NEW YORK, July 29, 2019 (GLOBE NEWSWIRE) -- National General Holdings Corp. (Nasdaq:NGHC) reported second quarter 2019 net income of $69.0 million or $0.60 per diluted share, compared to net income of $36.7 million or $0.34 per diluted share in the second quarter of 2018. Second quarter 2019 operating earnings (non-GAAP)⁽¹⁾ was $78.1 million or $0.67 per diluted share compared to $59.5 million or $0.54 per diluted share in the second quarter of 2018.

Second Quarter 2019 Highlights versus Second Quarter 2018*

• Net earned premium grew $92.9 million or 10.4% to $984.0 million driven by organic growth in our P&C segment of 11.3% and in our A&H segment of 6.3%.
• The overall combined ratio^(12,13) was 90.9% compared to 92.1% in the prior year’s quarter, excluding non-cash amortization of intangible assets. The P&C segment reported a decrease in combined ratio to 92.6% from 92.9% in the prior year’s quarter. The A&H segment reported a decrease in combined ratio to 82.6% from 88.6% in the prior year’s quarter, driven by strong operating results in our small group self-funded and individual products.
• Service and fee income grew 12.1% to $166.0 million, driven by organic growth primarily in our group administration fees and third party technology services fees within our A&H segment.
• Stockholders’ equity was $2.48 billion and fully diluted book value per share was $17.48 at June 30, 2019, growth of 11.6% and 14.6%, respectively, from December 31, 2018. Our trailing twelve month operating return on average equity (ROE)⁽¹⁴⁾ was 15.2% as of June 30, 2019.
• Second quarter 2019 operating earnings (non-GAAP)⁽¹⁾ primarily excludes $4.2 million or $0.04 net loss on investments and $5.6 million or $0.05 per share of non-cash amortization of intangible assets, net of tax.

Barry Karfunkel, National General’s CEO, stated: “Our second quarter 2019 results continue to highlight the earnings capabilities of our platform. Our P&C segment was able to generate a 92.6% combined ratio. Our A&H segment continues to grow profitably with a combined ratio of 82.6% in the quarter, utilizing our suite of products and owned distribution. I am pleased with the continued execution of our strategy of focused underwriting discipline.”

*NOTE: Unless specified otherwise, discussion of our second quarter 2019 and 2018 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 2019 as Compared to Second Quarter 2018

• Property & Casualty - Gross written premium decreased by 4.2% to $1,021.1 million, net written premium increased by 15.0% to $786.5 million, and net earned premium increased by 11.3% to $818.0 million. Service and fee income grew 7.6% to $113.1 million compared to $105.2 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio^(12,13) was 92.6% with a loss and LAE ratio of 72.6% and an expense ratio^(11,13) of 20.0%, versus a prior year combined ratio of 92.9% with a loss and LAE ratio of 73.5% and an expense ratio of 19.4%. The loss and LAE ratio was impacted by pre-tax catastrophe losses of approximately $18.4 million primarily related to weather-related events in the second quarter 2019, compared to $20.5 million of losses in the second quarter 2018. Unfavorable loss development was $10.4 million in the second quarter 2019, compared to favorable loss development of $5.4 million in the second quarter 2018.
   
• Accident & Health - Gross written premium grew by 9.5% to $171.7 million, net written premium grew by 9.7% to $152.7 million, and net earned premium grew by 6.3% to $166.0 million. The A&H gross written premium increase was driven by the continued growth across the entire book. Service and fee income grew 23.3% to $52.9 million compared to $42.9 million in the prior year’s quarter, primarily driven by group administration fees and third party technology services fees. Excluding non-cash amortization of intangible assets, the combined ratio^(12,13) was 82.6% with a loss and LAE ratio of 52.0% and an expense ratio^(11,13) of 30.6%, versus a prior year combined ratio of 88.6% with a loss and LAE ratio of 56.6% and an expense ratio of 32.0%. The loss and LAE ratio reflects continued strong performance in both small group self-funded and individual products. Favorable loss development was $8.1 million in the second quarter 2019, compared to $8.0 million in the second quarter 2018.
   
• Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $121.1 million, net written premium was $56.2 million, and net earned premium was $46.6 million. Reciprocal Exchanges combined ratio^(12,13) excluding non-cash amortization of intangible assets was 100.1% with a loss and LAE ratio of 75.7% and an expense ratio^(11,13) of 24.4%.

Second quarter 2019 investment income grew to $35.9 million, compared to $26.2 million in the second quarter of 2018, with the growth primarily driven by an increase in our investment portfolio. Total investments and cash and cash equivalents (including restricted cash) were $4.6 billion as of June 30, 2019. Accumulated other comprehensive income (loss) increased to a $59.9 million gain at June 30, 2019 from a $52.1 million loss at December 31, 2018, primarily due to the impact of lower interest rates which positively impacted bond valuations.

Interest expense was $12.9 million, down from $15.0 million in the prior year’s quarter. Debt was $708.7 million at June 30, 2019, up from $705.8 million at December 31, 2018.

