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| 8-K - 8-K - National General Holdings Corp. | nghc-20201029.htm |
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National General Holdings Corp. Reports Third Quarter 2020 Results
NEW YORK, October 29, 2020 (GLOBE NEWSWIRE) - National General Holdings Corp.
(Nasdaq: NGHC) reported third quarter 2020 net income of $102.1 million or $0.88 per diluted share, compared to net income of $63.3 million or $0.54 per diluted share in the third quarter of 2019. Third quarter 2020 operating earnings (non-GAAP)(1) were $105.2 million or $0.90 per diluted share compared to $68.2 million or $0.59 per diluted share in the third quarter of 2019.
Third Quarter 2020 Highlights versus Third Quarter 2019*
•Gross written premium grew by $57.9 million to $1,374.7 million compared to the prior year’s quarter. Our P&C segment growth of 2.1%, was primarily driven by our personal auto product line; and our A&H domestic segment growth of 23.3%, excluding our previously sold A&H international business.
•The overall combined ratio(11,12) was 89.2% compared to 92.5% in the prior year’s quarter, excluding non-cash amortization of intangible assets.
–The P&C segment reported a decrease in the combined ratio to 92.4% from 97.0% in the prior year’s quarter driven by continued strong underwriting and lower claims frequency. The P&C combined ratio includes prior year unfavorable loss development of $0.9 million compared to $14.9 million unfavorable loss development in the prior year’s quarter, and $87.1 million of pre-tax catastrophe losses related to weather-related events compared to $11.5 million of catastrophe losses in the prior year’s quarter.
–The A&H segment reported an increase in the combined ratio to 71.8% from 70.2% in the prior year’s quarter driven by the absence of our international business which was sold in the fourth quarter of 2019. The A&H service and fee income increased 39.0%. The A&H combined ratio includes $5.8 million of favorable loss development compared to $18.8 million of favorable loss development in the prior year’s quarter.
•Stockholders’ equity was $3.1 billion and fully diluted book value per share was $22.74 at September 30, 2020, growth of 17.1% and 19.3%, respectively, from December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $21.07 at September 30, 2020, growth of 14.4%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE)(13) was 19.0% as of September 30, 2020.
•Third quarter of 2020 operating earnings (non-GAAP)(1) excludes the following, net of tax: $2.1 million or $0.02 per share loss on equity method investments, $5.3 million or $0.05 per share of net gain on investments, $3.5 million or $0.03 per share of non-cash amortization of intangible assets, and $2.8 million or $0.02 per share of other expenses reflecting a M&A advisory cost.
•On September 30, 2020, the Company’s stockholders approved the proposal to merge with The Allstate Corporation. The merger remains subject to regulatory approval and the satisfaction of other customary conditions. The Company expects the merger to close in the first quarter of 2021.
Barry Karfunkel, National General’s CEO, stated: “I’m proud of the earnings National General was able to generate during a quarter that was highlighted by many catastrophic weather events. We’re excited with how we’ll be able to leverage our platform across a larger entity once our pending transaction closes. ”
*NOTE: Unless specified otherwise, discussion of our third 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 Third Quarter 2020 as Compared to Third Quarter 2019
•Property & Casualty - Gross written premium grew by 2.1% to $1,178.8 million, net written premium increased by 29.4% to $1,061.4 million, and net earned premium increased by 14.7% to $949.1 million. The P&C net earned premium increase was driven by lower cession to the quota shares, and growth in our personal auto, homeowners, and lender-placed product lines. Service and fee income was $109.8 million compared to $115.6 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio(11,12) was 92.4% with a loss and LAE ratio of 68.9% and an expense ratio(10,12) of 23.5%, versus a prior year combined ratio of 97.0% with a loss and LAE ratio of 75.8% and an expense ratio of 21.2%. The loss and LAE ratio was impacted by pre-tax catastrophe losses of approximately $87.1 million primarily related to weather-related events in the third quarter of 2020, compared to $11.5 million of losses in the third quarter of 2019. Unfavorable loss development was $0.9 million in the third quarter of 2020 primarily driven by small business auto, compared to unfavorable loss development of $14.9 million in the third quarter of 2019.
•Accident & Health - Gross written premium grew by $33.4 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 23.3% to $195.9 million. Service and fee income grew 39.0% to $88.6 million compared to $63.7 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio(11,12) was 71.8% with a loss and LAE ratio of 44.4% and an expense ratio(10,12) of 27.4%, versus a prior year combined ratio of 70.2% with a loss and LAE ratio of 41.8% and an expense ratio of 28.4%. The current quarter loss and LAE ratio reflects higher medical claims. Favorable loss development was $5.8 million in the third quarter of 2020, compared to favorable loss development of $18.8 million in the third 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 $29.5 million, and net earned premium was $54.1 million. Reciprocal Exchanges combined ratio(11,12) excluding non-cash amortization of intangible assets was 111.7% with a loss and LAE ratio of 78.5% and an expense ratio(10,12) of 33.2%.
Third quarter of 2020 net investment income decreased to $28.0 million, compared to $33.5 million in the third quarter of 2019. Total investments and cash and cash equivalents (including restricted cash) were $5.4 billion as of September 30, 2020. Unrealized gains on investments, included in accumulated other comprehensive income, increased to a $195.0 million gain at September 30, 2020, from a $74.5 million gain at December 31, 2019, primarily due to market improvement.
Interest expense was $11.3 million, down from $12.9 million in the prior year’s quarter. Debt was $679.4 million at September 30, 2020, compared to $686.0 million at December 31, 2019.
The third quarter of 2020 provision for income taxes was $26.7 million and the effective tax rate for the quarter was 19.5% compared with income taxes of $19.3 million and an effective rate of 21.3% in the third quarter of 2019.
Stockholders’ equity was $3,103.8 million at September 30, 2020, growth of 17.1% from $2,649.5 million at December 31, 2019. Fully diluted book value per share was $22.74 at September 30, 2020, growth of 19.3% from $19.06 at December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $21.07 at September 30, 2020, growth of 14.4%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE)(13) was 19.0% as of September 30, 2020.
