There were 1,124 press releases posted in the last 24 hours and 194,993 in the last 365 days.

National General Holdings Corp. Reports Third Quarter 2020 Results

/EIN News/ -- NEW YORK, Oct. 29, 2020 (GLOBE NEWSWIRE) -- National General Holdings Corp. (Nasdaq: NGHC) reported third quarter 2020 net income of $102.1 million or $0.88 per diluted share, compared to net income of $63.3 million or $0.54 per diluted share in the third quarter of 2019. Third quarter 2020 operating earnings (non-GAAP)(1) were $105.2 million or $0.90 per diluted share compared to $68.2 million or $0.59 per diluted share in the third quarter of 2019.

Third Quarter 2020 Highlights versus Third Quarter 2019*

  • Gross written premium grew by $57.9 million to $1,374.7 million compared to the prior year’s quarter. Our P&C segment growth of 2.1%, was primarily driven by our personal auto product line; and our A&H domestic segment growth of 23.3%, excluding our previously sold A&H international business.

  • The overall combined ratio(11,12) was 89.2% compared to 92.5% in the prior year’s quarter, excluding non-cash amortization of intangible assets.

    – The P&C segment reported a decrease in the combined ratio to 92.4% from 97.0% in the prior year’s quarter driven by continued strong underwriting and lower claims frequency. The P&C combined ratio includes prior year unfavorable loss development of $0.9 million compared to $14.9 million unfavorable loss development in the prior year’s quarter, and $87.1 million of pre-tax catastrophe losses related to weather-related events compared to $11.5 million of catastrophe losses in the prior year’s quarter.

    –  The A&H segment reported an increase in the combined ratio to 71.8% from 70.2% in the prior year’s quarter driven by the absence of our international business which was sold in the fourth quarter of 2019. The A&H service and fee income increased 39.0%. The A&H combined ratio includes $5.8 million of favorable loss development compared to $18.8 million of favorable loss development in the prior year’s quarter.

  • Stockholders’ equity was $3.1 billion and fully diluted book value per share was $22.74 at September 30, 2020, growth of 17.1% and 19.3%, respectively, from December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $21.07 at September 30, 2020, growth of 14.4%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE)(13) was 19.0% as of September 30, 2020.

  • Third quarter of 2020 operating earnings (non-GAAP)(1) excludes the following, net of tax: $2.1 million or $0.02 per share loss on equity method investments, $5.3 million or $0.05 per share of net gain on investments, $3.5 million or $0.03 per share of non-cash amortization of intangible assets, and $2.8 million or $0.02 per share of other expenses reflecting a M&A advisory cost.

  • On September 30, 2020, the Company’s stockholders approved the proposal to merge with The Allstate Corporation. The merger remains subject to regulatory approval and the satisfaction of other customary conditions. The Company expects the merger to close in the first quarter of 2021.

Barry Karfunkel, National General’s CEO, stated: “I’m proud of the earnings National General was able to generate during a quarter that was highlighted by many catastrophic weather events. We’re excited with how we’ll be able to leverage our platform across a larger entity once our pending transaction closes. ”

*NOTE: Unless specified otherwise, discussion of our third quarter 2020 and 2019 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 Third Quarter 2020 as Compared to Third Quarter 2019

  • Property & Casualty - Gross written premium grew by 2.1% to $1,178.8 million, net written premium increased by 29.4% to $1,061.4 million, and net earned premium increased by 14.7% to $949.1 million. The P&C net earned premium increase was driven by lower cession to the quota shares, and growth in our personal auto, homeowners, and lender-placed product lines. Service and fee income was $109.8 million compared to $115.6 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio(11,12) was 92.4% with a loss and LAE ratio of 68.9% and an expense ratio(10,12) of 23.5%, versus a prior year combined ratio of 97.0% with a loss and LAE ratio of 75.8% and an expense ratio of 21.2%. The loss and LAE ratio was impacted by pre-tax catastrophe losses of approximately $87.1 million primarily related to weather-related events in the third quarter of 2020, compared to $11.5 million of losses in the third quarter of 2019. Unfavorable loss development was $0.9 million in the third quarter of 2020 primarily driven by small business auto, compared to unfavorable loss development of $14.9 million in the third quarter of 2019.
     
  • Accident & Health - Gross written premium grew by $33.4 million compared to the prior year’s quarter due to growth in both our small group self-funded and individual products. Excluding our A&H international business, our A&H domestic segment grew by 23.3% to $195.9 million. Service and fee income grew 39.0% to $88.6 million compared to $63.7 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio(11,12) was 71.8% with a loss and LAE ratio of 44.4% and an expense ratio(10,12) of 27.4%, versus a prior year combined ratio of 70.2% with a loss and LAE ratio of 41.8% and an expense ratio of 28.4%. The current quarter loss and LAE ratio reflects higher medical claims. Favorable loss development was $5.8 million in the third quarter of 2020, compared to favorable loss development of $18.8 million in the third quarter of 2019.
     
  • Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $98.4 million, net written premium was $29.5 million, and net earned premium was $54.1 million. Reciprocal Exchanges combined ratio(11,12) excluding non-cash amortization of intangible assets was 111.7% with a loss and LAE ratio of 78.5% and an expense ratio(10,12) of 33.2%.

