NEW YORK, Aug. 07, 2017 (GLOBE NEWSWIRE) -- National General Holdings Corp. (NASDAQ:NGHC) today reported a second quarter 2017 net loss of $5.1 million or $0.05 per diluted share, compared to net income of $44.3 million or $0.41 per diluted share in the second quarter of 2016. Second quarter 2017 operating earnings⁽¹⁾ was $11.9 million or $0.11 per diluted share, compared to $46.4 million or $0.43 per diluted share in the second quarter of 2016.

Second Quarter 2017 Highlights Versus Second Quarter 2016*

• Net written premium grew $242.4 million or 34.7% to $940.8 million, driven by added premiums from the acquisitions of Direct General, Century-National and Standard Property and Casualty Insurance Company, and organic growth within our P&C business of 15.8%, or 23.1% excluding the decline in lender-placed premiums and continued growth of our A&H segment.
  
  
• The overall combined ratio^(10,14) was 96.2% compared to 94.0% in the prior year’s quarter, excluding non-cash amortization of intangible assets. The P&C segment reported an increase in combined ratio to 96.8% from 94.2% in the prior year’s quarter, which was impacted by poor results from National General Lender Services, an increase in estimated losses from first quarter West Coast precipitation and hail events recognized in the second quarter and continued investment in our platform. The A&H segment reported a combined ratio of 93.1% compared to 92.9% in the prior year’s quarter.
  
  
• Total revenues grew by $291.1 million or 36.2% to $1,095.7 million, primarily driven by the aforementioned premium growth, service and fee income growth of $37.9 million or 38.1%, and net investment income growth of $2.3 million or 8.5%.
  
  
• Shareholders’ equity was $1.94 billion and fully diluted book value per share was $13.88 at June 30, 2017, growth of 2.4% and 2.7%, respectively, from December 31, 2016. Our trailing twelve month operating return on average equity (ROE)⁽¹⁶⁾ was 8.0% as of June 30, 2017.
  
  
• Second quarter 2017 operating earnings exclude the following material items, net of tax: $5.4 million or $0.05 per share of net loss on investments and $7.6 million or $0.07 per share of non-cash amortization of intangible assets.
  
  
• Second quarter 2017 operating earnings include approximately $16.1 million or $0.09 per share of losses related to an increase in estimated loss from first quarter West Coast precipitation and hail events that were recognized in the second quarter and $19.3 million or $0.11 per share loss impacting equity method investments related to losses recorded based on our proportionate share of investments in certain real estate joint ventures.

Barry Karfunkel, National General’s President and CEO, stated: “The results this quarter were disappointing due to the poor performance from National General Lender Services and weather losses impacting our home product. Within both our home and auto product lines, we continue to experience tremendous organic growth that is meeting our underwriting return hurdles. We expect the opportunity for profitable growth to continue as we have the scale and underwriting sophistication to compete in a largely fragmented market.

Effective July 1, 2017, we entered into two quota share reinsurance agreements with a group of high quality third-party reinsurance providers, a testament to the value placed on the business that we have built.”

*NOTE: Unless specified otherwise, discussion of our second quarter 2017 and 2016 results do not include financial results from the Reciprocal Exchanges, which are presented within our consolidated financial results within this release but are not included in net income available to NGHC common stockholders.

Overview of Second Quarter 2017 as Compared to Second Quarter 2016

Gross written premium grew 33.8% to $1,035.6 million, net written premium grew 34.7% to $940.8 million, and net earned premium grew 38.8% to $939.5 million. Premium growth was driven by several key factors: underlying organic growth within our P&C segment, continued growth of our A&H segment, and additional premiums from the acquisitions of Direct General, Century-National, and Standard Property and Casualty Insurance Company.

Service and fee income grew 38.1% to $137.6 million, driven by added service and fee income from our recent completed transactions, primarily the Direct General acquisition which contributed an additional $24.4 million in the quarter and additional fees in our A&H segment.

Excluding non-cash amortization of intangible assets, the combined ratio^(10,14,15) was 96.2% with a loss ratio⁽¹⁵⁾ of 72.0% and an expense ratio^(10,13,15) of 24.2%, compared to a prior year combined ratio of 94.0% with a loss ratio of 67.2% and an expense ratio of 26.8%. In the current year’s quarter, certain costs associated with claims handling were reclassified from general and administrative expenses to loss adjustment expenses when compared with the previous year’s quarter, resulting in an increase in loss and loss adjustment expense ratio and a decrease in expense ratio in corresponding amounts⁽¹⁵⁾.

