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National General Holdings Corp. Reports Third Quarter 2018 Results
NEW YORK, October 30, 2018 (GLOBE NEWSWIRE) - National General Holdings Corp. (Nasdaq:NGHC) today reported third quarter 2018 net income of $60.5 million or $0.55 per diluted share, compared to net income of $49.8 million or $0.46 per diluted share in the third quarter of 2017. Third quarter 2018 operating earnings(1) was $70.8 million or $0.65 per diluted share, compared to $28.7 million or $0.26 per diluted share in the third quarter of 2017.
Third Quarter 2018 Highlights Versus Third Quarter 2017*
| • | Gross written premium grew $133.6 million or 12.1% to $1,234.3 million, driven by continued organic growth in our P&C segment of 11.3% and in our A&H segment of 18.7%. |
| • | In the third quarter, our homeowners’ product experienced organic growth of 24.6% driven by strong results from strategic partnerships and the continued expansion in the high net worth market. Our personal auto product experienced organic growth of 10.3% driven by continued rate increases and PIF growth. |
| • | The overall combined ratio(9,13) was 91.3% compared to 96.8% in the prior year’s quarter, excluding non-cash amortization of intangible assets. The P&C segment reported a decrease in combined ratio to 94.4% from 98.1% in the prior year’s quarter. The combined ratio includes $35.0 million of losses, or 4.7 P&C loss ratio points, primarily related to Hurricane Florence and the California Fires in the third quarter 2018, compared to $52.4 million of losses, or 7.6 P&C loss ratio points, from events in the third quarter 2017. The A&H segment reported a combined ratio of 77.0% compared to 89.7% in the prior year’s quarter. |
| • | Loss trends in both of our segments remained strong in the quarter. The P&C loss ratio reflects favorable loss trends for accident year 2018 compared with prior accident years at the same age, particularly on the shorter-tailed auto physical damage claims, which improved our view of the current accident year loss ratio. The A&H loss ratio reflects an improvement in our view of the current accident year loss ratio for both small group self-funded and individual products. |
| • | Service and fee income grew 20.6% to $160.4 million, driven by organic growth in both our Accident & Health and Property & Casualty segments. |
| • | Shareholders’ equity was $2.06 billion and fully diluted book value per share was $14.66 at September 30, 2018, growth of 6.7% and 5.8%, respectively, from December 31, 2017. Our trailing twelve month operating return on average equity (ROE)(14) was 14.5% as of September 30, 2018. |
| • | Third quarter 2018 operating earnings exclude the following material items, net of tax: $2.4 million or $0.02 net loss on investments and $6.5 million or $0.06 per share of non-cash amortization of intangible assets. |
Barry Karfunkel, National General’s CEO, stated: “Our third quarter results continue to demonstrate the underwriting results that both our Property and Casualty and Accident and Health segments are able to generate with the full integration of past acquisitions. Despite another active catastrophe quarter, our P&C segment was able to generate a 94% combined ratio, largely driven by strong trends in our auto book. Our A&H segment continues to grow profitably, and our suite of products and owned distribution positions us well in the changing domestic healthcare environment. I am pleased with the continued execution of our strategy: continued profitable growth within the niches of the insurance industry we serve.”
*NOTE: Unless specified otherwise, discussion of our third quarter 2018 and 2017 results do not include financial results from the Reciprocal Exchanges, which are presented within our consolidated financial results within this release but are not included in net income available to NGHC common stockholders.
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Overview of Third Quarter 2018 as Compared to Third Quarter 2017 by Segment
| • | Property & Casualty - Gross written premium grew by 11.3% to $1,090.4 million, net written premium increased by 67.7% to $784.6 million, with net premiums written for the third quarter of 2017 impacted by the unearned premium transfer associated with the Quota Shares, and net earned premium increased by 7.9% to $741.0 million. P&C gross written premium growth was primarily driven by organic growth of 24.6% from our homeowners’ product and 10.3% from our personal auto product. Service and fee income grew 13.3% to $114.0 million. Excluding non-cash amortization of intangible assets, the combined ratio(9,13) was 94.4% with a loss ratio of 73.5% and an expense ratio(9,12) of 20.9%, versus a prior year combined ratio of 98.1% with a loss ratio of 77.0% and an expense ratio of 21.1%. The loss ratio reflects favorable loss trends for accident year 2018 compared with prior accident years at the same age, particularly on the shorter-tailed auto physical damage claims, which improved our view of the current accident year loss ratio. The loss ratio was also impacted by pre-tax catastrophe losses of approximately $35.0 million primarily related to Hurricane Florence and the California Fires in the third quarter 2018. |
| • | Accident & Health - Gross written premium grew by 18.7% to $143.9 million, net written premium grew by 12.1% to $123.6 million, and net earned premium grew by 14.5% to $155.3 million. The A&H gross written premium increase was driven by the continued growth across the entire book. Service and fee income was $46.5 million compared to $32.5 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio(9,13) was 77.0% with a loss ratio of 46.8% and an expense ratio(9,12) of 30.2%, versus a prior year combined ratio of 89.7% with a loss ratio of 61.5% and an expense ratio of 28.2%. The loss ratio reflects an improvement in our view of the current accident year loss ratio for both small group self-funded and individual products. |
| • | Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $121.4 million, net written premium was $14.8 million, and net earned premium was $43.2 million. Reciprocal Exchanges combined ratio(9,13) excluding non-cash amortization of intangible assets was 129.3% with a loss ratio of 93.2% and an expense ratio(9,12) of 36.1%. |
Third quarter 2018 investment income grew to $31.0 million, compared to $25.4 million in the third quarter of 2017, with the increase partially driven by an improvement in the book yield from the previous quarter’s re-balancing and new investments in the quarter. Total investments and cash and cash equivalents (including restricted cash) were $4.1 billion as of September 30, 2018. Accumulated other comprehensive income (loss) increased to a $68.6 million loss at September 30, 2018 from a $8.1 million loss at December 31, 2017, primarily due to the impact of higher interest rates which negatively impacted bond valuations.
Interest expense was $12.6 million and debt was $675.3 million at September 30, 2018, and $713.7 million at December 31, 2017.
The third quarter of 2018 provision for income taxes was $16.4 million and the effective tax rate for the quarter was 19.4%. The effective tax rate for the nine months ended September 30, 2018 was 19.7%.
