FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today
reported results for the three and six months ended June 30,
2021.
Q2 2021 highlights (as measured against the same three-month
period last year, except where noted):
- Net loss of $50.4 million or $(2.89) per diluted share,
including $17.0 million primarily for a non-cash charge for a
valuation allowance against our net deferred tax asset. Excluding
the non-cash charge, net loss of $33.4 million compares to net loss
of $21.5 million or $(1.57) per diluted share.
- Adjusted operating loss of $50.5 million or $(2.90) per diluted
share, including $17.0 million primarily for a non-cash charge for
a valuation allowance against our net deferred tax asset. Excluding
the non-cash charge, adjusted operating loss of $33.5 million
compares to $28.1 million or $(2.05) per diluted share.
- $23.5 million of claims, net of reinsurance recoveries and fee
income, from previously disclosed catastrophe losses driven by 15
separate events, primarily convective storm and hail events
impacting Texas, Florida and Louisiana.
- $17.3 million of incremental ceded premiums related to
additional excess-of-loss reinsurance purchases and reinstatement
premiums from 2020/2021 treaty year retention events.
- $196.3 million of gross written premiums, compared to $205.4
million.
- Gross loss ratio for current quarter attritional losses of
35.4% and gross expense ratio of 24.2%, as compared to 39.8% and
21.2%, respectively, in the second quarter of 2020.
- Florida homeowners in-force policies decreased 21.7% to
approximately 180,000, while Florida gross premiums written
decreased 4.0%, reflecting continued execution of our strategy to
increase revenue per policy and limit the size of our book of
business until rates more accurately reflect increased costs of
claims and reinsurance.
- On April 20, 2021, the Company closed on an offering of $21.0
million in convertible Senior Unsecured Notes due 2026 bearing
interest at a fixed rate of 5.0% per year, semi-annually.
- Non-insurance company liquidity of approximately $80 million at
June 30, 2021, which then decreased to $40 million as a result
of surplus infusions into our insurance carriers related to second
quarter results.
- Book value per share of $5.64 as of June 30, 2021.
“FedNat’s results this quarter were significantly impacted by
high catastrophe losses along with large expenses from additional
reinsurance purchases and reinstatement premiums, as the Company
worked to minimize the impact of weather losses on the statutory
capital of our insurance companies. Through these actions and with
the downstreaming of capital, we continued to maintain appropriate
capital positions at our insurance companies” said Michael H.
Braun, FedNat’s Chief Executive Officer. “FedNat’s second quarter
earnings also include the impact of a non-cash charge for a
valuation allowance against our net deferred tax assets. We expect
the net deferred tax assets to be realized in the future; however,
the timing of this recognition will depend on the timing of pre-tax
income we earn in future quarters.”
Mr. Braun continued, "FedNat has made progress on our
initiatives to improve profitability through ongoing multiple rate
increases in our Florida and non-Florida markets and by reducing
our books of business until rates more adequately reflect our cost
of doing business. These initiatives also helped us to reduce the
expected overall cost of our 2021-2022 reinsurance program, as a
percentage of premium, which went into effect on July 1.”
Mr. Braun added, “FedNat’s Board and management team continue to
explore all options to strengthen the Company and improve
shareholder value. The work of the Board’s Strategic Review
Committee, which was formed in November 2020, is ongoing and the
committee continues to work with Piper Sandler as its financial
advisor.”
Revenues
- Total revenue decreased $75.0 million or 55.9%, to $59.0
million for the three months ended June 30, 2021, compared
with $134.0 million for the three months ended June 30, 2020.
The decrease was driven by increases in ceded premiums earned from
incremental quota-share agreements and higher catastrophe
reinsurance costs as well as lower net investment income, slightly
offset by higher other income, all of which are discussed in
further detail below.
