National General Holdings Corp. (Nasdaq: NGHC) reported first
quarter 2020 net income of $92.9 million or $0.80 per diluted
share, compared to net income of $83.9 million or $0.72 per
diluted share in the first quarter of 2019. First quarter 2020
operating earnings (non-GAAP)(1) were $105.8 million or $0.91
per diluted share compared to $89.7 million or $0.77 per
diluted share in the first quarter of 2019.
First Quarter 2020 Highlights versus
First Quarter 2019*
- Gross written premium decreased by $19.5 million to
$1,384.7 million compared to the prior year’s quarter due to
the sale of our EuroAccident international business in the fourth
quarter of 2019. Excluding our A&H international business, our
P&C segment had growth of 4.5%, driven by the acquisition of
National Farmers Union Property and Casualty Company (“Farmers
Union Insurance”), acquired in the third quarter of 2019; and our
A&H domestic segment had growth of 25.4%.
- The overall combined ratio(10,11) was 87.8% compared to 89.0%
in the prior year’s quarter, excluding non-cash amortization of
intangible assets. The P&C segment reported a decrease in the
combined ratio to 89.9% from 90.1% in the prior year’s quarter. The
combined ratio includes prior year unfavorable development of $4.5
million compared to $5.5 million favorable in the prior year’s
quarter, $8.1 million of catastrophe losses related to
weather-related events compared to $12.1 million of catastrophe
losses in the prior year’s quarter. The A&H segment reported a
decrease in the combined ratio to 77.3% from 84.2% in the prior
year’s quarter, driven by strong operating results in our small
group self-funded and individual products, absence of our
international business which was sold in the fourth quarter of 2019
and growth in service fee income in our group administration fees
and third party technology fees.
- Service and fee income grew 6.0% to $191.2 million, driven
by growth primarily in our group administration fees and third
party technology fees within our A&H segment.
- Stockholders’ equity was $2.71 billion and fully diluted book
value per share was $19.41 at March 31, 2020, growth of 2.1%
and 1.8%, respectively, from December 31, 2019. Excluding
accumulated other comprehensive income, fully diluted book value
per share was $19.03 at March 31, 2020, growth of 3.3%, from
December 31, 2019. Our trailing twelve-month operating return on
average equity (ROE)(12) was 16.1% as of March 31, 2020.
- First quarter of 2020 operating earnings (non-GAAP)(1) excludes
the following, net of tax: $2.9 million or $0.03 per share
loss on equity method investments, $4.8 million or $0.04 per share
of net loss on investments and $5.1 million or $0.04 per share
of non-cash amortization of intangible assets.
Barry Karfunkel, National General’s CEO, stated: “The first
quarter of 2020 was a strong quarter for National General
generating an 87.8% combined ratio and $105.8 million of
operating earnings. Both our P&C and A&H segments
contributed to our performance and continue to demonstrate the
strength of our diversified franchise. I am very pleased with how
seamlessly the National General team was able to transition to
remote operations in response to COVID-19 while ensuring the safety
of our employees, without sustaining any business interruption. We
feel confident going into this challenging economic period with a
broadly diversified business which includes our Auto, Home, Lender
Placed and A&H products.”
*NOTE: Unless specified otherwise, discussion
of our first quarter 2020 and 2019 results do not include financial
results from the Reciprocal Exchanges, which are presented within
our consolidated financial results within this release but are not
included in net income available to NGHC common stockholders.
Overview of First Quarter 2020 as
Compared to First Quarter 2019
- Property & Casualty - Gross written
premium grew by 4.5% to $1,197.7 million, net written premium
increased by 7.7% to $986.1 million, and net earned premium
increased by 12.7% to $852.9 million. P&C gross written
premium growth was primarily driven by $49.0 million added
premiums from the acquisition of Farmers Union Insurance. Service
and fee income was $110.6 million compared to $119.4 million
in the prior year’s quarter. Excluding non-cash amortization of
intangible assets, the combined ratio(10,11) was 89.9% with a loss
and LAE ratio of 66.6% and an expense ratio(9,11) of 23.3%, versus
a prior year combined ratio of 90.1% with a loss and LAE ratio of
69.4% and an expense ratio of 20.7%. The loss and LAE ratio
benefited from by pre-tax catastrophe losses of approximately
$8.1 million primarily related to weather-related events in
the first quarter of 2020, compared to $12.1 million of losses in
the first quarter of 2019. Unfavorable loss development was
$4.5 million in the first quarter of 2020 primarily driven by
small business auto, compared to favorable loss development of
$5.5 million in the first quarter of 2019. The loss and LAE
ratio reflects stronger accident year quarter experience versus
prior year’s quarter.
- Accident & Health - Gross written premium
decreased by $71.5 million compared to the prior year’s quarter due
to the sale of our EuroAccident international business in the
fourth quarter of 2019. Excluding our A&H international
business, our A&H domestic segment grew by 25.4% to
$187.0 million. The A&H domestic segment increase was
driven by growth in both our small group self-funded and individual
products. Service and fee income grew 32.0% to $80.5 million
compared to $61.0 million in the prior year’s quarter,
primarily driven by group administration fees and third party
technology services fees. Excluding non-cash amortization of
intangible assets, the combined ratio(10,11) was 77.3% with a loss
and LAE ratio of 49.5% and an expense ratio(9,11) of 27.8%, versus
a prior year combined ratio of 84.2% with a loss and LAE ratio of
52.5% and an expense ratio of 31.7%. The loss and LAE ratio
reflects strong performance in both small group self-funded and
individual products. Favorable loss development was $4.8 million in
the first quarter of 2020, compared to favorable loss development
of $10.9 million in the first quarter of 2019.