Third quarter of 2020 net investment income decreased to $28.0 million, compared to $33.5 million in the third quarter of 2019. Total investments and cash and cash equivalents (including restricted cash) were $5.4 billion as of September 30, 2020. Unrealized gains on investments, included in accumulated other comprehensive income, increased to a $195.0 million gain at September 30, 2020, from a $74.5 million gain at December 31, 2019, primarily due to market improvement.

Interest expense was $11.3 million, down from $12.9 million in the prior year’s quarter. Debt was $679.4 million at September 30, 2020, compared to $686.0 million at December 31, 2019.

The third quarter of 2020 provision for income taxes was $26.7 million and the effective tax rate for the quarter was 19.5% compared with income taxes of $19.3 million and an effective rate of 21.3% in the third quarter of 2019.

Stockholders’ equity was $3,103.8 million at September 30, 2020, growth of 17.1% from $2,649.5 million at December 31, 2019. Fully diluted book value per share was $22.74 at September 30, 2020, growth of 19.3% from $19.06 at December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $21.07 at September 30, 2020, growth of 14.4%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE)(13) was 19.0% as of September 30, 2020.

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
2020   Q3   Weather-related Events   $87.1   9.2%   $0.59
2020   Q2   Weather-related Events   $35.3   4.2%   $0.24
2020   Q1   Weather-related Events   $8.1   0.9%   $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

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

About National General Holdings Corp.

National General Holdings Corp. (NASDAQ: NGHC), 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 us. 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, plans and expectations related to our proposed merger with The Allstate Corporation (“Allstate”), including anticipated timing for closing of the merger, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Allstate, the inability to complete the proposed merger due to the failure to obtain regulatory approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, the possibility that competing offers will be made, 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 effects of pandemics or other widespread health problems such as the ongoing COVID-19 pandemic on our business, including our investment portfolio, and the national and global economy generally, 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 - Third Quarter
$ in thousands
(Unaudited)

    Three Months Ended September 30,
    2020     2019  
    NGHC   Reciprocal
Exchanges
  Consolidated     NGHC   Reciprocal
Exchanges
  Consolidated  
Revenues:                            
Gross written premium   $ 1,374,740     $ 98,387     $ 1,473,127       $ 1,316,890     $ 118,267       $ 1,435,157      
Net written premium   1,235,765     29,491     1,265,256       967,319     67,285       1,034,604      
Net earned premium   1,124,475     54,098     1,178,573       996,521     57,117       1,053,638      
                             
Ceding commission income   21,772     8,952     30,724       42,521     15,066       57,587      
Service and fee income   198,353     1,628     184,969   (A)   179,293     1,585       161,626     (G)
Net investment income   28,019     2,254     28,904   (B)   33,451     2,160       33,740     (H)
Net gain (loss) on investments   6,736     13,103     19,839       1,718     (137 )     1,581      
Total revenues   $ 1,379,355     $ 80,035     $ 1,443,009   (C)   $ 1,253,504     $ 75,791       $ 1,308,172     (I)
                             
Expenses:                            
Loss and loss adjustment expense   $ 731,722     $ 42,442     $ 774,164       $ 698,064     $ 47,270       $ 745,334      
Acquisition costs and other underwriting expenses   252,444     16,201     268,645       193,521     15,569       209,090      
General and administrative expenses   247,241     12,382     244,611   (D)   258,583     24,533       263,864     (J)
Interest expense   11,292     1,369     11,292   (E)   12,898     1,871       12,898     (K)
Total expenses   $ 1,242,699      $ 72,394      $ 1,298,712   (F)   $ 1,163,066     $ 89,243       $ 1,231,186     (L)
                             
Income (loss) before provision (benefit) for income taxes   $ 136,656     $ 7,641     $ 144,297       $ 90,438     $ (13,452 )     $ 76,986      
Provision (benefit) for income taxes   26,687     741     27,428       19,284     (2,537 )     16,747      
Net income (loss) before non-controlling interest and dividends on preferred shares   109,969     6,900     116,869       71,154     (10,915 )     60,239      
Less: net income (loss) attributable to noncontrolling interest       6,900     6,900           (10,915 )     (10,915 )    
Net income before dividends on preferred shares   109,969         109,969       71,154           71,154      
Less: dividends on preferred shares   7,875         7,875       7,875           7,875      
Net income available to common stockholders   $ 102,094     $     $ 102,094       $ 63,279     $       $ 63,279      

NOTES: Consolidated column includes eliminations as follows: (A) $(15,012), (B) $(1,369), (C) $(16,381), (D) $(15,012), (E) $(1,369), (F) $(16,381), (G) $(19,252), (H) $(1,871), (I) $(21,123), (J) $(19,252), (K) $(1,871) and (L) $(21,123).

