NGHC - Earnings call transcript Q4 2019 | National General Holdings Corp.

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Operator

Good morning, ladies and gentlemen, and welcome to the 4Q 2019 Quarterly Earnings Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.

It is now my pleasure to turn the floor over to your host, Paul Anderson. Sir, the floor is yours.

Paul Anderson

Thank you. to General welcome Corp. and morning the Holdings National Good Conference Fourth Earnings Quarter XXXX Call. Paul Investor Director name Anderson, My is of Relations. Officer. With me and Financial Officer, Chief Karfunkel, this morning Mike are Weiner, Barry Executive Chief

our Mr. results, respect Before forward-looking statements. Mr. and Weiner to please the following Karfunkel note with review

These remarks. our or assumptions. expectations objectives their that business of assurance There of those results predict the or based and operations, statements control. involve statements of management no facts may these many potential. are management impossible related actual statements on the developments assumptions earnings including changes which and company's team accurately, difficult our for activities be other current Members may are in to will historical beyond that include than include be are can with in to consistent Such and the future plans future

materially only results our this Exchange statements, to speak of projections any in required or of presentation future information, a statement, result these presentation may expressed of factors and Commission. otherwise, Actual forth in of and the differ or Securities implied statements law. and as with including as the developments, by set forward-looking risks result as new from significant update The those whether a revise no undertake or the as we be this except as obligation uncertainties, date filings in may

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

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

Barry Karfunkel

Thank you. earnings our thank morning you and joining call. for year-end Good

been XXXX to earnings is returns. year able strong record What been our announce to to Despite of another has able years to spectacular. opportunities the for we've team come. earnings produce nothing some growth short improvement, and in forward pleased to look I'm for continued of accomplish

We powered by proprietary analytic integrated with that and all turn, enables lines have which In this technology achieved diversified data businesses, excellent and operations. us of efforts provides by our our this are insight leveraging our across platform. business

I'll across time spend various of some additional providing some color our business. lines

produce continues personal Our solid to auto results.

Our the rights certain York, reduce for written to New XXXX. the for transaction Top renewal was in our relationships X% premium increased benefited one-time quarter. unprofitable nationwide line us that exiting XXXX by dampened business having not in MGA gross and actions

Our approach to growth that has peers. we counter-cyclical will a our to always been take approach

ramp decrease conditions, most market below commission relax equal we underwriting loss to during rate trend. While rates rates, rules tend peers soft take and to trends up

trying advantage. rate peers comes rate as to harden our strong and a strategy When up we're counter-cyclical us We new believe from winning the with increases, are us adequacy. our this a of gives double-digit markets inevitably benefiting catch to business that result

in constantly Florida. Another products. results extremely released RAD product Early enhancing first we win QX, way our our we are X by favorable. In is

As was result enhanced loss and sources, with looking new an data increased product and rate with segmentation past business our on new enhanced X we favorable. modeling RAD introduced the rollout, our conversion based credit metrics

will a target the states product, side which the by enable forward to us much with side, We additional mid-market added of look releasing customer base. wider benefit product in the to having

direct be Our exciting. progress very to continues to consumer

now XX%. approximately experienced This Our XX% direct our personal to of premium growth channel total roughly of consumer auto business. comprises channel

last and in year. pricing Our actions small a business result auto underwriting book declined as QX, taken slightly of

segment P&C auto. experience primarily to small business in strengthened We $XX due in million, the reserves have by our

in line confident stronger contributions experience XXXX. will are that this from we We

XXXX, homeowners by California, I'm in of While results our how The meaningful XX% makes of currently which our positioned. we're was roughly packaged homeowner extremely business. driver sub-optimal up results pleased contributor a our weren't

were into we approved January. went QX, in XX.X% for During a California, homeowners rate during effect increase which

increase, in rate this California a in after our that of competitors. to strength we're relative position believe We

to re-underwrite our to project areas avoided completed year. this certain of from immediate We in was saw XXXX. our that as occurred Additionally, exposure last wildfire we material concentration a benefits claims in wildfire

to launching leveraging launched We in introduced many our segmentation, Another third-party Texas. product win as was data with enhanced The our planned product, next-generation seems which product be our performing feeds. products new conversion conversion year. rates in course other and poor-performing We to replace this states in existing in over rates non-existent the up product our attractive segments. of forward having segments homeowners look

