National General Holdings Corp. Reports Fourth Quarter 2015 Results
NEW YORK, Feb. 09, 2016 (GLOBE NEWSWIRE) -- National General Holdings Corp. (NASDAQ:NGHC) today reported fourth quarter 2015 operating earnings(1) of $42.3 million or $0.39 per diluted share, compared to $31.2 million or $0.33 per diluted share in the fourth quarter of 2014. Net income was $13.7 million or $0.13 per diluted share, compared to $11.2 million or $0.12 per diluted share in the fourth quarter of 2014.
Full year 2015 operating earnings(1) were $165.5 million or $1.64 per diluted share, compared to $126.5 million or $1.35 per diluted share in 2014. Full year 2015 net income was $128.2 million or $1.27 per diluted share, compared to $100.0 million or $1.07 per diluted share in 2014.
Fourth Quarter 2015 Highlights Versus Fourth Quarter 2014*
- Net written premium grew $211.6 million or 52.0% to $618.1 million, driven by added premiums from the National General Lender Services (formerly QBE Lender-Placed Insurance) and Assurant Health transactions which closed on October 1, 2015, underlying organic growth within our P&C business, and continued expansion of our A&H segment.
- The combined ratio was 94.2%, in-line with 94.2% in the prior year's quarter, excluding non-cash amortization of intangible assets and impairment of goodwill, with both the P&C and A&H segments reporting an improvement in their respective combined ratios.
- Total revenues grew by $278.1 million or 58.6% to $752.5 million, driven by the aforementioned premium growth, service and fee income growth of $42.0 million or 73.3% (including Attorney-in-Fact management fees of $9.3 million), and net investment income growth of $4.1 million or 25.4%, partially offset by a $1.3 million decline in ceding commission income.
- Shareholders' equity was $1.51 billion and fully diluted book value per share was $11.96 at December 31, 2015, growth of 42.9% and 14.2%, respectively, from December 31, 2014. Annualized operating return on average equity (ROE) was 13.0% for the fourth quarter and 14.6% for the full year ended December 31, 2015.
- Fourth quarter 2015 operating earnings exclude the following items, net of tax: $17.5 million or $0.16 per share of non-cash impairment of goodwill, $5.3 million or $0.05 per share of non-cash amortization of intangible assets, $4.4 million or $0.04 per share of other than temporary impairment losses, $0.9 million or $0.01 per share of foreign exchange losses, and $0.4 million or less than $0.01 per share of realized investment losses, and $0.1 million or less than $0.01 per share of equity in losses of unconsolidated subsidiaries (other than LSC Entities and Real Estate investments).
- Fourth quarter 2015 operating earnings include approximately $4.0 million or approximately $0.02 per share of losses related to the string of tornadoes that hit the Dallas, Texas area in late December 2015, and a net negative impact of $7.5 million or approximately $0.05 per share within our EuroAccident subsidiary as reserve strengthening was partially offset by a deferred purchase price adjustment.
Michael Karfunkel, National General's Chairman and CEO, stated: "Our fourth quarter results were a solid finish to an excellent year at National General. We continue to produce significant top line growth and strong underwriting profitability, and we enjoyed another busy year on the M&A front, completing two significant deals during the fourth quarter when we closed the National General Lender Services and Assurant Health transactions. We expect that both of these transactions will be accretive to our personal lines franchise and our earnings power going forward. We continue to focus on profitably growing our business both organically and through additional accretive M&A opportunities, maintaining an intense emphasis on disciplined expense management, integrating acquisitions, and delivering strong returns to our shareholders.”
*NOTE: Unless specified otherwise, discussion of our fourth quarter 2015 and 2014 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. Attorney-in-Fact management fees referenced within this release are eliminated in consolidated financial results.
Overview of Fourth Quarter 2015 as Compared to Fourth Quarter 2014
Gross written premium grew 46.5% to $678.2 million, net written premium grew 52.0% to $618.1 million, and net earned premium grew 58.8% to $642.3 million. Premium growth was driven by several key factors: underlying organic growth within our P&C business, continued expansion of our A&H segment, and additional premiums from the National General Lender Services (formerly QBE Lender-Placed Insurance) and Assurant Health acquisitions which closed on October 1, 2015.
Ceding commission income was a loss of $1.3 million reflecting a sliding scale adjustment related to our terminated third-party quota share. Service and fee income grew 73.3% to $99.3 million, driven by added service and fee income from recently completed acquisitions and underlying growth within both our A&H and P&C operations, with the latter including management fees of $9.3 million related to the Attorneys-in-Fact that manage the Reciprocal Exchanges.
Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 94.2% with a loss ratio of 69.3% and an expense ratio of 24.9%, versus a prior year combined ratio of 94.2% with a loss ratio of 68.2% and an expense ratio of 26.1%. Both the P&C and A&H segments reported an improvement in their respective combined ratios.
Underwriting results detailed by each of our business segments are as follows:
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Property & Casualty - Gross written premium grew by 31.6% to $579.7 million, net written premium grew by 37.7% to $529.0 million, and net earned premium grew by 45.3% to $543.5 million. P&C premium growth was driven by underlying organic growth of approximately 5.0% and the addition of $125.7 million of net written premium from the National General Lender Services acquisition, which closed on October 1, 2015. Ceding commission income was a loss of $1.5 million compared to $48 thousand of income in the prior year's quarter, reflecting a sliding scale adjustment related to our terminated third-party quota share. Service and fee income grew 27.0% to $55.2 million, driven by increased premium volume in the quarter, the addition of service and fee income from acquisitions completed during the past year (including ARS and National General Lender Services), and $9.3 million of fees earned by the Attorneys-in-Fact that manage the Reciprocal Exchanges, compared to $8.4 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 92.4% with a loss ratio of 65.0% and an expense ratio of 27.3%, versus a prior year combined ratio of 92.8% with a loss ratio of 66.5% and an expense ratio of 26.3%. The improved loss ratio was driven primarily by business mix changes, most notably the addition of National General Lender Services which typically runs at lower loss ratios than our legacy business, partially offset by losses of approximately $4.0 million related to the string of tornadoes that hit the Dallas, Texas area in late December 2015. The slight increase in the expense ratio is the result of business mix changes.
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Accident & Health - Gross written premium grew to $98.5 million, net written premium grew to $89.2 million, and net earned premium grew to $98.8 million, from $22.5 million, $22.4 million, and $30.5 million, respectively, in the prior year's quarter. A&H premium growth was driven by the addition of $53.1 million of net written premium from the Assurant Health acquisition, which closed on October 1, 2015, as well as continued growth from both our domestic and international businesses, with $22.2 million in net written premium at our U.S. underwriting subsidiaries compared to $9.8 million in the prior year’s quarter, and $13.9 million of premium from EuroAccident (our Swedish group life and health MGA) compared to $12.6 million in the prior year’s quarter. Service and fee income grew to $44.1 million from $13.8 million in the prior year’s quarter, driven by the addition of service and fee income from acquisitions completed over the past year (including HST and Assurant Health), and strong growth at VelaPoint (our call center general agency) and TABS (our domestic stop loss business). Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 104.2% with a loss ratio of 92.7% and an expense ratio of 11.5%, versus a prior year combined ratio of 112.1% with a loss ratio of 88.8% and an expense ratio of 23.3%. Fourth quarter 2015 A&H results include the net negative impact of $7.5 million within our EuroAccident subsidiary. This included an increase to IBNR reserves to reflect a conversion to National General’s reserving philosophy from the prior carriers' reserving philosophy for business that was assumed in 2014 and is now written on National General paper, partially offset by the benefit from a corresponding adjustment made to reduce the deferred purchase price from the initial acquisition of EuroAccident.