The second quarter of 2019 provision for income taxes was $22.3 million and the effective tax rate for the quarter was 22.2% compared with income taxes of $9.4 million and an effective rate of 17.5% in the second quarter of 2018. The effective tax rate was impacted by the implementation of tax law changes under the Tax Cuts and Jobs Act in 2018.

Stockholders’ equity was $2,479.3 million at June 30, 2019, growth of 11.6% from $2,220.8 million at December 31, 2018. Fully diluted book value per share was $17.48 at June 30, 2019, growth of 14.6% from $15.25 at December 31, 2018. Our trailing twelve month operating return on average equity (ROE)⁽¹⁴⁾ was 15.2% as of June 30, 2019.

Year-to-Date P&C Segment Notable Large Losses
Year		Quarter		Event		P&C Notable Large Losses and LAE ($ millions)			P&C Loss Ratio Points*		EPS Impact After Tax
2019		Q2		Weather-related Events		$18.4			2.2%		$0.13
2019		Q1		Winter Weather		$12.1			1.6%		$0.08
2018		Q2		Spring Weather-related and Texas Hail Events		$20.5			2.8%		$0.15
2018		Q1		Winter Weather		$14.2			2.0%		$0.10

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

Additional Items

• Auto and Homeowners Quota Share Renewals. 
  
  Effective July 1, 2019, the Company renewed its auto quota share reinsurance agreement for a two year term. Effective July 1, 2019, the Company cedes 10.0% of net liability under new and renewal auto policies with the ability to increase the cession to up to 30.0% and decrease the cession down to 5.0% under certain conditions. The Company receives a 31.2% provisional ceding commission on premiums ceded to the reinsurer during the term of the Auto Quota Share Agreement, subject to a sliding scale adjustment to a maximum of 32.8% if the loss ratio for the reinsured business is 64.7% or less and a minimum of 30.0% if the loss ratio is 67.5% or higher.
  
  Effective July 1, 2019, the Company renewed its homeowners quota share reinsurance agreement for a one year term. Effective July 1, 2019, the Company cedes 40.0% of net liability under homeowners policies and receives a 36.0% ceding commission on new and renewal business and a portion of the in-force business. A portion of the in-force business is being run-off under the prior agreements. The weighted average expected ceding commission for all in-force business and new and renewal homeowners business is 37.5% over the contract term.

Conference Call

On Tuesday, July 30, 2019 at 9:00 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:

800 Access Number:	800-346-7359
973 Access Number:	973-528-0008
Conference Entry Code:	620532
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, July 30, 2019 to 11:59 PM ET on Tuesday, August 13, 2019 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 620532. 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 vendors or 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,
		2019													2018
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	1,192,762			$	121,146			$	1,313,908				$	1,222,468			$	117,981			$	1,340,449
Net written premium		939,178				56,220				995,398					823,127				66,848				889,975
Net earned premium		984,021				46,630				1,030,651					891,103				51,803				942,906
Ceding commission income		43,346				16,846				60,192					41,982				13,426				55,408
Service and fee income		166,049				1,516				148,908			(A)		148,108				445				130,501			(G)
Net investment income		35,949				2,124				35,131			(B)		26,183				2,205				25,995			(H)
Net gain (loss) on investments		(5,274		)		44				(5,230		)			(18,736		)		(968		)		(19,704		)
Total revenues		$	1,224,091			$	67,160			$	1,269,652		(C)		$	1,088,640			$	66,911			$	1,135,106		(I)
Expenses:
Loss and loss adjustment expense		$	680,246			$	35,289			$	715,535				$	628,650			$	41,678			$	670,328
Acquisition costs and other underwriting expenses		185,951				8,175				194,126					171,300				10,560				181,860
General and administrative expenses		244,827				21,597				247,767			(D)		219,662				22,819				224,429			(J)
Interest expense		12,925				2,942				12,925			(E)		15,038				2,393				15,038			(K)
Total expenses		$	1,123,949			$	68,003			$	1,170,353		(F)		$	1,034,650			$	77,450			$	1,091,655		(L)
Income (loss) before provision (benefit) for income taxes		$	100,142			$	(843	)		$	99,299				$	53,990			$	(10,539	)		$	43,451
Provision (benefit) for income taxes		22,266				(25		)		22,241					9,442				(2,901		)		6,541
Net income (loss) before non-controlling interest and dividends on preferred shares		77,876				(818		)		77,058					44,548				(7,638		)		36,910
Less: net income (loss) attributable to non-controlling interest		—				(818		)		(818		)			—				(7,638		)		(7,638		)
Net income before dividends on preferred shares		77,876				—				77,876					44,548				—				44,548
Less: dividends on preferred shares		8,925				—				8,925					7,875				—				7,875
Net income available to common stockholders		$	68,951			$	—			$	68,951				$	36,673			$	—			$	36,673

NOTES: Consolidated column includes eliminations as follows: (A) $(18,657), (B) $(2,942), (C) $(21,599), (D) $(18,657), (E) $(2,942), (F) $(21,599) || (G) $(18,052), (H) $(2,393), (I) $(20,445), (J) $(18,052), (K) $(2,393) and (L) $(20,445).