taken actions for to XXXX, don't our homeowners. many growth the we XXXX see expect Given in in

should instruments expertise. materially. leveraged per and our our increase improve acquire to all and against to play with ability together set However, our to out are assets, various capabilities along its We Accidents impress to We distribution strategy. symphony. continues health product policy the rate lead that businesses and a acquired select generation we've now technology the in-house beautiful product, and coming analytic to deliver

we XX.X. which was an of all-in sold mid-quarter, XX.X% combined experienced with Absent growth Euroaccident, ratio of

pricing business stop growth leader an and by underwriting. in loss its being industry its space and analytical group the strong highly Our approach unique with small continues to

target in loss coming continue for savings base we our segmentation This as ratio and us further decreases distance to for growth years back top line our the reinvest our between segments, rate competitors. creating is expected the from

rate drove new was which of segmented Our the our medical short-term release XX% by target driven product, growth growth our within segments. significant individual line's

of product well as distance further our forward this will more product offering. our even forward we to which segmentation, from competitors Looking to as medical us another releasing look supplemental an updated year, with yet releasing short-term version

our own a doubling generation agencies our season, dependent generation Medicare lead lead agency, are increasing growth costs. other while external own AEP its experiencing had with bolstered which are Our platforms, our agencies, more platform, year-over-year. strong lead on HealthCompare, business than

them businesses I'm progress about mode, two to years. maturing these next in as begin being the incubate considerably the over expect While our excited that classify I'd and making technology businesses are

of of in an past, would the ratio and XXs. I've Euroaccident and our combined While the guided sale be health given I the the accident growth mid our expect low in Medicare combined to ratio business. the to in XXs,

the carrier growth to the time. over our growth Medicare rate to technology of expect exceed improve continue and rate years, businesses combined over expected to the I'd coming With our ratio

initiatives, In time, to the summary, result contributors of XXXX's continue contributors, should a additional periods. meaningful coming which series success we've in which should in At had many XXXX. contribute improvement same in the accomplished

is CFO, my pleasure it of for our a call to Weiner, over that, Mike With our review turn to results. the financial

Michael Weiner

Thank you, Barry.

income or share. million per $X.XX net in We $XXX.X of diluted had XXXX

in which earnings quarter. per was fourth XXXX XXXX. EPS $X.XX, share. compares operating $XX.X $X.XX or Operating $XXX.X of XXXX were Fourth were million income which the earnings Our Operating quarter in $XX.X prior-year of last $XX.X was versus diluted $X.XX million million, diluted net quarter year's $XX.X compares million in net the to to million income quarter.

$X.X Our results in which prior $XX quarter to in were weather favorably million by the losses million of the year's impacted of compare losses, quarter.

see than While catastrophic lower did losses losses. years, higher non-catastrophic weather-related were prior we

in our development prior-year in the $X.X versus of $XX.X $X.X segment primarily million unfavorable the The versus P&C favorable reported development prior-year unfavorable $X.X prior-year by million quarter. segment driven included development, XXXX health business That's quarter. accident small of of prior-year favorable development million auto. quarter of Fourth million

prior-period million was Trailing $XX.X XXst, the as for the full on operating equity company XX-month adverse. of XXXX. development million return year, the December $X.X For was combined

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

the property investments reflecting within some billion $XX.X consumer Now direct two our on our for first X%, in operating premium the grew continued our of written premium acquisition $X segments, of auto give Farmers I'd distribution. Union Personal included color and X.X% which like quarter, additional segment. million Gross Insurance. additional to casualty grew from to to

business, in assets. fee the reflecting of $XXX.X of Union. income me, including excluding of and mix decreased million versus was intangible Farmers XX.X%, National Service million to The XX.X X% P&C the ratio amortization addition changes quarter, XXX.X% excuse the continued combined - our for