- Gross premiums written decreased $9.1 million, or 4.4%, to
$196.3 million in the quarter compared with $205.4 million for the
same three-month period last year, which was driven by a reduction
in our policies-in-force and exposure across all states, as a
result of our exposure management in response to the challenging
litigation environment partially offset by rate actions that we
have taken across our insurance subsidiaries.
- Gross premiums earned decreased $1.4 million, or 0.8%, to
$178.5 million for the three months ended June 30, 2021, as
compared to $179.9 million for the three months ended June 30,
2020.
- Ceded premiums increased $74.6 million, or 109.0%, to $143.0
million in the quarter, compared to $68.4 million the same
three-month period last year. The increase was driven by
approximately $30 million higher excess of loss reinsurance spend,
driven by higher rate-on-line prices in this year's program as well
as additional purchases of supplemental coverage to backfill layers
and gaps in coverage stemming from the non-cascading portion of our
reinsurance tower, following the six retention catastrophe events
that have occurred since July 1, 2020. Additionally, there was
approximately $44 million of higher quota-share ceded premium: $24
million related to the 80% quota-share treaty for FNIC's
non-Florida book of business and $20 million related to new and
incremental treaties for FNIC's Florida book of business. This
increase to ceded premium earned associated with the aforementioned
quota-share treaties is largely offset by corresponding reductions
in loss and LAE, and commission and other underwriting expenses
when comparing the periods.
- Net realized and unrealized gains (losses) decreased $0.8
million, to $9.6 million for the three months ended
June 30, 2021, compared to $10.4 million in the prior year
period. The current quarter includes a $10.7 million gain from an
embedded derivative relating to a catastrophe weather event during
the second quarter of 2021. Refer to notes 2 and 3 from our June
30, 2021 Form 10-Q for further information.
- Other income increased $3.8 million, or 72.4%, to $9.0 million
in the quarter, compared with $5.2 million in the prior year
period. The increase in other income was primarily driven by higher
brokerage revenue. The brokerage revenue increase is the result of
higher excess of loss reinsurance spend from the reinsurance
programs in place, including the additional purchases, during the
second quarter of 2021 as compared to the second quarter of
2020.
Expenses
- Losses and loss adjustment expenses (“LAE”) decreased $52.5
million, or 40.4%, to $77.4 million for the three months ended
June 30, 2021, compared with $129.9 million for the same
three-month period last year driven by higher ceded losses under
quota-share reinsurance treaties. The net loss ratio increased
101.7 percentage points, to 218.2% in the current quarter, as
compared to 116.5% in the second quarter of 2020. The higher loss
ratio was primarily the result of higher ceded premiums, as
discussed earlier, which reduces net earned premiums, the
denominator on the net loss ratio calculation. In the current
quarter, net losses were driven by approximately $34.2 million of
current quarter net catastrophe losses (net of claims handling fee
income) and approximately $10.4 million of prior period reserve
strengthening primarily relating to Winter Storm Uri due to
increased gaps in excess-of-loss reinsurance coverage and loss
limits in quota-share treaties, as we increased the gross reserves
on the retention storms that occurred in the second half of 2020.
The $34.2 million and $10.4 million, noted above; were partially
offset by $10.7 million of income recognized within realized and
unrealized gains (losses) in our consolidated statement of
operations (as noted above) and $5.0 million from lower
reinstatement premiums, presented within net premiums earned in our
consolidated statement of operations, stemming from the same
changes to estimated losses from 2020 retention events that drove
the prior period strengthening mentioned above. Second quarter 2020
net losses were driven by net catastrophe losses of $59.2 million
and prior period reserve strengthening of $7.5 million.
- Our gross expense ratio was 24.2% during the three months ended
June 30, 2021, as compared to 21.2% during the three months
ended June 30, 2020. The net expense ratio increased 33.9%
percentage points to 65.3% in the second quarter of 2021, as
compared to 31.4% in the second quarter of 2020 due primarily to
higher ceded reinsurance premiums in 2021, as discussed
earlier.