Underwriting results detailed by each of our business segments are as follows:

• Property & Casualty - Gross written premium grew by 34.8% to $904.6 million, net written premium grew by 35.3% to $822.5 million, and net earned premium grew by 39.9% to $804.6 million. P&C net written premium growth was driven by several key factors: organic growth of 15.8%, or 23.1% excluding the decline in lender-placed premiums, $77.9 million from the Direct General acquisition, $12.2 million from the Standard Property and Casualty Insurance Company acquisition and $31.1 million from the Century-National acquisition, partially offset by a decrease in our lender-placed premiums. Service and fee income grew 55.5% to $94.5 million, driven by increased premium volume in the quarter and the addition of service and fee income from acquisitions completed during the prior year, particularly Direct General. Excluding non-cash amortization of intangible assets, the combined ratio^(10,14) was 96.8% with a loss ratio of 73.6% and an expense ratio^(10,13) of 23.2%, versus a prior year combined ratio of 94.2% with a loss ratio of 65.4% and an expense ratio of 28.8%. The loss ratio was impacted by pre-tax catastrophe losses of approximately $16.1 million related to an increase in estimated loss from first quarter West Coast precipitation and hail events that were recognized in the second quarter. In the current year’s quarter, the reclassification of certain costs associated with claims handling from general and administrative expenses to loss adjustment expenses impacted both the loss and expense ratios by identical amounts⁽¹⁵⁾.
  
  
• Accident & Health - Gross written premium grew to $131.0 million, net written premium grew to $118.2 million, and net earned premium grew to $134.9 million, from $102.9 million, $90.4 million, and $101.9 million, respectively, in the prior year’s quarter. The A&H net written premium increase was driven by the continued growth across the entire book. Service and fee income was $43.0 million compared to $38.9 million in the prior year’s quarter. The increase in service and fee income primarily relates to continued growth in our book. Excluding non-cash amortization of intangible assets, the combined ratio^(10,14) was 93.1% with a loss ratio of 62.8% and an expense ratio^(10,13,15) of 30.3%, versus a prior year combined ratio of 92.9% with a loss ratio of 77.3% and an expense ratio of 15.6%. The improvement in our loss ratio reflects the strong performance across our entire book.
  
  
• Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $99.2 million, net written premium was $51.2 million, and net earned premium was $42.3 million. Reciprocal Exchanges combined ratio^(10,14,15) excluding non-cash amortization of intangible assets was 114.4% with a loss ratio of 80.0% and an expense ratio^(10,13) of 34.4%, which was elevated by weather events recognized in the second quarter. Investment income grew 8.5% to $29.7 million, reflecting an increase in the size of our investment portfolio as compared to the prior year’s quarter. Second quarter 2017 results included $8.4 million of net investment losses compared to a gain of $3.9 million in the second quarter of 2016. Total investments and cash and cash equivalents were $3.8 billion as of June 30, 2017. Accumulated other comprehensive income increased to $32.9 million at June 30, 2017 from $12.7 million at December 31, 2016.

Interest expense was $11.6 million, up from $8.9 million in the prior year’s quarter due to an increased amount of debt on our balance sheet. Debt was $754.7 million at June 30, 2017, up from $678.7 million at June 30, 2016, as a result of debt assumed from our prior acquisitions.

Earnings (losses) of equity investments (predominantly our investment in Life Settlement Entities and alternative investments) was a $18.9 million loss in the second quarter of 2017 versus a $7.4 million gain in the prior year’s quarter.

The second quarter of 2017 provision for income taxes was $5.7 million and the effective tax rate for the quarter was 20.9% compared with incomes taxes of $14.8 million and an effective tax rate of 26.5% in the second quarter of 2016.

National General Holding Corp.’s shareholders’ equity was $1,939.9 million at June 30, 2017, growth of 2.4% from $1,893.8 million at December 31, 2016. Fully diluted book value per share was $13.88 at June 30, 2017, growth of 2.7% from $13.52 at December 31, 2016. Our trailing twelve month operating return on average equity (ROE)⁽¹⁶⁾ was 8.0% as of June 30, 2017.

Year-to-Date P&C Segment Notable Large Losses
2017 Quarter			P&C Notable Large Losses and LAE ($ millions)			P&C Loss Ratio Points*		EPS Impact After Tax
Q2	Hail event		$7.0			0.9%		$0.04
Q2	Increased Loss Estimate from Q1 West Coast Storms		$9.1			1.1%		$0.05
Q1	West Coast Storms		$8.9			1.2%		$0.05

* Loss ratio points related to P&C net earned premium in quarter the loss event was recorded

Conference Call

On Tuesday, August 8, 2017 at 11:00 AM ET, President and Chief Executive Officer Barry Karfunkel and Chief Financial Officer Mike Weiner will review results and discuss business conditions via a conference call that may be accessed as follows:

Toll-Free U.S. Dial-in:		888-267-2845
International Dial-in:		973-413-6102
Conference Entry Code:		583127
Webcast Registration:		http://ir.nationalgeneral.com/events.cfm

A replay of the conference call will be accessible from 2:00 PM ET on Tuesday, August 8, 2017 to 11:59 PM ET on Tuesday, August 22, 2017 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 583127. In addition, a replay of the webcast can also be retrieved at http://ir.nationalgeneral.com/events.cfm.

About National General Holdings Corp.

National General Holdings Corp., 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 the Company. 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, 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 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 our life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, 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, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with AmTrust Financial Services, Inc., ACP Re Ltd., Maiden Holdings, Ltd., or third party agencies, breaches in data security or other disruptions involving our technology, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statement except as may be required by law. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected is contained in the Company’s filings with the Securities and Exchange Commission.

