FNHC - Earnings call transcript Q3 2019

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Operator

Good morning, and welcome to FedNat Holding Company's Third Quarter 2019 Financial Results Conference Call. My name is Victor, and I'll be your conference operator this morning. [Operator Instructions] Before we begin today's call, I'd like to remind everyone that this conference call is being recorded as well as broadcast live via webcast.

Additionally, today's call will be available via webcast replay later this afternoon and accessible by visiting the Investor Relations section of FedNat's website at www.fednat.com.

Now, I'd like to turn the call over to Bernie Kilkelly for FedNat Investor Relations. Bernie?

Bernie Kilkelly

and conference to call. morning, XXXX third Good results financial you. welcome FedNat's again quarter Thank

We measures Our references a results. such income. to release more non-GAAP these earnings and to measures, as prepared meaningful, efficient adjusted prior transparency provide greater to remarks comparison include use and non-GAAP year's operating

definitions non-GAAP and on measures from GAAP the found on reconciliations the begin of non-GAAP X Our Page be Page XX. measures can release, our to earnings

are that expect, or call probably, Words are statements. may, conference forward-looking this or facts contemplate, estimate, statements. should, will as historical envision, might, in words forward-looking similar guidance, phrases believe, anticipate, target Statements other project, seek, predict, such intended not are identify intend, and plan, could, potential, indicate, to

statements call events, forward-looking on are may discussed and The result statements risks uncertainties this Actual matters management differ current from forecasted these is that on realized. outcomes based in being and expressed forward-looking may involving or expectations what in results filings with materially call time not are expectations press that risks including the time. numerous not to in but the this by and due risks from to uncertainties, uncertainties yesterday other conference issued and call, limited release described this the our SEC made company and on to made

reflect specifically to statements any statements obligation call this today's or or information, speak Company any otherwise. conference FedNat or made circumstances forward-looking Holding disclaims during date. to Forward-looking only future as And of revise events update new

to Now I'll FedNat's the Mike CEO. Braun, over call turn

Mike Braun

here me and Accounting Jordan, to call. Erick this our Officer; morning. our Financial Thank third with you. are quarter Ron welcome Chief Good Fernandez, Officer, our conference morning, Chief and XXXX

have then provide overview for into to time of deeper will questions. results, and the I'm dive an then give Ron we will quarter, the financial a going

to our growth FedNat quarter performance made value. and shareholder had company strategies significant progress the future in the position and solid on third for

represents primarily year's rose million catastrophe were an XX, share impact to prior Earnings $X the $XX.XX losses increase of to at compared to year-to-date. which the quarter, per share due September pretax XX% in the quarter. $X.XX value Book of of per in $X.XX

Our his will was income by which in detail net third higher also Ron remarks. costs, reinsurance quarter impacted

homeowners reduction of performance and with claims make in continue solid auto core in this our our auto business, and business winding profitable open was including The year's to growth, down XX% a CGL compared quarter. progress noncore second to we

will focus our enable overall Our improve us we on as exit profitability solely businesses business. insurance homeowners from these FedNat's to core

the impacted marketplace. stabilization product our a the costs book homeowners costs was of reinsurance Texas, in recent in Florida in the more our growth of driven quarter, business, competitive the increased portion offerings in book with by higher along core While of primarily become as have our

we future due of for engine addition earnings well acquisition. This a the in bodes larger Maison the place factoring to have even before go-forward the in

Turning necessary to to on Maison. The approvals all December, regulatory early acquisition in be continues close track place. with in to

bring transaction strategic FedNat. We about and financial excited the will this are benefits to

FedNat as non-Florida accelerates Maison for book share X our in Louisiana, Texas The Maison the in profitable profitably fit attractive for have and is grow acquisition strategy said book. that a our I've As increases to past, of potential perfect our growth. the market states homeowners

X. $X accretive program, XXXX-XXXX million million $X We tower combined is operating combined already took that share the in reinsurance based in expect in on be on our per reinsurance July savings effect Maison which earnings from to reflected to and synergies

book by quarterly the written a that prior to QX representing which in premiums driven It of higher the in also FNIC's over written the first primarily of quarter, third of grew the 'XX, year's by our rate in earned XX% our the growth Florida in to X as that new year-over-year This catastrophe instance worth In due QX the quarter. increased increases. years, gross business. result million, driven premiums in gross compared premiums are of coverage was also is our Florida non-Florida business. book from quarter, in $XX.X 'XX book growth noting impact as the XX.X%, decrease started reinsurance our were XX% a reinsurance July an of Net byproduct ceded premiums growing of