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Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $65.8 million, net written premium was $33.0 million, and net earned premium was $36.3 million. Excluding non-cash amortization of intangible assets, the combined ratio was 102.1% with a loss ratio of 112.3% and an expense ratio of (10.2)%.
Investment income grew 25.4% to $20.0 million, reflecting an increase in the size of our investment portfolio as compared to the prior year’s quarter. Fourth quarter 2015 results included $0.6 million of net realized investment losses compared with a loss of $0.1 million in the fourth quarter of 2014, as well as an other than temporary impairment loss of $6.8 million compared to a loss of $2.2 million in the fourth quarter of 2014. Total investments and cash equivalents were $2.7 billion as of December 31, 2015. Accumulated other comprehensive income (AOCI) declined to $(19.4) million at December 31, 2015 from $2.4 million at September 30, 2015.
Other revenue was a loss of $0.5 million in the fourth quarter of 2015 compared to a loss of $1.2 million in the prior year’s quarter, as both quarters included a foreign exchange loss from currency fluctuations within our European subsidiaries ($1.4 million in 4Q15 and $1.1 million in 4Q14), but the current year’s quarter was partially offset by a $0.8 million gain related to a grant received by Imperial.
Interest expense was $8.2 million, up from $4.5 million in the prior year’s quarter due to an increased amount of debt on our balance sheet. Debt was $446.1 million as of December 31, 2015, up from $250.7 million at December 31, 2014 as a result of August 2015 issuance of $100 million of subordinated notes and our October 2015 issuance of $100 million of senior unsecured notes.
Equity in earnings of unconsolidated subsidiaries (predominantly our investment in Life Settlement Entities and our Real Estate investments) was a $1.7 million gain in the fourth quarter of 2015 versus a $4.3 million gain in the prior year's quarter, reflecting fair value adjustments on life settlement contracts and income from real estate investments that were made during 2015.
The fourth quarter 2015 provision for income taxes was $(0.5) million and the effective tax rate for the quarter was (3.0)%. Included in the fourth quarter 2015 provision for income taxes was an $18.2 million benefit attributable to a reduction of the deferred tax liability associated with the equalization reserves of our Luxembourg Reinsurance Company (LRC) subsidiaries. Excluding this item and the non-cash impairment of goodwill, which is not tax deductible, the adjusted 2015 fourth quarter effective tax rate was 53.5%. Excluding LRC tax benefits and the non-cash impairment of goodwill, the adjusted effective tax rate was 29.6% for the twelve months ended December 31, 2015.
National General Holding Corp.'s shareholders' equity was $1,514.0 million at December 31, 2015, growth of 42.9% from $1,059.8 million at December 31, 2014. Fully diluted book value per share was $11.96 at December 31, 2015, growth of 14.2% from $10.47 at December 31, 2014. Annualized operating return on average equity (ROE) was 13.0% for the fourth quarter 2015 and 14.6% for the year ended December 31, 2015.
Luxembourg Reinsurance Companies (LRC)
- Included in the fourth quarter 2015 provision for income taxes was an $18.2 million benefit attributable to a reduction of the deferred tax liability (DTL) associated with the equalization reserves of our LRC subsidiaries. For the full year 2015, the provision for income taxes included a benefit of $26.7 million attributable to a reduction of the DTL associated with the equalization reserves of our LRC subsidiaries. As of December 31, 2015, the DTL associated with our LRC subsidiaries was $13.8 million.
- Fourth quarter 2015 results include a $17.5 million expense related to a non-cash impairment of goodwill ($11.2 million attributed to the P&C segment and $6.2 million attributed to the A&H segment), compared to an expense of $15.8 million in the fourth quarter of 2014 ($9.4 million attributed to the P&C segment and $6.4 million attributed to the A&H segment). Both the 2015 and 2014 non-cash impairment of goodwill expenses relate to goodwill balances associated with our LRC subsidiaries. The remaining goodwill balance associated with LRC subsidiaries stood at $8.4 million as of December 31, 2015.
- The full year 2015 net benefit related to our LRC subsidiaries was $9.2 million, including the benefit attributable to a reduction in DTL and the expense related to non-cash impairment of goodwill.
Additional Items
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National General Lender Services Acquisition - On October 1, 2015, we closed on the acquisition of the Lender-Placed Insurance business of QBE North America, a division of QBE Insurance Group Limited (ASX:QBE.AX). The transaction included the acquisition of certain assets, including loan-tracking systems and technology, client servicing accounts, intellectual property, and vendor relationships, as well as the assumption of the related insurance liabilities in a reinsurance transaction through which National General received loss reserves, unearned premium reserves, and invested assets. The purchase price was an aggregate cash payment of $90 million (including ceding commission) subject to certain adjustments. The business has been branded National General Lender Services.
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Assurant Health Acquisition - On October 1, 2015, we closed on the acquisition of certain business lines and assets from Assurant Health, a business segment of Assurant, Inc. (NYSE:AIZ). Included in the transaction were the small group self-funded and supplemental product lines, as well as the acquisition of North Star Marketing, a proprietary small group sales channel. The purchase price was an aggregate cash payment of $14 million.
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Senior Unsecured Debt Issuance - On October 8, 2015, we closed on a private issuance of $100.0 million aggregate principal amount of 6.75% notes due 2024. The Notes bear interest at 6.75% per year, payable semiannually in arrears on May 15th and November 15th of each year, beginning on November 15, 2015. The Notes will mature on May 15, 2024, unless earlier redeemed or purchased by National General. Net proceeds of the issuance were approximately $98.85 million.
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Century-National Insurance Company Acquisition - On January 25, 2016 we announced an agreement to acquire Century-National Insurance Company (CNIC), a California based property and casualty underwriter. The purchase price for the transaction is currently expected to be approximately $315 million, based on September 30, 2015 results, with the actual purchase price calculated based upon financial position at closing. The estimated purchase price equates to a $50 million premium to tangible book value, and includes an upfront cash payment of approximately $140 million with the remaining balance deferred over two years. The transaction is expected to close in the second quarter of 2016, subject to customary closing conditions and regulatory approvals.
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New Credit Agreement - On January 25, 2016, we entered into a $225 million revolving credit facility with a letter of credit sub-limit of $25 million and an expansion feature not to exceed $50 million. The New Credit Agreement has a maturity date of January 25, 2020, and replaces our previous $135 million credit agreement.
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Standard Mutual Insurance Company Acquisition - On January 27, 2016 we announced that we had entered into a definitive agreement, pending regulatory and policyholder approval, to acquire Standard Mutual Insurance Company (SMIC), an Illinois based property and casualty underwriter, following the completion of the conversion of SMIC to a stock company from a mutual company. The transaction is expected to close in the second quarter of 2016, subject to customary closing conditions and regulatory approvals.
