NEW YORK, Aug. 06, 2018 (GLOBE NEWSWIRE) -- National General Holdings Corp. (Nasdaq:NGHC) today reported second quarter 2018 net income of $36.7 million or $0.34 per diluted share, compared to net income of $5.5 million or $0.05 per diluted share in the second quarter of 2017. Second quarter 2018 operating earnings⁽¹⁾ was $59.5 million or $0.54 per diluted share, compared to $23.7 million or $0.22 per diluted share in the second quarter of 2017. Second quarter 2018 net income was impacted by an $18.7 million net realized loss on investments related to a repositioning of the portfolio.

Second Quarter 2018 Highlights Versus Second Quarter 2017*

• Gross written premium grew $186.9 million or 18.0% to $1,222.5 million, driven by continued organic growth in our P&C segment of 17.8% and in our A&H segment of 19.7%.
• In the second quarter, our homeowners’ product experienced organic growth of 25.5% driven by strong results from strategic partnerships and the continued expansion in the high net worth market. Our personal auto product experienced organic growth of 22.8% driven by continued rate increases and PIF growth.
• The overall combined ratio^(9,13) was 92.1% compared to 96.3% in the prior year’s quarter, excluding non-cash amortization of intangible assets. The P&C segment reported a decrease in combined ratio to 92.9% from 96.8% in the prior year’s quarter. The combined ratio includes $20.5 million of losses, or 2.8 P&C loss ratio points, primarily related to spring weather events in the Midwestern and Northeastern parts of the U.S. and hail in Texas in the second quarter 2018, compared to $16.1 million of losses, or 2.0 P&C loss ratio points, from events in the second quarter 2017. The A&H segment reported a combined ratio of 88.6% compared to 93.7% in the prior year’s quarter.
• Service and fee income grew 7.7% to $148.1 million, driven by organic growth in both our Accident & Health and Property & Casualty segments.
• Shareholders’ equity was $1.98 billion and fully diluted book value per share was $14.28 at June 30, 2018, growth of 2.8% and 3.0%, respectively, from December 31, 2017. Our trailing twelve month operating return on average equity (ROE)⁽¹⁴⁾ was 12.1% as of June 30, 2018.
• Second quarter 2018 operating earnings exclude the following material items, net of tax: $14.8 million or $0.14 net loss on investments and $6.5 million or $0.06 per share of non-cash amortization of intangible assets.

Barry Karfunkel, National General’s CEO, stated: “We are pleased to report another quarter with both strong top line growth and underwriting results, despite continued active catastrophe loss activity for the industry.  Our second quarter results reflect the strength and stability of returns the platform we have built is able to generate.  We expect the opportunity for profitable growth across the diversified niche lines of business we have developed to continue as market dynamics in both our P&C and A&H segments remain favorable.”

*NOTE: Unless specified otherwise, discussion of our second quarter 2018 and 2017 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 2018 as Compared to Second Quarter 2017 by Segment

• Property & Casualty - Gross written premium grew by 17.8% to $1,065.6 million, net written premium decreased by 16.9% to $683.9 million and net earned premium decreased by 8.7% to $734.9 million. P&C gross written premium growth was primarily driven by organic growth of 25.5% from our homeowners’ product and 22.8% from our personal auto product. The decrease in the net premiums written and earned were driven by the home and auto quota shares entered after July 1, 2017.  Service and fee income grew 11.3% to $105.2 million. Excluding non-cash amortization of intangible assets, the combined ratio^(9,13) was 92.9% with a loss ratio of 73.5% and an expense ratio^(9,12) of 19.4%, versus a prior year combined ratio of 96.8% with a loss ratio of 73.6% and an expense ratio of 23.2%. The decrease in the expense ratio was driven by the impact of the home and auto quota shares.  The loss ratio was impacted by pre-tax catastrophe losses of approximately $20.5 million primarily related to spring weather events in the Midwestern and Northeastern parts of the U.S. and hail in Texas in the second quarter 2018.
   
• Accident & Health - Gross written premium grew by 19.7% to $156.8 million, net written premium grew by 17.8% to $139.3 million, and net earned premium grew by 15.8% to $156.2 million. The A&H gross written premium increase was driven by the continued growth across the entire book. Service and fee income was $42.9 million compared to $43.0 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio^(9,13) was 88.6% with a loss ratio of 56.6% and an expense ratio^(9,12) of 32.0%, versus a prior year combined ratio of 93.7% with a loss ratio of 63.4% and an expense ratio of 30.3%.
   
• Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $118.0 million, net written premium was $66.8 million, and net earned premium was $51.8 million. Reciprocal Exchanges combined ratio^(9,13) excluding non-cash amortization of intangible assets was 118.2% with a loss ratio of 80.5% and an expense ratio^(9,12) of 37.7%.

Second quarter 2018 investment income decreased to $26.2 million, compared to $27.8 million in the second quarter of 2017, reflecting our decision to increase credit quality of the portfolio in the second half of 2017. Total investments and cash and cash equivalents (including restricted cash) were $3.8 billion as of June 30, 2018. Accumulated other comprehensive income (loss) increased to a $55.7 million loss at June 30, 2018 from a $8.1 million loss at December 31, 2017, primarily due to the impact of higher interest rates which negatively impacted bond valuations.

Interest expense, which includes interest credited on funds held balances, was $15.0 million and debt was $705.1 million at June 30, 2018, and $713.7 million at December 31, 2017.

The second quarter of 2018 provision for income taxes was $9.4 million and the effective tax rate for the quarter was 17.5%.  The effective tax rate for the first half of 2018 was 19.9%.

Shareholders’ equity was $1,982.2 million at June 30, 2018, growth of 2.8% from $1,928.6 million at December 31, 2017. Fully diluted book value per share was $14.28 at June 30, 2018, growth of 3.0% from $13.86 at December 31, 2017. Our trailing twelve month operating return on average equity (ROE)⁽¹⁴⁾ was 12.1% as of June 30, 2018.

Year-to-Date P&C Segment Notable Large Losses
2018 Quarter			P&C Notable Large Losses and LAE ($ millions)			P&C Loss Ratio Points*			EPS Impact After Tax
Q2	Spring Weather-related and Texas Hail Events		$20.5			2.8	%		$0.15
Q1	Northeastern Winter Weather		$14.2			2.0	%		$0.10
* Loss ratio points related to P&C net earned premium in quarter the loss event was recorded.

Additional Item

• National General Enters into Business Collaboration Agreement with Aioi Nissay Dowa Insurance Co., Ltd. - On July 11, 2018, we entered into a collaboration agreement among Aioi Nissay Dowa Insurance Co., Ltd. (AD), part of MS&AD Insurance Group and Aioi Nissay Dowa Insurance Services USA Corp. (AIS), a subsidiary of AD. In conjunction with the collaboration agreement, we issued AD $30 million aggregate liquidation preference of our Series D Fixed/Floating Rate Non-Cumulative Convertible Preferred Stock. Holders of the Preferred Stock will be entitled to receive noncumulative cash dividends, if and when declared by the board of directors, at a rate of 7% per annum, subject to adjustment to a floating rate following July 15, 2023. The Series D Preferred Stock is convertible at the holder’s option, on or after July 15, 2023 to shares of the Company’s common stock at an initial conversion price of $38 per share. We may, at our option, redeem the Series D Preferred Stock on or after July 15, 2023, with the redemption price being at the liquidation preference, unless certain premium thresholds are met under the collaboration agreement.

Conference Call

On Tuesday, August 7, 2018 at 9:30 AM ET, 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:	226472
Webcast Registration:	http://ir.nationalgeneral.com/events-and-presentations

A replay of the conference call will be accessible from 2:00 PM ET on Tuesday, August 7, 2018 to 11:59 PM ET on Tuesday, August 21, 2018 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 226472. In addition, a replay of the webcast can also be retrieved at http://ir.nationalgeneral.com/events-and-presentations. 

