NGHC - Earnings call transcript Q2 2019 | National General Holdings Corp.

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Operator

Good morning, ladies and gentlemen, and welcome to the National General Holdings 2Q 2019 Quarterly Earnings Call. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, Felicia Heard. Ma’am, the floor is yours.

Felicia Heard

Thank you. to General welcome Corp. and morning, the Holdings National Good

Barry name Conference Heard, With Second Officer; are Officer. Earnings Chief My Mike me Chief is Weiner, and morning General. Quarter XXXX National Call. Felicia Financial Executive at Financial this Karfunkel, Analyst

expressed future Before may our please include their than or to beyond that these which many and plans involve operations, facts predict following a changes on the factors consistent Weiner risks may will assumptions statements accurately, in statements and our to business note Exchange materially implied these no differ or Members management assurance Commission. for of remarks. There forth in that are review as are forward-looking those in set uncertainties, can respect from actual other and be developments objectives future the our filings to statements. and including Such include statements Actual Securities in may our results activities with significant of and relating Mr. and with be impossible of potential. the based Company’s the those assumptions. Karfunkel results, are expectations with control. including management statements or earnings team of difficult result historical current the results These

revise be date The otherwise, new projections or and statement, a presentation, as law. except required forward-looking this of the undertake future by only this we obligation information, presentation of statements or result update any in whether as developments no to may speak of as

for or measures GAAP is www.nationalgeneral.com. second the and the quarter section earnings, from to Investor on not refer most directly these Relations release in non-GAAP information XXXX our our financial financial are will to derived Our of of generally related is press principles, website, accepted accounting Reconciliation that available the GAAP. provided comparable measures management statements

Karfunkel. Barry CEO, call turn over to now Mr. my the to pleasure is It our

Barry Karfunkel

Good for call. joining our quarter second you. earnings and Thank morning, thank you conference

combined ratios Accidental operating I’m year-over-year pleased with Property and solid segments. our our Health across driven by & strong Casualty earnings growth &

more Diving in lines a our to various provide of color business. on little

Our X.X% a written personal experienced year-over-year premium decrease. auto line gross

experiencing As smaller to which business, on our the rate in stance rates. causing independent turn decreases, The of never market quarter, this line of we’re always to within all main last we get of soft agencies. is greatest is behind the activity, taken across business shopping take on impact mentioned carriers being is that we've which having lines caught lowering

a full As balanced focused approach we across and seek growth to the profitability underwriters, market cycle.

to contributing to new a relating to decrease unprofitable operations. competitor to some the the significant business the rights Also year-over-year in some transaction MGA prior actions year's boosts taken seizing relationships renewal and and quarter, are Nationwide terminate

business, direct-to-consumer platform. I further direct-to-consumer invest line, experience at to am growth. generating seeing stands note as to X% to pleased XX% total auto our in roughly which currently And did that look of continue our forward we we growth year-over-year our

Turning business. homeowners to of line our

this was of on stricter areas California with Our driver in non-renewals along The gross rules. wildfire X.X%. fell premium our written key exposed underwriting

for decrease We our renewed book. this of homeowners California, the to quota lines I of our would business. by written overall with within and XX%, continued performance see of business. As and line auto we're premium pleased gross slight expect our increased our of share top-line

property to renewal our reflects things our lower that margins While auto ceding are contributed our our strong in share solid commission. there expertise, quota and many business

strong new Our growth with homeowner line XXXX, experienced of over business penalty XX% brings top-line in which it.

and to increase caused an its market have And non-cat uptick with our due the loss including in wildfires, to activity weather year’s the weather is prior losses seen attritional by in activity loss industry. lastly, ratio impacted negatively were load. we line cat Secondly, which we what

lender-placed Our of terminated to of a was a decrease the client XX% being due result to of unprofitable a account. decline, that due half premium as termination was is under acquired. business experienced The meaning

with are lender-placed insurance pleased the business. our initiatives of growth line in We

accounts today, earning over started second premium have While the our quarter XXXX. yet, haven't our new home tracked of of as from XX% loans grown

I have you on wouldn’t are we loan significant growth as progress. to lower guide been experienced boarded some clients rates. the premium But, penetration tracked growth written expecting to reflect making of that

Casualty segment. & To wrap up our Property

and bit value cycles. number equity While focus quarters disappointing a past across acceptable years, and our return earning our is an one relative to share be book per underwriters, while premium growth our business growing to on was prudent all

to Turning A&H.