Conference Call
On Wednesday, February 10, 2016 at 11:00 AM ET, Chairman and Chief Executive Officer Michael Karfunkel and Chief Financial Officer Mike Weiner will review results and discuss business conditions via a conference call that may be accessed as follows:
| Toll-Free U.S. Dial-in: | 888-267-2860 |
| International Dial-in: | 973-413-6102 |
| Conference Entry Code: | 956584 |
| Webcast Registration: | http://ir.nationalgeneral.com/events.cfm |
A replay of the conference call will be accessible from 2:00 PM ET on Wednesday, February 10, 2016 to 11:59 PM ET on Wednesday, February 24, 2016 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 956584. In addition, a replay of the webcast can also be retrieved at http://ir.nationalgeneral.com/events.cfm.
About National General Holdings Corp.
National General Holdings Corp., headquartered in New York City, is a specialty personal lines insurance holding company. National General traces its roots to 1939, has a financial strength rating of A- (excellent) from A.M. Best, and provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, supplemental health, and other niche insurance products.
Forward Looking Statements
This news release contains "forward-looking statements" that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as "may," "will," "plan," "expect," "project," "intend," "estimate," "anticipate" and "believe" or their variations or similar terminology. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, estimates of the fair value of life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships, 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, | ||||||||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | |||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Gross written premium | $ | 678,175 | $ | 65,752 | $ | 743,927 | $ | 462,848 | $ | 60,049 | $ | 522,897 | ||||||||||||||
| Ceded premiums (related parties - $397, $0, and $397 in 2015 and $318, $687, and $1,005 in 2014) | (60,041 | ) | (32,714 | ) | (92,755 | ) | (56,306 | ) | (14,178 | ) | (70,484 | ) | ||||||||||||||
| Net written premium | 618,134 | 33,038 | 651,172 | 406,542 | 45,871 | 452,413 | ||||||||||||||||||||
| Net earned premium | 642,299 | 36,269 | 678,568 | 404,566 | 40,930 | 445,496 | ||||||||||||||||||||
| Ceding commission income/(loss) | (1,261 | ) | 17,851 | 16,590 | 48 | 4,750 | 4,798 | |||||||||||||||||||
| Service and fee income | 99,265 | 10,236 | 100,213 | (A) | 57,269 | 117 | 48,979 | (F) | ||||||||||||||||||
| Net investment income | 20,026 | 2,359 | 22,385 | 15,969 | 1,799 | 17,768 | ||||||||||||||||||||
| Net realized gain/(loss) on investments | (609 | ) | 75 | (534 | ) | (91 | ) | — | (91 | ) | ||||||||||||||||
| Other than temporary impairment loss | (6,755 | ) | — | (6,755 | ) | (2,244 | ) | — | (2,244 | ) | ||||||||||||||||
| Other revenue | (461 | ) | — | (461 | ) | (1,153 | ) | — | (1,153 | ) | ||||||||||||||||
| Total revenues | $ | 752,504 | $ | 66,790 | $ | 810,006 | (B) | $ | 474,364 | $ | 47,596 | $ | 513,553 | (G) | ||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Loss and loss adjustment expense | $ | 445,130 | $ | 40,737 | $ | 485,867 | $ | 275,727 | $ | 21,368 | $ | 297,095 | ||||||||||||||
| Acquisition costs and other underwriting expenses | 103,839 | 7,005 | 110,799 | (C) | 76,389 | 5,994 | 82,383 | |||||||||||||||||||
| General and administrative | 179,636 | 16,528 | 186,921 | (D) | 105,122 | 10,156 | 106,871 | (H) | ||||||||||||||||||
| Interest expense | 8,198 | (6,422 | ) | 1,776 | 4,463 | 5,452 | 9,915 | |||||||||||||||||||
| Total expenses | $ | 736,803 | $ | 57,848 | $ | 785,363 | (E) | $ | 461,701 | $ | 42,970 | $ | 496,264 | (I) | ||||||||||||
| Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries | $ | 15,701 | $ | 8,942 | $ | 24,643 | $ | 12,663 | $ | 4,626 | $ | 17,289 | ||||||||||||||
| Provision/(benefit) for income taxes | (464 | ) | (5,472 | ) | (5,936 | ) | 4,715 | 1,375 | 6,090 | |||||||||||||||||
| Income before equity in earnings (losses) of unconsolidated subsidiaries | 16,165 | 14,414 | 30,579 | 7,948 | 3,521 | 11,199 | ||||||||||||||||||||
| Equity in earnings (losses) of unconsolidated subsidiaries | 1,743 | — | 1,743 | 4,278 | — | 4,278 | ||||||||||||||||||||
| Net income before non-controlling interest and dividends on preferred shares | 17,908 | 14,414 | 32,322 | 12,226 | 3,251 | 15,477 | ||||||||||||||||||||
| Less: net income attributable to non-controlling interest | 64 | 14,414 | 14,478 | 29 | 3,251 | 3,280 | ||||||||||||||||||||
| Net income before dividends on preferred shares | 17,844 | — | 17,844 | 12,197 | — | 12,197 | ||||||||||||||||||||
| Less: dividends on preferred shares | 4,125 | — | 4,125 | 1,031 | — | 1,031 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 13,719 | $ | — | $ | 13,719 | $ | 11,166 | $ | — | $ | 11,166 | ||||||||||||||
NOTE: Consolidated column includes eliminations as follows: (A) $(9,288), (B) $(9,288), (C) $(45), (D) $(9,243), (E) $(9,288), (F) $(8,407) , (G) $(8,407), (H) $(8,407), and (I) $(8,407).