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

		Six Months Ended June 30,
		2019													2018
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	2,596,971			$	226,715			$	2,823,686				$	2,559,510			$	215,670			$	2,773,579		(G)
Net written premium		2,054,887				105,175				2,160,062					1,879,192				117,426				1,996,618
Net earned premium		1,902,520				92,288				1,994,808					1,750,586				97,858				1,848,444
Ceding commission income		94,346				35,380				129,726					74,940				24,936				99,876
Service and fee income		346,437				2,886				314,415			(A)		302,868				2,891				272,623			(H)
Net investment income		70,232				4,294				68,576			(B)		51,202				4,349				51,006			(I)
Net loss on investments		(4,508		)		(700		)		(5,208		)			(18,487		)		(1,099		)		(19,586		)
Total revenues		$	2,409,027			$	134,148			$	2,502,317		(C)		$	2,161,109			$	128,935			$	2,252,363		(J)
Expenses:
Loss and loss adjustment expense		$	1,290,030			$	77,314			$	1,367,344				$	1,218,285			$	86,209			$	1,304,494
Acquisition costs and other underwriting expenses		389,284				16,760				406,044					328,908				21,662				350,570
General and administrative expenses		487,660				43,109				495,861			(D)		446,955				41,615				455,434			(K)
Interest expense		25,924				5,950				25,924			(E)		26,192				4,545				26,192			(L)
Total expenses		$	2,192,898			$	143,133			$	2,295,173		(F)		$	2,020,340			$	154,031			$	2,136,690		(M)
Income (loss) before provision (benefit) for income taxes		$	216,129			$	(8,985	)		$	207,144				$	140,769			$	(25,096	)		$	115,673
Provision (benefit) for income taxes		46,495				(1,748		)		44,747					28,013				(5,270		)		22,743
Net income (loss) before non-controlling interest and dividends on preferred shares		169,634				(7,237		)		162,397					112,756				(19,826		)		92,930
Less: net income (loss) attributable to non-controlling interest		—				(7,237		)		(7,237		)			—				(19,826		)		(19,826		)
Net income before dividends on preferred shares		169,634				—				169,634					112,756				—				112,756
Less: dividends on preferred shares		16,800				—				16,800					15,750				—				15,750
Net income available to common stockholders		$	152,834			$	—			$	152,834				$	97,006			$	—			$	97,006

NOTES: Consolidated column includes eliminations as follows: (A) $(34,908), (B) $(5,950), (C) $(40,858), (D) $(34,908), (E) $(5,950), (F) $(40,858) || (G) $(1,601), (H) $(33,136), (I) $(4,545), (J) $(37,681), (K) $(33,136), (L) $(4,545) and (M) $(37,681).

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

	Three Months Ended June 30,								Six Months Ended June 30,
	2019				2018				2019				2018
Net income available to common stockholders	$	68,951			$	36,673			$	152,834			$	97,006
Basic net income per common share	$	0.61			$	0.34			$	1.35			$	0.91
Diluted net income per common share	$	0.60			$	0.34			$	1.33			$	0.89
Operating earnings attributable to NGHC (non-GAAP)(1)	$	78,140			$	59,484			$	167,856			$	127,107
Basic operating earnings per common share (non-GAAP)(1)	$	0.69			$	0.56			$	1.48			$	1.19
Diluted operating earnings per common share (non-GAAP)(1)	$	0.67			$	0.54			$	1.45			$	1.16
Dividends declared per common share	$	0.04			$	0.04			$	0.08			$	0.08
Weighted average number of basic shares outstanding	113,178,552				106,969,134				113,097,084				106,864,469
Weighted average number of diluted shares outstanding	116,050,267				109,402,465				116,062,721				109,181,041
Shares outstanding, end of period	113,215,632				107,057,771
Fully diluted shares outstanding, end of period	116,087,347				109,374,343
Book value per share	$	17.92			$	14.59
Fully diluted book value per share	$	17.48			$	14.28

Reconciliation of Net Income to Operating Earnings (Non-GAAP)^(1)(14)
$ in thousands, except per share data
(Unaudited)

		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Net income available to common stockholders		$	68,951			$	36,673			$	152,834			$	97,006
Add (subtract):
Net loss on investments		5,274				18,736				4,508				18,487
Equity in (earnings) losses of equity method investments		(731		)		834				203				2,303
Non-cash amortization of intangible assets		7,089				8,217				14,305				15,137
Income tax expense (benefit)		(2,443		)		(4,976		)		(3,994		)		(5,826		)
Operating earnings attributable to NGHC (non-GAAP)(1)		$	78,140			$	59,484			$	167,856			$	127,107
Operating earnings per common share (non-GAAP)(1):
Basic operating earnings per common share (non-GAAP)(1)		$	0.69			$	0.56			$	1.48			$	1.19
Diluted operating earnings per common share (non-GAAP)(1)		$	0.67			$	0.54			$	1.45			$	1.16

