EX-99.1 2 fnhcq4-2018pressrelease.htm EXHIBIT 99.1 Exhibit




FEDNAT HOLDING COMPANY REPORTS
FOURTH QUARTER AND FULL YEAR 2018 RESULTS

Sunrise, Florida, February 27, 2019 - FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today reported results for the three and twelve months ended December 31, 2018.

Q4 2018 highlights (as measured against the same three-month period last year, except where noted):
•
Net loss of $9.3 million or $0.73 per diluted share, including $23.7 million of pre-tax claims, net, from Hurricane Michael and other severe weather events.
•
Net loss of $5.5 million or $0.43 per diluted share, excluding investment losses of $5.1 million, pre-tax.
•
Gross written premiums of $127.6 million.
•
4.1% increase in net premiums earned to $91.1 million, with Homeowners up 11.1%.
•
Quarter-end Florida homeowners’ in-force policies of approximately 247,000.
•
45.5% increase in non-Florida homeowners in-force policies to approximately 44,000.
•
During 2018, decreased 105 positions representing over $6.0 million in annual savings as a result of management's initiatives to maximize operational efficiencies.
•
Book value per share decreased 3.5% to $16.84 as compared to $17.45 as of September 30, 2018, due to the impact of Hurricane Michael.
•
Book value per share excluding accumulated other comprehensive income increased 6.0% to $17.13 as of December 31, 2018 from $16.16 as of December 31, 2017.

Mr. Michael H. Braun, the Company’s Chief Executive Officer, said “In 2018, we continued to make excellent progress in strengthening our underwriting profitability, controlling our expense structure and positioning our core Homeowners business for growth and further diversification.  We generated a solid increase in earnings for the year despite the fourth quarter impact of severe weather events, including Hurricane Michael, a major storm that affected many of our policy holders in Florida’s Panhandle area. Our thoughts go out to all those individuals that were impacted by the recent weather events and have deployed the appropriate resources to help our policyholders in their time of need. Excluding the impact of net retained losses related to weather and the continued wind down of our non-core auto and commercial general liability business lines, our fourth quarter performance was strong. Our core Homeowners line continued to show improvement in non-catastrophe underwriting profitability and a decrease in our attritional loss ratio. We continue to expand our non-Florida homeowners business as gross premiums earned grew 49% compared to last year’s fourth quarter.  In looking at the full year performance, our prudent underwriting and exposure management resulted in a significant cost savings from our reinsurance program along with other initiatives that resulted in greater operating efficiencies. The progress we made on our growth objectives position us for long term, sustainable earnings growth. “
 
Mr. Braun added, “Adding to our excitement about our growth opportunity is the definitive agreement to acquire the insurance operations of 1347 Property Insurance Holding, Inc., announced earlier this week.  This acquisition is a great strategic and financial fit for FedNat, accelerating our geographic diversification while delivering immediate earnings accretion and attractive cost synergies. We believe that the combination of these quality homeowners insurers will help enhance value for FedNat shareholders.”

Consolidated

•
Net loss of $9.3 million or $0.73 per diluted share during the fourth quarter of 2018, as compared to net income of $6.3 million or $0.48 per diluted share during the fourth quarter of 2017. The fourth quarter was significantly impacted by $23.7 million of additional losses related to Hurricane Michael and other severe weather events during the period.
•
Compared to September 30, 2018, book value per share decreased $0.61 to $16.84 at December 31, 2018. The increase was predominantly driven by a net loss of $0.73 per share, as noted above, and dividends declared of $0.08 per share, partially offset by a decrease in our accumulated other comprehensive loss of $0.17 per share.

