National General Holdings Corp. (Nasdaq: NGHC) reported second
quarter 2020 net income of $157.6 million or $1.37 per diluted
share, compared to net income of $69.0 million or $0.60 per
diluted share in the second quarter of 2019. Second quarter 2020
operating earnings (non-GAAP)(1) were $157.6 million or $1.36
per diluted share compared to $78.1 million or $0.67 per
diluted share in the second quarter of 2019.
Second Quarter 2020 Highlights versus
Second Quarter 2019*
- Gross written premium grew by $50.4 million to
$1,243.2 million compared to the prior year’s quarter due to
our P&C segment growth of 3.2%, driven by the acquisition of
National Farmers Union Property and Casualty Company (“Farmers
Union Insurance”) in the third quarter of 2019, and organic growth,
largely offset by the premium refund provided due to lower miles
driven as a result of the COVID-19 pandemic; and our A&H
domestic segment growth of 20.2%, excluding our previously sold
A&H international business.
- The overall combined ratio(11,12) was 80.5% compared to 90.9%
in the prior year’s quarter, excluding non-cash amortization of
intangible assets. The P&C segment reported an improved
combined ratio to 83.6% from 92.6% in the prior year’s quarter
driven by our continued strong underwriting and recent declines in
miles driven. The P&C combined ratio includes prior year
unfavorable loss development of $8.6 million compared to $10.4
million unfavorable loss development in the prior year’s quarter,
and $35.3 million of catastrophe losses related to
weather-related events compared to $18.4 million of
catastrophe losses in the prior year’s quarter. The A&H segment
reported a decrease in the combined ratio to 65.0% from 82.6% in
the prior year’s quarter, driven by strong operating results in our
small group self-funded and individual products, absence of our
international business which was sold in the fourth quarter of
2019, and growth in service and fee income of 51.3%. The A&H
combined ratio includes $11.4 million of favorable loss development
compared to $8.1 million of favorable loss development in the prior
year’s quarter.
- Stockholders’ equity was $3.0 billion and fully diluted book
value per share was $22.02 at June 30, 2020, growth of 13.0%
and 15.5%, respectively, from December 31, 2019. Excluding
accumulated other comprehensive income, fully diluted book value
per share was $20.40 at June 30, 2020, growth of 10.7%, from
December 31, 2019. Our trailing twelve-month operating return on
average equity (ROE)(13) was 18.1% as of June 30, 2020.
- Second quarter of 2020 operating earnings (non-GAAP)(1)
excludes the following, net of tax: $0.1 million loss on
equity method investments, $4.4 million or $0.04 per share of net
gain on investments and $4.2 million or $0.04 per share of
non-cash amortization of intangible assets.
- Repurchased 459,083 shares during the second quarter of 2020 as
part of our share repurchase program.
- Agreement announced on July 7, 2020 to be acquired by Allstate
for expected total consideration of $34.50 per share cash
(consisting of $32.00 in cash and an up to $2.50 per share closing
dividend), subject to shareholder and regulatory approval and other
customary closing conditions.
Barry Karfunkel, National General’s CEO, stated:
“Our well diversified platform continues to perform well. With our
recently announced agreement to be acquired by Allstate, we look
forward to contributing to the greater Allstate. I want to
personally thank each and every one of the National General team
members for their outstanding and continued work during these
unprecedented times and for their continuing contribution to the
success of the pending acquisition.”
*NOTE: Unless specified otherwise,
discussion of our second quarter 2020 and 2019 results do not
include financial results from the Reciprocal Exchanges, which are
presented within our consolidated financial results within this
release but are not included in net income available to NGHC common
stockholders.
Overview of Second Quarter 2020 as Compared
to Second Quarter 2019
- Property & Casualty - Gross written
premium grew by 3.2% to $1,053.5 million, net written premium
increased by 0.4% to $789.4 million, and net earned premium
increased by 2.9% to $842.0 million. P&C gross written
premium growth was driven by $47.7 million of added premiums
from the acquisition of Farmers Union Insurance, and organic
growth, largely offset by the premium refund provided due to lower
miles driven as a result of the COVID-19 pandemic. Service and fee
income was $112.0 million compared to $113.1 million in the
prior year’s quarter. Excluding non-cash amortization of intangible
assets, the combined ratio(11,12) was 83.6% with a loss and LAE
ratio of 59.8% and an expense ratio(10,12) of 23.8%, versus a prior
year combined ratio of 92.6% with a loss and LAE ratio of 72.6% and
an expense ratio of 20.0%. The loss and LAE ratio was impacted by
pre-tax catastrophe losses of approximately $35.3 million
primarily related to weather-related events in the second quarter
of 2020, compared to $18.4 million of losses in the second quarter
of 2019. Unfavorable loss development was $8.6 million in the
second quarter of 2020 primarily driven by small business auto,
compared to unfavorable loss development of $10.4 million in
the second quarter of 2019.
- Accident & Health - Gross written premium
grew by $18.0 million compared to the prior year’s quarter due to
growth in both our small group self-funded and individual products.
Excluding our A&H international business, our A&H domestic
segment grew by 20.2% to $189.7 million. Service and fee
income grew 51.3% to $80.1 million compared to
$52.9 million in the prior year’s quarter. Excluding non-cash
amortization of intangible assets, the combined ratio(11,12) was
65.0% with a loss and LAE ratio of 39.5% and an expense
ratio(10,12) of 25.5%, versus a prior year combined ratio of 82.6%
with a loss and LAE ratio of 52.0% and an expense ratio of 30.6%.
The loss and LAE ratio reflects strong performance in both small
group self-funded and individual products. Favorable loss
development was $11.4 million in the second quarter of 2020,
compared to favorable loss development of $8.1 million in the
second quarter of 2019.
- Reciprocal Exchanges - Results for the
Reciprocal Exchanges are not included in net income available to
NGHC common stockholders. Gross written premium was
$98.4 million, net written premium was $57.3 million, and
net earned premium was $54.8 million. Reciprocal Exchanges
combined ratio(11,12) excluding non-cash amortization of intangible
assets was 83.1% with a loss and LAE ratio of 54.8% and an expense
ratio(10,12) of 28.3%.
Second quarter of 2020 net investment income
decreased to $30.5 million, compared to $35.9 million in
the second quarter of 2019. Total investments and cash and cash
equivalents (including restricted cash) were $5.2 billion as
of June 30, 2020. Accumulated other comprehensive income
increased to a $186.9 million gain at June 30, 2020, from
a $74.5 million gain at December 31, 2019, primarily due
to market improvement.
Interest expense was $11.8 million, down from
$12.9 million in the prior year’s quarter. Debt was
$682.3 million at June 30, 2020, compared to
$686.0 million at December 31, 2019.
The second quarter of 2020 provision for income
taxes was $49.0 million and the effective tax rate for the
quarter was 22.7% compared with income taxes of $22.3 million
and an effective rate of 22.2% in the second quarter of 2019.
Stockholders’ equity was $2,995.1 million at
June 30, 2020, growth of 13.0% from $2,649.5 million at
December 31, 2019. Fully diluted book value per share was
$22.02 at June 30, 2020, growth of 15.5% from $19.06 at
December 31, 2019. Excluding accumulated other comprehensive
income, fully diluted book value per share was $20.40 at
June 30, 2020, growth of 10.7%, from December 31, 2019. Our
trailing twelve-month operating return on average equity (ROE)(13)
was 18.1% as of June 30, 2020.
Year-to-Date P&C Segment Notable Large
Losses |
Year |
|
Quarter |
|
Event |
|
P&C Notable Large Losses and LAE ($
millions) |
|
P&C Loss and LAE Ratio Points* |
|
EPS Impact After Tax |
2020 |
|
Q2 |
|
Weather-related Events |
|
$35.3 |
|
4.2% |
|
$0.24 |
2020 |
|
Q1 |
|
Weather-related Events |
|
$8.1 |
|
0.9% |
|
$0.06 |
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
Q2 |
|
Weather-related Events |
|
$18.4 |
|
2.2% |
|
$0.13 |
2019 |
|
Q1 |
|
Winter Weather |
|
$12.1 |
|
1.6% |
|
$0.08 |
* Loss and LAE ratio points related to P&C net earned
premium in quarter the loss event was recorded.
Additional item -
Homeowners Quota Share - Effective July 1,
2020, we cede 20.0% of net liability and receive a 37.0% ceding
commission on in-force, new and renewal business, under our
homeowners quota share reinsurance agreement.
About National General Holdings Corp.
National General Holdings Corp. (NASDAQ: NGHC), headquartered in
New York City, is a specialty personal lines insurance holding
company. National General traces its roots to 1939, has a financial
strength rating of A- (excellent) from A.M. Best, and provides
personal and commercial automobile, homeowners, umbrella,
recreational vehicle, motorcycle, lender-placed, supplemental
health and other niche insurance products.
IMPORTANT INFORMATION FOR
INVESTORS
Additional Information and Where to Find
It
This communication may be deemed solicitation
material in respect of the proposed acquisition of National General
Holdings Corp. (the “Company”) by The Allstate Corporation. In
connection with the merger, the Company plans to file with the
Securities and Exchange Commission and furnish its stockholders a
proxy statement. Additionally, the Company will file other relevant
materials with the Securities and Exchange Commission in connection
with the proposed transaction.
