×

Federated National Holding Company Reports Second Quarter 2017 Results

SUNRISE, Fla., Aug. 07, 2017 (GLOBE NEWSWIRE) -- Federated National Holding Company (the “Company”) (Nasdaq:FNHC) today reported results for the three and six months ended June 30, 2017.

Q2 2017 highlights (as measured against the same three-month period last year, except where noted):

  • Gross written premiums of $168.7 million
  • 4.1% increase in Florida homeowners’ policies to approximately 280,000
  • 56.7% increase in non-Florida homeowners’ policies to approximately 24,500
  • 35.6% increase in total revenue to $97.6 million
  • $2.8 million of claims, net of reinsurance, from rainstorms, tornados, and other severe weather events in Florida, Louisiana, and Texas
  • $3.1 million of losses from prior year development related to Automobile and Homeowners lines of business
  • Net income of $4.9 million or $0.37 per diluted share
  • 4.4% increase in book value per share, excluding noncontrolling interest, to $16.97 as compared with $16.26 at December 31, 2016
  • Total loss reserves at June 30, 2017 of $157.0 million
  • Repurchased 390,923 shares of common stock at a weighted average price of $15.82, during the second quarter of 2017.

Commenting on the quarter, Mr. Michael H. Braun, the Company’s Chief Executive Officer, said, “Our net income of $4.9 million for the second quarter includes an expense of $2.8 million in claims, net of reinsurance, related to multiple severe weather events that impacted our policyholders. During the quarter, we also achieved multiple initiatives including finalization of our excess-of-loss catastrophe reinsurance program, replacement of our 10% Florida homeowners quota share treaty, and implementation of actions to improve underwriting results in our automobile book of business. We also continued with our previously announced share repurchase program. Our 2016 statewide average rate increase of 5.6% on our Florida homeowners’ book of business will be fully reflected in our earned premium for the third quarter, and our additional statewide average rate increase of 9.9% takes effect beginning August 1st. We are also pleased to provide enhanced disclosures this quarter via the presentation of our results by line of business basis, demonstrating our continued commitment to transparency with the investing community. It is our intent to provide this supplemental information on an ongoing basis.”

Line of Business Reporting and Income Statement Reclassifications

In order to provide greater transparency into our operating results, beginning this quarter the Company has provided supplemental line of business information. The “Homeowners” line of business consists of our homeowners and fire property and casualty insurance business, which currently operates in Florida, Alabama, Texas, Louisiana and South Carolina. The “Automobile” line of business consists of our nonstandard personal automobile insurance business which currently operates in Georgia, Texas, Alabama, and Florida. The “Other” line of business primarily consists of our commercial general liability and federal flood businesses, along with corporate and investment operations. As part of our initial presentation of line of business information, we have provided supplemental schedules of quarterly results dating back to the first quarter of 2016.

In conjunction with the inception of line of business reporting, the Company has reclassified certain items in the consolidated statement of operations. These reclassifications have no impact on net income, but do impact Other income, Losses and loss adjustment expenses and Commissions and other underwriting expenses, and accordingly, the loss ratio, expense ratio and combined ratio. These reclassifications are immaterial to the consolidated financial statements, but better reflect the substance of the underlying activities. The items reclassified include: (1) ceding commission income in Automobile is now presented in Commissions and other underwriting expenses, having previously been presented in Other income; and (2) compensation costs associated with our claims management activities are now presented in Loss and loss adjustment expenses, having previously been presented in Commissions and other underwriting expenses. To aid users of our financial statements, we have provided a schedule of consolidated quarterly results and operating ratios dating back to the first quarter of 2016. These reclassifications are reflected in all consolidated and line of business results presented herein.

Revenues

  • Total revenues increased $25.6 million, or 35.6%, to $97.6 million for the three months ended June 30, 2017, compared with $71.9 million for the same three-month period last year.

  • Gross written premiums decreased $2.5 million, or 1.5%, to $168.7 million in the quarter, compared with $171.2 million for the same three-month period last year. The decrease was driven by Automobile, which decreased $8.4 million, offset by Homeowners increasing $6.0 million. The Automobile decrease was related to moving two of our programs into run-off during the second half of 2016, plus a third program in the first quarter of 2017, thus reducing the premiums being written this quarter. Homeowners’ non-Florida continues to have significant growth in 2017, specifically in Louisiana and Texas, with Texas beginning to write policies in the first quarter of 2017. Homeowners’ Florida written premiums this quarter, which include the 5.6% rate increase that became effective August 1, 2016, was in line with the same period last year.