small stop-loss to extremely perform continues business group Our well.

than While internal call center short-term agency lower expected, to believe medical including grow -- we in individual space overall wonderful distribution, for with to positioned well industry product direct-to-consumer a our continue been we're assets. the to and has marketing grow quotes and

well sales as Our products, our technology driven and grow, individual comprised and of third-party Medicare third-party fee LeadCloud, health sales of continues our agency income by software as our Quotit to AgentCubed.

to international well by from premium, and some supplemental Our as business new a rollout written impact seen foreign rates. exchange of has price gross group increase driven as segmentation,

$X.XX We're that Lastly, to quarterly platform as it's its with ability we value margins. to and extremely continue built to exhibit produce industry share top above at through we've to strong excited returns, dividends the that Board book our appropriate line year. growth our grow has per strong and earnings our decided increase

provide my turn to our performance. on our our Weiner, that, CFO, call to financial over pleasure Mike With to additional color it’s

Mike Weiner

Thanks you, Barry.

$XX.X second year's quarter, to $X.XX million $XX.X million quarter net were XXXX. diluted was EPS million of compared million, prior $X.XX, was the quarter. compared earnings Operating $XX.X in Second year XXXX last the versus income up $XX Operating approximately XX%. income in quarter net to in of

losses quarter Our the prior weather-related losses in Catastrophic non-cat results of that million by in the impacted were weather prior, to quarter. $XX.X losses than we in but the saw of higher lower million compares quarter. year $XX.X losses were

million of versus year's prior Second year the in $X.X favorable quarter million XXXX included unfavorable development $XX.X quarter. development prior

XX-month trailing return equity as of on June was XXXX. XX.X% XX, operating Our

fully diluted from Our value to grew XXXX $XX.XX. XX, share book per XX.X% December

July release for earnings our Form we and time our quota in our highlighted auto X, insurance reviewed two-year XX-Q, effective As period. agreement share XXXX,

commission. We will liabilities ceding of and of and July business under Also, XX.X% term our XX% in-force, a new business homeowners a XXXX, and ceding at effective renewal net provisional renewed share we under agreement X, cede commission. one-year renewal we’ll XX% new at cede for XX% net liabilities quota reinsurance

auto new Additionally, these XX.X%. a a weighted-average The net proportion will business renewal agreement, under our quota share off to volatility as protection surplus all earnings, expected our prior continue are home business are in impact small run have and in-force commission we for the a our in the of that to and with of in-force expectations. of and changes both line on effect provide to resulting ceding relief

compared Property premium excluding two to Now, combined I'd in segments. prior personal primarily was XQ to our liability XX.X% gross on income expense $X by Service loss lower accident development, and grew primarily the detail intangible million, by XX%, Within driven which amortization reflecting year X.X% some year ratio monoline & like loss auto. was Casualty, in assets. lender-placed in written our operating unfavorable in The $XX.X ratio year $XXX.X billion, of XX.X% personal X.X% auto was XXXX. ratios, XX.X% quarter, versus fee XX.X% ratio compares to book to to driven P&C by million. XX.X% declined give auto. additional insurance of auto prior and The offset The

product our selection thereby reflecting premium trends, Overall, moderately as mix helping are frequency and divided we from net claims trend better our better than industry year-over-year mix trend, RAD our this which accident We favorable segmentation attribute trends, auto attribute our within to Severity pricing by in trends portfolio. our well moderately RAD and risk trend, to book, and new defined X.X as favorable, X.X shift results. product loss year continued as are initiatives. shift continued

the and quarter. our XX.X% Gross and year within was Health written individual fees, Service in million group from prior by our growth Accident distribution technology group third-party fees. Now benefited versus which grew X.X% and $XXX.X premium income products. agency to fee $XX.X grew The & million growth administration $XX.X in to million, strong driven segment.

year XX.X% self was prior current amortization year versus improvement products. for prior was in ratio quarter. The XX% the loss of intangible reflects The individual loss assets. the Health versus accident loss excluding The the XX.X% ratios Accident in combined non-cash XX.X% group & continued small ratio in year the funded quarter, ratio both and

XX.X% prior was continued year The ratio We the year in of favorable versus expense also had XX%, $X.X development million. prior quarter.

earnings like the the about echo to strong this of and General. resulted Barry's I'd National growth demonstrating excitement really power in quarter

for to the call up like to open turn call to now the I’d moderator questions. the over

