National General Holdings Corp. (Nasdaq:NGHC) reported fourth
quarter 2019 net income of $98.4 million or $0.85 per diluted
share, compared to net income of $17.3 million or $0.16 per
diluted share in the fourth quarter of 2018. Fourth quarter 2019
operating earnings (non-GAAP)(1) was $83.1 million or $0.72
per diluted share compared to $33.6 million or $0.30 per
diluted share in the fourth quarter of 2018.
Full year 2019 net income was $314.5 million or $2.73 per
diluted share, compared to net income of $174.9 million or
$1.59 per diluted share in 2018. 2019 operating earnings
(non-GAAP)(1) was $319.2 million or $2.75 per diluted share
compared to $231.5 million or $2.09 per diluted share in
2018.
Fourth Quarter 2019 Highlights versus
Fourth Quarter 2018*
- Gross written premium grew $46.1 million or 3.9% to
$1,221.8 million, primarily driven by the acquisition of
National Farmers Union Property and Casualty Company (“Farmers
Union Insurance”) which closed on August 1, 2019, and continued
organic growth in our A&H segment of 7.5%, partially offset by
the impact of the Euro Accident Health and Care Insurance
(“Euroaccident”) sale which closed on December 2, 2019.
- The overall combined ratio(12,13) was 91.4% in the fourth
quarter compared to 95.9% in the prior year’s quarter and 91.0% for
the full year compared to 92.6% in 2018, excluding non-cash
amortization of intangible assets. The P&C segment reported a
decrease in combined ratio to 94.2% from 100.5% in the prior year’s
quarter. The combined ratio includes $9.2 million of
catastrophe losses related to weather-related events compared to
$59.0 million of Hurricane Michael and California fires
catastrophe losses in the prior year’s quarter. The A&H segment
reported an increase in combined ratio to 77.1% from 73.6% in the
prior year’s quarter.
- Service and fee income grew 10.5% to $179.3 million,
driven by organic growth primarily in our group administration fees
and third party technology services fees within our A&H
segment.
- Stockholders’ equity was $2.65 billion and fully diluted book
value per share was $19.06 at December 31, 2019, growth of
19.3% and 25.0%, respectively, from December 31, 2018. Our
trailing twelve month operating return on average equity (ROE)(14)
was 16.1% as of December 31, 2019.
- Fourth quarter 2019 operating earnings (non-GAAP)(1) excludes
the following items, net of tax: $3.4 million or $0.03 per
share earnings from equity method investments, $33.8 million
or $0.29 per share of net gain on investments (including $20.9
million gain on the sale of Euroaccident, net of tax),
$10.7 million or $0.09 per share of non-cash amortization of
intangible assets and $11.3 million or $0.10 per share of
other expenses reflecting an acquisition related arbitration
award.
Barry Karfunkel, National General’s CEO, stated: “2019 was an
exceptional year for National General generating a 91.0% combined
ratio, $319.2 million of operating earnings, ROE of 16.1% and
growth in diluted book value per share of 25.0%. While our P&C
segment earnings were negatively impacted by reserve strengthening
within our small business auto product line, the P&C segment
continued its strong performance via both our independent agency
and direct to consumer distribution channels. Our A&H segment
reported very strong profitability within our group and individual
products. I am pleased with the continued execution of our strategy
of focused underwriting discipline and long term growth
initiatives.”
*NOTE: Unless specified otherwise, discussion
of our fourth quarter 2019 and 2018 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 Fourth Quarter 2019 as
Compared to Fourth Quarter 2018
- Property & Casualty - Gross written
premium grew by 3.3% to $1,045.9 million, net written premium
increased by 12.7% to $807.6 million, and net earned premium
increased by 12.7% to $842.3 million. P&C gross written
premium growth was primarily driven by $47.4 million of added
premiums from the acquisition of Farmers Union Insurance. Service
and fee income was $107.5 million compared to
$110.8 million in the prior year’s quarter. Excluding
amortization of intangible assets, the combined ratio(12,13) was
94.2% with a loss and LAE ratio of 73.6% and an expense
ratio(11,13) of 20.6%, versus a prior year combined ratio of 100.5%
with a loss and LAE ratio of 79.6% and an expense ratio of 20.9%.
The loss and LAE ratio was impacted by pre-tax catastrophe losses
of approximately $9.2 million primarily related to
weather-related events in the fourth quarter 2019, compared to
$59.0 million of losses in the fourth quarter 2018. Prior year
loss development was $26.8 million unfavorable in the fourth
quarter 2019 primarily driven by small business auto, compared to
unfavorable loss development of $8.6 million in the fourth
quarter 2018.
- Accident & Health - Gross written premium
grew by 7.5% to $175.8 million, net written premium grew by
14.3% to $160.4 million, and net earned premium grew by 10.2%
to $166.5 million. The A&H gross written premium increase
was driven by the continued growth in our domestic A&H
business. Service and fee income grew 39.7% to $71.8 million
compared to $51.4 million in the prior year’s quarter,
primarily driven by group administrative fees and third party
technology services fees. Excluding non-cash amortization of
intangible assets, the combined ratio(12,13) was 77.1% with a loss
and LAE ratio of 41.4% and an expense ratio(11,13) of 35.7%, versus
a prior year combined ratio of 73.6% with a loss and LAE ratio of
45.7% and an expense ratio of 27.9%. The loss and LAE ratio
reflects continued strong performance in both small group
self-funded and individual products. Prior year loss development
was $7.6 million favorable in the fourth quarter 2019,
compared to favorable loss development of $6.4 million in the
fourth quarter 2018.
- Reciprocal Exchanges - Results for the
Reciprocal Exchanges are not included in net income available to
NGHC common stockholders. Gross written premium was
$102.5 million, net written premium was $62.0 million,
and net earned premium was $60.8 million. Reciprocal Exchanges
combined ratio(12,13) excluding non-cash amortization of intangible
assets was 113.8% with a loss and LAE ratio of 86.4% and an expense
ratio(11,13) of 27.4%.
Fourth quarter 2019 investment income grew to
$38.5 million, compared to $37.7 million in the fourth
quarter of 2018. Total investments and cash and cash equivalents
(including restricted cash) were $4.8 billion as of
December 31, 2019. Accumulated other comprehensive income
(loss) increased to a $74.5 million gain at December 31,
2019 from a $52.1 million loss at December 31, 2018,
primarily due to the impact of lower interest rates which
positively impacted bond valuations.
Interest expense was $12.7 million for both the current and
prior year’s quarter. Debt was $686.0 million at
December 31, 2019, down from $705.8 million at
December 31, 2018.
The fourth quarter of 2019 provision for income taxes was
$20.3 million and the effective tax rate for the quarter was
15.9% compared with income taxes of $12.6 million and an
effective rate of 32.5% in the fourth quarter of 2018. The
effective tax rate for the year ended December 31, 2019 was
19.8%.
Stockholders’ equity was $2,649.5 million at December 31,
2019, growth of 19.3% from $2,220.8 million at December 31,
2018. Fully diluted book value per share was $19.06 at
December 31, 2019, growth of 25.0% from $15.25 at
December 31, 2018. Our trailing twelve month operating return
on average equity (ROE)(14) was 16.1% as of December 31,
2019.
|
|
Year-to-Date
P&C Segment Notable Large Losses |
Year |
|
Quarter |
|
Event |
|
P&C Notable LargeLosses and LAE($
millions) |
|
P&C Lossand LAERatio Points* |
|
EPS ImpactAfter Tax |
2019 |
|
Q4 |
|
Weather-related Events |
|
$9.2 |
|
1.1% |
|
$0.06 |
2019 |
|
Q3 |
|
Weather-related Events |
|
$11.5 |
|
1.4% |
|
$0.08 |
2019 |
|
Q2 |
|
Weather-related Events |
|
$18.4 |
|
2.2% |
|
$0.13 |
2019 |
|
Q1 |
|
Winter Weather |
|
$12.1 |
|
1.6% |
|
$0.08 |
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
Q4 |
|
Hurricane Michael and November
California Fires |
|
$59.0 |
|
7.9% |
|
$0.41 |
2018 |
|
Q3 |
|
California Fires and Hurricane
Florence |
|
$35.0 |
|
4.7% |
|
$0.25 |
2018 |
|
Q2 |
|
Spring Weather-related and
Texas Hail Events |
|
$20.5 |
|
2.8% |
|
$0.15 |
2018 |
|
Q1 |
|
Winter Weather |
|
$14.2 |
|
2.0% |
|
$0.10 |
* Loss and LAE ratio points related to P&C net earned
premium in quarter the loss event was recorded.