  • Gross premiums earned increased $13.2 million, or 9.6%, to $150.6 million, driven primarily by growth in Homeowners spanning all states, and to a lesser extent by growth in Automobile.

  • Ceded premiums earned decreased $9.9 million, or 12.8%, to $67.4 million in the quarter, compared with the same three-month period last year. The decrease in ceded premiums earned was driven primarily by the expiration of the 30% Florida-only property quota share treaty, which ended on July 1, 2016. The effect of this expiration was partially offset by additional excess-of-loss reinsurance costs purchased for the 2016-2017 reinsurance programs, which became effective on June 1, 2016 and July 1, 2016. Additionally, in Automobile, ceded premiums as a percentage of gross premiums earned decreased to 65% this quarter compared with 79% in the same period last year. This decrease is the result of one of our auto programs exceeding the premium limit in the related reinsurance treaty. This program was terminated effective July 1, 2017.

  • Together, the increase in gross earned premium and the decrease in ceded premiums drove net premiums earned of $83.2 million, a $23.1 million increase, or 38.5%, from the same three-month period last year.

  • Net realized investment gains were $2.6 million for the three months ended June 30, 2017, compared to less than $0.1 million in the prior year period. This increase was driven by a redistribution of our equity portfolio between our investment managers during the second quarter of 2017.
  • Other income decreased $0.1 million to $4.7 million for the current quarter, compared with $4.8 million in the prior year period. The decrease was primarily the result of a profitability management decision to move from 12-month term Automobile policies to 6-month policy terms in one of our largest programs enabling rate increases to take effect more quickly. Increases in other income in Homeowners and Other largely offset the decline from Automobile.

Expenses

  • Losses and loss adjustment expenses (“LAE”) increased $6.0 million, or 12.2%, to $55.0 million for the three months ended June 30, 2017, compared with $49.0 million for the same three-month period last year. Losses and LAE includes reported claims, whether paid or unpaid, as well as the provision of reserves for estimated reported claims. Approximately $5 million of the increase in losses and LAE represents a volume variance driven strictly by growth in premiums in the second quarter of 2017 compared with the second quarter of 2016. Losses were also impacted by claims, net of reinsurance of $2.8 million related to rainstorms, tornados, and other severe weather events during the quarter in the states of Florida, Louisiana and Texas. Additionally, the Company experienced adverse development, net of reinsurance, of $3.1 million in Automobile and Homeowners. These increased losses were lower than the elevated level of losses in the second quarter of 2016 related to Homeowners’ adverse development and the impact of severe weather events, such as Tropical Storm Colin. The remainder of the quarter-over-quarter variance is related to lower ceded losses in the 2017 quarter as a result of the expiration of the 30% Florida-only property quota share treaty, as noted above.
  • During the quarter, we reclassified $3.5 million of net reserves related to our commercial general liability business, which resides in the Other line of business, to Homeowners. This movement was a direct result of reassessing our reserves at a line of business level. Previously, we assessed the adequacy of our loss reserves on a consolidated company basis. This reclassification had no impact on net income on a consolidated basis and no impact to the overall consolidated net loss reserves.
  • Commissions and other underwriting expenses increased $14.2 million, or 89.1%, to $30.2 million for the three months ended June 30, 2017, compared with $16.0 million for the three months ended June 30, 2016. The increase was the result of higher acquisition costs in support of the premium growth in Homeowners and the lower ceded commissions from the expiration of the 30% Florida-only property quota share treaty on July 1, 2016.

Stock Repurchase Program

  • During the second quarter of 2017, the Company repurchased 390,923 shares of common stock for $6.2 million at a weighted average price of $15.82. The Company has repurchased an additional 84,445 shares subsequent to quarter end.

Conference Call Information

The Company will hold an investor conference call at 9:00 AM (ET) Tuesday, August 8, 2017. The Company’s CEO, Michael Braun, its CFO, Ronald Jordan, and its CAO, Erick Fernandez will discuss the financial results and review the outlook for the Company. Messrs. Braun, Jordan and Fernandez invite interested parties to participate in the conference call.