Balance Sheet
$ in thousands
(Unaudited)

		June 30, 2019													December 31, 2018
ASSETS		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Total investments (2)		$	4,325,977			$	321,365			$	4,539,962		(A)		$	4,013,699			$	314,411			$	4,226,806		(H)
Cash and cash equivalents, including restricted cash		244,051				289				244,340					233,383				200				233,583
Premiums and other receivables, net		1,467,727				65,053				1,532,780					1,338,485				61,327				1,399,812
Reinsurance balances (3)		1,798,741				253,869				2,052,610					2,023,911				253,501				2,277,412
Intangible assets, net		365,685				3,315				369,000					376,532				3,405				379,937
Goodwill		183,430				—				183,430					180,183				—				180,183
Other (4)		751,784				24,024				744,534			(B)		739,068				27,879				741,547			(I)
Total assets		$	9,137,395			$	667,915			$	9,666,656		(C)		$	8,905,261			$	660,723			$	9,439,280		(J)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves		$	2,692,943			$	194,297			$	2,887,240				$	2,778,689			$	178,470			$	2,957,159
Unearned premiums and other revenue		2,099,746				267,086				2,366,832					2,014,965				265,763				2,280,728
Reinsurance payable		554,685				36,733				591,418					615,872				40,393				656,265
Accounts payable and accrued expenses (5)		305,045				35,402				309,173			(D)		390,338				33,120				398,058			(K)
Debt		708,657				107,380				708,657			(E)		705,795				101,304				705,795			(L)
Other		297,057				45,411				342,468					178,764				61,640				240,404
Total liabilities		$	6,658,133			$	686,309			$	7,205,788		(F)		$	6,684,423			$	680,690			$	7,238,409		(M)
Stockholders’ equity:
Common stock (6)		$	1,132			$	—			$	1,132				$	1,129			$	—			$	1,129
Preferred stock (7)		450,000				—				450,000					450,000				—				450,000
Additional paid-in capital		1,060,379				—				1,060,379					1,057,783				—				1,057,783
Accumulated other comprehensive income (loss)		59,910				—				59,910					(52,130		)		—				(52,130		)
Retained earnings		907,841				—				907,841					764,056				—				764,056
Total National General Holdings Corp. stockholders’ equity		2,479,262				—				2,479,262					2,220,838				—				2,220,838
Non-controlling interest		—				(18,394		)		(18,394		)			—				(19,967		)		(19,967		)
Total stockholders’ equity		$	2,479,262			$	(18,394	)		$	2,460,868				$	2,220,838			$	(19,967	)		$	2,200,871
Total liabilities and stockholders’ equity		$	9,137,395			$	667,915			$	9,666,656		(G)		$	8,905,261			$	660,723			$	9,439,280		(N)

NOTES: Consolidated column includes eliminations as follows: (A) $(107,380), (B) $(31,274), (C) $(138,654), (D) $(31,274), (E) $(107,380), (F) $(138,654), (G) $(138,654) || (H) $(101,304), (I) $(25,400), (J) $(126,704), (K) $(25,400), (L) $(101,304), (M) $(126,704) and (N) $(126,704).

Segment Information - Second Quarter
$ in thousands
(Unaudited)

		Three Months Ended June 30,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	1,021,090			$	171,672			$	1,192,762				$	121,146				$	1,065,632			$	156,836			$	1,222,468				$	117,981
Net written premium		786,471				152,707				939,178					56,220					683,869				139,258				823,127					66,848
Net earned premium		817,972				166,049				984,021					46,630					734,934				156,169				891,103					51,803
Ceding commission income		39,418				3,928				43,346					16,846					41,720				262				41,982					13,426
Service and fee income		113,112				52,937				166,049					1,516					105,167				42,941				148,108					445
Total underwriting revenues		$	970,502			$	222,914			$	1,193,416				$	64,992				$	881,821			$	199,372			$	1,081,193				$	65,674
Loss and loss adjustment expense		593,922				86,324				680,246					35,289					540,216				88,434				628,650					41,678
Acquisition costs and other underwriting expenses		137,950				48,001				185,951					8,175					123,183				48,117				171,300					10,560
General and administrative expenses		183,535				61,292				244,827					21,597					172,530				47,132				219,662					22,819
Total underwriting expenses		$	915,407			$	195,617			$	1,111,024				$	65,061				$	835,929			$	183,683			$	1,019,612				$	75,057
Underwriting income (loss)		55,095				27,297				82,392					(69		)			45,892				15,689				61,581					(9,383		)
Non-cash amortization of intangible assets		5,412				1,677				7,089					12					6,179				2,038				8,217					(26		)
Underwriting income (loss) before amortization and impairment		$	60,507			$	28,974			$	89,481				$	(57	)			$	52,071			$	17,727			$	69,798				$	(9,409	)
Underwriting ratios
Loss and loss adjustment expense ratio (8)		72.6		%		52.0		%		69.1		%			75.7		%			73.5		%		56.6		%		70.5		%			80.5		%
Operating expense ratio (Non-GAAP) (9)		20.7		%		31.6		%		22.5		%			24.5		%			20.3		%		33.3		%		22.5		%			37.7		%
Combined ratio (Non-GAAP) (10)		93.3		%		83.6		%		91.6		%			100.2		%			93.8		%		89.9		%		93.0		%			118.2		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (8)		72.6		%		52.0		%		69.1		%			75.7		%			73.5		%		56.6		%		70.5		%			80.5		%
Operating expense ratio (Non-GAAP) (11)		20.0		%		30.6		%		21.8		%			24.4		%			19.4		%		32.0		%		21.6		%			37.7		%
Combined ratio before amortization and impairment (Non-GAAP) (12)		92.6		%		82.6		%		90.9		%			100.1		%			92.9		%		88.6		%		92.1		%			118.2		%