XX.X%, reflecting pre-tax attributable $XX which compared prior-year XX.X% Hurricane California related wildfires were and expense the share ratio The income. quota the which was a favorably to ago. XX.X% in prior-year year's the to ratio the loss to Michael quarter. losses million compared $X.X catastrophic primarily This commission million, and in in quarter, was changes the compares ceding year is to lower The XX.X% to

trend, to from segmentation, RAD better product define loss we auto and of by as is X% trend moderately as frequency This initiatives. our X.X in well reflecting product, net as We mix our year-over-year X.X now driven Overall, trend, new shift book which attribute industry, trends, helping thereby is moderately accident year Xst, selection and net by quota the pricing XXXX, continued favorable risk will cede we premium share. our divided are continuing monoline from shift. than favorable RAD year. results. auto Severity we under mix liabilities to attribute increase claims the trends better the January Effective continued as our capital reduction self-generated our this

fourth Within strong our million in to individual in the products. $XX.X benefited agency prior-year fees. to insurance driven products gross versus which written growth for XXXX, and quarter of accident domestic premium fourth million both health $XXX.X $XXX.X group grew the segment, and quarter our million our distribution in growth on well technology as $XX.X by versus administration XX.X% and fees grew third-party million quarter. income fee as The and Service group was from

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

our investment That's favorable trends group of our quarter, versus most was had million continued strong expense reflecting of million both That's We XX.X in XXXX. the businesses. versus in recent ratio also The the and XX.X. year current in accident continued the quarter, in continued reflecting development $X.X prior-year businesses. prior-year in individual $X.X

our basis. our to the December Xnd, XX.X%. and year sale The a is a were expectation annual rate of gain $XXX for lower by and we reasonable The of previously our XXXX. We go-forward tax We was lower the projected tax million transaction. taxes return to adjustments. The business driven pre-tax XX.X%. the be anticipate provision the than and approximately million, a $XX.X state rate on lower sold from was rate rate proceeds This realized XX% Euroaccident foreign on on for

$X.X The increased quarter. This was Investment million. portfolio increased lower increase over size of income positive income market our investment million in and flow increasing $XX.X cash the the to offset Investment by due was our yields. prior-year portfolio.

and like outstanding would for members team I'd to diverse National an echo thank we I comments General. of XXXX. in earnings delivering results to strong demonstrate power like Barry's the that - and General also continue National to our continued excitement in the about our year

questions. to turn like over to now the for I'd call the moderator

Operator

Randy from is live. your Randy, and coming question. is question pose first your Binner. your And your affiliation Instructions] [Operator Please announce line

Randy Binner

I'm issue first FBR. with a the kind of been currently fourth quarter is a the B. market. little earlier have little pricing an market the Riley your That's versus talk standard one XXXX. the is, recently I about sounds It non-standard like it bit versus maybe competition? the a loss in cost you guess better questions. in in I few bit can and than was

has on too. You but non-standard, have a book that focuses standard

So you I'm or the market better think, competition curious, non-standard dynamic dynamic versus pricing in standard. worse if and is just

Barry Karfunkel

Sure. Good morning.

product our tag-along auto getting with leading the for is the business primarily and focus product. products standard homeowners So the as the

side, various preferred really a we're whereas we're there other some by it's non-standard monoline So There on softness than heavily standard seeing on of we in markets as today the driven really automobile less are focus are softness certain others. that markets where seeing markets. product, whereas don't

Michael Weiner

business, to alluded also we I and it's non-standard the that everything - underlying earlier, comments talk we're about mid slightly there's to rate and in no that. Mike. this I'd prices of taking similar And Randy, story. to is definition same we're it, flat trends his about also the obviously looking Xs, really with being consumer Barry we our to When non-standard. in in auto like But down to loss perfect talked to that. accordance I'd it's of at in that think add seeing and old high the actually in auto in relatively insurance quarter, the

You've this decreasing frequency severity. seen or declining increasing and

going every when underwriters market we're growth than defending is think we to discipline but to going harden, itself rates why and higher inevitably pricing and into, and that's I that we're heart say, our it's continue on manifest would going focus that at average So does margin. to day

Randy Binner

commercial auto, can then And the what adverse characterize you on drove development?