Operator

the And the Thank is and mention you. is and your your coming Matt, first is Matt Please gentlemen, questions. instructions] Carletti. from floor line your pose for question open question. live. [Operator affiliation Ladies

Matt Carletti

JMP Securities. Thanks. Matt Carletti with

questions. couple of Just a

I evolved And that think, second how kind phenomenon the seem you you a I'll You geographies slowing has competition. what terms you're it some give mentioned competitors you auto, to did it talk of less Is a bit if in Can the there? a kind past than July, color seeing of it are be of of could in over particular quarter that little others? intensifying, aggressive more on months? kind that could few little and you're of your seeing shopping with seeing there? you're comments start it there in expand about getting and on cycle. down Are any say,

Barry Karfunkel

Yes.

it's mostly QX as discussed. definitely -- are we into and just was We QX -- it

basis. see it state-by-state do we not It’s So, very on much a intensifying.

states, soft -- we other don't that. competitive So, so it's of in and it the in a states, quite couple see is market

much that is -- it's So, basis. state-by-state on very

Mike Weiner

that both in at us different ways, it. share at look versus one and the as look we multiple we dimensions many different frequency of to think industry Matt, thing like looking I'd at I that do here severity in to trends,

severity better if at trends, you we rolling we I do continue decreasing X-quarter to the frequency sequentially up, both the alluded do and to picked all to on. look so of than But frequency As earlier, other And industry XX-quarter the environment. better. in a X-quarter, year-over-year, has measures continue

So, seeing corresponding not rate. And opposite. with keeping is when cases, just peer our you premium opinion just rate up But our trends. severity the at industry some lower in is seeing at in the are not saying not a up going we're -- actions; we're look it, the ultimately

what pullback attribute about X, would a growth, where really the market the probably in preceding and we're had I competitors then that took what of happened a ago, lot business years in now seeing So, quarters. to the X.X has underpriced

going go we'll cycle. -- to and As not the We're his Barry chase just and going to underwriting in business. focus in that margin, ups our the we're comments, to alluded downs on

Matt Carletti

share quota the then, programs. And in reinsurance question more the just related to one changes

bit terms Specifically, little can of any capital when are of they that? were needs superior the your to if recall, Not materially? they put really or just but kind was you commission at talk place, implications ceding a you off in if about, in were big because forms I reason capital moment time, other And forms longer you capital that capital of term? there changes think could this in in get. as change access Do of of

Barry Karfunkel

from No, which and auto obviously as all. capital down it. last we're to our like us has space terms a in as two margin other We we the we favorable our business, sideways us ceding over that But if of on get it up auto volatility also have for so the is cataracts more these within protection adjust well not XX%, well years. about that’s means benefits associated with has contract. property the the and decreased, become ability it at served reinsurance, Actually, our the the piece loss that

of and it's a So, protection. combination surplus really volatility relief

minimis the made earnings we feel our de with we comfortable decision the ultimate going So, forward. what to most on impact

going combined you it's were forward impact of like XX to kind us be the financial going to a are for just these months. in for forward a ratio if de X.X% So, what next roll something us, impacts minimis,

Operator

announce your Randy, line question. question your your And live. from pose Please is the is coming Binner. affiliation next and Randy

Randy Binner

Riley. B. with I'm

is I changes reserve first on have just prior question year development. the The in quarter the for

all from on the expand So, you was pieces and And that overall, think it drove book. you it's I Can was related the auto side? there in I to renewal that it other liability auto, all liability. think mentioned it? another from the confirm Nationwide But, of part piece

Barry Karfunkel

to nothing PPD. it's Actually, Sure. Nationwide, the do with

should I about we So apologize. have -- PYD, say, I

we about million unfavorable So, P&C $XX have of activity.

with liability unfavorable. from auto. planned from X.X We million small be about million exact All have vast year-to-date auto about a on basis million, X it favorable, X.X came the to came that business of so, a majority

pretty everybody cases of much else Specifically, ref seeing the we're the in as claims, tort is with industry. same volume attorney higher seeing

What this every We than $XX do but different for the What movement. $X.X I’ll We full And movement -- industries. here a little XX.X single really total is, you earlier account quarterly alluded into the take business. a we P&C, do is it's variations view point. quarter. you at view about to normal for potentially to as at just others, that NatGen when PYD, in both, favorable million in million reserve study our best year, unfavorable the I we're for point A&H any

Randy Binner

or another development stop-loss in was it the And that there, was in there? area, products