- Reciprocal Exchanges - Results for the
Reciprocal Exchanges are not included in net income available to
NGHC common stockholders. Gross written premium was
$91.9 million, net written premium was $55.3 million, and
net earned premium was $57.6 million. Reciprocal Exchanges
combined ratio(10,11) excluding non-cash amortization of intangible
assets was 99.9% with a loss and LAE ratio of 73.6% and an expense
ratio(9,11) of 26.3%.
First quarter of 2020 investment income decreased to
$29.7 million, compared to $34.3 million in the first
quarter of 2019. The decrease primarily reflects lower income on
alternative assets in the quarter. Total investments and cash and
cash equivalents (including restricted cash) were $4.9 billion
as of March 31, 2020. Accumulated other comprehensive income
decreased to a $43.8 million gain at March 31, 2020, from
a $74.5 million gain at December 31, 2019, primarily due
to the effects of the interest rate environment and the market
impacts of COVID-19.
Interest expense was $11.8 million, down from
$13.0 million in the prior year’s quarter. Debt was
$685.1 million at March 31, 2020, compared to
$686.0 million at December 31, 2019.
The first quarter of 2020 provision for income taxes was
$28.2 million and the effective tax rate for the quarter was
21.9% compared with income taxes of $24.2 million and an
effective rate of 20.9% in the first quarter of 2019.
Stockholders’ equity was $2,705.5 million at March 31,
2020, growth of 2.1% from $2,649.5 million at December 31,
2019. Fully diluted book value per share was $19.41 at
March 31, 2020, growth of 1.8% from $19.06 at
December 31, 2019. Excluding accumulated other comprehensive
income, fully diluted book value per share was $19.03 at March 31,
2020, growth of 3.3%, from December 31, 2019. Our trailing
twelve-month operating return on average equity (ROE)(12) was 16.1%
as of March 31, 2020.
Year-to-Date P&C Segment Notable Large
Losses |
Year |
|
Quarter |
|
Event |
|
P&C Notable Large Losses and LAE ($
millions) |
|
P&C Loss and LAE Ratio Points* |
|
EPS Impact After Tax |
2020 |
|
Q1 |
|
Weather-related Events |
|
$8.1 |
|
0.9% |
|
$0.06 |
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
Q1 |
|
Winter Weather |
|
$12.1 |
|
1.6% |
|
$0.08 |
* Loss and LAE ratio points related to P&C net earned
premium in quarter the loss event was recorded.
Additional items
Share Repurchase - On April 29, 2020, the Board
of Directors of the Company authorized and approved a share
repurchase program for up to $50 million aggregate purchase price
of the currently outstanding shares of the Company’s common stock
over the next 12 months. Under the share repurchase program, the
Company may from time to time repurchase shares through open market
or block purchases, or otherwise in accordance with applicable
federal securities laws, including Rule 10b-18 of the Securities
Exchange Act of 1934 (the “Exchange Act”). The Company’s share
repurchase program may be modified, suspended or terminated at any
time.
The Company cannot predict the timing or number of shares it may
repurchase as the share repurchase program will depend on various
factors, including price and general business and market
conditions. Information regarding share repurchases will be
available in the Company’s periodic reports on Form 10-Q and 10-K
filed with the Securities and Exchange Commission as required by
the applicable rules of the Exchange Act.
Auto Quota Share - Effective January 1, 2020,
we cede 5.0% of net liability under our auto quota share
reinsurance agreement.
Conference Call
On Thursday, April 30, 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:
800-346-7359973 Access
Number:
973-528-0008Conference Entry
Code:
929313Webcast
Registration:
http://ir.nationalgeneral.com/events-and-presentations
A replay of the conference call will be accessible from 2:00 PM
ET on Thursday, April 30, 2020 to 11:59 PM ET on Thursday,
May 14, 2020 by dialing either 800-332-6854 (toll-free) within
the U.S. or 973-528-0005 outside the U.S. and entering passcode
929313. 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 effects of
pandemics or other widespread health problems such as the ongoing
COVID-19 pandemic on our business, 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 - First
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
1,384,701 |
|
|
|
$ |
91,853 |
|
|
|
$ |
1,476,554 |
|
|
|
|
$ |
1,404,209 |
|
|
$ |
105,569 |
|
|
|
$ |
1,509,778 |
|
|
|
Net written premium |
|
1,154,308 |
|
|
|
55,295 |
|
|
|
1,209,603 |
|
|
|
|
1,115,709 |
|
|
48,955 |
|
|
|
1,164,664 |
|
|
|
Net earned premium |
|
1,017,608 |
|
|
|
57,598 |
|
|
|
1,075,206 |
|
|
|
|
918,499 |
|
|
45,658 |
|
|
|
964,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
36,591 |
|
|
|
13,714 |
|
|
|
50,305 |
|
|
|
|
51,000 |
|
|
18,534 |
|
|
|
69,534 |
|
|
|
Service and fee income |
|
191,157 |
|
|
|
1,157 |
|
|
|
179,441 |
|
|
(A) |
|
180,388 |
|
|
1,370 |
|
|
|
165,507 |
|
|
(G) |
Net investment income |
|
29,747 |
|
|
|
2,183 |
|
|
|
30,243 |
|
|
(B) |
|
34,283 |
|
|
2,170 |
|
|
|
33,445 |
|
|
(H) |
Net gain (loss) on investments |
|
(6,068 |
) |
|
|
(793 |
) |
|
|
(6,861 |
) |
|
|
|
766 |
|
|
(744 |
) |
|
|
22 |
|
|
|
Total revenues |
|
$ |
1,269,035 |
|
|
|
$ |
73,859 |
|
|
|
$ |
1,328,334 |
|
|
(C) |
|
$ |
1,184,936 |
|
|
$ |
66,988 |
|
|
|
$ |
1,232,665 |
|
|
(I) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
649,631 |
|
|
|
$ |
42,367 |
|
|
|
$ |
691,998 |
|
|
|
|
$ |
609,784 |
|
|
$ |
42,025 |
|
|
|
$ |
651,809 |
|
|
|
Acquisition costs and other underwriting expenses |
|
217,745 |
|
|
|
10,497 |
|
|
|
228,242 |
|
|
|
|
203,333 |
|
|
8,585 |
|
|
|
211,918 |
|
|
|
General and administrative expenses |
|
260,879 |
|
|
|
19,563 |
|
|
|
267,569 |
|
|
(D) |
|
242,833 |
|
|
21,512 |
|
|
|
248,094 |
|
|
(J) |
Interest expense |
|
11,780 |
|
|
|
1,687 |
|
|
|
11,780 |
|
|
(E) |
|
12,999 |
|
|
3,008 |
|
|
|
12,999 |
|
|
(K) |
Total expenses |
|
$ |
1,140,035 |
|
|
|
$ |
74,114 |
|
|
|
$ |
1,199,589 |
|
|
(F) |
|
$ |
1,068,949 |
|
|
$ |
75,130 |
|
|
|
$ |
1,124,820 |
|
|
(L) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision
(benefit) for income taxes |
|
$ |
129,000 |
|
|
|
$ |
(255 |
) |
|
|
$ |
128,745 |
|
|
|
|
$ |
115,987 |
|
|
$ |
(8,142 |
) |
|
|
$ |
107,845 |
|
|
|
Provision (benefit) for income taxes |
|
28,241 |
|
|
|
(69 |
) |
|
|
28,172 |
|
|
|
|
24,229 |
|
|
(1,723 |
) |
|
|
22,506 |
|
|
|
Net income (loss) before
non-controlling interest and dividends on preferred shares |
|
100,759 |
|
|
|
(186 |
) |
|
|
100,573 |
|
|
|
|
91,758 |
|
|
(6,419 |
) |
|
|
85,339 |
|
|
|
Less: net income (loss) attributable to noncontrolling
interest |
|
— |
|
|
|
(186 |
) |
|
|
(186 |
) |
|
|
|
— |
|
|
(6,419 |
) |
|
|
(6,419 |
) |
|
|
Net income before dividends on
preferred shares |
|
100,759 |
|
|
|
— |
|
|
|
100,759 |
|
|
|
|
91,758 |
|
|
— |
|
|
|
91,758 |
|
|
|
Less: dividends on preferred shares |
|
7,875 |
|
|
|
— |
|
|
|
7,875 |
|
|
|
|
7,875 |
|
|
— |
|
|
|
7,875 |
|
|
|
Net income available to common stockholders |
|
$ |
92,884 |
|
|
|
$ |
— |
|
|
|
$ |
92,884 |
|
|
|
|
$ |
83,883 |
|
|
$ |
— |
|
|
|
$ |
83,883 |
|
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(12,873), (B) $(1,687), (C)
$(14,560), (D) $(12,873), (E) $(1,687), (F) $(14,560) (G)
$(16,251), (H) $(3,008), (I) $(19,259), (J) $(16,251), (K) $(3,008)
and (L) $(19,259).