Additional item
Auto Quota Share - Effective January 1, 2020,
we cede 5.0% of net liability under our auto quota share
reinsurance agreement.
Conference Call
On Friday, February 21, 2020 at 9:00 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:
800 Access
Number: |
800-346-7359 |
973 Access Number: |
973-528-0008 |
Conference Entry Code: |
652437 |
Webcast Registration: |
http://ir.nationalgeneral.com/events-and-presentations |
A replay of the conference call will be accessible from 2:00 PM
ET on Friday, February 21, 2020 to 11:59 PM ET on Friday,
March 6, 2020 by dialing either 800-332-6854 (toll-free)
within the U.S. or 973-528-0005 outside the U.S. and entering
passcode 652437. 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 potential
effect of changes in LIBOR reporting practices, 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 vendors or 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 - Fourth
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
|
NGHC |
|
ReciprocalExchanges |
|
Consolidated |
|
|
NGHC |
|
ReciprocalExchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
1,221,772 |
|
|
$ |
102,465 |
|
|
$ |
1,324,237 |
|
|
|
$ |
1,175,687 |
|
|
$ |
111,902 |
|
|
$ |
1,287,589 |
|
|
Net written premium |
|
967,943 |
|
|
62,012 |
|
|
1,029,955 |
|
|
|
856,746 |
|
|
51,325 |
|
|
908,071 |
|
|
Net earned premium |
|
1,008,770 |
|
|
60,826 |
|
|
1,069,596 |
|
|
|
898,479 |
|
|
45,752 |
|
|
944,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
38,085 |
|
|
13,055 |
|
|
51,140 |
|
|
|
48,495 |
|
|
17,226 |
|
|
65,721 |
|
|
Service and fee income |
|
179,276 |
|
|
1,284 |
|
|
165,924 |
|
(A) |
|
162,170 |
|
|
1,285 |
|
|
146,270 |
|
(G) |
Net investment income |
|
38,491 |
|
|
2,184 |
|
|
38,917 |
|
(B) |
|
37,666 |
|
|
2,182 |
|
|
37,332 |
|
(H) |
Net gain (loss) on investments |
|
16,393 |
|
|
707 |
|
|
17,100 |
|
|
|
(4,689 |
) |
|
(2,100 |
) |
|
(6,789 |
) |
|
Other income |
|
26,428 |
|
|
— |
|
|
26,428 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
Total revenues |
|
$ |
1,307,443 |
|
|
$ |
78,056 |
|
|
$ |
1,369,105 |
|
(C) |
|
$ |
1,142,121 |
|
|
$ |
64,345 |
|
|
$ |
1,186,765 |
|
(I) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
689,262 |
|
|
$ |
52,528 |
|
|
$ |
741,790 |
|
|
|
$ |
664,125 |
|
|
$ |
36,297 |
|
|
$ |
700,422 |
|
|
Acquisition costs and other underwriting expenses |
|
199,523 |
|
|
12,710 |
|
|
212,233 |
|
|
|
184,195 |
|
|
9,031 |
|
|
193,226 |
|
|
General and administrative expenses |
|
278,331 |
|
|
18,352 |
|
|
282,047 |
|
(D) |
|
242,340 |
|
|
21,724 |
|
|
246,879 |
|
(J) |
Interest expense |
|
12,722 |
|
|
1,758 |
|
|
12,722 |
|
(E) |
|
12,650 |
|
|
2,516 |
|
|
12,650 |
|
(K) |
Total expenses |
|
$ |
1,179,838 |
|
|
$ |
85,348 |
|
|
$ |
1,248,792 |
|
(F) |
|
$ |
1,103,310 |
|
|
$ |
69,568 |
|
|
$ |
1,153,177 |
|
(L) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision
(benefit) for income taxes |
|
$ |
127,605 |
|
|
$ |
(7,292 |
) |
|
$ |
120,313 |
|
|
|
$ |
38,811 |
|
|
$ |
(5,223 |
) |
|
$ |
33,588 |
|
|
Provision (benefit) for income taxes |
|
20,324 |
|
|
(4,805 |
) |
|
15,519 |
|
|
|
12,595 |
|
|
2,628 |
|
|
15,223 |
|
|
Net income (loss) before
noncontrolling interest and dividends on preferred shares |
|
107,281 |
|
|
(2,487 |
) |
|
104,794 |
|
|
|
26,216 |
|
|
(7,851 |
) |
|
18,365 |
|
|
Less: net income (loss) attributable to noncontrolling
interest |
|
— |
|
|
(2,487 |
) |
|
(2,487 |
) |
|
|
— |
|
|
(7,851 |
) |
|
(7,851 |
) |
|
Net income before dividends on
preferred shares |
|
107,281 |
|
|
— |
|
|
107,281 |
|
|
|
26,216 |
|
|
— |
|
|
26,216 |
|
|
Less: dividends on preferred shares |
|
8,925 |
|
|
— |
|
|
8,925 |
|
|
|
8,867 |
|
|
— |
|
|
8,867 |
|
|
Net income available to common stockholders |
|
$ |
98,356 |
|
|
$ |
— |
|
|
$ |
98,356 |
|
|
|
$ |
17,349 |
|
|
$ |
— |
|
|
$ |
17,349 |
|
|
Consolidated column includes eliminations as
follows: (A) $(14,636), (B) $(1,758), (C) $(16,394), (D) $(14,636),
(E) $(1,758), (F) $(16,394), (G) $(17,185), (H) $(2,516), (I)
$(19,701), (J) $(17,185), (K) $(2,516) and (L) $(19,701).
Income Statement - Year to Date$
in thousands(Unaudited)
|
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
|
NGHC |
|
ReciprocalExchanges |
|
Consolidated |
|
|
NGHC |
|
ReciprocalExchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
5,135,633 |
|
|
$ |
447,447 |
|
|
$ |
5,583,080 |
|
|
|
$ |
4,969,517 |
|
|
$ |
448,923 |
|
|
$ |
5,416,839 |
|
(G) |
Net written premium |
|
3,990,149 |
|
|
234,472 |
|
|
4,224,621 |
|
|
|
3,644,148 |
|
|
183,565 |
|
|
3,827,713 |
|
|
Net earned premium |
|
3,907,811 |
|
|
210,231 |
|
|
4,118,042 |
|
|
|
3,545,441 |
|
|
186,761 |
|
|
3,732,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
174,952 |
|
|
63,501 |
|
|
238,453 |
|
|
|
167,948 |
|
|
56,749 |
|
|
224,697 |
|
|
Service and fee income |
|
705,006 |
|
|
5,755 |
|
|
641,965 |
|
(A) |
|
625,463 |
|
|
5,751 |
|
|
561,583 |
|
(H) |
Net investment income |
|
142,174 |
|
|
8,638 |
|
|
141,233 |
|
(B) |
|
119,852 |
|
|
8,875 |
|
|
119,034 |
|
(I) |
Net gain (loss) on investments |
|
13,603 |
|
|
(130 |
) |
|
13,473 |
|
|
|
(26,179 |
) |
|
(3,366 |
) |
|
(29,545 |
) |
|
Other income |
|
26,428 |
|
|
— |
|
|
26,428 |
|
|
|
— |
|
|
— |
|
|
— |
|
|
Total revenues |
|
$ |
4,969,974 |
|
|
$ |
287,995 |
|
|
$ |
5,179,594 |
|
(C) |
|
$ |
4,432,525 |
|
|
$ |
254,770 |
|
|
$ |
4,607,971 |
|
(J) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
2,677,356 |
|
|
$ |
177,112 |
|
|
$ |
2,854,468 |
|
|
|
$ |
2,499,508 |
|
|
$ |
162,718 |
|
|
$ |
2,662,226 |
|
|
Acquisition costs and other underwriting expenses |
|
782,328 |
|
|
45,039 |
|
|
827,367 |
|
|
|
693,283 |
|
|
41,983 |
|
|
735,266 |
|
|
General and administrative expenses |
|
1,024,574 |
|
|
85,994 |
|
|
1,041,772 |
|
(D) |
|
923,921 |
|
|
83,756 |
|
|
938,046 |
|
(K) |
Interest expense |
|
51,544 |
|
|
9,579 |
|
|
51,544 |
|
(E) |
|
51,425 |
|
|
9,693 |
|
|
51,425 |
|
(L) |
Total expenses |
|
$ |
4,535,802 |
|
|
$ |
317,724 |
|
|
$ |
4,775,151 |
|
(F) |
|
$ |
4,168,137 |
|
|
$ |
298,150 |
|
|
$ |
4,386,963 |
|
(M) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision
(benefit) for income taxes |
|
$ |
434,172 |
|
|
$ |
(29,729 |
) |
|
$ |
404,443 |
|
|
|
$ |
264,388 |
|
|
$ |
(43,380 |
) |
|
$ |
221,008 |
|
|
Provision (benefit) for income taxes |
|
86,103 |
|
|
(9,090 |
) |
|
77,013 |
|
|
|
57,034 |
|
|
(3,550 |
) |
|
53,484 |
|
|
Net income (loss) before
noncontrolling interest and dividends on preferred shares |
|
348,069 |
|
|
(20,639 |
) |
|
327,430 |
|
|
|
207,354 |
|
|
(39,830 |
) |
|
167,524 |
|
|
Less: net income (loss) attributable to noncontrolling
interest |
|
— |
|
|
(20,639 |
) |
|
(20,639 |
) |
|
|
— |
|
|
(39,830 |
) |
|
(39,830 |
) |
|
Net income before dividends on
preferred shares |
|
348,069 |
|
|
— |
|
|
348,069 |
|
|
|
207,354 |
|
|
— |
|
|
207,354 |
|
|
Less: dividends on preferred shares |
|
33,600 |
|
|
— |
|
|
33,600 |
|
|
|
32,492 |
|
|
— |
|
|
32,492 |
|
|
Net income available to common stockholders |
|
$ |
314,469 |
|
|
$ |
— |
|
|
$ |
314,469 |
|
|
|
$ |
174,862 |
|
|
$ |
— |
|
|
$ |
174,862 |
|
|
Consolidated column includes eliminations as
follows: (A) $(68,796), (B) $(9,579), (C) $(78,375), (D) $(68,796),
(E) $(9,579), (F) $(78,375), (G) $(1,601), (H) $(69,631), (I)
$(9,693), (J) $(79,324), (K) $(69,631), (L) $(9,693) and (M)
$(79,324).