to Imelda, proud million of million with to I'm our profit-share agreement included again in Dorian, losses our service our and Hurricane Barry trusted our our Carolina, of which Storm $X arose and their general number need, which catastrophe primarily is The $XX non-Florida and Our South property for underwriter from is Florida quarter managing SageSure, to FedNat's Hurricane losses catastrophe say independent from subject dedicated the book, that provided a quality in non-Florida our business. policyholders gross Texas. impacted which Tropical once agents priority. Louisiana time and one staff XX%

to reputation FedNat continue X,XXX for a the by we industry-leading service agents. affords of level We our this as be partner destination plus remain encouraged

market, the Assignment in into reform went Florida In of effect Benefits July.

major in has reasons of AOB the increases attritional in past for been homeowners several market us main know, a disruptive the over losses years. you for one Florida As the and

over well rate XX% a which legislation rate and believe We as We a our have claim lower past of Florida offsetting policyholders insurers, the partners. of should reinsurance is premiums lead to homeowners years. higher as with for cost us, compounded been ahead win curve, the to for Florida reduced and X new eventually increases, big the the costs at

of We future the of in early is already to update the a focus. into forward lawsuits. this but an of providing reform as full comes It of AOB benefits picture quarters days, still seeing impact we're look declining early including reform, AOB-related

market with the core environment billion a positions grow greater business increases share improved of proactive and approach homeowners This to book market. $X of in paired operating rate Florida our our to our fragmented profitably plus us capture

presence expand we we in bring the market, currently to large fold, as are the the underway. we where of our segment opportunity Additionally, middle have Maison market Florida homeowners into more

non-Florida have for runway grow In the to Maison continuing profitably continued and these of We in growth book are in Texas, long upon business, Alabama our Louisiana, a completion our homeowners states, believe acquisition. the particularly South Carolina. we we

the our premiums in year-over-year million, gross premiums growth regions. in In around to book quarter, of led was area and biggest Texas, Houston XX% grew other by almost up This strong $XX.X and increase. of tripled third non-Florida gross which growth business coastal Florida, outside earned the

as quite being upon policy also implemented not of While XX% includes rate rate mentioning Maison. state are increases the taking that FedNat increases underwriting day part and that result is increase renewal of Maison's in the still hold family, each of Texas. it these every the are and worth results a were improve a multiple at yet of statewide

we our XXXX ratio, discuss FedNat's Ron savings that implemented improved produced gross improvement detail. and in exit which noncore of to annual from efficiency million will initiatives in $X expense operating contributing resulting in lines our in the more is

Our strong and capital flexibility. capital structure with remains ample

Following cash the opportunity capital the close to dividends. of to and program, be that share capital resume the to addition will to Maison to shareholders is repurchase some anticipate acquisition, of we deliver which quarterly our able use strong a our in value our believe we we

we announced returning with to, the quarterly management value the and that earnings its in that dividend to and in our company's a shareholders, $X.XX. cash Board seeing our XX.X% with stands to capital values To increase in announcement, Board shareholders. approved FedNat tandem and

Board. X Ron, call turn the additional originally over were I our corporate to I put Meeting directors elected Shareholders the the number highlight directors to enhancements in independent X, Two on government at with Before want October total that independent This of government's, to to important place we Annual directors. XX. expands

We Patterson Board. have experience C-suite to on are Dave deep and Michelson industry thrilled Dave insurance Both leaders. as backgrounds and our bring

special we've needed amending government our rights super eliminate voting of by in shareholders' shares Additionally, percentage strengthened call corporate and documents to requirements meeting. outstanding years, our to reduced the majority a recent

have We're leading been pleased these efforts recently gave governance by top report the score. to ISS, which recognized FedNat adviser, its proxy that

Now over the to to Ron numbers. go call I'll turn the over

Ron Jordan

performance everyone. improvement pricing catastrophe in At ratio be with good severe business time, quarter, and combined were XXXX. weather underlying in Mike, third and with events losses the from Thanks, our to pleased continued results core We impacted homeowners the morning, in our the same of trends. by

pretax third losses was income a million $X to from basis, the year-to-date impact discussed, figures pretax in as impacts in weather-related $XX million reduced by $X.X quarter cat compared last $X comparable quarter. compared pretax XXXX to On XXXX. million due in million are to Mike As third of as events year's

on higher by costs, results reinsurance comment I'll a which quarter were moment. in also third Our impacted

roughly per pretax Net primary $X.X million non-GAAP was share. was income the investment million of share. $X.XX adjustment exclusion quarter this Adjusted income the in of or The per $X.X quarter gains. $XXX,XXX was or $X.XX operating

XQ cat our covered Mike details has of already the losses.

