National General Holdings Corp. Reports Third Quarter 2014 Results;
Increases Quarterly Dividend to $0.02 Per Share
NEW YORK, November 4, 2014 (GLOBE NEWSWIRE) -- National General Holdings Corp. (NASDAQ:NGHC) today reported third quarter 2014 net income of $32.1 million or $0.34 per diluted share, compared to $12.8 million or $0.16 per diluted share in the third quarter of 2013. Operating earnings(1) were $35.4 million or $0.37 per diluted share in the third quarter of 2014, compared to $13.9 million or $0.17 per diluted share in the third quarter of 2013. Third quarter 2014 operating earnings exclude $1.1 million or $0.01 per share of realized investment losses, $1.6 million or $0.01 per share of equity in losses of unconsolidated subsidiaries, and $2.5 million or $0.02 per share of non-cash amortization of intangible assets. In addition, National General's Board of Directors has approved a 100% increase in the quarterly dividend to $0.02 per share from $0.01 per share, effective with the fourth quarter dividend.
Third Quarter 2014 Highlights Versus Third Quarter 2013*
| |
| • | Net written premium grew by $266.2 million or 168.4% to $424.4 million, driven by the run-off of our third-party quota share treaty, assumed premiums from Tower Personal Lines reinsurance, additional premiums from acquisitions completed during the past year, underlying organic growth within our P&C business, and continued expansion of our A&H segment. |
| |
| • | The combined ratio was 91.5% compared to 94.4% in the prior year's quarter. The 2.9 point combined ratio improvement was driven by a reduction in both the loss and expense ratios within our P&C segment, partially offset by increased loss and expense ratios in our growing A&H segment - although excluding non-cash amortization of intangible assets, our A&H segment reported a modest underwriting profit during the quarter. |
| |
| • | Total revenues grew $258.2 million or 110.8% to $491.2 million, driven by the aforementioned premium growth, service and fee income growth of $11.5 million or 33.4% (including Attorney-in-Fact management of $1.5 million), and net investment income growth of $5.3 million or 62.3%, partially offset by a $22.9 million or 97.2% decline in ceding commission income reflecting the run-off of our third-party quota share. |
| |
| • | Shareholders' equity was $1.05 billion and fully diluted book value per share was $10.40 at September 30, 2014, growth of 10.2% and 9.7%, respectively, from June 30, 2014. Annualized operating return on average equity (ROE) was 14.9% for the third quarter and 15.1% for the nine months ended September 30, 2014. |
Michael Karfunkel, National General's Chairman and CEO, stated: "We are delighted with our third quarter results, which equate to a solid 14.9% annualized ROE and again showed impressive top line growth, both organically and from recent transactions, as well as strong underwriting profitability with a 91.5% combined ratio. Perhaps more importantly, we closed the Tower Personal Lines transaction on September 15, 2014, which has given us a broader product mix including homeowners and umbrella coverages, an enhanced geographic footprint, and additional competitive strength with the ability to bundle several personal lines product offerings to our agents and customers. We continue to focus our efforts on profitably growing our business both organically and through additional accretive M&A opportunities, maintaining an intense emphasis on disciplined expense management, and delivering strong returns to our shareholders. We are proud that for the first nine months of 2014, we produced $88.8 million of net income, nearly three times the $32.2 million we reported for the same period in 2013.”
*NOTE: Unless specified otherwise, discussion of our third quarter 2014 results does not include financial results from the Reciprocal Exchanges, which are presented within our consolidated financial results within this release but are not included in income attributable to NGHC common shareholders. Third quarter 2014 results include 15 days of results of the Reciprocal Exchanges (as the Attorneys-in-Fact were acquired with the closing of the Tower Personal Lines transaction on September 15, 2014).
Overview of Third Quarter 2014 as Compared to Third Quarter 2013
Gross written premium grew 46.6% to $487.6 million, net written premium grew 168.4% to $424.4 million, and net earned premium grew 159.9% to $431.7 million. Our premium growth was driven by several key factors: (1) a continued increase in net retention due to the run-off of our third party quota share, which is now 100% complete as of July 31, 2014, (2) new and renewal business from reinsurance of the Tower Personal Lines book, (3) additional premiums from acquisitions completed during the past year, (4) underlying organic growth within our P&C segment, and (5) continued expansion of our A&H segment.
Ceding commission income decreased 97.2% to $0.7 million, reflecting the run-off of our third party quota share. Service, fee, and other income grew 33.4% to $45.9 million, driven by double-digit growth in both the P&C and A&H segments, and we note that the P&C segment now includes management fees of $1.5 million related to the Attorneys-in-Fact that manage the Reciprocal Exchanges.
The combined ratio was 91.5% with a loss ratio of 62.5% and an expense ratio of 29.1%, versus a prior year combined ratio of 94.4% with a loss ratio of 65.2% and an expense ratio of 29.2%. The improved loss ratio was driven primarily by a reduction in the P&C loss ratio, partially offset by a higher A&H loss ratio. The expense ratio decreased modestly as a result of an improved P&C expense ratio, partially offset by an elevated A&H expense ratio due to our continued investment in the expansion of this segment. The third quarter expense ratio included 0.6 points of expense from non-cash amortization of intangible assets, versus 1.3 points in the prior year's quarter.