Listeners interested in participating in the Q&A session may dial-in with the number below:
(877) 303-6913

Conference ID: 53101026

A live webcast of the call will be available online via the “Conference Calls” section of the Company’s website at FedNat.com or interested parties can click on the following link:

http://www.fednat.com/investors/conference-calls/

Please call at least five minutes in advance to ensure that you are connected prior to the presentation. A webcast replay of the conference call will be available shortly after the live webcast is completed and may be accessed via the Company’s website.

About the Company

The Company is authorized to underwrite, and/or place through our wholly owned subsidiaries, homeowners’ multi-peril, personal automobile, commercial general liability, federal flood, and various other lines of insurance in Florida and various other states. The Company also serves as managing general agent for its joint venture, Monarch National Insurance Company. The Company markets and distributes its own and third-party insurers’ products and our other services through a network of independent agents. The Company also utilizes a select number of general agents for the same purpose.

Forward-Looking Statements /Safe Harbor Statements

Safe harbor statement under the Private Securities Litigation Reform Act of 1995:

Statements that are not historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as “anticipate,” “believe,” “budget,” “contemplate,” “continue,” “could,” “envision,” “estimate,” “expect,” “guidance,” “indicate,” “intend,” “may,” “might,” “plan,” “possibly,” “potential,” “predict,” “probably,” “pro-forma,” “project,” “seek,” “should,” “target,” or “will” or the negative thereof or other variations thereon and similar words or phrases or comparable terminology are intended to identify forward-looking statements.

Forward-looking statements might also include, but are not limited to, one or more of the following:

  • Projections of revenues, income, earnings per share, dividends, capital structure or other financial items or measures;
  • Descriptions of plans or objectives of management for future operations, insurance products/or services;
  • Forecasts of future insurable events, economic performance, liquidity, need for funding and income; and
  • Descriptions of assumptions or estimates underlying or relating to any of the foregoing.

The risks and uncertainties include, without limitation, risks and uncertainties related to estimates, assumptions and projections generally; the nature of the Company’s business; the adequacy of its reserves for losses and loss adjustment expense; claims experience; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail) and other catastrophic losses; reinsurance costs and the ability of reinsurers to indemnify the Company; raising additional capital and our potential failure to meet minimum capital and surplus requirements; potential assessments that support property and casualty insurance pools and associations; the effectiveness of internal financial controls; the effectiveness of our underwriting, pricing and related loss limitation methods; changes in loss trends, including as a result of insureds’ assignment of benefits; court decisions and trends in litigation; our potential failure to pay claims accurately; ability to obtain regulatory approval applications for requested rate increases, or to underwrite in additional jurisdictions, and the timing thereof; the impact that the results of the Monarch joint venture may have on our results of operations; inflation and other changes in economic conditions (including changes in interest rates and financial markets); pricing competition and other initiatives by competitors; legislative and regulatory developments; the outcome of litigation pending against the Company, and any settlement thereof; dependence on investment income and the composition of the Company’s investment portfolio; insurance agents; ratings by industry services; the reliability and security of our information technology systems; reliance on key personnel; acts of war and terrorist activities; and other matters described from time to time by the Company in releases and publications, and in periodic reports and other documents filed with the United States Securities and Exchange Commission.

In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including claims and litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a contingency. Reported results may therefore appear to be volatile in certain accounting periods.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We do not undertake any obligation to update publicly or revise any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
(in thousands, except per share data)
Revenue:
Gross premiums written$168,692 $171,218 $314,743 $307,242
Gross premiums earned 150,563 137,334 298,541 265,433
Ceded premiums earned (67,404) (77,289) (136,889) (150,391)
Net premiums earned 83,159 60,045 161,652 115,042
Net investment income 2,560 2,194 4,878 4,234
Net realized investment gains 2,648 7 2,543 934
Direct written policy fees 4,486 4,925 9,571 9,127
Other income 4,710 4,778 9,637 8,828
Total revenue 97,563 71,949 188,281 138,165
Costs and expenses:
Losses and loss adjustment expenses 54,956 48,983 108,722 80,243
Commissions and other underwriting expenses 30,197 15,971 57,336 31,364
General and administrative expenses 5,076 5,086 9,695 9,167
Interest expense 82 94 166 178
Total costs and expenses 90,311 70,134 175,919 120,952
Income before income taxes 7,252 1,815 12,362 17,213
Income taxes 2,635 697 4,573 6,492
Net income 4,617 1,118 7,789 10,721
Net (loss) income attributable to noncontrolling interest (328) 127 (301) 195
Net income attributable to Federated National Holding Company shareholders$4,945 $991 $8,090 $10,526
Net income per share:
Basic$0.38 $0.07 $0.61 $0.76
Diluted$0.37 $0.07 $0.60 $0.75
Number of shares used to calculate net income per share:
Basic 13,171 13,805 13,305 13,816
Diluted 13,256 13,988 13,405 14,013
Dividends declared per share of common stock$0.08 $0.06 $0.16 $0.11


