NEW YORK, Feb. 20, 2020 (GLOBE NEWSWIRE) -- National General Holdings Corp. (Nasdaq:NGHC) reported fourth quarter 2019 net income of $98.4 million or $0.85 per diluted share, compared to net income of $17.3 million or $0.16 per diluted share in the fourth quarter of 2018. Fourth quarter 2019 operating earnings (non-GAAP)⁽¹⁾ was $83.1 million or $0.72 per diluted share compared to $33.6 million or $0.30 per diluted share in the fourth quarter of 2018.

Full year 2019 net income was $314.5 million or $2.73 per diluted share, compared to net income of $174.9 million or $1.59 per diluted share in 2018. 2019 operating earnings (non-GAAP)⁽¹⁾ was $319.2 million or $2.75 per diluted share compared to $231.5 million or $2.09 per diluted share in 2018.

Fourth Quarter 2019 Highlights versus Fourth Quarter 2018*

• Gross written premium grew $46.1 million or 3.9% to $1,221.8 million, primarily driven by the acquisition of National Farmers Union Property and Casualty Company (“Farmers Union Insurance”) which closed on August 1, 2019, and continued organic growth in our A&H segment of 7.5%, partially offset by the impact of the Euro Accident Health and Care Insurance (“Euroaccident”) sale which closed on December 2, 2019.
• The overall combined ratio^(12,13) was 91.4% in the fourth quarter compared to 95.9% in the prior year’s quarter and 91.0% for the full year compared to 92.6% in 2018, excluding non-cash amortization of intangible assets. The P&C segment reported a decrease in combined ratio to 94.2% from 100.5% in the prior year’s quarter. The combined ratio includes $9.2 million of catastrophe losses related to weather-related events compared to $59.0 million of Hurricane Michael and California fires catastrophe losses in the prior year’s quarter. The A&H segment reported an increase in combined ratio to 77.1% from 73.6% in the prior year’s quarter.
• Service and fee income grew 10.5% to $179.3 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 $2.65 billion and fully diluted book value per share was $19.06 at December 31, 2019, growth of 19.3% and 25.0%, respectively, from December 31, 2018. Our trailing twelve month operating return on average equity (ROE)⁽¹⁴⁾ was 16.1% as of December 31, 2019.
• Fourth quarter 2019 operating earnings (non-GAAP)⁽¹⁾ excludes the following items, net of tax: $3.4 million or $0.03 per share earnings from equity method investments, $33.8 million or $0.29 per share of net gain on investments (including $20.9 million gain on the sale of Euroaccident, net of tax), $10.7 million or $0.09 per share of non-cash amortization of intangible assets and $11.3 million or $0.10 per share of other expenses reflecting an acquisition related arbitration award.

Barry Karfunkel, National General’s CEO, stated: “2019 was an exceptional year for National General generating a 91.0% combined ratio, $319.2 million of operating earnings, ROE of 16.1% and growth in diluted book value per share of 25.0%. While our P&C segment earnings were negatively impacted by reserve strengthening within our small business auto product line, the P&C segment continued its strong performance via both our independent agency and direct to consumer distribution channels. Our A&H segment reported very strong profitability within our group and individual products. I am pleased with the continued execution of our strategy of focused underwriting discipline and long term growth initiatives.”

*NOTE: Unless specified otherwise, discussion of our fourth 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 Fourth Quarter 2019 as Compared to Fourth Quarter 2018

• Property & Casualty - Gross written premium grew by 3.3% to $1,045.9 million, net written premium increased by 12.7% to $807.6 million, and net earned premium increased by 12.7% to $842.3 million. P&C gross written premium growth was primarily driven by $47.4 million of added premiums from the acquisition of Farmers Union Insurance. Service and fee income was $107.5 million compared to $110.8 million in the prior year’s quarter. Excluding amortization of intangible assets, the combined ratio^(12,13) was 94.2% with a loss and LAE ratio of 73.6% and an expense ratio^(11,13) of 20.6%, versus a prior year combined ratio of 100.5% with a loss and LAE ratio of 79.6% and an expense ratio of 20.9%. The loss and LAE ratio was impacted by pre-tax catastrophe losses of approximately $9.2 million primarily related to weather-related events in the fourth quarter 2019, compared to $59.0 million of losses in the fourth quarter 2018. Prior year loss development was $26.8 million unfavorable in the fourth quarter 2019 primarily driven by small business auto, compared to unfavorable loss development of $8.6 million in the fourth quarter 2018.
   