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| Year-to-Date P&C Segment Notable Large Losses | ||||||||||||||||||||||||||||||||
| Year | Quarter | Event | P&C Notable Large Losses and LAE ($ millions) | P&C Loss and LAE Ratio Points* | EPS Impact After Tax | |||||||||||||||||||||||||||
| 2020 | Q3 | Weather-related Events | $87.1 | 9.2% | $0.59 | |||||||||||||||||||||||||||
| 2020 | Q2 | Weather-related Events | $35.3 | 4.2% | $0.24 | |||||||||||||||||||||||||||
| 2020 | Q1 | Weather-related Events | $8.1 | 0.9% | $0.06 | |||||||||||||||||||||||||||
| 2019 | Q3 | Weather-related Events | $11.5 | 1.4% | $0.08 | |||||||||||||||||||||||||||
| 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.
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.
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 regulatory 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
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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.
4
Income Statement - Third Quarter
$ in thousands
(Unaudited)
| Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | |||||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||
| Gross written premium | $ | 1,374,740 | $ | 98,387 | $ | 1,473,127 | $ | 1,316,890 | $ | 118,267 | $ | 1,435,157 | ||||||||||||||||||||||||||||||||
| Net written premium | 1,235,765 | 29,491 | 1,265,256 | 967,319 | 67,285 | 1,034,604 | ||||||||||||||||||||||||||||||||||||||
| Net earned premium | 1,124,475 | 54,098 | 1,178,573 | 996,521 | 57,117 | 1,053,638 | ||||||||||||||||||||||||||||||||||||||
| Ceding commission income | 21,772 | 8,952 | 30,724 | 42,521 | 15,066 | 57,587 | ||||||||||||||||||||||||||||||||||||||
| Service and fee income | 198,353 | 1,628 | 184,969 | (A) | 179,293 | 1,585 | 161,626 | (G) | ||||||||||||||||||||||||||||||||||||
| Net investment income | 28,019 | 2,254 | 28,904 | (B) | 33,451 | 2,160 | 33,740 | (H) | ||||||||||||||||||||||||||||||||||||
| Net gain (loss) on investments | 6,736 | 13,103 | 19,839 | 1,718 | (137) | 1,581 | ||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 1,379,355 | $ | 80,035 | $ | 1,443,009 | (C) | $ | 1,253,504 | $ | 75,791 | $ | 1,308,172 | (I) | ||||||||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||||||||||||||
| Loss and loss adjustment expense | $ | 731,722 | $ | 42,442 | $ | 774,164 | $ | 698,064 | $ | 47,270 | $ | 745,334 | ||||||||||||||||||||||||||||||||
| Acquisition costs and other underwriting expenses | 252,444 | 16,201 | 268,645 | 193,521 | 15,569 | 209,090 | ||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 247,241 | 12,382 | 244,611 | (D) | 258,583 | 24,533 | 263,864 | (J) | ||||||||||||||||||||||||||||||||||||
| Interest expense | 11,292 | 1,369 | 11,292 | (E) | 12,898 | 1,871 | 12,898 | (K) | ||||||||||||||||||||||||||||||||||||
| Total expenses | $ | 1,242,699 | $ | 72,394 | $ | 1,298,712 | (F) | $ | 1,163,066 | $ | 89,243 | $ | 1,231,186 | (L) | ||||||||||||||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | 136,656 | $ | 7,641 | $ | 144,297 | $ | 90,438 | $ | (13,452) | $ | 76,986 | ||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | 26,687 | 741 | 27,428 | 19,284 | (2,537) | 16,747 | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) before non-controlling interest and dividends on preferred shares | 109,969 | 6,900 | 116,869 | 71,154 | (10,915) | 60,239 | ||||||||||||||||||||||||||||||||||||||
| Less: net income (loss) attributable to noncontrolling interest | — | 6,900 | 6,900 | — | (10,915) | (10,915) | ||||||||||||||||||||||||||||||||||||||
| Net income before dividends on preferred shares | 109,969 | — | 109,969 | 71,154 | — | 71,154 | ||||||||||||||||||||||||||||||||||||||
| Less: dividends on preferred shares | 7,875 | — | 7,875 | 7,875 | — | 7,875 | ||||||||||||||||||||||||||||||||||||||
| Net income available to common stockholders | $ | 102,094 | $ | — | $ | 102,094 | $ | 63,279 | $ | — | $ | 63,279 | ||||||||||||||||||||||||||||||||
NOTES: Consolidated column includes eliminations as follows: (A) $(15,012), (B) $(1,369), (C) $(16,381), (D) $(15,012),
(E) $(1,369), (F) $(16,381), (G) $(19,252), (H) $(1,871), (I) $(21,123), (J) $(19,252), (K) $(1,871) and (L) $(21,123).