Earnings and Per Share Data$ in
thousands, except shares and per share data(Unaudited)
|
|
Three Months EndedDecember 31, |
|
Year EndedDecember 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income available to common stockholders |
|
$ |
98,356 |
|
|
$ |
17,349 |
|
|
$ |
314,469 |
|
|
$ |
174,862 |
|
Basic net income per common share |
|
$ |
0.87 |
|
|
$ |
0.16 |
|
|
$ |
2.78 |
|
|
$ |
1.62 |
|
Diluted net income per common share |
|
$ |
0.85 |
|
|
$ |
0.16 |
|
|
$ |
2.73 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
|
|
Operating earnings
attributable to NGHC (non-GAAP)(1) |
|
$ |
83,081 |
|
|
$ |
33,590 |
|
|
$ |
319,174 |
|
|
$ |
231,495 |
|
Basic operating earnings per common share (non-GAAP)(1) |
|
$ |
0.73 |
|
|
$ |
0.31 |
|
|
$ |
2.82 |
|
|
$ |
2.15 |
|
Diluted operating earnings per common share (non-GAAP)(1) |
|
$ |
0.72 |
|
|
$ |
0.30 |
|
|
$ |
2.75 |
|
|
$ |
2.09 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per common
share |
|
$ |
0.05 |
|
|
$ |
0.04 |
|
|
$ |
0.18 |
|
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of
basic shares outstanding |
|
113,337,130 |
|
|
109,782,543 |
|
|
113,199,501 |
|
|
107,659,813 |
|
Weighted average number of
diluted shares outstanding |
|
115,344,349 |
|
|
112,947,180 |
|
|
116,096,972 |
|
|
110,822,056 |
|
Shares outstanding, end of
period |
|
113,368,811 |
|
|
112,940,595 |
|
|
|
|
|
Fully diluted shares
outstanding, end of period |
|
115,376,030 |
|
|
116,105,232 |
|
|
|
|
|
Book value per share |
|
$ |
19.40 |
|
|
$ |
15.68 |
|
|
|
|
|
Fully diluted book value per
share |
|
$ |
19.06 |
|
|
$ |
15.25 |
|
|
|
|
|
Reconciliation of Net Income to Operating
Earnings (Non-GAAP)(1)(14)$ in thousands, except per share
data(Unaudited)
|
|
Three Months EndedDecember 31, |
|
Year EndedDecember 31, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net income available to common stockholders |
|
$ |
98,356 |
|
|
$ |
17,349 |
|
|
$ |
314,469 |
|
|
$ |
174,862 |
|
Add (subtract): |
|
|
|
|
|
|
|
|
Equity in earnings of equity method investments |
|
(4,359 |
) |
|
(3,144 |
) |
|
(2,951 |
) |
|
(165 |
) |
Net (gain) loss on investments and gain on sale of a business |
|
(42,821 |
) |
|
4,689 |
|
|
(40,031 |
) |
|
26,179 |
|
Non-cash amortization of intangible assets |
|
13,572 |
|
|
7,926 |
|
|
34,665 |
|
|
31,323 |
|
Arbitration award / Litigation settlement |
|
14,273 |
|
|
10,000 |
|
|
14,273 |
|
|
10,000 |
|
Income tax expense (benefit) |
|
4,060 |
|
|
(3,230 |
) |
|
(1,251 |
) |
|
(10,704 |
) |
Operating earnings attributable to NGHC
(non-GAAP)(1) |
|
$ |
83,081 |
|
|
$ |
33,590 |
|
|
$ |
319,174 |
|
|
$ |
231,495 |
|
|
|
|
|
|
|
|
|
|
Operating earnings per
common share (non-GAAP)(1): |
|
|
|
|
|
|
|
|
Basic operating earnings per common share (non-GAAP)(1) |
|
$ |
0.73 |
|
|
$ |
0.31 |
|
|
$ |
2.82 |
|
|
$ |
2.15 |
|
Diluted operating earnings per common share (non-GAAP)(1) |
|
$ |
0.72 |
|
|
$ |
0.30 |
|
|
$ |
2.75 |
|
|
$ |
2.09 |
|
Balance Sheet$ in
thousands(Unaudited)
|
|
December 31, 2019 |
|
|
December 31, 2018 |
|
ASSETS |
|
NGHC |
|
ReciprocalExchanges |
|
Consolidated |
|
|
NGHC |
|
ReciprocalExchanges |
|
Consolidated |
|
Total investments (2) |
|
$ |
4,632,960 |
|
|
$ |
329,494 |
|
|
$ |
4,854,998 |
|
(A) |
|
$ |
4,013,699 |
|
|
$ |
314,411 |
|
|
$ |
4,226,806 |
|
(H) |
Cash and cash equivalents,
including restricted cash |
|
163,480 |
|
|
983 |
|
|
164,463 |
|
|
|
233,383 |
|
|
200 |
|
|
233,583 |
|
|
Premiums and other
receivables, net |
|
1,373,089 |
|
|
55,859 |
|
|
1,428,948 |
|
|
|
1,338,485 |
|
|
61,327 |
|
|
1,399,812 |
|
|
Reinsurance balances (3) |
|
1,745,036 |
|
|
225,019 |
|
|
1,970,055 |
|
|
|
2,023,911 |
|
|
253,501 |
|
|
2,277,412 |
|
|
Intangible assets, net |
|
362,598 |
|
|
3,225 |
|
|
365,823 |
|
|
|
376,532 |
|
|
3,405 |
|
|
379,937 |
|
|
Goodwill |
|
179,328 |
|
|
— |
|
|
179,328 |
|
|
|
180,183 |
|
|
— |
|
|
180,183 |
|
|
Other (4) |
|
798,675 |
|
|
29,070 |
|
|
792,919 |
|
(B) |
|
739,068 |
|
|
27,879 |
|
|
741,547 |
|
(I) |
Total assets |
|
$ |
9,255,166 |
|
|
$ |
643,650 |
|
|
$ |
9,756,534 |
|
(C) |
|
$ |
8,905,261 |
|
|
$ |
660,723 |
|
|
$ |
9,439,280 |
|
(J) |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss
adjustment expense reserves |
|
$ |
2,680,628 |
|
|
$ |
205,786 |
|
|
$ |
2,886,414 |
|
|
|
$ |
2,778,689 |
|
|
$ |
178,470 |
|
|
$ |
2,957,159 |
|
|
Unearned premiums and other
revenue |
|
2,059,688 |
|
|
252,553 |
|
|
2,312,241 |
|
|
|
2,014,965 |
|
|
265,763 |
|
|
2,280,728 |
|
|
Reinsurance payable |
|
527,155 |
|
|
35,689 |
|
|
562,844 |
|
|
|
615,872 |
|
|
40,393 |
|
|
656,265 |
|
|
Accounts payable and accrued
expenses (5) |
|
306,869 |
|
|
43,323 |
|
|
315,366 |
|
(D) |
|
390,338 |
|
|
33,120 |
|
|
398,058 |
|
(K) |
Debt |
|
686,006 |
|
|
107,456 |
|
|
686,006 |
|
(E) |
|
705,795 |
|
|
101,304 |
|
|
705,795 |
|
(L) |
Other |
|
345,366 |
|
|
30,803 |
|
|
376,169 |
|
|
|
178,764 |
|
|
61,640 |
|
|
240,404 |
|
|
Total liabilities |
|
$ |
6,605,712 |
|
|
$ |
675,610 |
|
|
$ |
7,139,040 |
|
(F) |
|
$ |
6,684,423 |
|
|
$ |
680,690 |
|
|
$ |
7,238,409 |
|
(M) |