Underwriting results detailed by each of our business segments are as follows:
| |
| • | Property & Casualty - Gross written premium grew 44.9% to $469.9 million, net written premium grew 171.5% to $406.7 million, and net earned premium grew 154.9% to $402.2 million. P&C premium growth was driven by four key factors: (1) a continued increase in net retention due to the run-off of our third party quota share, which is now 100% complete as of July 31, 2014; (2) the addition of new and renewal business from reinsurance of the Tower Personal Lines, which produced $74.8 million in net written premiums during the quarter; (3) additional premiums from acquisitions completed during the past year, which contributed $33.9 million in net written premium during the quarter ($28.4 million from Imperial and $5.5 million from Personal Express Insurance Company); and (4) underlying organic growth of 6.1%. Ceding commission income decreased 97.2% to $0.7 million, reflecting the run-off of our third party quota share. Service, fee, and other income grew 45.3% to $31.4 million, driven by the increased premium volume in the quarter and the addition of $1.5 million of fees earned by the Attorneys-in-Fact that manage the Reciprocal Exchanges. The combined ratio was 90.7% with a loss ratio of 62.5% and an expense ratio of 28.2%, versus a prior year combined ratio of 96.0% with a loss ratio of 66.1% and an expense ratio of 29.9%. The quarter's improved loss ratio was driven primarily by business mix changes, most notably the addition of the homeowners line of business. The quarter's improved expense ratio was primarily the result of the impact of the ceding commission paid on business written via the Cut-Through Reinsurance Agreement, as well as a reduction in our underlying expense ratio resulting from expense initiatives and technology enhancements enacted in recent years. The P&C expense ratio included 0.4 points of expenses for non-cash amortization of intangible assets, versus 1.1 points in the prior year's quarter. |
| |
| • | Accident & Health - Gross written premium grew to $17.7 million, net written premium grew to $17.7 million, and net earned premium grew to $29.5 million, from $8.4 million, $8.3 million, and $8.3 million, respectively, in the prior year's quarter. A&H premium growth was driven by continued progress in the expansion of our domestic business, as well as the addition of $6.6 million of premium from EuroAccident, which is now written on National General paper. Service, fee, and other income grew 13.4% to $14.5 million, primarily reflecting growth at VelaPoint (our call center general agency) and TABS (our domestic stop loss business), with consistent fee income at EuroAccident year-over-year. The combined ratio was 102.8% with a loss ratio of 61.9% and an expense ratio of 40.8%, versus a prior year combined ratio of 64.7% with a loss ratio of 48.4% and an expense ratio of 16.3%. The increase in the third quarter loss ratio reflects the continued maturation of the business, as prior year results were characterized by a less meaningful premium volume. The third quarter 2014 expense ratio included increased expenses related to our continued investment in the expansion of our A&H business, as well as 3.1 points of expenses for non-cash amortization of intangible assets, versus 5.9 points of expenses in the prior year's quarter. We highlight that excluding non-cash amortization of intangible assets, the A&H segment reported modest underwriting income of $0.1 million in the third quarter of 2014. |
| |
| • | Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in income attributable to NGHC common shareholders, and the quarter includes 15 days of results for the Reciprocal Exchanges (as the Attorneys-in-Fact were acquired with the closing of the Tower Personal Lines transaction on September 15, 2014). Gross written premium was $10.0 million, net written premium was $7.2 million, and net earned premium was $6.7 million. The combined ratio was 110.2% with a loss ratio of 80.0% and an expense ratio of 30.3%, and the quarter included 5.3 points attributable to non-cash amortization of intangible assets and $1.5 million of expenses related to Attorney-in-Fact management fees. |
Investment income, excluding net realized gains and losses, grew 62.3% to $13.7 million, reflecting an increase in the size of our investment portfolio mainly as a result of our capital raising actions in the first half of 2014. Third quarter 2014 results included $1.1 million of net realized investment losses compared with a gain of $0.5 million in the third quarter of 2013. Total cash, cash equivalents and investments was $1.75 billion as of September 30, 2014. Accumulated other comprehensive income (AOCI) declined to $20.9 million at September 30, 2014 from $31.9 million at June 30, 2014.
Interest expense of $4.4 million increased from $0.5 million in the prior year’s quarter due to an increased amount of debt on our balance sheet. Debt was $255.6 million as of September 30, 2014, down slightly from $259.1 million as of June 30, 2014, but up from $81.1 million at December 31, 2013, primarily as a result of our $250 million May 2014 senior note issuance.
Equity in earnings of unconsolidated subsidiaries (predominantly our investment in Life Settlement Entities) was a loss of $1.6 million in the third quarter versus a loss of $0.1 million in the prior year's quarter, reflecting fair value adjustments on life settlement contracts.
The third quarter 2014 provision for income taxes was $10.2 million and the effective tax rate for the quarter was 22.7%. Included in the third quarter 2014 provision for income taxes was a $3.8 million benefit attributable to a reduction of the deferred tax liability associated with the equalization reserves of our Luxembourg Reinsurance Company subsidiaries. Excluding this benefit, the tax rate for the quarter would have been 31.1%.
National General Holding Corp.'s shareholders' equity was $1,051.3 million, growth of 10.2% from $954.1 million at June 30, 2014 driven by the quarter’s retained earnings and a $75.3 million increase to additional paid-in capital based on the valuation of the Attorneys-in-Fact, partially offset by an $11.0 million decline in AOCI. Excluding the AIF valuation increase and AOCI decline, shareholders' equity grew 3.7% from the end of the second quarter. Fully diluted book value per share was $10.40 at September 30, 2014, growth of 9.7% from $9.48 at June 30, 2014. Annualized operating return on average equity (ROE) was 14.9% for the third quarter and 15.1% for the nine months ended September 30, 2014.
National General's Board of Directors has approved an increase in the company's quarterly cash dividend on its common stock to $0.02 per share from $0.01 per share, effective with the fourth quarter dividend payment. The 100% dividend increase equates to an annualized dividend of $0.08 per share, or a dividend yield of 0.4% at current share price levels. The first quarter dividend on common stock will be payable on January 15, 2015 to shareholders of record as of January 1, 2015. The Board of Directors also approved a cash dividend on its 7.50% Non-Cumulative Preferred Stock, Series A, in the amount of $0.46875 per share. The fourth quarter preferred dividend will be payable on January 15, 2015 to shareholders of record as of January 1, 2015.
Conference Call
On Tuesday, November 4, 2014 at 11:00 AM ET, Chairman and CEO Michael Karfunkel and CFO Mike Weiner will review these results via a conference call that may be accessed as follows:
Toll-Free Dial-in: 888-267-2860
Toll Dial-in (outside the U.S.): 973-413-6102
Conference Entry Code: 842046
Webcast Registration: http://ir.nationalgeneral.com/events.cfm
A replay of the conference call will be accessible from 2:00 PM ET on Tuesday, November 4, 2014 to 11:59 PM ET on Tuesday, November 11, 2014 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 842046. In addition, a replay of the webcast can also be retrieved at http://ir.nationalgeneral.com/events.cfm.
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, recreational vehicle, motorcycle, homeowners, supplemental health, and other niche insurance products.
Forward Looking Statements
This news release contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as “may,” “will,” “plan,” “expect,” “project,” “intend,” “estimate,” “anticipate” and “believe” or their variations or similar terminology. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, estimates of the fair value of life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, 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, breaches in data security or other disruptions involving our technology, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statement except as may be required by law. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected, is contained in the Company's filings with the Securities and Exchange Commission.