Barry Karfunkel

stop-loss. is in The business. And vast again, it of very very, tail short this majority was

of what X.X are year the all just definition our So, X.X. is, development to if policies about it, you on, not of written think prior

could that for you've year development shows a up to us. that and in third continue we to development. But, development I year in that have But, favorable been favorable of three it's in four policy the a business. last you forward. would So, good very going trend consider as quarter not continue written quarter of quarter that prior see

Randy Binner

And any be place which in one better kind more open the then, and you potentially of put period, would to selling A&H. on in seek enrollment Can quarter? that fourth initiatives or on updates just share the results top-line you’ve progress

Barry Karfunkel

of we our So, job up a solid internal do staffing agencies.

couple going external coming of product marketplace. the lead direct-to-consumer in open segmented going our the of couple which of does rolling drive marketing of a not we've advance generation lines and advance degree to domain product is less -- working really open in space process the months dependent out new well of a for our being the as in in new as a are to operations names rating And in advance period, of we're course as period product our the and of assets, in a direct-to-consumer bring business been launching enrollment business branded enrollment acquiring sophistication We -- our on to be currently that forward. exist of on

Operator

Thank you.

your Christopher Christopher affiliation your is coming pose question live. your Campbell. Next is and from question. line mention Please

Christopher Campbell

just Yes. quarter. reserves. a KBW. It’s morning. the one guess, Good on the Congrats question Chris small Campbell from I on first my is

commercial auto auto So, most on it was years auto. was like liability accident -- What the that? sounds the of coming from

Barry Karfunkel

spread a accident much few over pretty It’s periods.

probably continue bit think, and ‘XX, and I it’s ‘XX in ‘XX ‘XX. better. ‘XX little to be a

Christopher Campbell

side, guys And the kind auto, line just are then your in rates then, of and to RV books? you seeing personal the moving personal what homeowners

Barry Karfunkel

rates line We with taking are trends. in

rates We’re to is. trend your what premium taking equal

our is overall agent, the So, blended X% the as in business. rate I our environment think well that’s both independent preferred by X% and probably really And our as standard direct-to-consumer, RV. or

again taking behind trends, is rates not the get geographic reiterate I’ll we for our on important premium the each and So, But we so of going that to don’t peer going below obviously differ nature caught most curve. it’s be. us, to is are

Christopher Campbell

to the of in that would on X% aggregate an way think your the is that it? X% cost you're basically level inflation, equal taking are So, seeing right loss what to terms about you

Barry Karfunkel

Correct. again, about our book. look that And industry But it the we at is cost average as inflation loss specifically in in well.

Christopher Campbell

auto like commercial which premium, looking X.X%. the And I was just then, at was down

kind all is would I commercial to have Now, just on what that of expected in increase, auto. taking everybody color the

you of overall how like, environment changes. rate much versus exposure seeing So, like then, the rate the growth there? And are what's that is just

Barry Karfunkel

changes. auto. commercial is used really decrease the word is The vehicle. to business, be vast you that going small But, This exposure majority of

us industry. fleets there no while for hard for and contractors. by in like NatGen, large there larger writing artisan it’s limits are means So, limits, of -- the We're small

areas into back, underwriting between higher So, that's but guidelines a and -- pulling I I the think back we've the we're York seen difference other New pull particular like just a we're our where industry. going majority and cases, just areas that capacity vast bit where tort though, to I say would of can. say, wouldn’t some of these we us is

Christopher Campbell

Okay. of That's then, last on kind one LPI. just And very a helpful.

walk the dynamics track had guess, there? loans. So, you you're I seeing us what mentioned increasing I can like, Barry some of of think, through

So, are is currently I product how then, guess And What's share? you your market how designed many tracking? loans for that your reinsurance line?

Barry Karfunkel

Sure.

something But Let you, second dynamics distant alluded XX gross me Again, Barry. growth terms penetration to disclose kick something it the we're industry. the of arguably probably, of and off for -- by XX written drive it, volume comments We tracking the rates. actually when that Barry and going up a percent it don’t goes being isn't he of percent to our made loan premium. the in that

You have these some a penetration we from subprime rate client track a of the that potentially higher quality than lower more onboard And or loans quality The loans. perspective. non-standard higher portfolio to loans. continue

And far goes, cat that. treaties” goes or for as into as property “home our it reinsurance

that the get the access protection as of policies. protection we loss well as sideways our we top So, get through house

Christopher Campbell

do it's pricing And on down is policy with get just coverage. of like I it. of less homeowners LPI Because kind separate general. more I mean, that? the a in you just expensive, think Got And way stripped

more you seems it like So, I the that be attractive reinsurers. would mean, for

commission do So, on you like ceding get that? a higher

Barry Karfunkel

Absolutely.