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock (6) |
|
$ |
1,134 |
|
|
$ |
— |
|
|
$ |
1,134 |
|
|
|
$ |
1,129 |
|
|
$ |
— |
|
|
$ |
1,129 |
|
|
Preferred stock (7) |
|
450,000 |
|
|
— |
|
|
450,000 |
|
|
|
450,000 |
|
|
— |
|
|
450,000 |
|
|
Additional paid-in
capital |
|
1,065,634 |
|
|
— |
|
|
1,065,634 |
|
|
|
1,057,783 |
|
|
— |
|
|
1,057,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other
comprehensive income (loss) |
|
74,548 |
|
|
— |
|
|
74,548 |
|
|
|
(52,130 |
) |
|
— |
|
|
(52,130 |
) |
|
Retained earnings |
|
1,058,138 |
|
|
— |
|
|
1,058,138 |
|
|
|
764,056 |
|
|
— |
|
|
764,056 |
|
|
Total National General Holdings Corp. stockholders’
equity |
|
2,649,454 |
|
|
— |
|
|
2,649,454 |
|
|
|
2,220,838 |
|
|
— |
|
|
2,220,838 |
|
|
Noncontrolling interest |
|
— |
|
|
(31,960 |
) |
|
(31,960 |
) |
|
|
— |
|
|
(19,967 |
) |
|
(19,967 |
) |
|
Total stockholders’ equity |
|
$ |
2,649,454 |
|
|
$ |
(31,960 |
) |
|
$ |
2,617,494 |
|
|
|
$ |
2,220,838 |
|
|
$ |
(19,967 |
) |
|
$ |
2,200,871 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
9,255,166 |
|
|
$ |
643,650 |
|
|
$ |
9,756,534 |
|
(G) |
|
$ |
8,905,261 |
|
|
$ |
660,723 |
|
|
$ |
9,439,280 |
|
(N) |
Consolidated column includes eliminations as
follows: (A) $(107,456), (B) $(34,826), (C) $(142,282), (D)
$(34,826), (E) $(107,456), (F) $(142,282), (G) $(142,282), (H)
$(101,304), (I) $(25,400), (J) $(126,704), (K) $(25,400), (L)
$(101,304), (M) $(126,704) and (N) $(126,704).
Segment Information - Fourth
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
Gross written premium |
|
$ |
1,045,926 |
|
|
$ |
175,846 |
|
|
$ |
1,221,772 |
|
|
|
$ |
102,465 |
|
|
|
$ |
1,012,138 |
|
|
$ |
163,549 |
|
|
$ |
1,175,687 |
|
|
|
$ |
111,902 |
|
Net written premium |
|
807,574 |
|
|
160,369 |
|
|
967,943 |
|
|
|
62,012 |
|
|
|
716,394 |
|
|
140,352 |
|
|
856,746 |
|
|
|
51,325 |
|
Net earned premium |
|
842,283 |
|
|
166,487 |
|
|
1,008,770 |
|
|
|
60,826 |
|
|
|
747,457 |
|
|
151,022 |
|
|
898,479 |
|
|
|
45,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
35,926 |
|
|
2,159 |
|
|
38,085 |
|
|
|
13,055 |
|
|
|
42,281 |
|
|
6,214 |
|
|
48,495 |
|
|
|
17,226 |
|
Service
and fee income |
|
107,474 |
|
|
71,802 |
|
|
179,276 |
|
|
|
1,284 |
|
|
|
110,776 |
|
|
51,394 |
|
|
162,170 |
|
|
|
1,285 |
|
Total underwriting revenues |
|
$ |
985,683 |
|
|
$ |
240,448 |
|
|
$ |
1,226,131 |
|
|
|
$ |
75,165 |
|
|
|
$ |
900,514 |
|
|
$ |
208,630 |
|
|
$ |
1,109,144 |
|
|
|
$ |
64,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense (A) |
|
620,267 |
|
|
68,995 |
|
|
689,262 |
|
|
|
52,528 |
|
|
|
595,144 |
|
|
68,981 |
|
|
664,125 |
|
|
|
36,297 |
|
Acquisition costs and other
underwriting expenses |
|
130,238 |
|
|
69,285 |
|
|
199,523 |
|
|
|
12,710 |
|
|
|
135,968 |
|
|
48,227 |
|
|
184,195 |
|
|
|
9,031 |
|
General
and administrative expenses (B) |
|
198,077 |
|
|
65,981 |
|
|
264,058 |
|
|
|
18,352 |
|
|
|
178,797 |
|
|
53,543 |
|
|
232,340 |
|
|
|
21,724 |
|
Total underwriting expenses |
|
$ |
948,582 |
|
|
$ |
204,261 |
|
|
$ |
1,152,843 |
|
|
|
$ |
83,590 |
|
|
|
$ |
909,909 |
|
|
$ |
170,751 |
|
|
$ |
1,080,660 |
|
|
|
$ |
67,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
37,101 |
|
|
36,187 |
|
|
73,288 |
|
|
|
(8,425 |
) |
|
|
(9,395 |
) |
|
37,879 |
|
|
28,484 |
|
|
|
(2,789 |
) |
Non-cash amortization of intangible assets |
|
11,766 |
|
|
1,806 |
|
|
13,572 |
|
|
|
30 |
|
|
|
5,835 |
|
|
2,091 |
|
|
7,926 |
|
|
|
111 |
|
Underwriting income (loss)
before amortization and impairment |
|
$ |
48,867 |
|
|
$ |
37,993 |
|
|
$ |
86,860 |
|
|
|
$ |
(8,395 |
) |
|
|
$ |
(3,560 |
) |
|
$ |
39,970 |
|
|
$ |
36,410 |
|
|
|
$ |
(2,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (8) |
|
73.6 |
% |
|
41.4 |
% |
|
68.3 |
% |
|
|
86.4 |
% |
|
|
79.6 |
% |
|
45.7 |
% |
|
73.9 |
% |
|
|
79.3 |
% |
Operating expense ratio (Non-GAAP) (9) |
|
22.0 |
% |
|
36.8 |
% |
|
24.4 |
% |
|
|
27.5 |
% |
|
|
21.6 |
% |
|
29.2 |
% |
|
22.9 |
% |
|
|
26.8 |
% |
Combined ratio (Non-GAAP)
(10) |
|
95.6 |
% |
|
78.2 |
% |
|
92.7 |
% |
|
|
113.9 |
% |
|
|
101.2 |
% |
|
74.9 |
% |
|
96.8 |
% |
|
|
106.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before
amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (8) |
|
73.6 |
% |
|
41.4 |
% |
|
68.3 |
% |
|
|
86.4 |
% |
|
|
79.6 |
% |
|
45.7 |
% |
|
73.9 |
% |
|
|
79.3 |
% |
Operating expense ratio (Non-GAAP) (11) |
|
20.6 |
% |
|
35.7 |
% |
|
23.1 |
% |
|
|
27.4 |
% |
|
|
20.9 |
% |
|
27.9 |
% |
|
22.0 |
% |
|
|
26.5 |
% |
Combined ratio before
amortization and impairment (Non-GAAP) (12) |
|
94.2 |
% |
|
77.1 |
% |
|
91.4 |
% |
|
|
113.8 |
% |
|
|
100.5 |
% |
|
73.6 |
% |
|
95.9 |
% |
|
|
105.8 |
% |
(A) Loss and loss adjustment expenses for the
three months ended December 31, 2019 included $26,832 of
unfavorable development on prior accident year loss and loss
adjustment expense reserves in the P&C segment, and $7,581 of
favorable development in the A&H segment, versus $8,558 of
unfavorable development in the P&C segment, and $6,354 of
favorable development in the A&H segment for the three months
ended December 31, 2018.