| Income Statement - Year to Date | ||||||||||||||||||||||||||
| $ in thousands | ||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||
| Twelve Months Ended December 31, | ||||||||||||||||||||||||||
| 2015 | 2014 | |||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges | Consolidated | NGHC | Reciprocal Exchanges | Consolidated | |||||||||||||||||||||
| Revenues: | ||||||||||||||||||||||||||
| Gross written premium | $ | 2,309,756 | $ | 283,582 | $ | 2,589,748 | (A) | $ | 2,065,065 | $ | 70,042 | $ | 2,135,107 | |||||||||||||
| Ceded premiums (related parties - $1,504, $74, and $1,578 in 2015 and $44,249, $216, and $44,465 in 2014) | (249,601 | ) | (157,491 | ) | (403,502 | ) | (B) | (248,117 | ) | (16,966 | ) | (265,083 | ) | |||||||||||||
| Net written premium | 2,060,155 | 126,091 | 2,186,246 | 1,816,948 | 53,076 | 1,870,024 | ||||||||||||||||||||
| Net earned premium | 1,995,101 | 134,709 | 2,129,810 | 1,585,598 | 47,622 | 1,633,220 | ||||||||||||||||||||
| Ceding commission income/(loss) | (2,510 | ) | 46,300 | 43,790 | 7,643 | 4,787 | 12,430 | |||||||||||||||||||
| Service and fee income | 300,114 | 13,226 | 273,548 | (C) | 178,333 | 139 | 168,571 | (H) | ||||||||||||||||||
| Net investment income | 66,429 | 8,911 | 75,340 | 50,627 | 1,799 | 52,426 | ||||||||||||||||||||
| Net realized gain/(loss) on investments | 4,594 | 346 | 4,940 | (648 | ) | — | (648 | ) | ||||||||||||||||||
| Other than temporary impairment loss | (15,247 | ) | — | (15,247 | ) | (2,244 | ) | — | (2,244 | ) | ||||||||||||||||
| Other revenue | (788 | ) | — | (788 | ) | (1,660 | ) | — | (1,660 | ) | ||||||||||||||||
| Total revenues | $ | 2,347,693 | $ | 203,492 | $ | 2,511,393 | (D) | $ | 1,817,649 | $ | 54,347 | $ | 1,862,095 | (I) | ||||||||||||
| Expenses: | ||||||||||||||||||||||||||
| Loss and loss adjustment expense | $ | 1,284,080 | $ | 97,561 | $ | 1,381,641 | $ | 1,026,346 | $ | 26,719 | $ | 1,053,065 | ||||||||||||||
| Acquisition costs and other underwriting expenses | 378,066 | 27,972 | 405,930 | (E) | 308,822 | 6,267 | 315,089 | |||||||||||||||||||
| General and administrative | 504,672 | 65,359 | 530,347 | (F) | 346,696 | 11,967 | 348,762 | (J) | ||||||||||||||||||
| Interest expense | 24,229 | 4,656 | 28,885 | 12,012 | 5,724 | 17,736 | ||||||||||||||||||||
| Total expenses | $ | 2,191,047 | $ | 195,548 | $ | 2,346,803 | (G) | $ | 1,693,876 | $ | 50,677 | $ | 1,734,652 | (K) | ||||||||||||
| Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries | $ | 156,646 | $ | 7,944 | $ | 164,590 | $ | 123,773 | $ | 3,670 | $ | 127,443 | ||||||||||||||
| Provision/(benefit) for income taxes | 24,905 | (5,949 | ) | 18,956 | 22,712 | 1,164 | 23,876 | |||||||||||||||||||
| Income before equity in earnings (losses) of unconsolidated subsidiaries | 131,741 | 13,893 | 145,634 | 101,061 | 2,506 | 103,567 | ||||||||||||||||||||
| Equity in earnings (losses) of unconsolidated subsidiaries | 10,643 | — | 10,643 | 1,180 | — | 1,180 | ||||||||||||||||||||
| Net income before non-controlling interest and dividends on preferred shares | 142,384 | 13,893 | 156,277 | 102,241 | 2,506 | 104,747 | ||||||||||||||||||||
| Less: net income attributable to non-controlling interest | 132 | 13,893 | 14,025 | (2 | ) | 2,506 | 2,504 | |||||||||||||||||||
| Net income before dividends on preferred shares | 142,252 | — | 142,252 | 102,243 | — | 102,243 | ||||||||||||||||||||
| Less: dividends on preferred shares | 14,025 | — | 14,025 | 2,291 | — | 2,291 | ||||||||||||||||||||
| Net income available to common stockholders | $ | 128,227 | $ | — | $ | 128,227 | $ | 99,952 | $ | — | $ | 99,952 | ||||||||||||||
NOTE: Consolidated column includes eliminations as follows: (A) $(3,590), (B) $(3,590), (C) $(39,792), (D) $(39,792), (E) $(108), (F) $(39,684), (G) $(39,792), (H) $(9,901), (I) $(9,901), (J) $(9,901), and (K) $(9,901).
| Earnings and Per Share Data | ||||||||||||||||
| $ in thousands, except shares and per share data | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net income available to common stockholders | $ | 13,719 | $ | 11,166 | $ | 128,227 | $ | 99,952 | ||||||||
| Basic net income per common share | $ | 0.13 | $ | 0.12 | $ | 1.31 | $ | 1.09 | ||||||||
| Diluted net income per common share | $ | 0.13 | $ | 0.12 | $ | 1.27 | $ | 1.07 | ||||||||
| Operating earnings attributable to NGHC(1) | $ | 42,257 | $ | 31,181 | $ | 165,457 | $ | 126,507 | ||||||||
| Basic operating earnings per common share(1) | $ | 0.40 | $ | 0.33 | $ | 1.68 | $ | 1.38 | ||||||||
| Diluted operating earnings per common share(1) | $ | 0.39 | $ | 0.33 | $ | 1.64 | $ | 1.35 | ||||||||
| Dividends declared per common share | $ | 0.03 | $ | 0.02 | $ | 0.09 | $ | 0.05 | ||||||||
| Weighted average number of basic shares outstanding | 105,503,021 | 93,411,409 | 98,241,904 | 91,499,122 | ||||||||||||
| Weighted average number of diluted shares outstanding | 108,161,786 | 95,916,749 | 100,723,936 | 93,515,417 | ||||||||||||
| Shares outstanding, end of period | 105,554,331 | 93,427,382 | 105,554,331 | 93,427,382 | ||||||||||||
| Fully diluted shares outstanding, end of period | 108,213,095 | 95,932,723 | 108,036,363 | 95,624,982 | ||||||||||||
| Book value per share | $ | 12.26 | $ | 10.75 | $ | 12.26 | $ | 10.75 | ||||||||
| Fully diluted book value per share | $ | 11.96 | $ | 10.47 | $ | 11.98 | $ | 10.51 | ||||||||
| Reconciliation of Net Income to Operating Earnings (Non-GAAP) | |||||||||||||||||
| $ in thousands, except per share data | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| Net income available to common stockholders | $ | 13,719 | $ | 11,166 | $ | 128,227 | $ | 99,952 | |||||||||
| Add (subtract) net of tax: | |||||||||||||||||
| Net realized (gain)/loss on investments | 396 | 59 | (2,986 | ) | 421 | ||||||||||||
| Other than temporary impairment losses | 4,391 | 1,459 | 9,911 | 1,459 | |||||||||||||
| Foreign exchange (gain)/loss | 902 | 723 | 1,837 | 1,088 | |||||||||||||
| Equity in (earnings)/losses of unconsolidated subsidiaries (other than LSC Entities and Real Estate investments) | 67 | 103 | 216 | 434 | |||||||||||||
| Non-cash amortization of intangible assets | 5,315 | 1,879 | 10,785 | 7,361 | |||||||||||||
| Non-cash impairment of goodwill | 17,467 | 15,792 | 17,467 | 15,792 | |||||||||||||
| Operating earnings attributable to NGHC | $ | 42,257 | $ | 31,181 | $ | 165,457 | $ | 126,507 | |||||||||
| Operating earnings per common share: | |||||||||||||||||
| Basic operating earnings per common share | $ | 0.40 | $ | 0.33 | $ | 1.68 | $ | 1.38 | |||||||||
| Diluted operating earnings per common share | $ | 0.39 | $ | 0.33 | $ | 1.64 | $ | 1.35 | |||||||||
| Balance Sheet Highlights | |||||||||||||||||||||||||||||||||||||
| $ in thousands | |||||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||||