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Gross premiums written:(in thousands)
Homeowners/Fire Florida$136,811 $136,395 $247,664 $244,020
Homeowners/Fire non-Florida 14,815 9,253 25,183 16,295
Personal automobile 10,622 18,996 29,913 34,685
Commercial general liability 2,926 3,571 6,222 7,322
Federal flood 3,518 3,003 5,761 4,920
Total gross premiums written$168,692 $171,218 $314,743 $307,242
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Gross premiums earned:(in thousands)
Homeowners/Fire Florida$119,832 $111,637 $237,376 $219,185
Homeowners/Fire non-Florida 10,230 6,785 19,330 12,639
Personal automobile 14,760 13,283 30,407 22,416
Commercial general liability 3,140 3,444 6,334 6,921
Federal flood 2,601 2,185 5,094 4,272
Total gross premiums earned$150,563 $137,334 $298,541 $265,433
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Net premiums earned:(in thousands)
Homeowners/Fire$74,958 $54,028 $145,554 $104,135
Personal automobile 5,224 2,752 10,093 4,346
Commercial general liability 2,977 3,265 6,005 6,561
Total net premiums earned$83,159 $60,045 $161,652 $115,042
Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
Commissions and other underwriting expenses:(in thousands)
Homeowners/Fire Florida$14,407 $13,739 $28,464 $26,025
All other lines of business 8,210 7,027 16,734 13,022
Ceded commissions (4,633) (14,366) (9,696) (27,788)
Total commissions and other fees 17,984 6,400 35,502 11,259
Salaries and wages 3,728 2,711 7,403 6,809
Other underwriting expenses 8,485 6,860 14,431 13,296
Total commissions and other underwriting expenses:$30,197 $15,971 $57,336 $31,364


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics (continued)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016 2017 2016
Net Loss Ratio 66.1% 81.6% 67.3% 69.8%
Net Expense Ratio 42.4% 35.1% 41.5% 35.2%
Combined Ratio 108.5% 116.6% 108.7% 105.0%
Gross Loss Ratio 48.5% 54.5% 49.3% 48.4%
Gross Expense Ratio 26.5% 25.8% 25.7% 25.7%
Book value per share excluding noncontrolling interest$16.97 $17.92 $16.97 $17.92


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Quarterly Statements of Operations and Operating Metrics
(Unaudited)
Consolidated
Three Months Ended
March 31, 2016June 30, 2016Sept 30, 2016Dec 31, 2016March 31, 2017June 30, 2017
(in thousands)
Revenue:
Gross premiums written$136,024 $171,218 $161,137 $137,105 $146,051 $168,692
Gross premiums earned 128,099 137,334 147,624 152,365 147,978 150,563
Ceded premiums earned (73,102) (77,289) (78,219) (76,940) (69,485) (67,404)
Net premiums earned 54,997 60,045 69,405 75,425 78,493 83,159
Net investment income 2,040 2,194 2,164 2,665 2,318 2,560
Net realized investment gains 927 7 1,126 985 (105) 2,648
Direct written policy fees 4,202 4,925 4,318 4,285 5,085 4,486
Other income 4,050 4,778 4,493 4,071 4,927 4,710
Total revenue 66,216 71,949 81,506 87,431 90,718 97,563
Costs and expenses:
Losses and loss adjustment expenses 31,260 48,983 45,973 69,765 53,766 54,956
Commissions and other underwriting expenses 15,393 15,971 29,867 29,622 27,139 30,197
General and administrative expenses 4,081 5,086 4,044 3,975 4,619 5,076
Interest expense 84 94 81 89 84 82
Total costs and expenses 50,818 70,134 79,965 103,451 85,608 90,311
Income (loss) before income taxes 15,398 1,815 1,541 (16,020) 5,110 7,252
Income taxes 5,795 697 103 (3,912) 1,938 2,635
Net income (loss) 9,603 1,118 1,438 (12,108) 3,172 4,617
Net income (loss) attributable to noncontrolling interest 68 127 44 8 27 (328)
Net income (loss) attributable to Federated National Holding Company shareholders$9,535 $991 $1,394 $(12,116) $3,145 $4,945
Net Loss Ratio 56.8% 81.6% 66.2% 92.5% 68.5% 66.1%
Net Expense Ratio 35.4% 35.1% 48.9% 44.5% 40.5% 42.4%
Combined Ratio 92.2% 116.6% 115.1% 137.0% 109.0% 108.5%
Gross Loss Ratio 41.9% 54.5% 48.9% 79.6% 50.0% 48.5%
Gross Expense Ratio 25.7% 25.8% 26.5% 24.7% 24.8% 26.5%