5
Income Statement - Year To Date
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | |||||||||||||||||||||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||||||||||||||||||||
| Gross written premium | $ | 4,002,606 | $ | 288,676 | $ | 4,291,282 | $ | 3,913,861 | $ | 344,982 | $ | 4,258,843 | ||||||||||||||||||||||||||||||||
| Net written premium | 3,347,713 | 142,054 | 3,489,767 | 3,022,206 | 172,460 | 3,194,666 | ||||||||||||||||||||||||||||||||||||||
| Net earned premium | 3,152,865 | 166,481 | 3,319,346 | 2,899,041 | 149,405 | 3,048,446 | ||||||||||||||||||||||||||||||||||||||
| Ceding commission income | 93,893 | 33,776 | 127,669 | 136,867 | 50,446 | 187,313 | ||||||||||||||||||||||||||||||||||||||
| Service and fee income | 581,533 | 5,121 | 545,002 | (A) | 525,730 | 4,471 | 476,041 | (G) | ||||||||||||||||||||||||||||||||||||
| Net investment income | 88,289 | 6,449 | 90,322 | (B) | 103,683 | 6,454 | 102,316 | (H) | ||||||||||||||||||||||||||||||||||||
| Net gain (loss) on investments | 6,179 | 11,957 | 18,136 | (2,790) | (837) | (3,627) | ||||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 3,922,759 | $ | 223,784 | $ | 4,100,475 | (C) | $ | 3,662,531 | $ | 209,939 | $ | 3,810,489 | (I) | ||||||||||||||||||||||||||||||
| Expenses: | ||||||||||||||||||||||||||||||||||||||||||||
| Loss and loss adjustment expense | $ | 1,951,792 | $ | 114,816 | $ | 2,066,608 | $ | 1,988,094 | $ | 124,584 | $ | 2,112,678 | ||||||||||||||||||||||||||||||||
| Acquisition costs and other underwriting expenses | 689,467 | 36,798 | 726,265 | 582,805 | 32,329 | 615,134 | ||||||||||||||||||||||||||||||||||||||
| General and administrative expenses | 765,438 | 50,803 | 774,589 | (D) | 746,243 | 67,642 | 759,725 | (J) | ||||||||||||||||||||||||||||||||||||
| Interest expense | 34,851 | 4,416 | 34,851 | (E) | 38,822 | 7,821 | 38,822 | (K) | ||||||||||||||||||||||||||||||||||||
| Total expenses | $ | 3,441,548 | $ | 206,833 | $ | 3,602,313 | (F) | $ | 3,355,964 | $ | 232,376 | $ | 3,526,359 | (L) | ||||||||||||||||||||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | 481,211 | $ | 16,951 | $ | 498,162 | $ | 306,567 | $ | (22,437) | $ | 284,130 | ||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | 103,909 | 2,198 | 106,107 | 65,779 | (4,285) | 61,494 | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) before non-controlling interest and dividends on preferred shares | 377,302 | 14,753 | 392,055 | 240,788 | (18,152) | 222,636 | ||||||||||||||||||||||||||||||||||||||
| Less: net income (loss) attributable to noncontrolling interest | — | 14,753 | 14,753 | — | (18,152) | (18,152) | ||||||||||||||||||||||||||||||||||||||
| Net income before dividends on preferred shares | 377,302 | — | 377,302 | 240,788 | — | 240,788 | ||||||||||||||||||||||||||||||||||||||
| Less: dividends on preferred shares | 24,675 | — | 24,675 | 24,675 | — | 24,675 | ||||||||||||||||||||||||||||||||||||||
| Net income available to common stockholders | $ | 352,627 | $ | — | $ | 352,627 | $ | 216,113 | $ | — | $ | 216,113 | ||||||||||||||||||||||||||||||||
NOTES: Consolidated column includes eliminations as follows: (A) $(41,652), (B) $(4,416), (C) $(46,068), (D) $(41,652),
(E) $(4,416), (F) $(46,068) (G) $(54,160), (H) $(7,821), (I) $(61,981), (J) $(54,160), (K) $(7,821) and (L) $(61,981).
6
Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 102,094 | $ | 63,279 | $ | 352,627 | $ | 216,113 | |||||||||||||||
| Basic net income per common share | $ | 0.90 | $ | 0.56 | $ | 3.11 | $ | 1.91 | |||||||||||||||
| Diluted net income per common share | $ | 0.88 | $ | 0.54 | $ | 3.04 | $ | 1.87 | |||||||||||||||
Operating earnings attributable to NGHC (non-GAAP)(1) | $ | 105,174 | $ | 68,237 | $ | 368,576 | $ | 236,093 | |||||||||||||||
Basic operating earnings per common share (non-GAAP)(1) | $ | 0.93 | $ | 0.60 | $ | 3.25 | $ | 2.09 | |||||||||||||||
Diluted operating earnings per common share (non-GAAP)(1) | $ | 0.90 | $ | 0.59 | $ | 3.17 | $ | 2.03 | |||||||||||||||
| Dividends declared per common share | $ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.13 | |||||||||||||||
| Weighted average number of basic shares outstanding | 113,418,411 | 113,263,367 | 113,505,785 | 113,153,121 | |||||||||||||||||||
| Weighted average number of diluted shares outstanding | 116,666,374 | 116,138,489 | 116,231,852 | 116,087,524 | |||||||||||||||||||
| Shares outstanding, end of period | 113,475,176 | 113,313,042 | |||||||||||||||||||||
| Fully diluted shares outstanding, end of period | 116,723,139 | 116,188,164 | |||||||||||||||||||||
| Book value per share | $ | 23.39 | $ | 18.62 | |||||||||||||||||||
| Fully diluted book value per share | $ | 22.74 | $ | 18.16 | |||||||||||||||||||