Revenues

•
Total revenue decreased $5.4 million or 5.2%, to $96.4 million for the three months ended December 31, 2018, compared with $101.8 million for the three months ended December 31, 2017. The decrease was primarily driven by $5.4 million lower net earned premiums from the non-core lines of business we are exiting, investment losses of $5.1 million and lower brokerage income offset by higher net premiums earned in Homeowners as a result of decreased reinsurance spend for the three months ended December 31, 2018 as compared to the same period in 2017.
•
With continued focus on profitability and underwriting exposure, gross written premiums decreased $6.3 million, or 4.7%, to $127.6 million in the quarter, compared with $133.9 million for the same three-month period last year. The decrease in

1


premiums written is the result of declining premiums in the non-core businesses we are exiting, Automobile and commercial general liability. Gross written premiums in Homeowners grew by 1.9%, with 52.4% non-Florida growth out-pacing the redirection from our exposure management efforts in Florida. Our homeowners non-Florida business continues to write premiums at a significant growth rate across Texas and South Carolina, in particular.
•
Gross premiums earned decreased $10.1 million, or 6.6%, to $141.8 million for the three months ended December 31, 2018, as compared to $151.9 million for the three months ended December 31, 2017. This result was driven by our decision to exit the Automobile and commercial general liability lines. In homeowners Florida, our 10.0% rate increase, effective August 1, 2017, has earned out and homeowners non-Florida grew by 48.6% over the fourth quarter of 2017 on an earned basis.
•
Ceded premiums decreased $13.7 million, or 21.3%, to $50.7 million in the quarter, compared to $64.4 million the same three-month period last year. The decrease was primarily driven by lower Homeowners excess of loss reinsurance spend and lower ceded premiums in Automobile as a result of decreases in premiums earned during the period.
•
Other income decreased $3.7 million, or 46.1%, to $4.3 million in the quarter, compared with $8.0 million in the same three-month period last year, due to lower brokerage and fee income. The brokerage revenue decrease is the result of lower excess of loss reinsurance spend from the new reinsurance program, effective July 1, 2018. Commission income decreased as a result of lower Automobile fee income driving the reduction in premiums earned as well as lower fee income from other areas of the business.

Expenses

•
Losses and loss adjustment expenses (“LAE”) increased $13.4 million, or 22.8%, to $72.3 million for the three months ended December 31, 2018, compared with $58.9 million for the same three-month period last year. The net loss ratio increased 12.1 percentage points, to 79.4% in the current quarter, compared to 67.3% in the fourth quarter of 2017. The higher ratio was the result of net losses from Hurricane Michael and other severe weather ($23.7 million in the fourth quarter of 2018), partially offset by the decrease in the size of Automobile ($2.8 million lower losses, including adverse development) and improved loss experience in the homeowners Florida book of business.
•
Our gross losses from Hurricane Michael were $275 million with net losses being $23.0 million, as discussed above, and previously announced. Additionally, we increased our Hurricane Irma ultimate from $634 million to $695 million across our two insurance companies, with no net income impact, as we are above our retention.
•
The net expense ratio increased 1.0 percentage points, to 38.9% in the current quarter, as compared to 37.9% in the fourth quarter of 2017. Commissions and other underwriting expenses increased $1.6 million, or 5.9%, to $29.6 million for the three months ended December 31, 2018, compared with $28.0 million for the three months ended December 31, 2017. The increase is made up of higher homeowners non-Florida commission costs and profit share costs as a result of higher premiums earned and good loss experience in our non-Florida book of business.
•
General and administrative expenses increased $0.6 million, or 11.7%, to $5.8 million for the three months ended December 31, 2018, compared with $5.2 million for the three months ended December 31, 2017. The increase is the result of higher professional fees primarily related to due diligence costs related to the previously announced acquisition of the insurance operations of 1347 Property Insurance Holdings, Inc., also discussed in "Subsequent Event/Maison Acquisition" below.
•
Interest expense increased $0.9 million to $1.0 million for the three months ended December 31, 2018, compared with $0.1 million in the prior year period. The increase in interest expense is the result of the Company issuing $45.0 million of senior notes, late in December 2017. During the fourth quarter of 2017, the Company had $5.0 million of debt outstanding.