- Commissions and other underwriting expenses decreased $11.9
million, or 40.7%, to $17.4 million for the three months ended
June 30, 2021, compared with $29.3 million for the three
months ended June 30, 2020. This decrease was primarily due to
a higher ceding commission driven by the new quota-share treaties
in FNIC's Florida and non-Florida books of business. Additionally,
when comparing these periods, the decrease was partially offset by
higher non-Florida acquisition related costs, which includes gross
commissions, fees and other underwriting expenses as a result of
premium growth.
- Income taxes (benefits) increased $17.9 million, to $6.6
million for the three months ended June 30, 2021, compared to
$(11.3) million for the three months ended June 30, 2020. The
increase was driven by the Company recording $17.0 million
primarily related to a non-cash charge for our valuation allowance
against our net deferred tax assets for net operating loss
carryforwards. We currently expect that these net deferred tax
assets will be realizable; however, recognition of these amounts
may not occur until the Company reports taxable income.
Non-GAAP Performance Measures
Non United States generally accepted accounting principles
("GAAP") measures do not replace the most directly comparable GAAP
measures and we have included detailed reconciliations thereof on
page 10.
We exclude the after-tax (using our statutory income tax rate)
effects of the following items from GAAP net income (loss) to
arrive at adjusted operating income (loss):
- Net realized and unrealized investment gains (losses);
- Gains (losses) associated with
early extinguishment of debt;
- Merger and acquisition, integration and other strategic costs
and the amortization of specifically identifiable intangibles
(other than value of business acquired);
- Impairment of intangibles;
- Income (loss) from initial adoption of new regulations and
accounting guidance; and
- Income (loss) from discontinued operations.
We also exclude the pre-tax effect of the first bullet above
from GAAP revenues to arrive at adjusted operating revenues.
Management believes these non-GAAP performance measures allow
for a better understanding of the underlying trend in our business,
as the excluded items are not necessarily indicative of our
operating fundamentals or performance.
Similarly, we exclude accumulated other comprehensive income
(loss) ("AOCI") from book value per share to arrive at book value
per share, excluding AOCI.
Conference Call Information
The Company will hold an investor conference call at 9:00 AM
(ET) Tuesday, August 10, 2021. The Company’s CEO, Michael Braun and
its CFO, Ronald Jordan will discuss the financial results and
review the outlook for the Company. Messrs. Braun and Jordan invite
interested parties to participate in the conference call.
Listeners interested in participating in the Q&A session may
access the conference call as follows:
|
Toll-Free
Dial-in: (877) 303-6913 |
|
|
|
Conference ID: 8919418 |
A live webcast of the call will be available online via the
“Conference Calls” section of the Company’s website at FedNat.com
or interested parties can click on the following link:
|
http://www.fednat.com/investors/conference-calls/ |
Please call at least five minutes in advance to ensure that you
are connected prior to the presentation. A webcast replay of the
conference call will be available shortly after the live webcast is
completed and may be accessed via the Company’s website.
About the Company
FedNat Holding Company is a regional insurance holding company
that controls substantially all aspects of the insurance
underwriting, distribution and claims processes through our
subsidiaries and contractual relationships with independent agents
and general agents. The Company, through its wholly owned
subsidiaries FedNat Insurance Company, Maison Insurance Company and
Monarch National Insurance Company, is focused on providing
homeowners insurance in Florida, Texas, Louisiana, Alabama, South
Carolina and Mississippi. More information is available at
https://www.fednat.com/investor-relations/.
Forward-Looking Statements
Safe harbor statement under the Private Securities Litigation
Reform Act of 1995:
Statements that are not historical fact are forward-looking
statements that are subject to certain risks and uncertainties that
could cause actual events and results to differ materially from
those discussed herein. Without limiting the generality of the
foregoing, words such as “anticipate,” “believe,” “budget,”
“contemplate,” “continue,” “could,” “envision,” “estimate,”
“expect,” “guidance,” “indicate,” “intend,” “may,” “might,” “plan,”
“possibly,” “potential,” “predict,” “probably,” “pro-forma,”
“project,” “seek,” “should,” “target,” or “will” or the negative or
other variations thereof, and similar words or phrases or
comparable terminology, are intended to identify forward-looking
statements.