Income Statement - Third Quarter
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, |
| | | 2014 | | | 2013 |
| | | NGHC | | Reciprocal Exchanges | | Consolidated | | | NGHC |
| Revenues: | | | | | | | | | |
| Gross written premium | | $ | 487,602 |
| | 9,993 |
| | 497,595 |
| | | $ | 332,714 |
|
| Ceded premiums (related parties - $12,690 and $147,401 in 2014 and 2013, respectively) | | (63,237 | ) | | (2,788 | ) | | (66,025 | ) | | | (174,591 | ) |
| Net written premium | | 424,365 |
| | 7,205 |
| | 431,570 |
| | | 158,123 |
|
| Net earned premium | | 431,714 |
| | 6,692 |
| | 438,406 |
| | | 166,125 |
|
| | | | | | | | | | |
| Ceding commission income (primarily related parties) | | 668 |
| | 37 |
| | 705 |
| | | 23,518 |
|
| Service and fee income | | 45,872 |
| | 22 |
| | 45,894 |
| | | 34,385 |
|
| Net investment income | | 13,697 |
| | — |
| | 13,697 |
| | | 8,439 |
|
| Net realized gain/(loss) on investments | | (1,118 | ) | | — |
| | (1,118 | ) | | | 516 |
|
| Other than temporary impairment loss | | — |
| | — |
| | — |
| | | — |
|
| Other revenue | | 373 |
| | — |
| | 373 |
| | | — |
|
| Total revenues | | $ | 491,206 |
| | 6,751 |
| | 497,957 |
| | | $ | 232,983 |
|
| | | | | | | | | | |
| Expenses: | | | | | | | | | |
| Loss and loss adjustment expense | | $ | 269,668 |
| | 5,351 |
| | 275,019 |
| | | $ | 108,260 |
|
| Acquisition costs and other underwriting expenses | | 83,642 |
| | 273 |
| | 83,915 |
| | | 32,231 |
|
| General and administrative | | 88,317 |
| | 1,811 |
| | 90,128 |
| | | 74,232 |
|
| Interest expense | | 4,437 |
| | 272 |
| | 4,709 |
| | | 540 |
|
| Total expenses | | $ | 446,064 |
| | 7,707 |
| | 453,771 |
| | | $ | 215,263 |
|
| | | | | | | | | | |
| Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries | | 45,142 |
| | (956 | ) | | 44,186 |
| | | 17,720 |
|
| Provision for income taxes | | 10,237 |
| | (211 | ) | | 10,026 |
| | | 4,839 |
|
| Income before equity in earnings (losses) of unconsolidated subsidiaries | | 34,905 |
| | (745 | ) | | 34,160 |
| | | 12,881 |
|
| Equity in earnings (losses) of unconsolidated subsidiaries | | (1,611 | ) | | — |
| | (1,611 | ) | | | (128 | ) |
| Net income before non-controlling interest and cumulative dividends on preferred shares | | $ | 33,294 |
| | (745 | ) | | 32,549 |
| | | $ | 12,753 |
|
| Less: net income attributable to non-controlling interest | | (25 | ) | | (745 | ) | | (770 | ) | | | — |
|
| Net income before cumulative dividends on preferred shares | | $ | 33,319 |
| | — |
| | 33,319 |
| | | $ | 12,753 |
|
| Less: cumulative dividends on preferred shares | | 1,260 |
| | — |
| | 1,260 |
| | | — |
|
| Net income available to common stockholders | | $ | 32,059 |
| | — |
| | 32,059 |
| | | $ | 12,753 |
|
Income Statement - Year to Date
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, |
| | | 2014 | | | 2013 |
| | | NGHC | | Reciprocal Exchanges | | Consolidated | | | NGHC |
| Revenues: | | | | | | | | | |
| Gross written premium | | $ | 1,602,217 |
| | 9,993 |
| | 1,612,210 |
| | | $ | 1,021,016 |
|
| Ceded premiums (related parties - $42,967 and $291,501 in 2014 and 2013, respectively) | | (191,811 | ) | | (2,788 | ) | | (194,599 | ) | | | (543,373 | ) |
| Net written premium | | 1,410,406 |
| | 7,205 |
| | 1,417,611 |
| | | 477,643 |
|
| Net earned premium | | 1,181,032 |
| | 6,692 |
| | 1,187,724 |
| | | 472,832 |
|
| | | | | | | | | | |
| Ceding commission income (primarily related parties) | | 7,595 |
| | 37 |
| | 7,632 |
| | | 73,509 |
|
| Service and fee income | | 121,064 |
| | 22 |
| | 121,086 |
| | | 93,053 |
|
| Net investment income | | 34,232 |
| | — |
| | 34,232 |
| | | 22,093 |
|
| Net realized gain/(loss) on investments | | (1,118 | ) | | — |
| | (1,118 | ) | | | 1,463 |
|
| Other than temporary impairment loss | | — |
| | — |
| | — |
| | | — |
|
| Other revenue | | 480 |
| | — |
| | 480 |
| | | 16 |
|
| Total revenues | | $ | 1,343,285 |
| | 6,751 |
| | 1,350,036 |
| | | $ | 662,966 |
|
| | | | | | | | | | |
| Expenses: | | | | | | | | | |
| Loss and loss adjustment expense | | $ | 750,619 |
| | 5,351 |
| | 755,970 |
| | | $ | 310,133 |
|
| Acquisition costs and other underwriting expenses | | 232,433 |
| | 273 |
| | 232,706 |
| | | 94,664 |
|
| General and administrative | | 241,575 |
| | 1,811 |
| | 243,386 |