| December 31, 2015 | December 31, 2014 | ||||||||||||||||||||||||||||||||||||
| (unaudited) | (audited) | ||||||||||||||||||||||||||||||||||||
| NGHC | Reciprocal Exchanges |
Consolidated | NGHC | Reciprocal Exchanges |
Consolidated | ||||||||||||||||||||||||||||||||
| ASSETS | |||||||||||||||||||||||||||||||||||||
| Total Investments | $ | 2,425,168 | $ | 242,542 | $ | 2,667,710 | $ | 1,630,059 | $ | 236,046 | $ | 1,866,105 | |||||||||||||||||||||||||
| Cash and cash equivalents | 273,884 | 8,393 | 282,277 | 123,178 | 9,437 | 132,615 | |||||||||||||||||||||||||||||||
| Premiums and other receivables, net (2) | 702,439 | 56,194 | 758,633 | 589,205 | 58,238 | 647,443 | |||||||||||||||||||||||||||||||
| Reinsurance recoverable on unpaid losses (3) | 794,091 | 39,085 | 833,176 | 888,215 | 23,583 | 911,798 | |||||||||||||||||||||||||||||||
| Intangible assets, net | 344,073 | 3,040 | 347,113 | 237,404 | 7,420 | 244,824 | |||||||||||||||||||||||||||||||
| Goodwill | 112,414 | — | 112,414 | 70,764 | — | 70,764 | |||||||||||||||||||||||||||||||
| Other | 459,619 | 100,665 | 560,284 | 413,776 | 33,378 | 447,154 | |||||||||||||||||||||||||||||||
| Total assets | $ | 5,111,688 | $ | 449,919 | $ | 5,561,607 | $ | 3,952,601 | $ | 368,102 | $ | 4,320,703 | |||||||||||||||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||||||||||
| Unpaid loss and loss adjustment expense reserves | $ | 1,623,232 | $ | 132,392 | $ | 1,755,624 | $ | 1,450,305 | $ | 111,848 | $ | 1,562,153 | |||||||||||||||||||||||||
| Unearned premiums | 1,046,313 | 146,186 | 1,192,499 | 744,438 | 119,998 | 864,436 | |||||||||||||||||||||||||||||||
| Accounts payable and accrued expenses (4) | 265,057 | 18,060 | 283,117 | 189,430 | 13,678 | 203,108 | |||||||||||||||||||||||||||||||
| Notes payable (5) | 446,061 | 45,476 | 491,537 | 250,708 | 48,374 | 299,082 | |||||||||||||||||||||||||||||||
| Other | 217,004 | 85,186 | 302,190 | 257,940 | 60,534 | 318,474 | |||||||||||||||||||||||||||||||
| Total liabilities | $ | 3,597,667 | $ | 427,300 | $ | 4,024,967 | $ | 2,892,821 | $ | 354,432 | $ | 3,247,253 | |||||||||||||||||||||||||
| Stockholders’ equity: | |||||||||||||||||||||||||||||||||||||
| Common stock (6) | $ | 1,056 | $ | — | $ | 1,056 | $ | 934 | $ | — | $ | 934 | |||||||||||||||||||||||||
| Preferred stock (7) | 220,000 | — | 220,000 | 55,000 | — | 55,000 | |||||||||||||||||||||||||||||||
| Additional paid-in capital | 900,114 | — | 900,114 | 690,736 | — | 690,736 | |||||||||||||||||||||||||||||||
| Accumulated other comprehensive income/(loss) | (19,414 | ) | — | (19,414 | ) | 20,192 | — | 20,192 | |||||||||||||||||||||||||||||
| Retained earnings | 412,044 | — | 412,044 | 292,832 | — | 292,832 | |||||||||||||||||||||||||||||||
| Total National General Holdings Corp. stockholders' equity | 1,513,800 | — | 1,513,800 | 1,059,694 | — | 1,059,694 | |||||||||||||||||||||||||||||||
| Non-controlling interest | 221 | 22,619 | 22,840 | 86 | 13,670 | 13,756 | |||||||||||||||||||||||||||||||
| Total stockholders’ equity | $ | 1,514,021 | $ | 22,619 | $ | 1,536,640 | $ | 1,059,780 | $ | 13,670 | $ | 1,073,450 | |||||||||||||||||||||||||
| Total liabilities and stockholders’ equity | $ | 5,111,688 | $ | 449,919 | $ | 5,561,607 | $ | 3,952,601 | $ | 368,102 | $ | 4,320,703 | |||||||||||||||||||||||||
| Segment Information - Fourth Quarter | |||||||||||||||||||||||||||||||||||
| $ in thousands | |||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2015 | 2014 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges |
P&C | A&H | NGHC | Reciprocal Exchanges |
||||||||||||||||||||||||||||
| Gross written premium | $ | 579,662 | $ | 98,513 | $ | 678,175 | $ | 65,752 | $ | 440,332 | $ | 22,526 | $ | 462,858 | $ | 60,049 | |||||||||||||||||||
| Net written premium | 528,964 | 89,170 | 618,134 | 33,038 | 384,153 | 22,389 | 406,542 | 45,871 | |||||||||||||||||||||||||||
| Net earned premium | 543,547 | 98,752 | 642,299 | 36,269 | 374,034 | 30,532 | 404,566 | 40,930 | |||||||||||||||||||||||||||
| Ceding commission income/(loss) | (1,532 | ) | 271 | (1,261 | ) | 17,851 | 48 | — | 48 | 4,750 | |||||||||||||||||||||||||
| Service and fee income | 55,206 | 44,059 | 99,265 | 10,236 | 43,458 | 13,811 | 57,269 | 117 | |||||||||||||||||||||||||||
| Total underwriting revenue | 597,221 | 143,082 | 740,303 | 64,356 | 417,540 | 44,343 | 461,883 | 45,797 | |||||||||||||||||||||||||||
| Loss and loss adjustment expense | 353,560 | 91,570 | 445,130 | 40,737 | 248,606 | 27,121 | 275,727 | 21,368 | |||||||||||||||||||||||||||
| Acquisition costs and other | 78,116 | 25,723 | 103,839 | 7,005 | 68,771 | 7,618 | 76,389 | 5,994 | |||||||||||||||||||||||||||
| General and administrative | 139,764 | 39,872 | 179,636 | 16,528 | 84,577 | 20,545 | 105,122 | 10,156 | |||||||||||||||||||||||||||
| Total underwriting expenses | 571,440 | 157,165 | 728,605 | 64,270 | 401,954 | 55,284 | 457,238 | 37,518 | |||||||||||||||||||||||||||
| Underwriting income (loss) | 25,781 | (14,083 | ) | 11,698 | 86 | 15,586 | (10,941 | ) | 4,645 | 8,279 | |||||||||||||||||||||||||
| Non-cash impairment of goodwill | 11,222 | 6,245 | $ | 17,467 | — | 9,419 | 6,373 | 15,792 | — | ||||||||||||||||||||||||||
| Non-cash amortization of intangible assets | 4,516 | 3,661 | $ | 8,177 | (841 | ) | 2,026 | 864 | 2,890 | 2,115 | |||||||||||||||||||||||||
| Underwriting income (loss) before amortization and impairment | $ | 41,519 | $ | (4,177 | ) | $ | 37,342 | $ | (755 | ) | $ | 27,031 | $ | (3,704 | ) | $ | 23,327 | $ | 10,394 | ||||||||||||||||
| Underwriting ratios | |||||||||||||||||||||||||||||||||||
| Loss and loss adjustment expense ratio (8) | 65.0 | % | 92.7 | % | 69.3 | % | 112.3 | % | 66.5 | % | 88.8 | % | 68.2 | % | 52.2 | % | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) (9,10) | 30.2 | % | 21.5 | % | 28.9 | % | (12.6 | )% | 29.4 | % | 47.0 | % | 30.7 | % | 27.6 | % | |||||||||||||||||||
| Combined ratio (Non-GAAP) (9,11) | 95.3 | % | 114.3 | % | 98.2 | % | 99.8 | % | 95.8 | % | 135.8 | % | 98.9 | % | 79.8 | % | |||||||||||||||||||
| Underwriting ratios (before amortization and impairment) | |||||||||||||||||||||||||||||||||||
| Loss and loss adjustment expense ratio (8) | 65.0 | % | 92.7 | % | 69.3 | % | 112.3 | % | 66.5 | % | 88.8 | % | 68.2 | % | 52.2 | % | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) (9,12) | 27.3 | % | 11.5 | % | 24.9 | % | (10.2 | )% | 26.3 | % | 23.3 | % | 26.1 | % | 22.4 | % | |||||||||||||||||||
| Combined ratio (Non-GAAP) (9,11) | 92.4 | % | 104.2 | % | 94.2 | % | 102.1 | % | 92.8 | % | 112.1 | % | 94.2 | % | 74.6 | % | |||||||||||||||||||
NOTE: Loss and loss adjustment expense ratio and operating expense ratio may not sum to combined ratio due to rounding.