Earnings and Per Share Data$ in
thousands, except shares and per share data(Unaudited)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
Net income available to common
stockholders |
$ |
92,884 |
|
|
$ |
83,883 |
|
Basic net income per common share |
$ |
0.82 |
|
|
$ |
0.74 |
|
Diluted net income per common share |
$ |
0.80 |
|
|
$ |
0.72 |
|
|
|
|
|
Operating earnings
attributable to NGHC (non-GAAP)(1) |
$ |
105,759 |
|
|
$ |
89,716 |
|
Basic operating earnings per common share (non-GAAP)(1) |
$ |
0.93 |
|
|
$ |
0.79 |
|
Diluted operating earnings per common share (non-GAAP)(1) |
$ |
0.91 |
|
|
$ |
0.77 |
|
|
|
|
|
Dividends declared per common
share |
$ |
0.05 |
|
|
$ |
0.04 |
|
|
|
|
|
Weighted average number of
basic shares outstanding |
113,557,441 |
|
|
113,014,711 |
|
Weighted average number of
diluted shares outstanding |
116,075,344 |
|
|
116,075,226 |
|
Shares outstanding, end of
period |
113,708,996 |
|
|
113,137,346 |
|
Fully diluted shares
outstanding, end of period |
116,226,899 |
|
|
116,197,861 |
|
Book value per share |
$ |
19.84 |
|
|
$ |
16.82 |
|
Fully diluted book value per
share |
$ |
19.41 |
|
|
$ |
16.38 |
|
Reconciliation of Net Income to Operating
Earnings (Non-GAAP)(1)(12)$ in thousands, except per share
data(Unaudited)
|
|
Three Months Ended March 31, |
|
|
2020 |
|
2019 |
Net income available
to common stockholders |
|
$ |
92,884 |
|
|
|
$ |
83,883 |
|
|
Add (subtract): |
|
|
|
|
Equity in losses of equity method investments |
|
3,728 |
|
|
|
934 |
|
|
Net (gain) loss on investments |
|
6,068 |
|
|
|
(766 |
) |
|
Non-cash amortization of intangible assets |
|
6,502 |
|
|
|
7,216 |
|
|
Income tax expense (benefit) |
|
(3,423 |
) |
|
|
(1,551 |
) |
|
Operating earnings attributable to NGHC
(non-GAAP)(1) |
|
$ |
105,759 |
|
|
|
$ |
89,716 |
|
|
|
|
|
|
|
Operating earnings per
common share (non-GAAP)(1): |
|
|
|
|
Basic operating earnings per common share
(non-GAAP)(1) |
|
$ |
0.93 |
|
|
|
$ |
0.79 |
|
|
Diluted operating earnings per common share
(non-GAAP)(1) |
|
$ |
0.91 |
|
|
|
$ |
0.77 |
|
|
Balance Sheet$ in
thousands(Unaudited)
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
ASSETS |
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Total investments (2) |
|
$ |
4,514,671 |
|
|
$ |
333,521 |
|
|
|
$ |
4,740,698 |
|
|
(A) |
|
$ |
4,632,960 |
|
|
$ |
329,494 |
|
|
|
$ |
4,854,998 |
|
|
(H) |
Cash and cash equivalents,
including restricted cash |
|
339,756 |
|
|
116 |
|
|
|
339,872 |
|
|
|
|
163,480 |
|
|
983 |
|
|
|
164,463 |
|
|
|
Premiums and other
receivables, net |
|
1,492,416 |
|
|
49,344 |
|
|
|
1,541,760 |
|
|
|
|
1,373,089 |
|
|
55,859 |
|
|
|
1,428,948 |
|
|
|
Reinsurance balances |
|
1,702,818 |
|
|
210,511 |
|
|
|
1,913,329 |
|
|
|
|
1,745,036 |
|
|
225,019 |
|
|
|
1,970,055 |
|
|
|
Intangible assets, net |
|
354,388 |
|
|
3,180 |
|
|
|
357,568 |
|
|
|
|
362,598 |
|
|
3,225 |
|
|
|
365,823 |
|
|
|
Goodwill |
|
179,328 |
|
|
— |
|
|
|
179,328 |
|
|
|
|
179,328 |
|
|
— |
|
|
|
179,328 |
|
|
|
Other (3) |
|
795,402 |
|
|
29,092 |
|
|
|
788,019 |
|
|
(B) |
|
798,675 |
|
|
29,070 |
|
|
|
792,919 |
|
|
(I) |
Total assets |
|
$ |
9,378,779 |
|
|
$ |
625,764 |
|
|
|
$ |
9,860,574 |
|
|
(C) |
|
$ |
9,255,166 |
|
|
$ |
643,650 |
|
|
|
$ |
9,756,534 |
|
|
(J) |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss
adjustment expense reserves |
|
$ |
2,650,259 |
|
|
$ |
197,934 |
|
|
|
$ |
2,848,193 |
|
|
|
|
$ |
2,680,628 |
|
|
$ |
205,786 |
|
|
|
$ |
2,886,414 |
|
|
|
Unearned premiums and other
revenue |
|
2,143,837 |
|
|
232,538 |
|
|
|
2,376,375 |
|
|
|
|
2,059,688 |
|
|
252,553 |
|
|
|
2,312,241 |
|
|
|
Reinsurance payable |
|
515,629 |
|
|
38,353 |
|
|
|
553,982 |
|
|
|
|
527,155 |
|
|
35,689 |
|
|
|
562,844 |
|
|
|