| | | 209,455 |
|
| Interest expense | | 7,549 |
| | 272 |
| | 7,821 |
| | | 1,456 |
|
| Total expenses | | $ | 1,232,176 |
| | 7,707 |
| | 1,239,883 |
| | | $ | 615,708 |
|
| | | | | | | | | | |
| Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries | | 111,109 |
| | (956 | ) | | 110,153 |
| | | 47,258 |
|
| Provision for income taxes | | 17,997 |
| | (211 | ) | | 17,786 |
| | | 12,393 |
|
| Income before equity in earnings (losses) of unconsolidated subsidiaries | | 93,112 |
| | (745 | ) | | 92,367 |
| | | 34,865 |
|
| Equity in earnings (losses) of unconsolidated subsidiaries | | (3,098 | ) | | — |
| | (3,098 | ) | | | (452 | ) |
| Net income before non-controlling interest and cumulative dividends on preferred shares | | $ | 90,014 |
| | (745 | ) | | 89,269 |
| | | $ | 34,413 |
|
| Less: net income attributable to non-controlling interest | | (31 | ) | | (745 | ) | | (776 | ) | | | 44 |
|
| Net income before cumulative dividends on preferred shares | | $ | 90,045 |
| | — |
| | 90,045 |
| | | $ | 34,369 |
|
| Less: cumulative dividends on preferred shares | | 1,260 |
| | — |
| | 1,260 |
| | | 2,158 |
|
| Net income available to common stockholders | | $ | 88,785 |
| | — |
| | 88,785 |
| | | $ | 32,211 |
|
Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, |
| | 2014 | | 2013 | | | 2014 | | 2013 |
| Net income available to common stockholders | $ | 32,059 |
| | $ | 12,753 |
| | | $ | 88,785 |
| | $ | 32,211 |
|
| Basic net income per common share | $ | 0.34 |
| | $ | 0.16 |
| | | $ | 0.98 |
| | $ | 0.54 |
|
| Diluted net income per common share* | $ | 0.34 |
| | $ | 0.16 |
| | | $ | 0.96 |
| | $ | 0.50 |
|
| | | | | | | | | |
Operating earnings attributable to NGHC(1) | $ | 35,446 |
| | $ | 13,928 |
| | | $ | 97,008 |
| | $ | 34,569 |
|
Basic operating earnings per common share(1) | $ | 0.38 |
| | $ | 0.17 |
| | | $ | 1.07 |
| | $ | 0.58 |
|
Diluted operating earnings per common share(1)* | $ | 0.37 |
| | $ | 0.17 |
| | | $ | 1.05 |
| | $ | 0.53 |
|
| | | | | | | | | |
| Dividends declared per common share | $ | 0.01 |
| | $ | 0.01 |
| | | $ | 0.03 |
| | $ | 0.01 |
|
| | | | | | | | | |
| Weighted average number of basic shares outstanding | 93,359,265 |
| | 79,700,000 |
| | | 90,853,536 |
| | 60,063,250 |
|
| Weighted average number of diluted shares outstanding | 95,663,429 |
| | 80,624,303 |
| | | 92,615,198 |
| | 68,690,957 |
|
| Shares outstanding, end of period | 93,408,212 |
| | 79,700,000 |
| | | 93,408,212 |
| | 79,700,000 |
|
| Fully diluted shares outstanding, end of period | 95,765,403 |
| | 80,447,486 |
| | | 92,857,313 |
| | 80,447,486 |
|
| | | | | | | | | |
| Book value per share | $ | 10.67 |
| | $ | 7.88 |
| | | $ | 10.67 |
| | $ | 7.88 |
|
| Fully diluted book value per share | $ | 10.40 |
| | $ | 7.80 |
| | | $ | 10.73 |
| | $ | 7.80 |
|
Reconciliation of Net Income to Operating Earnings (Non-GAAP)
$ in thousands, except per share data
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
| | | 2014 | | 2013 | | | 2014 | | 2013 |
| | | | | | | | | | |
| Net income available to common stockholders | | $ | 32,059 |
| | $ | 12,753 |
| | | $ | 88,785 |
| | $ | 32,211 |
|
| Add (subtract) net of tax: | | | | | | | | | |
| Net realized (gain)/loss on investments | | 727 |
| | (335 | ) | | | 727 |
| | (951 | ) |
| Other than temporary impairment losses | | — |
| | — |
| | | — |
| | — |
|
| Equity in (earnings)/losses of unconsolidated subsidiaries | | 1,047 |
| | 83 |
| | | 2,014 |
| | 294 |
|
| Non cash amortization of intangible assets | | 1,613 |
| | 1,427 |
| | | 5,482 |
| | 3,015 |
|
| Operating earnings attributable to NGHC | | $ | 35,446 |
| | $ | 13,928 |
| | 1,000 |
| $ | 97,008 |
| 1,000 |
| $ | 34,569 |
|
| | | | | | | | | | |
| Operating earnings per common share: | | | | | | | | | |
| Basic operating earnings per common share | | $ | 0.38 |
| | $ | 0.17 |
| | | $ | 1.07 |
| | $ | 0.58 |
|
| Diluted operating earnings per common share* | | $ | 0.37 |
| | $ | 0.17 |
| | | $ | 1.05 |
| | $ | 0.53 |
|
* NOTE: Diluted net income per common share and diluted operating earnings per common share for Three Months and Nine Months Ended September 30, 2013 are adjusted for preferred dividends of $0 and $2,158, respectively, from the 8% cumulative convertible Series A Preferred stock converted on June 5, 2013.