Income Statement - Second Quarter
$ in thousands
(Unaudited)
		Three Months Ended June 30,
		2017													2016
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	1,035,552			$	99,157			$	1,133,909		(A)		$	774,048			$	77,170			$	850,507		(H)
Net written premium		940,757				51,243				992,000					698,319				39,130				737,449
Net earned premium		939,495				42,256				981,751					676,912				36,028				712,940
Ceding commission income (loss)		3,399				18,109				21,508					(3,205		)		14,909				11,704
Service and fee income		137,562				1,494				125,176			(B)		99,629				1,195				90,017			(I)
Net investment income		29,680				2,147				29,446			(C)		27,361				2,248				27,528			(J)
Net gain (loss) on investments		(8,362		)		6,187				(2,175		)			3,854				141				3,995
Other income (expense)		(6,098		)		—				(6,098		)			—				—				—
Total revenues		$	1,095,676			$	70,193			$	1,149,608		(D)		$	804,551			$	54,521			$	846,184		(K)
Expenses:
Loss and loss adjustment expense		$	676,587			$	33,820			$	710,407				$	454,622			$	17,736			$	472,358
Acquisition costs and other underwriting expenses		173,255				15,540				188,795					108,387				493				108,874			(L)
General and administrative expenses		206,865				18,509				211,494			(E)		176,660				25,261				191,120			(M)
Interest expense		11,550				2,381				11,550			(F)		8,939				2,081				8,939			(N)
Total expenses		$	1,068,257			$	70,250			$	1,122,246		(G)		$	748,608			$	45,571			$	781,291		(O)
Income (loss) before provision (benefit) for income taxes and earnings (losses) of equity method investments		$	27,419			$	(57	)		$	27,362				$	55,943			$	8,950			$	64,893
Provision (benefit) for income taxes		5,740				72				5,812					14,825				(274		)		14,551
Income (loss) before earnings (losses) of equity method investments		21,679				(129		)		21,550					41,118				9,224				50,342
Earnings (losses) of equity method investments		(18,915		)		—				(18,915		)			7,356				—				7,356
Net income (loss) before non-controlling interest and dividends on preferred shares		2,764				(129		)		2,635					48,474				9,224				57,698
Less: net income (loss) attributable to non-controlling interest		(30		)		(129		)		(159		)			4				9,224				9,228
Net income before dividends on preferred shares		2,794				—				2,794					48,470				—				48,470
Less: dividends on preferred shares		7,875				—				7,875					4,125				—				4,125
Net income (loss) available to common stockholders		$	(5,081	)		$	—			$	(5,081	)			$	44,345			$	—			$	44,345

NOTES:
Consolidated column includes eliminations as follows: (A) $(800), (B) $(13,880), (C) $(2,381), (D) $(16,261), (E) $(13,880), (F) $(2,381), (G) $(16,261), (H) $(711), (I) $(10,807), (J) $(2,081), (K) $(12,888), (L) $(6), (M) $(10,801), (N) $(2,081) and (O) $(12,888).

Income Statement - Year to Date
$ in thousands
(Unaudited)
		Six Months Ended June 30,
		2017													2016 (1)
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	2,209,206			$	181,373			$	2,388,978		(A)		$	1,590,242			$	77,170			$	1,666,701		(H)
Net written premium		2,025,795				92,944				2,118,739					1,442,906				39,130				1,482,036
Net earned premium		1,820,634				81,288				1,901,922					1,331,832				36,028				1,367,860
Ceding commission income (loss)		6,146				35,356				41,502					(5,100		)		14,909				9,809
Service and fee income		273,425				3,574				251,118			(B)		196,573				1,195				186,961			(I)
Net investment income		55,449				5,031				55,836			(C)		49,031				2,248				49,198			(J)
Net gain (loss) on investments		(7,874		)		6,187				(1,687		)			8,172				141				8,313
Other income (expense)		3,703				—				3,703					—				—				—
Total revenues		$	2,151,483			$	131,436			$	2,252,394		(D)		$	1,580,508			$	54,521			$	1,622,141		(K)
Expenses:
Loss and loss adjustment expense		$	1,264,812			$	61,920			$	1,326,732				$	863,672			$	17,736			$	881,408
Acquisition costs and other underwriting expenses		334,376				29,720				364,096					221,286				493				221,773			(L)
General and administrative expenses		448,948				43,612				466,679			(E)		353,287				25,261				367,747			(M)
Interest expense		23,095				4,644				23,095			(F)		18,080				2,081				18,080			(N)
Total expenses		$	2,071,231			$	139,896			$	2,180,602		(G)		$	1,456,325			$	45,571			$	1,489,008		(O)
Income (loss) before provision (benefit) for income taxes and earnings (losses) of equity method investments		$	80,252			$	(8,460	)		$	71,792				$	124,183			$	8,950			$	133,133
Provision (benefit) for income taxes		21,506				(2,176		)		19,330					32,908				(274		)		32,634
Income (loss) before earnings (losses) of equity method investments		58,746				(6,284		)		52,462					91,275				9,224				100,499
Earnings (losses) of equity method investments		(13,961		)		—				(13,961		)			14,038				—				14,038
Net income (loss) before non-controlling interest and dividends on preferred shares		44,785				(6,284		)		38,501					105,313				9,224				114,537
Less: net income (loss) attributable to non-controlling interest		—				(6,284		)		(6,284		)			16				9,224				9,240
Net income before dividends on preferred shares		44,785				—				44,785					105,297				—				105,297
Less: dividends on preferred shares		15,750				—				15,750					8,250				—				8,250
Net income available to common stockholders		$	29,035			$	—			$	29,035				$	97,047			$	—			$	97,047