Forward-looking statements might also include, but are not
limited to, one or more of the following:
- Projections of revenues, income, earnings per share, dividends,
capital structure or other financial items or measures;
- Descriptions of plans or objectives of management for future
operations, insurance products or services;
- Forecasts of future insurable events, economic performance,
liquidity, need for funding and income; and
- Descriptions of assumptions or estimates underlying or relating
to any of the foregoing.
The risks and uncertainties include, without limitation, risks
and uncertainties related to estimates, assumptions and projections
generally; the nature of the Company’s business; the adequacy of
its reserves for losses and loss adjustment expense; claims
experience; weather conditions (including the severity and
frequency of storms, hurricanes, tornadoes and hail) and other
catastrophic losses; reinsurance costs and the ability of
reinsurers to indemnify the Company; raising additional capital and
our compliance with minimum capital and surplus requirements;
potential assessments that support property and casualty insurance
pools and associations; the effectiveness of internal financial
controls; the effectiveness of our underwriting, pricing and
related loss limitation methods; changes in loss trends, including
as a result of insureds’ assignment of benefits; court decisions
and trends in litigation; our potential failure to pay claims
consistent with our contractual obligations; ability to obtain
regulatory approval applications for requested rate increases, or
to underwrite in additional jurisdictions, and the timing thereof;
the impact that the results of our subsidiaries’ operations may
have on our results of operations; inflation and other changes in
economic conditions (including changes in interest rates and
financial markets); pricing competition and other initiatives by
competitors; legislative and regulatory developments; the outcome
of litigation pending against the Company, and any settlement
thereof; dependence on investment income and the composition of the
Company’s investment portfolio; insurance agents; ratings by
industry services; the reliability and security of our information
technology systems; reliance on key personnel; acts of war and
terrorist activities; and other matters described from time to time
by the Company in releases and publications, and in periodic
reports and other documents filed with the United States Securities
and Exchange Commission.
In addition, investors should be aware that generally accepted
accounting principles prescribe when a company may reserve for
particular risks, including claims and litigation exposures.
Accordingly, results for a given reporting period could be
significantly affected if and when a reserve is established for a
contingency. Reported results may therefore appear to be volatile
in certain accounting periods.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on
which they are made. We do not undertake any obligation to update