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

    Nine Months Ended September 30,
    2020     2019  
    NGHC   Reciprocal
Exchanges
  Consolidated     NGHC   Reciprocal
Exchanges
  Consolidated  
Revenues:                            
Gross written premium   $ 4,002,606     $ 288,676     $ 4,291,282       $ 3,913,861       $ 344,982       $ 4,258,843      
Net written premium   3,347,713     142,054     3,489,767       3,022,206       172,460       3,194,666      
Net earned premium   3,152,865     166,481     3,319,346       2,899,041       149,405       3,048,446      
                             
Ceding commission income   93,893     33,776     127,669       136,867       50,446       187,313      
Service and fee income   581,533     5,121     545,002   (A)   525,730       4,471       476,041     (G)
Net investment income   88,289     6,449     90,322   (B)   103,683       6,454       102,316     (H)
Net gain (loss) on investments   6,179     11,957     18,136       (2,790 )     (837 )     (3,627 )    
Total revenues   $ 3,922,759     $ 223,784     $ 4,100,475   (C)   $ 3,662,531       $ 209,939       $ 3,810,489     (I)
                             
Expenses:                            
Loss and loss adjustment expense   $ 1,951,792     $ 114,816     $ 2,066,608       $ 1,988,094       $ 124,584       $ 2,112,678      
Acquisition costs and other underwriting expenses   689,467     36,798     726,265       582,805       32,329       615,134      
General and administrative expenses   765,438     50,803     774,589   (D)   746,243       67,642       759,725     (J)
Interest expense   34,851     4,416     34,851   (E)   38,822       7,821       38,822     (K)
Total expenses   $ 3,441,548     $ 206,833     $ 3,602,313   (F)   $ 3,355,964       $ 232,376       $ 3,526,359     (L)
                             
Income (loss) before provision (benefit) for income taxes   $ 481,211     $ 16,951     $ 498,162       $ 306,567       $ (22,437 )     $ 284,130      
Provision (benefit) for income taxes   103,909     2,198     106,107       65,779       (4,285 )     61,494      
Net income (loss) before non-controlling interest and dividends on preferred shares   377,302     14,753     392,055       240,788       (18,152 )     222,636      
Less: net income (loss) attributable to noncontrolling interest       14,753     14,753             (18,152 )     (18,152 )    
Net income before dividends on preferred shares   377,302         377,302       240,788             240,788      
Less: dividends on preferred shares   24,675         24,675       24,675             24,675      
Net income available to common stockholders   $ 352,627     $     $ 352,627       $ 216,113       $       $ 216,113      

NOTES: Consolidated column includes eliminations as follows: (A) $(41,652), (B) $(4,416), (C) $(46,068), (D) $(41,652), (E) $(4,416), (F) $(46,068) (G) $(54,160), (H) $(7,821), (I) $(61,981), (J) $(54,160), (K) $(7,821) and (L) $(61,981).

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

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Net income available to common stockholders $ 102,094     $ 63,279     $ 352,627     $ 216,113  
Basic net income per common share $ 0.90     $ 0.56     $ 3.11     $ 1.91  
Diluted net income per common share $ 0.88     $ 0.54     $ 3.04     $ 1.87  
               
Operating earnings attributable to NGHC (non-GAAP)(1) $ 105,174     $ 68,237     $ 368,576     $ 236,093  
Basic operating earnings per common share (non-GAAP)(1) $ 0.93     $ 0.60     $ 3.25     $ 2.09  
Diluted operating earnings per common share (non-GAAP)(1) $ 0.90     $ 0.59     $ 3.17     $ 2.03  
               
Dividends declared per common share $ 0.05     $ 0.05     $ 0.15     $ 0.13  
               
Weighted average number of basic shares outstanding 113,418,411     113,263,367     113,505,785     113,153,121  
Weighted average number of diluted shares outstanding 116,666,374     116,138,489     116,231,852     116,087,524  
Shares outstanding, end of period 113,475,176     113,313,042          
Fully diluted shares outstanding, end of period 116,723,139     116,188,164          
Book value per share $ 23.39     $ 18.62          
Fully diluted book value per share $ 22.74     $ 18.16          

Reconciliation of Net Income to Operating Earnings (Non-GAAP)(1)(13)
$ in thousands, except per share data
(Unaudited)

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2020   2019   2020   2019
Net income available to common stockholders $ 102,094     $ 63,279     $ 352,627     $ 216,113  
Add (subtract):              
Equity in losses of equity method investments 2,635     1,205     6,523     1,408  
Net (gain) loss on investments (6,736 )   (1,718 )   (6,179 )   2,790  
Non-cash amortization of intangible assets 4,427     6,788     16,272     21,093  
M&A advisory cost 3,573         3,573      
Income tax benefit (819 )   (1,317 )   (4,240 )   (5,311 )
Operating earnings attributable to NGHC (non-GAAP)(1) $ 105,174     $ 68,237     $ 368,576     $ 236,093  
               
Operating earnings per common share (non-GAAP)(1):              
Basic operating earnings per common share (non-GAAP)(1) $ 0.93     $ 0.60     $ 3.25     $ 2.09  
Diluted operating earnings per common share (non-GAAP)(1) $ 0.90     $ 0.59     $ 3.17     $ 2.03  

Balance Sheet
$ in thousands
(Unaudited)