NOTE: Loss and loss adjustment expenses for the three months ended June 30, 2019 included $10,396 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $8,135 of favorable development in the A&H segment, versus $5,383 of favorable development in the P&C segment, and $8,040 of favorable development in the A&H segment for the three months ended June 30, 2018.

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

		Six Months Ended June 30,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	2,166,755			$	430,216			$	2,596,971				$	226,715				$	2,168,898			$	390,612			$	2,559,510				$	215,670
Net written premium		1,701,999				352,888				2,054,887					105,175					1,516,581				362,611				1,879,192					117,426
Net earned premium		1,574,891				327,629				1,902,520					92,288					1,440,541				310,045				1,750,586					97,858
Ceding commission income		87,827				6,519				94,346					35,380					74,420				520				74,940					24,936
Service and fee income		232,488				113,949				346,437					2,886					214,740				88,128				302,868					2,891
Total underwriting revenues		$	1,895,206			$	448,097			$	2,343,303				$	130,554				$	1,729,701			$	398,693			$	2,128,394				$	125,685
Loss and loss adjustment expense		1,118,957				171,073				1,290,030					77,314					1,038,573				179,712				1,218,285					86,209
Acquisition costs and other underwriting expenses		283,435				105,849				389,284					16,760					237,183				91,725				328,908					21,662
General and administrative expenses		367,730				119,930				487,660					43,109					349,215				97,740				446,955					41,615
Total underwriting expenses		$	1,770,122			$	396,852			$	2,166,974				$	137,183				$	1,624,971			$	369,177			$	1,994,148				$	149,486
Underwriting income (loss)		125,084				51,245				176,329					(6,629		)			104,730				29,516				134,246					(23,801		)
Non-cash amortization of intangible assets		10,897				3,408				14,305					23					11,579				3,558				15,137					(53		)
Underwriting income (loss) before amortization and impairment		$	135,981			$	54,653			$	190,634				$	(6,606	)			$	116,309			$	33,074			$	149,383				$	(23,854	)
Underwriting ratios
Loss and loss adjustment expense ratio (8)		71.0		%		52.2		%		67.8		%			83.8		%			72.1		%		58.0		%		69.6		%			88.1		%
Operating expense ratio (Non-GAAP) (9)		21.0		%		32.1		%		22.9		%			23.4		%			20.6		%		32.5		%		22.7		%			36.2		%
Combined ratio (Non-GAAP) (10)		92.0		%		84.3		%		90.7		%			107.2		%			92.7		%		90.5		%		92.3		%			124.3		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (8)		71.0		%		52.2		%		67.8		%			83.8		%			72.1		%		58.0		%		69.6		%			88.1		%
Operating expense ratio (Non-GAAP) (11)		20.3		%		31.1		%		22.2		%			23.4		%			19.8		%		31.4		%		21.9		%			36.3		%
Combined ratio before amortization and impairment (Non-GAAP) (12)		91.3		%		83.3		%		90.0		%			107.2		%			91.9		%		89.4		%		91.5		%			124.4		%

NOTE: Loss and loss adjustment expenses for the six months ended June 30, 2019 included $4,882 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $18,987 of favorable development in the A&H segment, versus $20,552 of favorable development in the P&C segment, and $11,423 of favorable development in the A&H segment for the six months ended June 30, 2018.