Shareholders’ equity was $2,056.9 million at September 30, 2018, growth of 6.7% from $1,928.6 million at December 31, 2017. Fully diluted book value per share was $14.66 at September 30, 2018, growth of 5.8% from $13.86 at December 31, 2017. Our trailing twelve month operating return on average equity (ROE)(14) was 14.5% as of September 30, 2018.
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| Year-to-Date P&C Segment Notable Large Losses | |||||||
| 2018 Quarter | P&C Notable Large Losses and LAE ($ millions) | P&C Loss Ratio Points* | EPS Impact After Tax | ||||
| Q3 | California Fires and Hurricane Florence | $35.0 | 4.7% | $0.25 | |||
| Q2 | Spring Weather-related and Texas Hail Events | $20.5 | 2.8% | $0.15 | |||
| Q1 | Northeastern Winter Weather | $14.2 | 2.0% | $0.10 | |||
* Loss ratio points related to P&C net earned premium in quarter the loss event was recorded.
Additional Item
We expect Hurricane Michael, which impacted the Southeastern U.S. in October 2018, to produce pre-tax losses of $7-10 million ($6-8 million after-tax) in Q4’18, net of quota share reinsurance recoverables.
Conference Call
On Wednesday, October 31, 2018 at 8:30 AM ET, Chief Executive Officer Barry Karfunkel and Chief Financial Officer Mike Weiner will review results and discuss business conditions via a conference call that may be accessed as follows:
Toll-Free U.S. Dial-in: 888-346-7359
International Dial-in: 973-528-0008
Conference Entry Code: 626384
Webcast Registration: http://ir.nationalgeneral.com/events-and-presentations
A replay of the conference call will be accessible from 2:00 PM ET on Wednesday, October 31, 2018 to 11:59 PM ET on Wednesday, November 14, 2018 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 626384. In addition, a replay of the webcast can also be retrieved at
http://ir.nationalgeneral.com/events-and-presentations.
About National General Holdings Corp.
National General Holdings Corp., headquartered in New York City, is a specialty personal lines insurance holding company. National General traces its roots to 1939, has a financial strength rating of A- (excellent) from A.M. Best, and provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, supplemental health and other niche insurance products.
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Forward Looking Statements
This news release contains “forward-looking statements” that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as “may,” “will,” “plan,” “expect,” “project,” “intend,” “estimate,” “anticipate” and “believe” or their variations or similar terminology. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, estimates of the fair value of investments, development of claims and the effect on loss reserves, large loss activity including hurricanes and wildfires, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, the effect of unpredictable catastrophic losses, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, the effects of tax reform, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with third party or vendor agencies, breaches in data security or other disruptions involving our technology, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statement except as may be required by law. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected is contained in the Company’s filings with the Securities and Exchange Commission.
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Income Statement - Third Quarter
$ in thousands
(Unaudited)
| Three Months Ended September 30, | ||||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | |||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Gross written premium | $ | 1,234,320 | $ | 121,351 | $ | 1,355,671 | $ | 1,100,706 | $ | 104,406 | $ | 1,204,311 | (G) | |||||||||||||
| Net written premium | 908,210 | 14,814 | 923,024 | 578,021 | 43,533 | 621,554 | ||||||||||||||||||||
| Net earned premium | 896,376 | 43,151 | 939,527 | 822,323 | 41,978 | 864,301 | ||||||||||||||||||||
| Ceding commission income | 44,513 | 14,587 | 59,100 | 30,901 | 19,201 | 50,102 | ||||||||||||||||||||
| Service and fee income | 160,425 | 1,575 | 142,690 | (A) | 133,057 | 4,084 | 122,526 | (H) | ||||||||||||||||||
| Net investment income | 30,984 | 2,344 | 30,696 | (B) | 25,426 | 2,189 | 25,150 | (I) | ||||||||||||||||||
| Net gain (loss) on investments | (3,003 | ) | (167 | ) | (3,170 | ) | 47,659 | (54 | ) | 47,605 | ||||||||||||||||
| Other income (expense) | — | — | — | (3,901 | ) | — | (3,901 | ) | ||||||||||||||||||
| Total revenues | $ | 1,129,295 | $ | 61,490 | $ | 1,168,843 | (C) | $ | 1,055,465 | $ | 67,398 | $ | 1,105,783 | (J) | ||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Loss and loss adjustment expense | $ | 617,098 | $ | 40,212 | $ | 657,310 | $ | 612,289 | $ | 26,856 | $ | 639,145 | ||||||||||||||
| Acquisition costs and other underwriting expenses | 180,180 | 11,290 | 191,470 | 146,469 | 17,116 | 163,585 | ||||||||||||||||||||
| General and administrative expenses | 234,626 | 20,417 | 235,733 | (D) | 209,923 | 18,819 | 214,127 | (K) | ||||||||||||||||||
| Interest expense | 12,583 | 2,632 | 12,583 | (E) | 11,495 | 2,465 | 11,495 | (L) | ||||||||||||||||||
| Total expenses | $ | 1,044,487 | $ | 74,551 | $ | 1,097,096 | (F) | $ | 980,176 | $ | 65,256 | $ | 1,028,352 | (M) | ||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | 84,808 | $ | (13,061 | ) | $ | 71,747 | $ | 75,289 | $ | 2,142 | $ | 77,431 | |||||||||||||
| Provision (benefit) for income taxes | 16,426 | (908 | ) | 15,518 | 17,644 | 831 | 18,475 | |||||||||||||||||||
| Net income (loss) before non-controlling interest and dividends on preferred shares | 68,382 | (12,153 | ) | 56,229 | 57,645 | 1,311 | 58,956 | |||||||||||||||||||
| Less: net income (loss) attributable to non-controlling interest | — | (12,153 | ) | (12,153 | ) | — | 1,311 | 1,311 | ||||||||||||||||||
| Net income before dividends on preferred shares | 68,382 | — | 68,382 | 57,645 | — | 57,645 | ||||||||||||||||||||
| Less: dividends on preferred shares | 7,875 | — | 7,875 | 7,875 | — | 7,875 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 60,507 | $ | — | $ | 60,507 | $ | 49,770 | $ | — | $ | 49,770 | ||||||||||||||
NOTES: Consolidated column includes eliminations as follows: (A) $(19,310), (B) $(2,632), (C) $(21,942), (D) $(19,310), (E) $(2,632), (F) $(21,942), (G) $(801), (H) $(14,615), (I) $(2,465), (J) $(17,080), (K) $(14,615), (L) $(2,465) and (M) $(17,080).