    September 30, 2020     December 31, 2019  
ASSETS   NGHC   Reciprocal
Exchanges
  Consolidated     NGHC   Reciprocal
Exchanges
  Consolidated  
Total investments (2)   $ 5,119,295       $ 331,076       $ 5,342,799     (A)   $ 4,632,960     $ 329,494       $ 4,854,998     (H)
Cash and cash equivalents, including restricted cash   250,602       741       251,343         163,480     983       164,463      
Premiums and other receivables, net   1,528,240       70,076       1,598,316         1,373,089     55,859       1,428,948      
Reinsurance balances   1,515,120       230,692       1,745,812         1,745,036     225,019       1,970,055      
Intangible assets, net   342,884       3,090       345,974         362,598     3,225       365,823      
Goodwill   179,328             179,328         179,328           179,328      
Other (3)   775,595       24,216       760,684     (B)   798,675     29,070       792,919     (I)
Total assets   $ 9,711,064       $ 659,891       $ 10,224,256     (C)   $ 9,255,166     $ 643,650       $ 9,756,534     (J)
LIABILITIES AND STOCKHOLDERS’ EQUITY                            
Liabilities:                            
Unpaid loss and loss adjustment expense reserves   $ 2,688,969       $ 208,496       $ 2,897,465         $ 2,680,628     $ 205,786       $ 2,886,414      
Unearned premiums and other revenue   2,117,887       219,582       2,337,469         2,059,688     252,553       2,312,241      
Reinsurance payable   350,717       51,711       402,428         527,155     35,689       562,844      
Accounts payable and accrued expenses   412,540       46,731       420,144     (D)   306,869     43,323       315,366     (K)
Debt   679,436       107,572       679,436     (E)   686,006     107,456       686,006     (L)
Other   357,745       44,004       401,749         345,366     30,803       376,169      
Total liabilities   $ 6,607,294       $ 678,096       $ 7,138,691     (F)   $ 6,605,712     $ 675,610       $ 7,139,040     (M)
Stockholders’ equity:                            
Preferred stock (4)   $ 450,000       $       $ 450,000         $ 450,000     $       $ 450,000      
Common stock (5)   1,139             1,139         1,134           1,134      
Treasury stock, at cost (6)   (8,482 )           (8,482 )                      
Additional paid-in capital   1,073,288             1,073,288         1,065,634           1,065,634      
Accumulated other comprehensive income   194,953             194,953         74,548           74,548      
Retained earnings   1,392,872             1,392,872         1,058,138           1,058,138      
Total National General Holdings Corp. stockholders’ equity   3,103,770             3,103,770         2,649,454           2,649,454      
Noncontrolling interest         (18,205 )     (18,205 )           (31,960 )     (31,960 )    
Total stockholders’ equity   $ 3,103,770       $ (18,205 )     $ 3,085,565          $ 2,649,454     $ (31,960 )     $ 2,617,494      
Total liabilities and stockholders’ equity   $ 9,711,064       $ 659,891       $ 10,224,256      (G)   $ 9,255,166     $ 643,650       $ 9,756,534     (N)

NOTES: Consolidated column includes eliminations as follows: (A) $(107,572), (B) $(39,127), (C) $(146,699), (D) $(39,127), (E) $(107,572), (F) $(146,699), (G) $(146,699) (H) $(107,456), (I) $(34,826), (J) $(142,282), (K) $(34,826), (L) $(107,456), (M) $(142,282) and (N) $(142,282).

Segment Information - Third Quarter
$ in thousands
(Unaudited)

    Three Months Ended September 30,
    2020     2019
    P&C   A&H   NGHC     Reciprocal
Exchanges
    P&C   A&H   NGHC     Reciprocal
Exchanges
Gross written premium   $ 1,178,803     $ 195,937     $ 1,374,740       $ 98,387         $ 1,154,335     $ 162,555     $ 1,316,890       $ 118,267    
Net written premium   1,061,435     174,330     1,235,765       29,491         819,970     147,349       967,319       67,285    
Net earned premium   949,071     175,404     1,124,475       54,098         827,618     168,903     996,521       57,117    
                                       
Ceding commission income   21,567     205     21,772       8,952         40,260     2,261     42,521       15,066    
Service and fee income   109,756     88,597     198,353       1,628         115,557     63,736     179,293       1,585    
Total underwriting revenues   $ 1,080,394     $ 264,206     $ 1,344,600       $ 64,678         $ 983,435     $ 234,900     $ 1,218,335       $ 73,768    
                                       
Loss and loss adjustment expense (A)   653,774     77,948     731,722       42,442         627,452     70,612     698,064       47,270    
Acquisition costs and other underwriting expenses   173,166     79,278     252,444       16,201         146,307     47,214     193,521       15,569    
General and administrative expenses (B)   184,776     58,892     243,668       12,382         190,286     68,297     258,583       24,533    
Total underwriting expenses   $ 1,011,716     $ 216,118     $ 1,227,834       $ 71,025         $ 964,045     $ 186,123     $ 1,150,168       $ 87,372    
                                       