Accounts payable and accrued
expenses |
|
307,892 |
|
|
42,221 |
|
|
|
313,638 |
|
|
(D) |
|
306,869 |
|
|
43,323 |
|
|
|
315,366 |
|
|
(K) |
Debt |
|
685,078 |
|
|
107,494 |
|
|
|
685,078 |
|
|
(E) |
|
686,006 |
|
|
107,456 |
|
|
|
686,006 |
|
|
(L) |
Other |
|
370,554 |
|
|
41,266 |
|
|
|
411,820 |
|
|
|
|
345,366 |
|
|
30,803 |
|
|
|
376,169 |
|
|
|
Total liabilities |
|
$ |
6,673,249 |
|
|
$ |
659,806 |
|
|
|
$ |
7,189,086 |
|
|
(F) |
|
$ |
6,605,712 |
|
|
$ |
675,610 |
|
|
|
$ |
7,139,040 |
|
|
(M) |
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock (4) |
|
$ |
1,137 |
|
|
$ |
— |
|
|
|
$ |
1,137 |
|
|
|
|
$ |
1,134 |
|
|
$ |
— |
|
|
|
$ |
1,134 |
|
|
|
Preferred stock (5) |
|
450,000 |
|
|
— |
|
|
|
450,000 |
|
|
|
|
450,000 |
|
|
— |
|
|
|
450,000 |
|
|
|
Additional paid-in
capital |
|
1,066,075 |
|
|
— |
|
|
|
1,066,075 |
|
|
|
|
1,065,634 |
|
|
— |
|
|
|
1,065,634 |
|
|
|
Accumulated other
comprehensive income |
|
43,845 |
|
|
— |
|
|
|
43,845 |
|
|
|
|
74,548 |
|
|
— |
|
|
|
74,548 |
|
|
|
Retained earnings |
|
1,144,473 |
|
|
— |
|
|
|
1,144,473 |
|
|
|
|
1,058,138 |
|
|
— |
|
|
|
1,058,138 |
|
|
|
Total National General Holdings Corp. stockholders’
equity |
|
2,705,530 |
|
|
— |
|
|
|
2,705,530 |
|
|
|
|
2,649,454 |
|
|
— |
|
|
|
2,649,454 |
|
|
|
Noncontrolling interest |
|
— |
|
|
(34,042 |
) |
|
|
(34,042 |
) |
|
|
|
— |
|
|
(31,960 |
) |
|
|
(31,960 |
) |
|
|
Total stockholders’ equity |
|
$ |
2,705,530 |
|
|
$ |
(34,042 |
) |
|
|
$ |
2,671,488 |
|
|
|
|
$ |
2,649,454 |
|
|
$ |
(31,960 |
) |
|
|
$ |
2,617,494 |
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
9,378,779 |
|
|
$ |
625,764 |
|
|
|
$ |
9,860,574 |
|
|
(G) |
|
$ |
9,255,166 |
|
|
$ |
643,650 |
|
|
|
$ |
9,756,534 |
|
|
(N) |
NOTES: Consolidated column
includes eliminations as follows: (A) $(107,494), (B) $(36,475),
(C) $(143,969), (D) $(36,475), (E) $(107,494), (F) $(143,969), (G)
$(143,969) (H) $(107,456), (I) $(34,826), (J) $(142,282), (K)
$(34,826), (L) $(107,456), (M) $(142,282) and (N) $(142,282).
Segment Information - First
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
Gross written premium |
|
$ |
1,197,676 |
|
|
$ |
187,025 |
|
|
$ |
1,384,701 |
|
|
|
$ |
91,853 |
|
|
|
$ |
1,145,665 |
|
|
$ |
258,544 |
|
|
$ |
1,404,209 |
|
|
|
$ |
105,569 |
|
|
Net written premium |
|
986,092 |
|
|
168,216 |
|
|
1,154,308 |
|
|
|
55,295 |
|
|
|
915,528 |
|
|
200,181 |
|
|
1,115,709 |
|
|
48,955 |
|
|
Net earned premium |
|
852,902 |
|
|
164,706 |
|
|
1,017,608 |
|
|
|
57,598 |
|
|
|
756,919 |
|
|
161,580 |
|
|
918,499 |
|
|
|
45,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
36,031 |
|
|
560 |
|
|
36,591 |
|
|
|
13,714 |
|
|
|
48,409 |
|
|
2,591 |
|
|
51,000 |
|
|
|
18,534 |
|
|
Service and fee income |
|
110,633 |
|
|
80,524 |
|
|
191,157 |
|
|
|
1,157 |
|
|
|
119,376 |
|
|
61,012 |
|
|
180,388 |
|
|
|
1,370 |
|
|
Total underwriting revenues |
|
$ |
999,566 |
|
|
$ |
245,790 |
|
|
$ |
1,245,356 |
|
|
|
$ |
72,469 |
|
|
|
$ |
924,704 |
|
|
$ |
225,183 |
|
|
$ |
1,149,887 |
|
|
|
$ |
65,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense (A) |
|
568,030 |
|
|
81,601 |
|
|
649,631 |
|
|
|
42,367 |
|
|
|
525,035 |
|
|
84,749 |
|
|
609,784 |
|
|
|
42,025 |
|
|
Acquisition costs and other
underwriting expenses |
|
149,274 |
|
|
68,471 |
|
|
217,745 |
|
|
|
10,497 |
|
|
|
145,485 |
|
|
57,848 |
|
|
203,333 |
|
|
|
8,585 |
|
|
General and administrative
expenses (B) |
|
201,127 |
|
|
59,752 |
|
|
260,879 |
|
|
|
19,563 |
|
|
|
184,195 |
|
|
58,638 |
|
|
242,833 |
|
|
|
21,512 |
|
|
Total underwriting expenses |
|
$ |
918,431 |
|
|
$ |
209,824 |
|
|
$ |
1,128,255 |
|
|
|
$ |
72,427 |
|
|
|
$ |
854,715 |
|
|
$ |
201,235 |
|
|
$ |
1,055,950 |
|
|
|
$ |
72,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