• Accident & Health - Gross written premium grew by 7.5% to $175.8 million, net written premium grew by 14.3% to $160.4 million, and net earned premium grew by 10.2% to $166.5 million. The A&H gross written premium increase was driven by the continued growth in our domestic A&H business. Service and fee income grew 39.7% to $71.8 million compared to $51.4 million in the prior year’s quarter, primarily driven by group administrative fees and third party technology services fees. Excluding non-cash amortization of intangible assets, the combined ratio^(12,13) was 77.1% with a loss and LAE ratio of 41.4% and an expense ratio^(11,13) of 35.7%, versus a prior year combined ratio of 73.6% with a loss and LAE ratio of 45.7% and an expense ratio of 27.9%. The loss and LAE ratio reflects continued strong performance in both small group self-funded and individual products. Prior year loss development was $7.6 million favorable in the fourth quarter 2019, compared to favorable loss development of $6.4 million in the fourth quarter 2018.
   
• Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $102.5 million, net written premium was $62.0 million, and net earned premium was $60.8 million. Reciprocal Exchanges combined ratio^(12,13) excluding non-cash amortization of intangible assets was 113.8% with a loss and LAE ratio of 86.4% and an expense ratio^(11,13) of 27.4%.

Fourth quarter 2019 investment income grew to $38.5 million, compared to $37.7 million in the fourth quarter of 2018. Total investments and cash and cash equivalents (including restricted cash) were $4.8 billion as of December 31, 2019. Accumulated other comprehensive income (loss) increased to a $74.5 million gain at December 31, 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 $12.7 million for both the current and prior year’s quarter. Debt was $686.0 million at December 31, 2019, down from $705.8 million at December 31, 2018.

The fourth quarter of 2019 provision for income taxes was $20.3 million and the effective tax rate for the quarter was 15.9% compared with income taxes of $12.6 million and an effective rate of 32.5% in the fourth quarter of 2018. The effective tax rate for the year ended December 31, 2019 was 19.8%.

Stockholders’ equity was $2,649.5 million at December 31, 2019, growth of 19.3% from $2,220.8 million at December 31, 2018. Fully diluted book value per share was $19.06 at December 31, 2019, growth of 25.0% from $15.25 at December 31, 2018. Our trailing twelve month operating return on average equity (ROE)⁽¹⁴⁾ was 16.1% as of December 31, 2019.

		Year-to-Date P&C Segment Notable Large Losses
Year		Quarter		Event		P&C Notable Large Losses and LAE ($ millions)			P&C Loss and LAE Ratio Points*		EPS Impact After Tax
2019		Q4		Weather-related Events		$9.2			1.1%		$0.06
2019		Q3		Weather-related Events		$11.5			1.4%		$0.08
2019		Q2		Weather-related Events		$18.4			2.2%		$0.13
2019		Q1		Winter Weather		$12.1			1.6%		$0.08
2018		Q4		Hurricane Michael and November California Fires		$59.0			7.9%		$0.41
2018		Q3		California Fires and Hurricane Florence		$35.0			4.7%		$0.25
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 item

Auto Quota Share - Effective January 1, 2020, we cede 5.0% of net liability under our auto quota share reinsurance agreement.

Conference Call

On Friday, February 21, 2020 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:	652437
Webcast Registration:	http://ir.nationalgeneral.com/events-and-presentations

A replay of the conference call will be accessible from 2:00 PM ET on Friday, February 21, 2020 to 11:59 PM ET on Friday, March 6, 2020 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 652437. 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 potential effect of changes in LIBOR reporting practices, 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 - Fourth Quarter
$ in thousands
(Unaudited)

		Three Months Ended December 31,
		2019													2018
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	1,221,772			$	102,465			$	1,324,237				$	1,175,687			$	111,902			$	1,287,589
Net written premium		967,943				62,012				1,029,955					856,746				51,325				908,071
Net earned premium		1,008,770				60,826				1,069,596					898,479				45,752				944,231
Ceding commission income		38,085				13,055				51,140					48,495				17,226				65,721
Service and fee income		179,276				1,284				165,924			(A)		162,170				1,285				146,270			(G)
Net investment income		38,491				2,184				38,917			(B)		37,666				2,182				37,332			(H)
Net gain (loss) on investments		16,393				707				17,100					(4,689		)		(2,100		)		(6,789		)
Other income		26,428				—				26,428					—				—				—
Total revenues		$	1,307,443			$	78,056			$	1,369,105		(C)		$	1,142,121			$	64,345			$	1,186,765		(I)
Expenses:
Loss and loss adjustment expense		$	689,262			$	52,528			$	741,790				$	664,125			$	36,297			$	700,422
Acquisition costs and other underwriting expenses		199,523				12,710				212,233					184,195				9,031				193,226
General and administrative expenses		278,331				18,352				282,047			(D)		242,340				21,724				246,879			(J)
Interest expense		12,722				1,758				12,722			(E)		12,650				2,516				12,650			(K)
Total expenses		$	1,179,838			$	85,348			$	1,248,792		(F)		$	1,103,310			$	69,568			$	1,153,177		(L)
Income (loss) before provision (benefit) for income taxes		$	127,605			$	(7,292	)		$	120,313				$	38,811			$	(5,223	)		$	33,588
Provision (benefit) for income taxes		20,324				(4,805		)		15,519					12,595				2,628				15,223
Net income (loss) before noncontrolling interest and dividends on preferred shares		107,281				(2,487		)		104,794					26,216				(7,851		)		18,365
Less: net income (loss) attributable to noncontrolling interest		—				(2,487		)		(2,487		)			—				(7,851		)		(7,851		)
Net income before dividends on preferred shares		107,281				—				107,281					26,216				—				26,216
Less: dividends on preferred shares		8,925				—				8,925					8,867				—				8,867
Net income available to common stockholders		$	98,356			$	—			$	98,356				$	17,349			$	—			$	17,349