NOTES:
(1) The Reciprocal Exchanges did not meet the criteria for consolidation under GAAP for the Three Months Ended March 31, 2016.

Consolidated column includes eliminations as follows: (A) $(1,601), (B) $(25,881), (C) $(4,644), (D) $(30,525), (E) $(25,881), (F) $(4,644), (G) $(30,525), (H) $(711), (I) $(10,807), (J) $(2,081), (K) $(12,888), (L) $(6), (M) $(10,801), (N) $(2,081) and (O) $(12,888).

Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2017				2016				2017				2016
Net income (loss) available to common stockholders		$	(5,081	)		$	44,345			$	29,035			$	97,047
Basic net income (loss) per common share		$	(0.05	)		$	0.42			$	0.27			$	0.92
Diluted net income (loss) per common share		$	(0.05	)		$	0.41			$	0.27			$	0.90
Operating earnings attributable to NGHC(1)		$	11,864			$	46,416			$	53,149			$	100,150
Basic operating earnings per common share(1)		$	0.11			$	0.44			$	0.50			$	0.95
Diluted operating earnings per common share(1)		$	0.11			$	0.43			$	0.49			$	0.93
Dividends declared per common share		$	0.04			$	0.03			$	0.08			$	0.06
Weighted average number of basic shares outstanding		106,560,000				105,803,802				106,514,396				105,700,682
Weighted average number of diluted shares outstanding		109,447,812				108,197,897				109,364,273				107,987,406
Shares outstanding, end of period		106,607,110				105,932,281				106,607,110				105,932,281
Fully diluted shares outstanding, end of period		109,507,711				108,326,376				109,507,711				108,219,006
Book value per share		$	14.26			$	13.75			$	14.26			$	13.75
Fully diluted book value per share		$	13.88			$	13.45			$	13.88			$	13.46

Reconciliation of Net Income to Operating Earnings (Non-GAAP)
$ in thousands, except per share data
(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2017				2016				2017				2016
Net income (loss) available to common stockholders		$	(5,081	)		$	44,345			$	29,035			$	97,047
Add (subtract):
Net (gain) loss on investments		8,362				(3,854		)		7,874				(8,172		)
Bargain purchase gain		6,098				—				(3,703		)		—
Equity in (earnings) losses of unconsolidated subsidiaries (other than LSC investment and certain Real Estate investments)		(82		)		(148		)		(100		)		13
Non-cash amortization of intangible assets		11,690				7,188				33,027				12,852
Income tax at 35%		(9,123		)		(1,115		)		(12,984		)		(1,590		)
Operating earnings attributable to NGHC (1)		$	11,864			$	46,416			$	53,149			$	100,150
Operating earnings per common share:
Basic operating earnings per common share		$	0.11			$	0.44			$	0.50			$	0.95
Diluted operating earnings per common share		$	0.11			$	0.43			$	0.49			$	0.93

Balance Sheet
$ in thousands
		June 30, 2017 (unaudited)													December 31, 2016 (audited)
ASSETS		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Total investments (2)		$	3,606,723			$	389,017			$	3,906,659		(A)		$	3,456,112			$	306,345			$	3,673,449		(J)
Cash and cash equivalents		237,815				4,023				241,838					212,894				7,405				220,299
Premiums and other receivables, net		1,284,584				48,911				1,332,694			(B)		1,044,272				47,198				1,090,669			(K)
Reinsurance recoverable (3)		900,456				68,625				969,081					892,264				55,972				948,236
Intangible assets, net		406,880				3,775				410,655					456,695				11,025				467,720
Goodwill		189,587				—				189,587					155,290				—				155,290
Other (4)		639,600				107,987				736,618			(C)		621,679				89,764				689,318			(L)
Total assets		$	7,265,645			$	622,338			$	7,787,132		(D)		$	6,839,206			$	517,709			$	7,244,981		(M)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves		$	2,220,251			$	139,905			$	2,360,156				$	2,127,997			$	137,075			$	2,265,072
Unearned premiums		1,698,598				182,874				1,881,472					1,472,299				163,326				1,635,625
Reinsurance payable (5)		101,510				27,317				128,026			(E)		78,949				20,662				98,810			(N)
Accounts payable and accrued expenses (6)		397,164				81,855				468,050			(F)		330,210				13,179				336,991			(O)
Debt		754,736				89,081				754,736			(G)		752,001				89,008				752,001			(P)
Other		153,485				78,239				231,724					183,921				62,784				230,978			(Q)
Total liabilities		$	5,325,744			$	599,271			$	5,824,164		(H)		$	4,945,377			$	486,034			$	5,319,477		(R)
Stockholders’ equity:
Common stock (7)		$	1,066			$	—			$	1,066				$	1,064			$	—			$	1,064
Preferred stock (8)		420,000				—				420,000					420,000				—				420,000
Additional paid-in capital		920,310				—				920,310					914,706				—				914,706
Accumulated other comprehensive income		32,876				—				32,876					12,710				—				12,710
Retained earnings		565,649				—				565,649					545,106				—				545,106
Total National General Holdings Corp. stockholders’ equity		1,939,901				—				1,939,901					1,893,586				—				1,893,586
Non-controlling interest		—				23,067				23,067					243				31,675				31,918
Total stockholders’ equity		$	1,939,901			$	23,067			$	1,962,968				$	1,893,829			$	31,675			$	1,925,504
Total liabilities and stockholders’ equity		$	7,265,645			$	622,338			$	7,787,132		(I)		$	6,839,206			$	517,709			$	7,244,981		(S)