Reconciliation of Operating Expense Ratio (Non-GAAP)^(9,11,13)
$ in thousands
(Unaudited)

		Three Months Ended June 30,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	915,407			$	195,617			$	1,111,024				$	65,061				$	835,929			$	183,683			$	1,019,612				$	75,057
Less: Loss and loss adjustment expense		593,922				86,324				680,246					35,289					540,216				88,434				628,650					41,678
Less: Ceding commission income		39,418				3,928				43,346					16,846					41,720				262				41,982					13,426
Less: Service and fee income		113,112				52,937				166,049					1,516					105,167				42,941				148,108					445
Operating expense		168,955				52,428				221,383					11,410					148,826				52,046				200,872					19,508
Net earned premium		$	817,972			$	166,049			$	984,021				$	46,630				$	734,934			$	156,169			$	891,103				$	51,803
Operating expense ratio (Non-GAAP) (9)		20.7		%		31.6		%		22.5		%			24.5		%			20.3		%		33.3		%		22.5		%			37.7		%
Total underwriting expenses		$	915,407			$	195,617			$	1,111,024				$	65,061				$	835,929			$	183,683			$	1,019,612				$	75,057
Less: Loss and loss adjustment expense		593,922				86,324				680,246					35,289					540,216				88,434				628,650					41,678
Less: Ceding commission income		39,418				3,928				43,346					16,846					41,720				262				41,982					13,426
Less: Service and fee income		113,112				52,937				166,049					1,516					105,167				42,941				148,108					445
Less: Non-cash amortization of intangible assets		5,412				1,677				7,089					12					6,179				2,038				8,217					(26		)
Operating expense before amortization and impairment		163,543				50,751				214,294					11,398					142,647				50,008				192,655					19,534
Net earned premium		$	817,972			$	166,049			$	984,021				$	46,630				$	734,934			$	156,169			$	891,103				$	51,803
Operating expense ratio before amortization and impairment (Non-GAAP) (11)		20.0		%		30.6		%		21.8		%			24.4		%			19.4		%		32.0		%		21.6		%			37.7		%

Reconciliation of Operating Expense Ratio (Non-GAAP)^(9,11,13)
$ in thousands
(Unaudited)

		Six Months Ended June 30,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	1,770,122			$	396,852			$	2,166,974				$	137,183				$	1,624,971			$	369,177			$	1,994,148				$	149,486
Less: Loss and loss adjustment expense		1,118,957				171,073				1,290,030					77,314					1,038,573				179,712				1,218,285					86,209
Less: Ceding commission income		87,827				6,519				94,346					35,380					74,420				520				74,940					24,936
Less: Service and fee income		232,488				113,949				346,437					2,886					214,740				88,128				302,868					2,891
Operating expense		330,850				105,311				436,161					21,603					297,238				100,817				398,055					35,450
Net earned premium		$	1,574,891			$	327,629			$	1,902,520				$	92,288				$	1,440,541			$	310,045			$	1,750,586				$	97,858
Operating expense ratio (Non-GAAP) (9)		21.0		%		32.1		%		22.9		%			23.4		%			20.6		%		32.5		%		22.7		%			36.2		%
Total underwriting expenses		$	1,770,122			$	396,852			$	2,166,974				$	137,183				$	1,624,971			$	369,177			$	1,994,148				$	149,486
Less: Loss and loss adjustment expense		1,118,957				171,073				1,290,030					77,314					1,038,573				179,712				1,218,285					86,209
Less: Ceding commission income		87,827				6,519				94,346					35,380					74,420				520				74,940					24,936
Less: Service and fee income		232,488				113,949				346,437					2,886					214,740				88,128				302,868					2,891
Less: Non-cash amortization of intangible assets		10,897				3,408				14,305					23					11,579				3,558				15,137					(53		)
Operating expense before amortization and impairment		319,953				101,903				421,856					21,580					285,659				97,259				382,918					35,503
Net earned premium		$	1,574,891			$	327,629			$	1,902,520				$	92,288				$	1,440,541			$	310,045			$	1,750,586				$	97,858
Operating expense ratio before amortization and impairment (Non-GAAP) (11)		20.3		%		31.1		%		22.2		%			23.4		%			19.8		%		31.4		%		21.9		%			36.3		%

Premiums by Product Line
$ in thousands
(Unaudited)

	Three Months Ended June 30,
	Gross Written Premium												Net Written Premium												Net Earned Premium
	2019				2018				Change				2019				2018				Change				2019				2018				Change
Property & Casualty
Personal Auto	$	611,312			$	632,225			(3.3	)%			$	511,952			$	485,724			5.4	%			$	542,834			$	486,438			11.6	%
Homeowners	190,037				190,706				(0.4	)%			108,404				50,304				nm				102,008				79,658				28.1	%
RV/Packaged	61,314				59,999				2.2	%			58,167				59,118				(1.6	)%			49,411				48,993				0.9	%
Small Business Auto	83,829				84,986				(1.4	)%			65,420				63,432				3.1	%			60,059				60,104				(0.1	)%
Lender-placed insurance	58,859				80,599				(27.0	)%			37,214				14,887				nm				60,278				53,694				12.3	%
Other	15,739				17,117				(8.1	)%			5,314				10,404				(48.9	)%			3,382				6,047				(44.1	)%
Total Premium	$	1,021,090			$	1,065,632			(4.2	)%			$	786,471			$	683,869			15.0	%			$	817,972			$	734,934			11.3	%
Accident & Health
Group	75,036				59,233				26.7	%			57,960				48,827				18.7	%			57,949				48,839				18.7	%
Individual	82,799				78,464				5.5	%			82,652				78,464				5.3	%			83,916				79,329				5.8	%
International	13,837				19,139				(27.7	)%			12,095				11,967				1.1	%			24,184				28,001				(13.6	)%
Total Premium	$	171,672			$	156,836			9.5	%			$	152,707			$	139,258			9.7	%			$	166,049			$	156,169			6.3	%
Total National General	$	1,192,762			$	1,222,468			(2.4	)%			$	939,178			$	823,127			14.1	%			$	984,021			$	891,103			10.4	%
Reciprocal Exchanges
Personal Auto	$	43,984			$	42,065			4.6	%			$	18,661			$	14,520			28.5	%			$	16,093			$	12,462			29.1	%
Homeowners	76,140				74,895				1.7	%			37,211				52,016				(28.5	)%			30,225				39,109				(22.7	)%
Other	1,022				1,021				0.1	%			348				312				11.5	%			312				232				34.5	%
Total Premium	$	121,146			$	117,981			2.7	%			$	56,220			$	66,848			(15.9	)%			$	46,630			$	51,803			(10.0	)%
Consolidated Total	$	1,313,908			$	1,340,449			(2.0	)%			$	995,398			$	889,975			11.8	%			$	1,030,651			$	942,906			9.3	%