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 investments, development of claims and the effect on loss reserves, large loss activity including hurricanes and wildfires, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, the effect of unpredictable catastrophic losses, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, the effects of tax reform, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with third party or vendor 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,
		2018													2017
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	1,222,468			$	117,981			$	1,340,449				$	1,035,552			$	99,157			$	1,133,909		(G)
Net written premium		823,127				66,848				889,975					940,757				51,243				992,000
Net earned premium		891,103				51,803				942,906					939,495				42,256				981,751
Ceding commission income		41,982				13,426				55,408					3,399				18,109				21,508
Service and fee income		148,108				445				130,501			(A)		137,562				1,494				125,176			(H)
Net investment income		26,183				2,205				25,995			(B)		27,765				2,147				27,531			(I)
Net gain (loss) on investments		(18,736		)		(968		)		(19,704		)			(8,362		)		6,187				(2,175		)
Other income (expense)		—				—				—					(6,098		)		—				(6,098		)
Total revenues		$	1,088,640			$	66,911			$	1,135,106		(C)		$	1,093,761			$	70,193			$	1,147,693		(J)
Expenses:
Loss and loss adjustment expense		$	628,650			$	41,678			$	670,328				$	677,374			$	33,820			$	711,194
Acquisition costs and other underwriting expenses		171,300				10,560				181,860					173,255				15,540				188,795
General and administrative expenses		219,662				22,819				224,429			(D)		206,865				18,509				211,494			(K)
Interest expense		15,038				2,393				15,038			(E)		11,550				2,381				11,550			(L)
Total expenses		$	1,034,650			$	77,450			$	1,091,655		(F)		$	1,069,044			$	70,250			$	1,123,033		(M)
Income (loss) before provision (benefit) for income taxes		$	53,990			$	(10,539	)		$	43,451				$	24,717			$	(57	)		$	24,660
Provision (benefit) for income taxes		9,442				(2,901		)		6,541					11,415				72				11,487
Net income (loss) before non-controlling interest and dividends on preferred shares		44,548				(7,638		)		36,910					13,302				(129		)		13,173
Less: net income (loss) attributable to non-controlling interest		—				(7,638		)		(7,638		)			(30		)		(129		)		(159		)
Net income before dividends on preferred shares		44,548				—				44,548					13,332				—				13,332
Less: dividends on preferred shares		7,875				—				7,875					7,875				—				7,875
Net income available to common stockholders		$	36,673			$	—			$	36,673				$	5,457			$	—			$	5,457
NOTES: Consolidated column includes eliminations as follows: (A) $(18,052), (B) $(2,393), (C) $(20,445), (D) $(18,052), (E) $(2,393), (F) $(20,445), (G) $(800), (H) $(13,880), (I) $(2,381), (J) $(16,261), (K) $(13,880), (L) $(2,381) and (M) $(16,261).

Income Statement - Year to Date
$ in thousands
(Unaudited)

		Six Months Ended June 30,
		2018													2017
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	2,559,510			$	215,670			$	2,773,579		(A)		$	2,207,520			$	181,373			$	2,387,292		(H)
Net written premium		1,879,192				117,426				1,996,618					2,024,109				92,944				2,117,053
Net earned premium		1,750,586				97,858				1,848,444					1,818,948				81,288				1,900,236
Ceding commission income		74,940				24,936				99,876					6,146				35,356				41,502
Service and fee income		302,868				2,891				272,623			(B)		273,425				3,574				251,118			(I)
Net investment income		51,202				4,349				51,006			(C)		56,188				5,031				56,575			(J)
Net gain (loss) on investments		(18,487		)		(1,099		)		(19,586		)			(9,774		)		6,187				(3,587		)
Other income		—				—				—					3,703				—				3,703
Total revenues		$	2,161,109			$	128,935			$	2,252,363		(D)		$	2,148,636			$	131,436			$	2,249,547		(K)
Expenses:
Loss and loss adjustment expense		$	1,218,285			$	86,209			$	1,304,494				$	1,268,091			$	61,920			$	1,330,011
Acquisition costs and other underwriting expenses		328,908				21,662				350,570					333,795				29,720				363,515
General and administrative expenses		446,955				41,615				455,434			(E)		448,948				43,612				466,679			(L)
Interest expense		26,192				4,545				26,192			(F)		23,095				4,644				23,095			(M)
Total expenses		$	2,020,340			$	154,031			$	2,136,690		(G)		$	2,073,929			$	139,896			$	2,183,300		(N)
Income (loss) before provision (benefit) for income taxes		$	140,769			$	(25,096	)		$	115,673				$	74,707			$	(8,460	)		$	66,247
Provision (benefit) for income taxes		28,013				(5,270		)		22,743					24,452				(2,176		)		22,276
Net income (loss) before non-controlling interest and dividends on preferred shares		112,756				(19,826		)		92,930					50,255				(6,284		)		43,971
Less: net income (loss) attributable to non-controlling interest		—				(19,826		)		(19,826		)			—				(6,284		)		(6,284		)
Net income before dividends on preferred shares		112,756				—				112,756					50,255				—				50,255
Less: dividends on preferred shares		15,750				—				15,750					15,750				—				15,750
Net income available to common stockholders		$	97,006			$	—			$	97,006				$	34,505			$	—			$	34,505
NOTES: Consolidated column includes eliminations as follows: (A) $(1,601), (B) $(33,136), (C) $(4,545), (D) $(37,681), (E) $(33,136), (F) $(4,545), (G) $(37,681), (H) $(1,601), (I) $(25,881), (J) $(4,644), (K) $(30,525), (L) $(25,881), (M) $(4,644) and (N) $(30,525).

Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2018				2017				2018				2017
Net income available to common stockholders		$	36,673			$	5,457			$	97,006			$	34,505
Basic net income per common share		$	0.34			$	0.05			$	0.91			$	0.32
Diluted net income per common share		$	0.34			$	0.05			$	0.89			$	0.32
Operating earnings attributable to NGHC(1)		$	59,484			$	23,699			$	127,107			$	59,438
Basic operating earnings per common share(1)		$	0.56			$	0.22			$	1.19			$	0.56
Diluted operating earnings per common share(1)		$	0.54			$	0.22			$	1.16			$	0.54
Dividends declared per common share		$	0.04			$	0.04			$	0.08			$	0.08
Weighted average number of basic shares outstanding		106,969,134				106,560,000				106,864,469				106,514,396
Weighted average number of diluted shares outstanding		109,402,465				109,447,812				109,181,041				109,364,273
Shares outstanding, end of period		107,057,771				106,607,110
Fully diluted shares outstanding, end of period		109,374,343				109,507,711
Book value per share		$	14.59			$	14.24
Fully diluted book value per share		$	14.28			$	13.86

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,
		2018				2017				2018				2017
Net income available to common stockholders		$	36,673			$	5,457			$	97,006			$	34,505
Add (subtract):
Net loss on investments		18,736				8,362				18,487				9,774
Other (income) expense		—				6,098				—				(3,703		)
Equity in (earnings) losses of equity method investments		834				1,915				2,303				(739		)
Non-cash amortization of intangible assets		8,217				11,690				15,137				33,027
Income tax expense (benefit)		(4,976		)		(9,823		)		(5,826		)		(13,426		)
Operating earnings attributable to NGHC (1)		$	59,484			$	23,699			$	127,107			$	59,438
Operating earnings per common share:
Basic operating earnings per common share		$	0.56			$	0.22			$	1.19			$	0.56
Diluted operating earnings per common share		$	0.54			$	0.22			$	1.16			$	0.54

Balance Sheet
$ in thousands

		June 30, 2018 (unaudited)													December 31, 2017 (audited)
ASSETS		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Total investments (2)		$	3,415,421			$	322,114			$	3,636,306		(A)		$	3,411,730			$	327,213			$	3,649,788		(J)
Cash and cash equivalents, including restricted cash		399,484				1,844				401,328					351,433				6,051				357,484
Premiums and other receivables, net		1,634,837				59,426				1,692,662			(B)		1,268,330				56,792				1,324,321			(K)
Reinsurance activity (3)		1,856,515				200,967				2,057,482					1,616,103				195,184				1,811,287
Intangible assets, net		386,258				3,595				389,853					400,385				3,685				404,070
Goodwill		181,827				—				181,827					174,153				—				174,153
Other (4)		718,608				31,994				730,276			(C)		705,321				29,174				718,640			(L)
Total assets		$	8,592,950			$	619,940			$	9,089,734		(D)		$	7,927,455			$	618,099			$	8,439,743		(M)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves		$	2,560,233			$	167,256			$	2,727,489				$	2,520,204			$	143,353			$	2,663,557
Unearned premiums and other revenue		2,055,260				246,763				2,302,023					1,807,210				225,395				2,032,605
Reinsurance payable		546,300				36,455				581,154			(E)		329,772				69,076				398,047			(N)
Accounts payable and accrued expenses (5)		659,704				25,456				664,834			(F)		423,054				24,682				431,881			(O)
Debt		705,077				101,229				705,077			(G)		713,710				89,155				713,710			(P)
Other		84,160				43,722				127,882					204,936				41,582				246,518
Total liabilities		$	6,610,734			$	620,881			$	7,108,459		(H)		$	5,998,886			$	593,243			$	6,486,318		(Q)
Stockholders’ equity:
Common stock (6)		$	1,071			$	—			$	1,071				$	1,067			$	—			$	1,067
Preferred stock (7)		420,000				—				420,000					420,000				—				420,000
Additional paid-in capital		921,744				—				921,744					917,751				—				917,751
Accumulated other comprehensive income (loss)		(55,698		)		—				(55,698		)			(8,112		)		—				(8,112		)
Retained earnings		695,099				—				695,099					597,863				—				597,863
Total National General Holdings Corp. stockholders’ equity		1,982,216				—				1,982,216					1,928,569				—				1,928,569
Non-controlling interest		—				(941		)		(941		)			—				24,856				24,856
Total stockholders’ equity		$	1,982,216			$	(941	)		$	1,981,275				$	1,928,569			$	24,856			$	1,953,425
Total liabilities and stockholders’ equity		$	8,592,950			$	619,940			$	9,089,734		(I)		$	7,927,455			$	618,099			$	8,439,743		(R)
NOTES: Consolidated column includes eliminations as follows: (A) $(101,229), (B) $(1,601), (C) $(20,326), (D) $(123,156), (E) $(1,601), (F) $(20,326), (G) $(101,229), (H) $(123,156), (I) $(123,156), (J) $(89,155), (K) $(801), (L) $(15,855), (M) $(105,811), (N) $(801), (O) $(15,855), (P) $(89,155), (Q) $(105,811) and (R) $(105,811).