NOTES:
Consolidated column includes eliminations as follows: (A) $(89,081), (B) $(801), (C) $(10,969), (D) $(100,851), (E) $(801), (F) $(10,969), (G) $(89,081), (H) $(100,851), (I) $(100,851), (J) $(89,008), (K) $(801), (L) $(22,125), (M) $(111,934), (N) $(801), (O) $(6,398), (P) $(89,008), (Q) $(15,727), (R) $(111,934) and (S) $(111,934).

Segment Information - Second Quarter
$ in thousands
(Unaudited)
		Three Months Ended June 30,
		2017																		2016
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	904,578			$	130,974			$	1,035,552				$	99,157				$	671,157			$	102,891			$	774,048				$	77,170
Net written premium		822,508				118,249				940,757					51,243					607,942				90,377				698,319					39,130
Net earned premium		804,643				134,852				939,495					42,256					575,002				101,910				676,912					36,028
Ceding commission income (loss)		3,128				271				3,399					18,109					(3,564		)		359				(3,205		)			14,909
Service and fee income		94,519				43,043				137,562					1,494					60,773				38,856				99,629					1,195
Total underwriting revenues		$	902,290			$	178,166			$	1,080,456				$	61,859				$	632,211			$	141,125			$	773,336				$	52,132
Loss and loss adjustment expense		591,844				84,743				676,587					33,820					375,893				78,729				454,622					17,736
Acquisition costs and other		126,496				46,759				173,255					15,540					81,291				27,096				108,387					493
General and administrative		168,023				38,842				206,865					18,509					147,113				29,547				176,660					25,261
Total underwriting expenses		$	886,363			$	170,344			$	1,056,707				$	67,869				$	604,297			$	135,372			$	739,669				$	43,490
Underwriting income (loss)		15,927				7,822				23,749					(6,010		)			27,914				5,753				33,667					8,642
Non-cash amortization of intangible assets		10,278				1,412				11,690					(91		)			5,628				1,560				7,188					6,726
Underwriting income (loss) before amortization and impairment		$	26,205			$	9,234			$	35,439				$	(6,101	)			$	33,542			$	7,313			$	40,855				$	15,368
Underwriting ratios
Loss and loss adjustment expense ratio (9)		73.6		%		62.8		%		72.0		%			80.0		%			65.4		%		77.3		%		67.2		%			49.2		%
Operating expense ratio (Non-GAAP) (10,11)		24.5		%		31.4		%		25.5		%			34.2		%			29.8		%		17.1		%		27.9		%			26.8		%
Combined ratio (Non-GAAP) (10,12)		98.1		%		94.2		%		97.5		%			114.2		%			95.2		%		94.4		%		95.1		%			76.0		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (9)		73.6		%		62.8		%		72.0		%			80.0		%			65.4		%		77.3		%		67.2		%			49.2		%
Operating expense ratio (Non-GAAP) (10,13)		23.2		%		30.3		%		24.2		%			34.4		%			28.8		%		15.6		%		26.8		%			8.1		%
Combined ratio before amortization and impairment (Non-GAAP) (10,14)		96.8		%		93.1		%		96.2		%			114.4		%			94.2		%		92.9		%		94.0		%			57.3		%

Note: Loss and loss adjustment expenses for the three months ended June 30, 2017 included $6,570 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $4,524 of favorable development in the A&H segment, versus $6,756 of favorable development in the P&C segment, and $4,350 of unfavorable development in the A&H segment for the three months ended June 30, 2016.