March we will exposure costs, book characteristics information September the impact of our catastrophe as the reinsurance our hurricane normal was of in The the reinsurance shows which income with in well year So in across by fund at in private factors: driven as to increase coverages, projected XX. was 'XX; our notable quarter, premiums I true-up some our from of remarks to as Florida and second, business actual to This the our increase the in on the an our first, of XQ XX% each share spans up statement. higher states treaty information occurs in course both business as operate ceded of set of share in. last in homeowners of total as fact all cat of true-up loss the X as X% Florida the respect terms XQ and book spend 'XX compared quota other the that

that April Florida, of book reflected, steady our These As laser-focused Florida the took management. deliberate the our have including increase this you a and past book, in is Florida exposure first, the on year; years. know, size in-force our through X.X% of effect factors increases, rate driven especially couple we rigorous over of of and decrease in industry-leading second, through our have profitability been which

a a As program and years tended the direction. have result, small be in in favorable catastrophe recent to true-ups

Insurance driven up written and an quarter. retention X% third by with business business already Florida in Company's dynamics This mentioned, over renewal 'XX increase rate improved the increases, an of percentage book new in from new retention our XQ production as However, in grew uptick with FedNat third was course the 'XX. and XQ the gross emerging quarter, premiums

been sizable back competitiveness in market to point to book of carriers rate offerings growth as price in in a this result Contributing increases of part our has our increase product inflection by Florida middle numerous an to brought the the XXXX. of

a of and disclosed. previously estimate of the at underlying book positive these September are $XXX business that in-force projection year than the XX larger loss cost the drove result earlier trends, treaty our As exposures million

year. treaty at treaty million $XX 'XX/'XX now $XXX over year of cost the increase full The an of course stands million, the

of was 'XX/'XX cost point the a treaty comparison, $XXX As year million. approximately

clarity, do figures citing to the two pertain I'm carriers existing our Maison. here For include and not

over $XX Without specifics expected related is year treaty going be on or tax. pretax proprietary into million $XX net the million the the impact after to full approximately offsets,

as quarter XXXX of In quarter third third of terms reinsurance of quarter and $X.X the compared to earnings, costs compared to our second to the increased XXXX. as $X.X catastrophe million million

after-tax The impact costs share. the diluted The or ceded just $X.X was higher impact per from overall per resulting approximately reinsurance these million of share. the for quarter half adjustments September specifically premiums on increase XX of accounted exposure in the $X.XX or under $X.XX

book, in cat our our accounting growing point growth the mode. that the annualized the that Florida book gross treaty forward, profitability results of cost going However, returning relative bearing earned portion to quarters’ of of and from of cost September evenly oversized the treaty convention actual spreads XX over to in quarter quarter. the adjustment combination business time of the in Note the well-pruned level benefit a the somewhat will third annual premiums four the a

very quarter. policies. on consider quarter no on the policies, for written a the the that annual Despite coverage gross cost the it put of business To those fact finer new catastrophe such the premium earned it, includes bears at XX% essentially point of end of

premiums expense by noting the treaty loss dynamic net The combined absent to million the unique premium they X% the additional ceded recur premiums the in Also have of the not from worth remainder over been is cat increased have and increase. the and year. ceded what punitive quarter net the earned ratios. over of would $X.X reduced quarter fact that This third will on is

subject to quarter. result, a each the a X% ratio impacts. component This to in combined the our points thereof ratio As elevated on net and by basis, numerator are loss X.X X third points net the relative ratio expense related to in added

indicative portion impact in obvious, a not and earned the premiums metrics or of important an expenses. be the is increase that function to losses note lower seems it is While to it's increase denominator of of in strictly net these

gross ratio measure and in excluding the turn let's quarter. improved advantage Now by associated the efficiency, expense to to has XX.X% basis quarter ratio our year ratio. important is XXX XX.X% compared ceded of the in with expense fluctuations an the prior of third This noise from premiums. the net expense in points to This

that and non-Florida annualized the SageSure staff initiatives in of scale XXXX, is our savings in period, profit of impact resulted had share demonstrating implemented of in points, efficiencies basis increasing which expense improvement the million Excluding the benefits homeowners on we healthy of cat that still losses technology the a XXX the reductions and business. the each $X

in core homeowners, quarter, starting million after-tax of with business million look which of cat $X.X with let's this representing business. losses Now line $X.X of our headwind the at our made lines business in

premiums of XX% or compared increased million broader to non-Florida quarter our recognition gross gain growing increased XX% in distribution continues markets. XXXX. third written or $XX.X our grew and written brand to premiums these $XX.X In business, the million Gross as

in Florida time we've gross the which book increased had quarter-over-quarter growth Mike million over as mentioned. premiums in Importantly, our or written $X.X X%, FNIC's in years, first X by was Florida

remain point this FedNat's are market to rates, important clarify hardening over of of reflects in laser-focused the such that inflection our this loosen An capture compounded have our underwriting and to years, XX% embody Florida is competitive. increases over the that profitability underwriting we additional competitors become back as not believe X want on standards to did market I increasing which We past more the share. rates that point growth