The materials to be filed by the Company with the
Securities and Exchange Commission may be obtained free of charge
at the Securities and Exchange Commission’s web site at
www.sec.gov. In addition, stockholders also may obtain free copies
of the proxy statement, when available, from the Company by
contacting National General Holdings Corp. Investor Relations at 59
Maiden Lane, 38th Floor New York, New York 10038, telephone number
(212) 380-9462 or InvestorRelations@ngic.com.
INVESTORS AND STOCKHOLDERS OF THE COMPANY ARE URGED
TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN
THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT
DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES TO
THE MERGER.
Participants in the
Solicitation
The Company and its directors, executive officers
and other members of management and employees, under the Securities
and Exchange Commission rules, may be deemed to be participants in
the solicitation of proxies of the Company’s stockholders in
connection with the proposed merger. Investors and security holders
may obtain more detailed information regarding the names,
affiliations and interests of certain of the Company’s executive
officers and directors in the solicitation by reading the Company’s
proxy statement for its 2020 annual meeting of stockholders and the
proxy statement and other relevant materials which may be filed
with the Securities and Exchange Commission in connection with the
merger when and if they become available. Information concerning
the interests of the Company’s participants in the solicitation,
which may, in some cases, be different than those of the Company’s
stockholders generally, will be set forth in the proxy statement
relating to the merger when and if it becomes available. Additional
information regarding the Company’s executive officers and
directors in the solicitation is available by reading the Company’s
proxy statement for its 2020 annual meeting of stockholders.
Forward Looking Statements
This news release contains “forward-looking
statements” that are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are based on the Company’s current
expectations and beliefs concerning future developments and their
potential effects on the Company. Forward-looking statements can
generally be identified by the use of forward-looking terminology,
such as “may,” “will,” “plan,” “expect,” “project,” “intend,”
“estimate,” “anticipate” and “believe” or their variations or
similar terminology. There can be no assurance that actual
developments will be those anticipated by us. Actual results may
differ materially from those expressed or implied in these
statements as a result of significant risks and uncertainties,
including, but not limited to, plans and expectations related to
our proposed merger with The Allstate Corporation (“Allstate”),
including anticipated timing for closing of the merger, the
occurrence of any event, change or other circumstances that could
give rise to the termination of the merger agreement with Allstate,
the inability to complete the proposed merger due to the failure to
obtain stockholder approval for the proposed merger or the failure
to satisfy other conditions to completion of the proposed merger,
the possibility that competing offers will be made, non-receipt of
expected payments from insureds or reinsurers, changes in interest
rates, a downgrade in the financial strength ratings of our
insurance subsidiaries, the potential effect of changes in LIBOR
reporting practices, the effects of pandemics or other widespread
health problems such as the ongoing COVID-19 pandemic on our
business, including our investment portfolio, and the national and
global economy generally, the effect of the performance of
financial markets on our investment portfolio, our ability to
accurately underwrite and price our products and to maintain and
establish accurate loss reserves, estimates of the fair value of
investments, development of claims and the effect on loss reserves,
large loss activity including hurricanes and wildfires, the cost
and availability of reinsurance coverage, the effects of emerging
claim and coverage issues, the effect of unpredictable catastrophic
losses, changes in the demand for our products, our degree of
success in integrating acquired businesses, the effect of general
economic conditions, state and federal legislation, the effects of
tax reform, regulations and regulatory investigations into industry
practices, risks associated with conducting business outside the
United States, developments relating to existing agreements,
disruptions to our business relationships with third party vendors
or agencies, breaches in data security or other disruptions
involving our technology, heightened competition, changes in
pricing environments, and changes in asset valuations. The
forward-looking statements contained in this news release are made
only as of the date of this release. The Company undertakes no
obligation to publicly update any forward-looking statement except
as may be required by law. Additional information about these risks
and uncertainties, as well as others that may cause actual results
to differ materially from those projected, is contained in the
Company’s filings with the Securities and Exchange Commission.
Income Statement - Second
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
1,243,165 |
|
|
$ |
98,436 |
|
|
$ |
1,341,601 |
|
|
|
$ |
1,192,762 |
|
|
$ |
121,146 |
|
|
$ |
1,313,908 |
|
|
Net written premium |
|
957,640 |
|
|
57,268 |
|
|
1,014,908 |
|
|
|
939,178 |
|
|
56,220 |
|
|
995,398 |
|
|
Net earned premium |
|
1,010,782 |
|
|
54,785 |
|
|
1,065,567 |
|
|
|
984,021 |
|
|
46,630 |
|
|
1,030,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
35,530 |
|
|
11,110 |
|
|
46,640 |
|
|
|
43,346 |
|
|
16,846 |
|
|
60,192 |
|
|
Service and fee income |
|
192,023 |
|
|
2,336 |
|
|
180,592 |
|
(A) |
|
166,049 |
|
|
1,516 |
|
|
148,908 |
|
(G) |
Net investment income |
|
30,523 |
|
|
2,012 |
|
|
31,175 |
|
(B) |
|
35,949 |
|
|
2,124 |
|
|
35,131 |
|
(H) |
Net gain (loss) on investments |
|
5,511 |
|
|
(353 |
) |
|
5,158 |
|
|
|
(5,274 |
) |
|
44 |
|
|
(5,230 |
) |
|
Total revenues |
|
$ |
1,274,369 |
|
|
$ |
69,890 |
|
|
$ |
1,329,132 |
|
(C) |
|
$ |
1,224,091 |
|
|
$ |
67,160 |
|
|
$ |
1,269,652 |
|
(I) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
570,439 |
|
|
$ |
30,007 |
|
|
$ |
600,446 |
|
|
|
$ |
680,246 |
|
|
$ |
35,289 |
|
|
$ |
715,535 |
|
|
Acquisition costs and other underwriting expenses |
|
219,278 |
|
|
10,100 |
|
|
229,378 |
|
|
|
185,951 |
|
|
8,175 |
|
|
194,126 |
|
|
General and administrative expenses |
|
257,318 |
|
|
18,858 |
|
|
262,409 |
|
(D) |
|
244,827 |
|
|
21,597 |
|
|
247,767 |
|
(J) |
Interest expense |
|
11,779 |
|
|
1,360 |
|
|
11,779 |
|
(E) |
|
12,925 |
|
|
2,942 |
|
|
12,925 |
|
(K) |
Total expenses |
|
$ |
1,058,814 |
|
|
$ |
60,325 |
|
|
$ |
1,104,012 |
|
(F) |
|
$ |
1,123,949 |
|
|
$ |
68,003 |
|
|
$ |
1,170,353 |
|
(L) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision
(benefit) for income taxes |
|
$ |
215,555 |
|
|
$ |
9,565 |
|
|
$ |
225,120 |
|
|
|
$ |
100,142 |
|
|
$ |
(843 |
) |
|
$ |
99,299 |
|
|
Provision (benefit) for income taxes |
|
48,981 |
|
|
1,526 |
|
|
50,507 |
|
|
|
22,266 |
|
|
(25 |
) |
|
22,241 |
|
|
Net income (loss) before
non-controlling interest and dividends on preferred shares |
|
166,574 |
|
|
8,039 |
|
|
174,613 |
|
|
|
77,876 |
|
|
(818 |
) |
|
77,058 |
|
|
Less: net income (loss) attributable to noncontrolling
interest |
|
— |
|
|
8,039 |
|
|
8,039 |
|
|
|
— |
|
|
(818 |
) |
|
(818 |
) |
|
Net income before dividends on
preferred shares |
|
166,574 |
|
|
— |
|
|
166,574 |
|
|
|
77,876 |
|
|
— |
|
|
77,876 |
|
|
Less: dividends on preferred shares |
|
8,925 |
|
|
— |
|
|
8,925 |
|
|
|
8,925 |
|
|
— |
|
|
8,925 |
|
|
Net income available to common stockholders |
|
$ |
157,649 |
|
|
$ |
— |
|
|
$ |
157,649 |
|
|
|
$ |
68,951 |
|
|
$ |
— |
|
|
$ |
68,951 |
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(13,767), (B) $(1,360), (C)
$(15,127), (D) $(13,767), (E) $(1,360), (F) $(15,127), (G)
$(18,657), (H) $(2,942), (I) $(21,599), (J) $(18,657), (K) $(2,942)
and (L) $(21,599).