Underwriting income (loss)   68,678     48,088     116,766       (6,347 )       19,390     48,777     68,167       (13,604 )  
Non-cash amortization of intangible assets   3,140     1,287     4,427       33         5,257     1,531     6,788       18    
Underwriting income (loss) before amortization and impairment   $ 71,818     $ 49,375     $ 121,193       $ (6,314 )       $ 24,647     $ 50,308     $ 74,955       $ (13,586 )  
                                       
Underwriting ratios                                      
Loss and loss adjustment expense ratio (7)   68.9 %   44.4 %   65.1 %     78.5   %     75.8 %   41.8 %   70.1 %     82.8   %
Operating expense ratio (Non-GAAP) (8)   23.9 %   28.1 %   24.5 %     33.3   %     21.8 %   29.3 %   23.1 %     41.1   %
Combined ratio (Non-GAAP) (9)   92.8 %   72.5 %   89.6 %     111.8   %     97.6 %   71.1 %   93.2 %     123.9   %
                                       
Underwriting ratios (before amortization and impairment)                                      
Loss and loss adjustment expense ratio (7)   68.9 %   44.4 %   65.1 %     78.5   %     75.8 %   41.8 %   70.1 %     82.8   %
Operating expense ratio (Non-GAAP) (10)   23.5 %   27.4 %   24.1 %     33.2   %     21.2 %   28.4 %   22.4 %     41.0   %
Combined ratio before amortization and impairment (Non-GAAP) (11)   92.4 %   71.8 %   89.2 %     111.7   %     97.0 %   70.2 %   92.5 %     123.8   %

(A) Loss and loss adjustment expenses for the three months ended September 30, 2020, included $934 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $5,827 of favorable loss development in the A&H segment, versus $14,909 of unfavorable loss development in the P&C segment, and $18,788 of favorable loss development in the A&H segment for the three months ended September 30, 2019.

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

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

    Nine Months Ended September 30,
    2020     2019
    P&C   A&H   NGHC     Reciprocal
Exchanges
    P&C   A&H   NGHC     Reciprocal
Exchanges
Gross written premium   $ 3,429,987     $ 572,619     $ 4,002,606       $ 288,676       $ 3,321,090     $ 592,771     $ 3,913,861       $ 344,982    
Net written premium   2,836,955     510,758     3,347,713       142,054       2,521,969     500,237       3,022,206       172,460    
Net earned premium   2,643,958     508,907     3,152,865       166,481       2,402,509     496,532     2,899,041       149,405    
                                       
Ceding commission income   92,657     1,236     93,893       33,776       128,087     8,780     136,867       50,446    
Service and fee income   332,344     249,189     581,533       5,121       348,045     177,685     525,730       4,471    
Total underwriting revenues   $ 3,068,959     $ 759,332     $ 3,828,291       $ 205,378       $ 2,878,641     $ 682,997     $ 3,561,638       $ 204,322    
                                       
Loss and loss adjustment expense (A)   1,725,588     226,204     1,951,792       114,816       1,746,409     241,685     1,988,094       124,584    
Acquisition costs and other underwriting expenses   474,824     214,643     689,467       36,798       429,742     153,063     582,805       32,329    
General and administrative expenses (B)   585,230     176,635     761,865       50,803       558,016     188,227     746,243       67,642    
Total underwriting expenses   $ 2,785,642     $ 617,482     $ 3,403,124       $ 202,417       $ 2,734,167     $ 582,975     $ 3,317,142       $ 224,555    
                                       
Underwriting income (loss)   283,317     141,850     425,167       2,961       144,474     100,022     244,496       (20,233 )  
Non-cash amortization of intangible assets   12,368     3,904     16,272       93       16,154     4,939     21,093       41    
Underwriting income (loss) before amortization and impairment   $ 295,685     $ 145,754     $ 441,439       $ 3,054       $ 160,628     $ 104,961     $ 265,589       $ (20,192 )  
                                       
Underwriting ratios                                      
Loss and loss adjustment expense ratio (7)   65.3 %   44.4 %   61.9 %     69.0 %     72.7 %   48.7 %   68.6 %     83.4   %
Operating expense ratio (Non-GAAP) (8)   24.0 %   27.7 %   24.6 %     29.3 %     21.3 %   31.2 %   23.0 %     30.2   %
Combined ratio (Non-GAAP) (9)   89.3 %   72.1 %   86.5 %     98.3 %     94.0 %   79.9 %   91.6 %     113.6   %
                                       
Underwriting ratios (before amortization and impairment)                                      
Loss and loss adjustment expense ratio (7)   65.3 %   44.4 %   61.9 %     69.0 %     72.7 %   48.7 %   68.6 %     83.4   %
Operating expense ratio (Non-GAAP) (10)   23.6 %   26.9 %   24.1 %     29.2 %     20.6 %   30.2 %   22.3 %     30.1   %
Combined ratio before amortization and impairment (Non-GAAP) (11)   88.9 %   71.3 %   86.0 %     98.2 %     93.3 %   78.9 %   90.9 %     113.5   %

(A) Loss and loss adjustment expenses for the nine months ended September 30, 2020, included $13,989 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $22,065 of favorable loss development in the A&H segment, versus $19,791 of unfavorable loss development in the P&C segment, and $37,775 of favorable loss development in the A&H segment for the nine months ended September 30, 2019.