Balance Sheet
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | | | |
| | | September 30, 2014 | | | December 31, 2013 |
| | | (unaudited) | | | (audited) |
| ASSETS | | NGHC | | Reciprocal Exchanges | | Consolidated | | | NGHC |
| Investments: | | | | | | | | | |
Fixed maturities, available-for-sale, at fair value (amortized cost $1,288,829, $229,585, $1,518,414 and $757,188, respectively)
| | $ | 1,324,641 |
| | $ | 229,585 |
| | $ | 1,554,226 |
| | | $ | 766,589 |
|
| Equity securities, available-for-sale, at fair value (cost $53,794, $2,752, $56,546 and $6,939, respectively) | | 53,403 |
| | 2,752 |
| | 56,155 |
| | | 6,287 |
|
| Short-term investments | | — |
| | 2,901 |
| | 2,901 |
| | | — |
|
| Equity investment in unconsolidated subsidiaries | | 146,650 |
| | — |
| | 146,650 |
| | | 133,193 |
|
| Other investments | | 4,095 |
| | — |
| | 4,095 |
| | | 2,893 |
|
| Securities pledged (amortized cost $100,932, $0, $100,932 and $133,013, respectively) | | 100,932 |
| | — |
| | 100,932 |
| | | 133,922 |
|
| Total investments | | 1,629,721 |
| | 235,238 |
| | 1,864,959 |
| | | 1,042,884 |
|
| Cash and cash equivalents | | 117,695 |
| | 446 |
| | 118,141 |
| | | 73,823 |
|
| Accrued investment income | | 11,813 |
| | 1,975 |
| | 13,788 |
| | | 9,263 |
|
| Premiums and other receivables, net | | 685,114 |
| | 72,263 |
| | 757,377 |
| | | 449,252 |
|
| Deferred acquisition costs | | 111,791 |
| | — |
| | 111,791 |
| | | 60,112 |
|
Reinsurance recoverable on unpaid losses (2) | | 891,909 |
| | 19,137 |
| | 911,046 |
| | | 950,828 |
|
| Prepaid reinsurance premiums | | 72,288 |
| | 28,012 |
| | 100,300 |
| | | 50,878 |
|
| Notes receivable from related party | | 125,364 |
| | — |
| | 125,364 |
| | | — |
|
| Due from affiliate | | 7,008 |
| | — |
| | 7,008 |
| | | 4,785 |
|
| Income tax receivable | | — |
| | 1,030 |
| | 1,030 |
| | | — |
|
| Premises and equipment, net | | 29,346 |
| | — |
| | 29,346 |
| | | 29,535 |
|
| Intangible assets, net | | 230,460 |
| | 13,508 |
| | 243,968 |
| | | 86,564 |
|
| Goodwill | | 97,711 |
| | — |
| | 97,711 |
| | | 70,351 |
|
| Prepaid and other assets | | 14,539 |
| | 123 |
| | 14,662 |
| | | 9,240 |
|
| Total assets | | $ | 4,024,759 |
| | $ | 371,732 |
| | $ | 4,396,491 |
| | | $ | 2,837,515 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Unpaid loss and loss adjustment expense reserves | | $ | 1,413,726 |
| | 100,282 |
| | 1,514,008 |
| | | $ | 1,259,241 |
|
| Unearned premiums | | 744,843 |
| | 116,145 |
| | 860,988 |
| | | 476,232 |
|
| Unearned service contract and other revenue | | 8,949 |
| | — |
| | 8,949 |
| | | 7,319 |
|
Reinsurance payable (3) | | 95,425 |
| | 7,940 |
| | 103,365 |
| | | 93,534 |
|
| Accounts payable and accrued expenses | | 243,976 |
| | 19,822 |
| | 263,798 |
| | | 91,143 |
|
| Due to affiliate | | — |
| | 17,808 |
| | 17,808 |
| | | — |
|
| Securities sold under agreements to repurchase, at contract value | | 95,362 |
| | — |
| | 95,362 |
| | | 109,629 |
|
| Deferred tax liability | | 48,691 |
| | 24,046 |
| | 72,737 |
| | | 24,476 |
|
| Income tax payable | | 19,604 |
| | — |
| | 19,604 |
| | | 1,987 |
|
| Notes payable | | 255,622 |
| | 44,600 |
| | 300,222 |
| | | 81,142 |
|
| Other liabilities | | 47,236 |
| | 4,506 |
| | 51,742 |
| | | 49,945 |
|
| Total liabilities | | $ | 2,973,434 |
| | $ | 335,149 |
| | $ | 3,308,583 |
| | | $ | 2,194,648 |
|
| Stockholders’ equity: | | | | | | | | | |
Common stock (4) | | $ | 934 |
| | $ | — |
| | $ | 934 |
| | | $ | 797 |
|
Preferred stock (5) | | 55,000 |
| | — |
| | 55,000 |
| | | — |
|
| Additional paid-in capital | | 690,908 |
| | — |
| | 690,908 |
| | | 437,006 |
|
| Retained earnings | | 283,541 |
| | — |
| | 283,541 |
| | | 197,552 |
|
| Accumulated other comprehensive income | | 20,873 |
| | — |
| | 20,873 |
| | | 7,425 |
|
| Total National General Holdings Corp. stockholders' equity | | 1,051,256 |
| | — |
| | 1,051,256 |
| | | 642,780 |
|
| Non-controlling interest | | 69 |
| | 36,583 |
| | 36,652 |
| | | 87 |
|
| Total stockholders’ equity | | 1,051,325 |
| | 36,583 |
| | 1,087,908 |
| | | 642,867 |
|
| Total liabilities and stockholders’ equity | | $ | 4,024,759 |
| | $ | 371,732 |
| | $ | 4,396,491 |
| | | $ | 2,837,515 |
|
Segment Information - Third Quarter
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, |
| | | 2014 | | | | | | 2013 |
| | | P&C | | A&H | | NGHC | | | Reciprocal Exchanges | | | P&C | | A&H | | NGHC |
| Gross written premium | | $ | 469,873 |
| | $ | 17,729 |
| | $ | 487,602 |
| | | $ | 9,993 |
| | | $ | 324,298 |
| | $ | 8,416 |
| | $ | 332,714 |
|
| Net written premium | | 406,699 |
| | 17,666 |
| | 424,365 |
| | | 7,205 |
| | | 149,787 |
| | 8,336 |
| | 158,123 |
|
| Net earned premium | | 402,246 |
| | 29,468 |
| | 431,714 |
| | | 6,692 |
| | | 157,784 |
| | 8,341 |
| | 166,125 |
|
| | | | | | | | | | | | | | | | | |
| Ceding commission income (primarily related parties) | | 668 |
| | — |
| | 668 |
| | | 37 |
| | | 23,518 |
| | — |
| | 23,518 |
|
| Service, fee, and other income | | 31,356 |
| | 14,516 |
| | 45,872 |
| | | 22 |
| | | 21,583 |
| | 12,802 |
| | 34,385 |
|
| Total underwriting revenue | | $ | 434,270 |
| | $ | 43,984 |
| | $ | 478,254 |
| | | $ | 6,751 |
| | | $ | 202,885 |
| | $ | 21,143 |
| | $ | 224,028 |
|
| | | | | | | | | | | | | | | | | |
| Loss and loss adjustment expense | | $ | 251,418 |