Income Statement - Year To Date$
in thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross written premium |
|
$ |
2,627,866 |
|
|
$ |
190,289 |
|
|
$ |
2,818,155 |
|
|
|
$ |
2,596,971 |
|
|
$ |
226,715 |
|
|
$ |
2,823,686 |
|
|
Net written premium |
|
2,111,948 |
|
|
112,563 |
|
|
2,224,511 |
|
|
|
2,054,887 |
|
|
105,175 |
|
|
2,160,062 |
|
|
Net earned premium |
|
2,028,390 |
|
|
112,383 |
|
|
2,140,773 |
|
|
|
1,902,520 |
|
|
92,288 |
|
|
1,994,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
72,121 |
|
|
24,824 |
|
|
96,945 |
|
|
|
94,346 |
|
|
35,380 |
|
|
129,726 |
|
|
Service and fee income |
|
383,180 |
|
|
3,493 |
|
|
360,033 |
|
(A) |
|
346,437 |
|
|
2,886 |
|
|
314,415 |
|
(G) |
Net investment income |
|
60,270 |
|
|
4,195 |
|
|
61,418 |
|
(B) |
|
70,232 |
|
|
4,294 |
|
|
68,576 |
|
(H) |
Net gain (loss) on investments |
|
(557 |
) |
|
(1,146 |
) |
|
(1,703 |
) |
|
|
(4,508 |
) |
|
(700 |
) |
|
(5,208 |
) |
|
Total revenues |
|
$ |
2,543,404 |
|
|
$ |
143,749 |
|
|
$ |
2,657,466 |
|
(C) |
|
$ |
2,409,027 |
|
|
$ |
134,148 |
|
|
$ |
2,502,317 |
|
(I) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment expense |
|
$ |
1,220,070 |
|
|
$ |
72,374 |
|
|
$ |
1,292,444 |
|
|
|
$ |
1,290,030 |
|
|
$ |
77,314 |
|
|
$ |
1,367,344 |
|
|
Acquisition costs and other underwriting expenses |
|
437,023 |
|
|
20,597 |
|
|
457,620 |
|
|
|
389,284 |
|
|
16,760 |
|
|
406,044 |
|
|
General and administrative expenses |
|
518,197 |
|
|
38,421 |
|
|
529,978 |
|
(D) |
|
487,660 |
|
|
43,109 |
|
|
495,861 |
|
(J) |
Interest expense |
|
23,559 |
|
|
3,047 |
|
|
23,559 |
|
(E) |
|
25,924 |
|
|
5,950 |
|
|
25,924 |
|
(K) |
Total expenses |
|
$ |
2,198,849 |
|
|
$ |
134,439 |
|
|
$ |
2,303,601 |
|
(F) |
|
$ |
2,192,898 |
|
|
$ |
143,133 |
|
|
$ |
2,295,173 |
|
(L) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision
(benefit) for income taxes |
|
$ |
344,555 |
|
|
$ |
9,310 |
|
|
$ |
353,865 |
|
|
|
$ |
216,129 |
|
|
$ |
(8,985 |
) |
|
$ |
207,144 |
|
|
Provision (benefit) for income taxes |
|
77,222 |
|
|
1,457 |
|
|
78,679 |
|
|
|
46,495 |
|
|
(1,748 |
) |
|
44,747 |
|
|
Net income (loss) before
non-controlling interest and dividends on preferred shares |
|
267,333 |
|
|
7,853 |
|
|
275,186 |
|
|
|
169,634 |
|
|
(7,237 |
) |
|
162,397 |
|
|
Less: net income (loss) attributable to noncontrolling
interest |
|
— |
|
|
7,853 |
|
|
7,853 |
|
|
|
— |
|
|
(7,237 |
) |
|
(7,237 |
) |
|
Net income before dividends on
preferred shares |
|
267,333 |
|
|
— |
|
|
267,333 |
|
|
|
169,634 |
|
|
— |
|
|
169,634 |
|
|
Less: dividends on preferred shares |
|
16,800 |
|
|
— |
|
|
16,800 |
|
|
|
16,800 |
|
|
— |
|
|
16,800 |
|
|
Net income available to common stockholders |
|
$ |
250,533 |
|
|
$ |
— |
|
|
$ |
250,533 |
|
|
|
$ |
152,834 |
|
|
$ |
— |
|
|
$ |
152,834 |
|
|
NOTES: Consolidated column
includes eliminations as follows: (A) $(26,640), (B) $(3,047), (C)
$(29,687), (D) $(26,640), (E) $(3,047), (F) $(29,687) (G)
$(34,908), (H) $(5,950), (I) $(40,858), (J) $(34,908), (K) $(5,950)
and (L) $(40,858).
Earnings and Per Share Data$ in
thousands, except shares and per share data(Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income available to common stockholders |
$ |
157,649 |
|
|
$ |
68,951 |
|
|
$ |
250,533 |
|
|
$ |
152,834 |
|
Basic net income per common share |
$ |
1.39 |
|
|
$ |
0.61 |
|
|
$ |
2.21 |
|
|
$ |
1.35 |
|
Diluted net income per common share |
$ |
1.37 |
|
|
$ |
0.60 |
|
|
$ |
2.17 |
|
|
$ |
1.33 |
|
|
|
|
|
|
|
|
|
Operating earnings
attributable to NGHC (non-GAAP)(1) |
$ |
157,643 |
|
|
$ |
78,140 |
|
|
$ |
263,402 |
|
|
$ |
167,856 |
|
Basic operating earnings per common share (non-GAAP)(1) |
$ |
1.39 |
|
|
$ |
0.69 |
|
|
$ |
2.32 |
|
|
$ |
1.48 |
|
Diluted operating earnings per common share (non-GAAP)(1) |
$ |
1.36 |
|
|
$ |
0.67 |
|
|
$ |
2.27 |
|
|
$ |
1.45 |
|
|
|
|
|
|
|
|
|
Dividends declared per common
share |
$ |
0.05 |
|
|
$ |
0.04 |
|
|
$ |
0.10 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
Weighted average number of
basic shares outstanding |
113,542,628 |
|
|
113,178,552 |
|
|
113,549,952 |
|
|
113,097,084 |
|
Weighted average number of
diluted shares outstanding |
115,720,069 |
|
|
116,050,267 |
|
|
115,898,110 |
|
|
116,062,721 |
|
Shares outstanding, end of
period |
113,397,545 |
|
|
113,215,632 |
|
|
|
|
|
Fully diluted shares
outstanding, end of period |
115,574,986 |
|
|
116,087,347 |
|
|
|
|
|
Book value per share |
$ |
22.44 |
|
|
$ |
17.92 |
|
|
|
|
|
Fully diluted book value per
share |
$ |
22.02 |
|
|
$ |
17.48 |
|
|
|
|
|
Reconciliation of Net Income to Operating
Earnings (Non-GAAP)(1)(13)$ in thousands, except per share
data(Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net income available to common stockholders |
$ |
157,649 |
|
|
$ |
68,951 |
|
|
$ |
250,533 |
|
|
$ |
152,834 |
|
Add (subtract): |
|
|
|
|
|
|
|
Equity in (earnings) losses of equity method investments |
160 |
|
|
(731 |
) |
|
3,888 |
|
|
203 |
|
Net (gain) loss on investments |
(5,511 |
) |
|
5,274 |
|
|
557 |
|
|
4,508 |
|
Non-cash amortization of intangible assets |
5,343 |
|
|
7,089 |
|
|
11,845 |
|
|
14,305 |
|
Income tax expense (benefit) |
2 |
|
|
(2,443 |
) |
|
(3,421 |
) |
|
(3,994 |
) |
Operating earnings attributable to NGHC
(non-GAAP)(1) |
$ |
157,643 |
|
|
$ |
78,140 |
|
|
$ |
263,402 |
|
|
$ |
167,856 |
|
|
|
|
|
|
|
|
|
Operating earnings per
common share (non-GAAP)(1): |
|
|
|
|
|
|
|
Basic operating earnings per common share
(non-GAAP)(1) |
$ |
1.39 |
|
|
$ |
0.69 |
|
|
$ |
2.32 |
|
|
$ |
1.48 |
|
Diluted operating earnings per common share
(non-GAAP)(1) |
$ |
1.36 |
|
|
$ |
0.67 |
|
|
$ |
2.27 |
|
|
$ |
1.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet$ in
thousands(Unaudited)
|
|
June 30, 2020 |
|
|
December 31, 2019 |
|
ASSETS |
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
|
NGHC |
|
Reciprocal Exchanges |
|
Consolidated |
|
Total investments (2) |
|
$ |
4,853,180 |
|
|
$ |
340,103 |
|
|
$ |
5,085,750 |
|
(A) |
|
$ |
4,632,960 |
|
|
$ |
329,494 |
|
|
$ |
4,854,998 |
|
(H) |
Cash and cash equivalents,
including restricted cash |
|
334,771 |
|
|
237 |
|
|
335,008 |
|
|
|
163,480 |
|
|
983 |
|
|
164,463 |
|
|
Premiums and other
receivables, net |
|
1,438,085 |
|
|
49,649 |
|
|
1,487,734 |
|
|
|
1,373,089 |
|
|
55,859 |
|
|
1,428,948 |
|
|
Reinsurance balances |
|
1,614,713 |
|
|
196,005 |
|
|
1,810,718 |
|
|
|
1,745,036 |
|
|
225,019 |
|
|
1,970,055 |
|
|
Intangible assets, net |
|
347,686 |
|
|
3,135 |
|
|
350,821 |
|
|
|
362,598 |
|