Segment Information - Second Quarter
$ in thousands
(Unaudited)

		Three Months Ended June 30,
		2018																		2017
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	1,065,632			$	156,836			$	1,222,468				$	117,981				$	904,578			$	130,974			$	1,035,552				$	99,157
Net written premium		683,869				139,258				823,127					66,848					822,508				118,249				940,757					51,243
Net earned premium		734,934				156,169				891,103					51,803					804,643				134,852				939,495					42,256
Ceding commission income		41,720				262				41,982					13,426					3,128				271				3,399					18,109
Service and fee income		105,167				42,941				148,108					445					94,519				43,043				137,562					1,494
Total underwriting revenues		$	881,821			$	199,372			$	1,081,193				$	65,674				$	902,290			$	178,166			$	1,080,456				$	61,859
Loss and loss adjustment expense		540,216				88,434				628,650					41,678					591,844				85,530				677,374					33,820
Acquisition costs and other		123,183				48,117				171,300					10,560					126,496				46,759				173,255					15,540
General and administrative		172,530				47,132				219,662					22,819					168,023				38,842				206,865					18,509
Total underwriting expenses		$	835,929			$	183,683			$	1,019,612				$	75,057				$	886,363			$	171,131			$	1,057,494				$	67,869
Underwriting income (loss)		45,892				15,689				61,581					(9,383		)			15,927				7,035				22,962					(6,010		)
Non-cash amortization of intangible assets		6,179				2,038				8,217					(26		)			10,278				1,412				11,690					(91		)
Underwriting income (loss) before amortization and impairment		$	52,071			$	17,727			$	69,798				$	(9,409	)			$	26,205			$	8,447			$	34,652				$	(6,101	)
Underwriting ratios
Loss and loss adjustment expense ratio (8)		73.5		%		56.6		%		70.5		%			80.5		%			73.6		%		63.4		%		72.1		%			80.0		%
Operating expense ratio (Non-GAAP) (9,10)		20.3		%		33.3		%		22.5		%			37.7		%			24.5		%		31.4		%		25.5		%			34.2		%
Combined ratio (Non-GAAP) (9,11)		93.8		%		89.9		%		93.0		%			118.2		%			98.1		%		94.8		%		97.6		%			114.2		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (8)		73.5		%		56.6		%		70.5		%			80.5		%			73.6		%		63.4		%		72.1		%			80.0		%
Operating expense ratio (Non-GAAP) (9,12)		19.4		%		32.0		%		21.6		%			37.7		%			23.2		%		30.3		%		24.2		%			34.4		%
Combined ratio before amortization and impairment (Non-GAAP) (9,13)		92.9		%		88.6		%		92.1		%			118.2		%			96.8		%		93.7		%		96.3		%			114.4		%
NOTE: Loss and loss adjustment expenses for the three months ended June 30, 2018 included $5,383 of favorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $8,040 of favorable development in the A&H segment, versus $6,570 of unfavorable development in the P&C segment, and $4,524 of favorable development in the A&H segment for the three months ended June 30, 2017.