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2017 2016
ASSETS(in thousands, except share and per share data)
Investments
Debt securities, available-for-sale, at fair value$383,910 $374,756
Debt securities, held-to-maturity, at amortized cost 5,421 5,551
Equity securities, available-for-sale, at fair value 45,445 29,375
Total investments 434,776 409,682
Cash and cash equivalents 99,529 74,593
Prepaid reinsurance premiums 120,589 156,932
Premiums receivable, net of allowance 59,422 54,854
Reinsurance recoverable, net 41,090 48,530
Deferred acquisition costs 41,299 37,477
Income taxes receivable 13,468 13,871
Property and equipment, net 4,298 4,194
Other assets 11,250 11,509
TOTAL ASSETS$825,721 $811,642
LIABILITIES
Loss and loss adjustment expense reserves$156,973 $158,476
Unearned premiums 310,224 294,022
Reinsurance payable 69,782 79,154
Debt from consolidated variable interest entity 4,919 4,909
Deferred income taxes, net 7,397 1,433
Other liabilities 36,589 35,792
Total liabilities 585,884 573,786
SHAREHOLDERS’ EQUITY
Preferred stock, $0.01 par value: 1,000,000 shares authorized - -
Common stock, $0.01 par value: 25,000,000 shares authorized; 13,060,207 and 13,473,120 shares issued and outstanding, respectively 130 134
Additional paid-in capital 138,191 136,779
Accumulated other comprehensive income 5,157 1,941
Retained earnings 78,190 80,275
Total Federated National Holding Company shareholders’ equity 221,668 219,129
Noncontrolling interest 18,169 18,727
Total shareholders' equity 239,837 237,856
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$825,721 $811,642


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)
Three Months Ended June 30,
2017 2016
HomeownersAutomobileOtherConsolidated HomeownersAutomobileOtherConsolidated
(in thousands)
Revenue:
Gross premiums written$151,626 $10,622 $6,444 $168,692 $145,648 $18,996 $6,574 $171,218
Gross premiums earned 130,062 14,760 5,741 150,563 118,422 13,283 5,629 137,334
Ceded premiums earned (55,104) (9,536) (2,764) (67,404) (64,394) (10,531) (2,364) (77,289)
Net premiums earned 74,958 5,224 2,977 83,159 54,028 2,752 3,265 60,045
Net investment income 2,560 2,560 2,194 2,194
Net realized investment gains 2,648 2,648 7 7
Direct written policy fees 2,559 1,767 160 4,486 2,398 2,356 171 4,925
Other income 2,753 970 987 4,710 2,092 1,889 797 4,778
Total revenue 80,270 7,961 9,332 97,563 58,518 6,997 6,434 71,949
Costs and expenses:
Losses and loss adjustment expenses 49,095 7,086 (1,225) 54,956 43,478 2,203 3,302 48,983
Commissions and other underwriting expenses 25,741 3,217 1,239 30,197 12,830 2,008 1,133 15,971
General and administrative expenses 3,883 175 1,018 5,076 3,900 150 1,036 5,086
Interest expense 82 82 94 94
Total costs and expenses 78,801 10,478 1,032 90,311 60,302 4,361 5,471 70,134
Income (loss) before income taxes 1,469 (2,517) 8,300 7,252 (1,784) 2,636 963 1,815
Income taxes 567 (970) 3,038 2,635 (688) 1,016 369 697
Net income (loss) 902 (1,547) 5,262 4,617 (1,096) 1,620 594 1,118
Net (loss) income attributable to noncontrolling interest (328) (328) 127 127
Net income (loss) attributable to Federated National Holding Company shareholders$1,230 $(1,547) $5,262 $4,945 $(1,223) $1,620 $594 $991
Net loss ratio 65.5% 135.6% (41.1)% 66.1% 80.5% 80.1% 101.1% 81.6%
Net expense ratio 39.5% 64.9% 42.4% 31.0% 78.4% 35.1%
Combined ratio 105.0% 200.6% 108.5% 111.4% 158.5% 116.6%