publicly or revise any forward-looking statements to reflect
circumstances or events that occur after the date the
forward-looking statements are made.
FEDNAT HOLDING COMPANY AND SUBSIDIARIESSelected
Financial Highlights(Dollars in thousands, except per share
data)(Unaudited)
|
As of or For the |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2021 |
|
2020 |
|
% Change |
|
2021 |
|
2020 |
|
% Change |
Net Income (Loss)
Attributable to Common Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(50,369 |
) |
|
$ |
(21,479 |
) |
|
134.5 |
% |
|
$ |
(69,750 |
) |
|
$ |
(19,346 |
) |
|
260.5 |
% |
Adjusted operating income
(loss) |
(50,494 |
) |
|
(28,122 |
) |
|
79.6 |
% |
|
(69,909 |
) |
|
(23,802 |
) |
|
193.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Common
Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) -
diluted |
$ |
(2.89 |
) |
|
$ |
(1.57 |
) |
|
84.7 |
% |
|
$ |
(4.39 |
) |
|
$ |
(1.38 |
) |
|
217.0 |
% |
Adjusted operating income
(loss) - diluted |
(2.90 |
) |
|
(2.05 |
) |
|
41.4 |
% |
|
(4.40 |
) |
|
(1.70 |
) |
|
158.2 |
% |
Dividends declared |
— |
|
|
0.09 |
|
|
(100.0 |
)% |
|
— |
|
|
0.18 |
|
|
(100.0 |
)% |
Book value |
5.64 |
|
|
16.18 |
|
|
(65.1 |
)% |
|
5.64 |
|
|
16.18 |
|
|
(65.1 |
)% |
Book value, excluding
AOCI |
5.35 |
|
|
15.13 |
|
|
(64.6 |
)% |
|
5.35 |
|
|
15.13 |
|
|
(64.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return to
Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchases of common
stock |
$ |
— |
|
|
$ |
3,250 |
|
|
NCM |
|
$ |
— |
|
|
$ |
10,000 |
|
|
NCM |
Dividends declared |
|
— |
|
|
|
1,258 |
|
|
(100.0 |
)% |
|
|
— |
|
|
2,560 |
|
|
(100.0 |
)% |
|
$ |
— |
|
|
$ |
4,508 |
|
|
(100.0 |
)% |
|
$ |
— |
|
|
$ |
12,560 |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
$ |
59,038 |
|
|
$ |
134,019 |
|
|
(55.9 |
)% |
|
$ |
111,786 |
|
|
$ |
249,718 |
|
|
(55.2 |
)% |
Adjusted operating
revenues |
58,879 |
|
|
123,636 |
|
|
(52.4 |
)% |
|
111,535 |
|
|
242,160 |
|
|
(53.9 |
)% |
Gross premiums written |
196,285 |
|
|
205,378 |
|
|
(4.4 |
)% |
|
370,492 |
|
|
378,340 |
|
|
(2.1 |
)% |
Gross premiums earned |
178,478 |
|
|
179,896 |
|
|
(0.8 |
)% |
|
357,480 |
|
|
355,470 |
|
|
0.6 |
% |
Net premiums earned |
35,481 |
|
|
111,478 |
|
|
(68.2 |
)% |
|
75,226 |
|
|
217,388 |
|
|
(65.4 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Net Premiums
Earned |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss ratio |
218.2 |
% |
|
116.5 |
% |
|
|
|
|
166.8 |
% |
|
91.5 |
% |
|
|
|
Net expense ratio |
65.3 |
% |
|
31.4 |
% |
|
|
|
|
66.8 |
% |
|
35.6 |
% |
|
|
|
Combined ratio |
283.5 |
% |
|
147.9 |
% |
|
|
|
|
233.6 |
% |
|
127.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-Force Homeowners
Policies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida |
180,000 |
|
|
230,000 |
|
|
(21.7 |
)% |
|
180,000 |
|
|
230,000 |
|
|
(21.7 |
)% |
Non-Florida |
144,000 |
|
|
149,000 |
|
|
(3.4 |
)% |
|
144,000 |
|
|
149,000 |
|
|
(3.4 |
)% |
|
324,000 |
|
|
379,000 |
|
|
(14.5 |
)% |
|
324,000 |
|
|
379,000 |
|
|