|
3,225 |
|
|
365,823 |
|
|
Goodwill |
|
179,328 |
|
|
— |
|
|
179,328 |
|
|
|
179,328 |
|
|
— |
|
|
179,328 |
|
|
Other (3) |
|
776,916 |
|
|
29,364 |
|
|
768,484 |
|
(B) |
|
798,675 |
|
|
29,070 |
|
|
792,919 |
|
(I) |
Total assets |
|
$ |
9,544,679 |
|
|
$ |
618,493 |
|
|
$ |
10,017,843 |
|
(C) |
|
$ |
9,255,166 |
|
|
$ |
643,650 |
|
|
$ |
9,756,534 |
|
(J) |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unpaid loss and loss
adjustment expense reserves |
|
$ |
2,626,314 |
|
|
$ |
200,270 |
|
|
$ |
2,826,584 |
|
|
|
$ |
2,680,628 |
|
|
$ |
205,786 |
|
|
$ |
2,886,414 |
|
|
Unearned premiums and other
revenue |
|
2,102,044 |
|
|
226,403 |
|
|
2,328,447 |
|
|
|
2,059,688 |
|
|
252,553 |
|
|
2,312,241 |
|
|
Reinsurance payable |
|
437,989 |
|
|
23,907 |
|
|
461,896 |
|
|
|
527,155 |
|
|
35,689 |
|
|
562,844 |
|
|
Accounts payable and accrued
expenses |
|
320,176 |
|
|
45,549 |
|
|
327,929 |
|
(D) |
|
306,869 |
|
|
43,323 |
|
|
315,366 |
|
(K) |
Debt |
|
682,266 |
|
|
107,533 |
|
|
682,266 |
|
(E) |
|
686,006 |
|
|
107,456 |
|
|
686,006 |
|
(L) |
Other |
|
380,766 |
|
|
30,279 |
|
|
411,045 |
|
|
|
345,366 |
|
|
30,803 |
|
|
376,169 |
|
|
Total liabilities |
|
$ |
6,549,555 |
|
|
$ |
633,941 |
|
|
$ |
7,038,167 |
|
(F) |
|
$ |
6,605,712 |
|
|
$ |
675,610 |
|
|
$ |
7,139,040 |
|
(M) |
Stockholders’
equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock (4) |
|
$ |
450,000 |
|
|
$ |
— |
|
|
$ |
450,000 |
|
|
|
$ |
450,000 |
|
|
$ |
— |
|
|
$ |
450,000 |
|
|
Common stock (5) |
|
1,139 |
|
|
— |
|
|
1,139 |
|
|
|
1,134 |
|
|
— |
|
|
1,134 |
|
|
Treasury stock, at cost
(6) |
|
(8,482 |
) |
|
— |
|
|
(8,482 |
) |
|
|
— |
|
|
— |
|
|
— |
|
|
Additional paid-in
capital |
|
1,069,152 |
|
|
— |
|
|
1,069,152 |
|
|
|
1,065,634 |
|
|
— |
|
|
1,065,634 |
|
|
Accumulated other
comprehensive income |
|
186,864 |
|
|
— |
|
|
186,864 |
|
|
|
74,548 |
|
|
— |
|
|
74,548 |
|
|
Retained earnings |
|
1,296,451 |
|
|
— |
|
|
1,296,451 |
|
|
|
1,058,138 |
|
|
— |
|
|
1,058,138 |
|
|
Total National General Holdings Corp. stockholders’
equity |
|
2,995,124 |
|
|
— |
|
|
2,995,124 |
|
|
|
2,649,454 |
|
|
— |
|
|
2,649,454 |
|
|
Noncontrolling interest |
|
— |
|
|
(15,448 |
) |
|
(15,448 |
) |
|
|
— |
|
|
(31,960 |
) |
|
(31,960 |
) |
|
Total stockholders’ equity |
|
$ |
2,995,124 |
|
|
$ |
(15,448 |
) |
|
$ |
2,979,676 |
|
|
|
$ |
2,649,454 |
|
|
$ |
(31,960 |
) |
|
$ |
2,617,494 |
|
|
Total liabilities and stockholders’ equity |
|
$ |
9,544,679 |
|
|
$ |
618,493 |
|
|
$ |
10,017,843 |
|
(G) |
|
$ |
9,255,166 |
|
|
$ |
643,650 |
|
|
$ |
9,756,534 |
|
(N) |
NOTES: Consolidated column
includes eliminations as follows: (A) $(107,533), (B) $(37,796),
(C) $(145,329), (D) $(37,796), (E) $(107,533), (F) $(145,329), (G)
$(145,329) (H) $(107,456), (I) $(34,826), (J) $(142,282), (K)
$(34,826), (L) $(107,456), (M) $(142,282) and (N) $(142,282).
Segment Information - Second
Quarter$ in thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Gross written premium |
|
$ |
1,053,508 |
|
|
$ |
189,657 |
|
|
$ |
1,243,165 |
|
|
|
$ |
98,436 |
|
|
|
$ |
1,021,090 |
|
|
$ |
171,672 |
|
|
$ |
1,192,762 |
|
|
|
$ |
121,146 |
|
Net written premium |
|
789,428 |
|
|
168,212 |
|
|
957,640 |
|
|
|
57,268 |
|
|
|
786,471 |
|
|
152,707 |
|
|
939,178 |
|
|
56,220 |
|
Net earned premium |
|
841,985 |
|
|
168,797 |
|
|
1,010,782 |
|
|
|
54,785 |
|
|
|
817,972 |
|
|
166,049 |
|
|
984,021 |
|
|
|
46,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
35,059 |
|
|
471 |
|
|
35,530 |
|
|
|
11,110 |
|
|
|
39,418 |
|
|
3,928 |
|
|
43,346 |
|
|
|
16,846 |
|
Service and fee income |
|
111,955 |
|
|
80,068 |
|
|
192,023 |
|
|
|
2,336 |
|
|
|
113,112 |
|
|
52,937 |
|
|
166,049 |
|
|
|
1,516 |
|
Total underwriting revenues |
|
$ |
988,999 |
|
|
$ |
249,336 |
|
|
$ |
1,238,335 |
|
|
|
$ |
68,231 |
|
|
|
$ |
970,502 |
|
|
$ |
222,914 |
|
|
$ |
1,193,416 |
|
|
|
$ |
64,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense (A) |
|
503,784 |
|
|
66,655 |
|
|
570,439 |
|
|
|
30,007 |
|
|
|
593,922 |
|
|
86,324 |
|
|
680,246 |
|
|
|
35,289 |
|
Acquisition costs and other
underwriting expenses |
|
152,384 |
|
|
66,894 |
|
|
219,278 |
|
|
|
10,100 |
|
|
|
137,950 |
|
|
48,001 |
|
|
185,951 |
|
|
|
8,175 |
|
General and administrative
expenses |
|
199,327 |
|
|
57,991 |
|
|
257,318 |
|
|
|
18,858 |
|
|
|
183,535 |
|
|
61,292 |
|
|
244,827 |
|
|
|
21,597 |
|
Total underwriting expenses |
|
$ |
855,495 |
|
|
$ |
191,540 |
|
|
$ |
1,047,035 |
|
|
|
$ |
58,965 |
|
|
|
$ |
915,407 |
|
|
$ |
195,617 |
|
|
$ |
1,111,024 |
|
|
|
$ |
65,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
133,504 |
|
|
57,796 |
|
|
191,300 |
|
|
|
9,266 |
|
|
|
55,095 |
|
|
27,297 |
|
|
82,392 |
|
|
|
(69 |
) |
Non-cash amortization of
intangible assets |
|
4,041 |
|
|
1,302 |
|
|
5,343 |
|
|
|
30 |
|
|
|
5,412 |
|
|
1,677 |
|
|
7,089 |
|
|
|
12 |
|
Underwriting income (loss) before amortization and impairment |
|
$ |
137,545 |
|
|
$ |
59,098 |
|
|
$ |
196,643 |
|
|
|
$ |
9,296 |
|
|
|
$ |
60,507 |
|
|
$ |
28,974 |
|
|
$ |
89,481 |
|
|
|
$ |
(57 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (7) |
|
59.8 |
% |
|
39.5 |
% |
|
56.4 |
% |
|
|
54.8 |
% |
|
|
72.6 |
% |
|
52.0 |
% |
|
69.1 |
% |
|
|
75.7 |
% |
Operating expense ratio
(Non-GAAP) (8) |
|
24.3 |
% |
|
26.3 |
% |
|
24.6 |
% |
|
|
28.3 |
% |
|
|
20.7 |
% |
|
31.6 |
% |
|
22.5 |
% |
|
|
24.5 |
% |
Combined ratio (Non-GAAP) (9) |
|
84.1 |
% |
|
65.8 |
% |
|
81.0 |
% |
|
|
83.1 |
% |
|
|
93.3 |
% |
|
83.6 |
% |
|
91.6 |
% |
|
|
100.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before
amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (7) |
|
59.8 |
% |
|
39.5 |
% |
|
56.4 |
% |
|
|
54.8 |
% |
|
|
72.6 |
% |
|
52.0 |
% |
|
69.1 |
% |
|
|
75.7 |
% |
Operating expense ratio
(Non-GAAP) (10) |
|
23.8 |
% |
|
25.5 |
% |
|
24.1 |
% |
|
|
28.3 |
% |
|
|
20.0 |
% |
|
30.6 |
% |
|
21.8 |
% |
|
|
24.4 |
% |
Combined ratio before amortization and impairment (Non-GAAP)
(11) |
|
83.6 |
% |
|
65.0 |
% |
|
80.5 |
% |
|
|
83.1 |
% |
|
|
92.6 |
% |
|
82.6 |
% |
|
90.9 |
% |
|
|
100.1 |
% |
(A) Loss and loss adjustment expenses for the
three months ended June 30, 2020 included $8,584 of unfavorable
loss development on prior accident year loss and loss adjustment
expense reserves in the P&C segment, and $11,430 of favorable
loss development in the A&H segment, versus $10,396 of
unfavorable loss development in the P&C segment, and $8,135 of
favorable loss development in the A&H segment for the three
months ended June 30, 2019.