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)
(Continued)
Six Months Ended June 30,
2017 2016
HomeownersAutomobileOtherConsolidated HomeownersAutomobileOtherConsolidated
(in thousands)
Revenue:
Gross premiums written$272,847 $29,913 $11,983 $314,743 $260,315 $34,685 $12,242 $307,242
Gross premiums earned 256,706 30,407 11,428 298,541 231,824 22,416 11,193 265,433
Ceded premiums earned (111,152) (20,314) (5,423) (136,889) (127,689) (18,070) (4,632) (150,391)
Net premiums earned 145,554 10,093 6,005 161,652 104,135 4,346 6,561 115,042
Net investment income - - 4,878 4,878 - - 4,234 4,234
Net realized investment gains - - 2,543 2,543 - - 934 934
Direct written policy fees 4,629 4,622 320 9,571 4,288 4,500 339 9,127
Other income 5,485 2,487 1,665 9,637 3,908 3,520 1,400 8,828
Total revenue 155,668 17,202 15,411 188,281 112,331 12,366 13,468 138,165
Costs and expenses:
Losses and loss adjustment expenses 93,897 13,512 1,313 108,722 70,812 3,729 5,702 80,243
Commissions and other underwriting expenses 48,155 6,695 2,486 57,336 25,642 3,399 2,323 31,364
General and administrative expenses 7,373 350 1,972 9,695 7,094 300 1,773 9,167
Interest expense 166 - - 166 178 - - 178
Total costs and expenses 149,591 20,557 5,771 175,919 103,726 7,428 9,798 120,952
Income (loss) before income taxes 6,077 (3,355) 9,640 12,362 8,605 4,938 3,670 17,213
Income taxes 2,345 (1,294) 3,522 4,573 3,320 1,904 1,268 6,492
Net income (loss) 3,732 (2,061) 6,118 7,789 5,285 3,034 2,402 10,721
Net (loss) income attributable to noncontrolling interest (301) - - (301) 195 - - 195
Net income (loss) attributable to Federated National Holding Company shareholders$4,033 $(2,061) $6,118 $8,090 $5,090 $3,034 $2,402 $10,526
Net loss ratio 64.5% 133.9% 21.9% 67.3% 68.0% 85.8% 86.9% 69.8%
Net expense ratio 38.1% 69.8% 41.5% 31.4% 85.1% 35.2%
Combined ratio 102.7% 203.7% 108.7% 99.4% 170.9% 105.0%


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Quarterly Statements of Operations and Operating Metrics by Line of Business
(Unaudited)
(Continued)
Homeowners
Three Months Ended
March 31, 2016June 30, 2016Sept 30, 2016Dec 31, 2016March 31, 2017June 30, 2017
(in thousands)
Revenue:
Gross premiums written$114,667 $145,648 $133,532 $118,890 $121,221 $151,626
Gross premiums earned 113,402 118,422 124,709 127,821 126,644 130,062
Ceded premiums earned (63,295) (64,394) (62,288) (59,996) (56,048) (55,104)
Net premiums earned 50,107 54,028 62,421 67,825 70,596 74,958
Direct written policy fees 1,890 2,398 2,190 1,926 2,070 2,559
Other income 1,816 2,092 2,765 2,673 2,732 2,753
Total revenue 53,813 58,518 67,376 72,424 75,398 80,270
Costs and expenses:
Losses and loss adjustment expenses 27,334 43,478 40,399 58,709 44,802 49,095
Commissions and other underwriting expenses 12,812 12,830 23,875 23,088 22,414 25,741
General and administrative expenses 3,194 3,900 3,033 2,952 3,490 3,883
Interest expense 84 94 81 89 84 82
Total costs and expenses 43,424 60,302 67,388 84,838 70,790 78,801
Income (loss) before income taxes 10,389 (1,784) (12) (12,414) 4,608 1,469
Income taxes 4,008 (688) (4) (4,787) 1,778 567
Net income (loss) 6,381 (1,096) (8) (7,627) 2,830 902
Net income (loss) attributable to noncontrolling interest 68 127 44 8 27 (328)
Net income (loss) attributable to Federated National Holding Company shareholders$6,313 $(1,223) $(52) $(7,635) $2,803 $1,230
Net Loss Ratio 54.6% 80.5% 64.7% 86.6% 63.5% 65.5%
Net Expense Ratio 31.9% 31.0% 43.1% 38.4% 36.7% 39.5%
Combined Ratio 86.5% 111.4% 107.8% 125.0% 100.2% 105.0%