Consolidated column includes eliminations as follows: (A) $(14,636), (B) $(1,758), (C) $(16,394), (D) $(14,636), (E) $(1,758), (F) $(16,394), (G) $(17,185), (H) $(2,516), (I) $(19,701), (J) $(17,185), (K) $(2,516) and (L) $(19,701).

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

		Year Ended December 31,
		2019													2018
		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Revenues:
Gross written premium		$	5,135,633			$	447,447			$	5,583,080				$	4,969,517			$	448,923			$	5,416,839		(G)
Net written premium		3,990,149				234,472				4,224,621					3,644,148				183,565				3,827,713
Net earned premium		3,907,811				210,231				4,118,042					3,545,441				186,761				3,732,202
Ceding commission income		174,952				63,501				238,453					167,948				56,749				224,697
Service and fee income		705,006				5,755				641,965			(A)		625,463				5,751				561,583			(H)
Net investment income		142,174				8,638				141,233			(B)		119,852				8,875				119,034			(I)
Net gain (loss) on investments		13,603				(130		)		13,473					(26,179		)		(3,366		)		(29,545		)
Other income		26,428				—				26,428					—				—				—
Total revenues		$	4,969,974			$	287,995			$	5,179,594		(C)		$	4,432,525			$	254,770			$	4,607,971		(J)
Expenses:
Loss and loss adjustment expense		$	2,677,356			$	177,112			$	2,854,468				$	2,499,508			$	162,718			$	2,662,226
Acquisition costs and other underwriting expenses		782,328				45,039				827,367					693,283				41,983				735,266
General and administrative expenses		1,024,574				85,994				1,041,772			(D)		923,921				83,756				938,046			(K)
Interest expense		51,544				9,579				51,544			(E)		51,425				9,693				51,425			(L)
Total expenses		$	4,535,802			$	317,724			$	4,775,151		(F)		$	4,168,137			$	298,150			$	4,386,963		(M)
Income (loss) before provision (benefit) for income taxes		$	434,172			$	(29,729	)		$	404,443				$	264,388			$	(43,380	)		$	221,008
Provision (benefit) for income taxes		86,103				(9,090		)		77,013					57,034				(3,550		)		53,484
Net income (loss) before noncontrolling interest and dividends on preferred shares		348,069				(20,639		)		327,430					207,354				(39,830		)		167,524
Less: net income (loss) attributable to noncontrolling interest		—				(20,639		)		(20,639		)			—				(39,830		)		(39,830		)
Net income before dividends on preferred shares		348,069				—				348,069					207,354				—				207,354
Less: dividends on preferred shares		33,600				—				33,600					32,492				—				32,492
Net income available to common stockholders		$	314,469			$	—			$	314,469				$	174,862			$	—			$	174,862

Consolidated column includes eliminations as follows: (A) $(68,796), (B) $(9,579), (C) $(78,375), (D) $(68,796), (E) $(9,579), (F) $(78,375), (G) $(1,601), (H) $(69,631), (I) $(9,693), (J) $(79,324), (K) $(69,631), (L) $(9,693) and (M) $(79,324).