Reconciliation of Net Income to Operating Earnings (Non-GAAP)(1)(13)
$ in thousands, except per share data
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 102,094 | $ | 63,279 | $ | 352,627 | $ | 216,113 | |||||||||||||||
| Add (subtract): | |||||||||||||||||||||||
| Equity in losses of equity method investments | 2,635 | 1,205 | 6,523 | 1,408 | |||||||||||||||||||
| Net (gain) loss on investments | (6,736) | (1,718) | (6,179) | 2,790 | |||||||||||||||||||
| Non-cash amortization of intangible assets | 4,427 | 6,788 | 16,272 | 21,093 | |||||||||||||||||||
| M&A advisory cost | 3,573 | — | 3,573 | — | |||||||||||||||||||
| Income tax benefit | (819) | (1,317) | (4,240) | (5,311) | |||||||||||||||||||
Operating earnings attributable to NGHC (non-GAAP)(1) | $ | 105,174 | $ | 68,237 | $ | 368,576 | $ | 236,093 | |||||||||||||||
Operating earnings per common share (non-GAAP)(1): | |||||||||||||||||||||||
Basic operating earnings per common share (non-GAAP)(1) | $ | 0.93 | $ | 0.60 | $ | 3.25 | $ | 2.09 | |||||||||||||||
Diluted operating earnings per common share (non-GAAP)(1) | $ | 0.90 | $ | 0.59 | $ | 3.17 | $ | 2.03 | |||||||||||||||
7
Balance Sheet
$ in thousands
(Unaudited)
| September 30, 2020 | December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||
| ASSETS | NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | ||||||||||||||||||||||||||||||||||||||
Total investments (2) | $ | 5,119,295 | $ | 331,076 | $ | 5,342,799 | (A) | $ | 4,632,960 | $ | 329,494 | $ | 4,854,998 | (H) | ||||||||||||||||||||||||||||||
| Cash and cash equivalents, including restricted cash | 250,602 | 741 | 251,343 | 163,480 | 983 | 164,463 | ||||||||||||||||||||||||||||||||||||||
| Premiums and other receivables, net | 1,528,240 | 70,076 | 1,598,316 | 1,373,089 | 55,859 | 1,428,948 | ||||||||||||||||||||||||||||||||||||||
| Reinsurance balances | 1,515,120 | 230,692 | 1,745,812 | 1,745,036 | 225,019 | 1,970,055 | ||||||||||||||||||||||||||||||||||||||
| Intangible assets, net | 342,884 | 3,090 | 345,974 | 362,598 | 3,225 | 365,823 | ||||||||||||||||||||||||||||||||||||||
| Goodwill | 179,328 | — | 179,328 | 179,328 | — | 179,328 | ||||||||||||||||||||||||||||||||||||||
Other (3) | 775,595 | 24,216 | 760,684 | (B) | 798,675 | 29,070 | 792,919 | (I) | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 9,711,064 | $ | 659,891 | $ | 10,224,256 | (C) | $ | 9,255,166 | $ | 643,650 | $ | 9,756,534 | (J) | ||||||||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||
| Unpaid loss and loss adjustment expense reserves | $ | 2,688,969 | $ | 208,496 | $ | 2,897,465 | $ | 2,680,628 | $ | 205,786 | $ | 2,886,414 | ||||||||||||||||||||||||||||||||
| Unearned premiums and other revenue | 2,117,887 | 219,582 | 2,337,469 | 2,059,688 | 252,553 | 2,312,241 | ||||||||||||||||||||||||||||||||||||||
| Reinsurance payable | 350,717 | 51,711 | 402,428 | 527,155 | 35,689 | 562,844 | ||||||||||||||||||||||||||||||||||||||
| Accounts payable and accrued expenses | 412,540 | 46,731 | 420,144 | (D) | 306,869 | 43,323 | 315,366 | (K) | ||||||||||||||||||||||||||||||||||||
| Debt | 679,436 | 107,572 | 679,436 | (E) | 686,006 | 107,456 | 686,006 | (L) | ||||||||||||||||||||||||||||||||||||
| Other | 357,745 | 44,004 | 401,749 | 345,366 | 30,803 | 376,169 | ||||||||||||||||||||||||||||||||||||||
| Total liabilities | $ | 6,607,294 | $ | 678,096 | $ | 7,138,691 | (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 | 1,073,288 | — | 1,073,288 | 1,065,634 | — | 1,065,634 | ||||||||||||||||||||||||||||||||||||||
| Accumulated other comprehensive income | 194,953 | — | 194,953 | 74,548 | — | 74,548 | ||||||||||||||||||||||||||||||||||||||
| Retained earnings | 1,392,872 | — | 1,392,872 | 1,058,138 | — | 1,058,138 | ||||||||||||||||||||||||||||||||||||||
| Total National General Holdings Corp. stockholders’ equity | 3,103,770 | — | 3,103,770 | 2,649,454 | — | 2,649,454 | ||||||||||||||||||||||||||||||||||||||
| Noncontrolling interest | — | (18,205) | (18,205) | — | (31,960) | (31,960) | ||||||||||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 3,103,770 | $ | (18,205) | $ | 3,085,565 | $ | 2,649,454 | $ | (31,960) | $ | 2,617,494 | ||||||||||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 9,711,064 | $ | 659,891 | $ | 10,224,256 | (G) | $ | 9,255,166 | $ | 643,650 | $ | 9,756,534 | (N) | ||||||||||||||||||||||||||||||
NOTES: Consolidated column includes eliminations as follows: (A) $(107,572), (B) $(39,127), (C) $(146,699), (D) $(39,127),
(E) $(107,572), (F) $(146,699), (G) $(146,699) (H) $(107,456), (I) $(34,826), (J) $(142,282), (K) $(34,826), (L) $(107,456),
(M) $(142,282) and (N) $(142,282).