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Income Statement - Year to Date
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||||||||||||||
| 2018 | 2017 | |||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | |||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Gross written premium | $ | 3,793,830 | $ | 337,021 | $ | 4,129,250 | (A) | $ | 3,308,226 | $ | 285,779 | $ | 3,591,603 | (H) | ||||||||||||
| Net written premium | 2,787,402 | 132,240 | 2,919,642 | 2,602,130 | 136,477 | 2,738,607 | ||||||||||||||||||||
| Net earned premium | 2,646,962 | 141,009 | 2,787,971 | 2,641,271 | 123,266 | 2,764,537 | ||||||||||||||||||||
| Ceding commission income | 119,453 | 39,523 | 158,976 | 37,047 | 54,557 | 91,604 | ||||||||||||||||||||
| Service and fee income | 463,293 | 4,466 | 415,313 | (B) | 406,482 | 7,658 | 373,644 | (I) | ||||||||||||||||||
| Net investment income | 82,186 | 6,693 | 81,702 | (C) | 81,614 | 7,220 | 81,725 | (J) | ||||||||||||||||||
| Net gain (loss) on investments | (21,490 | ) | (1,266 | ) | (22,756 | ) | 37,885 | 6,133 | 44,018 | |||||||||||||||||
| Other income | — | — | — | (198 | ) | — | (198 | ) | ||||||||||||||||||
| Total revenues | $ | 3,290,404 | $ | 190,425 | $ | 3,421,206 | (D) | $ | 3,204,101 | $ | 198,834 | $ | 3,355,330 | (K) | ||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Loss and loss adjustment expense | $ | 1,835,383 | $ | 126,421 | $ | 1,961,804 | $ | 1,880,380 | $ | 88,776 | $ | 1,969,156 | ||||||||||||||
| Acquisition costs and other underwriting expenses | 509,088 | 32,952 | 542,040 | 480,264 | 46,836 | 527,100 | ||||||||||||||||||||
| General and administrative expenses | 681,581 | 62,032 | 691,167 | (E) | 658,871 | 62,431 | 680,806 | (L) | ||||||||||||||||||
| Interest expense | 38,775 | 7,177 | 38,775 | (F) | 34,590 | 7,109 | 34,590 | (M) | ||||||||||||||||||
| Total expenses | $ | 3,064,827 | $ | 228,582 | $ | 3,233,786 | (G) | $ | 3,054,105 | $ | 205,152 | $ | 3,211,652 | (N) | ||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | 225,577 | $ | (38,157 | ) | $ | 187,420 | $ | 149,996 | $ | (6,318 | ) | $ | 143,678 | ||||||||||||
| Provision (benefit) for income taxes | 44,439 | (6,178 | ) | 38,261 | 42,096 | (1,345 | ) | 40,751 | ||||||||||||||||||
| Net income (loss) before non-controlling interest and dividends on preferred shares | 181,138 | (31,979 | ) | 149,159 | 107,900 | (4,973 | ) | 102,927 | ||||||||||||||||||
| Less: net income (loss) attributable to non-controlling interest | — | (31,979 | ) | (31,979 | ) | — | (4,973 | ) | (4,973 | ) | ||||||||||||||||
| Net income before dividends on preferred shares | 181,138 | — | 181,138 | 107,900 | — | 107,900 | ||||||||||||||||||||
| Less: dividends on preferred shares | 23,625 | — | 23,625 | 23,625 | — | 23,625 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 157,513 | $ | — | $ | 157,513 | $ | 84,275 | $ | — | $ | 84,275 | ||||||||||||||
NOTES: Consolidated column includes eliminations as follows: (A) $(1,601), (B) $(52,446), (C) $(7,177), (D) $(59,623), (E) $(52,446), (F) $(7,177), (G) $(59,623), (H) $(2,402), (I) $(40,496), (J) $(7,109), (K) $(47,605), (L) $(40,496), (M) $(7,109) and (N) $(47,605).
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Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income available to common stockholders | $ | 60,507 | $ | 49,770 | $ | 157,513 | $ | 84,275 | ||||||||
| Basic net income per common share | $ | 0.56 | $ | 0.47 | $ | 1.47 | $ | 0.79 | ||||||||
| Diluted net income per common share | $ | 0.55 | $ | 0.46 | $ | 1.44 | $ | 0.78 | ||||||||
Operating earnings attributable to NGHC(1) | $ | 70,798 | $ | 28,653 | $ | 197,905 | $ | 88,091 | ||||||||
Basic operating earnings per common share(1) | $ | 0.66 | $ | 0.27 | $ | 1.85 | $ | 0.83 | ||||||||
Diluted operating earnings per common share(1) | $ | 0.65 | $ | 0.26 | $ | 1.81 | $ | 0.81 | ||||||||
| Dividends declared per common share | $ | 0.04 | $ | 0.04 | $ | 0.12 | $ | 0.12 | ||||||||
| Weighted average number of basic shares outstanding | 107,101,837 | 106,645,601 | 106,944,461 | 106,556,662 | ||||||||||||
| Weighted average number of diluted shares outstanding | 109,563,392 | 108,520,964 | 109,315,780 | 108,690,139 | ||||||||||||
| Shares outstanding, end of period | 107,132,560 | 106,670,768 | ||||||||||||||
| Fully diluted shares outstanding, end of period | 109,594,115 | 108,546,131 | ||||||||||||||
| Book value per share | $ | 15.00 | $ | 14.44 | ||||||||||||
| Fully diluted book value per share | $ | 14.66 | $ | 14.19 | ||||||||||||
Reconciliation of Net Income to Operating Earnings (Non-GAAP)