Together, higher the was impact at in which points to would than ratio combined have year of in X drivers quarter XX.X% and combined third we in that on lower cat XX%, otherwise have due XX already that ceded cat efficiencies added demonstrating the of and compared ratio, losses higher of XQ last X premiums homeowners quarter, points these trajectory in the combined discussed. Our core to third in is scale. the almost XXX.X% excluding to X.X come homeowners 'XX around terms positive our of XX.X%, pricing ratio the business quarter points

Auto having there these and CGL purely reached of discontinued the our noncore lines during claims, XX% $XXX,XXX in exit. headwinds The that runoff in-force a million main policies to by Open quarter continue almost Turning year to the to to operations. to in a declined third quarter reserve diminish. X with improvement than claims takeaway well is quarter mode, XXXX, in XQ September from as recorded now claim an the as auto is ago, less in 'XX. count is development in XX, compared operating compared the important quarter in milestone earnings we the and in XXX of $X to contributing adjusted $XXX,XXX

were the of business. quarter to other the in our Commercial of third of $XXX,XXX quarter strengthening third the in CGL reserve general third recorded quarter CGL $XXX,XXX year. XXXX. $X.X line compared gross the $XXX,XXX We in as with is quarter million compared included in in liability last earned premiums

fixed last income in was our generated net of investment quarter, third quarter were in a quarter. $X.X of from quarter. which in compared yields, came line as last in the non-GAAP investment This and $X.X which operating to million driven $X.X the in we compared other over year's along effective breakeven. Investment portfolio gains, million, which improvement excluded with result Overall, our year's to business last $XXX,XXX $XXX,XXX quarter of third third a adjusted lower income, by of tax measures, increased growth at million of year's million an our improved $X.X income rate third

Turning structure. our capital to

our book continue by gains This position value bond rising in an in a by of share strong year-to-date, to unrealized be September of We XX. aided portfolio. $XX.XX to as as per increase represents shown XX%

of repurchases remain having shareholders. liquidity to on the in as the strengthened to the know, reenter have you effective announcement acquisition share capital our existing on the closing will this execute in among the our program, will HoldCo long-term in year to liquidity subsidiaries, million Maison market way forward remaining puts that a in of XXXX. funds earlier be conjunction Maison to has we that the which used capital us $XXX position $XX and The currently sheet December transaction. which million $XX to and an our look after Maison raised million As from authorization to December. strong buyback of $XX We roughly includes close over opportunity with We balance non-regulated of return of million

fixed average with of composite portfolio rating X.X carrying duration of a with high-quality income million. an and value $XXX remains Our short a total A-, under term, of just S&P

quarter third which, undeployed Maison the cash with equivalents, in $XXX the million includes ended funding. We and cash of course,

To our is wrap are we and core that growing up, stronger. stronger homeowners confident business

and We growth increased to because AOB profitable complement Florida in and reform. as offerings our the steady product strong growth of for our of an competitiveness result of a increased non-Florida opportunity have

closing of as Maison of distribution. upcoming and will our outside proprietary The Florida the footprint acquisition expand non-Florida further

and winding We XXXX. minimal earnings expect from lines impact in are noncore down progress these making our runoff in on substantial businesses

staff positioned efficiencies are and our well our to from of our business capitalize to and use We reduce technology. scale on increase initiatives

back With that, to I'll over turn Mike. the call

Mike Braun

you Operator, go with the All up right. we'll open if ahead Ron. and could open Thank that, you, questions, queue. for

Operator

of James. first come question the Raymond will from [Operator And Greg our line Instructions] Peters from

Greg Peters

this you're like basis true-up or you to suggesting $X of that Or quarters. our a of million just additional comments recommend else cost sort Is premium look quarter. unpack the would reinsurance it increased before the third was next we're the in at of that for and I on that read? you, incremental for estimate circle million estimate And back go-forward around seems ceded an costs going wanted your cost, accurate an to the X because would how $X.X have that? I wherever

Mike Braun

accurate XX to the adjustment That's read line. September Yes. the with on respect premiums ceded an

of are business. to, a with a to of there fact in has the exposures alluded our impact couple That I As to growth that offsets of non-Florida do portion that the that down. bring net relates pretax that

or our So income there then, that. And we is earn course, catastrophe internal SageSure brokers impact share as from you broker on a know, firm. profit of brokerage reinsurance

So brokerage income as up, the our goes goes up. spend

remarks, I impact, combination have impact those of gross roughly as mentioned my ceded X in the the, the impacts on So the the premiums.