(B) General and administrative expenses includes
expenses allocated to segments only.
Segment Information - Year to
Date$ in thousands(Unaudited)
|
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Gross written premium |
|
$ |
4,367,016 |
|
|
$ |
768,617 |
|
|
$ |
5,135,633 |
|
|
|
$ |
447,447 |
|
|
|
$ |
4,271,408 |
|
|
$ |
698,109 |
|
|
$ |
4,969,517 |
|
|
|
$ |
448,923 |
|
Net written premium |
|
3,329,543 |
|
|
660,606 |
|
|
3,990,149 |
|
|
|
234,472 |
|
|
|
3,017,609 |
|
|
626,539 |
|
|
3,644,148 |
|
|
|
183,565 |
|
Net earned premium |
|
3,244,792 |
|
|
663,019 |
|
|
3,907,811 |
|
|
|
210,231 |
|
|
|
2,929,028 |
|
|
616,413 |
|
|
3,545,441 |
|
|
|
186,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
164,013 |
|
|
10,939 |
|
|
174,952 |
|
|
|
63,501 |
|
|
|
160,945 |
|
|
7,003 |
|
|
167,948 |
|
|
|
56,749 |
|
Service
and fee income |
|
455,519 |
|
|
249,487 |
|
|
705,006 |
|
|
|
5,755 |
|
|
|
439,483 |
|
|
185,980 |
|
|
625,463 |
|
|
|
5,751 |
|
Total underwriting revenues |
|
$ |
3,864,324 |
|
|
$ |
923,445 |
|
|
$ |
4,787,769 |
|
|
|
$ |
279,487 |
|
|
|
$ |
3,529,456 |
|
|
$ |
809,396 |
|
|
$ |
4,338,852 |
|
|
|
$ |
249,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense (A) |
|
2,366,676 |
|
|
310,680 |
|
|
2,677,356 |
|
|
|
177,112 |
|
|
|
2,178,163 |
|
|
321,345 |
|
|
2,499,508 |
|
|
|
162,718 |
|
Acquisition costs and other
underwriting expenses |
|
559,980 |
|
|
222,348 |
|
|
782,328 |
|
|
|
45,039 |
|
|
|
508,557 |
|
|
184,726 |
|
|
693,283 |
|
|
|
41,983 |
|
General
and administrative expenses (B) |
|
756,093 |
|
|
254,208 |
|
|
1,010,301 |
|
|
|
85,994 |
|
|
|
712,113 |
|
|
201,808 |
|
|
913,921 |
|
|
|
83,756 |
|
Total underwriting expenses |
|
$ |
3,682,749 |
|
|
$ |
787,236 |
|
|
$ |
4,469,985 |
|
|
|
$ |
308,145 |
|
|
|
$ |
3,398,833 |
|
|
$ |
707,879 |
|
|
$ |
4,106,712 |
|
|
|
$ |
288,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
181,575 |
|
|
136,209 |
|
|
317,784 |
|
|
|
(28,658 |
) |
|
|
130,623 |
|
|
101,517 |
|
|
232,140 |
|
|
|
(39,196 |
) |
Non-cash amortization of intangible assets |
|
27,920 |
|
|
6,745 |
|
|
34,665 |
|
|
|
71 |
|
|
|
23,960 |
|
|
7,363 |
|
|
31,323 |
|
|
|
44 |
|
Underwriting income (loss)
before amortization and impairment |
|
$ |
209,495 |
|
|
$ |
142,954 |
|
|
$ |
352,449 |
|
|
|
$ |
(28,587 |
) |
|
|
$ |
154,583 |
|
|
$ |
108,880 |
|
|
$ |
263,463 |
|
|
|
$ |
(39,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (8) |
|
72.9 |
% |
|
46.9 |
% |
|
68.5 |
% |
|
|
84.2 |
% |
|
|
74.4 |
% |
|
52.1 |
% |
|
70.5 |
% |
|
|
87.1 |
% |
Operating expense ratio (Non-GAAP) (9) |
|
21.5 |
% |
|
32.6 |
% |
|
23.4 |
% |
|
|
29.4 |
% |
|
|
21.2 |
% |
|
31.4 |
% |
|
23.0 |
% |
|
|
33.9 |
% |
Combined ratio (Non-GAAP)
(10) |
|
94.4 |
% |
|
79.5 |
% |
|
91.9 |
% |
|
|
113.6 |
% |
|
|
95.6 |
% |
|
83.5 |
% |
|
93.5 |
% |
|
|
121.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before
amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (8) |
|
72.9 |
% |
|
46.9 |
% |
|
68.5 |
% |
|
|
84.2 |
% |
|
|
74.4 |
% |
|
52.1 |
% |
|
70.5 |
% |
|
|
87.1 |
% |
Operating expense ratio (Non-GAAP) (11) |
|
20.6 |
% |
|
31.6 |
% |
|
22.5 |
% |
|
|
29.4 |
% |
|
|
20.4 |
% |
|
30.2 |
% |
|
22.1 |
% |
|
|
33.8 |
% |
Combined ratio before
amortization and impairment (Non-GAAP) (12) |
|
93.5 |
% |
|
78.5 |
% |
|
91.0 |
% |
|
|
113.6 |
% |
|
|
94.8 |
% |
|
82.3 |
% |
|
92.6 |
% |
|
|
120.9 |
% |
(A) Loss and loss adjustment expenses for the
year ended December 31, 2019 included $46,623 of unfavorable
development on prior accident year loss and loss adjustment expense
reserves in the P&C segment, and $45,356 of favorable
development in the A&H segment, versus $4,760 of favorable
development in the P&C segment, and $30,977 of favorable
development in the A&H segment for the year ended December 31,
2018.
(B) General and administrative expenses includes
expenses allocated to segments only.