$ in thousands, except per share data
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Net income available to common stockholders | $ | 60,507 | $ | 49,770 | $ | 157,513 | $ | 84,275 | ||||||||
| Add (subtract): | ||||||||||||||||
| Net (gain) loss on investments | 3,003 | (47,659 | ) | 21,490 | (37,885 | ) | ||||||||||
| Other expense | — | 3,901 | — | 198 | ||||||||||||
| Equity in (earnings) losses of equity method investments | 676 | 1,997 | 2,979 | 1,258 | ||||||||||||
| Non-cash amortization of intangible assets | 8,260 | 9,274 | 23,397 | 42,301 | ||||||||||||
| Income tax expense (benefit) | (1,648 | ) | 11,370 | (7,474 | ) | (2,056 | ) | |||||||||
Operating earnings attributable to NGHC (1) | $ | 70,798 | $ | 28,653 | $ | 197,905 | $ | 88,091 | ||||||||
| Operating earnings per common share: | ||||||||||||||||
| Basic operating earnings per common share | $ | 0.66 | $ | 0.27 | $ | 1.85 | $ | 0.83 | ||||||||
| Diluted operating earnings per common share | $ | 0.65 | $ | 0.26 | $ | 1.81 | $ | 0.81 | ||||||||
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Balance Sheet
$ in thousands
| September 30, 2018 (unaudited) | December 31, 2017 (audited) | |||||||||||||||||||||||||
| ASSETS | NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | ||||||||||||||||||||
Total investments (2) | $ | 3,644,476 | $ | 320,337 | $ | 3,863,534 | (A) | $ | 3,411,730 | $ | 327,213 | $ | 3,649,788 | (J) | ||||||||||||
| Cash and cash equivalents, including restricted cash | 434,667 | 263 | 434,930 | 351,433 | 6,051 | 357,484 | ||||||||||||||||||||
| Premiums and other receivables, net | 1,398,843 | 64,090 | 1,461,332 | (B) | 1,268,330 | 56,792 | 1,324,321 | (K) | ||||||||||||||||||
Reinsurance activity (3) | 1,951,021 | 256,773 | 2,207,794 | 1,616,103 | 195,184 | 1,811,287 | ||||||||||||||||||||
| Intangible assets, net | 379,652 | 3,550 | 383,202 | 400,385 | 3,685 | 404,070 | ||||||||||||||||||||
| Goodwill | 183,984 | — | 183,984 | 174,153 | — | 174,153 | ||||||||||||||||||||
Other (4) | 704,870 | 32,350 | 714,312 | (C) | 705,321 | 29,174 | 718,640 | (L) | ||||||||||||||||||
| Total assets | $ | 8,697,513 | $ | 677,363 | $ | 9,249,088 | (D) | $ | 7,927,455 | $ | 618,099 | $ | 8,439,743 | (M) | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||
| Unpaid loss and loss adjustment expense reserves | $ | 2,679,190 | $ | 175,945 | $ | 2,855,135 | $ | 2,520,204 | $ | 143,353 | $ | 2,663,557 | ||||||||||||||
| Unearned premiums and other revenue | 2,067,437 | 264,418 | 2,331,855 | 1,807,210 | 225,395 | 2,032,605 | ||||||||||||||||||||
| Reinsurance payable | 594,460 | 62,833 | 655,692 | (E) | 329,772 | 69,076 | 398,047 | (N) | ||||||||||||||||||
Accounts payable and accrued expenses (5) | 460,498 | 27,299 | 464,889 | (F) | 423,054 | 24,682 | 431,881 | (O) | ||||||||||||||||||
| Debt | 675,263 | 101,279 | 675,263 | (G) | 713,710 | 89,155 | 713,710 | (P) | ||||||||||||||||||
| Other | 163,731 | 59,544 | 223,275 | 204,936 | 41,582 | 246,518 | ||||||||||||||||||||
| Total liabilities | $ | 6,640,579 | $ | 691,318 | $ | 7,206,109 | (H) | $ | 5,998,886 | $ | 593,243 | $ | 6,486,318 | (Q) | ||||||||||||
| Stockholders’ equity: | ||||||||||||||||||||||||||
Common stock (6) | $ | 1,071 | $ | — | $ | 1,071 | $ | 1,067 | $ | — | $ | 1,067 | ||||||||||||||
Preferred stock (7) | 450,000 | — | 450,000 | 420,000 | — | 420,000 | ||||||||||||||||||||
| Additional paid-in capital | 923,124 | — | 923,124 | 917,751 | — | 917,751 | ||||||||||||||||||||
| Accumulated other comprehensive income (loss) | (68,581 | ) | — | (68,581 | ) | (8,112 | ) | — | (8,112 | ) | ||||||||||||||||
| Retained earnings | 751,320 | — | 751,320 | 597,863 | — | 597,863 | ||||||||||||||||||||
| Total National General Holdings Corp. stockholders’ equity | 2,056,934 | — | 2,056,934 | 1,928,569 | — | 1,928,569 | ||||||||||||||||||||
| Non-controlling interest | — | (13,955 | ) | (13,955 | ) | — | 24,856 | 24,856 | ||||||||||||||||||
| Total stockholders’ equity | $ | 2,056,934 | $ | (13,955 | ) | $ | 2,042,979 | $ | 1,928,569 | $ | 24,856 | $ | 1,953,425 | |||||||||||||
| Total liabilities and stockholders’ equity | $ | 8,697,513 | $ | 677,363 | $ | 9,249,088 | (I) | $ | 7,927,455 | $ | 618,099 | $ | 8,439,743 | (R) | ||||||||||||
NOTES: Consolidated column includes eliminations as follows: (A) $(101,279), (B) $(1,601), (C) $(22,908), (D) $(125,788), (E) $(1,601), (F) $(22,908), (G) $(101,279), (H) $(125,788), (I) $(125,788), (J) $(89,155), (K) $(801), (L) $(15,855), (M) $(105,811), (N) $(801), (O) $(15,855), (P) $(89,155), (Q) $(105,811) and (R) $(105,811).