Greg Peters

So of just discussion business carrying for cited that is one forward reason because the you increased growing the cost again. was the that

to to I more position is end the If reset or this in year? did the be the quarter competitors, the going rating Or that that or because just in become continues the should through you first quarter? suggest call forward of of your favorable true-up, fourth there's of your market actions would reset that carried another treaty is it,

Ron Jordan

$XXX is of a only latter. June spend, treaty our during through halfway season is the That's end Greg, private This for the question, the true-up of X/XX the of and one wind the is through point is and the happens which, and portion that the that treaty year share adjustment exposure of the a the It's lion's XX all answer only our true-up great the year. million spend. course, the way

for further the adjustments related down of our no to is potential portion or there spend. no, up So private

program, of out state portion is I'm the process the send adjustments. FHCF the and in the to compiling sure, to of right ready respect now, getting With

inside from X/XX. in at and been time our weeks few including the get that next input reflected estimate, would state the recorded that actual brokers adjustment outside the reinsurance some notice be We'll modest. best here. Our already the in of We very has to expect brokers those we

Greg Peters

be could that that there another notice. But the get from right? adjustment when you Is

Ron Jordan

X/XX right? on On the carrier other There's election the be our their state, of the estimate that dynamics we've did a of numbers. in it FHCF do, did Yes. impacted what size just updated there, lot percentages books lot to in we'd mean by a portion, again, of is FHCF So, do, best parts what I because though, these expect there's item. moving their the every X.

Greg Peters

it. I of questions a Got up the to just this. Can claim some reported to And leading of I'm pivot sure reserves? effective a date of peers about surge your lot there's an up AOB book? how you your update I'm happened of your through third within have reform. that And wondering perspective, held if those on quarter? provide reserves And the the could end

Mike Braun

I'll clarify, of the have Since Ron correctly. AOB, contracts and reform Mike. absolutely come end QX, and commentary But really We've Yes, a in at as But taken place. of I July were deeper AOB, math. saw then, reform significantly. executed think, as in, And go less in stated, they to Greg, it We were valid. not suits, and those less can is the you occurred X. give it's been on has AOB seen activity. the Therefore, some AOB little have extremely this you they a not spike dropped QX effective. also come AOB to in, terms then relates

early still directly. the as the more And to ways let days, suits include me of adjusters avenues it's clarify, insureds, just there's public than contacting Now the get those attorney insured as route well AOB. but

abuse the last over the to and legs more to table, growth the really rapid So central AOB. where X occurred are rapid that there X was years

muted think, So bit. really has a been that, I quite

think The the in AOB are that I policyholders across other whole real very The is this a all adjusters. bar challenge still was state for a state. the plaintiff's the Florida well of But avenues open. public big strong reform's win as the with as

Ron Jordan

Yes.

we that talked terms our want the everyone the remembers third that guess, only course the think, sure in quarterly happens is, would I And in seasonality typically that year quarter seasonality I I operations. call, really worst from the is our quarter just I year losses. a normal make on that our the ago first of to of of in add perspective, thing this my was about Just time

we more does up months, in sorts more claims. fires, go those the of frequency lightning, So summer get our we,

terribly I atypical that anything don't quarter our there's know think, third about So this I year.

Greg Peters

tea tone more this question And with the year. last ask feels to it But question, of reinsurance I had changed to costs. is And strategy's of leaves, longer-term costs and program your headwind strategy think company going read next you The how, a next I The would had form focused any the curious the costs limit on like of up of seems market that definitely a reinsurance Okay. are go in you're to be if sort year. the reinsurance rates. I'll your more I'm perspective, reinsurance adjust positioning year? to just again it to from deals you may face and reinsurance higher