8
Segment Information - Third Quarter
$ in thousands
(Unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross written premium | $ | 1,178,803 | $ | 195,937 | $ | 1,374,740 | $ | 98,387 | $ | 1,154,335 | $ | 162,555 | $ | 1,316,890 | $ | 118,267 | |||||||||||||||||||||||||||||||||||||||||||
| Net written premium | 1,061,435 | 174,330 | 1,235,765 | 29,491 | 819,970 | 147,349 | 967,319 | 67,285 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earned premium | 949,071 | 175,404 | 1,124,475 | 54,098 | 827,618 | 168,903 | 996,521 | 57,117 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Ceding commission income | 21,567 | 205 | 21,772 | 8,952 | 40,260 | 2,261 | 42,521 | 15,066 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Service and fee income | 109,756 | 88,597 | 198,353 | 1,628 | 115,557 | 63,736 | 179,293 | 1,585 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total underwriting revenues | $ | 1,080,394 | $ | 264,206 | $ | 1,344,600 | $ | 64,678 | $ | 983,435 | $ | 234,900 | $ | 1,218,335 | $ | 73,768 | |||||||||||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense (A) | 653,774 | 77,948 | 731,722 | 42,442 | 627,452 | 70,612 | 698,064 | 47,270 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition costs and other underwriting expenses | 173,166 | 79,278 | 252,444 | 16,201 | 146,307 | 47,214 | 193,521 | 15,569 | |||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses (B) | 184,776 | 58,892 | 243,668 | 12,382 | 190,286 | 68,297 | 258,583 | 24,533 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 1,011,716 | $ | 216,118 | $ | 1,227,834 | $ | 71,025 | $ | 964,045 | $ | 186,123 | $ | 1,150,168 | $ | 87,372 | |||||||||||||||||||||||||||||||||||||||||||
| Underwriting income (loss) | 68,678 | 48,088 | 116,766 | (6,347) | 19,390 | 48,777 | 68,167 | (13,604) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash amortization of intangible assets | 3,140 | 1,287 | 4,427 | 33 | 5,257 | 1,531 | 6,788 | 18 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Underwriting income (loss) before amortization and impairment | $ | 71,818 | $ | 49,375 | $ | 121,193 | $ | (6,314) | $ | 24,647 | $ | 50,308 | $ | 74,955 | $ | (13,586) | |||||||||||||||||||||||||||||||||||||||||||
| Underwriting ratios | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (7) | 68.9 | % | 44.4 | % | 65.1 | % | 78.5 | % | 75.8 | % | 41.8 | % | 70.1 | % | 82.8 | % | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio (Non-GAAP) (8) | 23.9 | % | 28.1 | % | 24.5 | % | 33.3 | % | 21.8 | % | 29.3 | % | 23.1 | % | 41.1 | % | |||||||||||||||||||||||||||||||||||||||||||
Combined ratio (Non-GAAP) (9) | 92.8 | % | 72.5 | % | 89.6 | % | 111.8 | % | 97.6 | % | 71.1 | % | 93.2 | % | 123.9 | % | |||||||||||||||||||||||||||||||||||||||||||
| Underwriting ratios (before amortization and impairment) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (7) | 68.9 | % | 44.4 | % | 65.1 | % | 78.5 | % | 75.8 | % | 41.8 | % | 70.1 | % | 82.8 | % | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio (Non-GAAP) (10) | 23.5 | % | 27.4 | % | 24.1 | % | 33.2 | % | 21.2 | % | 28.4 | % | 22.4 | % | 41.0 | % | |||||||||||||||||||||||||||||||||||||||||||
Combined ratio before amortization and impairment (Non-GAAP) (11) | 92.4 | % | 71.8 | % | 89.2 | % | 111.7 | % | 97.0 | % | 70.2 | % | 92.5 | % | 123.8 | % | |||||||||||||||||||||||||||||||||||||||||||
(A) Loss and loss adjustment expenses for the three months ended September 30, 2020, included $934 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $5,827 of favorable loss development in the A&H segment, versus $14,909 of unfavorable loss development in the P&C segment, and $18,788 of favorable loss development in the A&H segment for the three months ended September 30, 2019.
(B) General and administrative expenses includes expenses allocated to segments only.
9
Segment Information - Year To Date
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross written premium | $ | 3,429,987 | $ | 572,619 | $ | 4,002,606 | $ | 288,676 | $ | 3,321,090 | $ | 592,771 | $ | 3,913,861 | $ | 344,982 | |||||||||||||||||||||||||||||||||||||||||||
| Net written premium | 2,836,955 | 510,758 | 3,347,713 | 142,054 | 2,521,969 | 500,237 | 3,022,206 | 172,460 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earned premium | 2,643,958 | 508,907 | 3,152,865 | 166,481 | 2,402,509 | 496,532 | 2,899,041 | 149,405 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Ceding commission income | 92,657 | 1,236 | 93,893 | 33,776 | 128,087 | 8,780 | 136,867 | 50,446 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Service and fee income | 332,344 | 249,189 | 581,533 | 5,121 | 348,045 | 177,685 | 525,730 | 4,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total underwriting revenues | $ | 3,068,959 | $ | 759,332 | $ | 3,828,291 | $ | 205,378 | $ | 2,878,641 | $ | 682,997 | $ | 3,561,638 | $ | 204,322 | |||||||||||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense (A) | 1,725,588 | 226,204 | 1,951,792 | 114,816 | 1,746,409 | 241,685 | 1,988,094 | 124,584 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition costs and other underwriting expenses | 474,824 | 214,643 | 689,467 | 36,798 | 429,742 | 153,063 | 582,805 | 32,329 | |||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses (B) | 585,230 | 176,635 | 761,865 | 50,803 | 558,016 | 188,227 | 746,243 | 67,642 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 2,785,642 | $ | 617,482 | $ | 3,403,124 | $ | 202,417 | $ | 2,734,167 | $ | 582,975 | $ | 3,317,142 | $ | 224,555 | |||||||||||||||||||||||||||||||||||||||||||
| Underwriting income (loss) | 283,317 | 141,850 | 425,167 | 2,961 | 144,474 | 100,022 | 244,496 | (20,233) | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Non-cash amortization of intangible assets | 12,368 | 3,904 | 16,272 | 93 | 16,154 | 4,939 | 21,093 | 41 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Underwriting income (loss) before amortization and impairment | $ | 295,685 | $ | 145,754 | $ | 441,439 | $ | 3,054 | $ | 160,628 | $ | 104,961 | $ | 265,589 | $ | (20,192) | |||||||||||||||||||||||||||||||||||||||||||
| Underwriting ratios | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (7) | 65.3 | % | 44.4 | % | 61.9 | % | 69.0 | % | 72.7 | % | 48.7 | % | 68.6 | % | 83.4 | % | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio (Non-GAAP) (8) | 24.0 | % | 27.7 | % | 24.6 | % | 29.3 | % | 21.3 | % | 31.2 | % | 23.0 | % | 30.2 | % | |||||||||||||||||||||||||||||||||||||||||||
Combined ratio (Non-GAAP) (9) | 89.3 | % | 72.1 | % | 86.5 | % | 98.3 | % | 94.0 | % | 79.9 | % | 91.6 | % | 113.6 | % | |||||||||||||||||||||||||||||||||||||||||||
| Underwriting ratios (before amortization and impairment) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss and loss adjustment expense ratio (7) | 65.3 | % | 44.4 | % | 61.9 | % | 69.0 | % | 72.7 | % | 48.7 | % | 68.6 | % | 83.4 | % | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio (Non-GAAP) (10) | 23.6 | % | 26.9 | % | 24.1 | % | 29.2 | % | 20.6 | % | 30.2 | % | 22.3 | % | 30.1 | % | |||||||||||||||||||||||||||||||||||||||||||
Combined ratio before amortization and impairment (Non-GAAP) (11) | 88.9 | % | 71.3 | % | 86.0 | % | 98.2 | % | 93.3 | % | 78.9 | % | 90.9 | % | 113.5 | % | |||||||||||||||||||||||||||||||||||||||||||
(A) Loss and loss adjustment expenses for the nine months ended September 30, 2020, included $13,989 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $22,065 of favorable loss development in the A&H segment, versus $19,791 of unfavorable loss development in the P&C segment, and $37,775 of favorable loss development in the A&H segment for the nine months ended September 30, 2019.