Segment Information - Year To
Date$ in thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Gross written premium |
|
$ |
2,251,184 |
|
|
$ |
376,682 |
|
|
$ |
2,627,866 |
|
|
|
$ |
190,289 |
|
|
|
$ |
2,166,755 |
|
|
$ |
430,216 |
|
|
$ |
2,596,971 |
|
|
|
$ |
226,715 |
|
Net written premium |
|
1,775,520 |
|
|
336,428 |
|
|
2,111,948 |
|
|
|
112,563 |
|
|
|
1,701,999 |
|
|
352,888 |
|
|
2,054,887 |
|
|
105,175 |
|
Net earned premium |
|
1,694,887 |
|
|
333,503 |
|
|
2,028,390 |
|
|
|
112,383 |
|
|
|
1,574,891 |
|
|
327,629 |
|
|
1,902,520 |
|
|
|
92,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ceding commission income |
|
71,090 |
|
|
1,031 |
|
|
72,121 |
|
|
|
24,824 |
|
|
|
87,827 |
|
|
6,519 |
|
|
94,346 |
|
|
|
35,380 |
|
Service and fee income |
|
222,588 |
|
|
160,592 |
|
|
383,180 |
|
|
|
3,493 |
|
|
|
232,488 |
|
|
113,949 |
|
|
346,437 |
|
|
|
2,886 |
|
Total underwriting revenues |
|
$ |
1,988,565 |
|
|
$ |
495,126 |
|
|
$ |
2,483,691 |
|
|
|
$ |
140,700 |
|
|
|
$ |
1,895,206 |
|
|
$ |
448,097 |
|
|
$ |
2,343,303 |
|
|
|
$ |
130,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense (A) |
|
1,071,814 |
|
|
148,256 |
|
|
1,220,070 |
|
|
|
72,374 |
|
|
|
1,118,957 |
|
|
171,073 |
|
|
1,290,030 |
|
|
|
77,314 |
|
Acquisition costs and other
underwriting expenses |
|
301,658 |
|
|
135,365 |
|
|
437,023 |
|
|
|
20,597 |
|
|
|
283,435 |
|
|
105,849 |
|
|
389,284 |
|
|
|
16,760 |
|
General and administrative
expenses |
|
400,454 |
|
|
117,743 |
|
|
518,197 |
|
|
|
38,421 |
|
|
|
367,730 |
|
|
119,930 |
|
|
487,660 |
|
|
|
43,109 |
|
Total underwriting expenses |
|
$ |
1,773,926 |
|
|
$ |
401,364 |
|
|
$ |
2,175,290 |
|
|
|
$ |
131,392 |
|
|
|
$ |
1,770,122 |
|
|
$ |
396,852 |
|
|
$ |
2,166,974 |
|
|
|
$ |
137,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting income
(loss) |
|
214,639 |
|
|
93,762 |
|
|
308,401 |
|
|
|
9,308 |
|
|
|
125,084 |
|
|
51,245 |
|
|
176,329 |
|
|
|
(6,629 |
) |
Non-cash amortization of
intangible assets |
|
9,228 |
|
|
2,617 |
|
|
11,845 |
|
|
|
60 |
|
|
|
10,897 |
|
|
3,408 |
|
|
14,305 |
|
|
|
23 |
|
Underwriting income (loss) before amortization and impairment |
|
$ |
223,867 |
|
|
$ |
96,379 |
|
|
$ |
320,246 |
|
|
|
$ |
9,368 |
|
|
|
$ |
135,981 |
|
|
$ |
54,653 |
|
|
$ |
190,634 |
|
|
|
$ |
(6,606 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (7) |
|
63.2 |
% |
|
44.5 |
% |
|
60.1 |
% |
|
|
64.4 |
% |
|
|
71.0 |
% |
|
52.2 |
% |
|
67.8 |
% |
|
|
83.8 |
% |
Operating expense ratio
(Non-GAAP) (8) |
|
24.1 |
% |
|
27.4 |
% |
|
24.6 |
% |
|
|
27.3 |
% |
|
|
21.0 |
% |
|
32.1 |
% |
|
22.9 |
% |
|
|
23.4 |
% |
Combined ratio (Non-GAAP) (9) |
|
87.3 |
% |
|
71.9 |
% |
|
84.7 |
% |
|
|
91.7 |
% |
|
|
92.0 |
% |
|
84.3 |
% |
|
90.7 |
% |
|
|
107.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underwriting ratios (before
amortization and impairment) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss adjustment
expense ratio (7) |
|
63.2 |
% |
|
44.5 |
% |
|
60.1 |
% |
|
|
64.4 |
% |
|
|
71.0 |
% |
|
52.2 |
% |
|
67.8 |
% |
|
|
83.8 |
% |
Operating expense ratio
(Non-GAAP) (10) |
|
23.6 |
% |
|
26.6 |
% |
|
24.1 |
% |
|
|
27.3 |
% |
|
|
20.3 |
% |
|
31.1 |
% |
|
22.2 |
% |
|
|
23.4 |
% |
Combined ratio before amortization and impairment (Non-GAAP)
(11) |
|
86.8 |
% |
|
71.1 |
% |
|
84.2 |
% |
|
|
91.7 |
% |
|
|
91.3 |
% |
|
83.3 |
% |
|
90.0 |
% |
|
|
107.2 |
% |
(A) Loss and loss adjustment expenses for the
six months ended June 30, 2020 included $13,055 of unfavorable loss
development on prior accident year loss and loss adjustment expense
reserves in the P&C segment, and $16,238 of favorable loss
development in the A&H segment, versus $4,882 of unfavorable
loss development in the P&C segment, and $18,987 of favorable
loss development in the A&H segment for the six months ended
June 30, 2019.
Reconciliation of Operating Expense Ratio
(Non-GAAP)(8,10,12)$ in thousands(Unaudited)
|
|
Three Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Total underwriting expenses |
|
$ |
855,495 |
|
|
$ |
191,540 |
|
|
$ |
1,047,035 |
|
|
|
$ |
58,965 |
|
|
|
$ |
915,407 |
|
|
$ |
195,617 |
|
|
$ |
1,111,024 |
|
|
|
$ |
65,061 |
|
Less: Loss and loss adjustment
expense |
|
503,784 |
|
|
66,655 |
|
|
570,439 |
|
|
|
30,007 |
|
|
|
593,922 |
|
|
86,324 |
|
|
680,246 |
|
|
|
35,289 |
|
Less: Ceding commission
income |
|
35,059 |
|
|
471 |
|
|
35,530 |
|
|
|
11,110 |
|
|
|
39,418 |
|
|
3,928 |
|
|
43,346 |
|
|
|
16,846 |
|
Less: Service and fee
income |
|
111,955 |
|
|
80,068 |
|
|
192,023 |
|
|
|
2,336 |
|
|
|
113,112 |
|
|
52,937 |
|
|
166,049 |
|
|
|
1,516 |
|
Operating expense (Non-GAAP) (8) |
|
204,697 |
|
|
44,346 |
|
|
249,043 |
|
|
|
15,512 |
|
|
|
168,955 |
|
|
52,428 |
|
|
221,383 |
|
|
|
11,410 |
|
Net earned premium |
|
$ |
841,985 |
|
|
$ |
168,797 |
|
|
$ |
1,010,782 |
|
|
|
$ |
54,785 |
|
|
|
$ |
817,972 |
|
|
$ |
166,049 |
|
|
$ |
984,021 |
|
|
|
$ |
46,630 |
|
Operating expense ratio (Non-GAAP) (8) |
|
24.3 |
% |
|
26.3 |
% |
|
24.6 |
% |
|
|
28.3 |
% |
|
|
20.7 |
% |
|
31.6 |
% |
|
22.5 |
% |
|
|
24.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
855,495 |
|
|
$ |
191,540 |
|
|
$ |
1,047,035 |
|
|
|
$ |
58,965 |
|
|
|
$ |
915,407 |
|
|
$ |
195,617 |
|
|
$ |
1,111,024 |
|
|
|
$ |
65,061 |
|
Less: Loss and loss adjustment
expense |
|
503,784 |
|
|
66,655 |
|
|
570,439 |
|
|
|
30,007 |
|
|
|
593,922 |
|
|
86,324 |
|
|
680,246 |
|
|
|
35,289 |
|
Less: Ceding commission
income |
|
35,059 |
|
|
471 |
|
|
35,530 |
|
|
|
11,110 |
|
|
|
39,418 |
|
|
3,928 |
|
|
43,346 |
|
|
|
16,846 |
|
Less: Service and fee
income |
|
111,955 |
|
|
80,068 |
|
|
192,023 |
|
|
|
2,336 |
|
|
|
113,112 |
|
|
52,937 |
|
|
166,049 |
|
|
|
1,516 |
|
Less: Non-cash amortization of
intangible assets |
|
4,041 |
|
|
1,302 |
|
|
5,343 |
|
|
|
30 |
|
|
|
5,412 |
|
|
1,677 |
|
|
7,089 |
|
|
|
12 |
|
Operating expense before amortization and impairment (Non-GAAP)
(10) |
|
200,656 |
|
|
43,044 |
|
|
243,700 |
|
|
|
15,482 |
|
|
|
163,543 |
|
|
50,751 |
|
|
214,294 |
|
|
|
11,398 |
|
Net earned premium |
|
$ |
841,985 |
|
|
$ |
168,797 |
|
|
$ |
1,010,782 |