| | $ | 18,250 |
| | $ | 269,668 |
| | | $ | 5,351 |
| | | $ | 104,222 |
| | $ | 4,038 |
| | $ | 108,260 |
|
| Acquisition costs and other | | 68,146 |
| | 15,496 |
| | 83,642 |
| | | 273 |
| | | 26,063 |
| | 6,168 |
| | 32,231 |
|
| General and administrative | | 77,267 |
| | 11,050 |
| | 88,317 |
| | | 1,811 |
| | | 66,236 |
| | 7,996 |
| | 74,232 |
|
| Total underwriting expenses | | 396,831 |
| | 44,796 |
| | 441,627 |
| | | 7,435 |
| | | 196,521 |
| | 18,202 |
| | 214,723 |
|
| | | | | | | | | | | | | | | | | |
| Underwriting income (loss) | | 37,439 |
| | (812 | ) | | 36,627 |
| | | (684 | ) | | | 6,364 |
| | 2,941 |
| | 9,305 |
|
| Non cash amortization of intangible assets | | 1,565 |
| | 916 |
| | 2,481 |
| | | 353 |
| | | 1,703 |
| | 492 |
| | 2,195 |
|
| Underwriting income (loss) before non cash amortization of intangible assets | | $ | 39,004 |
| | $ | 104 |
| | $ | 39,108 |
| | | $ | (331 | ) | | | $ | 8,067 |
| | $ | 3,433 |
| | $ | 11,500 |
|
| | | | | | | | | | | | | | | | | |
| Underwriting ratios | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio (6) | | 62.5 | % | | 61.9 | % | | 62.5 | % | | | 80.0 | % | | | 66.1 | % | | 48.4 | % | | 65.2 | % |
Operating expense ratio (Non-GAAP) (7,8) | | 28.2 | % | | 40.8 | % | | 29.1 | % | | | 30.3 | % | | | 29.9 | % | | 16.3 | % | | 29.2 | % |
Combined ratio (Non-GAAP) (7,9) | | 90.7 | % | | 102.8 | % | | 91.5 | % | | | 110.2 | % | | | 96.0 | % | | 64.7 | % | | 94.4 | % |
| | | | | | | | | | | | | | | | | |
| Underwriting ratios (before amortization) | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio (6) | | 62.5 | % | | 61.9 | % | | 62.5 | % | | | 80.0 | % | | | 66.1 | % | | 48.4 | % | | 65.2 | % |
Operating expense ratio (Non-GAAP) (7,10) | | 27.8 | % | | 37.7 | % | | 28.5 | % | | | 25.0 | % | | | 28.8 | % | | 10.4 | % | | 27.9 | % |
Combined ratio (Non-GAAP) (7,9) | | 90.3 | % | | 99.6 | % | | 90.9 | % | | | 104.9 | % | | | 94.9 | % | | 58.8 | % | | 93.1 | % |
NOTE: Loss and loss adjustment expense ratio and operating expense ratio may not sum to combined ratio due to rounding.
Segment Information - Year to Date
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, |
| | | 2014 | | | 2013 |
| | | P&C | | A&H | | NGHC | | | Reciprocal Exchanges | | | P&C | | A&H | | NGHC |
| Gross written premium | | $ | 1,484,344 |
| | $ | 117,873 |
| | $ | 1,602,217 |
| | | $ | 9,993 |
| | | $ | 996,034 |
| | $ | 24,982 |
| | $ | 1,021,016 |
|
| Net written premium | | 1,292,793 |
| | 117,613 |
| | 1,410,406 |
| | | 7,205 |
| | | 452,816 |
| | 24,827 |
| | 477,643 |
|
| Net earned premium | | 1,091,088 |
| | 89,944 |
| | 1,181,032 |
| | | 6,692 |
| | | 448,000 |
| | 24,832 |
| | 472,832 |
|
| | | | | | | | | | | | | | | | | |
| Ceding commission income (primarily related parties) | | 7,595 |
| | — |
| | 7,595 |
| | | 37 |
| | | 73,509 |
| | — |
| | 73,509 |
|
| Service, fee, and other income | | 76,418 |
| | 44,646 |
| | 121,064 |
| | | 22 |
| | | 62,996 |
| | 30,057 |
| | 93,053 |
|
| Total underwriting revenue | | $ | 1,175,101 |
| | $ | 134,590 |
| | $ | 1,309,691 |
| | | $ | 6,751 |
| | | $ | 584,505 |
| | $ | 54,889 |
| | $ | 639,394 |
|
| | | | | | | | | | | | | | | | | |
| Loss and loss adjustment expense | | $ | 691,856 |
| | $ | 58,763 |
| | $ | 750,619 |
| | | $ | 5,351 |
| | | $ | 293,401 |
| | $ | 16,732 |
| | $ | 310,133 |
|
| Acquisition costs and other | | 185,359 |
| | 47,074 |
| | 232,433 |
| | | 273 |
| | | 77,249 |
| | 17,415 |
| | 94,664 |
|
| General and administrative | | 205,503 |
| | 36,072 |
| | 241,575 |
| | | 1,811 |
| | | 191,681 |
| | 17,774 |
| | 209,455 |
|
| Total underwriting expenses | | 1,082,718 |
| | 141,909 |
| | 1,224,627 |
| | | 7,435 |
| | | 562,331 |
| | 51,921 |
| | 614,252 |
|
| | | | | | | | | | | | | | | | | |
| Underwriting income (loss) | | 92,383 |
| | (7,319 | ) | | 85,064 |
| | | (684 | ) | | | 22,174 |
| | 2,968 |
| | 25,142 |
|
| Non cash amortization of intangible assets | | 3,181 |
| | 5,253 |
| | 8,434 |
| | | 353 |
| | | 3,713 |
| | 926 |
| | 4,639 |
|
| Underwriting income (loss) before non cash amortization of intangible assets | | $ | 95,564 |
| | $ | (2,066 | ) | | $ | 93,498 |
| | | $ | (331 | ) | | | $ | 25,887 |
| | $ | 3,894 |
| | $ | 29,781 |
|
| | | | | | | | | | | | | | | | | |
| Underwriting ratios | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio (6) | | 63.4 | % | | 65.3 | % | | 63.6 | % | | | 80.0 | % | | | 65.5 | % | | 67.4 | % | | 65.6 | % |
Operating expense ratio (Non-GAAP) (7,8) | | 28.1 | % | | 42.8 | % | | 29.2 | % | | | 30.3 | % | | | 29.6 | % | | 20.7 | % | | 29.1 | % |
Combined ratio (Non-GAAP) (7,9) | | 91.5 | % | | 108.1 | % | | 92.8 | % | | | 110.2 | % | | | 95.1 | % | | 88.0 | % | | 94.7 | % |
| | | | | | | | | | | | | | | | | |
| Underwriting ratios (before amortization) | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio (6) | | 63.4 | % | | 65.3 | % | | 63.6 | % | | | 80.0 | % | | | 65.5 | % | | 67.4 | % | | 65.6 | % |
Operating expense ratio (Non-GAAP) (7,10) | | 27.8 | % | | 37.0 | % | | 28.5 | % | | | 25.0 | % | | | 28.7 | % | | 16.9 | % | | 28.1 | % |
Combined ratio (Non-GAAP) (7,9) | | 91.2 | % | | 102.3 | % | | 92.1 | % | | | 104.9 | % | | | 94.2 | % | | 84.3 | % | | 93.7 | % |
NOTE: Loss and loss adjustment expense ratio and operating expense ratio may not sum to combined ratio due to rounding.