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

Reconciliation of Operating Expense Ratio (Non-GAAP)(8,10,12)
$ in thousands
(Unaudited)

    Three Months Ended September 30,
    2020     2019
    P&C   A&H   NGHC     Reciprocal
Exchanges
    P&C   A&H   NGHC     Reciprocal
Exchanges
Total underwriting expenses   $ 1,011,716     $ 216,118     $ 1,227,834       $ 71,025       $ 964,045     $ 186,123     $ 1,150,168       $ 87,372  
Less: Loss and loss adjustment expense   653,774     77,948     731,722       42,442       627,452     70,612     698,064       47,270  
Less: Ceding commission income   21,567     205     21,772       8,952       40,260     2,261     42,521       15,066  
Less: Service and fee income   109,756     88,597     198,353       1,628       115,557     63,736     179,293       1,585  
Operating expense (Non-GAAP) (8)   226,619     49,368     275,987       18,003       180,776     49,514     230,290       23,451  
Net earned premium   $ 949,071     $ 175,404     $ 1,124,475       $ 54,098       $ 827,618     $ 168,903     $ 996,521       $ 57,117  
Operating expense ratio (Non-GAAP) (8)   23.9 %   28.1 %   24.5 %     33.3 %     21.8 %   29.3 %   23.1 %     41.1 %
                                       
Total underwriting expenses   $ 1,011,716     $ 216,118     $ 1,227,834       $ 71,025       $ 964,045     $ 186,123     $ 1,150,168       $ 87,372  
Less: Loss and loss adjustment expense   653,774     77,948     731,722       42,442       627,452     70,612     698,064       47,270  
Less: Ceding commission income   21,567     205     21,772       8,952       40,260     2,261     42,521       15,066  
Less: Service and fee income   109,756     88,597     198,353       1,628       115,557     63,736     179,293       1,585  
Less: Non-cash amortization of intangible assets   3,140     1,287     4,427       33       5,257     1,531     6,788       18  
Operating expense before amortization and impairment (Non-GAAP) (10)   223,479     48,081     271,560       17,970       175,519     47,983     223,502       23,433  
Net earned premium   $ 949,071     $ 175,404     $ 1,124,475       $ 54,098       $ 827,618     $ 168,903     $ 996,521       $ 57,117  
Operating expense ratio before amortization and impairment (Non-GAAP) (10)   23.5 %   27.4 %   24.1 %     33.2 %     21.2 %   28.4 %   22.4 %     41.0 %

Reconciliation of Operating Expense Ratio (Non-GAAP)(8,10,12)
$ in thousands
(Unaudited)

    Nine Months Ended September 30,
    2020     2019
    P&C   A&H   NGHC     Reciprocal
Exchanges
    P&C   A&H   NGHC     Reciprocal
Exchanges
Total underwriting expenses   $ 2,785,642      $ 617,482      $ 3,403,124        $ 202,417        $ 2,734,167      $ 582,975      $ 3,317,142        $ 224,555   
Less: Loss and loss adjustment expense   1,725,588      226,204      1,951,792        114,816        1,746,409      241,685      1,988,094        124,584   
Less: Ceding commission income   92,657      1,236      93,893        33,776        128,087      8,780      136,867        50,446   
Less: Service and fee income   332,344      249,189      581,533        5,121        348,045      177,685      525,730        4,471   
Operating expense (Non-GAAP) (8)   635,053      140,853      775,906        48,704        511,626      154,825      666,451        45,054   
Net earned premium   $ 2,643,958      $ 508,907      $ 3,152,865        $ 166,481        $ 2,402,509      $ 496,532      $ 2,899,041        $ 149,405   
Operating expense ratio (Non-GAAP) (8)   24.0  %   27.7  %   24.6  %     29.3  %     21.3  %   31.2  %   23.0  %     30.2  %
                                       
Total underwriting expenses   $ 2,785,642      $ 617,482      $ 3,403,124        $ 202,417        $ 2,734,167      $ 582,975      $ 3,317,142        $ 224,555   
Less: Loss and loss adjustment expense   1,725,588      226,204      1,951,792        114,816        1,746,409      241,685      1,988,094        124,584   
Less: Ceding commission income   92,657      1,236      93,893        33,776        128,087      8,780      136,867        50,446   
Less: Service and fee income   332,344      249,189      581,533        5,121        348,045      177,685      525,730        4,471   
Less: Non-cash amortization of intangible assets   12,368      3,904      16,272        93        16,154      4,939      21,093        41   
Operating expense before amortization and impairment (Non-GAAP) (10)   622,685      136,949      759,634        48,611        495,472      149,886      645,358        45,013   
Net earned premium   $ 2,643,958      $ 508,907      $ 3,152,865        $ 166,481        $ 2,402,509      $ 496,532      $ 2,899,041        $ 149,405   
Operating expense ratio before amortization and impairment (Non-GAAP) (10)   23.6  %   26.9  %   24.1  %     29.2  %     20.6  %   30.2  %   22.3  %     30.1  %


