SUNRISE, Florida, May 07, 2019 (GLOBE NEWSWIRE) -- FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today reported results for the three months ended March 31, 2019.

Q1 2019 highlights (as measured against the same three-month period last year, except where noted):

"FedNat continued to make excellent progress on its strategies to drive profitable growth in the first quarter.  While that progress was masked by the impact of a large hail storm that impacted Brevard County in Florida, I’m nonetheless very pleased with the continued fundamental improvement in our core homeowners business performance,” said Michael H. Braun, the Company’s Chief Executive Officer.  “Highlights in the quarter included more than five percentage points of improvement in our net expense ratio, strong growth in our non-Florida homeowners book, and of course, the February announcement of our pending acquisition of the Maison businesses, which will further strengthen and diversify our Company when we complete the transaction, which is anticipated to be during the second quarter.  We are also greatly encouraged by Florida’s recent passage of legislation to regulate Assignment of Benefit rules, a move that is a huge win for all policyholders within the state of Florida, regardless of who they insure their homes with, and will significantly enhance our industry’s ability to serve Florida homeowners affordably and more effectively.  Collectively these developments, along with our ongoing focus on performance improvement, position FedNat for attractive opportunity to drive profitable growth for our shareholders in the quarters to come.”

Consolidated

Revenues

Expenses

Line of Business Results

Non-GAAP Performance Measures

Non United States generally accepted accounting principles ("GAAP") measures do not replace the most directly comparable GAAP measures and we have included a detailed reconciliation thereof on page 11.

We exclude the after-tax (using our statutory income tax rate) effects of the following items from GAAP net income (loss) to arrive at adjusted operating income (loss):

We also exclude the pre-tax effect of the first bullet above from GAAP revenues to arrive at adjusted operating revenues.

Management believes these non-GAAP performance measures allow for a better understanding of the underlying trend in our business, as the excluded items are not necessarily indicative of our operating fundamentals or performance.

Similarly, we exclude accumulated other comprehensive income (loss) ("AOCI") from book value per share to arrive at book value per share, excluding AOCI.

Conference Call Information

The Company will hold an investor conference call at 9:00 AM (ET) Wednesday, May 8, 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: 9374219

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:

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. The “Other” line of business primarily consists of our commercial general liability and federal flood businesses, along with corporate and investment operations.

Forward-Looking Statements

Certain statements made by FedNat Holding Company or on its behalf may contain “forward-looking statements” within 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:

The risks and uncertainties include, without limitation, risks and uncertainties related to estimates, assumptions and projections generally; the nature of the Company’s business and its ability to integrate the operations to be acquired; 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.  The Company does 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 (954) 308-1341



FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Financial Highlights
(Dollars in thousands, except per share data)
(Unaudited)
 
 As of or For the
 Three Months Ended
 2019 2018 % Change
Net Income (Loss) Attributable to Common Shareholders     
Net income (loss):     
Homeowners$(1,423) $6,941  (120.5)%
Automobile(679) (41) 1,556.1%
Other(1,763) 563  (413.1)%
Consolidated$(3,865) $7,463  (151.8)%
      
Adjusted operating income (loss):     
Homeowners$(1,387) $7,117  (119.5)%
Automobile(679) (20) 3,295.0%
Other(328) 1,367  (124.0)%
Consolidated$(2,394) $8,464  (128.3)%
      
Per Common Share     
Net income (loss) - diluted$(0.30) $0.58  (152.4)%
Adjusted operating income (loss) - diluted(0.19) 0.65  (128.6)%
Dividends declared0.08  0.08  —%
Book value16.98  16.36  3.8%
Book value, excluding AOCI16.73  16.66  0.4%
      
Return to Shareholders     
Repurchases of common stock$—  $5,000  (100.0)%
Dividends declared1,041  1,043  (0.2)%
 $1,041  $6,043  (82.8)%
      
Revenue     
Total revenues$101,197  $93,077  8.7%
Adjusted operating revenues98,896  94,129  5.1%
Gross premiums written132,233  134,395  (1.6)%
Gross premiums earned138,367  146,442  (5.5)%
Net premiums earned88,784  82,109  8.1%
      
Ratios to Net Premiums Earned     
Net loss ratio75.3% 56.1%  
Net expense ratio38.9% 44.2%  
Combined ratio114.2% 100.3%  
      