Line of Business Results

•
Homeowners’ net loss for the current quarter was $1.4 million, which included 11.1% growth in net premiums earned compared to the fourth quarter of 2017. The combined ratio for the current quarter was 108.7%, which includes $23.7 million from the impact of Hurricane Michael and other severe weather events, offset by improved homeowners Florida attritional loss experience in the current accident year.
•
Automobile's net loss for the fourth quarter of 2018 was $4.0 million, as compared with a loss of $2.2 million in the prior year quarter, primarily driven by adverse prior year development as we exit this line of business.
•
Other’s net loss of $4.0 million in the fourth quarter of 2018, was driven by $5.1 million of net investment losses, $1.0 million of interest expense, and $1.8 million of prior year development in our commercial general liability book of business, partially offset by net investment income of $3.4 million.

2018 vs. 2017 Full Year Results

•
The Company reported net income of $14.9 million, or $1.16 per diluted share, for 2018 as compared to net income of $8.0 million, or $0.60 per diluted share, for 2017. The improved performance in 2018 is the result of lower reinsurance spend in Homeowners and improved attritional loss experience, offset by investment losses in 2018.

2


•
Excluding investment gains and losses in both periods, the Company's net income was $18.0 million or $1.40 per diluted share in 2018, as compared net income of $2.7 million or $0.21 per diluted share in 2017, up $15.3 million.
•
Full year earnings in our Homeowners business were $22.2 million in 2018, as compared to $3.2 million in 2017.

Subsequent Event/Maison Acquisition

As previously announced on February 25th, 2019, the Company has executed a definitive agreement for the acquisition of the insurance operations of 1347 Property Insurance Holdings, Inc. ("PIH"). The purchase price is $51.0 million, which includes $25.5 million in cash and $25.5 million in shares of the Company’s common stock. Additionally, in connection with the acquisition, the Company announced an offering of $100 million of Senior Unsecured Fixed Rate Notes due 2029 at an interest rate of 7.5%. The cash from the offering will be used to purchase PIH, retire the full $45.0 million of outstanding debt (thereby lowering our overall cost of borrowing) and other general corporate purposes.

The acquisition is expected to be immediately accretive to earnings per share and return on equity as well, in part due to significant reinsurance and operating synergies inherent therein. See the Company's Form 8-K filing dated February 25, 2019 for further information.

The Company applied for and was approved by the Florida Office of Insurance regulation for a state-wide average rate increase of 4.6% for Florida homeowners multiple-peril insurance policies, which is expected to become effective for new and renewal policies on April 20, 2019.

Conference Call Information
The Company will hold an investor conference call at 9:00 AM (ET) Thursday, February 28, 2019. The Company’s CEO, Michael Braun and its CFO, Ronald Jordan will discuss the financial results and review the outlook for the Company. Messrs. Braun and Jordan invite interested parties to participate in the conference call.

Listeners interested in participating in the Q&A session may access the conference call as follows:

Toll-Free Dial-in: (877) 303-6913

Conference ID: 5898179

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

http://www.fednat.com/investor-relations/investor-presentations/

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 an insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through our subsidiaries and contractual relationships with independent agents and general agents. The Company, through our wholly owned subsidiaries, are authorized to underwrite, and/or place homeowners multi-peril, federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers’ products and other services through a network of independent and general agents.

The Company’s supplemental line of business information is designed to afford users greater transparency into our results. 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, pending our withdrawal. The “Other” line of business primarily consists of our commercial general liability (pending our withdrawal) and federal flood businesses, along with corporate and investment operations.


3


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 or other variations thereof, 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 compliance with 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 our subsidiaries’ operations 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.