81,135 |
|
|
35,966 |
|
|
117,101 |
|
|
|
42 |
|
|
|
69,989 |
|
|
23,948 |
|
|
93,937 |
|
|
|
(6,560 |
) |
|
Non-cash amortization of
intangible assets |
|
5,187 |
|
|
1,315 |
|
|
6,502 |
|
|
|
30 |
|
|
|
5,485 |
|
|
1,731 |
|
|
7,216 |
|
|
|
11 |
|
|
Underwriting income (loss) before amortization and impairment |
|
$ |
86,322 |
|
|
$ |
37,281 |
|
|
$ |
123,603 |
|
|
|
$ |
72 |
|
|
|
$ |
75,474 |
|
|
$ |
25,679 |
|
|
$ |
101,153 |
|
|
|
$ |
(6,549 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (6) |
|
66.6 |
% |
|
49.5 |
% |
|
63.8 |
% |
|
|
73.6 |
% |
|
|
69.4 |
% |
|
52.5 |
% |
|
66.4 |
% |
|
|
92.0 |
|
% |
Operating expense ratio
(Non-GAAP) (7) |
|
23.9 |
% |
|
28.6 |
% |
|
24.7 |
% |
|
|
26.4 |
% |
|
|
21.4 |
% |
|
32.7 |
% |
|
23.4 |
% |
|
|
22.3 |
|
% |
Combined ratio (Non-GAAP) (8) |
|
90.5 |
% |
|
78.1 |
% |
|
88.5 |
% |
|
|
100.0 |
% |
|
|
90.8 |
% |
|
85.2 |
% |
|
89.8 |
% |
|
|
114.3 |
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before
amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (6) |
|
66.6 |
% |
|
49.5 |
% |
|
63.8 |
% |
|
|
73.6 |
% |
|
|
69.4 |
% |
|
52.5 |
% |
|
66.4 |
% |
|
|
92.0 |
|
% |
Operating expense ratio
(Non-GAAP) (9) |
|
23.3 |
% |
|
27.8 |
% |
|
24.0 |
% |
|
|
26.3 |
% |
|
|
20.7 |
% |
|
31.7 |
% |
|
22.6 |
% |
|
|
22.3 |
|
% |
Combined ratio before amortization and impairment (Non-GAAP)
(10) |
|
89.9 |
% |
|
77.3 |
% |
|
87.8 |
% |
|
|
99.9 |
% |
|
|
90.1 |
% |
|
84.2 |
% |
|
89.0 |
% |
|
|
114.3 |
|
% |
(A) Loss and loss adjustment expenses for the
three months ended March 31, 2020 included $4,471 of unfavorable
development on prior accident year loss and loss adjustment expense
reserves in the P&C segment, and $4,808 of favorable
development in the A&H segment, versus $5,514 of favorable
development in the P&C segment, and $10,852 of favorable
development in the A&H segment for the three months ended March
31, 2019.
Reconciliation of Operating Expense Ratio
(Non-GAAP)(7,9,11)$ in thousands(Unaudited)
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
ReciprocalExchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Total underwriting
expenses |
|
$ |
918,431 |
|
|
$ |
209,824 |
|
|
$ |
1,128,255 |
|
|
|
$ |
72,427 |
|
|
|
$ |
854,715 |
|
|
$ |
201,235 |
|
|
$ |
1,055,950 |
|
|
|
$ |
72,122 |
|
Less: Loss and loss adjustment
expense |
|
568,030 |
|
|
81,601 |
|
|
649,631 |
|
|
|
42,367 |
|
|
|
525,035 |
|
|
84,749 |
|
|
609,784 |
|
|
|
42,025 |
|
Less: Ceding commission
income |
|
36,031 |
|
|
560 |
|
|
36,591 |
|
|
|
13,714 |
|
|
|
48,409 |
|
|
2,591 |
|
|
51,000 |
|
|
|
18,534 |
|
Less: Service and fee
income |
|
110,633 |
|
|
80,524 |
|
|
191,157 |
|
|
|
1,157 |
|
|
|
119,376 |
|
|
61,012 |
|
|
180,388 |
|
|
|
1,370 |
|
Operating expense |
|
203,737 |
|
|
47,139 |
|
|
250,876 |
|
|
|
15,189 |
|
|
|
161,895 |
|
|
52,883 |
|
|
214,778 |
|
|
|
10,193 |
|
Net earned premium |
|
$ |
852,902 |
|
|
$ |
164,706 |
|
|
$ |
1,017,608 |
|
|
|
$ |
57,598 |
|
|
|
$ |
756,919 |
|
|
$ |
161,580 |
|
|
$ |
918,499 |
|
|
|
$ |
45,658 |
|
Operating expense ratio (Non-GAAP) (7) |
|
23.9 |
% |
|
28.6 |
% |
|
24.7 |
% |
|
|
26.4 |
% |
|
|
21.4 |
% |
|
32.7 |
% |
|
23.4 |
% |
|
|
22.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
918,431 |
|
|
$ |
209,824 |
|
|
$ |
1,128,255 |
|
|
|
$ |
72,427 |
|
|
|
$ |
854,715 |
|
|
$ |
201,235 |
|
|
$ |
1,055,950 |
|
|
|
$ |
72,122 |
|
Less: Loss and loss adjustment
expense |
|
568,030 |
|
|
81,601 |
|
|
649,631 |
|
|
|
42,367 |
|
|
|
525,035 |
|
|
84,749 |
|
|
609,784 |
|
|
|
42,025 |
|
Less: Ceding commission
income |
|
36,031 |
|
|
560 |
|
|
36,591 |
|
|
|
13,714 |
|
|
|
48,409 |
|
|
2,591 |
|
|
51,000 |
|
|
|
18,534 |
|
Less: Service and fee
income |
|
110,633 |
|
|
80,524 |