Barry Karfunkel

severity. rates to awards attorney really representation industry It's plaguing at with Sure. in driving with higher this time seems what large be the jury higher at point

updated as to as items. enhanced be with confident adjust actions, for new able feel practices taken we definitely we And actions certain pricing claims as well we've factors in So - really those able business produced. to to be see certain being taken

Randy Binner

leave I'll right. that... at All

Michael Weiner

add of million that little in I'd it as the our a - to business, a it's of year, was whole, also written look at business it like you a actual size and if that year but it's is last $XX small gross not million. quarter, was the business a a auto, premium for $XXX the piece over -

business. total So see as that in echo just but the have meaningful a I I we'll that in taken It's think number meaningful do decrease we company, Barry's probably go the forward. we the not in comments number actions sense

see effectively side behind we're that, being fit, XXXX. have think very that hopeful reacted taking be where think I able on we to the conservative in put we'll the in up us of we and this little a of probably terms I development

cut I Randy. off, Sorry, you

Randy Binner

Thank No, good. no. you. I'm

Operator

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

Jeff Schmitt

the different Jeff and with them? the income that had you're fee I growing for buckets A&H, the maybe And the the business the Question bit quite and bit, growth a in think in William what touch quarter there, type there could was mentioned Schmitt Medicare Blair. but obviously you you of in quite buckets service seeing and up on a year. on

Barry Karfunkel

I loss with premium that So stop business should with - loss the and grow mimic that. - is stop so anything our STPA one goes obviously out? as our that tandem we've our did stop leave fees our those got in from seeing along of that We're network technology and well, business and grows, health access businesses. loss bucket with fee Medicare growth fee our Mike,

Michael Weiner

No.

actually So perfect.

a little and then the service business, really Medicare from think which with we So if about a in fees other move GWP forward. whole, perspective as quite with that, fee over increase that the about business a of XX% completely third-party The large line it a in XX%. by driver as about vast income majority of we're XX%, group our it's driven bullish grew group and you grew

Jeff Schmitt

then so mentioned kind And a margins Okay, but I the had sort A&H, still business ratio just in great. And of closer why Euroaccident in of the combined you averaging that adjusted that mid me may combined up? 'XX could think in 'XX help you XXs the margin lower going go business, was you think that about forward. at looking and to expected XX%,

Michael Weiner

great XXs we and the Well, in we business Yes. mid said our business. two in of pricing going better right, terms basis performance than - are but listen, you're it's adjusted on an be anticipated, of where vintage the we're about had generated I been for to the that X% expectations years that,

of this some in - both accident those to In there addition development of do was I way the never it to was is, timing policies, annual perfect there favorable it's because mean, years.

close alluding end for get gap higher it's I we'll to day, think you'll on X% I a basis. to, - of in a you us. XXs and hope the on telling adjust was number are So go-forward at mid that up the indications that That's slightly we'll our say what the if but that, be fair

Operator

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

Yaron Kinar

guess, Yaron with Kinar question end. on Goldman one my just Sachs. I

past guidance combined in A&H guided to we you segment, for the XX think combined for proportionately lower to As which our XX? you're I then lowering should ratio, had consolidated your the on the expectations ratio the

Barry Karfunkel

about speak consolidated combined Mike let ratio. the I'll

the our ratio. increasing A&H combined guidance actually on we're However,

outperformed results Obviously guidance was for the that. in Our be significantly to us low prior XXs.

our Now in XXs to increasing ratio guidance low actually that for now. we go current right combined prior guidance from to our XXs be are the mid

the we not to expect contributors more vehicle dramatically to the meaningful total move are mentioned because and be - combined go-forward in we would We commercial prepared homeowners our ratio We to both in takes business puts company basis. on business remarks, a the of our that as overall really expect there sides.

business of far. really total ratio would be we've experiencing line to in with expect the what thus we the been So combined

Michael Weiner

Yes, little alluded that market took over and to that is we two the business. segment, Barry thing our we and account that, the difficult that on combined small business it and packaged to on I'd with add P&C a well Barry was the the XX just ratio this year only Yaron, headwinds the into in the development sizable delivered had as as

XX I that the but range in we'll So offset XX. of total, in wouldn't center I end at day right of to think dead that, do be the the

variable be well on earning business. particularly just biggest have going for the the to the with what we're going small those ratio, we cats in is really happens homeowners both Again, which - side. to think us things, the traditional rate on ratio homeowners positioned It's be loss not really the on and with we

we're So to year. a forward looking good

Operator

you. more queue from time. the at this there questions were Thank And no

Paul Anderson

then I'd with all there forward like morning. and If you look more goodbye. your no We the to again to questions, this you to take thank are opportunity time Thank speaking soon. for you

Operator

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

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

National General (NTTNP) 21 Feb 202019 Q4 Earnings call transcript