Contacts

Michael H. Braun, CEO (954) 308-1322,
Ronald Jordan, CFO (954) 308-1363,
or Erick A. Fernandez, CAO (954) 308-1341

4


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31,
 
December 31,
 
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
 
Net premiums earned
 
$
91,098

 
$
87,503

 
$
355,257

 
$
333,481

Net investment income
 
3,402

 
2,773

 
12,460

 
10,254

Net realized and unrealized investment gains (losses)
 
(5,060
)
 
(96
)
 
(4,144
)
 
8,548

Direct written policy fees
 
2,681

 
3,556

 
13,366

 
17,173

Other income
 
4,321

 
8,016

 
19,154

 
22,206

Total revenues
 
96,442

 
101,752

 
396,093

 
391,662


 
 

 
 

 
 

 
 

Costs and expenses:
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
 
72,318

 
58,874

 
228,416

 
247,557

Commissions and other underwriting expenses
 
29,642

 
27,984

 
121,109

 
114,867

General and administrative expenses
 
5,838

 
5,226

 
22,183

 
19,963

Interest expense
 
1,038

 
101

 
4,177

 
348

Total costs and expenses
 
108,836

 
92,185

 
375,885

 
382,735


 
 
 
 
 
 

 
 

Income (loss) before income taxes
 
(12,394
)
 
9,567

 
20,208

 
8,927

Income tax expense (benefit)
 
(3,089
)
 
3,943

 
5,498

 
3,585

Net income (loss)
 
(9,305
)
 
5,624

 
14,710

 
5,342

Net income (loss) attributable to non-controlling interest
 
—

 
(672
)
 
(218
)
 
(2,647
)
Net income (loss) attributable to FedNat Holding Company shareholders
 
$
(9,305
)
 
$
6,296

 
$
14,928

 
$
7,989


 
 

 
 

 
 
 
 
Net Income (Loss) Per Common Share
 
 
 
 
 
 
 
 
Basic
 
$
(0.73
)
 
$
0.48

 
$
1.17

 
$
0.61

Diluted
 
$
(0.73
)
 
$
0.48

 
$
1.16

 
$
0.60


 
 
 
 
 
 

 
 

Weighted Average Number of Shares of Common Stock Outstanding
 
 
 
 
 
 
 
 
Basic
 
12,777

 
13,131

 
12,775

 
13,170

Diluted
 
12,777

 
13,197

 
12,867

 
13,250


 
 
 
 
 
 

 
 

Dividends Declared Per Common Share
 
$
0.08

 
$
0.08

 
$
0.24

 
$
0.32



5


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)

 
Three Months Ended
 
Twelve Months Ended

 
December 31,
 
December 31,

 
2018
 
2017
 
2018
 
2017

 
(In thousands)
Gross premiums written:
 
 
 
 
 
 
 
 
Homeowners Florida
 
$
102,834

 
$
108,106

 
$
458,652

 
$
482,039

Homeowners non-Florida
 
21,941

 
14,393

 
81,037

 
54,716

Automobile
 
(25
)
 
6,416

 
8,603

 
43,505

Commercial general liability
 
(135
)
 
2,280

 
5,384

 
11,048

Federal flood
 
2,998

 
2,697

 
14,088

 
12,109

Total gross premiums written
 
$
127,613

 
$
133,892

 
$
567,764

 
$
603,417



 
Three Months Ended
 
Twelve Months Ended

 
December 31,
 
December 31,

 
2018
 
2017
 
2018
 
2017

 
(In thousands)
Gross premiums earned:
 
 
 
 
 
 
 
 
Homeowners Florida
 
$
116,614

 
$
122,188

 
$
473,121

 
$
481,541

Homeowners non-Florida
 
19,499

 
13,125

 
66,571

 
43,983

Automobile
 
526

 
10,747

 
18,402

 
54,679

Commercial general liability
 
1,650

 
2,877

 
8,794

 
12,216

Federal flood
 
3,492

 
2,936

 
13,132

 
10,774

Total gross premiums earned
 
$
141,781

 
$
151,873

 
$
580,020

 
$
603,193



 
Three Months Ended
 
Twelve Months Ended

 
December 31,
 
December 31,

 
2018
 
2017
 
2018
 
2017

 
(In thousands)
Net premiums earned:
 