Mike Braun

really they million us, there's events, about in billion been X With net. good weather terms The X, $XXX of multiple and And Irma. had last primarily point. obviously, over over on about last X, chin. we obviously, been years, no Greg, gross Yes, took Michael there's year, this the $X.X the it years of the losses of Florida, X But and losses. reinsurers

billion that's So what the moved felt. are $X.X significantly is they had about have low. saying pricing, that this historical that renewal. based prior is reinsurers rates that still on But pricing We think

pricing tell you, I'll know next don't that a robust year. on XX where panel, reinsurers is going got program. the answer, But So we've Greg,

next appetite, really renewal, decrease had occurred we're going program. lot that. had to a but of new we're tell of a is lot big in lost Greg, the be renewal our last to And and it. and I'll under at assumption And and the I'll you, big you, the XX some that we in we the out We'll are more find a markets underwriting for some increase the more, some year pressure that that find we pricing big, we sticking, at added that prepared months, about that that sure on about But a with appetite had moved the that within actually over six prudent them there's tell XX. make

Operator

KBW. the from next of come And will Christopher our Campbell question line from

Christopher Campbell

the just off. a to on Irma guess any numbers start you I questions gross did I mean Michael in loss have few or guys development quarter?

Mike Braun

$XX did. million Chris, million yes, we $XX Michael. for Irma, for

Christopher Campbell

your picks? Okay. incremental from And disclosed that's loss latest

Mike Braun

Correct.

Christopher Campbell

buybacks guys going question as kind I I guess, then that kind Great. deal Maison you probably much December, your excess period? out of of buybacks quarterly once you probation from do forward, is until you capital closes just And Okay. early know I But a are of capital on management. have? locked closes. guess, how the thought just on out what come of the pace And

Mike Braun

you've Chris. X mean, to documented Irma you've so well asked know Well, as got about movement. I industry's you there, and the move questions continue those and Michael, you and

X Irma, tell it's about we So you, week. of I'll in terms of unfortunate, per years out, loss first still notices get XX

claim. do a And why to impact from the It's years did really perspective. significant that's report have really that, frustrating. a to bit of our Statutorily, to So on of geographic amount hands of difficult a those come some Irma they a such continue kind get in at X state a late date.

were In claims. terms of Michael, massive those

a nearly we're And in and X very XX% devastation. I a it's we're writer in Panhandle. think we're is believe complete seeing the top with big I the what market Panhandle share, the a be out I year to long their honestly, quite for of of going rebuild. time are to folks and still home, it's a event, those that after area lot think,

in those XX%. terms about Irma, have been So closed claims of most of

law continue terms to as just rebuild, pull And about when these what's are of called and have at people house. of XX%. also, more to including called those have permits ordinance. they folks something available, And the are they living becomes a when evolve expense, out of have additional ALE, to rebuild, In as we're lot you Michael, information and

are tough management. those Switching capital to question about X situations. So second your

capital of shares back us and for our at at on buy a extremely low updated in that's value that above. $XX.XX, have we It's lot if Based number. can yesterday's extremely holding $XX.XX close We accretive XX% the price. book at That's here company.

how that's decision intention to easy in at early be on but goes can't the the But the of for deeper on to I a numbers. buying compelling, I that compelling we'll after it's the still be the And back Ron book, entire close to close curious available that at price to the go shares, where on that is after but very think market we I'm in capital of much Our XX%. think XX% in company, for lot be of an this here is acquisition. And happen. back much. it is in Maison be into acquisition intention would compelling. the the in be very the for excited the nonstatutory deal December. Board. We've price deciding capital see lot got this We're to terms it I We'll a buying up, at math of and goes. the that's market, it's back when if us. obviously, stock shortly holding speak back can And and

Christopher Campbell

it. Got

okay. I guess, I So mean,

So, like how much excess capital is there?

Mike Braun

authorized Board Well, that's million last December, and powder. the $XX from all from dry we have

specifically, will not as getting the authorized, number. here. out I be I have. an what But again, that anticipate approval anticipate number Board we buying So is review we'll back. the asking December. be we would and that And million that would think there, again million But what We're this a we'll $XX easy putting is be we'll we'll announce which as $XX soon the that Board decide I for

Ron Jordan

of the in HoldCo liquidity And minimum terms to in as threshold view rules past, of a have the kind we like the we've talked and some liquidity in like. that about we Chris, of that thumb

of full there mentioned, after closing coming $XX as million Maison. definitely the we'll is on room $XX to liquidity So more that And in exhaust million months. and authorization I have

Christopher Campbell

one declining any about mean Florida. be modeling of impact corporate And I had rates we your talked then like tax should from that? think I in peers

Mike Braun

Yes, tax benefit. X% It's It's state the there to rate. retroactive change X. a January of in is Florida

a how So in that, X% there that reflected is do on that's and go an quarter, impact, forward. our further rollback? of specifics long benefit third will know, place? And is Erick, in know there you we that it