Segment Information - Year to Date
$ in thousands
(Unaudited)
		Six Months Ended June 30,
		2017																		2016
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges (1)
Gross written premium		$	1,886,277			$	322,929			$	2,209,206				$	181,373				$	1,332,494			$	257,748			$	1,590,242				$	77,170
Net written premium		1,726,432				299,363				2,025,795					92,944					1,208,716				234,190				1,442,906					39,130
Net earned premium		1,556,856				263,778				1,820,634					81,288					1,129,050				202,782				1,331,832					36,028
Ceding commission income (loss)		5,588				558				6,146					35,356					(5,828		)		728				(5,100		)			14,909
Service and fee income		198,109				75,316				273,425					3,574					124,261				72,312				196,573					1,195
Total underwriting revenues		$	1,760,553			$	339,652			$	2,100,205				$	120,218				$	1,247,483			$	275,822			$	1,523,305				$	52,132
Loss and loss adjustment expense		1,113,178				151,634				1,264,812					61,920					708,552				155,120				863,672					17,736
Acquisition costs and other		256,127				78,249				334,376					29,720					172,950				48,336				221,286					493
General and administrative		364,893				84,055				448,948					43,612					291,807				61,480				353,287					25,261
Total underwriting expenses		$	1,734,198			$	313,938			$	2,048,136				$	135,252				$	1,173,309			$	264,936			$	1,438,245				$	43,490
Underwriting income (loss)		26,355				25,714				52,069					(15,034		)			74,174				10,886				85,060					8,642
Non-cash amortization of intangible assets		30,012				3,015				33,027					6,978					9,475				3,377				12,852					6,726
Underwriting income (loss) before amortization and impairment		$	56,367			$	28,729			$	85,096				$	(8,056	)			$	83,649			$	14,263			$	97,912				$	15,368
Underwriting ratios
Loss and loss adjustment expense ratio (9)		71.5		%		57.5		%		69.5		%			76.2		%			62.8		%		76.5		%		64.8		%			49.2		%
Operating expense ratio (Non-GAAP) (10,11)		26.8		%		32.8		%		27.7		%			42.3		%			30.7		%		18.1		%		28.8		%			26.8		%
Combined ratio (Non-GAAP) (10,12)		98.3		%		90.3		%		97.2		%			118.5		%			93.5		%		94.6		%		93.6		%			76.0		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (9)		71.5		%		57.5		%		69.5		%			76.2		%			62.8		%		76.5		%		64.8		%			49.2		%
Operating expense ratio (Non-GAAP) (10,13)		24.9		%		31.6		%		25.9		%			33.7		%			29.8		%		16.5		%		27.8		%			8.1		%
Combined ratio before amortization and impairment (Non-GAAP) (10,14)		96.4		%		89.1		%		95.4		%			109.9		%			92.6		%		93.0		%		92.6		%			57.3		%

Note: (1) Reciprocal Exchanges' column for the six months ended June 30, 2016 excludes its operating results from January 1, 2016 to March 31, 2016.
Loss and loss adjustment expenses for the six months ended June 30, 2017 included $2,216 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $12,844 of favorable development in the A&H segment, versus $7,334 of favorable development in the P&C segment, and $3,584 of unfavorable development in the A&H segment for the six months ended June 30, 2016.

Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)
		Three Months Ended June 30,
		2017																		2016
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	886,363			$	170,344			$	1,056,707				$	67,869				$	604,297			$	135,372			$	739,669				$	43,490
Less: Loss and loss adjustment expense		591,844				84,743				676,587					33,820					375,893				78,729				454,622					17,736
Less: Ceding commission income (loss)		3,128				271				3,399					18,109					(3,564		)		359				(3,205		)			14,909
Less: Service and fee income		94,519				43,043				137,562					1,494					60,773				38,856				99,629					1,195
Operating expense		196,872				42,287				239,159					14,446					171,195				17,428				188,623					9,650
Net earned premium		$	804,643			$	134,852			$	939,495				$	42,256				$	575,002			$	101,910			$	676,912				$	36,028
Operating expense ratio (Non-GAAP)		24.5		%		31.4		%		25.5		%			34.2		%			29.8		%		17.1		%		27.9		%			26.8		%
Total underwriting expenses		$	886,363			$	170,344			$	1,056,707				$	67,869				$	604,297			$	135,372			$	739,669				$	43,490
Less: Loss and loss adjustment expense		591,844				84,743				676,587					33,820					375,893				78,729				454,622					17,736
Less: Ceding commission income (loss)		3,128				271				3,399					18,109					(3,564		)		359				(3,205		)			14,909
Less: Service and fee income		94,519				43,043				137,562					1,494					60,773				38,856				99,629					1,195
Less: Non-cash amortization of intangible assets		10,278				1,412				11,690					(91		)			5,628				1,560				7,188					6,726
Operating expense before amortization and impairment		186,594				40,875				227,469					14,537					165,567				15,868				181,435					2,924
Net earned premium		$	804,643			$	134,852			$	939,495				$	42,256				$	575,002			$	101,910			$	676,912				$	36,028
Operating expense ratio before amortization and impairment (Non-GAAP)		23.2		%		30.3		%		24.2		%			34.4		%			28.8		%		15.6		%		26.8		%			8.1		%

Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)
		Six Months Ended June 30,
		2017																		2016
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	1,734,198			$	313,938			$	2,048,136				$	135,252				$	1,173,309			$	264,936			$	1,438,245				$	43,490
Less: Loss and loss adjustment expense		1,113,178				151,634				1,264,812					61,920					708,552				155,120				863,672					17,736
Less: Ceding commission income (loss)		5,588				558				6,146					35,356					(5,828		)		728				(5,100		)			14,909
Less: Service and fee income		198,109				75,316				273,425					3,574					124,261				72,312				196,573					1,195
Operating expense		417,323				86,430				503,753					34,402					346,324				36,776				383,100					9,650
Net earned premium		$	1,556,856			$	263,778			$	1,820,634				$	81,288				$	1,129,050			$	202,782			$	1,331,832				$	36,028
Operating expense ratio (Non-GAAP)		26.8		%		32.8		%		27.7		%			42.3		%			30.7		%		18.1		%		28.8		%			26.8		%
Total underwriting expenses		$	1,734,198			$	313,938			$	2,048,136				$	135,252				$	1,173,309			$	264,936			$	1,438,245				$	43,490
Less: Loss and loss adjustment expense		1,113,178				151,634				1,264,812					61,920					708,552				155,120				863,672					17,736
Less: Ceding commission income (loss)		5,588				558				6,146					35,356					(5,828		)		728				(5,100		)			14,909
Less: Service and fee income		198,109				75,316				273,425					3,574					124,261				72,312				196,573					1,195
Less: Non-cash amortization of intangible assets		30,012				3,015				33,027					6,978					9,475				3,377				12,852					6,726
Operating expense before amortization and impairment		387,311				83,415				470,726					27,424					336,849				33,399				370,248					2,924
Net earned premium		$	1,556,856			$	263,778			$	1,820,634				$	81,288				$	1,129,050			$	202,782			$	1,331,832				$	36,028
Operating expense ratio before amortization and impairment (Non-GAAP)		24.9		%		31.6		%		25.9		%			33.7		%			29.8		%		16.5		%		27.8		%			8.1		%

Premiums by Business Line
$ in thousands
(Unaudited)
		Three Months Ended June 30,
		Gross Written Premium												Net Written Premium												Net Earned Premium
		2017				2016				Change				2017				2016				Change				2017				2016				Change
Property & Casualty
Personal Auto		$	514,990			$	338,095			52.3	%			$	471,372			$	297,281			58.6	%			$	495,225			$	290,829			70.3	%
Homeowners		151,984				100,717				50.9	%			131,926				90,559				45.7	%			110,570				81,556				35.6	%
RV/Packaged		52,598				46,693				12.6	%			52,190				46,421				12.4	%			43,314				39,015				11.0	%
Small Business Auto		80,890				68,366				18.3	%			72,864				62,948				15.8	%			70,324				51,470				36.6	%
Lender-placed insurance		90,374				108,190				(16.5	)%			86,525				105,385				(17.9	)%			79,201				108,519				(27.0	)%
Other		13,742				9,096				51.1	%			7,631				5,348				42.7	%			6,009				3,613				66.3	%
Property & Casualty		904,578				671,157				34.8	%			822,508				607,942				35.3	%			804,643				575,002				39.9	%
Accident & Health		130,974				102,891				27.3	%			118,249				90,377				30.8	%			134,852				101,910				32.3	%
Total National General		$	1,035,552			$	774,048			33.8	%			$	940,757			$	698,319			34.7	%			$	939,495			$	676,912			38.8	%
Reciprocal Exchanges
Personal Auto		$	35,221			$	23,121			52.3	%			$	21,601			$	13,453			60.6	%			$	17,239			$	12,980			32.8	%
Homeowners		63,049				51,636				22.1	%			29,174				23,535				24.0	%			24,613				19,604				25.6	%
Other		887				2,413				(63.2	)%			468				2,142				(78.2	)%			404				3,444				(88.3	)%
Reciprocal Exchanges		$	99,157			$	77,170			28.5	%			$	51,243			$	39,130			31.0	%			$	42,256			$	36,028			17.3	%
Consolidated Total (A)		$	1,133,909			$	850,507			33.3	%			$	992,000			$	737,449			34.5	%			$	981,751			$	712,940			37.7	%

NOTES:
(A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges of $(287) in Personal Auto and $(513) in Homeowners Gross Written Premium in 2017, respectively, and $(220) in Personal Auto and $(491) in Homeowners Gross Written Premium in 2016, respectively.