(14.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FEDNAT HOLDING COMPANY AND
SUBSIDIARIESConsolidated Statement of Operations(In thousands,
except per share data)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues: |
|
|
|
|
|
|
|
Net premiums earned |
$ |
35,481 |
|
|
$ |
111,478 |
|
|
$ |
75,226 |
|
|
$ |
217,388 |
|
Net investment income |
1,733 |
|
|
3,341 |
|
|
3,407 |
|
|
7,233 |
|
Net realized and unrealized gains (losses) |
9,584 |
|
|
10,383 |
|
|
9,676 |
|
|
7,558 |
|
Direct written policy fees |
3,236 |
|
|
3,593 |
|
|
6,551 |
|
|
7,059 |
|
Other income |
9,004 |
|
|
5,224 |
|
|
16,926 |
|
|
10,480 |
|
Total revenues |
59,038 |
|
|
134,019 |
|
|
111,786 |
|
|
249,718 |
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
77,430 |
|
|
129,916 |
|
|
125,446 |
|
|
198,846 |
|
Commissions and other underwriting expenses |
17,355 |
|
|
29,270 |
|
|
38,386 |
|
|
65,625 |
|
General and administrative expenses |
5,814 |
|
|
5,663 |
|
|
11,880 |
|
|
11,908 |
|
Interest expense |
2,229 |
|
|
1,915 |
|
|
4,155 |
|
|
3,830 |
|
Total costs and expenses |
102,828 |
|
|
166,764 |
|
|
179,867 |
|
|
280,209 |
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
(43,790 |
) |
|
(32,745 |
) |
|
(68,081 |
) |
|
(30,491 |
) |
Income tax expense
(benefit) |
6,579 |
|
|
(11,266 |
) |
|
1,669 |
|
|
(11,145 |
) |
Net income (loss) |
$ |
(50,369 |
) |
|
$ |
(21,479 |
) |
|
$ |
(69,750 |
) |
|
$ |
(19,346 |
) |
|
|
|
|
|
|
|
|
Net Income (Loss) Per
Common Share |
|
|
|
|
|
|
|
Basic |
$ |
(2.89 |
) |
|
$ |
(1.57 |
) |
|
$ |
(4.39 |
) |
|
$ |
(1.38 |
) |
Diluted |
(2.89 |
) |
|
(1.57 |
) |
|
(4.39 |
) |
|
(1.38 |
) |
|
|
|
|
|
|
|
|
Weighted Average Number of Shares of Common Stock
Outstanding |
|
|
|
|
|
|
|
Basic |
17,411 |
|
|
13,714 |
|
|
15,901 |
|
|
13,981 |
|
Diluted |
17,411 |
|
|
13,714 |
|
|
15,901 |
|
|
13,981 |
|
|
|
|
|
|
|
|
|
Dividends Declared Per
Common Share |
$ |
— |
|
|
$ |
0.09 |
|
|
$ |
— |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FEDNAT HOLDING COMPANY AND SUBSIDIARIESSelected
Operating Metrics(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
(In thousands) |
Gross premiums written: |
|
|
|
|
|
|
|
Homeowners Florida |
$ |
117,274 |
|
|
$ |
122,151 |
|
|
$ |
229,243 |
|
|
$ |
233,698 |
|
Homeowners non-Florida |
72,579 |
|
|
77,508 |
|
|
130,488 |
|
|
135,450 |
|
Federal flood |
6,492 |
|
|
5,647 |
|
|
10,881 |
|
|
9,307 |
|
Non-core |
(60 |
) |
|
72 |
|
|
(120 |
) |
|
(115 |
) |
Total gross premiums written |
$ |
196,285 |
|
|
$ |
205,378 |
|
|
$ |
370,492 |
|
|
$ |
378,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
(In thousands) |
Gross premiums earned: |
|
|
|
|
|
|
|
Homeowners Florida |
$ |
109,337 |
|
|
$ |
115,791 |
|
|
$ |
218,763 |
|
|
$ |
231,891 |
|
Homeowners non-Florida |
64,220 |
|
|
59,787 |
|
|
129,143 |
|
|
115,312 |
|
Federal flood |
4,981 |
|
|
4,246 |
|
|
9,694 |
|
|
8,382 |
|
Non-core |
(60 |
) |
|
72 |
|
|
(120 |
) |
|
(115 |
) |
Total gross premiums earned |
$ |
178,478 |
|
|
$ |
179,896 |
|
|
$ |
357,480 |
|
|
$ |
355,470 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