Reconciliation of Operating Expense Ratio and Operating Expense Ratio Before Amortization (Non-GAAP)
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, |
| | | 2014 | | | 2013 |
| | | P&C | | A&H | | NGHC | | | Reciprocal Exchanges | | | P&C | | A&H | | Total |
| Total underwriting expenses | | $ | 396,831 |
| | $ | 44,796 |
| | $ | 441,627 |
| | | 7,435 |
| | | $ | 196,521 |
| | $ | 18,202 |
| | $ | 214,723 |
|
| Less: Loss and loss adjustment expense | | 251,418 |
| | 18,250 |
| | 269,668 |
| | | 5,351 |
| | | 104,222 |
| | 4,038 |
| | 108,260 |
|
| Less: Ceding commission income | | 668 |
| | — |
| | 668 |
| | | 37 |
| | | 23,518 |
| | — |
| | 23,518 |
|
| Less: Service, fee and other income | | 31,356 |
| | 14,516 |
| | 45,872 |
| | | 22 |
| | | 21,583 |
| | 12,802 |
| | 34,385 |
|
| Operating expense | | 113,389 |
| | 12,030 |
| | 125,419 |
| | | 2,025 |
| | | 47,198 |
| | 1,362 |
| | 48,560 |
|
| Net earned premium | | $ | 402,246 |
| | $ | 29,468 |
| | $ | 431,714 |
| | | $ | 6,692 |
| | | $ | 157,784 |
| | $ | 8,341 |
| | $ | 166,125 |
|
| Operating expense ratio (Non-GAAP) | | 28.2 | % | | 40.8 | % | | 29.1 | % | | | 30.3 | % | | | 29.9 | % | | 16.3 | % | | 29.2 | % |
| | | | | | | | | | | | | | | | | |
| Total underwriting expenses | | $ | 396,831 |
| | $ | 44,796 |
| | $ | 441,627 |
| | | $ | 7,435 |
| | | $ | 196,521 |
| | $ | 18,202 |
| | $ | 214,723 |
|
| Less: Loss and loss adjustment expense | | 251,418 |
| | 18,250 |
| | 269,668 |
| | | 5,351 |
| | | 104,222 |
| | 4,038 |
| | 108,260 |
|
| Less: Ceding commission income | | 668 |
| | — |
| | 668 |
| | | 37 |
| | | 23,518 |
| | — |
| | 23,518 |
|
| Less: Service, fee and other income | | 31,356 |
| | 14,516 |
| | 45,872 |
| | | 22 |
| | | 21,583 |
| | 12,802 |
| | 34,385 |
|
| Less: Non cash amortization of intangible assets | | 1,565 |
| | 916 |
| | 2,481 |
| | | 353 |
| | | 1,703 |
| | 492 |
| | 2,195 |
|
| Operating expense before amortization | | 111,824 |
| | 11,114 |
| | 122,938 |
| | | 1,672 |
| | | 45,495 |
| | 870 |
| | 46,365 |
|
| Net earned premium | | $ | 402,246 |
| | $ | 29,468 |
| | 431,714 |
| | | 6,692 |
| | | $ | 157,784 |
| | $ | 8,341 |
| | $ | 166,125 |
|
| Operating expense ratio before amortization (Non-GAAP) | | 27.8 | % | | 37.7 | % | | 28.5 | % | | | 25.0 | % | | | 28.8 | % | | 10.4 | % | | 27.9 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Nine Months Ended September 30, |
| | | 2014 | | | 2013 |
| | | P&C | | A&H | | NGHC | | | Reciprocal Exchanges | | | P&C | | A&H | | NGHC |
| Total underwriting expenses | | $ | 1,082,718 |
| | $ | 141,909 |
| | $ | 1,224,627 |
| | | $ | 7,435 |
| | | $ | 562,331 |
| | $ | 51,921 |
| | $ | 614,252 |
|
| Less: Loss and loss adjustment expense | | 691,856 |
| | 58,763 |
| | 750,619 |
| | | 5,351 |
| | | 293,401 |
| | 16,732 |
| | 310,133 |
|
| Less: Ceding commission income | | 7,595 |
| | — |
| | 7,595 |
| | | 37 |
| | | 73,509 |
| | — |
| | 73,509 |
|
| Less: Service, fee and other income | | 76,418 |
| | 44,646 |
| | 121,064 |
| | | 22 |
| | | 62,996 |
| | 30,057 |
| | 93,053 |
|
| Operating expense | | 306,849 |
| | 38,500 |
| | 345,349 |
| | | 2,025 |
| | | 132,425 |
| | 5,132 |
| | 137,557 |
|
| Net earned premium | | $ | 1,091,088 |
| | $ | 89,944 |
| | $ | 1,181,032 |
| | | $ | 6,692 |
| | | $ | 448,000 |
| | $ | 24,832 |
| | $ | 472,832 |
|
| Operating expense ratio (Non-GAAP) | | 28.1 | % | | 42.8 | % | | 29.2 | % | | | 30.3 | % | | | 29.6 | % | | 20.7 | % | | 29.1 | % |
| | | | | | | | | | | | | | | | | |
| Total underwriting expenses | | $ | 1,082,718 |
| | $ | 141,909 |
| | $ | 1,224,627 |
| | | $ | 7,435 |
| | | $ | 562,331 |
| | $ | 51,921 |
| | $ | 614,252 |
|
| Less: Loss and loss adjustment expense | | 691,856 |
| | 58,763 |
| | 750,619 |
| | | 5,351 |
| | | 293,401 |
| | 16,732 |
| | 310,133 |
|
| Less: Ceding commission income | | 7,595 |
| | — |
| | 7,595 |
| | | 37 |
| | | 73,509 |
| | — |
| | 73,509 |
|
| Less: Service, fee and other income | | 76,418 |
| | 44,646 |
| | 121,064 |
| | | 22 |
| | | 62,996 |
| | 30,057 |
| | 93,053 |
|
| Less: Non cash amortization of intangible assets | | 3,181 |
| | 5,253 |
| | 8,434 |
| | | 353 |
| | | 3,713 |
| | 926 |
| | 4,639 |
|
| Operating expense before amortization | | 303,668 |
| | 33,247 |
| | 336,915 |
| | | 1,672 |
| | | 128,712 |
| | 4,206 |
| | 132,918 |
|
| Net earned premium | | $ | 1,091,088 |
| | $ | 89,944 |
| | $ | 1,181,032 |
| | | $ | 6,692 |
| | | $ | 448,000 |
| | $ | 24,832 |
| | $ | 472,832 |
|
| Operating expense ratio before amortization (Non-GAAP) | | 27.8 | % | | 37.0 | % | | 28.5 | % | | | 25.0 | % | | | 28.7 | % | | 16.9 | % | | 28.1 | % |
Gross Written Premium by Business Line
$ in thousands
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, |
| | | | | | | % of Total | | | | | | | % of Total |