8
Segment Information - Third Quarter
$ in thousands
(Unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||
| Gross written premium | $ | 1,090,372 | $ | 143,948 | $ | 1,234,320 | $ | 121,351 | $ | 979,440 | $ | 121,266 | $ | 1,100,706 | $ | 104,406 | |||||||||||||||||||
| Net written premium | 784,634 | 123,576 | 908,210 | 14,814 | 467,824 | 110,197 | 578,021 | 43,533 | |||||||||||||||||||||||||||
| Net earned premium | 741,030 | 155,346 | 896,376 | 43,151 | 686,596 | 135,727 | 822,323 | 41,978 | |||||||||||||||||||||||||||
| Ceding commission income | 44,244 | 269 | 44,513 | 14,587 | 30,675 | 226 | 30,901 | 19,201 | |||||||||||||||||||||||||||
| Service and fee income | 113,967 | 46,458 | 160,425 | 1,575 | 100,565 | 32,492 | 133,057 | 4,084 | |||||||||||||||||||||||||||
| Total underwriting revenues | $ | 899,241 | $ | 202,073 | $ | 1,101,314 | $ | 59,313 | $ | 817,836 | $ | 168,445 | $ | 986,281 | $ | 65,263 | |||||||||||||||||||
| Loss and loss adjustment expense | 544,446 | 72,652 | 617,098 | 40,212 | 528,875 | 83,414 | 612,289 | 26,856 | |||||||||||||||||||||||||||
| Acquisition costs and other | 135,406 | 44,774 | 180,180 | 11,290 | 112,643 | 33,826 | 146,469 | 17,116 | |||||||||||||||||||||||||||
| General and administrative | 184,101 | 50,525 | 234,626 | 20,417 | 171,460 | 38,463 | 209,923 | 18,819 | |||||||||||||||||||||||||||
| Total underwriting expenses | $ | 863,953 | $ | 167,951 | $ | 1,031,904 | $ | 71,919 | $ | 812,978 | $ | 155,703 | $ | 968,681 | $ | 62,791 | |||||||||||||||||||
| Underwriting income (loss) | 35,288 | 34,122 | 69,410 | (12,606 | ) | 4,858 | 12,742 | 17,600 | 2,472 | ||||||||||||||||||||||||||
| Non-cash amortization of intangible assets | 6,546 | 1,714 | 8,260 | (14 | ) | 7,994 | 1,280 | 9,274 | (69 | ) | |||||||||||||||||||||||||
| Underwriting income (loss) before amortization and impairment | $ | 41,834 | $ | 35,836 | $ | 77,670 | $ | (12,620 | ) | $ | 12,852 | $ | 14,022 | $ | 26,874 | $ | 2,403 | ||||||||||||||||||
| Underwriting ratios | |||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (8) | 73.5 | % | 46.8 | % | 68.8 | % | 93.2 | % | 77.0 | % | 61.5 | % | 74.5 | % | 64.0 | % | |||||||||||||||||||
Operating expense ratio (Non-GAAP) (9,10) | 21.8 | % | 31.3 | % | 23.4 | % | 36.0 | % | 22.3 | % | 29.2 | % | 23.4 | % | 30.1 | % | |||||||||||||||||||
Combined ratio (Non-GAAP) (9,11) | 95.3 | % | 78.1 | % | 92.2 | % | 129.2 | % | 99.3 | % | 90.7 | % | 97.9 | % | 94.1 | % | |||||||||||||||||||
| Underwriting ratios (before amortization and impairment) | |||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (8) | 73.5 | % | 46.8 | % | 68.8 | % | 93.2 | % | 77.0 | % | 61.5 | % | 74.5 | % | 64.0 | % | |||||||||||||||||||
Operating expense ratio (Non-GAAP) (9,12) | 20.9 | % | 30.2 | % | 22.5 | % | 36.1 | % | 21.1 | % | 28.2 | % | 22.3 | % | 30.3 | % | |||||||||||||||||||
Combined ratio before amortization and impairment (Non-GAAP) (9,13) | 94.4 | % | 77.0 | % | 91.3 | % | 129.3 | % | 98.1 | % | 89.7 | % | 96.8 | % | 94.3 | % | |||||||||||||||||||
NOTE: Loss and loss adjustment expenses for the three months ended September 30, 2018 included $7,234 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $13,200 of favorable development in the A&H segment, versus $4,961 of unfavorable development in the P&C segment, and $2,738 of unfavorable development in the A&H segment for the three months ended September 30, 2017.
9
Segment Information - Year to Date
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||
| Gross written premium | $ | 3,259,270 | $ | 534,560 | $ | 3,793,830 | $ | 337,021 | $ | 2,864,031 | $ | 444,195 | $ | 3,308,226 | $ | 285,779 | |||||||||||||||||||
| Net written premium | 2,301,215 | 486,187 | 2,787,402 | 132,240 | 2,192,570 | 409,560 | 2,602,130 | 136,477 | |||||||||||||||||||||||||||
| Net earned premium | 2,181,571 | 465,391 | 2,646,962 | 141,009 | 2,241,766 | 399,505 | 2,641,271 | 123,266 | |||||||||||||||||||||||||||
| Ceding commission income | 118,664 | 789 | 119,453 | 39,523 | 36,263 | 784 | 37,047 | 54,557 | |||||||||||||||||||||||||||
| Service and fee income | 328,707 | 134,586 | 463,293 | 4,466 | 298,674 | 107,808 | 406,482 | 7,658 | |||||||||||||||||||||||||||
| Total underwriting revenues | $ | 2,628,942 | $ | 600,766 | $ | 3,229,708 | $ | 184,998 | $ | 2,576,703 | $ | 508,097 | $ | 3,084,800 | $ | 185,481 | |||||||||||||||||||
| Loss and loss adjustment expense | 1,583,019 | 252,364 | 1,835,383 | 126,421 | 1,642,053 | 238,327 | 1,880,380 | 88,776 | |||||||||||||||||||||||||||
| Acquisition costs and other | 372,589 | 136,499 | 509,088 | 32,952 | 368,189 | 112,075 | 480,264 | 46,836 | |||||||||||||||||||||||||||