 
 
 
 
 
 
 
Homeowners
 
$
89,390

 
$
80,435

 
$
342,247

 
$
298,255

Automobile
 
132

 
4,339

 
4,658

 
23,642

Commercial general liability
 
1,576

 
2,729

 
8,352

 
11,584

Total net premiums earned
 
$
91,098

 
$
87,503

 
$
355,257

 
$
333,481


6


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics (continued)
(Unaudited)


 
Three Months Ended
 
Twelve Months Ended

 
December 31,
 
December 31,

 
2018
 
2017
 
2018
 
2017

 
(In thousands)
Commissions and other underwriting expenses:
 
 
 
 
 
 
 
 
Homeowners Florida
 
$
13,897

 
$
11,740

 
$
56,693

 
$
57,151

All others
 
5,460

 
4,653

 
19,948

 
20,135

Ceding commissions
 
(3,966
)
 
(1,216
)
 
(12,743
)
 
(16,299
)
Total commissions
 
15,391

 
15,177

 
63,898

 
60,987

 
 
 
 
 
 
 
 
 
Automobile
 
93

 
1,194

 
4,322

 
7,847

Homeowners non-Florida
 
793

 
240

 
2,147

 
1,223

Total fees
 
886

 
1,434

 
6,469

 
9,070

 
 
 
 
 
 
 
 
 
Salaries and wages
 
2,997

 
3,160

 
14,279

 
14,521

Other underwriting expenses
 
10,368

 
8,213

 
36,463

 
30,289

Total commissions and other underwriting expenses
 
$
29,642

 
$
27,984

 
$
121,109

 
$
114,867



 
Three Months Ended
 
Twelve Months Ended

 
December 31,
 
December 31,

 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Net loss ratio
 
79.4
%
 
67.3
%
 
64.3
%
 
74.2
%
Net expense ratio
 
38.9
%
 
37.9
%
 
40.3
%
 
40.5
%
Combined ratio
 
118.3
%
 
105.2
%
 
104.6
%
 
114.7
%
Gross loss ratio
 
277.6
%
 
77.4
%
 
149.8
%
 
108.3
%
Gross expense ratio
 
27.8
%
 
25.0
%
 
26.9
%
 
25.5
%
Book value per share excluding non-controlling interest
 
$
16.84

 
$
16.29

 
$
16.84

 
$
16.29


7


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)


 
December 31,

 
2018
 
2017
ASSETS
 
(In thousands)
Investments:
 
 
 
 
Debt securities, available-for-sale, at fair value (amortized cost of $433,664 and $422,300, respectively)
 
$
428,641

 
$
423,238

Debt securities, held-to-maturity, at amortized cost
 
5,126

 
5,349

Equity securities, at fair value
 
17,758

 
15,434

Total investments (including $0 and $26,284 related to the VIE, respectively)
 
451,525

 
444,021

Cash and cash equivalents (including $0 and $14,211 related to the VIE, respectively)
 
64,423

 
86,228

Prepaid reinsurance premiums
 
108,577

 
135,492

Premiums receivable, net of allowance of $77 and $70, respectively (including $0 and $1,184 related to the VIE, respectively)
 
29,791

 
46,393

Reinsurance recoverable, net
 
211,424

 
124,601

Deferred acquisition costs, net
 
39,436

 
40,893

Income taxes, net
 
5,220

 
9,817

Property and equipment, net
 
4,819

 
4,025

Other assets (including $0 and $2,322 related to the VIE, respectively)
 
10,156

 
13,403

Total assets
 
$
925,371

 
$
904,873


 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Liabilities
 
 
 
 
Loss and loss adjustment expense reserves
 
$
296,230

 
$
230,515

Unearned premiums
 
281,992

 
294,423

Reinsurance payable
 
63,599

 
71,944

Long-term debt, net of deferred financing costs of $596 and $749, respectively
 
44,404

 
49,251

Deferred revenue
 
4,585

 
6,222

Other liabilities
 
19,302

 
25,059

Total liabilities
 
710,112

 
677,414

Shareholders' Equity
 
 
 