(B) General and administrative expenses includes expenses allocated to segments only.
10
Reconciliation of Operating Expense Ratio (Non-GAAP)(8,10,12)
$ in thousands
(Unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 1,011,716 | $ | 216,118 | $ | 1,227,834 | $ | 71,025 | $ | 964,045 | $ | 186,123 | $ | 1,150,168 | $ | 87,372 | |||||||||||||||||||||||||||||||||||||||||||
| Less: Loss and loss adjustment expense | 653,774 | 77,948 | 731,722 | 42,442 | 627,452 | 70,612 | 698,064 | 47,270 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Ceding commission income | 21,567 | 205 | 21,772 | 8,952 | 40,260 | 2,261 | 42,521 | 15,066 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Service and fee income | 109,756 | 88,597 | 198,353 | 1,628 | 115,557 | 63,736 | 179,293 | 1,585 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expense (Non-GAAP) (8) | 226,619 | 49,368 | 275,987 | 18,003 | 180,776 | 49,514 | 230,290 | 23,451 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earned premium | $ | 949,071 | $ | 175,404 | $ | 1,124,475 | $ | 54,098 | $ | 827,618 | $ | 168,903 | $ | 996,521 | $ | 57,117 | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio (Non-GAAP) (8) | 23.9 | % | 28.1 | % | 24.5 | % | 33.3 | % | 21.8 | % | 29.3 | % | 23.1 | % | 41.1 | % | |||||||||||||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 1,011,716 | $ | 216,118 | $ | 1,227,834 | $ | 71,025 | $ | 964,045 | $ | 186,123 | $ | 1,150,168 | $ | 87,372 | |||||||||||||||||||||||||||||||||||||||||||
| Less: Loss and loss adjustment expense | 653,774 | 77,948 | 731,722 | 42,442 | 627,452 | 70,612 | 698,064 | 47,270 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Ceding commission income | 21,567 | 205 | 21,772 | 8,952 | 40,260 | 2,261 | 42,521 | 15,066 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Service and fee income | 109,756 | 88,597 | 198,353 | 1,628 | 115,557 | 63,736 | 179,293 | 1,585 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Non-cash amortization of intangible assets | 3,140 | 1,287 | 4,427 | 33 | 5,257 | 1,531 | 6,788 | 18 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expense before amortization and impairment (Non-GAAP) (10) | 223,479 | 48,081 | 271,560 | 17,970 | 175,519 | 47,983 | 223,502 | 23,433 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earned premium | $ | 949,071 | $ | 175,404 | $ | 1,124,475 | $ | 54,098 | $ | 827,618 | $ | 168,903 | $ | 996,521 | $ | 57,117 | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio before amortization and impairment (Non-GAAP) (10) | 23.5 | % | 27.4 | % | 24.1 | % | 33.2 | % | 21.2 | % | 28.4 | % | 22.4 | % | 41.0 | % | |||||||||||||||||||||||||||||||||||||||||||
11
Reconciliation of Operating Expense Ratio (Non-GAAP)(8,10,12)
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 2,785,642 | $ | 617,482 | $ | 3,403,124 | $ | 202,417 | $ | 2,734,167 | $ | 582,975 | $ | 3,317,142 | $ | 224,555 | |||||||||||||||||||||||||||||||||||||||||||
| Less: Loss and loss adjustment expense | 1,725,588 | 226,204 | 1,951,792 | 114,816 | 1,746,409 | 241,685 | 1,988,094 | 124,584 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Ceding commission income | 92,657 | 1,236 | 93,893 | 33,776 | 128,087 | 8,780 | 136,867 | 50,446 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Service and fee income | 332,344 | 249,189 | 581,533 | 5,121 | 348,045 | 177,685 | 525,730 | 4,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expense (Non-GAAP) (8) | 635,053 | 140,853 | 775,906 | 48,704 | 511,626 | 154,825 | 666,451 | 45,054 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earned premium | $ | 2,643,958 | $ | 508,907 | $ | 3,152,865 | $ | 166,481 | $ | 2,402,509 | $ | 496,532 | $ | 2,899,041 | $ | 149,405 | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio (Non-GAAP) (8) | 24.0 | % | 27.7 | % | 24.6 | % | 29.3 | % | 21.3 | % | 31.2 | % | 23.0 | % | 30.2 | % | |||||||||||||||||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 2,785,642 | $ | 617,482 | $ | 3,403,124 | $ | 202,417 | $ | 2,734,167 | $ | 582,975 | $ | 3,317,142 | $ | 224,555 | |||||||||||||||||||||||||||||||||||||||||||
| Less: Loss and loss adjustment expense | 1,725,588 | 226,204 | 1,951,792 | 114,816 | 1,746,409 | 241,685 | 1,988,094 | 124,584 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Ceding commission income | 92,657 | 1,236 | 93,893 | 33,776 | 128,087 | 8,780 | 136,867 | 50,446 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Service and fee income | 332,344 | 249,189 | 581,533 | 5,121 | 348,045 | 177,685 | 525,730 | 4,471 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: Non-cash amortization of intangible assets | 12,368 | 3,904 | 16,272 | 93 | 16,154 | 4,939 | 21,093 | 41 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Operating expense before amortization and impairment (Non-GAAP) (10) | 622,685 | 136,949 | 759,634 | 48,611 | 495,472 | 149,886 | 645,358 | 45,013 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earned premium | $ | 2,643,958 | $ | 508,907 | $ | 3,152,865 | $ | 166,481 | $ | 2,402,509 | $ | 496,532 | $ | 2,899,041 | $ | 149,405 | |||||||||||||||||||||||||||||||||||||||||||
Operating expense ratio before amortization and impairment (Non-GAAP) (10) | 23.6 | % | 26.9 | % | 24.1 | % | 29.2 | % | 20.6 | % | 30.2 | % | 22.3 | % | 30.1 | % | |||||||||||||||||||||||||||||||||||||||||||
12
Premiums by Product Line