| | | 2014 | | 2013 | | % Change | | 2014 | | 2013 | | | 2014 | | 2013 | | % Change | | 2014 | | 2013 |
| Property & Casualty | | | | | | | | | | | | | | | | | | | | | |
| Personal Auto | | $315,672 | | $252,794 | | 24.9% | | 64.7% | | 76.0% | | | $953,010 | | $775,838 | | 22.8% | | 59.5% | | 76.0% |
| Homeowners | | 74,583 | | 288 | | NA | | 15.3% | | 0.1% | | | 290,667 | | 397 | | NA | | 18.1% | | —% |
| RV/Packaged | | 39,490 | | 40,128 | | (1.6)% | | 8.1% | | 12.1% | | | 120,183 | | 122,652 | | (2.0)% | | 7.5% | | 12.0% |
| Commercial Auto | | 35,619 | | 27,604 | | 29.0% | | 7.3% | | 8.3% | | | 107,173 | | 86,933 | | 23.3% | | 6.7% | | 8.5% |
| Other | | 4,509 | | 3,483 | | 29.5% | | 0.9% | | 1.0% | | | 13,311 | | 10,214 | | 30.3% | | 0.8% | | 1.0% |
| P&C Total | | $469,873 | | $324,298 | | 44.9% | | 96.4% | | 97.5% | | | $1,484,344 | | $996,034 | | 49.0% | | 92.6% | | 97.6% |
| | | | | | | | | | | | | | | | | | | | | | |
| Accident & Health | | 17,729 | | 8,416 | | 110.7% | | 3.6% | | 2.5% | | | 117,873 |
| | 24,982 |
| | 371.8% | | 7.4% | | 2.4% |
| | | | | | | | | | | | | | | | | | | | | | |
| Total NGHC | | $487,602 | | $332,714 | | 46.6% | | 100.0% | | 100.0% | | | $1,602,217 | | $1,021,016 | | 56.9% | | 100.0% | | 100.0% |
| | | | | | | | | | | | | | | | | | | | | | |
| Reciprocal Exchanges | | | | | | | | | | | | | | | | | | | | | |
| Personal Auto | | $4,330 | | — | | NA | | 43.3% | | NA | | | $4,330 | | — | | NA | | 43.3% | | NA |
| Homeowners | | 5,013 |
| | — | | NA | | 50.2% | | NA | | | 5,013 |
| | — | | NA | | 50.2% | | NA |
| Other | | 650 |
| | — | | NA | | 6.5% | | NA | | | 650 |
| | — | | NA | | 6.5% | | NA |
| Reciprocal Exchanges Total | | $9,993 | | — | | NA | | 100.0% | | NA | | | $9,993 | | — | | NA | | 100.0% | | NA |
| | | | | | | | | | | | | | | | | | | | | | |
| Consolidated Total | | $497,595 | | $332,714 | | 49.6% | | | | | | | $1,612,210 | | $1,021,016 | | 57.9% | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
NOTE: Percentage totals may not sum due to rounding.
Additional Disclosures
(1) References to operating earnings and basic and diluted operating EPS are Non-GAAP financial measures defined by the Company as net income and basic earnings per share excluding after-tax net realized investment gain or loss on securities, equity in earnings (losses) of unconsolidated subsidiaries, and non-cash amortization of intangible assets. Please see the Non-GAAP Financial Measures table within this release for important information about the use of these Non-GAAP measures and their reconciliation to GAAP.
(2)Reinsurance recoverable on unpaid losses includes $101,744 and $176,241 from related parties at September 30, 2014 and December 31, 2013, respectively; includes $19,137 relating to Reciprocal Exchanges at September 30, 2014.
(3)Reinsurance payable includes $34,722 and $76,360 to related parties at September 30, 2014 and December 31, 2013, respectively; includes $7,940 relating to Reciprocal Exchanges at September 30, 2014.
(4) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 93,408,212 shares - September 30, 2014; authorized 150,000,000 shares, issued and outstanding 79,731,800 shares - December 31, 2013.
(5) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,200,000 shares and 0 shares - September 30, 2014 and December 31, 2013.
(6) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expenses by net earned premium.
(7) Operating expense ratio and combined ratio are considered non-GAAP financial measures under applicable SEC rules because a component of those ratios, operating expense, is calculated by offsetting acquisition and other underwriting costs and general and administrative expense by ceding commission income and service and fee income. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets on a consolidated basis. 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 important information about the use of these Non-GAAP measures and their reconciliation to GAAP.
(8) Operating expense ratio (non-GAAP) is calculated by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expense less ceding commission income and service and fee income.
(9) Combined ratio (non-GAAP) is calculated by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) together.
(10) Operating expense ratio (non-GAAP) before amortization is calculated by dividing the operating expense before amortization by net earned premium. Operating expense before amortization consists of the sum of acquisition and other underwriting costs and general and administrative expense less ceding commission income and service and fee income less non cash amortization of intangible assets.
Investor Contact
Dean Evans
Director of Investor Relations
Phone: 212-380-9462
Email: Dean.Evans@NGIC.com
