |
% |
|
|
134,630 |
|
|
229,938 |
|
|
(41.4 |
)% |
|
|
162,629 |
|
|
241,990 |
|
|
(32.8 |
)% |
Other |
|
45,495 |
|
|
36,258 |
|
|
25.5 |
% |
|
|
24,362 |
|
|
16,185 |
|
|
50.5 |
% |
|
|
15,775 |
|
|
15,999 |
|
|
(1.4 |
)% |
Property & Casualty |
|
3,259,270 |
|
|
2,864,031 |
|
|
13.8 |
% |
|
|
2,301,215 |
|
|
2,192,570 |
|
|
5.0 |
% |
|
|
2,181,571 |
|
|
2,241,766 |
|
|
(2.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
534,560 |
|
|
444,195 |
|
|
20.3 |
% |
|
|
486,187 |
|
|
409,560 |
|
|
18.7 |
% |
|
|
465,391 |
|
|
399,505 |
|
|
16.5 |
% |
Total National General |
|
$ |
3,793,830 |
|
|
$ |
3,308,226 |
|
|
14.7 |
% |
|
|
$ |
2,787,402 |
|
|
$ |
2,602,130 |
|
|
7.1 |
% |
|
|
$ |
2,646,962 |
|
|
$ |
2,641,271 |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
|
$ |
116,602 |
|
|
$ |
102,420 |
|
|
13.8 |
% |
|
|
$ |
40,860 |
|
|
$ |
51,240 |
|
|
(20.3 |
)% |
|
|
$ |
38,812 |
|
|
$ |
48,523 |
|
|
(20.0 |
)% |
Homeowners |
|
217,486 |
|
|
180,616 |
|
|
20.4 |
% |
|
|
90,826 |
|
|
83,887 |
|
|
8.3 |
% |
|
|
101,578 |
|
|
73,533 |
|
|
38.1 |
% |
Other |
|
2,933 |
|
|
2,743 |
|
|
6.9 |
% |
|
|
554 |
|
|
1,350 |
|
|
(59.0 |
)% |
|
|
619 |
|
|
1,210 |
|
|
(48.8 |
)% |
Reciprocal Exchanges |
|
$ |
337,021 |
|
|
$ |
285,779 |
|
|
17.9 |
% |
|
|
$ |
132,240 |
|
|
$ |
136,477 |
|
|
(3.1 |
)% |
|
|
$ |
141,009 |
|
|
$ |
123,266 |
|
|
14.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total (A) |
|
$ |
4,129,250 |
|
|
$ |
3,591,603 |
|
|
15.0 |
% |
|
|
$ |
2,919,642 |
|
|
$ |
2,738,607 |
|
|
6.6 |
% |
|
|
$ |
2,787,971 |
|
|
$ |
2,764,537 |
|
|
0.8 |
% |
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 $(866) in Personal
Auto and $(1,536) 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 $233,179 and $347,548 in related
parties at September 30, 2018 and December 31, 2017,
respectively.
(3) Reinsurance activity includes $9,075 and $15,688 from
related parties at September 30, 2018 and December 31, 2017,
respectively.
(4) Other includes $1,181 and $2,334 from related parties at
September 30, 2018 and December 31, 2017, respectively.
(5) Accounts payable and accrued expenses includes $69,376 and
$140,057 to related parties at September 30, 2018 and December 31,
2017, respectively.
(6) Common stock: $0.01 par value - authorized 150,000,000
shares, issued and outstanding 107,132,560 shares - September 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 2,565,120 shares - September 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 Q3’18
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 $35.0 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.
|
|
Q3’18 Combined
Ratio |
|
Impact of Q3’18
Weather-related Events |
|
Q3’18 Combined Ratio
Excluding Weather-related Events |
P&C Segment |
|
94.4 |
% |
|
4.7 |
% |
|
89.7 |
% |
|
|
|
|
|
|
|
Overall NGHC |
|
91.3 |
% |
|
3.9 |
% |
|
87.4 |
% |
Investor Contact
Christine WorleyDirector of Investor RelationsPhone:
212-380-9462Email: Christine.Worley@NGIC.com
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