|
|
191,157 |
|
|
|
1,157 |
|
|
|
119,376 |
|
|
61,012 |
|
|
180,388 |
|
|
|
1,370 |
|
Less: Non-cash amortization of
intangible assets |
|
5,187 |
|
|
1,315 |
|
|
6,502 |
|
|
|
30 |
|
|
|
5,485 |
|
|
1,731 |
|
|
7,216 |
|
|
|
11 |
|
Operating expense before amortization and impairment |
|
198,550 |
|
|
45,824 |
|
|
244,374 |
|
|
|
15,159 |
|
|
|
156,410 |
|
|
51,152 |
|
|
207,562 |
|
|
|
10,182 |
|
Net earned premium |
|
$ |
852,902 |
|
|
$ |
164,706 |
|
|
$ |
1,017,608 |
|
|
|
$ |
57,598 |
|
|
|
$ |
756,919 |
|
|
$ |
161,580 |
|
|
$ |
918,499 |
|
|
|
$ |
45,658 |
|
Operating expense ratio before amortization and impairment
(Non-GAAP) (9) |
|
23.3 |
% |
|
27.8 |
% |
|
24.0 |
% |
|
|
26.3 |
% |
|
|
20.7 |
% |
|
31.7 |
% |
|
22.6 |
% |
|
|
22.3 |
% |
Premiums by Product Line$ in
thousands(Unaudited)
|
Three Months Ended March 31, |
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
794,497 |
|
|
$ |
766,681 |
|
|
3.6 |
% |
|
|
$ |
702,307 |
|
|
$ |
658,920 |
|
|
6.6 |
% |
|
|
$ |
579,502 |
|
|
$ |
510,554 |
|
|
13.5 |
% |
Homeowners |
165,253 |
|
|
152,042 |
|
|
8.7 |
% |
|
|
88,543 |
|
|
85,245 |
|
|
3.9 |
% |
|
|
91,483 |
|
|
84,058 |
|
|
8.8 |
% |
RV/Packaged |
53,128 |
|
|
51,851 |
|
|
2.5 |
% |
|
|
51,978 |
|
|
51,597 |
|
|
0.7 |
% |
|
|
49,292 |
|
|
50,305 |
|
|
(2.0 |
)% |
Small Business Auto |
72,752 |
|
|
85,878 |
|
|
(15.3 |
)% |
|
|
58,599 |
|
|
74,186 |
|
|
(21.0 |
)% |
|
|
59,425 |
|
|
67,633 |
|
|
(12.1 |
)% |
Lender-placed insurance |
95,444 |
|
|
75,938 |
|
|
25.7 |
% |
|
|
77,469 |
|
|
42,070 |
|
|
84.1 |
% |
|
|
69,667 |
|
|
41,718 |
|
|
67.0 |
% |
Other |
16,602 |
|
|
13,275 |
|
|
25.1 |
% |
|
|
7,196 |
|
|
3,510 |
|
|
nm |
|
|
3,533 |
|
|
2,651 |
|
|
33.3 |
% |
Total Premium |
$ |
1,197,676 |
|
|
$ |
1,145,665 |
|
|
4.5 |
% |
|
|
$ |
986,092 |
|
|
$ |
915,528 |
|
|
7.7 |
% |
|
|
$ |
852,902 |
|
|
$ |
756,919 |
|
|
12.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group |
87,538 |
|
|
64,938 |
|
|
34.8 |
% |
|
|
69,471 |
|
|
53,950 |
|
|
28.8 |
% |
|
|
69,470 |
|
|
53,963 |
|
|
28.7 |
% |
Individual |
99,487 |
|
|
84,192 |
|
|
18.2 |
% |
|
|
98,745 |
|
|
84,123 |
|
|
17.4 |
% |
|
|
95,236 |
|
|
82,235 |
|
|
15.8 |
% |
Total Premium Domestic |
$ |
187,025 |
|
|
$ |
149,130 |
|
|
25.4 |
% |
|
|
$ |
168,216 |
|
|
$ |
138,073 |
|
|
21.8 |
% |
|
|
$ |
164,706 |
|
|
$ |
136,198 |
|
|
20.9 |
% |
International |
— |
|
|
109,414 |
|
|
nm |
|
|
— |
|
|
62,108 |
|
|
nm |
|
|
— |
|
|
25,382 |
|
|
nm |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
1,384,701 |
|
|
$ |
1,404,209 |
|
|
(1.4 |
)% |
|
|
$ |
1,154,308 |
|
|
$ |
1,115,709 |
|
|
3.5 |
% |
|
|
$ |
1,017,608 |
|
|
$ |
918,499 |
|
|
10.8 |
% |
Total National General
(A) |
$ |
1,384,701 |
|
|
$ |
1,294,795 |
|
|
6.9 |
% |
|
|
$ |
1,154,308 |
|
|
$ |
1,053,601 |
|
|
9.6 |
% |
|
|
$ |
1,017,608 |
|
|
$ |
893,117 |
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
31,809 |
|
|
$ |
36,862 |
|
|
(13.7 |
)% |
|
|
$ |
29,074 |
|
|
$ |
15,645 |
|
|
85.8 |
% |
|
|
$ |
32,923 |
|
|
$ |
15,861 |
|
|
nm |
Homeowners |
59,236 |
|
|
67,800 |
|
|
(12.6 |
)% |
|
|
25,925 |
|
|
33,016 |
|
|
(21.5 |
)% |
|
|
24,333 |
|
|
29,491 |
|
|
(17.5 |
)% |
Other |
808 |
|
|
907 |
|
|
(10.9 |
)% |
|
|
296 |
|
|
294 |
|
|
0.7 |
% |
|
|
342 |
|
|
306 |
|
|
11.8 |
% |
Total Premium |
$ |
91,853 |
|
|
$ |
105,569 |
|
|
(13.0 |
)% |
|
|
$ |
55,295 |
|
|
$ |
48,955 |
|
|
13.0 |
% |
|
|
$ |
57,598 |
|
|
$ |
45,658 |
|
|
26.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total |
$ |
1,476,554 |
|
|
$ |
1,509,778 |
|
|
(2.2 |
)% |
|
|
$ |
1,209,603 |
|
|
$ |
1,164,664 |
|
|
3.9 |
% |
|
|
$ |
1,075,206 |
|
|
$ |
964,157 |
|
|
11.5 |
% |
(A) Excludes A&H international product line which was sold
in the fourth quarter of 2019.