 
Preferred stock, $0.01 par value: 1,000,000 shares authorized
 
—

 
—

Common stock, $0.01 par value: 25,000,000 shares authorized; 12,784,444 and 12,988,247 shares issued and outstanding, respectively
 
128

 
130

Additional paid-in capital
 
141,128

 
139,728

Accumulated other comprehensive income (loss)
 
(3,750
)
 
1,770

Retained earnings
 
77,753

 
70,009

Total shareholders’ equity attributable to FedNat Holding Company shareholders
 
215,259

 
211,637

Non-controlling interest
 
—

 
15,822

Total shareholders’ equity
 
215,259

 
227,459

Total liabilities and shareholders' equity
 
$
925,371

 
$
904,873


8


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)


Three Months Ended December 31,

2018
 
2017

Homeowners
 
Automobile
 
Other
 
Consolidated
 
Homeowners
 
Automobile
 
Other
 
Consolidated
 
(Dollars in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
$
124,775

 
$
(25
)
 
$
2,863

 
$
127,613

 
$
122,499

 
$
6,416

 
$
4,977

 
$
133,892

Gross premiums earned
136,113

 
526

 
5,142

 
141,781

 
135,313

 
10,747

 
5,813

 
151,873

Ceded premiums
(46,723
)
 
(394
)
 
(3,566
)
 
(50,683
)
 
(54,878
)
 
(6,408
)
 
(3,084
)
 
(64,370
)
Net premiums earned
89,390

 
132

 
1,576

 
91,098

 
80,435

 
4,339

 
2,729

 
87,503

Net investment income
—

 
—

 
3,402

 
3,402

 
—

 
—

 
2,773

 
2,773

Net realized and unrealized investment gains (losses)
—

 
—

 
(5,060
)
 
(5,060
)
 
—

 
—

 
(96
)
 
(96
)
Direct written policy fees
2,506

 
93

 
82

 
2,681

 
2,214

 
1,194

 
148

 
3,556

Other income
3,461

 
64

 
796

 
4,321

 
4,957

 
616

 
2,443

 
8,016

Total revenues
95,357

 
289

 
796

 
96,442

 
87,606

 
6,149

 
7,997

 
101,752

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
64,634

 
4,840

 
2,844

 
72,318

 
47,345

 
7,633

 
3,896

 
58,874

Commissions and other underwriting expenses
27,819

 
730

 
1,093

 
29,642

 
25,038

 
1,885

 
1,061

 
27,984

General and administrative expenses
4,718

 
50

 
1,070

 
5,838

 
4,115

 
150

 
961

 
5,226

Interest expense
—

 
—

 
1,038

 
1,038

 
101

 
—

 
—

 
101

Total costs and expenses
97,171

 
5,620

 
6,045

 
108,836

 
76,599

 
9,668

 
5,918

 
92,185

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
(1,814
)
 
(5,331
)
 
(5,249
)
 
(12,394
)
 
11,007

 
(3,519
)
 
2,079

 
9,567

Income tax expense (benefit)
(460
)
 
(1,351
)
 
(1,278
)
 
(3,089
)
 
4,246

 
(1,358
)
 
1,055

 
3,943

Net income (loss)
(1,354
)
 
(3,980
)
 
(3,971
)
 
(9,305
)
 
6,761

 
(2,161
)
 
1,024

 
5,624

Net income (loss) attributable to non-controlling interest
—

 
—

 
—

 
—

 
(672
)
 
—

 
—

 
(672
)
Net income (loss) attributable to FNHC shareholders
$
(1,354
)
 
$
(3,980
)
 
$
(3,971
)
 
$
(9,305
)
 
$
7,433

 
$
(2,161
)
 
$
1,024

 
$
6,296

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios to net premiums earned:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss ratio
72.3
%
 