| Segment Information - Year to Date | |||||||||||||||||||||||||||||||||||
| $ in thousands | |||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2015 | 2014 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges |
P&C | A&H | NGHC | Reciprocal Exchanges |
||||||||||||||||||||||||||||
| Gross written premium | $ | 2,057,834 | $ | 251,922 | $ | 2,309,756 | $ | 283,582 | $ | 1,924,666 | $ | 140,399 | $ | 2,065,065 | $ | 70,042 | |||||||||||||||||||
| Net written premium | 1,844,202 | 215,953 | 2,060,155 | 126,091 | 1,676,946 | 140,002 | 1,816,948 | 53,076 | |||||||||||||||||||||||||||
| Net earned premium | 1,783,800 | 211,301 | 1,995,101 | 134,709 | 1,465,122 | 120,476 | 1,585,598 | 47,622 | |||||||||||||||||||||||||||
| Ceding commission income/(loss) | (3,601 | ) | 1,091 | (2,510 | ) | 46,300 | 7,643 | — | 7,643 | 4,787 | |||||||||||||||||||||||||
| Service and fee income | 201,304 | 98,810 | 300,114 | 13,226 | 119,876 | 58,457 | 178,333 | 139 | |||||||||||||||||||||||||||
| Total underwriting revenue | 1,981,503 | 311,202 | 2,292,705 | 194,235 | 1,592,641 | 178,933 | 1,771,574 | 52,548 | |||||||||||||||||||||||||||
| Loss and loss adjustment expense | 1,112,758 | 171,322 | 1,284,080 | 97,561 | 940,457 | 85,889 | 1,026,346 | 26,719 | |||||||||||||||||||||||||||
| Acquisition costs and other | 312,067 | 65,999 | 378,066 | 27,972 | 254,130 | 54,692 | 308,822 | 6,267 | |||||||||||||||||||||||||||
| General and administrative | 422,561 | 82,111 | 504,672 | 65,359 | 290,079 | 56,617 | 346,696 | 11,967 | |||||||||||||||||||||||||||
| Total underwriting expenses | 1,847,386 | 319,432 | 2,166,818 | 190,892 | 1,484,666 | 197,198 | 1,681,864 | 44,953 | |||||||||||||||||||||||||||
| Underwriting income (loss) | 134,117 | (8,230 | ) | 125,887 | 3,343 | 107,975 | (18,265 | ) | 89,710 | 7,595 | |||||||||||||||||||||||||
| Non-cash impairment of goodwill | 11,222 | 6,245 | 17,467 | — | 9,419 | 6,373 | 15,792 | — | |||||||||||||||||||||||||||
| Non-cash amortization of intangible assets | 9,995 | 6,597 | 16,592 | 4,380 | 5,208 | 6,117 | 11,325 | 2,468 | |||||||||||||||||||||||||||
| Underwriting income (loss) before amortization and impairment | $ | 155,334 | $ | 4,612 | $ | 159,946 | $ | 7,723 | $ | 122,602 | $ | (5,775 | ) | $ | 116,827 | $ | 10,063 | ||||||||||||||||||
| Underwriting ratios | |||||||||||||||||||||||||||||||||||
| Loss and loss adjustment expense ratio (8) | 62.4 | % | 81.1 | % | 64.4 | % | 72.4 | % | 64.2 | % | 71.3 | % | 64.7 | % | 56.1 | % | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) (9,10) | 30.1 | % | 22.8 | % | 29.3 | % | 25.1 | % | 28.4 | % | 43.9 | % | 29.6 | % | 27.9 | % | |||||||||||||||||||
| Combined ratio (Non-GAAP) (9,11) | 92.5 | % | 103.9 | % | 93.7 | % | 97.5 | % | 92.6 | % | 115.2 | % | 94.3 | % | 84.1 | % | |||||||||||||||||||
| Underwriting ratios (before amortization and impairment) | |||||||||||||||||||||||||||||||||||
| Loss and loss adjustment expense ratio (8) | 62.4 | % | 81.1 | % | 64.4 | % | 72.4 | % | 64.2 | % | 71.3 | % | 64.7 | % | 56.1 | % | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) (9,12) | 28.9 | % | 16.7 | % | 27.6 | % | 21.8 | % | 27.4 | % | 33.5 | % | 27.9 | % | 22.8 | % | |||||||||||||||||||
| Combined ratio (Non-GAAP) (9,11) | 91.3 | % | 97.8 | % | 92.0 | % | 94.3 | % | 91.6 | % | 104.8 | % | 92.6 | % | 78.9 | % | |||||||||||||||||||
NOTE: Loss and loss adjustment expense ratio and operating expense ratio may not sum to combined ratio due to rounding.