Reconciliation of Operating Expense Ratio
(Non-GAAP)(9,11,13)$ in thousands(Unaudited)
|
|
Three Months Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
Total underwriting expenses |
|
$ |
948,582 |
|
|
$ |
204,261 |
|
|
$ |
1,152,843 |
|
|
|
$ |
83,590 |
|
|
|
$ |
909,909 |
|
|
$ |
170,751 |
|
|
$ |
1,080,660 |
|
|
|
$ |
67,052 |
|
Less: Loss and loss adjustment
expense |
|
620,267 |
|
|
68,995 |
|
|
689,262 |
|
|
|
52,528 |
|
|
|
595,144 |
|
|
68,981 |
|
|
664,125 |
|
|
|
36,297 |
|
Less: Ceding commission
income |
|
35,926 |
|
|
2,159 |
|
|
38,085 |
|
|
|
13,055 |
|
|
|
42,281 |
|
|
6,214 |
|
|
48,495 |
|
|
|
17,226 |
|
Less:
Service and fee income |
|
107,474 |
|
|
71,802 |
|
|
179,276 |
|
|
|
1,284 |
|
|
|
110,776 |
|
|
51,394 |
|
|
162,170 |
|
|
|
1,285 |
|
Operating expense |
|
184,915 |
|
|
61,305 |
|
|
246,220 |
|
|
|
16,723 |
|
|
|
161,708 |
|
|
44,162 |
|
|
205,870 |
|
|
|
12,244 |
|
Net earned premium |
|
$ |
842,283 |
|
|
$ |
166,487 |
|
|
$ |
1,008,770 |
|
|
|
$ |
60,826 |
|
|
|
$ |
747,457 |
|
|
$ |
151,022 |
|
|
$ |
898,479 |
|
|
|
$ |
45,752 |
|
Operating expense ratio (Non-GAAP) (9) |
|
22.0 |
% |
|
36.8 |
% |
|
24.4 |
% |
|
|
27.5 |
% |
|
|
21.6 |
% |
|
29.2 |
% |
|
22.9 |
% |
|
|
26.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
948,582 |
|
|
$ |
204,261 |
|
|
$ |
1,152,843 |
|
|
|
$ |
83,590 |
|
|
|
$ |
909,909 |
|
|
$ |
170,751 |
|
|
$ |
1,080,660 |
|
|
|
$ |
67,052 |
|
Less: Loss and loss adjustment
expense |
|
620,267 |
|
|
68,995 |
|
|
689,262 |
|
|
|
52,528 |
|
|
|
595,144 |
|
|
68,981 |
|
|
664,125 |
|
|
|
36,297 |
|
Less: Ceding commission
income |
|
35,926 |
|
|
2,159 |
|
|
38,085 |
|
|
|
13,055 |
|
|
|
42,281 |
|
|
6,214 |
|
|
48,495 |
|
|
|
17,226 |
|
Less: Service and fee
income |
|
107,474 |
|
|
71,802 |
|
|
179,276 |
|
|
|
1,284 |
|
|
|
110,776 |
|
|
51,394 |
|
|
162,170 |
|
|
|
1,285 |
|
Less:
Non-cash amortization of intangible assets |
|
11,766 |
|
|
1,806 |
|
|
13,572 |
|
|
|
30 |
|
|
|
5,835 |
|
|
2,091 |
|
|
7,926 |
|
|
|
111 |
|
Operating expense before
amortization and impairment |
|
173,149 |
|
|
59,499 |
|
|
232,648 |
|
|
|
16,693 |
|
|
|
155,873 |
|
|
42,071 |
|
|
197,944 |
|
|
|
12,133 |
|
Net earned premium |
|
$ |
842,283 |
|
|
$ |
166,487 |
|
|
$ |
1,008,770 |
|
|
|
$ |
60,826 |
|
|
|
$ |
747,457 |
|
|
$ |
151,022 |
|
|
$ |
898,479 |
|
|
|
$ |
45,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense ratio before amortization and impairment
(Non-GAAP) (11) |
|
20.6 |
% |
|
35.7 |
% |
|
23.1 |
% |
|
|
27.4 |
% |
|
|
20.9 |
% |
|
27.9 |
% |
|
22.0 |
% |
|
|
26.5 |
% |
Reconciliation of Operating Expense Ratio
(Non-GAAP)(9,11,13)$ in thousands(Unaudited)
|
|
Year Ended December 31, |
|
|
2019 |
|
|
2018 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
Total underwriting expenses |
|
$ |
3,682,749 |
|
|
$ |
787,236 |
|
|
$ |
4,469,985 |
|
|
|
$ |
308,145 |
|
|
|
$ |
3,398,833 |
|
|
$ |
707,879 |
|
|
$ |
4,106,712 |
|
|
|
$ |
288,457 |
|
Less: Loss and loss adjustment
expense |
|
2,366,676 |
|
|
310,680 |
|
|
2,677,356 |
|
|
|
177,112 |
|
|
|
2,178,163 |
|
|
321,345 |
|
|
2,499,508 |
|
|
|
162,718 |
|
Less: Ceding commission
income |
|
164,013 |
|
|
10,939 |
|
|
174,952 |
|
|
|
63,501 |
|
|
|
160,945 |
|
|
7,003 |
|
|
167,948 |
|
|
|
56,749 |
|
Less:
Service and fee income |
|
455,519 |
|
|
249,487 |
|
|
705,006 |
|
|
|
5,755 |
|
|
|
439,483 |
|
|
185,980 |
|
|
625,463 |
|
|
|
5,751 |
|
Operating expense |
|
696,541 |
|
|
216,130 |
|
|
912,671 |
|
|
|
61,777 |
|
|
|
620,242 |
|
|
193,551 |
|
|
813,793 |
|
|
|
63,239 |
|
Net earned premium |
|
$ |
3,244,792 |
|
|
$ |
663,019 |
|
|
$ |
3,907,811 |
|
|
|
$ |
210,231 |
|
|
|
$ |
2,929,028 |
|
|
$ |
616,413 |
|
|
$ |
3,545,441 |
|
|
|
$ |
186,761 |
|
Operating expense ratio (Non-GAAP) (9) |
|
21.5 |
% |
|
32.6 |
% |
|
23.4 |
% |
|
|
29.4 |
% |
|
|
21.2 |
% |
|
31.4 |
% |
|
23.0 |
% |
|
|
33.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
3,682,749 |
|
|
$ |
787,236 |
|
|
$ |
4,469,985 |
|
|
|
$ |
308,145 |
|
|
|
$ |
3,398,833 |
|
|
$ |
707,879 |
|
|
$ |
4,106,712 |
|
|
|
$ |
288,457 |
|
Less: Loss and loss adjustment
expense |
|
2,366,676 |
|
|
310,680 |
|
|
2,677,356 |
|
|
|
177,112 |
|
|
|
2,178,163 |
|
|
321,345 |
|
|
2,499,508 |
|
|
|
162,718 |
|
Less: Ceding commission
income |
|
164,013 |
|
|
10,939 |
|
|
174,952 |
|
|
|
63,501 |
|
|
|
160,945 |
|
|
7,003 |
|
|
167,948 |
|
|
|
56,749 |
|
Less: Service and fee
income |
|
455,519 |
|
|
249,487 |
|
|
705,006 |
|
|
|
5,755 |
|
|
|
439,483 |
|
|
185,980 |
|
|
625,463 |
|
|
|
5,751 |
|
Less:
Non-cash amortization of intangible assets |
|
27,920 |
|
|
6,745 |
|
|
34,665 |
|
|
|
71 |
|
|
|
23,960 |
|
|
7,363 |
|
|
31,323 |
|
|
|
44 |
|
Operating expense before
amortization and impairment |
|
668,621 |
|
|
209,385 |
|
|
878,006 |
|
|
|
61,706 |
|
|
|
596,282 |
|
|
186,188 |
|
|
782,470 |
|
|
|
63,195 |
|
Net earned premium |
|
$ |
3,244,792 |
|
|
$ |
663,019 |
|
|
$ |
3,907,811 |
|
|
|
$ |
210,231 |
|
|
|
$ |
2,929,028 |
|
|
$ |
616,413 |
|
|
$ |
3,545,441 |
|
|
|
$ |
186,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense ratio before amortization and impairment
(Non-GAAP) (11) |
|
20.6 |
% |
|
31.6 |
% |
|
22.5 |
% |
|
|
29.4 |
% |
|
|
20.4 |
% |
|
30.2 |
% |
|
22.1 |
% |
|
|
33.8 |
% |
Premiums by Product Line$ in
thousands(Unaudited)
|
Three Months Ended December 31, |
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
2019 |
|
2018 |
|
Change |
|
|
2019 |
|
2018 |
|
Change |
|
|
2019 |
|
2018 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
637,500 |
|
|
$ |
619,180 |
|
|
3.0 |
% |
|
|
$ |
529,481 |
|
|
$ |
474,173 |
|
|
11.7 |
% |
|
|
$ |
569,014 |
|
|
$ |
490,874 |
|
|
15.9 |
% |
Homeowners |