So, great, it’s a question. great

that got that at then we premium, new lender-placed that off -- actually the we will disproportionately running XX% ceding right quarter our property to that the premium, go majority that and can't had -- that higher. the XX.X% vast control we our of year. of quota our on to it. in make -- a which The business that quota it one, higher, last And commission published that. as So initial less we're we lender-placed was expanded We now second the redid share we goes shares that we was decrease

it's But we us that the market is don't that more the So, for control unfortunately, in as attractive reinsurers to rates, a whole right, perspective. penetration does.

ceding portfolio and could penetration better conditions if forward in shifts, we moving in see our mix again, goes a So, higher, that commission market total, aside.

Operator

the you. now your your Jeff, from question your next is and live. affiliation Schmitt. announce is Thank question. coming Please pose line Jeff And

Jeff Schmitt

X% lost personal X% book Jeff the coming that morning. it Blair. but compared on you're how there standard? levels does about rate with the line growth. auto in William with in how particular, Good down, it’s non-standard getting to the Obviously, What Question sounds like look -- Schmitt still auto cost competitive to the trends. at do

Barry Karfunkel

the same? reflects Mike’s on is total It the and comment auto earlier centered book. the

Jeff Schmitt

you that? could know, terminated And relationships. of sense we get Okay. a some MGA we the on -- get I size said a on you’d sense Could

Barry Karfunkel

those ex It's well top have -- as terminated received as would QX boost -- XXXX the to that we relationships in our we the the line.

have would marginally would you up year-over-year. been those we remove If items,

Jeff Schmitt

the the just forward? bit And around Okay. actually last should looking going quarter, $X.X think bounced ceding side, in A&H I at on that million as guess $X about it’s the quarter. almost million commission we a How quite

Barry Karfunkel

-- retained of perspective a have Yes. Euro pretty Health vast one all large Well, of & quote we our with much the exception European our share majority or quota XX% we business from product, business, on Accident of but in which business the Accident share. business our our in

of So, their changes. business mix

a business first other that. through in So, quarter; written the that reaching is gross a the comes business from of perspective lot on

domestic business. we in A&H the much that piece growing of than remaining I keep also a in basis want other for the steady faster though, European gross at state think Keep mind is our a is to business net rate So, on A&H. to year, the

Operator

affiliation Kinar. Thank Yaron And post Please live. question mention line the your coming your your and question. is next is Yaron you. from

Unidentified Analyst

legislation, I of for re-underwriting you Rob is about Yaron at was impact any the wondering the is subrogation? coming repricing how Sachs. homeowners This if Thanks. business talk which Hey. caps if Goldman utilities from you could and wildfire on along, fund expect and

Barry Karfunkel

as be the with great as trend far working as you discussed to to our all But, states, exposed underwriting in and increases and premium California, to rate talk pure able of on as Mike, we've wildfire subrogation. non-renewing line in taking let other I'll overall. we're terms and the we're indication areas, subrogation?

Mike Weiner

a We've ultimately far out to out and lot to actually going don't or that opinion It’s of claims talking the great a utility. situation as as I in California. have very mean there been the our claims us there fluid as staff. a for on well is subrogation rights Yes. representatives against what

Unidentified Analyst

the just lender-placed terminated there? Okay. Thank the you. business, client trend thoughts just a And second aside from in premium on question,

Barry Karfunkel

going premium Well, there pick is the up. trend think to I

left last quarter we flat and that cancellation. that’s that about talked called So, the us client

in So, over that premiums while started premium kind one, We new some clients. we new of client earn that Those that. place going tracking of on-boarding goes of off time. business a earnest we those as of to July period time on in are period premium, day in

or the steady So, it’s going for to state year take so a environment.

XXish So rate if back XXXX you range. next run kind our we in a totality, business of I to where at look get we'll dollar think year, basis in were million at early

Operator

no there from time. questions at the lines And this are further

Felicia Heard

Thank look you you We next for to joining. speaking to quarter. forward all

Operator

you. Ladies and today’s gentlemen, Thank conclude conference does call. this

disconnect lines and your may your a for day. participation. wonderful Thank have this time You you at phone

National General (NTTNP) 30 Jul 192019 Q2 Earnings call transcript