| Reconciliation of Operating Expense Ratio (Non-GAAP) | |||||||||||||||||||||||||||||||||||
| $ in thousands | |||||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2015 | 2014 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 571,440 | $ | 157,165 | $ | 728,605 | $ | 64,270 | $ | 401,954 | $ | 55,284 | $ | 457,238 | $ | 37,518 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 353,560 | 91,570 | 445,130 | 40,737 | 248,606 | 27,121 | 275,727 | 21,368 | |||||||||||||||||||||||||||
| Less: Ceding commission income/(loss) | (1,532 | ) | 271 | (1,261 | ) | 17,851 | 48 | — | 48 | 4,750 | |||||||||||||||||||||||||
| Less: Service and fee income | 55,206 | 44,059 | 99,265 | 10,236 | 43,458 | 13,811 | 57,269 | 117 | |||||||||||||||||||||||||||
| Operating expense | 164,206 | 21,265 | 185,471 | (4,554 | ) | 109,842 | 14,352 | 124,194 | 11,283 | ||||||||||||||||||||||||||
| Net earned premium | $ | 543,547 | $ | 98,752 | $ | 642,299 | $ | 36,269 | $ | 374,034 | $ | 30,532 | $ | 404,566 | $ | 40,930 | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) | 30.2 | % | 21.5 | % | 28.9 | % | (12.6 | )% | 29.4 | % | 47.0 | % | 30.7 | % | 27.6 | % | |||||||||||||||||||
| Total underwriting expenses | $ | 571,440 | $ | 157,165 | $ | 728,605 | $ | 64,270 | $ | 401,954 | $ | 55,284 | $ | 457,238 | $ | 37,518 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 353,560 | 91,570 | 445,130 | 40,737 | 248,606 | 27,121 | 275,727 | 21,368 | |||||||||||||||||||||||||||
| Less: Ceding commission income/(loss) | (1,532 | ) | 271 | (1,261 | ) | 17,851 | 48 | — | 48 | 4,750 | |||||||||||||||||||||||||
| Less: Service and fee income | 55,206 | 44,059 | 99,265 | 10,236 | 43,458 | 13,811 | 57,269 | 117 | |||||||||||||||||||||||||||
| Less: Non-cash impairment of goodwill | 11,222 | 6,245 | 17,467 | — | 9,419 | 6,373 | 15,792 | — | |||||||||||||||||||||||||||
| Less: Non-cash amortization of intangible assets | 4,516 | 3,661 | 8,177 | (841 | ) | 2,026 | 864 | 2,890 | 2,115 | ||||||||||||||||||||||||||
| Operating expense before amortization and impairment | 148,468 | 11,359 | 159,827 | (3,713 | ) | 98,397 | 7,115 | 105,512 | 9,168 | ||||||||||||||||||||||||||
| Net earned premium | $ | 543,547 | $ | 98,752 | 642,299 | 36,269 | $ | 374,034 | $ | 30,532 | $ | 404,566 | $ | 40,930 | |||||||||||||||||||||
| Operating expense ratio before amortization and impairment (Non-GAAP) | 27.3 | % | 11.5 | % | 24.9 | % | (10.2 | )% | 26.3 | % | 23.3 | % | 26.1 | % | 22.4 | % | |||||||||||||||||||
| Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2015 | 2014 | ||||||||||||||||||||||||||||||||||
| P&C | A&H | NGHC | Reciprocal Exchanges | P&C | A&H | NGHC | Reciprocal Exchanges | ||||||||||||||||||||||||||||
| Total underwriting expenses | $ | 1,847,386 | $ | 319,432 | $ | 2,166,818 | $ | 190,892 | $ | 1,484,666 | $ | 197,198 | $ | 1,681,864 | $ | 44,953 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 1,112,758 | 171,322 | 1,284,080 | 97,561 | 940,457 | 85,889 | 1,026,346 | 26,719 | |||||||||||||||||||||||||||
| Less: Ceding commission income/(loss) | (3,601 | ) | 1,091 | (2,510 | ) | 46,300 | 7,643 | — | 7,643 | 4,787 | |||||||||||||||||||||||||
| Less: Service and fee income | 201,304 | 98,810 | 300,114 | 13,226 | 119,876 | 58,457 | 178,333 | 139 | |||||||||||||||||||||||||||
| Operating expense | 536,925 | 48,209 | 585,134 | 33,805 | 416,690 | 52,852 | 469,542 | 13,308 | |||||||||||||||||||||||||||
| Net earned premium | $ | 1,783,800 | $ | 211,301 | $ | 1,995,101 | $ | 134,709 | $ | 1,465,122 | $ | 120,476 | $ | 1,585,598 | $ | 47,622 | |||||||||||||||||||
| Operating expense ratio (Non-GAAP) | 30.1 | % | 22.8 | % | 29.3 | % | 25.1 | % | 28.4 | % | 43.9 | % | 29.6 | % | 27.9 | % | |||||||||||||||||||
| Total underwriting expenses | $ | 1,847,386 | $ | 319,432 | $ | 2,166,818 | $ | 190,892 | $ | 1,484,666 | $ | 197,198 | $ | 1,681,864 | $ | 44,953 | |||||||||||||||||||
| Less: Loss and loss adjustment expense | 1,112,758 | 171,322 | 1,284,080 | 97,561 | 940,457 | 85,889 | 1,026,346 | 26,719 | |||||||||||||||||||||||||||
| Less: Ceding commission income/(loss) | (3,601 | ) | 1,091 | (2,510 | ) | 46,300 | 7,643 | — | 7,643 | 4,787 | |||||||||||||||||||||||||
| Less: Service and fee income | 201,304 | 98,810 | 300,114 | 13,226 | 119,876 | 58,457 | 178,333 | 139 | |||||||||||||||||||||||||||
| Less: Non-cash impairment of goodwill | 11,222 | 6,245 | 17,467 | — | 9,419 | 6,373 | 15,792 | — | |||||||||||||||||||||||||||
| Less: Non-cash amortization of intangible assets | 9,995 | 6,597 | 16,592 | 4,380 | 5,208 | 6,117 | 11,325 | 2,468 | |||||||||||||||||||||||||||
| Operating expense before amortization and impairment | 515,708 | 35,367 | 551,075 | 29,425 | 402,063 | 40,362 | 442,425 | 10,840 | |||||||||||||||||||||||||||
| Net earned premium | $ | 1,783,800 | $ | 211,301 | $ | 1,995,101 | $ | 134,709 | $ | 1,465,122 | $ | 120,476 | $ | 1,585,598 | $ | 47,622 | |||||||||||||||||||
| Operating expense ratio before amortization and impairment (Non-GAAP) | 28.9 | % | 16.7 | % | 27.6 | % | 21.8 | % | 27.4 | % | 33.5 | % | 27.9 | % | 22.8 | % | |||||||||||||||||||
| Premiums by Business Line | ||||||||||||||||||||||||||||||||||||||||||||||||||
| $ in thousands | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Written Premium | Net Written Premium | Net Earned Premium | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||||||||||||||||||||||
| Property & Casualty | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | $ | 304,885 | $ | 288,565 | 5.7 | % | $ | 265,771 | $ | 252,284 | 5.3 | % | $ | 268,132 | $ | 259,599 | 3.3 | % | ||||||||||||||||||||||||||||||||
| Homeowners | 63,755 | 76,330 | (16.5 | )% | 58,901 | 60,396 | (2.5 | )% | 67,287 | 38,778 | 73.5 | % | ||||||||||||||||||||||||||||||||||||||
| RV/Packaged | 33,836 | 33,370 | 1.4 | % | 33,720 | 33,193 | 1.6 | % | 38,249 | 37,841 | 1.1 | % | ||||||||||||||||||||||||||||||||||||||
| Commercial Auto | 47,806 | 38,951 | 22.7 | % | 42,967 | 35,993 | 19.4 | % | 43,074 | 33,918 | 27.0 | % | ||||||||||||||||||||||||||||||||||||||
| Lender-Placed Insurance | 126,570 | — | NA | 125,693 | — | NA | 123,274 | — | NA | |||||||||||||||||||||||||||||||||||||||||
| Other | 2,810 | 3,106 | (9.5 | )% | 1,912 | 2,287 | (16.4 | )% | 3,531 | 3,898 | (9.4 | )% | ||||||||||||||||||||||||||||||||||||||
| Property & Casualty Total | 579,662 | 440,322 | 31.6 | % | 528,964 | 384,153 | 37.7 | % | 543,547 | 374,034 | 45.3 | % | ||||||||||||||||||||||||||||||||||||||
| Accident & Health | 98,513 | 22,526 | 337.3 | % | 89,170 | 22,389 | 298.3 | % | 98,752 | 30,532 | 223.4 | % | ||||||||||||||||||||||||||||||||||||||
| Total National General | 678,175 | 462,848 | 46.5 | % | 618,134 | 406,542 | 52.0 | % | 642,299 | 404,566 | 58.8 | % | ||||||||||||||||||||||||||||||||||||||
| Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | 20,853 | 28,106 | (25.8 | )% | 12,067 | 28,012 | (56.9 | )% | 13,512 | 24,362 | (44.5 | )% | ||||||||||||||||||||||||||||||||||||||