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

		Three Months Ended December 31,								Year Ended December 31,
		2019				2018				2019				2018
Net income available to common stockholders		$	98,356			$	17,349			$	314,469			$	174,862
Basic net income per common share		$	0.87			$	0.16			$	2.78			$	1.62
Diluted net income per common share		$	0.85			$	0.16			$	2.73			$	1.59
Operating earnings attributable to NGHC (non-GAAP)(1)		$	83,081			$	33,590			$	319,174			$	231,495
Basic operating earnings per common share (non-GAAP)(1)		$	0.73			$	0.31			$	2.82			$	2.15
Diluted operating earnings per common share (non-GAAP)(1)		$	0.72			$	0.30			$	2.75			$	2.09
Dividends declared per common share		$	0.05			$	0.04			$	0.18			$	0.16
Weighted average number of basic shares outstanding		113,337,130				109,782,543				113,199,501				107,659,813
Weighted average number of diluted shares outstanding		115,344,349				112,947,180				116,096,972				110,822,056
Shares outstanding, end of period		113,368,811				112,940,595
Fully diluted shares outstanding, end of period		115,376,030				116,105,232
Book value per share		$	19.40			$	15.68
Fully diluted book value per share		$	19.06			$	15.25

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

		Three Months Ended December 31,								Year Ended December 31,
		2019				2018				2019				2018
Net income available to common stockholders		$	98,356			$	17,349			$	314,469			$	174,862
Add (subtract):
Equity in earnings of equity method investments		(4,359		)		(3,144		)		(2,951		)		(165		)
Net (gain) loss on investments and gain on sale of a business		(42,821		)		4,689				(40,031		)		26,179
Non-cash amortization of intangible assets		13,572				7,926				34,665				31,323
Arbitration award / Litigation settlement		14,273				10,000				14,273				10,000
Income tax expense (benefit)		4,060				(3,230		)		(1,251		)		(10,704		)
Operating earnings attributable to NGHC (non-GAAP)(1)		$	83,081			$	33,590			$	319,174			$	231,495
Operating earnings per common share (non-GAAP)(1):
Basic operating earnings per common share (non-GAAP)(1)		$	0.73			$	0.31			$	2.82			$	2.15
Diluted operating earnings per common share (non-GAAP)(1)		$	0.72			$	0.30			$	2.75			$	2.09

Balance Sheet
$ in thousands
(Unaudited)

		December 31, 2019													December 31, 2018
ASSETS		NGHC				Reciprocal Exchanges				Consolidated					NGHC				Reciprocal Exchanges				Consolidated
Total investments (2)		$	4,632,960			$	329,494			$	4,854,998		(A)		$	4,013,699			$	314,411			$	4,226,806		(H)
Cash and cash equivalents, including restricted cash		163,480				983				164,463					233,383				200				233,583
Premiums and other receivables, net		1,373,089				55,859				1,428,948					1,338,485				61,327				1,399,812
Reinsurance balances (3)		1,745,036				225,019				1,970,055					2,023,911				253,501				2,277,412
Intangible assets, net		362,598				3,225				365,823					376,532				3,405				379,937
Goodwill		179,328				—				179,328					180,183				—				180,183
Other (4)		798,675				29,070				792,919			(B)		739,068				27,879				741,547			(I)
Total assets		$	9,255,166			$	643,650			$	9,756,534		(C)		$	8,905,261			$	660,723			$	9,439,280		(J)
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves		$	2,680,628			$	205,786			$	2,886,414				$	2,778,689			$	178,470			$	2,957,159
Unearned premiums and other revenue		2,059,688				252,553				2,312,241					2,014,965				265,763				2,280,728
Reinsurance payable		527,155				35,689				562,844					615,872				40,393				656,265
Accounts payable and accrued expenses (5)		306,869				43,323				315,366			(D)		390,338				33,120				398,058			(K)
Debt		686,006				107,456				686,006			(E)		705,795				101,304				705,795			(L)
Other		345,366				30,803				376,169					178,764				61,640				240,404
Total liabilities		$	6,605,712			$	675,610			$	7,139,040		(F)		$	6,684,423			$	680,690			$	7,238,409		(M)
Stockholders’ equity:
Common stock (6)		$	1,134			$	—			$	1,134				$	1,129			$	—			$	1,129
Preferred stock (7)		450,000				—				450,000					450,000				—				450,000
Additional paid-in capital		1,065,634				—				1,065,634					1,057,783				—				1,057,783
Accumulated other comprehensive income (loss)		74,548				—				74,548					(52,130		)		—				(52,130		)
Retained earnings		1,058,138				—				1,058,138					764,056				—				764,056
Total National General Holdings Corp. stockholders’ equity		2,649,454				—				2,649,454					2,220,838				—				2,220,838
Noncontrolling interest		—				(31,960		)		(31,960		)			—				(19,967		)		(19,967		)
Total stockholders’ equity		$	2,649,454			$	(31,960	)		$	2,617,494				$	2,220,838			$	(19,967	)		$	2,200,871
Total liabilities and stockholders’ equity		$	9,255,166			$	643,650			$	9,756,534		(G)		$	8,905,261			$	660,723			$	9,439,280		(N)

Consolidated column includes eliminations as follows: (A) $(107,456), (B) $(34,826), (C) $(142,282), (D) $(34,826), (E) $(107,456), (F) $(142,282), (G) $(142,282), (H) $(101,304), (I) $(25,400), (J) $(126,704), (K) $(25,400), (L) $(101,304), (M) $(126,704) and (N) $(126,704).