Erick Fernandez

year, years just be be I this it's reset until will more of it'll they'll Yes, effect couple that think it. in than a

Christopher Campbell

in my got XX% so And a model. I've

about be down that, XX%, we should So to or.. taking to way the think is that

Mike Braun

tax on federal taxes deduction in the factor you that state do a Yes, pay. is there

federal So state down. the down, goes deduction then goes your

tax the it's X% effective full on quite benefit the So rate. not

Christopher Campbell

from understand, I of because I from a, that lawsuits. getting the core of saying kind started And costs. reinsurance focus see a you're great want ratio reinsurance like a then bit the then, the that, headwind think Mike provided little you of you color just costs. benefit And impact loss bit the of of really to just want higher And know I I you, to piece Rod, was obviously, you're a the getting little declining on to on just

up, the was year-over-year. loss So bps think, ratio I core XXX

from So reform? is was was can benefit How the there into then AOB way And much we the that decompose much how how much attritional? from a costs? reinsurance was

Ron Jordan

Yes.

So to claims right, be To in our and our are recorded have with underlying of would terms reserves. activity. the respect Mike's clear, data, we comments I what accounting call booked not and

that recorded itself prove that's and reduced That to sure likely lower we and our we to We rather through, whether booked of that frequency, is results. a triangles needs in which which is we're through benefit time seeing benefit period to play understands be, some in want make likely, have from of continues continue things our expect Yes, positive nickel will the I the the through. the not extent that. take think perhaps more reform factor loss as out time that AOB will to future, through everyone AOB. but less severity, reserves to

to perhaps, key XX.X%, in thing core our that the is bring right the getting XX%, bring the of will then pick okay? book. book that our now, that's Florida Future terms help your down. So in to loss is through that XX%. back would gross is I our our side. comes on, back in In increases I And think rate but call If gross zero question, future, benefit back AOB let's Florida pick should that about how think it, down, on

Operator

[Operator Instructions].

from Financial. Our of the Doug next question comes from line Ruth Lenox

Doug Ruth

will what that the about more on Florida, front? happening in do you sales now you're Mike, optimistic what's

Mike Braun

terms Doug. up the saw continue caught have that looking Yes, we underwriting QX, appetite. is our the clearly, of we hasn't in competition prices. changed. the we're has marketplace, to same at Well, a what our the lens to change where What discipline But same seeing in we're absolutely and

over last I think of X in been we've the X AOB the pricing years. a leader to

in people side. take have like Some underwriting more would have been grow rate the and/or been We that aggressive to Florida, reluctant to Doug.

same However, the discipline keep to going it. we're to

is I long. runway the think

the XX rates have don't reform, I AOB whole more taken pre-AOB take in to we've think people market to clarify reflect AOB. we've has as I rate. seen And reform what a think in the points as aggressive. been fully market about let with on me

disconnect think I still. some there's therefore, So

can aggressive So that's and competitive we'll our product we the business sustainable in we we to that keep marketplace a capital. our as can believe be to write to the as in manner

Doug Ruth

come that Monarch label? of some from about what And your

Mike Braun

July. tweaks in it we're some Monarch trends promising been some in of seeing on has Yes. that. as We've And October. had relaunched effective

small, material However, and business impact Florida. that's it's in to very not on have our a going

million FNIC. for books Florida is Our $XXX $XX million. roughly MNIC approximately

in to at in as really open bring But year that. of we select And the and population I out see in calendar time. then more XXXX that. MNIC results, see with That's to at we're with it don't being agents So gradually, some we'll lot appropriate movement you'll a here aggressively And of see very this point. tweak very trends XXXX. it continue a prudent

Doug Ruth

do having you area? you're that explain how And success in the Houston the

Mike Braun

marketplace. some believe the the other is Florida, opportunity, that can And opportunity states. profile been similar there Clearly, think But years. we've us these that other Gulf also our states, that We Texas, Well, very there I that being are we with we number coastal in for coverage And see reinsurance reinsurance Florida in out of policies there experienced with are really, we a we got product we've writer nature. an similar these that it's in with a these big synergies to appetite states, program Texas. for competitive there. have within a Louisiana writing risk there's other that that bring

Doug Ruth

to with getting the the December? last do And what to for acquisition is, Maison in close has question my Okay. are early our biggest concerns

Mike Braun

opportunity Doug. a about Florida's excited we're it's challenges and obviously, it, improve We past. our non-Florida, years Well, had great to in distribution think

working towards well hope back early I like to December. We're We'd that marketplace the it. a closing be to that. in for from in excited as see we're buyback perspective. So