Segment Information - Year to Date
$ in thousands
(Unaudited)

		Six Months Ended June 30,
		2018																		2017
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	2,168,898			$	390,612			$	2,559,510				$	215,670				$	1,884,591			$	322,929			$	2,207,520				$	181,373
Net written premium		1,516,581				362,611				1,879,192					117,426					1,724,746				299,363				2,024,109					92,944
Net earned premium		1,440,541				310,045				1,750,586					97,858					1,555,170				263,778				1,818,948					81,288
Ceding commission income		74,420				520				74,940					24,936					5,588				558				6,146					35,356
Service and fee income		214,740				88,128				302,868					2,891					198,109				75,316				273,425					3,574
Total underwriting revenues		$	1,729,701			$	398,693			$	2,128,394				$	125,685				$	1,758,867			$	339,652			$	2,098,519				$	120,218
Loss and loss adjustment expense		1,038,573				179,712				1,218,285					86,209					1,113,178				154,913				1,268,091					61,920
Acquisition costs and other		237,183				91,725				328,908					21,662					255,546				78,249				333,795					29,720
General and administrative		349,215				97,740				446,955					41,615					364,893				84,055				448,948					43,612
Total underwriting expenses		$	1,624,971			$	369,177			$	1,994,148				$	149,486				$	1,733,617			$	317,217			$	2,050,834				$	135,252
Underwriting income (loss)		104,730				29,516				134,246					(23,801		)			25,250				22,435				47,685					(15,034		)
Non-cash amortization of intangible assets		11,579				3,558				15,137					(53		)			30,012				3,015				33,027					6,978
Underwriting income (loss) before amortization and impairment		$	116,309			$	33,074			$	149,383				$	(23,854	)			$	55,262			$	25,450			$	80,712				$	(8,056	)
Underwriting ratios
Loss and loss adjustment expense ratio (8)		72.1		%		58.0		%		69.6		%			88.1		%			71.6		%		58.7		%		69.7		%			76.2		%
Operating expense ratio (Non-GAAP) (9,10)		20.6		%		32.5		%		22.7		%			36.2		%			26.8		%		32.8		%		27.7		%			42.3		%
Combined ratio (Non-GAAP) (9,11)		92.7		%		90.5		%		92.3		%			124.3		%			98.4		%		91.5		%		97.4		%			118.5		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (8)		72.1		%		58.0		%		69.6		%			88.1		%			71.6		%		58.7		%		69.7		%			76.2		%
Operating expense ratio (Non-GAAP) (9,12)		19.8		%		31.4		%		21.9		%			36.3		%			24.9		%		31.6		%		25.8		%			33.7		%
Combined ratio before amortization and impairment (Non-GAAP) (9,13)		91.9		%		89.4		%		91.5		%			124.4		%			96.5		%		90.3		%		95.5		%			109.9		%
NOTE: Loss and loss adjustment expenses for the six months ended June 30, 2018 included $20,552 of favorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $11,423 of favorable development in the A&H segment, versus $2,216 of unfavorable development in the P&C segment, and $12,844 of favorable development in the A&H segment for the six months ended June 30, 2017.

Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)

		Three Months Ended June 30,
		2018																		2017
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	835,929			$	183,683			$	1,019,612				$	75,057				$	886,363			$	171,131			$	1,057,494				$	67,869
Less: Loss and loss adjustment expense		540,216				88,434				628,650					41,678					591,844				85,530				677,374					33,820
Less: Ceding commission income		41,720				262				41,982					13,426					3,128				271				3,399					18,109
Less: Service and fee income		105,167				42,941				148,108					445					94,519				43,043				137,562					1,494
Operating expense		148,826				52,046				200,872					19,508					196,872				42,287				239,159					14,446
Net earned premium		$	734,934			$	156,169			$	891,103				$	51,803				$	804,643			$	134,852			$	939,495				$	42,256
Operating expense ratio (Non-GAAP)		20.3		%		33.3		%		22.5		%			37.7		%			24.5		%		31.4		%		25.5		%			34.2		%
Total underwriting expenses		$	835,929			$	183,683			$	1,019,612				$	75,057				$	886,363			$	171,131			$	1,057,494				$	67,869
Less: Loss and loss adjustment expense		540,216				88,434				628,650					41,678					591,844				85,530				677,374					33,820
Less: Ceding commission income		41,720				262				41,982					13,426					3,128				271				3,399					18,109
Less: Service and fee income		105,167				42,941				148,108					445					94,519				43,043				137,562					1,494
Less: Non-cash amortization of intangible assets		6,179				2,038				8,217					(26		)			10,278				1,412				11,690					(91		)
Operating expense before amortization and impairment		142,647				50,008				192,655					19,534					186,594				40,875				227,469					14,537
Net earned premium		$	734,934			$	156,169			$	891,103				$	51,803				$	804,643			$	134,852			$	939,495				$	42,256
Operating expense ratio before amortization and impairment (Non-GAAP)		19.4		%		32.0		%		21.6		%			37.7		%			23.2		%		30.3		%		24.2		%			34.4		%

Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)

		Six Months Ended June 30,
		2018																		2017
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	1,624,971			$	369,177			$	1,994,148				$	149,486				$	1,733,617			$	317,217			$	2,050,834				$	135,252
Less: Loss and loss adjustment expense		1,038,573				179,712				1,218,285					86,209					1,113,178				154,913				1,268,091					61,920
Less: Ceding commission income		74,420				520				74,940					24,936					5,588				558				6,146					35,356
Less: Service and fee income		214,740				88,128				302,868					2,891					198,109				75,316				273,425					3,574
Operating expense		297,238				100,817				398,055					35,450					416,742				86,430				503,172					34,402
Net earned premium		$	1,440,541			$	310,045			$	1,750,586				$	97,858				$	1,555,170			$	263,778			$	1,818,948				$	81,288
Operating expense ratio (Non-GAAP)		20.6		%		32.5		%		22.7		%			36.2		%			26.8		%		32.8		%		27.7		%			42.3		%
Total underwriting expenses		$	1,624,971			$	369,177			$	1,994,148				$	149,486				$	1,733,617			$	317,217			$	2,050,834				$	135,252
Less: Loss and loss adjustment expense		1,038,573				179,712				1,218,285					86,209					1,113,178				154,913				1,268,091					61,920
Less: Ceding commission income		74,420				520				74,940					24,936					5,588				558				6,146					35,356
Less: Service and fee income		214,740				88,128				302,868					2,891					198,109				75,316				273,425					3,574
Less: Non-cash amortization of intangible assets		11,579				3,558				15,137					(53		)			30,012				3,015				33,027					6,978
Operating expense before amortization and impairment		285,659				97,259				382,918					35,503					386,730				83,415				470,145					27,424
Net earned premium		$	1,440,541			$	310,045			$	1,750,586				$	97,858				$	1,555,170			$	263,778			$	1,818,948				$	81,288
Operating expense ratio before amortization and impairment (Non-GAAP)		19.8		%		31.4		%		21.9		%			36.3		%			24.9		%		31.6		%		25.8		%			33.7		%

Premiums by Business Line
$ in thousands
(Unaudited)

		Three Months Ended June 30,
		Gross Written Premium												Net Written Premium												Net Earned Premium
		2018				2017				Change				2018				2017				Change				2018				2017				Change
Property & Casualty
Personal Auto		$	632,225			$	514,990			22.8	%			$	485,724			$	471,372			3.0	%			$	486,438			$	495,225			(1.8	)%
Homeowners		190,706				151,984				25.5	%			50,304				131,926				(61.9	)%			79,658				110,570				(28.0	)%
RV/Packaged		59,999				52,598				14.1	%			59,118				52,190				13.3	%			48,993				43,314				13.1	%
Small Business Auto		84,986				80,890				5.1	%			63,432				72,864				(12.9	)%			60,104				70,324				(14.5	)%
Lender-placed insurance		80,599				90,374				(10.8	)%			14,887				86,525				(82.8	)%			53,694				79,201				(32.2	)%
Other		17,117				13,742				24.6	%			10,404				7,631				36.3	%			6,047				6,009				0.6	%
Property & Casualty		1,065,632				904,578				17.8	%			683,869				822,508				(16.9	)%			734,934				804,643				(8.7	)%
Accident & Health		156,836				130,974				19.7	%			139,258				118,249				17.8	%			156,169				134,852				15.8	%
Total National General		$	1,222,468			$	1,035,552			18.0	%			$	823,127			$	940,757			(12.5	)%			$	891,103			$	939,495			(5.2	)%
Reciprocal Exchanges
Personal Auto		$	42,065			$	35,221			19.4	%			$	14,520			$	21,601			(32.8	)%			$	12,462			$	17,239			(27.7	)%
Homeowners		74,895				63,049				18.8	%			52,016				29,174				78.3	%			39,109				24,613				58.9	%
Other		1,021				887				15.1	%			312				468				(33.3	)%			232				404				(42.6	)%
Reciprocal Exchanges		$	117,981			$	99,157			19.0	%			$	66,848			$	51,243			30.5	%			$	51,803			$	42,256			22.6	%
Consolidated Total (A)		$	1,340,449			$	1,133,909			18.2	%			$	889,975			$	992,000			(10.3	)%			$	942,906			$	981,751			(4.0	)%
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.