Segment Information - Fourth Quarter
$ in thousands
(Unaudited)

		Three Months Ended December 31,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	1,045,926			$	175,846			$	1,221,772				$	102,465				$	1,012,138			$	163,549			$	1,175,687				$	111,902
Net written premium		807,574				160,369				967,943					62,012					716,394				140,352				856,746					51,325
Net earned premium		842,283				166,487				1,008,770					60,826					747,457				151,022				898,479					45,752
Ceding commission income		35,926				2,159				38,085					13,055					42,281				6,214				48,495					17,226
Service and fee income		107,474				71,802				179,276					1,284					110,776				51,394				162,170					1,285
Total underwriting revenues		$	985,683			$	240,448			$	1,226,131				$	75,165				$	900,514			$	208,630			$	1,109,144				$	64,263
Loss and loss adjustment expense (A)		620,267				68,995				689,262					52,528					595,144				68,981				664,125					36,297
Acquisition costs and other underwriting expenses		130,238				69,285				199,523					12,710					135,968				48,227				184,195					9,031
General and administrative expenses (B)		198,077				65,981				264,058					18,352					178,797				53,543				232,340					21,724
Total underwriting expenses		$	948,582			$	204,261			$	1,152,843				$	83,590				$	909,909			$	170,751			$	1,080,660				$	67,052
Underwriting income (loss)		37,101				36,187				73,288					(8,425		)			(9,395		)		37,879				28,484					(2,789		)
Non-cash amortization of intangible assets		11,766				1,806				13,572					30					5,835				2,091				7,926					111
Underwriting income (loss) before amortization and impairment		$	48,867			$	37,993			$	86,860				$	(8,395	)			$	(3,560	)		$	39,970			$	36,410				$	(2,678	)
Underwriting ratios
Loss and loss adjustment expense ratio (8)		73.6		%		41.4		%		68.3		%			86.4		%			79.6		%		45.7		%		73.9		%			79.3		%
Operating expense ratio (Non-GAAP) (9)		22.0		%		36.8		%		24.4		%			27.5		%			21.6		%		29.2		%		22.9		%			26.8		%
Combined ratio (Non-GAAP) (10)		95.6		%		78.2		%		92.7		%			113.9		%			101.2		%		74.9		%		96.8		%			106.1		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (8)		73.6		%		41.4		%		68.3		%			86.4		%			79.6		%		45.7		%		73.9		%			79.3		%
Operating expense ratio (Non-GAAP) (11)		20.6		%		35.7		%		23.1		%			27.4		%			20.9		%		27.9		%		22.0		%			26.5		%
Combined ratio before amortization and impairment (Non-GAAP) (12)		94.2		%		77.1		%		91.4		%			113.8		%			100.5		%		73.6		%		95.9		%			105.8		%

(A) Loss and loss adjustment expenses for the three months ended December 31, 2019 included $26,832 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $7,581 of favorable development in the A&H segment, versus $8,558 of unfavorable development in the P&C segment, and $6,354 of favorable development in the A&H segment for the three months ended December 31, 2018.

(B) General and administrative expenses includes expenses allocated to segments only.

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

		Year Ended December 31,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Gross written premium		$	4,367,016			$	768,617			$	5,135,633				$	447,447				$	4,271,408			$	698,109			$	4,969,517				$	448,923
Net written premium		3,329,543				660,606				3,990,149					234,472					3,017,609				626,539				3,644,148					183,565
Net earned premium		3,244,792				663,019				3,907,811					210,231					2,929,028				616,413				3,545,441					186,761
Ceding commission income		164,013				10,939				174,952					63,501					160,945				7,003				167,948					56,749
Service and fee income		455,519				249,487				705,006					5,755					439,483				185,980				625,463					5,751
Total underwriting revenues		$	3,864,324			$	923,445			$	4,787,769				$	279,487				$	3,529,456			$	809,396			$	4,338,852				$	249,261
Loss and loss adjustment expense (A)		2,366,676				310,680				2,677,356					177,112					2,178,163				321,345				2,499,508					162,718
Acquisition costs and other underwriting expenses		559,980				222,348				782,328					45,039					508,557				184,726				693,283					41,983
General and administrative expenses (B)		756,093				254,208				1,010,301					85,994					712,113				201,808				913,921					83,756
Total underwriting expenses		$	3,682,749			$	787,236			$	4,469,985				$	308,145				$	3,398,833			$	707,879			$	4,106,712				$	288,457
Underwriting income (loss)		181,575				136,209				317,784					(28,658		)			130,623				101,517				232,140					(39,196		)
Non-cash amortization of intangible assets		27,920				6,745				34,665					71					23,960				7,363				31,323					44
Underwriting income (loss) before amortization and impairment		$	209,495			$	142,954			$	352,449				$	(28,587	)			$	154,583			$	108,880			$	263,463				$	(39,152	)
Underwriting ratios
Loss and loss adjustment expense ratio (8)		72.9		%		46.9		%		68.5		%			84.2		%			74.4		%		52.1		%		70.5		%			87.1		%
Operating expense ratio (Non-GAAP) (9)		21.5		%		32.6		%		23.4		%			29.4		%			21.2		%		31.4		%		23.0		%			33.9		%
Combined ratio (Non-GAAP) (10)		94.4		%		79.5		%		91.9		%			113.6		%			95.6		%		83.5		%		93.5		%			121.0		%
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio (8)		72.9		%		46.9		%		68.5		%			84.2		%			74.4		%		52.1		%		70.5		%			87.1		%
Operating expense ratio (Non-GAAP) (11)		20.6		%		31.6		%		22.5		%			29.4		%			20.4		%		30.2		%		22.1		%			33.8		%
Combined ratio before amortization and impairment (Non-GAAP) (12)		93.5		%		78.5		%		91.0		%			113.6		%			94.8		%		82.3		%		92.6		%			120.9		%