|
|
|
$ |
54,785 |
|
|
|
$ |
817,972 |
|
|
$ |
166,049 |
|
|
$ |
984,021 |
|
|
|
$ |
46,630 |
|
Operating expense ratio before amortization and impairment
(Non-GAAP) (10) |
|
23.8 |
% |
|
25.5 |
% |
|
24.1 |
% |
|
|
28.3 |
% |
|
|
20.0 |
% |
|
30.6 |
% |
|
21.8 |
% |
|
|
24.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Operating Expense Ratio
(Non-GAAP)(8,10,12)$ in thousands(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2020 |
|
|
2019 |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
|
|
P&C |
|
A&H |
|
NGHC |
|
|
Reciprocal Exchanges |
Total underwriting expenses |
|
$ |
1,773,926 |
|
|
$ |
401,364 |
|
|
$ |
2,175,290 |
|
|
|
$ |
131,392 |
|
|
|
$ |
1,770,122 |
|
|
$ |
396,852 |
|
|
$ |
2,166,974 |
|
|
|
$ |
137,183 |
|
Less: Loss and loss adjustment
expense |
|
1,071,814 |
|
|
148,256 |
|
|
1,220,070 |
|
|
|
72,374 |
|
|
|
1,118,957 |
|
|
171,073 |
|
|
1,290,030 |
|
|
|
77,314 |
|
Less: Ceding commission
income |
|
71,090 |
|
|
1,031 |
|
|
72,121 |
|
|
|
24,824 |
|
|
|
87,827 |
|
|
6,519 |
|
|
94,346 |
|
|
|
35,380 |
|
Less: Service and fee
income |
|
222,588 |
|
|
160,592 |
|
|
383,180 |
|
|
|
3,493 |
|
|
|
232,488 |
|
|
113,949 |
|
|
346,437 |
|
|
|
2,886 |
|
Operating expense (Non-GAAP) (8) |
|
408,434 |
|
|
91,485 |
|
|
499,919 |
|
|
|
30,701 |
|
|
|
330,850 |
|
|
105,311 |
|
|
436,161 |
|
|
|
21,603 |
|
Net earned premium |
|
$ |
1,694,887 |
|
|
$ |
333,503 |
|
|
$ |
2,028,390 |
|
|
|
$ |
112,383 |
|
|
|
$ |
1,574,891 |
|
|
$ |
327,629 |
|
|
$ |
1,902,520 |
|
|
|
$ |
92,288 |
|
Operating expense ratio (Non-GAAP) (8) |
|
24.1 |
% |
|
27.4 |
% |
|
24.6 |
% |
|
|
27.3 |
% |
|
|
21.0 |
% |
|
32.1 |
% |
|
22.9 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total underwriting
expenses |
|
$ |
1,773,926 |
|
|
$ |
401,364 |
|
|
$ |
2,175,290 |
|
|
|
$ |
131,392 |
|
|
|
$ |
1,770,122 |
|
|
$ |
396,852 |
|
|
$ |
2,166,974 |
|
|
|
$ |
137,183 |
|
Less: Loss and loss adjustment
expense |
|
1,071,814 |
|
|
148,256 |
|
|
1,220,070 |
|
|
|
72,374 |
|
|
|
1,118,957 |
|
|
171,073 |
|
|
1,290,030 |
|
|
|
77,314 |
|
Less: Ceding commission
income |
|
71,090 |
|
|
1,031 |
|
|
72,121 |
|
|
|
24,824 |
|
|
|
87,827 |
|
|
6,519 |
|
|
94,346 |
|
|
|
35,380 |
|
Less: Service and fee
income |
|
222,588 |
|
|
160,592 |
|
|
383,180 |
|
|
|
3,493 |
|
|
|
232,488 |
|
|
113,949 |
|
|
346,437 |
|
|
|
2,886 |
|
Less: Non-cash amortization of
intangible assets |
|
9,228 |
|
|
2,617 |
|
|
11,845 |
|
|
|
60 |
|
|
|
10,897 |
|
|
3,408 |
|
|
14,305 |
|
|
|
23 |
|
Operating expense before amortization and impairment (Non-GAAP)
(10) |
|
399,206 |
|
|
88,868 |
|
|
488,074 |
|
|
|
30,641 |
|
|
|
319,953 |
|
|
101,903 |
|
|
421,856 |
|
|
|
21,580 |
|
Net earned premium |
|
$ |
1,694,887 |
|
|
$ |
333,503 |
|
|
$ |
2,028,390 |
|
|
|
$ |
112,383 |
|
|
|
$ |
1,574,891 |
|
|
$ |
327,629 |
|
|
$ |
1,902,520 |
|
|
|
$ |
92,288 |
|
Operating expense ratio before amortization and impairment
(Non-GAAP) (10) |
|
23.6 |
% |
|
26.6 |
% |
|
24.1 |
% |
|
|
27.3 |
% |
|
|
20.3 |
% |
|
31.1 |
% |
|
22.2 |
% |
|
|
23.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums by Product Line$ in
thousands(Unaudited)
|
Three Months Ended June 30, |
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
612,927 |
|
|
$ |
611,312 |
|
|
0.3 |
% |
|
|
$ |
533,242 |
|
|
$ |
511,952 |
|
|
4.2 |
% |
|
|
$ |
561,548 |
|
|
$ |
542,834 |
|
|
3.4 |
% |
Homeowners |
205,211 |
|
|
190,037 |
|
|
8.0 |
% |
|
|
84,257 |
|
|
108,404 |
|
|
(22.3 |
)% |
|
|
99,368 |
|
|
102,008 |
|
|
(2.6 |
)% |
RV/Packaged |
57,801 |
|
|
61,314 |
|
|
(5.7 |
)% |
|
|
55,882 |
|
|
58,167 |
|
|
(3.9 |
)% |
|
|
46,956 |
|
|
49,411 |
|
|
(5.0 |
)% |
Small Business Auto |
60,717 |
|
|
83,829 |
|
|
(27.6 |
)% |
|
|
46,429 |
|
|
65,420 |
|
|
(29.0 |
)% |
|
|
53,733 |
|
|
60,059 |
|
|
(10.5 |
)% |
Lender-placed insurance |
103,922 |
|
|
58,859 |
|
|
76.6 |
% |
|
|
64,674 |
|
|
37,214 |
|
|
73.8 |
% |
|
|
71,102 |
|
|
60,278 |
|
|
18.0 |
% |
Other |
12,930 |
|
|
15,739 |
|
|
(17.8 |
)% |
|
|
4,944 |
|
|
5,314 |
|
|
(7.0 |
)% |
|
|
9,278 |
|
|
3,382 |
|
|
174.3 |
% |
Total Premium |
$ |
1,053,508 |
|
|
$ |
1,021,090 |
|
|
3.2 |
% |
|
|
$ |
789,428 |
|
|
$ |
786,471 |
|
|
0.4 |
% |
|
|
$ |
841,985 |
|
|
$ |
817,972 |
|
|
2.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group |
89,467 |
|
|
75,036 |
|
|
19.2 |
% |
|
|
69,217 |
|
|
57,960 |
|
|
19.4 |
% |
|
|
69,232 |
|
|
57,949 |
|
|
19.5 |
% |
Individual |
100,190 |
|
|
82,799 |
|
|
21.0 |
% |
|
|
98,995 |
|
|
82,652 |
|
|
19.8 |
% |
|
|
99,565 |
|
|
83,916 |
|
|
18.6 |
% |
Total Premium Domestic |
$ |
189,657 |
|
|
$ |
157,835 |
|
|
20.2 |
% |
|
|
$ |
168,212 |
|
|
$ |
140,612 |
|
|
19.6 |
% |
|
|
$ |
168,797 |
|
|
$ |
141,865 |
|
|
19.0 |
% |
International |
— |
|
|
13,837 |
|
|
(100.0 |
)% |
|
|
— |
|
|
12,095 |
|
|
(100.0 |
)% |
|
|
— |
|
|
24,184 |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
1,243,165 |
|
|
$ |
1,192,762 |
|
|
4.2 |
% |
|
|
$ |
957,640 |
|
|
$ |
939,178 |
|
|
2.0 |
% |
|
|
$ |
1,010,782 |
|
|
$ |
984,021 |
|
|
2.7 |
% |
Total National General
(A) |
$ |
1,243,165 |
|
|
$ |
1,178,925 |
|
|
5.4 |
% |
|
|
$ |
957,640 |
|
|
$ |
927,083 |
|
|
3.3 |
% |
|
|
$ |
1,010,782 |
|
|
$ |
959,837 |
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
37,382 |
|
|
$ |
43,984 |
|
|
(15.0 |
)% |
|
|
$ |
34,281 |
|
|
$ |
18,661 |
|
|
83.7 |
% |
|
|
$ |
31,714 |
|
|
$ |
16,093 |
|
|
97.1 |
% |
Homeowners |
60,160 |
|
|
76,140 |
|
|
(21.0 |
)% |
|
|
22,667 |
|
|
37,211 |
|
|
(39.1 |
)% |
|
|
22,741 |
|
|
30,225 |
|
|
(24.8 |
)% |
Other |
894 |
|
|
1,022 |
|
|
(12.5 |
)% |
|
|
320 |
|
|
348 |
|
|
(8.0 |
)% |
|
|
330 |
|
|
312 |
|
|
5.8 |
% |
Total Premium |
$ |
98,436 |
|
|
$ |
121,146 |
|
|
(18.7 |
)% |
|
|
$ |
57,268 |
|
|
$ |
56,220 |
|
|
1.9 |
% |
|
|
$ |
54,785 |
|
|
$ |
46,630 |
|
|
17.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total |
$ |
1,341,601 |
|
|
$ |
1,313,908 |
|
|
2.1 |
% |
|
|
$ |
1,014,908 |
|
|
$ |
995,398 |
|
|
2.0 |
% |
|
|
$ |
1,065,567 |
|
|
$ |
1,030,651 |
|
|
3.4 |
% |
(A) Excludes A&H international product line which was sold
in the fourth quarter of 2019.