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Quarterly Statements of Operations and Operating Metrics by Line of Business
(Unaudited)
(Continued)
Automobile
Three Months Ended
March 31, 2016June 30, 2016Sept 30, 2016Dec 31, 2016March 31, 2017June 30, 2017
(in thousands)
Revenue:
Gross premiums written$15,689 $18,996 $21,523 $13,271 $19,291 $10,622
Gross premiums earned 9,133 13,283 17,163 18,732 15,647 14,760
Ceded premiums earned (7,539) (10,531) (13,409) (14,308) (10,778) (9,536)
Net premiums earned 1,594 2,752 3,754 4,424 4,869 5,224
Direct written policy fees 2,144 2,356 1,977 2,216 2,855 1,767
Other income 1,631 1,889 1,318 604 1,517 970
Total revenue 5,369 6,997 7,049 7,244 9,241 7,961
Costs and expenses:
Losses and loss adjustment expenses 1,526 2,203 3,498 5,829 6,426 7,086
Commissions and other underwriting expenses 1,391 2,008 4,883 5,325 3,478 3,217
General and administrative expenses 150 150 150 150 175 175
Total costs and expenses 3,067 4,361 8,531 11,304 10,079 10,478
Income (loss) before income taxes 2,302 2,636 (1,482) (4,060) (838) (2,517)
Income taxes 888 1,016 (572) (1,566) (324) (970)
Net income (loss) attributable to Federated National Holding Company shareholders$1,414 $1,620 $(910) $(2,494) $(514) $(1,547)
Net Loss Ratio 95.7% 80.1% 93.2% 131.8% 132.0% 135.6%
Net Expense Ratio 96.7% 78.4% 134.1% 123.8% 75.0% 64.9%
Combined Ratio 192.4% 158.5% 227.3% 255.5% 207.0% 200.6%


FEDERATED NATIONAL HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Quarterly Statements of Operations and Operating Metrics by Line of Business
(Unaudited)
(Continued)
Other
Three Months Ended
March 31, 2016June 30, 2016Sept 30, 2016Dec 31, 2016March 31, 2017June 30, 2017
(in thousands)
Revenue:
Gross premiums written$ 5,668 $ 6,574 $ 6,082 $ 4,944 $ 5,539 $ 6,444
Gross premiums earned 5,564 5,629 5,752 5,812 5,687 5,741
Ceded premiums earned (2,268) (2,364) (2,522) (2,636) (2,659) (2,764)
Net premiums earned 3,296 3,265 3,230 3,176 3,028 2,977
Net investment income 2,040 2,194 2,164 2,665 2,318 2,560
Net realized investment gains 927 7 1,126 985 (105) 2,648
Direct written policy fees 168 171 151 143 160 160
Other income 603 797 410 794 678 987
Total revenue 7,034 6,434 7,081 7,763 6,079 9,332
Costs and expenses:
Losses and loss adjustment expenses 2,400 3,302 2,076 5,227 2,538 (1,225)
Commissions and other underwriting expenses 1,190 1,133 1,109 1,209 1,247 1,239
General and administrative expenses 737 1,036 861 873 954 1,018
Interest expense - - - - - -
Total costs and expenses 4,327 5,471 4,046 7,309 4,739 1,032
Income before income taxes 2,707 963 3,035 454 1,340 8,300
Income taxes 899 369 679 2,441 484 3,038
Net income (loss) attributable to Federated National Holding Company shareholders$ 1,808 $ 594 $ 2,356 $ (1,987) $ 856 $ 5,262
Net Loss Ratio 72.8% 101.1% 64.3% 164.6% 83.8% (41.1)%


CONTACT: Michael H. Braun, CEO (954) 308-1322, Ronald Jordan, CFO (954) 308-1363, or Erick A. Fernandez, CAO (954) 308-1341 Federated National Holding Company

Source:Federated National Holding Company