(A) Loss and loss adjustment expenses for the year ended December 31, 2019 included $46,623 of unfavorable development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $45,356 of favorable development in the A&H segment, versus $4,760 of favorable development in the P&C segment, and $30,977 of favorable development in the A&H segment for the year ended December 31, 2018.

(B) General and administrative expenses includes expenses allocated to segments only.

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

		Three Months Ended December 31,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	948,582			$	204,261			$	1,152,843				$	83,590				$	909,909			$	170,751			$	1,080,660				$	67,052
Less: Loss and loss adjustment expense		620,267				68,995				689,262					52,528					595,144				68,981				664,125					36,297
Less: Ceding commission income		35,926				2,159				38,085					13,055					42,281				6,214				48,495					17,226
Less: Service and fee income		107,474				71,802				179,276					1,284					110,776				51,394				162,170					1,285
Operating expense		184,915				61,305				246,220					16,723					161,708				44,162				205,870					12,244
Net earned premium		$	842,283			$	166,487			$	1,008,770				$	60,826				$	747,457			$	151,022			$	898,479				$	45,752
Operating expense ratio (Non-GAAP) (9)		22.0		%		36.8		%		24.4		%			27.5		%			21.6		%		29.2		%		22.9		%			26.8		%
Total underwriting expenses		$	948,582			$	204,261			$	1,152,843				$	83,590				$	909,909			$	170,751			$	1,080,660				$	67,052
Less: Loss and loss adjustment expense		620,267				68,995				689,262					52,528					595,144				68,981				664,125					36,297
Less: Ceding commission income		35,926				2,159				38,085					13,055					42,281				6,214				48,495					17,226
Less: Service and fee income		107,474				71,802				179,276					1,284					110,776				51,394				162,170					1,285
Less: Non-cash amortization of intangible assets		11,766				1,806				13,572					30					5,835				2,091				7,926					111
Operating expense before amortization and impairment		173,149				59,499				232,648					16,693					155,873				42,071				197,944					12,133
Net earned premium		$	842,283			$	166,487			$	1,008,770				$	60,826				$	747,457			$	151,022			$	898,479				$	45,752
Operating expense ratio before amortization and impairment (Non-GAAP) (11)		20.6		%		35.7		%		23.1		%			27.4		%			20.9		%		27.9		%		22.0		%			26.5		%