nm - not meaningful
Fee Income$ in
thousands(Unaudited)
|
Three Months Ended March 31, |
|
2020 |
|
2019 |
|
Change |
Property & Casualty |
|
|
|
|
|
Service and Fee Income |
$ |
110,633 |
|
|
$ |
119,376 |
|
|
(7.3 |
)% |
Ceding Commission Income |
36,031 |
|
|
48,409 |
|
|
(25.6 |
)% |
Property & Casualty |
$ |
146,664 |
|
|
$ |
167,785 |
|
|
(12.6 |
)% |
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
Service and Fee Income |
|
|
|
|
|
Group |
$ |
40,482 |
|
|
$ |
30,374 |
|
|
33.3 |
% |
Individual |
2,217 |
|
|
2,136 |
|
|
3.8 |
% |
Third Party Fee |
37,825 |
|
|
28,502 |
|
|
32.7 |
% |
Total Service and Fee
Income |
80,524 |
|
|
61,012 |
|
|
32.0 |
% |
Ceding Commission Income |
560 |
|
|
2,591 |
|
|
(78.4 |
)% |
Accident and Health |
$ |
81,084 |
|
|
$ |
63,603 |
|
|
27.5 |
% |
|
|
|
|
|
|
Total National
General |
$ |
227,748 |
|
|
$ |
231,388 |
|
|
(1.6 |
)% |
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
Service and Fee Income |
$ |
1,157 |
|
|
$ |
1,370 |
|
|
(15.5 |
)% |
Ceding Commission Income |
13,714 |
|
|
18,534 |
|
|
(26.0 |
)% |
Reciprocal Exchanges |
$ |
14,871 |
|
|
$ |
19,904 |
|
|
(25.3 |
)% |
|
|
|
|
|
|
Consolidated Total
(A) |
$ |
229,746 |
|
|
$ |
235,041 |
|
|
(2.3 |
)% |
NOTES: (A) Consolidated Total
includes eliminations between National General and the Reciprocal
Exchanges in Service and Fee Income of $(12,873) and $(16,251) in
2020 and 2019, 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 credit loss on investments in debt
securities and foreign exchange gain or loss), 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 $235,843 and $238,841 from
related parties at March 31, 2020 and December 31, 2019,
respectively.
(3) Other includes $1,203 and $2,391 from related parties at
March 31, 2020 and December 31, 2019, respectively.
(4) Common stock: $0.01 par value - authorized 150,000,000
shares, issued and outstanding 113,708,996 shares - March 31,
2020; authorized 150,000,000 shares, issued and outstanding
113,368,811 shares - December 31, 2019.
(5) Preferred stock: $0.01 par value - authorized 10,000,000
shares, issued and outstanding 2,565,120 shares - March 31,
2020; authorized 10,000,000 shares, issued and outstanding
2,565,120 shares - December 31, 2019.
(6) Loss and loss adjustment expense ratio (loss ratio) is
calculated by dividing loss and loss adjustment expense by net
earned premium.
(7) 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 and service
and fee income. The ratio is used as an indicator of the Company’s
efficiency in acquiring and servicing its business.
(8) 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(6) and the operating expense ratio (non-GAAP)(7)
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.
(9) 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, 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.
(10) 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(6) and
the operating expense ratio before amortization and impairment
(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
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.
(11) 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.
(12) 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.
(13) Combined ratio excluding losses from various
weather-related events, is calculated by taking the combined ratio
as defined in Note 12, and adjusting it to exclude the total net
losses of $8.1 million and $12.1 million from these
events for the three months ended March 31, 2020 and 2019,
respectively. The Company believes this measure enhances investors’
understanding of our results by eliminating what we believe are
volatile and unusual events.
|
|
|
|
|
|
|
|
|
Year |
|
|
|
Combined Ratio (10) |
|
Impact of Weather-related Events |
|
Combined Ratio Excluding Weather-related Events
(13) |
2020 |
|
P&C Segment |
|
89.9% |
|
0.9% |
|
89.0% |
|
|
|
|
|
|
|
|
|
2020 |
|
Overall NGHC |
|
87.8% |
|
0.8% |
|
87.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
P&C Segment |
|
90.1% |
|
1.6% |
|
88.5% |
|
|
|
|
|
|
|
|
|
2019 |
|
Overall NGHC |
|
89.0% |
|
1.3% |
|
87.7% |
|
|
|
|
|
|
|
|
|
(14) 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.
Investor Contact
Paul AndersonDirector of Investor RelationsPhone:
212-380-9462Email: Paul.Anderson@NGIC.com
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