nm - not meaningful

Premiums by Product Line
$ in thousands
(Unaudited)

	Six Months Ended June 30,
	Gross Written Premium												Net Written Premium												Net Earned Premium
	2019				2018				Change				2019				2018				Change				2019				2018				Change
Property & Casualty
Personal Auto	$	1,377,993			$	1,357,437			1.5	%			$	1,170,872			$	1,039,721			12.6	%			$	1,053,388			$	940,654			12.0	%
Homeowners	342,079				331,993				3.0	%			193,649				142,900				35.5	%			186,066				161,853				15.0	%
RV/Packaged	113,165				109,463				3.4	%			109,764				108,307				1.3	%			99,716				94,682				5.3	%
Small Business Auto	169,707				171,230				(0.9	)%			139,606				128,159				8.9	%			127,692				118,666				7.6	%
Lender-placed insurance	134,797				165,533				(18.6	)%			79,284				78,101				1.5	%			101,996				114,163				(10.7	)%
Other	29,014				33,242				(12.7	)%			8,824				19,393				(54.5	)%			6,033				10,523				(42.7	)%
Total Premium	$	2,166,755			$	2,168,898			(0.1	)%			$	1,701,999			$	1,516,581			12.2	%			$	1,574,891			$	1,440,541			9.3	%
Accident & Health
Group	139,974				115,293				21.4	%			111,910				94,464				18.5	%			111,912				94,478				18.5	%
Individual	166,991				153,512				8.8	%			166,775				153,512				8.6	%			166,151				153,195				8.5	%
International	123,251				121,807				1.2	%			74,203				114,635				(35.3	)%			49,566				62,372				(20.5	)%
Total Premium	$	430,216			$	390,612			10.1	%			$	352,888			$	362,611			(2.7	)%			$	327,629			$	310,045			5.7	%
Total National General	$	2,596,971			$	2,559,510			1.5	%			$	2,054,887			$	1,879,192			9.3	%			$	1,902,520			$	1,750,586			8.7	%
Reciprocal Exchanges
Personal Auto	$	80,846			$	76,362			5.9	%			$	34,306			$	28,015			22.5	%			$	31,954			$	25,459			25.5	%
Homeowners	143,940				137,416				4.7	%			70,227				88,824				(20.9	)%			59,716				71,880				(16.9	)%
Other	1,929				1,892				2.0	%			642				587				9.4	%			618				519				19.1	%
Total Premium	$	226,715			$	215,670			5.1	%			$	105,175			$	117,426			(10.4	)%			$	92,288			$	97,858			(5.7	)%
Consolidated Total (A)	$	2,823,686			$	2,773,579			1.8	%			$	2,160,062			$	1,996,618			8.2	%			$	1,994,808			$	1,848,444			7.9	%

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.

Fee Income
$ in thousands
(Unaudited)

	Three Months Ended June 30,											Six Months Ended June 30,
	2019				2018				Change			2019				2018				Change
Property & Casualty
Service and Fee Income	$	113,112			$	105,167			7.6	%		$	232,488			$	214,740			8.3	%
Ceding Commission Income	39,418				41,720				(5.5	)%		87,827				74,420				18.0	%
Property & Casualty	$	152,530			$	146,887			3.8	%		$	320,315			$	289,160			10.8	%
Accident & Health
Service and Fee Income
Group	$	32,862			$	24,756			32.7	%		$	63,236			$	49,570			27.6	%
Individual	1,242				2,164				(42.6	)%		3,378				3,461				(2.4	)%
Third Party Fee	18,833				16,021				17.6	%		47,335				35,097				34.9	%
Total Service and Fee Income	52,937				42,941				23.3	%		113,949				88,128				29.3	%
Ceding Commission Income	3,928				262				nm			6,519				520				nm
Accident and Health	$	56,865			$	43,203			31.6	%		$	120,468			$	88,648			35.9	%
Total National General	$	209,395			$	190,090			10.2	%		$	440,783			$	377,808			16.7	%
Reciprocal Exchanges
Service and Fee Income	$	1,516			$	445			nm			$	2,886			$	2,891			(0.2	)%
Ceding Commission Income	16,846				13,426				25.5	%		35,380				24,936				41.9	%
Reciprocal Exchanges	$	18,362			$	13,871			32.4	%		$	38,266			$	27,827			37.5	%
Consolidated Total (A)	$	209,100			$	185,909			12.5	%		$	444,141			$	372,499			19.2	%