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

		Year Ended December 31,
		2019																		2018
		P&C				A&H				NGHC					Reciprocal Exchanges					P&C				A&H				NGHC					Reciprocal Exchanges
Total underwriting expenses		$	3,682,749			$	787,236			$	4,469,985				$	308,145				$	3,398,833			$	707,879			$	4,106,712				$	288,457
Less: Loss and loss adjustment expense		2,366,676				310,680				2,677,356					177,112					2,178,163				321,345				2,499,508					162,718
Less: Ceding commission income		164,013				10,939				174,952					63,501					160,945				7,003				167,948					56,749
Less: Service and fee income		455,519				249,487				705,006					5,755					439,483				185,980				625,463					5,751
Operating expense		696,541				216,130				912,671					61,777					620,242				193,551				813,793					63,239
Net earned premium		$	3,244,792			$	663,019			$	3,907,811				$	210,231				$	2,929,028			$	616,413			$	3,545,441				$	186,761
Operating expense ratio (Non-GAAP) (9)		21.5		%		32.6		%		23.4		%			29.4		%			21.2		%		31.4		%		23.0		%			33.9		%
Total underwriting expenses		$	3,682,749			$	787,236			$	4,469,985				$	308,145				$	3,398,833			$	707,879			$	4,106,712				$	288,457
Less: Loss and loss adjustment expense		2,366,676				310,680				2,677,356					177,112					2,178,163				321,345				2,499,508					162,718
Less: Ceding commission income		164,013				10,939				174,952					63,501					160,945				7,003				167,948					56,749
Less: Service and fee income		455,519				249,487				705,006					5,755					439,483				185,980				625,463					5,751
Less: Non-cash amortization of intangible assets		27,920				6,745				34,665					71					23,960				7,363				31,323					44
Operating expense before amortization and impairment		668,621				209,385				878,006					61,706					596,282				186,188				782,470					63,195
Net earned premium		$	3,244,792			$	663,019			$	3,907,811				$	210,231				$	2,929,028			$	616,413			$	3,545,441				$	186,761
Operating expense ratio before amortization and impairment (Non-GAAP) (11)		20.6		%		31.6		%		22.5		%			29.4		%			20.4		%		30.2		%		22.1		%			33.8		%

Premiums by Product Line
$ in thousands
(Unaudited)

	Three Months Ended December 31,
	Gross Written Premium												Net Written Premium												Net Earned Premium
	2019				2018				Change				2019				2018				Change				2019				2018				Change
Property & Casualty
Personal Auto	$	637,500			$	619,180			3.0	%			$	529,481			$	474,173			11.7	%			$	569,014			$	490,874			15.9	%
Homeowners	174,763				164,698				6.1	%			128,028				75,830				68.8	%			132,715				87,689				51.3	%
RV/Packaged	43,950				43,967				—	%			36,690				43,806				(16.2	)%			44,900				51,347				(12.6	)%
Small Business Auto	68,875				72,851				(5.5	)%			52,846				52,142				1.4	%			62,402				59,285				5.3	%
Lender-placed insurance	110,002				103,061				6.7	%			57,308				67,439				(15.0	)%			23,636				53,182				(55.6	)%
Other	10,836				8,381				29.3	%			3,221				3,004				7.2	%			9,616				5,080				89.3	%
Total Premium	$	1,045,926			$	1,012,138			3.3	%			$	807,574			$	716,394			12.7	%			$	842,283			$	747,457			12.7	%
Accident & Health
Group	$	75,352			$	62,693			20.2	%			$	60,477			$	51,626			17.1	%			$	60,477			$	51,618			17.2	%
Individual	88,012				76,232				15.5	%			87,733				76,181				15.2	%			88,129				75,883				16.1	%
International	12,482				24,624				(49.3	)%			12,159				12,545				(3.1	)%			17,881				23,521				(24.0	)%
Total Premium	$	175,846			$	163,549			7.5	%			$	160,369			$	140,352			14.3	%			$	166,487			$	151,022			10.2	%
Total National General	$	1,221,772			$	1,175,687			3.9	%			$	967,943			$	856,746			13.0	%			$	1,008,770			$	898,479			12.3	%
Reciprocal Exchanges
Personal Auto	$	32,676			$	36,527			(10.5	)%			$	33,498			$	20,899			60.3	%			$	40,642			$	21,111			92.5	%
Homeowners	68,953				74,421				(7.3	)%			29,829				30,049				(0.7	)%			19,489				24,228				(19.6	)%
Other	836				954				(12.4	)%			(1,315		)		377				nm				695				413				68.3	%
Total Premium	$	102,465			$	111,902			(8.4	)%			$	62,012			$	51,325			20.8	%			$	60,826			$	45,752			32.9	%
Consolidated Total	$	1,324,237			$	1,287,589			2.8	%			$	1,029,955			$	908,071			13.4	%			$	1,069,596			$	944,231			13.3	%

nm - not meaningful

Premiums by Product Line
$ in thousands
(Unaudited)