Premiums by Product Line

$ in thousands
(Unaudited)

  Three Months Ended September 30,
  Gross Written Premium     Net Written Premium     Net Earned Premium
  2020   2019   Change     2020   2019   Change     2020   2019   Change
Property & Casualty                                      
Personal Auto $ 741,306     $ 705,709     5.0 %     $ 650,889     $ 560,032       16.2 %     $ 632,781     $ 568,346     11.3 %
Homeowners 210,721     201,977     4.3 %     217,960     82,601       163.9 %     130,278     86,525     50.6 %
RV/Packaged 59,191     55,631     6.4 %     57,834     52,283       10.6 %     52,126     51,023     2.2 %
Small Business Auto 62,159     76,987     (19.3 )%     47,556     56,615       (16.0 )%     53,158     62,265     (14.6 )%
Lender-placed insurance 96,327     97,468     (1.2 )%     82,599     61,579       34.1 %     77,441     56,599     36.8 %
Other 9,099     16,563     (45.1 )%     4,597     6,860       (33.0 )%     3,287     2,860     14.9 %
Total Premium $ 1,178,803     $ 1,154,335     2.1 %     $ 1,061,435     $ 819,970       29.4 %     $ 949,071     $ 827,618     14.7 %
                                       
Accident & Health                                      
Group 89,852     73,223     22.7 %     70,672     59,001       19.8 %     70,670     59,009     19.8 %
Individual 106,085     85,728     23.7 %     103,658     85,541       21.2 %     104,734     85,971     21.8 %
Total Premium Domestic $ 195,937     $ 158,951     23.3 %     $ 174,330     $ 144,542       20.6 %     $ 175,404     $ 144,980     21.0 %
International     3,604     (100.0 )%         2,807       (100.0 )%         23,923     (100.0 )%
                                       
Total National General $ 1,374,740     $ 1,316,890     4.4 %     $ 1,235,765     $ 967,319       27.8 %     $ 1,124,475     $ 996,521     12.8 %
Total National General (A) $ 1,374,740     $ 1,313,286     4.7 %     $ 1,235,765     $ 964,512       28.1 %     $ 1,124,475     $ 972,598     15.6 %
                                       
Reciprocal Exchanges                                      
Personal Auto $ 33,561     $ 39,166     (14.3 )%     $ 10,323     $ 67,154       (84.6 )%     $ 24,654     $ 33,953     (27.4 )%
Homeowners 63,935     78,079     (18.1 )%     18,166     (2,047 )     (987.4 )%     28,963     22,759     27.3 %
Other 891     1,022     (12.8 )%     1,002     2,178       (54.0 )%     481     405     18.8 %
Total Premium $ 98,387     $ 118,267     (16.8 )%     $ 29,491     $ 67,285       (56.2 )%     $ 54,098     $ 57,117     (5.3 )%
                                       
Consolidated Total $ 1,473,127     $ 1,435,157     2.6 %     $ 1,265,256     $ 1,034,604       22.3 %     $ 1,178,573     $ 1,053,638     11.9 %

(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.

Premiums by Product Line
$ in thousands
(Unaudited)

  Nine Months Ended September 30,
  Gross Written Premium     Net Written Premium     Net Earned Premium
  2020   2019   Change     2020   2019   Change     2020   2019   Change
Property & Casualty                                      
Personal Auto $ 2,148,730     $ 2,083,702     3.1 %     $ 1,886,438     $ 1,730,904     9.0 %     $ 1,773,831     $ 1,621,734     9.4 %
Homeowners 581,185     544,056     6.8 %     390,760     276,250     41.5 %     321,129     272,591     17.8 %
RV/Packaged 170,120     168,796     0.8 %     165,694     162,047     2.3 %     148,374     150,739     (1.6 )%
Small Business Auto 195,628     246,694     (20.7 )%     152,584     196,221     (22.2 )%     166,316     189,957     (12.4 )%
Lender-placed insurance 295,693     232,265     27.3 %     224,742     140,863     59.5 %     218,210     158,595     37.6 %
Other 38,631     45,577     (15.2 )%     16,737     15,684     6.7 %     16,098     8,893     81.0 %
Total Premium $ 3,429,987     $ 3,321,090     3.3 %     $ 2,836,955     $ 2,521,969     12.5 %     $ 2,643,958     $ 2,402,509     10.0 %
                                       
Accident & Health                                      
Group 266,857     213,197     25.2 %     209,360     170,911     22.5 %     209,372     170,921     22.5 %
Individual 305,762     252,719     21.0 %     301,398     252,316     19.5 %     299,535     252,122     18.8 %
Total Premium Domestic $ 572,619     $ 465,916     22.9 %     $ 510,758     $ 423,227     20.7 %     $ 508,907     $ 423,043     20.3 %
International     126,855     (100.0 )%         77,010     (100.0 )%         73,489     (100.0 )%
                                       
Total National General $ 4,002,606     $ 3,913,861     2.3 %     $ 3,347,713     $ 3,022,206     10.8 %     $ 3,152,865     $ 2,899,041     8.8 %
Total National General (A) $ 4,002,606     $ 3,787,006     5.7 %     $ 3,347,713     $ 2,945,196     13.7 %     $ 3,152,865     $ 2,825,552     11.6 %
                                       