174,763 |
|
|
164,698 |
|
|
6.1 |
% |
|
|
128,028 |
|
|
75,830 |
|
|
68.8 |
% |
|
|
132,715 |
|
|
87,689 |
|
|
51.3 |
% |
RV/Packaged |
43,950 |
|
|
43,967 |
|
|
— |
% |
|
|
36,690 |
|
|
43,806 |
|
|
(16.2 |
)% |
|
|
44,900 |
|
|
51,347 |
|
|
(12.6 |
)% |
Small Business Auto |
68,875 |
|
|
72,851 |
|
|
(5.5 |
)% |
|
|
52,846 |
|
|
52,142 |
|
|
1.4 |
% |
|
|
62,402 |
|
|
59,285 |
|
|
5.3 |
% |
Lender-placed insurance |
110,002 |
|
|
103,061 |
|
|
6.7 |
% |
|
|
57,308 |
|
|
67,439 |
|
|
(15.0 |
)% |
|
|
23,636 |
|
|
53,182 |
|
|
(55.6 |
)% |
Other |
10,836 |
|
|
8,381 |
|
|
29.3 |
% |
|
|
3,221 |
|
|
3,004 |
|
|
7.2 |
% |
|
|
9,616 |
|
|
5,080 |
|
|
89.3 |
% |
Total Premium |
$ |
1,045,926 |
|
|
$ |
1,012,138 |
|
|
3.3 |
% |
|
|
$ |
807,574 |
|
|
$ |
716,394 |
|
|
12.7 |
% |
|
|
$ |
842,283 |
|
|
$ |
747,457 |
|
|
12.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group |
$ |
75,352 |
|
|
$ |
62,693 |
|
|
20.2 |
% |
|
|
$ |
60,477 |
|
|
$ |
51,626 |
|
|
17.1 |
% |
|
|
$ |
60,477 |
|
|
$ |
51,618 |
|
|
17.2 |
% |
Individual |
88,012 |
|
|
76,232 |
|
|
15.5 |
% |
|
|
87,733 |
|
|
76,181 |
|
|
15.2 |
% |
|
|
88,129 |
|
|
75,883 |
|
|
16.1 |
% |
International |
12,482 |
|
|
24,624 |
|
|
(49.3 |
)% |
|
|
12,159 |
|
|
12,545 |
|
|
(3.1 |
)% |
|
|
17,881 |
|
|
23,521 |
|
|
(24.0 |
)% |
Total Premium |
$ |
175,846 |
|
|
$ |
163,549 |
|
|
7.5 |
% |
|
|
$ |
160,369 |
|
|
$ |
140,352 |
|
|
14.3 |
% |
|
|
$ |
166,487 |
|
|
$ |
151,022 |
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
1,221,772 |
|
|
$ |
1,175,687 |
|
|
3.9 |
% |
|
|
$ |
967,943 |
|
|
$ |
856,746 |
|
|
13.0 |
% |
|
|
$ |
1,008,770 |
|
|
$ |
898,479 |
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
32,676 |
|
|
$ |
36,527 |
|
|
(10.5 |
)% |
|
|
$ |
33,498 |
|
|
$ |
20,899 |
|
|
60.3 |
% |
|
|
$ |
40,642 |
|
|
$ |
21,111 |
|
|
92.5 |
% |
Homeowners |
68,953 |
|
|
74,421 |
|
|
(7.3 |
)% |
|
|
29,829 |
|
|
30,049 |
|
|
(0.7 |
)% |
|
|
19,489 |
|
|
24,228 |
|
|
(19.6 |
)% |
Other |
836 |
|
|
954 |
|
|
(12.4 |
)% |
|
|
(1,315 |
) |
|
377 |
|
|
nm |
|
|
|
695 |
|
|
413 |
|
|
68.3 |
% |
Total Premium |
$ |
102,465 |
|
|
$ |
111,902 |
|
|
(8.4 |
)% |
|
|
$ |
62,012 |
|
|
$ |
51,325 |
|
|
20.8 |
% |
|
|
$ |
60,826 |
|
|
$ |
45,752 |
|
|
32.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total |
$ |
1,324,237 |
|
|
$ |
1,287,589 |
|
|
2.8 |
% |
|
|
$ |
1,029,955 |
|
|
$ |
908,071 |
|
|
13.4 |
% |
|
|
$ |
1,069,596 |
|
|
$ |
944,231 |
|
|
13.3 |
% |
nm - not meaningful
Premiums by Product Line$ in
thousands(Unaudited)
|
Year Ended December 31, |
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
2019 |
|
2018 |
|
Change |
|
|
2019 |
|
2018 |
|
Change |
|
|
2019 |
|
2018 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
2,721,202 |
|
|
$ |
2,637,743 |
|
|
3.2 |
% |
|
|
$ |
2,260,385 |
|
|
$ |
2,016,858 |
|
|
12.1 |
% |
|
|
$ |
2,190,748 |
|
|
$ |
1,927,667 |
|
|
13.6 |
% |
Homeowners |
718,819 |
|
|
689,040 |
|
|
4.3 |
% |
|
|
404,278 |
|
|
331,120 |
|
|
22.1 |
% |
|
|
405,306 |
|
|
329,850 |
|
|
22.9 |
% |
RV/Packaged |
212,746 |
|
|
208,394 |
|
|
2.1 |
% |
|
|
198,737 |
|
|
206,740 |
|
|
(3.9 |
)% |
|
|
195,639 |
|
|
197,258 |
|
|
(0.8 |
)% |
Small Business Auto |
315,569 |
|
|
319,299 |
|
|
(1.2 |
)% |
|
|
249,067 |
|
|
233,456 |
|
|
6.7 |
% |
|
|
252,359 |
|
|
237,587 |
|
|
6.2 |
% |
Lender-placed insurance |
342,267 |
|
|
363,056 |
|
|
(5.7 |
)% |
|
|
198,171 |
|
|
202,069 |
|
|
(1.9 |
)% |
|
|
182,231 |
|
|
215,811 |
|
|
(15.6 |
)% |
Other |
56,413 |
|
|
53,876 |
|
|
4.7 |
% |
|
|
18,905 |
|
|
27,366 |
|
|
(30.9 |
)% |
|
|
18,509 |
|
|
20,855 |
|
|
(11.2 |
)% |
Total Premium |
$ |
4,367,016 |
|
|
$ |
4,271,408 |
|
|
2.2 |
% |
|
|
$ |
3,329,543 |
|
|
$ |
3,017,609 |
|
|
10.3 |
% |
|
|
$ |
3,244,792 |
|
|
$ |
2,929,028 |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group |
$ |
288,549 |
|
|
$ |
239,729 |
|
|
20.4 |
% |
|
|
$ |
231,388 |
|
|
$ |
197,386 |
|
|
17.2 |
% |
|
|
$ |
231,398 |
|
|
$ |
197,406 |
|
|
17.2 |
% |
Individual |
340,731 |
|
|
308,122 |
|
|
10.6 |
% |
|
|
340,049 |
|
|
308,065 |
|
|
10.4 |
% |
|
|
340,251 |
|
|
307,952 |
|
|
10.5 |
% |
International |
139,337 |
|
|
150,258 |
|
|
(7.3 |
)% |
|
|
89,169 |
|
|
121,088 |
|
|
(26.4 |
)% |
|
|
91,370 |
|
|
111,055 |
|
|
(17.7 |
)% |
Total Premium |
$ |
768,617 |
|
|
$ |
698,109 |
|
|
10.1 |
% |
|
|
$ |
660,606 |
|
|
$ |
626,539 |
|
|
5.4 |
% |
|
|
$ |
663,019 |
|
|
$ |
616,413 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
5,135,633 |
|
|
$ |
4,969,517 |
|
|
3.3 |
% |
|
|
$ |
3,990,149 |
|
|
$ |
3,644,148 |
|
|
9.5 |
% |
|
|
$ |
3,907,811 |
|
|
$ |
3,545,441 |
|
|
10.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
152,688 |
|
|
$ |
153,129 |
|
|
(0.3 |
)% |
|
|
$ |
134,958 |
|
|
$ |
61,759 |
|
|
nm |
|
|
|
$ |
106,549 |
|
|
$ |
59,923 |
|
|
77.8 |
% |
Homeowners |
290,972 |
|
|
291,907 |
|
|
(0.3 |
)% |
|
|
98,009 |
|
|
120,875 |
|
|
(18.9 |
)% |
|
|
101,964 |
|
|
125,806 |
|
|
(19.0 |
)% |
Other |
3,787 |
|
|
3,887 |
|
|
(2.6 |
)% |
|
|
1,505 |
|
|
931 |
|
|
61.7 |
% |
|
|
1,718 |
|
|
1,032 |
|
|
66.5 |
% |
Total Premium |
$ |
447,447 |
|
|
$ |
448,923 |
|
|
(0.3 |
)% |
|
|
$ |
234,472 |
|
|
$ |
183,565 |
|
|
27.7 |
% |
|
|
$ |
210,231 |
|
|
$ |
186,761 |
|
|
12.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total
(A) |
$ |
5,583,080 |
|
|
$ |
5,416,839 |
|
|
3.1 |
% |
|
|
$ |
4,224,621 |
|
|
$ |
3,827,713 |
|
|
10.4 |
% |
|
|
$ |
4,118,042 |
|
|
$ |
3,732,202 |
|
|
10.3 |
% |
nm - not meaningful
(A) Consolidated Total includes eliminations
between National General and the Reciprocal Exchanges of $(567) in
Personal Auto and $(1,034) in Homeowners Gross Written Premium in
the year ended December 31, 2018, respectively.