In-Force Homeowners Policies     
Florida244,228  265,184  (7.9)%
Non-Florida52,297  33,492  56.1%
 296,525  298,676  (0.7)%





FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
 
 Three Months Ended
 March 31,
 2019 2018
Revenues:   
Net premiums earned$88,784  $82,109 
Net investment income3,710  2,943 
Net realized and unrealized investment gains (losses)2,301  (1,052)
Direct written policy fees2,391  3,576 
Other income4,011  5,501 
Total revenues101,197  93,077 
   
Costs and expenses:   
Losses and loss adjustment expenses66,839  46,071 
Commissions and other underwriting expenses28,234  30,221 
General and administrative expenses6,311  6,085 
Interest expense5,051  1,084 
Total costs and expenses106,435  83,461 
   
Income (loss) before income taxes(5,238) 9,616 
Income tax expense (benefit)(1,373) 2,371 
Net income (loss)(3,865) 7,245 
Net income (loss) attributable to non-controlling interest—  (218)
Net income (loss) attributable to FedNat Holding Company shareholders$(3,865) $7,463 
   
Net Income (Loss) Per Common Share   
Basic$(0.30) $0.58 
Diluted$(0.30) $0.58 
   
Weighted Average Number of Shares of Common Stock Outstanding   
Basic12,795  12,850 
Diluted12,795  12,945 
   
Dividends Declared Per Common Share$0.08  $0.08 




FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)
 
Three Months Ended
March 31,
2019 2018
(In thousands)
Gross premiums written:   
Homeowners Florida$103,963  $108,371 
Homeowners non-Florida25,320  14,444 
Automobile(1) 6,347 
Commercial general liability(53) 2,514 
Federal flood3,004  2,719 
Total gross premiums written$132,233  $134,395 


Three Months Ended
March 31,
2019 2018
(In thousands)
Gross premiums earned:   
Homeowners Florida$112,672  $118,824 
Homeowners non-Florida21,170  13,639 
Automobile22  8,328 
Commercial general liability1,036  2,629 
Federal flood3,467  3,022 
Total gross premiums earned$138,367  $146,442 


Three Months Ended
March 31,
2019 2018
(In thousands)
Net premiums earned:   
Homeowners$87,811  $77,405 
Automobile5  2,211 
Commercial general liability968  2,493 
Total net premiums earned$88,784  $82,109 




FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics (continued)
(Unaudited)
 
Three Months Ended
March 31,
2019 2018
(In thousands)
Commissions and other underwriting expenses:   
Homeowners Florida$13,222  $14,363 
All others5,267  4,800 
Ceding commissions(2,784) (3,715)
Total commissions15,705  15,448 
    
Automobile3  1,467 
Homeowners non-Florida676  186 
Total fees679  1,653 
    
Salaries and wages3,322  3,766 
Other underwriting expenses8,528  9,354 
Total commissions and other underwriting expenses$28,234  $30,221 


Three Months Ended
March 31,
2019 2018
    
Net loss ratio75.3% 56.1%
Net expense ratio38.9% 44.2%
Combined ratio114.2% 100.3%
Gross loss ratio211.4% 123.5%
Gross expense ratio27.0% 27.3%




FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)
 
March 31, December 31,
2019 2018
ASSETS(In thousands)
Investments:   
Debt securities, available-for-sale, at fair value$443,458  $428,641 
Debt securities, held-to-maturity, at amortized cost4,552  5,126 
Equity securities, at fair value20,824  17,758 
Total investments468,834  451,525 
Cash and cash equivalents100,589  64,423 
Prepaid reinsurance premiums69,858  108,577 
Premiums receivable, net of allowance22,684  29,791 
Reinsurance recoverable, net301,922  211,424 
Deferred acquisition costs, net40,232  39,436 
Income taxes, net4,027  5,220 
Other assets27,441  14,975 
Total assets$1,035,587  $925,371 
   
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Liabilities   
Loss and loss adjustment expense reserves$374,124  $296,230 
Unearned premiums275,860  281,992 
Reinsurance payable31,399  63,599 
Long-term debt, net of deferred financing costs98,401  44,404 
Deferred revenue4,567  4,585 
Other liabilities33,320  19,302 
Total liabilities817,671  710,112 
Shareholders' Equity   
Preferred stock, $0.01 par value: 1,000,000 shares authorized—  — 
Common stock, $0.01 par value: 25,000,000 shares authorized; 12,836,401 and 12,784,444 shares issued and outstanding, respectively128  128 
Additional paid-in capital141,803  141,128 
Accumulated other comprehensive income (loss)3,138  (3,750)
Retained earnings72,847  77,753 
Total shareholders’ equity attributable to FedNat Holding Company shareholders217,916  215,259 
Non-controlling interest—  — 
Total shareholders’ equity217,916  215,259 
Total liabilities and shareholders' equity$1,035,587  $925,371 






FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)
 
Three Months Ended March 31,
2019 2018
Homeowners Automobile Other Consolidated Homeowners Automobile Other Consolidated
(Dollars in thousands)
Revenues:               
Gross premiums written$129,283  $(1) $2,951  $132,233  $122,815  $6,347  $5,233  $134,395 
Gross premiums earned133,842  22  4,503  138,367  132,463  8,328  5,651  146,442 
Ceded premiums(46,031) (17) (3,535) (49,583) (55,058) (6,117) (3,158) (64,333)
Net premiums earned87,811  5  968  88,784  77,405  2,211  2,493  82,109 
Net investment income—  —  3,710  3,710  —  —  2,943  2,943 
Net realized and unrealized investment gains (losses)—  —  2,301  2,301  —  —  (1,052) (1,052)
Direct written policy fees2,298  3  90  2,391  1,923  1,467  186  3,576 
Other income3,542  12  457  4,011  3,977  488  1,036  5,501 
Total revenues93,651  20  7,526  101,197  83,305  4,166  5,606  93,077 
                
Costs and expenses:               
Losses and loss adjustment expenses63,330  844  2,665  66,839  41,955  2,236  1,880  46,071 
Commissions and other underwriting expenses27,367  35  832  28,234  27,356  1,860  1,005  30,221 
General and administrative expenses4,860  50  1,401  6,311  4,889  125  1,071  6,085 
Interest expense—  —  5,051  5,051  100  —  984  1,084 
Total costs and expenses95,557  929  9,949  106,435  74,300  4,221  4,940  83,461 
                
Income (loss) before income taxes(1,906) (909) (2,423) (5,238) 9,005  (55) 666  9,616 
Income tax expense (benefit)(483) (230) (660) (1,373) 2,282  (14) 103  2,371 
Net income (loss)(1,423) (679) (1,763) (3,865) 6,723  (41) 563  7,245 
Net income (loss) attributable to non-controlling interest—  —  —  —  (218) —  —  (218)
Net income (loss) attributable to FNHC shareholders$(1,423) $(679) $(1,763) $(3,865) $6,941  $(41) $563  $7,463 
                
Ratios to net premiums earned:               
Net loss ratio72.1% NCM 275.3% 75.3% 54.2% 101.1% 75.4% 56.1%
Net expense ratio36.7%     38.9% 41.7%     44.2%
Combined ratio108.8%     114.2% 95.9%     100.3%






FEDNAT HOLDING COMPANY AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliations
(Dollars in thousands)
(Unaudited)
 
  As of or For the Three Months Ended March 31,
  2019 2018
  Homeowners Automobile Other Consolidated Homeowners Automobile Other Consolidated
Revenue                
Total revenues $93,651  $20  $7,526  $101,197  $83,305  $4,166  $5,606  $93,077 
Less:                
Net realized and unrealized investment gains (losses) —  —  2,301  2,301  —  —  (1,052) (1,052)
Adjusted operating revenues $93,651  $20  $5,225  $98,896  $83,305  $4,166  $6,658  $94,129 
                 
Net Income (Loss)                
Net income (loss) $(1,423) $(679) $(1,763) $(3,865) $6,941  $(41) $563  $7,463 
Less:                
Net realized and unrealized investment gains (losses) —  —  1,718  1,718  —  —  (785) (785)
Acquisition and other costs (36) —  (484) (520) (176) (21) (19) (216)
Gain (loss) on early extinguishment of debt —  —  (2,669) (2,669) —  —  —  — 
Adjusted operating income (loss) $(1,387) $(679) $(328) $(2,394) $7,117  $(20) $1,367  $8,464 
                 
Income tax rate assumed for reconciling items above 25.35% 25.35% 25.35% 25.35% 25.35% 25.35% 25.35% 25.35%
                 
Per Common Share                
Book value       $16.98        $16.36 
Less:                
AOCI       0.24        (0.30)
Book value, excluding AOCI       $16.73        $16.66