Reciprocal Exchanges                                      
Personal Auto $ 102,752     $ 120,012     (14.4 )%     $ 73,678     $ 101,460     (27.4 )%     $ 89,291     $ 65,907     35.5 %
Homeowners 183,331     222,019     (17.4 )%     66,758     68,180     (2.1 )%     76,037     82,475     (7.8 )%
Other 2,593     2,951     (12.1 )%     1,618     2,820     (42.6 )%     1,153     1,023     12.7 %
Total Premium $ 288,676     $ 344,982     (16.3 )%     $ 142,054     $ 172,460     (17.6 )%     $ 166,481     $ 149,405     11.4 %
                                       
Consolidated Total $ 4,291,282     $ 4,258,843     0.8 %     $ 3,489,767     $ 3,194,666     9.2 %     $ 3,319,346     $ 3,048,446     8.9 %

(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.

Fee Income
$ in thousands
(Unaudited)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   Change   2020   2019   Change
Property & Casualty                      
Service and Fee Income $ 109,756     $ 115,557     (5.0 )%   $ 332,344     $ 348,045     (4.5 )%
Ceding Commission Income 21,567     40,260     (46.4 )%   92,657     128,087     (27.7 )%
Property & Casualty $ 131,323     $ 155,817     (15.7 )%   $ 425,001     $ 476,132     (10.7 )%
                       
Accident & Health                      
Service and Fee Income                      
Group $ 44,306     $ 34,848     27.1 %   $ 128,029     $ 98,084     30.5 %
Individual 2,379     2,128     11.8 %   6,861     5,506     24.6 %
Medicare Sales 10,032     5,610     78.8 %   32,822     17,870     83.7 %
Third Party Fee 31,881     21,150     50.7 %   81,478     56,225     44.9 %
Total Service and Fee Income 88,598     63,736     39.0 %   249,190     177,685     40.2 %
Ceding Commission Income 205     2,261     (90.9 )%   1,236     8,780     (85.9 )%
Accident and Health $ 88,803     $ 65,997     34.6 %   $ 250,426     $ 186,465     34.3 %
                       
Total National General $ 220,126     $ 221,814     (0.8 )%   $ 675,427     $ 662,597     1.9 %
                       
Reciprocal Exchanges                      
Service and Fee Income $ 1,628     $ 1,585     2.7 %   $ 5,121     $ 4,471     14.5 %
Ceding Commission Income 8,952     15,066     (40.6 )%   33,776     50,446     (33.0 )%
Reciprocal Exchanges $ 10,580     $ 16,651     (36.5 )%   $ 38,897     $ 54,917     (29.2 )%
                       
Consolidated Total (A) $ 215,694     $ 219,213     (1.6 )%   $ 672,672     $ 663,354     1.4 %

NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges in Service and Fee Income of $(15,012) and $(19,252) in the three months ended September 30, 2020, and 2019, respectively, and $(41,652) and $(54,160) in the nine months ended September 30, 2020, and 2019, 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 credit loss on investments in debt securities and foreign exchange gain or loss), 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 $231,593 and $238,841 from related parties at September 30, 2020, and December 31, 2019, respectively.

(3) Other includes $1,210 and $2,391 from related parties at September 30, 2020, and December 31, 2019, respectively.

(4) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - September 30, 2020; authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - December 31, 2019.

(5) Common stock: $0.01 par value - authorized 150,000,000 shares, issued 113,934,259 and outstanding 113,475,176 shares - September 30, 2020; authorized 150,000,000 shares, issued and outstanding 113,368,811 shares - December 31, 2019.

(6) Treasury stock, at cost: 459,083 shares - September 30, 2020.

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

(8) 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 and other general and administrative expenses (M&A advisory cost). The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business.

(9) 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(7) and the operating expense ratio (non-GAAP)(8) 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.

(10) 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 (M&A advisory cost) 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.

(11) 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(7) and the operating expense ratio before amortization and impairment (non-GAAP)(10) 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.

(12) 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.

(13) 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.

(14) Combined ratio excluding losses from various weather-related events, is calculated by taking the combined ratio as defined in Note 11, and adjusting it to exclude the total net losses of $87.1 million and $11.5 million from these events for the three months ended September 30, 2020, and 2019, 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 (11)   Impact of Weather-
related Events
  Combined Ratio
Excluding Weather-
related Events (14)
2020   P&C Segment   92.4%   9.2%   83.2%
                 
2020   Overall NGHC   89.2%   7.7%   81.5%
                 
                 
2019   P&C Segment   97.0%   1.4%   95.6%
                 
2019   Overall NGHC   92.5%   1.2%   91.3%

(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. Medicare fees include commission and general agent fees for selling Medicare policies issued by third-party insurance companies as well as revenue from our Medicare Supplement product. 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.

Investor Contact

Clifford Gallant
SVP of Capital Strategy and Investor Relations
Phone: 212-380-9462
Email: Clifford.Gallant@NGIC.COM

 

Primary Logo