| General and administrative | 533,316 | 148,265 | 681,581 | 62,032 | 536,353 | 122,518 | 658,871 | 62,431 | |||||||||||||||||||||||||||
| Total underwriting expenses | $ | 2,488,924 | $ | 537,128 | $ | 3,026,052 | $ | 221,405 | $ | 2,546,595 | $ | 472,920 | $ | 3,019,515 | $ | 198,043 | |||||||||||||||||||
| Underwriting income (loss) | 140,018 | 63,638 | 203,656 | (36,407 | ) | 30,108 | 35,177 | 65,285 | (12,562 | ) | |||||||||||||||||||||||||
| Non-cash amortization of intangible assets | 18,125 | 5,272 | 23,397 | (67 | ) | 38,006 | 4,295 | 42,301 | 6,909 | ||||||||||||||||||||||||||
| Underwriting income (loss) before amortization and impairment | $ | 158,143 | $ | 68,910 | $ | 227,053 | $ | (36,474 | ) | $ | 68,114 | $ | 39,472 | $ | 107,586 | $ | (5,653 | ) | |||||||||||||||||
| Underwriting ratios | |||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (8) | 72.6 | % | 54.2 | % | 69.3 | % | 89.7 | % | 73.2 | % | 59.7 | % | 71.2 | % | 72.0 | % | |||||||||||||||||||
Operating expense ratio (Non-GAAP) (9,10) | 21.0 | % | 32.1 | % | 23.0 | % | 36.2 | % | 25.4 | % | 31.5 | % | 26.3 | % | 38.2 | % | |||||||||||||||||||
Combined ratio (Non-GAAP) (9,11) | 93.6 | % | 86.3 | % | 92.3 | % | 125.9 | % | 98.6 | % | 91.2 | % | 97.5 | % | 110.2 | % | |||||||||||||||||||
| Underwriting ratios (before amortization and impairment) | |||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (8) | 72.6 | % | 54.2 | % | 69.3 | % | 89.7 | % | 73.2 | % | 59.7 | % | 71.2 | % | 72.0 | % | |||||||||||||||||||
Operating expense ratio (Non-GAAP) (9,12) | 20.2 | % | 31.0 | % | 22.1 | % | 36.2 | % | 23.7 | % | 30.5 | % | 24.7 | % | 32.6 | % | |||||||||||||||||||
Combined ratio before amortization and impairment (Non-GAAP) (9,13) | 92.8 | % | 85.2 | % | 91.4 | % | 125.9 | % | 96.9 | % | 90.2 | % | 95.9 | % | 104.6 | % | |||||||||||||||||||
NOTE: Loss and loss adjustment expenses for the nine months ended September 30, 2018 included $13,318 of favorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $24,623 of favorable development in the A&H segment, versus $7,177 of unfavorable development in the P&C segment, and $10,106 of favorable development in the A&H segment for the nine months ended September 30, 2017.
10
Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 863,953 | $ | 167,951 | $ | 1,031,904 | $ | 71,919 | $ | 812,978 | $ | 155,703 | $ | 968,681 | $ | 62,791 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 544,446 | 72,652 | 617,098 | 40,212 | 528,875 | 83,414 | 612,289 | 26,856 | |||||||||||||||||||||||||||
| Less: Ceding commission income | 44,244 | 269 | 44,513 | 14,587 | 30,675 | 226 | 30,901 | 19,201 | |||||||||||||||||||||||||||
| Less: Service and fee income | 113,967 | 46,458 | 160,425 | 1,575 | 100,565 | 32,492 | 133,057 | 4,084 | |||||||||||||||||||||||||||
| Operating expense | 161,296 | 48,572 | 209,868 | 15,545 | 152,863 | 39,571 | 192,434 | 12,650 | |||||||||||||||||||||||||||
| Net earned premium | $ | 741,030 | $ | 155,346 | $ | 896,376 | $ | 43,151 | $ | 686,596 | $ | 135,727 | $ | 822,323 | $ | 41,978 | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) | 21.8 | % | 31.3 | % | 23.4 | % | 36.0 | % | 22.3 | % | 29.2 | % | 23.4 | % | 30.1 | % | |||||||||||||||||||
| Total underwriting expenses | $ | 863,953 | $ | 167,951 | $ | 1,031,904 | $ | 71,919 | $ | 812,978 | $ | 155,703 | $ | 968,681 | $ | 62,791 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 544,446 | 72,652 | 617,098 | 40,212 | 528,875 | 83,414 | 612,289 | 26,856 | |||||||||||||||||||||||||||
| Less: Ceding commission income | 44,244 | 269 | 44,513 | 14,587 | 30,675 | 226 | 30,901 | 19,201 | |||||||||||||||||||||||||||
| Less: Service and fee income | 113,967 | 46,458 | 160,425 | 1,575 | 100,565 | 32,492 | 133,057 | 4,084 | |||||||||||||||||||||||||||
| Less: Non-cash amortization of intangible assets | 6,546 | 1,714 | 8,260 | (14 | ) | 7,994 | 1,280 | 9,274 | (69 | ) | |||||||||||||||||||||||||
| Operating expense before amortization and impairment | 154,750 | 46,858 | 201,608 | 15,559 | 144,869 | 38,291 | 183,160 | 12,719 | |||||||||||||||||||||||||||
| Net earned premium | $ | 741,030 | $ | 155,346 | $ | 896,376 | $ | 43,151 | $ | 686,596 | $ | 135,727 | $ | 822,323 | $ | 41,978 | |||||||||||||||||||
| Operating expense ratio before amortization and impairment (Non-GAAP) | 20.9 | % | 30.2 | % | 22.5 | % | 36.1 | % | 21.1 | % | 28.2 | % | 22.3 | % | 30.3 | % | |||||||||||||||||||
11
Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2018 | 2017 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 2,488,924 | $ | 537,128 | $ | 3,026,052 | $ | 221,405 | $ | 2,546,595 | $ | 472,920 | $ | 3,019,515 | $ | 198,043 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 1,583,019 | 252,364 | 1,835,383 | 126,421 | 1,642,053 | 238,327 | 1,880,380 | 88,776 | |||||||||||||||||||||||||||
| Less: Ceding commission income | 118,664 | 789 | 119,453 | 39,523 | 36,263 | 784 | 37,047 | 54,557 | |||||||||||||||||||||||||||
| Less: Service and fee income | 328,707 | 134,586 | 463,293 | 4,466 | 298,674 | 107,808 | 406,482 | 7,658 | |||||||||||||||||||||||||||
| Operating expense | 458,534 | 149,389 | 607,923 | 50,995 | 569,605 | 126,001 | 695,606 | 47,052 | |||||||||||||||||||||||||||
| Net earned premium | $ | 2,181,571 | $ | 465,391 | $ | 2,646,962 | $ | 141,009 | $ | 2,241,766 | $ | 399,505 | $ | 2,641,271 | $ | 123,266 | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) | 21.0 | % | 32.1 | % | 23.0 | % | 36.2 | % | 25.4 | % | 31.5 | % | 26.3 | % | 38.2 | % | |||||||||||||||||||
| Total underwriting expenses | $ | 2,488,924 | $ | 537,128 | $ | 3,026,052 | $ | 221,405 | $ | 2,546,595 | $ | 472,920 | $ | 3,019,515 | $ | 198,043 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 1,583,019 | 252,364 | 1,835,383 | 126,421 | 1,642,053 | 238,327 | 1,880,380 | 88,776 | |||||||||||||||||||||||||||
| Less: Ceding commission income | 118,664 | 789 | 119,453 | 39,523 | 36,263 | 784 | 37,047 | 54,557 | |||||||||||||||||||||||||||
| Less: Service and fee income | 328,707 | 134,586 | 463,293 | 4,466 | 298,674 | 107,808 | 406,482 | 7,658 | |||||||||||||||||||||||||||
| Less: Non-cash amortization of intangible assets | 18,125 | 5,272 | 23,397 | (67 | ) | 38,006 | 4,295 | 42,301 | 6,909 | ||||||||||||||||||||||||||
| Operating expense before amortization and impairment | 440,409 | 144,117 | 584,526 | 51,062 | 531,599 | 121,706 | 653,305 | 40,143 | |||||||||||||||||||||||||||
| Net earned premium | $ | 2,181,571 | $ | 465,391 | $ | 2,646,962 | $ | 141,009 | $ | 2,241,766 | $ | 399,505 | $ | 2,641,271 | $ | 123,266 | |||||||||||||||||||
| Operating expense ratio before amortization and impairment (Non-GAAP) | 20.2 | % | 31.0 | % | 22.1 | % | 36.2 | % | 23.7 | % | 30.5 | % | 24.7 | % | 32.6 | % | |||||||||||||||||||
12
Premiums by Business Line
$ in thousands
(Unaudited)
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||
| Gross Written Premium | Net Written Premium | Net Earned Premium | ||||||||||||||||||||||||||||||
| 2018 | 2017 | Change | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||||||||
| Property & Casualty | ||||||||||||||||||||||||||||||||
| Personal Auto | $ | 661,126 | $ | 599,608 | 10.3% | $ | 502,964 | $ | 318,773 | 57.8% | $ | 496,139 | $ | 428,112 | 15.9% | |||||||||||||||||
| Homeowners | 192,349 | 154,352 | 24.6% | 112,390 | (18,881 | ) | nm | 80,308 | 68,042 | 18.0% | ||||||||||||||||||||||
| RV/Packaged | 54,964 | 49,928 | 10.1% | 54,627 | 49,547 | 10.3% | 51,229 | 45,742 | 12.0% | |||||||||||||||||||||||
| Small Business Auto | 75,218 | 79,296 | (5.1)% | 53,155 | 43,505 | 22.2% | 59,636 | 60,013 | (0.6)% | |||||||||||||||||||||||
| Lender-placed insurance | 94,462 | 84,447 | 11.9% | 56,529 | 70,581 | (19.9)% | 48,466 | 79,048 | (38.7)% | |||||||||||||||||||||||
| Other | 12,253 | 11,809 | 3.8% | 4,969 | 4,299 | 15.6% | 5,252 | 5,639 | (6.9)% | |||||||||||||||||||||||
| Property & Casualty | 1,090,372 | 979,440 | 11.3% | 784,634 | 467,824 | 67.7% | 741,030 | 686,596 | 7.9% | |||||||||||||||||||||||
| Accident & Health | 143,948 | 121,266 | 18.7% | 123,576 | 110,197 | 12.1% | 155,346 | 135,727 | 14.5% | |||||||||||||||||||||||
| Total National General | $ | 1,234,320 | $ | 1,100,706 | 12.1% | $ | 908,210 | $ | 578,021 | 57.1% | $ | 896,376 | $ | 822,323 | 9.0% | |||||||||||||||||
| Reciprocal Exchanges | ||||||||||||||||||||||||||||||||
| Personal Auto | $ | 40,240 | $ | 39,040 | 3.1% | $ | 12,845 | $ | 12,533 | 2.5% | $ | 13,353 | $ | 15,167 | (12.0)% | |||||||||||||||||
| Homeowners | 80,070 | 64,240 | 24.6% | 2,002 | 30,497 | (93.4)% | 29,698 | 26,382 | 12.6% | |||||||||||||||||||||||
| Other | 1,041 | 1,126 | (7.5)% | (33 | ) | 503 | nm | 100 | 429 | (76.7)% | ||||||||||||||||||||||
| Reciprocal Exchanges | $ | 121,351 | $ | 104,406 | 16.2% | $ | 14,814 | $ | 43,533 | (66.0)% | $ | 43,151 | $ | 41,978 | 2.8% | |||||||||||||||||
Consolidated Total (A) | $ | 1,355,671 | $ | 1,204,311 | 12.6% | $ | 923,024 | $ | 621,554 | 48.5% | $ | 939,527 | $ | 864,301 | 8.7% | |||||||||||||||||
NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges of $(302) in Personal Auto and $(499) in Homeowners Gross Written Premium in 2017, respectively.