	Year Ended December 31,
	Gross Written Premium												Net Written Premium												Net Earned Premium
	2019				2018				Change				2019				2018				Change				2019				2018				Change
Property & Casualty
Personal Auto	$	2,721,202			$	2,637,743			3.2	%			$	2,260,385			$	2,016,858			12.1	%			$	2,190,748			$	1,927,667			13.6	%
Homeowners	718,819				689,040				4.3	%			404,278				331,120				22.1	%			405,306				329,850				22.9	%
RV/Packaged	212,746				208,394				2.1	%			198,737				206,740				(3.9	)%			195,639				197,258				(0.8	)%
Small Business Auto	315,569				319,299				(1.2	)%			249,067				233,456				6.7	%			252,359				237,587				6.2	%
Lender-placed insurance	342,267				363,056				(5.7	)%			198,171				202,069				(1.9	)%			182,231				215,811				(15.6	)%
Other	56,413				53,876				4.7	%			18,905				27,366				(30.9	)%			18,509				20,855				(11.2	)%
Total Premium	$	4,367,016			$	4,271,408			2.2	%			$	3,329,543			$	3,017,609			10.3	%			$	3,244,792			$	2,929,028			10.8	%
Accident & Health
Group	$	288,549			$	239,729			20.4	%			$	231,388			$	197,386			17.2	%			$	231,398			$	197,406			17.2	%
Individual	340,731				308,122				10.6	%			340,049				308,065				10.4	%			340,251				307,952				10.5	%
International	139,337				150,258				(7.3	)%			89,169				121,088				(26.4	)%			91,370				111,055				(17.7	)%
Total Premium	$	768,617			$	698,109			10.1	%			$	660,606			$	626,539			5.4	%			$	663,019			$	616,413			7.6	%
Total National General	$	5,135,633			$	4,969,517			3.3	%			$	3,990,149			$	3,644,148			9.5	%			$	3,907,811			$	3,545,441			10.2	%
Reciprocal Exchanges
Personal Auto	$	152,688			$	153,129			(0.3	)%			$	134,958			$	61,759			nm				$	106,549			$	59,923			77.8	%
Homeowners	290,972				291,907				(0.3	)%			98,009				120,875				(18.9	)%			101,964				125,806				(19.0	)%
Other	3,787				3,887				(2.6	)%			1,505				931				61.7	%			1,718				1,032				66.5	%
Total Premium	$	447,447			$	448,923			(0.3	)%			$	234,472			$	183,565			27.7	%			$	210,231			$	186,761			12.6	%
Consolidated Total (A)	$	5,583,080			$	5,416,839			3.1	%			$	4,224,621			$	3,827,713			10.4	%			$	4,118,042			$	3,732,202			10.3	%

nm - not meaningful

(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 the year ended December 31, 2018, respectively.

Fee Income
$ in thousands
(Unaudited)

	Three Months Ended December 31,											Year Ended December 31,
	2019				2018				Change			2019				2018				Change
Property & Casualty
Service and Fee Income	$	107,474			$	110,776			(3.0	)%		$	455,519			$	439,483			3.6	%
Ceding Commission Income	35,926				42,281				(15.0	)%		164,013				160,945				1.9	%
Property & Casualty	$	143,400			$	153,057			(6.3	)%		$	619,532			$	600,428			3.2	%
Accident & Health
Service and Fee Income
Group	$	36,122			$	29,736			21.5	%		$	134,206			$	104,504			28.4	%
Individual	4,144				1,331				nm			9,650				9,304				3.7	%
Third Party Fee	31,536				20,327				55.1	%		105,631				72,172				46.4	%
Total Service and Fee Income	71,802				51,394				39.7	%		249,487				185,980				34.1	%
Ceding Commission Income	2,159				6,214				(65.3	)%		10,939				7,003				56.2	%
Accident and Health	$	73,961			$	57,608			28.4	%		$	260,426			$	192,983			34.9	%
Total National General	$	217,361			$	210,665			3.2	%		$	879,958			$	793,411			10.9	%
Reciprocal Exchanges
Service and Fee Income	$	1,284			$	1,285			(0.1	)%		$	5,755			$	5,751			0.1	%
Ceding Commission Income	13,055				17,226				(24.2	)%		63,501				56,749				11.9	%
Reciprocal Exchanges	$	14,339			$	18,511			(22.5	)%		$	69,256			$	62,500			10.8	%
Consolidated Total (A)	$	217,064			$	211,991			2.4	%		$	880,418			$	786,280			12.0	%

nm - not meaningful

(A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges in Service and Fee Income of $(14,636) and $(17,185) in the three months ended December 31, 2019 and 2018, respectively, and $(68,796) and $(69,631) in the year ended December 31, 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 $238,841 and $233,723 in related parties at December 31, 2019 and December 31, 2018, respectively.

(3) Reinsurance balances includes $0 and $7,425 from related parties at December 31, 2019 and December 31, 2018, respectively.

(4) Other includes $2,391 and $2,362 from related parties at December 31, 2019 and December 31, 2018, respectively.

(5) Accounts payable and accrued expenses includes $639 and $69,874 to related parties at December 31, 2019 and December 31, 2018, respectively.

(6) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 113,368,811 shares - December 31, 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 - December 31, 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, service and fee income and other general and administrative expenses (arbitration award / litigation settlement expense). 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, service and fee income and other general and administrative expenses (arbitration award / litigation settlement expense) 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) 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

Paul Anderson
Director of Investor Relations
Phone: 212-380-9462
Email: Paul.Anderson@NGIC.com