$ in thousands
(Unaudited)
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Written Premium | Net Written Premium | Net Earned Premium | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Property & Casualty | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | $ | 741,306 | $ | 705,709 | 5.0% | $ | 650,889 | $ | 560,032 | 16.2% | $ | 632,781 | $ | 568,346 | 11.3% | ||||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 210,721 | 201,977 | 4.3% | 217,960 | 82,601 | 163.9% | 130,278 | 86,525 | 50.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| RV/Packaged | 59,191 | 55,631 | 6.4% | 57,834 | 52,283 | 10.6% | 52,126 | 51,023 | 2.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Small Business Auto | 62,159 | 76,987 | (19.3)% | 47,556 | 56,615 | (16.0)% | 53,158 | 62,265 | (14.6)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Lender-placed insurance | 96,327 | 97,468 | (1.2)% | 82,599 | 61,579 | 34.1% | 77,441 | 56,599 | 36.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 9,099 | 16,563 | (45.1)% | 4,597 | 6,860 | (33.0)% | 3,287 | 2,860 | 14.9% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Premium | $ | 1,178,803 | $ | 1,154,335 | 2.1% | $ | 1,061,435 | $ | 819,970 | 29.4% | $ | 949,071 | $ | 827,618 | 14.7% | ||||||||||||||||||||||||||||||||||||||||||||
| Accident & Health | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Group | 89,852 | 73,223 | 22.7% | 70,672 | 59,001 | 19.8% | 70,670 | 59,009 | 19.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Individual | 106,085 | 85,728 | 23.7% | 103,658 | 85,541 | 21.2% | 104,734 | 85,971 | 21.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Premium Domestic | $ | 195,937 | $ | 158,951 | 23.3% | $ | 174,330 | $ | 144,542 | 20.6% | $ | 175,404 | $ | 144,980 | 21.0% | ||||||||||||||||||||||||||||||||||||||||||||
| International | — | 3,604 | (100.0)% | — | 2,807 | (100.0)% | — | 23,923 | (100.0)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total National General | $ | 1,374,740 | $ | 1,316,890 | 4.4% | $ | 1,235,765 | $ | 967,319 | 27.8% | $ | 1,124,475 | $ | 996,521 | 12.8% | ||||||||||||||||||||||||||||||||||||||||||||
| Total National General (A) | $ | 1,374,740 | $ | 1,313,286 | 4.7% | $ | 1,235,765 | $ | 964,512 | 28.1% | $ | 1,124,475 | $ | 972,598 | 15.6% | ||||||||||||||||||||||||||||||||||||||||||||
| Reciprocal Exchanges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | $ | 33,561 | $ | 39,166 | (14.3)% | $ | 10,323 | $ | 67,154 | (84.6)% | $ | 24,654 | $ | 33,953 | (27.4)% | ||||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 63,935 | 78,079 | (18.1)% | 18,166 | (2,047) | (987.4)% | 28,963 | 22,759 | 27.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 891 | 1,022 | (12.8)% | 1,002 | 2,178 | (54.0)% | 481 | 405 | 18.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Premium | $ | 98,387 | $ | 118,267 | (16.8)% | $ | 29,491 | $ | 67,285 | (56.2)% | $ | 54,098 | $ | 57,117 | (5.3)% | ||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Total | $ | 1,473,127 | $ | 1,435,157 | 2.6% | $ | 1,265,256 | $ | 1,034,604 | 22.3% | $ | 1,178,573 | $ | 1,053,638 | 11.9% | ||||||||||||||||||||||||||||||||||||||||||||
(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.
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Premiums by Product Line
$ in thousands
(Unaudited)
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Written Premium | Net Written Premium | Net Earned Premium | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | 2020 | 2019 | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Property & Casualty | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | $ | 2,148,730 | $ | 2,083,702 | 3.1% | $ | 1,886,438 | $ | 1,730,904 | 9.0% | $ | 1,773,831 | $ | 1,621,734 | 9.4% | ||||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 581,185 | 544,056 | 6.8% | 390,760 | 276,250 | 41.5% | 321,129 | 272,591 | 17.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| RV/Packaged | 170,120 | 168,796 | 0.8% | 165,694 | 162,047 | 2.3% | 148,374 | 150,739 | (1.6)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Small Business Auto | 195,628 | 246,694 | (20.7)% | 152,584 | 196,221 | (22.2)% | 166,316 | 189,957 | (12.4)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Lender-placed insurance | 295,693 | 232,265 | 27.3% | 224,742 | 140,863 | 59.5% | 218,210 | 158,595 | 37.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 38,631 | 45,577 | (15.2)% | 16,737 | 15,684 | 6.7% | 16,098 | 8,893 | 81.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Premium | $ | 3,429,987 | $ | 3,321,090 | 3.3% | $ | 2,836,955 | $ | 2,521,969 | 12.5% | $ | 2,643,958 | $ | 2,402,509 | 10.0% | ||||||||||||||||||||||||||||||||||||||||||||
| Accident & Health | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Group | 266,857 | 213,197 | 25.2% | 209,360 | 170,911 | 22.5% | 209,372 | 170,921 | 22.5% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Individual | 305,762 | 252,719 | 21.0% | 301,398 | 252,316 | 19.5% | 299,535 | 252,122 | 18.8% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Premium Domestic | $ | 572,619 | $ | 465,916 | 22.9% | $ | 510,758 | $ | 423,227 | 20.7% | $ | 508,907 | $ | 423,043 | 20.3% | ||||||||||||||||||||||||||||||||||||||||||||