nm - not meaningful
13
Premiums by Business Line
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||
| Gross Written Premium | Net Written Premium | Net Earned Premium | ||||||||||||||||||||||||||||||
| 2018 | 2017 | Change | 2018 | 2017 | Change | 2018 | 2017 | Change | ||||||||||||||||||||||||
| Property & Casualty | ||||||||||||||||||||||||||||||||
| Personal Auto | $ | 2,018,563 | $ | 1,761,779 | 14.6% | $ | 1,542,685 | $ | 1,387,024 | 11.2% | $ | 1,436,793 | $ | 1,377,752 | 4.3% | |||||||||||||||||
| Homeowners | 524,342 | 421,061 | 24.5% | 255,290 | 217,590 | 17.3% | 242,161 | 282,741 | (14.4)% | |||||||||||||||||||||||
| RV/Packaged | 164,427 | 147,280 | 11.6% | 162,934 | 146,256 | 11.4% | 145,911 | 129,706 | 12.5% | |||||||||||||||||||||||
| Small Business Auto | 246,448 | 246,562 | —% | 181,314 | 195,577 | (7.3)% | 178,302 | 193,578 | (7.9)% | |||||||||||||||||||||||
| Lender-placed insurance | 259,995 | 251,091 | 3.5% | 134,630 | 229,938 | (41.4)% | 162,629 | 241,990 | (32.8)% | |||||||||||||||||||||||
| Other | 45,495 | 36,258 | 25.5% | 24,362 | 16,185 | 50.5% | 15,775 | 15,999 | (1.4)% | |||||||||||||||||||||||
| Property & Casualty | 3,259,270 | 2,864,031 | 13.8% | 2,301,215 | 2,192,570 | 5.0% | 2,181,571 | 2,241,766 | (2.7)% | |||||||||||||||||||||||
| Accident & Health | 534,560 | 444,195 | 20.3% | 486,187 | 409,560 | 18.7% | 465,391 | 399,505 | 16.5% | |||||||||||||||||||||||
| Total National General | $ | 3,793,830 | $ | 3,308,226 | 14.7% | $ | 2,787,402 | $ | 2,602,130 | 7.1% | $ | 2,646,962 | $ | 2,641,271 | 0.2% | |||||||||||||||||
| Reciprocal Exchanges | ||||||||||||||||||||||||||||||||
| Personal Auto | $ | 116,602 | $ | 102,420 | 13.8% | $ | 40,860 | $ | 51,240 | (20.3)% | $ | 38,812 | $ | 48,523 | (20.0)% | |||||||||||||||||
| Homeowners | 217,486 | 180,616 | 20.4% | 90,826 | 83,887 | 8.3% | 101,578 | 73,533 | 38.1% | |||||||||||||||||||||||
| Other | 2,933 | 2,743 | 6.9% | 554 | 1,350 | (59.0)% | 619 | 1,210 | (48.8)% | |||||||||||||||||||||||
| Reciprocal Exchanges | $ | 337,021 | $ | 285,779 | 17.9% | $ | 132,240 | $ | 136,477 | (3.1)% | $ | 141,009 | $ | 123,266 | 14.4% | |||||||||||||||||
Consolidated Total (A) | $ | 4,129,250 | $ | 3,591,603 | 15.0% | $ | 2,919,642 | $ | 2,738,607 | 6.6% | $ | 2,787,971 | $ | 2,764,537 | 0.8% | |||||||||||||||||
NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges of $(567) in Personal Auto and $(1,034) in Homeowners Gross Written Premium in 2018, respectively, and $(866) in Personal Auto and $(1,536) in Homeowners Gross Written Premium in 2017, respectively.
14
Additional Disclosures
(1) References to operating earnings and basic and diluted operating earnings per share (“EPS”) are non-GAAP financial measures defined by the Company as net income/loss and basic and diluted earnings per share excluding after-tax net gain or loss on investments (including foreign exchange gain or loss), other-than-temporary impairment losses, bargain purchase gains, earnings or losses of equity method investments (related parties), deferred tax asset impairment, non-cash impairment of goodwill and non-cash amortization of intangible assets. The Company believes operating earnings and basic and diluted operating EPS are relevant measures of the Company’s profitability because operating earnings and basic and diluted operating EPS contain the components of net income upon which the Company’s management has the most influence and excludes factors outside management’s direct control and non-recurring items. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.
(2) Total investments includes $233,179 and $347,548 in related parties at September 30, 2018 and December 31, 2017, respectively.
(3) Reinsurance activity includes $9,075 and $15,688 from related parties at September 30, 2018 and December 31, 2017, respectively.
(4) Other includes $1,181 and $2,334 from related parties at September 30, 2018 and December 31, 2017, respectively.
(5) Accounts payable and accrued expenses includes $69,376 and $140,057 to related parties at September 30, 2018 and December 31, 2017, respectively.
(6) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 107,132,560 shares - September 30, 2018; authorized 150,000,000 shares, issued and outstanding 106,697,648 shares - December 31, 2017.
(7) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - September 30, 2018; authorized 10,000,000 shares, issued and outstanding 2,565,000 shares - December 31, 2017.
(8) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expense by net earned premium.
(9) Operating expense ratio and combined ratio are considered non-GAAP financial measures under applicable SEC rules because a component of those ratios, operating expense, is calculated by offsetting acquisition and other underwriting costs and general and administrative expenses by ceding commission income and service and fee income. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets on a consolidated basis. The Company believes this presentation enhances the understanding of our results by eliminating what we believe are volatile and unusual events and presenting the ratios with what we believe are the underlying run rates of the business. Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.
(10) Operating expense ratio is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expenses less ceding commission income and service and fee income. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.
(11) Combined ratio is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) together. The ratio is used as an indicator of the Company’s underwriting discipline, efficiency in acquiring and servicing its business, and overall underwriting profit. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General.
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(12) Operating expense ratio before amortization and impairment is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by dividing the operating expense before amortization and impairment by net earned premium. Operating expense before amortization and impairment consists of the sum of acquisition and other underwriting costs and general and administrative expenses less ceding commission income and service and fee income less non-cash amortization of intangible assets and non-cash impairment of goodwill. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.
(13) Combined ratio before amortization and impairment is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio and the operating expense ratio before amortization and impairment (non-GAAP) together. The ratio is used as an indicator of the Company’s underwriting discipline, efficiency in acquiring and servicing its business, and overall underwriting profit. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP measures to the most directly comparable GAAP measure.
(14) Trailing twelve month operating return on average equity is the ratio of the previous twelve months operating earnings to average shareholders’ equity for the periods presented. Average shareholders’ equity is the sum of the shareholders’ equity excluding preferred stock at the beginning and end of the period presented divided by two. In the opinion of the Company’s management this ratio is an important indicator of how well management creates value for its shareholders through its operating activities and capital management. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of net income to operating earnings, which is the Non-GAAP component of the operating return on average equity.
(15) Combined ratio excluding losses from various Q3’18 weather-related events, and is calculated by taking the combined ratio as defined in Note 13, and adjusting it to exclude the total net losses of $35.0 million from these events. The company believes this measure enhances investors’ understanding of our results by eliminating what we believe are volatile and unusual events.
| Q3’18 Combined Ratio | Impact of Q3’18 Weather-related Events | Q3’18 Combined Ratio Excluding Weather-related Events | ||||
| P&C Segment | 94.4% | 4.7% | 89.7% | |||
| Overall NGHC | 91.3% | 3.9% | 87.4% | |||
Investor Contact
Christine Worley
Director of Investor Relations
Phone: 212-380-9462
Email: Christine.Worley@NGIC.com
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