I business there, perspective, acquisition ahead solid But forward and go from on Dean well think to that over behind Doug that to his an Doug's Raucy, got Stroud. underwriter, that as as operational us. front move get a And happy we're

the I early be brought because an that's that important December. I'm your And know that's dividend you. surprised you been question. said you should last for haven't up So in topic

Doug Ruth

I and nice FedNat was want to for gift. that thank at everybody a dividend, increasing that early Thanksgiving/holiday

that. thank So you for

Mike Braun

with recognize your And opportunities absolutely, you've with that. consistent again to think No, Doug. And once shareholders messaging buyback also value but the both in there's been Yes. we again, our on once the the dividend.

happy to benefit there the for have shareholders. that So we're our of all out of

Operator

will question next from our of Capital line And Bobman from Returns. the Ron be

Ron Bobman

a a I question cost working I are in rates you that Florida incurred, planning we've rate light of about on increase? in had Florida. on the homeowners was reinsurance wondering, increases or

Mike Braun

filing midyear. to not our costs the working ready we rate see you'll Yes, quarter fourth speak. I are on reinsurance a Ron. in from But to filing rate us reflect that at that we we've Yes, the actually think that as public. experienced make We're

Ron Bobman

Do number the of for GL a sort book? jumping around. just And count Okay. you claim have

Mike Braun

CGL? claims Open on

Ron Bobman

Exactly, do you have?

Mike Braun

we in with that but fine here, public I in back future apologize, feel document. room that, don't I I don't you have Ron, have the Yes, handy or a that putting figure getting

Ron Bobman

relates the claim you I'd of versus fourth well outstanding impact? Dallas-centric, to reserves loss think, Texas books any mostly having counts book, books the IBNR that but remain FedNat And the separately. the as do any early, that from Great. weather of in see as in it be you weather for quarter I those was that the for the noteworthy foresee both happened case do each activity think runoff I as interested it

Mike Braun

Yes.

So book We're when basis meaningful is good -- preannounce current is book our at quarter our to a perspective, But a it go ahead from down Dallas go-forward book not on weather had our to currently we have end. Houston. business. is practice existing book there. and FX in a big on our of question that. through Obviously, in But with go Dallas really

Ron Bobman

of Okay. question, growth X/XX, talk about basis FedNat, a PIF that All right. competitive. attributable making commentary relative about understand And growth, competitors Florida sort homeowners Florida actually in down June to little Florida, somewhat down. of time, rate same bit PIF gone A while What amongst on effect, don't from Florida I all a to my has at action last the more in XX lot

about why homeowners, down? in I PIF So so Florida went much discussion don't understand when fact growth, there's

Mike Braun

business the it's but PIF that's a decrease the stabilized correct, you're our for into baked for new pick QX. up. projections somewhat to count than We're Yes, And in we X quarter X, the small has where years in we we've we're last quarter, total as premium significantly come speak had premium, QX. to seen and PIF manner, that what in seeing anticipated quarter The after over we desire today. more decreased after seeing still the

on a seeing rate in So by front again, market. our to made. we've is But of the been that up taking competitiveness being the monitor market once frustrating now we've catching that. heard bit the we're because we're moves It's the continuing to end what

Ron Jordan

Yes.

total Just to million. X/XX, open count claims, get question back of auto as $X your growth to you XXX around claim is is and reserves our on our then

Ron Bobman

Could you of the that million and -- split between IBNR $X case?

Ron Jordan

I and the have case I only number, apologize. combined IBNR.

Operator

not showing now to back for Mike this And like Braun I'm over at remarks. any further turn the time. closing questions call any to I'd

Mike Braun

will well market as as in major fourth our acquisition and to All XXXX. the we with where progress in accelerating accretion. right. roadmap, we profitably to grow our be contributor a share believe are presence for heading our made can earnings long-term position we in into quarter to FedNat The markets third underwriting offering pleased ability the Maison the Thank you. utilize quarter we In growth profitable summary,

to year measures efficient cost reductions us our Lastly, probably operating and implemented lean the past the over have we've a scale structure business. given

our the FedNat improved has set excited XXXX, we the up performance about in and are company and future continued a shareholders. for

to out to reach if much. that, us. a follow-up with And questions, great Have there's you free thank feel So day. very

Operator

today's call. participating. for you this gentlemen, Thank conference and Ladies concludes

You may now disconnect.

FedNat Holding (FNHCQ) 9 Nov 192019 Q3 Earnings call transcript