nm - not meaningful

NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges in Service and Fee Income of $(18,657) and $(18,052) in the three months ended June 30, 2019 and 2018, respectively, and $(34,908) and $(33,136) in the six months ended June 30, 2019 and 2018, 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, 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, and any significant non-recurring or infrequent items that may not be indicative of ongoing operations. 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 financial measures to the most directly comparable GAAP measure.

(2) Total investments includes $235,141 and $233,723 in related parties at June 30, 2019 and December 31, 2018, respectively.

(3) Reinsurance balances includes $5,664 and $7,425 from related parties at June 30, 2019 and December 31, 2018, respectively.

(4) Other includes $2,376 and $2,362 from related parties at June 30, 2019 and December 31, 2018, respectively.

(5) Accounts payable and accrued expenses includes $2,454 and $69,874 to related parties at June 30, 2019 and December 31, 2018, respectively.

(6) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 113,215,632 shares - June 30, 2019; authorized 150,000,000 shares, issued and outstanding 112,940,595 shares - December 31, 2018.

(7) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - June 30, 2019; authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - December 31, 2018.

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

(9) Operating expense ratio is a non-GAAP financial measure defined by the Company, which 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.

(10) Combined ratio is a non-GAAP financial measure defined by the Company, which is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio⁽⁸⁾ and the operating expense ratio (non-GAAP)⁽⁹⁾ 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. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss.

(11) Operating expense ratio before amortization and impairment is a non-GAAP financial measure defined by the Company, which 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. Management believes that this measure provides a more useful comparison to the operating expense ratio of other insurance companies involved in fewer acquisitions.

(12) Combined ratio before amortization and impairment is a non-GAAP financial measure defined by the Company, which is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio⁽⁸⁾ and the operating expense ratio before amortization and impairment (non-GAAP)⁽¹¹⁾ 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. Management believes that this measure of underwriting profitability provides a more useful comparison to the combined ratio of other insurance companies involved in fewer acquisitions. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss.

(13) Combined ratio (non-GAAP), operating expense ratio (non-GAAP), combined ratio before amortization and impairment (non-GAAP) and operating expense ratio before amortization and impairment (non-GAAP) are considered non-GAAP financial measures under applicable SEC rules. Other companies may calculate these ratios 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 financial 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 (non-GAAP) to average shareholders’ equity for the same twelve-month period. Average shareholders’ equity is the sum of the shareholders’ equity excluding preferred stock at the beginning and end of the period 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 weather-related events, is calculated by taking the combined ratio as defined in Note 12, and adjusting it to exclude the total net losses of $18.4 million and $20.5 million from these events for the three months ended June 30, 2019 and 2018, respectively. The Company believes this measure enhances investors’ understanding of our results by eliminating what we believe are volatile and unusual events.

Year				Combined Ratio (12)		Impact of Weather-related Events		Combined Ratio Excluding Weather-related Events (15)
2019		P&C Segment		92.6%		2.2%		90.4%
2019		Overall NGHC		90.9%		1.2%		89.7%
2018		P&C Segment		92.9%		2.8%		90.1%
2018		Overall NGHC		92.1%		2.3%		89.8%

(16) Our products in the P&C segment include personal auto, homeowners, RV/Packaged, small business auto, lender-placed insurance and other products. The personal auto product includes policies for standard, preferred and nonstandard automobile insurance. The homeowners product includes multiple-peril policies and personal umbrella coverage to the homeowner. The RV/Packaged product offers policies that include RV automatic personal effects coverage, optional replacement cost coverage, RV storage coverage and full-time liability coverage. The small business auto product offers policies that include liability and physical damage coverage for light-to-medium duty commercial vehicles. The lender-placed insurance product offers fire, home and flood products, as well as collateral protection insurance and guaranteed asset protection products for automobiles. Our products and revenue in the A&H segment include group, individual and third party fees. The group product includes revenue from our small group self-funded product. The individual product line includes revenue from our supplemental products including short-term medical, accident/AD&D, hospital indemnity, cancer/critical illness, dental and term life insurance. Third party fees include commission and general agent fees for selling policies issued by third-party insurance companies, fees generated through selling our technology products to third parties and fees from our international health insurance offerings.

Investor Contact

Investor Relations Department
Phone: 212-380-9462
Email: InvestorRelations@NGIC.COM