| Homeowners | 39,064 | 28,015 | 39.4 | % | 17,933 | 14,491 | 23.8 | % | 18,363 | 13,558 | 35.4 | % | ||||||||||||||||||||||||||||||||||||||
| Other | 5,835 | 3,928 | 48.5 | % | 3,038 | 3,368 | (9.8 | )% | 4,394 | 3,010 | 46.0 | % | ||||||||||||||||||||||||||||||||||||||
| Reciprocal Exchanges Total | 65,752 | 60,049 | 9.5 | % | 33,038 | 45,871 | (28.0 | )% | 36,269 | 40,930 | (11.4 | )% | ||||||||||||||||||||||||||||||||||||||
| Consolidated Total | $ | 743,927 | $ | 522,897 | 42.3 | % | $ | 651,172 | $ | 452,413 | 43.9 | % | $ | 678,568 | $ | 445,496 | 52.3 | % | ||||||||||||||||||||||||||||||||
| Twelve Months Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross Written Premium | Net Written Premium | Net Earned Premium | ||||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2014 | Change | 2015 | 2014 | Change | 2015 | 2014 | Change | ||||||||||||||||||||||||||||||||||||||||||
| Property & Casualty | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | $ | 1,241,282 | $ | 1,241,575 | — | % | $ | 1,070,852 | $ | 1,047,795 | 2.2 | % | $ | 1,054,529 | $ | 979,082 | 7.7 | % | ||||||||||||||||||||||||||||||||
| Homeowners | 329,440 | 366,997 | (10.2 | )% | 309,775 | 333,586 | (7.1 | )% | 286,920 | 204,285 | 40.5 | % | ||||||||||||||||||||||||||||||||||||||
| RV/Packaged | 154,929 | 153,553 | 0.9 | % | 153,501 | 148,456 | 3.4 | % | 150,290 | 147,587 | 1.8 | % | ||||||||||||||||||||||||||||||||||||||
| Commercial Auto | 187,686 | 146,124 | 28.4 | % | 170,720 | 132,002 | 29.3 | % | 154,565 | 118,759 | 30.2 | % | ||||||||||||||||||||||||||||||||||||||
| Lender-Placed Insurance | 126,570 | — | NA | 125,693 | — | NA | 123,274 | — | NA | |||||||||||||||||||||||||||||||||||||||||
| Other | 17,927 | 16,417 | 9.2 | % | 13,661 | 15,107 | (9.6 | )% | 14,222 | 15,409 | (7.7 | )% | ||||||||||||||||||||||||||||||||||||||
| Property & Casualty Total | 2,057,834 | 1,924,666 | 6.9 | % | 1,844,202 | 1,676,946 | 10.0 | % | 1,783,800 | 1,465,122 | 21.8 | % | ||||||||||||||||||||||||||||||||||||||
| Accident & Health | 251,922 | 140,399 | 79.4 | % | 215,953 | 140,002 | 54.2 | % | 211,301 | 120,476 | 75.4 | % | ||||||||||||||||||||||||||||||||||||||
| Total National General | 2,309,756 | 2,065,065 | 11.8 | % | 2,060,155 | 1,816,948 | 13.4 | % | 1,995,101 | 1,585,598 | 25.8 | % | ||||||||||||||||||||||||||||||||||||||
| Reciprocal Exchanges | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Personal Auto | 88,494 | 32,436 | NA | 50,686 | 32,075 | NA | 74,477 | 28,405 | NA | |||||||||||||||||||||||||||||||||||||||||
| Homeowners | 168,015 | 33,028 | NA | 58,012 | 17,127 | NA | 45,354 | 15,779 | NA | |||||||||||||||||||||||||||||||||||||||||
| Other | 27,073 | 4,578 | NA | 17,393 | 3,874 | NA | 14,878 | 3,438 | NA | |||||||||||||||||||||||||||||||||||||||||
| Reciprocal Exchanges Total | 283,582 | 70,042 | NA | 126,091 | 53,076 | NA | 134,709 | 47,622 | NA | |||||||||||||||||||||||||||||||||||||||||
| Consolidated Total | $ | 2,589,748 | $ | 2,135,107 | 21.3 | % | $ | 2,186,246 | $ | 1,870,024 | 16.9 | % | $ | 2,129,810 | $ | 1,633,220 | 30.4 | % | ||||||||||||||||||||||||||||||||
NOTE: Consolidated Total includes elimination of $(3,590) within Gross Written Premium for Twelve Months Ended December 31, 2015.
Additional Disclosures
(1) References to operating earnings and basic and diluted operating EPS are Non-GAAP financial measures defined by the Company as net income and basic earnings per share excluding after-tax net realized investment gain or loss on securities, other than temporary impairment losses, foreign exchange gain or loss, equity in earnings or losses of unconsolidated subsidiaries (other than LSC Entities and Real Estate investment gains or losses), non-cash amortization of intangible assets, and non-cash impairment of goodwill. The Company believes operating earnings and basic and diluted operating EPS are more relevant measures of the Company’s profitability because operating earnings and basic and diluted operating EPS contain the components of net income upon which the Company’s management has the most influence and excludes factors outside management’s direct control and non-recurring items. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these Non-GAAP measures to the most directly comparable GAAP measure.
(2) Premiums and other receivables, net (NGHC) includes $62,306 and $168,134 from related parties at December 31, 2015 and December 31, 2014, respectively.
(3) Reinsurance recoverable on unpaid losses (NGHC) includes $42,774 and $88,970 from related parties at December 31, 2015 and December 31, 2014, respectively.
(4) Accounts payable and accrued expenses (NGHC) includes $51,755 and $68,096 to related parties at December 31, 2015 and December 31, 2014, respectively.
(5) Notes payable (Reciprocal Exchanges) includes $56,443 and $48,374 owed to related party at December 31, 2015 and December 31, 2014, respectively.
(6) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 105,554,331 shares - December 31, 2015; authorized 150,000,000 shares, issued and outstanding 93,427,382 shares - December 31, 2014.
(7) Preferred stock: $0.01 par value, authorized 10,000,000 shares, issued and outstanding 2,365,000 shares and 2,200,000 shares at December 31, 2015 and December 31, 2014, respectively.
(8) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expenses by net earned premium.
(9) Operating expense ratio and combined ratio are considered non-GAAP financial measures under applicable SEC rules because a component of those ratios, operating expense, is calculated by offsetting acquisition and other underwriting costs and general and administrative expense by ceding commission income and service and fee income. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets on a consolidated basis. The Company believes this presentation enhances the understanding of our results by eliminating what we believe are volatile and unusual events and presenting the ratios with what we believe are the underlying run rates of the business. Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these Non-GAAP measures to the most directly comparable GAAP measure.
(10) Operating expense ratio (non-GAAP) is calculated by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expense less ceding commission income and service and fee income.
(11) Combined ratio (non-GAAP) is calculated by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) together.
(12) Operating expense ratio (non-GAAP) before amortization and impairment is calculated 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 expense less ceding commission income and service and fee income less non-cash amortization of intangible assets and non-cash impairment of goodwill.
Investor Contact Dean Evans Director of Investor Relations Phone: 212-380-9462 Email: Dean.Evans@NGIC.com
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