3,666.7
%
 
180.5
%
 
79.4
%
 
58.9
%
 
175.9
%
 
142.8
%
 
67.3
%
Net expense ratio
36.4
%
 
 
 
 
 
38.9
%
 
36.2
%
 
 
 
 
 
37.9
%
Combined ratio
108.7
%
 
 
 
 
 
118.3
%
 
95.1
%
 
 
 
 
 
105.2
%






9


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)


Year Ended December 31,

2018
 
2017

Homeowners
 
Automobile
 
Other
 
Consolidated
 
Homeowners
 
Automobile
 
Other
 
Consolidated
 
(Dollars in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross premiums written
$
539,689

 
$
8,603

 
$
19,472

 
$
567,764

 
$
536,755

 
$
43,505

 
$
23,157

 
$
603,417

Gross premiums earned
539,692

 
18,402

 
21,926

 
580,020

 
525,524

 
54,679

 
22,990

 
603,193

Ceded premiums
(197,445
)
 
(13,744
)
 
(13,574
)
 
(224,763
)
 
(227,269
)
 
(31,037
)
 
(11,406
)
 
(269,712
)
Net premiums earned
342,247

 
4,658

 
8,352

 
355,257

 
298,255

 
23,642

 
11,584

 
333,481

Net investment income
—

 
—

 
12,460

 
12,460

 
—

 
—

 
10,254

 
10,254

Net realized and unrealized investment gains (losses)
—

 
—

 
(4,144
)
 
(4,144
)
 
—

 
—

 
8,548

 
8,548

Direct written policy fees
8,484

 
4,322

 
560

 
13,366

 
8,715

 
7,846

 
612

 
17,173

Other income
14,021

 
1,148

 
3,985

 
19,154

 
13,662

 
3,277

 
5,267

 
22,206

Total revenues
364,752

 
10,128

 
21,213

 
396,093

 
320,632

 
34,765

 
36,265

 
391,662

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Losses and loss adjustment expenses
206,062

 
11,617

 
10,737

 
228,416

 
206,842

 
32,752

 
7,963

 
247,557

Commissions and other underwriting expenses
111,103

 
5,751

 
4,255

 
121,109

 
97,111

 
12,976

 
4,780

 
114,867

General and administrative expenses
18,079

 
325

 
3,779

 
22,183

 
15,403

 
650

 
3,910

 
19,963

Interest expense
100

 
—

 
4,077

 
4,177

 
348

 
—

 
—

 
348

Total costs and expenses
335,344

 
17,693

 
22,848

 
375,885

 
319,704

 
46,378

 
16,653

 
382,735

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
29,408

 
(7,565
)
 
(1,635
)
 
20,208

 
928

 
(11,613
)
 
19,612

 
8,927

Income tax expense (benefit)
7,451

 
(1,917
)
 
(36
)
 
5,498

 
360

 
(4,481
)
 
7,706

 
3,585

Net income (loss)
21,957

 
(5,648
)
 
(1,599
)
 
14,710

 
568

 
(7,132
)
 
11,906

 
5,342

Net income (loss) attributable to non-controlling interest
(218
)
 
—

 
—

 
(218
)
 
(2,647
)
 
—

 
—

 
(2,647
)
Net income (loss) attributable to FNHC shareholders
$
22,175

 
$
(5,648
)
 
$
(1,599
)
 
$
14,928

 
$
3,215

 
$
(7,132
)
 
$
11,906

 
$
7,989

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios to net premiums earned:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss ratio
60.2
%
 
249.4
%
 
128.6
%
 
64.3
%
 
69.4
%
 
138.5
%
 
68.7
%
 
74.2
%
Net expense ratio
37.8
%
 
 
 
 
 
40.3
%
 
37.7
%
 
 
 
 
 
40.5
%
Combined ratio
98.0
%
 
 
 
 
 
104.6
%
 
107.1
%
 
 
 
 
 
114.7
%



10