Fee Income$ in
thousands(Unaudited)
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
Service and Fee Income |
$ |
107,474 |
|
|
$ |
110,776 |
|
|
(3.0 |
)% |
|
$ |
455,519 |
|
|
$ |
439,483 |
|
|
3.6 |
% |
Ceding Commission Income |
35,926 |
|
|
42,281 |
|
|
(15.0 |
)% |
|
164,013 |
|
|
160,945 |
|
|
1.9 |
% |
Property & Casualty |
$ |
143,400 |
|
|
$ |
153,057 |
|
|
(6.3 |
)% |
|
$ |
619,532 |
|
|
$ |
600,428 |
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
Service and Fee Income |
|
|
|
|
|
|
|
|
|
|
|
Group |
$ |
36,122 |
|
|
$ |
29,736 |
|
|
21.5 |
% |
|
$ |
134,206 |
|
|
$ |
104,504 |
|
|
28.4 |
% |
Individual |
4,144 |
|
|
1,331 |
|
|
nm |
|
|
9,650 |
|
|
9,304 |
|
|
3.7 |
% |
Third Party Fee |
31,536 |
|
|
20,327 |
|
|
55.1 |
% |
|
105,631 |
|
|
72,172 |
|
|
46.4 |
% |
Total Service and Fee
Income |
71,802 |
|
|
51,394 |
|
|
39.7 |
% |
|
249,487 |
|
|
185,980 |
|
|
34.1 |
% |
Ceding Commission Income |
2,159 |
|
|
6,214 |
|
|
(65.3 |
)% |
|
10,939 |
|
|
7,003 |
|
|
56.2 |
% |
Accident and Health |
$ |
73,961 |
|
|
$ |
57,608 |
|
|
28.4 |
% |
|
$ |
260,426 |
|
|
$ |
192,983 |
|
|
34.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
217,361 |
|
|
$ |
210,665 |
|
|
3.2 |
% |
|
$ |
879,958 |
|
|
$ |
793,411 |
|
|
10.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
Service and Fee Income |
$ |
1,284 |
|
|
$ |
1,285 |
|
|
(0.1 |
)% |
|
$ |
5,755 |
|
|
$ |
5,751 |
|
|
0.1 |
% |
Ceding Commission Income |
13,055 |
|
|
17,226 |
|
|
(24.2 |
)% |
|
63,501 |
|
|
56,749 |
|
|
11.9 |
% |
Reciprocal Exchanges |
$ |
14,339 |
|
|
$ |
18,511 |
|
|
(22.5 |
)% |
|
$ |
69,256 |
|
|
$ |
62,500 |
|
|
10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total
(A) |
$ |
217,064 |
|
|
$ |
211,991 |
|
|
2.4 |
% |
|
$ |
880,418 |
|
|
$ |
786,280 |
|
|
12.0 |
% |
nm - not meaningful
(A) Consolidated Total includes eliminations
between National General and the Reciprocal Exchanges in Service
and Fee Income of $(14,636) and $(17,185) in the three months ended
December 31, 2019 and 2018, respectively, and $(68,796) and
$(69,631) in the year ended December 31, 2019 and 2018,
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, 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, and any significant
non-recurring or infrequent items that may not be indicative of
ongoing operations. 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
financial measures to the most directly comparable GAAP
measure.
(2) Total investments includes $238,841 and $233,723 in related
parties at December 31, 2019 and December 31, 2018,
respectively.
(3) Reinsurance balances includes $0 and $7,425 from related
parties at December 31, 2019 and December 31, 2018,
respectively.
(4) Other includes $2,391 and $2,362 from related parties at
December 31, 2019 and December 31, 2018,
respectively.
(5) Accounts payable and accrued expenses includes $639 and
$69,874 to related parties at December 31, 2019 and
December 31, 2018, respectively.
(6) Common stock: $0.01 par value - authorized 150,000,000
shares, issued and outstanding 113,368,811 shares -
December 31, 2019; authorized 150,000,000 shares, issued and
outstanding 112,940,595 shares - December 31, 2018.
(7) Preferred stock: $0.01 par value - authorized 10,000,000
shares, issued and outstanding 2,565,120 shares - December 31,
2019; authorized 10,000,000 shares, issued and outstanding
2,565,120 shares - December 31, 2018.
(8) Loss and loss adjustment expense ratio (loss ratio) is
calculated by dividing loss and loss adjustment expense by net
earned premium.
(9) Operating expense ratio is a non-GAAP financial measure
defined by the Company, which 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, service and
fee income and other general and administrative expenses
(arbitration award / litigation settlement expense). The ratio is
used as an indicator of the Company’s efficiency in acquiring and
servicing its business.
(10) Combined ratio is a non-GAAP financial measure defined by
the Company, which is commonly used in the insurance industry. The
Company calculates the ratio by adding the loss and loss adjustment
expense ratio(8) and the operating expense ratio (non-GAAP)(9)
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. Management uses
operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to
evaluate financial performance against historical results and
establish targets. A combined ratio under 100% generally indicates
an underwriting profit, while over 100% an underwriting loss.
(11) Operating expense ratio before amortization and impairment
is a non-GAAP financial measure defined by the Company, which 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, service and fee income and other
general and administrative expenses (arbitration award / litigation
settlement expense) 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. Management believes that this measure provides a more
useful comparison to the operating expense ratio of other insurance
companies involved in fewer acquisitions.
(12) Combined ratio before amortization and impairment is a
non-GAAP financial measure defined by the Company, which is
commonly used in the insurance industry. The Company calculates the
ratio by adding the loss and loss adjustment expense ratio(8) and
the operating expense ratio before amortization and impairment
(non-GAAP)(11) 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. Management
believes that this measure of underwriting profitability provides a
more useful comparison to the combined ratio of other insurance
companies involved in fewer acquisitions. A combined ratio under
100% generally indicates an underwriting profit, while over 100% an
underwriting loss.
(13) Combined ratio (non-GAAP), operating expense ratio
(non-GAAP), combined ratio before amortization and impairment
(non-GAAP) and operating expense ratio before amortization and
impairment (non-GAAP) are considered non-GAAP financial measures
under applicable SEC rules. Other companies may calculate these
ratios 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 financial 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
(non-GAAP) to average shareholders’ equity for the same
twelve-month period. Average shareholders’ equity is the sum of the
shareholders’ equity excluding preferred stock at the beginning and
end of the period 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) Our products in the P&C segment include personal auto,
homeowners, RV/Packaged, small business auto, lender-placed
insurance and other products. The personal auto product includes
policies for standard, preferred and nonstandard automobile
insurance. The homeowners product includes multiple-peril policies
and personal umbrella coverage to the homeowner. The RV/Packaged
product offers policies that include RV automatic personal effects
coverage, optional replacement cost coverage, RV storage coverage
and full-time liability coverage. The small business auto product
offers policies that include liability and physical damage coverage
for light-to-medium duty commercial vehicles. The lender-placed
insurance product offers fire, home and flood products, as well as
collateral protection insurance and guaranteed asset protection
products for automobiles. Our products and revenue in the A&H
segment include group, individual and third party fees. The group
product includes revenue from our small group self-funded product.
The individual product line includes revenue from our supplemental
products including short-term medical, accident/AD&D, hospital
indemnity, cancer/critical illness, dental and term life insurance.
Third party fees include commission and general agent fees for
selling policies issued by third-party insurance companies, fees
generated through selling our technology products to third parties
and fees from our international health insurance offerings.
Investor Contact
Paul AndersonDirector of Investor RelationsPhone:
212-380-9462Email: Paul.Anderson@NGIC.com
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