Premiums by Product Line$ in
thousands(Unaudited)
|
Six Months Ended June 30, |
|
Gross Written Premium |
|
|
Net Written Premium |
|
|
Net Earned Premium |
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
1,407,424 |
|
|
$ |
1,377,993 |
|
|
2.1 |
% |
|
|
$ |
1,235,549 |
|
|
$ |
1,170,872 |
|
|
5.5 |
% |
|
|
$ |
1,141,050 |
|
|
$ |
1,053,388 |
|
|
8.3 |
% |
Homeowners |
370,464 |
|
|
342,079 |
|
|
8.3 |
% |
|
|
172,800 |
|
|
193,649 |
|
|
(10.8 |
)% |
|
|
190,851 |
|
|
186,066 |
|
|
2.6 |
% |
RV/Packaged |
110,929 |
|
|
113,165 |
|
|
(2.0 |
)% |
|
|
107,860 |
|
|
109,764 |
|
|
(1.7 |
)% |
|
|
96,248 |
|
|
99,716 |
|
|
(3.5 |
)% |
Small Business Auto |
133,469 |
|
|
169,707 |
|
|
(21.4 |
)% |
|
|
105,028 |
|
|
139,606 |
|
|
(24.8 |
)% |
|
|
113,158 |
|
|
127,692 |
|
|
(11.4 |
)% |
Lender-placed insurance |
199,366 |
|
|
134,797 |
|
|
47.9 |
% |
|
|
142,143 |
|
|
79,284 |
|
|
79.3 |
% |
|
|
140,769 |
|
|
101,996 |
|
|
38.0 |
% |
Other |
29,532 |
|
|
29,014 |
|
|
1.8 |
% |
|
|
12,140 |
|
|
8,824 |
|
|
37.6 |
% |
|
|
12,811 |
|
|
6,033 |
|
|
112.3 |
% |
Total Premium |
$ |
2,251,184 |
|
|
$ |
2,166,755 |
|
|
3.9 |
% |
|
|
$ |
1,775,520 |
|
|
$ |
1,701,999 |
|
|
4.3 |
% |
|
|
$ |
1,694,887 |
|
|
$ |
1,574,891 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group |
177,005 |
|
|
139,974 |
|
|
26.5 |
% |
|
|
138,688 |
|
|
111,910 |
|
|
23.9 |
% |
|
|
138,702 |
|
|
111,912 |
|
|
23.9 |
% |
Individual |
199,677 |
|
|
166,991 |
|
|
19.6 |
% |
|
|
197,740 |
|
|
166,775 |
|
|
18.6 |
% |
|
|
194,801 |
|
|
166,151 |
|
|
17.2 |
% |
Total Premium Domestic |
$ |
376,682 |
|
|
$ |
306,965 |
|
|
22.7 |
% |
|
|
$ |
336,428 |
|
|
$ |
278,685 |
|
|
20.7 |
% |
|
|
$ |
333,503 |
|
|
$ |
278,063 |
|
|
19.9 |
% |
International |
— |
|
|
123,251 |
|
|
(100.0 |
)% |
|
|
— |
|
|
74,203 |
|
|
(100.0 |
)% |
|
|
— |
|
|
49,566 |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
2,627,866 |
|
|
$ |
2,596,971 |
|
|
1.2 |
% |
|
|
$ |
2,111,948 |
|
|
$ |
2,054,887 |
|
|
2.8 |
% |
|
|
$ |
2,028,390 |
|
|
$ |
1,902,520 |
|
|
6.6 |
% |
Total National General
(A) |
$ |
2,627,866 |
|
|
$ |
2,473,720 |
|
|
6.2 |
% |
|
|
$ |
2,111,948 |
|
|
$ |
1,980,684 |
|
|
6.6 |
% |
|
|
$ |
2,028,390 |
|
|
$ |
1,852,954 |
|
|
9.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personal Auto |
$ |
69,191 |
|
|
$ |
80,846 |
|
|
(14.4 |
)% |
|
|
$ |
63,355 |
|
|
$ |
34,306 |
|
|
84.7 |
% |
|
|
$ |
64,637 |
|
|
$ |
31,954 |
|
|
102.3 |
% |
Homeowners |
119,396 |
|
|
143,940 |
|
|
(17.1 |
)% |
|
|
48,592 |
|
|
70,227 |
|
|
(30.8 |
)% |
|
|
47,074 |
|
|
59,716 |
|
|
(21.2 |
)% |
Other |
1,702 |
|
|
1,929 |
|
|
(11.8 |
)% |
|
|
616 |
|
|
642 |
|
|
(4.0 |
)% |
|
|
672 |
|
|
618 |
|
|
8.7 |
% |
Total Premium |
$ |
190,289 |
|
|
$ |
226,715 |
|
|
(16.1 |
)% |
|
|
$ |
112,563 |
|
|
$ |
105,175 |
|
|
7.0 |
% |
|
|
$ |
112,383 |
|
|
$ |
92,288 |
|
|
21.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Total |
$ |
2,818,155 |
|
|
$ |
2,823,686 |
|
|
(0.2 |
)% |
|
|
$ |
2,224,511 |
|
|
$ |
2,160,062 |
|
|
3.0 |
% |
|
|
$ |
2,140,773 |
|
|
$ |
1,994,808 |
|
|
7.3 |
% |
(A) Excludes A&H international product line which was sold
in the fourth quarter of 2019.
Fee Income$ in
thousands(Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
Property & Casualty |
|
|
|
|
|
|
|
|
|
|
|
Service and Fee Income |
$ |
111,955 |
|
|
$ |
113,112 |
|
|
(1.0 |
)% |
|
$ |
222,588 |
|
|
$ |
232,488 |
|
|
(4.3 |
)% |
Ceding Commission Income |
35,059 |
|
|
39,418 |
|
|
(11.1 |
)% |
|
71,090 |
|
|
87,827 |
|
|
(19.1 |
)% |
Property & Casualty |
$ |
147,014 |
|
|
$ |
152,530 |
|
|
(3.6 |
)% |
|
$ |
293,678 |
|
|
$ |
320,315 |
|
|
(8.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Accident & Health |
|
|
|
|
|
|
|
|
|
|
|
Service and Fee Income |
|
|
|
|
|
|
|
|
|
|
|
Group |
$ |
43,241 |
|
|
$ |
32,862 |
|
|
31.6 |
% |
|
$ |
83,723 |
|
|
$ |
63,236 |
|
|
32.4 |
% |
Individual |
2,265 |
|
|
1,242 |
|
|
82.4 |
% |
|
4,482 |
|
|
3,378 |
|
|
32.7 |
% |
Medicare Sales |
11,078 |
|
|
5,159 |
|
|
114.7 |
% |
|
22,790 |
|
|
12,260 |
|
|
85.9 |
% |
Third Party Fee |
23,484 |
|
|
13,674 |
|
|
71.7 |
% |
|
49,597 |
|
|
35,075 |
|
|
41.4 |
% |
Total Service and Fee
Income |
80,068 |
|
|
52,937 |
|
|
51.3 |
% |
|
160,592 |
|
|
113,949 |
|
|
40.9 |
% |
Ceding Commission Income |
471 |
|
|
3,928 |
|
|
(88.0 |
)% |
|
1,031 |
|
|
6,519 |
|
|
(84.2 |
)% |
Accident and Health |
$ |
80,539 |
|
|
$ |
56,865 |
|
|
41.6 |
% |
|
$ |
161,623 |
|
|
$ |
120,468 |
|
|
34.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Total National
General |
$ |
227,553 |
|
|
$ |
209,395 |
|
|
8.7 |
% |
|
$ |
455,301 |
|
|
$ |
440,783 |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Reciprocal Exchanges |
|
|
|
|
|
|
|
|
|
|
|
Service and Fee Income |
$ |
2,336 |
|
|
$ |
1,516 |
|
|
54.1 |
% |
|
$ |
3,493 |
|
|
$ |
2,886 |
|
|
21.0 |
% |
Ceding Commission Income |
11,110 |
|
|
16,846 |
|
|
(34.0 |
)% |
|
24,824 |
|
|
35,380 |
|
|
(29.8 |
)% |
Reciprocal Exchanges |
$ |
13,446 |
|
|
$ |
18,362 |
|
|
(26.8 |
)% |
|
$ |
28,317 |
|
|
$ |
38,266 |
|
|
(26.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Total
(A) |
$ |
227,232 |
|
|
$ |
209,100 |
|
|
8.7 |
% |
|
$ |
456,978 |
|
|
$ |
444,141 |
|
|
2.9 |
% |
NOTES: (A) Consolidated Total
includes eliminations between National General and the Reciprocal
Exchanges in Service and Fee Income of $(13,767) and $(18,657) in
the three months ended June 30, 2020 and 2019, respectively, and
$(26,640) and $(34,908) in the six months ended June 30, 2020 and
2019, respectively.