Premiums by Business Line
$ in thousands
(Unaudited)
		Six Months Ended June 30,
		Gross Written Premium												Net Written Premium												Net Earned Premium
		2017				2016				Change				2017				2016				Change				2017				2016				Change
Property & Casualty
Personal Auto		$	1,162,171			$	723,293			60.7	%			$	1,068,251			$	632,607			68.9	%			$	949,640			$	562,826			68.7	%
Homeowners		266,709				171,018				56.0	%			236,471				156,435				51.2	%			214,699				155,995				37.6	%
RV/Packaged		97,352				86,296				12.8	%			96,709				85,877				12.6	%			83,964				76,534				9.7	%
Small Business Auto		167,266				118,517				41.1	%			152,072				107,941				40.9	%			133,565				95,314				40.1	%
Lender-placed insurance		166,644				220,187				(24.3	)%			159,357				217,382				(26.7	)%			162,942				231,325				(29.6	)%
Other		26,135				13,183				98.2	%			13,572				8,474				60.2	%			12,046				7,056				70.7	%
Property & Casualty		1,886,277				1,332,494				41.6	%			1,726,432				1,208,716				42.8	%			1,556,856				1,129,050				37.9	%
Accident & Health		322,929				257,748				25.3	%			299,363				234,190				27.8	%			263,778				202,782				30.1	%
Total National General		$	2,209,206			$	1,590,242			38.9	%			$	2,025,795			$	1,442,906			40.4	%			$	1,820,634			$	1,331,832			36.7	%
Reciprocal Exchanges
Personal Auto		$	63,380			$	23,121			NA				$	38,707			$	13,453			NA				$	33,356			$	12,980			NA
Homeowners		116,376				51,636				NA				53,390				23,535				NA				47,151				19,604				NA
Other		1,617				2,413				NA				847				2,142				NA				781				3,444				NA
Reciprocal Exchanges (A)		$	181,373			$	77,170			NA				$	92,944			$	39,130			NA				$	81,288			$	36,028			NA
Consolidated Total (B)		$	2,388,978			$	1,666,701			43.3	%			$	2,118,739			$	1,482,036			43.0	%			$	1,901,922			$	1,367,860			39.0	%

NOTES:
(A) The Reciprocal Exchanges did not meet the criteria for consolidation under GAAP for the Three Months Ended March 31, 2016.
(B) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges of $(564) in Personal Auto and $(1,037) in Homeowners Gross Written Premium in 2017, respectively, and $(220) in Personal Auto and $(491) in Homeowners Gross Written Premium in 2016, respectively.

Additional Disclosures

(1) References to operating earnings and basic and diluted operating earnings per share (“EPS”) are non-GAAP financial measures defined by the Company as net income/loss and basic and diluted earnings per share excluding after-tax net gain or loss on investments (including foreign exchange gain or loss), other-than-temporary impairment losses, bargain purchase gains, earnings of operating equity method investments (800 Superior, LLC and 4455 LBJ Freeway, LLC), non-cash impairment of goodwill and non-cash amortization of intangible assets. 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 measures to the most directly comparable GAAP measure.

(2) Total investments includes $400,064 and $390,688 in related parties at June 30, 2017 and December 31, 2016, respectively.

(3) Reinsurance recoverable includes $38,750 and $37,046 from related parties at June 30, 2017 and December 31, 2016, respectively.

(4) Other includes $2,320 and $1,298 from related parties at June 30, 2017 and December 31, 2016, respectively.

(5) Reinsurance payable includes $33,476 and $33,419 due to related parties at June 30, 2017 and December 31, 2016, respectively.

(6) Accounts payable and accrued expenses includes $34,857 and $29,271 to related parties at June 30, 2017 and December 31, 2016, respectively.

(7) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 106,607,110 shares - June 30, 2017; authorized 150,000,000 shares, issued and outstanding 106,428,092 shares - December 31, 2016.

(8) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,000 shares - June 30, 2017; authorized 10,000,000 shares, issued and outstanding 2,565,000 shares - December 31, 2016.

(9) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expense by net earned premium.

(10) Operating expense ratio and combined ratio are considered non-GAAP financial measures under applicable SEC rules because a component of those ratios, operating expense, is calculated by offsetting acquisition and other underwriting costs and general and administrative expenses by ceding commission income and service and fee income. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets on a consolidated basis. The Company believes this presentation enhances the understanding of our results by eliminating what we believe are volatile and unusual events and presenting the ratios with what we believe are the underlying run rates of the business. 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 measures to the most directly comparable GAAP measure.

(11) Operating expense ratio is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expenses less ceding commission income and service and fee income. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business. 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 measures to the most directly comparable GAAP measure.

(12) Combined ratio is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) 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. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General.

(13) Operating expense ratio before amortization and impairment is a non-GAAP measure defined by the Company, that 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 and service and fee income 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. 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 measures to the most directly comparable GAAP measure.

(14) Combined ratio before amortization and impairment is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio and the operating expense ratio before amortization and impairment (non-GAAP) 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. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss. 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 measures to the most directly comparable GAAP measure.

(15) In the current year’s quarter, certain costs associated with claims handling were prospectively reclassified from general and administrative expenses to loss adjustment expenses. In the year-ago quarter, the corresponding change to the Property and Casualty segment would have been $26.1 million, negligible in the Accident and Health segment and $3.9 million in the Reciprocal Exchange.

(16) Trailing twelve month operating return on average equity is the ratio of the previous twelve months operating earnings to average shareholders’ equity for the periods presented. Average shareholders’ equity is the sum of the shareholders’ equity excluding preferred stock at the beginning and end of the period presented 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.

Investor Contact

Christine Worley
Director of Investor Relations
Phone: 212-380-9462
Email: Christine.Worley@NGIC.com