Premiums by Business Line
$ in thousands
(Unaudited)

		Six Months Ended June 30,
		Gross Written Premium												Net Written Premium												Net Earned Premium
		2018				2017				Change				2018				2017				Change				2018				2017				Change
Property & Casualty
Personal Auto		$	1,357,437			$	1,162,171			16.8	%			$	1,039,721			$	1,068,251			(2.7	)%			$	940,654			$	949,640			(0.9	)%
Homeowners		331,993				266,709				24.5	%			142,900				236,471				(39.6	)%			161,853				214,699				(24.6	)%
RV/Packaged		109,463				97,352				12.4	%			108,307				96,709				12.0	%			94,682				83,964				12.8	%
Small Business Auto		171,230				167,266				2.4	%			128,159				152,072				(15.7	)%			118,666				133,565				(11.2	)%
Lender-placed insurance		165,533				166,644				(0.7	)%			78,101				159,357				(51.0	)%			114,163				162,942				(29.9	)%
Other		33,242				24,449				36.0	%			19,393				11,886				63.2	%			10,523				10,360				1.6	%
Property & Casualty		2,168,898				1,884,591				15.1	%			1,516,581				1,724,746				(12.1	)%			1,440,541				1,555,170				(7.4	)%
Accident & Health		390,612				322,929				21.0	%			362,611				299,363				21.1	%			310,045				263,778				17.5	%
Total National General		$	2,559,510			$	2,207,520			15.9	%			$	1,879,192			$	2,024,109			(7.2	)%			$	1,750,586			$	1,818,948			(3.8	)%
Reciprocal Exchanges
Personal Auto		$	76,362			$	63,380			20.5	%			$	28,015			$	38,707			(27.6	)%			$	25,459			$	33,356			(23.7	)%
Homeowners		137,416				116,376				18.1	%			88,824				53,390				66.4	%			71,880				47,151				52.4	%
Other		1,892				1,617				17.0	%			587				847				(30.7	)%			519				781				(33.5	)%
Reciprocal Exchanges		$	215,670			$	181,373			18.9	%			$	117,426			$	92,944			26.3	%			$	97,858			$	81,288			20.4	%
Consolidated Total (A)		$	2,773,579			$	2,387,292			16.2	%			$	1,996,618			$	2,117,053			(5.7	)%			$	1,848,444			$	1,900,236			(2.7	)%
NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges of $(567) in Personal Auto and $(1,034) in Homeowners Gross Written Premium in 2018, respectively, and $(564) in Personal Auto and $(1,037) in Homeowners Gross Written Premium in 2017, 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 or losses of equity method investments (related parties), deferred tax asset impairment, 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 $233,092 and $347,548 in related parties at June 30, 2018 and December 31, 2017, respectively.

(3) Reinsurance activity includes $9,891 and $15,688 from related parties at June 30, 2018 and December 31, 2017, respectively.

(4) Other includes $2,348 and $2,334 from related parties at June 30, 2018 and December 31, 2017, respectively.

(5) Accounts payable and accrued expenses includes $72,415 and $140,057 to related parties at June 30, 2018 and December 31, 2017, respectively.

(6) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 107,057,771 shares - June 30, 2018; authorized 150,000,000 shares, issued and outstanding 106,697,648 shares - December 31, 2017.

(7) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,000 shares - June 30, 2018; authorized 10,000,000 shares, issued and outstanding 2,565,000 shares - December 31, 2017.

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

(9) 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.

(10) 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.

(11) 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.

(12) 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.

(13) 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.

(14) 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.

(15) Combined ratio excluding losses from various Q2’18 weather-related events, and is calculated by taking the combined ratio as defined in Note 13, and adjusting it to exclude the total net losses of $20.5 million from these events. The company believes this measure enhances investors’ understanding of our results by eliminating what we believe are volatile and unusual events.

		Q2’18 Combined Ratio			Impact of Q2’18 Weather-related Events			Q2’18 Combined Ratio Excluding Weather-related Events
P&C Segment		92.9%			2.8%			90.1%
Overall NGHC		92.1%			2.3%			89.8%

Investor Contact

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