| International | — | 126,855 | (100.0)% | — | 77,010 | (100.0)% | — | 73,489 | (100.0)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total National General | $ | 4,002,606 | $ | 3,913,861 | 2.3% | $ | 3,347,713 | $ | 3,022,206 | 10.8% | $ | 3,152,865 | $ | 2,899,041 | 8.8% | ||||||||||||||||||||||||||||||||||||||||||||
| Total National General (A) | $ | 4,002,606 | $ | 3,787,006 | 5.7% | $ | 3,347,713 | $ | 2,945,196 | 13.7% | $ | 3,152,865 | $ | 2,825,552 | 11.6% | ||||||||||||||||||||||||||||||||||||||||||||
| Reciprocal Exchanges | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | $ | 102,752 | $ | 120,012 | (14.4)% | $ | 73,678 | $ | 101,460 | (27.4)% | $ | 89,291 | $ | 65,907 | 35.5% | ||||||||||||||||||||||||||||||||||||||||||||
| Homeowners | 183,331 | 222,019 | (17.4)% | 66,758 | 68,180 | (2.1)% | 76,037 | 82,475 | (7.8)% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | 2,593 | 2,951 | (12.1)% | 1,618 | 2,820 | (42.6)% | 1,153 | 1,023 | 12.7% | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total Premium | $ | 288,676 | $ | 344,982 | (16.3)% | $ | 142,054 | $ | 172,460 | (17.6)% | $ | 166,481 | $ | 149,405 | 11.4% | ||||||||||||||||||||||||||||||||||||||||||||
| Consolidated Total | $ | 4,291,282 | $ | 4,258,843 | 0.8% | $ | 3,489,767 | $ | 3,194,666 | 9.2% | $ | 3,319,346 | $ | 3,048,446 | 8.9% | ||||||||||||||||||||||||||||||||||||||||||||
(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.
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Fee Income
$ in thousands
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||||||||||||||||||||
| Property & Casualty | |||||||||||||||||||||||||||||||||||
| Service and Fee Income | $ | 109,756 | $ | 115,557 | (5.0)% | $ | 332,344 | $ | 348,045 | (4.5)% | |||||||||||||||||||||||||
| Ceding Commission Income | 21,567 | 40,260 | (46.4)% | 92,657 | 128,087 | (27.7)% | |||||||||||||||||||||||||||||
| Property & Casualty | $ | 131,323 | $ | 155,817 | (15.7)% | $ | 425,001 | $ | 476,132 | (10.7)% | |||||||||||||||||||||||||
| Accident & Health | |||||||||||||||||||||||||||||||||||
| Service and Fee Income | |||||||||||||||||||||||||||||||||||
| Group | $ | 44,306 | $ | 34,848 | 27.1% | $ | 128,029 | $ | 98,084 | 30.5% | |||||||||||||||||||||||||
| Individual | 2,379 | 2,128 | 11.8% | 6,861 | 5,506 | 24.6% | |||||||||||||||||||||||||||||
| Medicare Sales | 10,032 | 5,610 | 78.8% | 32,822 | 17,870 | 83.7% | |||||||||||||||||||||||||||||
| Third Party Fee | 31,881 | 21,150 | 50.7% | 81,478 | 56,225 | 44.9% | |||||||||||||||||||||||||||||
| Total Service and Fee Income | 88,598 | 63,736 | 39.0% | 249,190 | 177,685 | 40.2% | |||||||||||||||||||||||||||||
| Ceding Commission Income | 205 | 2,261 | (90.9)% | 1,236 | 8,780 | (85.9)% | |||||||||||||||||||||||||||||
| Accident and Health | $ | 88,803 | $ | 65,997 | 34.6% | $ | 250,426 | $ | 186,465 | 34.3% | |||||||||||||||||||||||||
| Total National General | $ | 220,126 | $ | 221,814 | (0.8)% | $ | 675,427 | $ | 662,597 | 1.9% | |||||||||||||||||||||||||
| Reciprocal Exchanges | |||||||||||||||||||||||||||||||||||
| Service and Fee Income | $ | 1,628 | $ | 1,585 | 2.7% | $ | 5,121 | $ | 4,471 | 14.5% | |||||||||||||||||||||||||
| Ceding Commission Income | 8,952 | 15,066 | (40.6)% | 33,776 | 50,446 | (33.0)% | |||||||||||||||||||||||||||||
| Reciprocal Exchanges | $ | 10,580 | $ | 16,651 | (36.5)% | $ | 38,897 | $ | 54,917 | (29.2)% | |||||||||||||||||||||||||
Consolidated Total (A) | $ | 215,694 | $ | 219,213 | (1.6)% | $ | 672,672 | $ | 663,354 | 1.4% | |||||||||||||||||||||||||
NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges in Service and Fee Income of $(15,012) and $(19,252) in the three months ended September 30, 2020, and 2019, respectively, and $(41,652) and $(54,160) in the nine months ended September 30, 2020, and 2019, respectively.
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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 $231,593 and $238,841 from related parties at September 30, 2020, and December 31, 2019, respectively.
(3) Other includes $1,210 and $2,391 from related parties at September 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 - September 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 113,934,259 and outstanding 113,475,176 shares - September 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 - September 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 and other general and administrative expenses (M&A advisory cost). 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 and other general and administrative expenses (M&A advisory cost) less non-cash amortization of intangible assets and non-cash impairment of goodwill. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business. 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
16
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 $87.1 million and $11.5 million from these events for the three months ended September 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 | 92.4% | 9.2% | 83.2% | ||||||||||||||||||||||
| 2020 | Overall NGHC | 89.2% | 7.7% | 81.5% | ||||||||||||||||||||||
| 2019 | P&C Segment | 97.0% | 1.4% | 95.6% | ||||||||||||||||||||||
| 2019 | Overall NGHC | 92.5% | 1.2% | 91.3% | ||||||||||||||||||||||
(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 Gallant
SVP of Capital Strategy and Investor Relations
Phone: 212-380-9462
Email: Clifford.Gallant@NGIC.COM
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