Additional Disclosures
(1) References to operating earnings and basic and diluted
operating earnings per share (“EPS”) are non-GAAP financial
measures defined by the Company as net income/loss and basic and
diluted earnings per share excluding after-tax net gain or loss on
investments (including credit loss on investments in debt
securities and foreign exchange gain or loss), earnings or losses
of equity method investments (related parties), deferred tax asset
impairment, non-cash impairment of goodwill and non-cash
amortization of intangible assets, and any significant
non-recurring or infrequent items that may not be indicative of
ongoing operations. The Company believes operating earnings and
basic and diluted operating EPS are relevant measures of the
Company’s profitability because operating earnings and basic and
diluted operating EPS contain the components of net income upon
which the Company’s management has the most influence and excludes
factors outside management’s direct control and non-recurring
items. Other companies may calculate these measures differently,
and therefore, their measures may not be comparable to those used
by National General. Please see the Non-GAAP Financial Measures
table within this release for the reconciliation of these non-GAAP
financial measures to the most directly comparable GAAP
measure.
(2) Total investments includes $235,458 and $238,841 from
related parties at June 30, 2020 and December 31, 2019,
respectively.
(3) Other includes $2,405 and $2,391 from related parties at
June 30, 2020 and December 31, 2019, respectively.
(4) Preferred stock: $0.01 par value - authorized 10,000,000
shares, issued and outstanding 2,565,120 shares - June 30,
2020; authorized 10,000,000 shares, issued and outstanding
2,565,120 shares - December 31, 2019.
(5) Common stock: $0.01 par value - authorized 150,000,000
shares, issued 113,856,628 and outstanding 113,397,545 shares -
June 30, 2020; authorized 150,000,000 shares, issued and
outstanding 113,368,811 shares - December 31, 2019.
(6) Treasury stock, at cost: 459,083 shares - June 30,
2020.
(7) Loss and loss adjustment expense ratio (loss ratio) is
calculated by dividing loss and loss adjustment expense by net
earned premium.
(8) Operating expense ratio is a non-GAAP financial measure
defined by the Company, which is commonly used in the insurance
industry. The Company calculates the ratio by dividing operating
expense by net earned premium. Operating expense consists of the
sum of acquisition and other underwriting costs and general and
administrative expenses less ceding commission income and service
and fee income. The ratio is used as an indicator of the Company’s
efficiency in acquiring and servicing its business.
(9) Combined ratio is a non-GAAP financial measure defined by
the Company, which is commonly used in the insurance industry. The
Company calculates the ratio by adding the loss and loss adjustment
expense ratio(7) and the operating expense ratio (non-GAAP)(8)
together. The ratio is used as an indicator of the Company’s
underwriting discipline, efficiency in acquiring and servicing its
business, and overall underwriting profit. Management uses
operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to
evaluate financial performance against historical results and
establish targets. A combined ratio under 100% generally indicates
an underwriting profit, while over 100% an underwriting loss.
(10) Operating expense ratio before amortization and impairment
is a non-GAAP financial measure defined by the Company, which is
commonly used in the insurance industry. The Company calculates the
ratio by dividing the operating expense before amortization and
impairment by net earned premium. Operating expense before
amortization and impairment consists of the sum of acquisition and
other underwriting costs and general and administrative expenses
less ceding commission income, service and fee income, non-cash
amortization of intangible assets and non-cash impairment of
goodwill. The ratio is used as an indicator of the Company’s
efficiency in acquiring and servicing its business. Management
believes that this measure provides a more useful comparison to the
operating expense ratio of other insurance companies involved in
fewer acquisitions.
(11) Combined ratio before amortization and impairment is a
non-GAAP financial measure defined by the Company, which is
commonly used in the insurance industry. The Company calculates the
ratio by adding the loss and loss adjustment expense ratio(7) and
the operating expense ratio before amortization and impairment
(non-GAAP)(10) together. The ratio is used as an indicator of the
Company’s underwriting discipline, efficiency in acquiring and
servicing its business, and overall underwriting profit. Management
believes that this measure of underwriting profitability provides a
more useful comparison to the combined ratio of other insurance
companies involved in fewer acquisitions. A combined ratio under
100% generally indicates an underwriting profit, while over 100% an
underwriting loss.
(12) Combined ratio (non-GAAP), operating expense ratio
(non-GAAP), combined ratio before amortization and impairment
(non-GAAP) and operating expense ratio before amortization and
impairment (non-GAAP) are considered non-GAAP financial measures
under applicable SEC rules. Other companies may calculate these
ratios differently, and therefore, their measures may not be
comparable to those used by National General. Please see the
Non-GAAP Financial Measures table within this release for the
reconciliation of these non-GAAP financial measures to the most
directly comparable GAAP measure.
(13) Trailing twelve month operating return on average equity is
the ratio of the previous twelve months operating earnings
(non-GAAP) to average shareholders’ equity for the same
twelve-month period. Average shareholders’ equity is the sum of the
shareholders’ equity excluding preferred stock at the beginning and
end of the period divided by two. In the opinion of the Company’s
management this ratio is an important indicator of how well
management creates value for its shareholders through its operating
activities and capital management. Other companies may calculate
these measures differently, and therefore, their measures may not
be comparable to those used by National General. Please see the
Non-GAAP Financial Measures table within this release for the
reconciliation of net income to operating earnings, which is the
Non-GAAP component of the operating return on average equity.
(14) Combined ratio excluding losses from various
weather-related events, is calculated by taking the combined ratio
as defined in Note 11, and adjusting it to exclude the total net
losses of $35.3 million and $18.4 million from these events
for the three months ended June 30, 2020 and 2019, respectively.
The Company believes this measure enhances investors’ understanding
of our results by eliminating what we believe are volatile and
unusual events.
Year |
|
|
|
Combined Ratio (11) |
|
Impact of Weather-related Events |
|
Combined Ratio Excluding Weather-related Events
(14) |
2020 |
|
P&C Segment |
|
83.6% |
|
4.2% |
|
79.4% |
|
|
|
|
|
|
|
|
|
2020 |
|
Overall NGHC |
|
80.5% |
|
3.5% |
|
77.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
P&C Segment |
|
92.6% |
|
2.2% |
|
90.4% |
|
|
|
|
|
|
|
|
|
2019 |
|
Overall NGHC |
|
90.9% |
|
1.2% |
|
89.7% |
(15) Our products in the P&C segment include personal auto,
homeowners, RV/Packaged, small business auto, lender-placed
insurance and other products. The personal auto product includes
policies for standard, preferred and nonstandard automobile
insurance. The homeowners product includes multiple-peril policies
and personal umbrella coverage to the homeowner. The RV/Packaged
product offers policies that include RV automatic personal effects
coverage, optional replacement cost coverage, RV storage coverage
and full-time liability coverage. The small business auto product
offers policies that include liability and physical damage coverage
for light-to-medium duty commercial vehicles. The lender-placed
insurance product offers fire, home and flood products, as well as
collateral protection insurance and guaranteed asset protection
products for automobiles. Our products and revenue in the A&H
segment include group, individual and third party fees. The group
product includes revenue from our small group self-funded product.
The individual product line includes revenue from our supplemental
products including short-term medical, accident/AD&D, hospital
indemnity, cancer/critical illness, dental and term life insurance.
Medicare fees include commission and general agent fees for selling
Medicare policies issued by third-party insurance companies as well
as revenue from our Medicare Supplement product. Third party fees
include commission and general agent fees for selling policies
issued by third-party insurance companies, fees generated through
selling our technology products to third parties.
Investor Contact
Clifford GallantSVP of Capital Strategy and Investor
RelationsPhone: 212-380-9462Email: Clifford.Gallant@NGIC.COM
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