(In thousands) |
Net premiums earned: |
|
|
|
|
|
|
|
Homeowners Florida |
$ |
22,468 |
|
|
$ |
68,247 |
|
|
$ |
45,559 |
|
|
$ |
136,301 |
|
Homeowners non-Florida |
13,073 |
|
|
43,159 |
|
|
29,787 |
|
|
81,202 |
|
Non-core |
(60 |
) |
|
72 |
|
|
(120 |
) |
|
(115 |
) |
Total net premiums earned |
$ |
35,481 |
|
|
$ |
111,478 |
|
|
$ |
75,226 |
|
|
$ |
217,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FEDNAT HOLDING COMPANY AND SUBSIDIARIESSelected
Operating Metrics (continued)(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
(In thousands) |
Commissions and other
underwriting expenses: |
|
|
|
|
|
|
|
Homeowners Florida |
$ |
12,025 |
|
|
$ |
13,618 |
|
|
$ |
24,424 |
|
|
$ |
27,445 |
|
All others |
11,519 |
|
|
12,834 |
|
|
23,210 |
|
|
24,452 |
|
Ceding commissions |
(19,985 |
) |
|
(3,161 |
) |
|
(39,445 |
) |
|
(6,060 |
) |
Total commissions |
3,559 |
|
|
23,291 |
|
|
8,189 |
|
|
45,837 |
|
|
|
|
|
|
|
|
|
Fees |
1,233 |
|
|
1,222 |
|
|
2,568 |
|
|
2,336 |
|
Salaries and wages |
3,063 |
|
|
3,119 |
|
|
6,635 |
|
|
6,717 |
|
Other underwriting expenses |
9,500 |
|
|
1,638 |
|
|
20,994 |
|
|
10,735 |
|
Total commissions and other underwriting expenses |
$ |
17,355 |
|
|
$ |
29,270 |
|
|
$ |
38,386 |
|
|
$ |
65,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
|
|
|
|
|
|
|
Net loss ratio |
218.2 |
% |
|
116.5 |
% |
|
166.8 |
% |
|
91.5 |
% |
Net expense ratio |
65.3 |
% |
|
31.4 |
% |
|
66.8 |
% |
|
35.6 |
% |
Combined ratio |
283.5 |
% |
|
147.9 |
% |
|
233.6 |
% |
|
127.1 |
% |
Gross loss ratio |
166.9 |
% |
|
97.9 |
% |
|
131.5 |
% |
|
105.4 |
% |
Gross expense ratio |
24.2 |
% |
|
21.2 |
% |
|
25.1 |
% |
|
23.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
FEDNAT HOLDING COMPANY AND
SUBSIDIARIESConsolidated Balance Sheet(Unaudited)
|
June 30, |
|
December 31, |
|
2021 |
|
2020 |
ASSETS |
(In thousands) |
Investments: |
|
|
|
Debt securities, available-for-sale, at fair value |
$ |
418,301 |
|
|
$ |
488,210 |
|
Equity securities, at fair value |
6,008 |
|
|
3,157 |
|
Total investments |
424,309 |
|
|
491,367 |
|
Cash and cash equivalents |
110,608 |
|
|
102,367 |
|
Prepaid reinsurance
premiums |
191,033 |
|
|
278,272 |
|
Premiums receivable, net of
allowance |
47,460 |
|
|
50,803 |
|
Reinsurance recoverable,
net |
489,539 |
|
|
413,026 |
|
Deferred acquisition costs,
net |
24,825 |
|
|
25,405 |
|
Current and deferred income
taxes, net |
29,786 |
|
|
35,035 |
|
Other assets |
38,410 |
|
|
32,262 |
|
Total assets |
$ |
1,355,970 |
|
|
$ |
1,428,537 |
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Liabilities |
|
|
|
Loss and loss adjustment
expense reserves |
$ |
583,414 |
|
|
$ |
540,367 |
|
Unearned premiums |
379,800 |
|
|
366,789 |
|
Reinsurance payable and funds
withheld liabilities |
118,713 |
|
|
202,827 |
|
Long-term debt, net of
deferred financing costs |
118,688 |
|
|
98,683 |
|
Deferred revenue |
6,852 |
|
|
7,187 |
|
Other liabilities |
50,089 |
|
|
54,524 |
|
Total liabilities |
1,257,556 |
|
|
1,270,377 |
|
Shareholders'
Equity |
|
|
|
Preferred stock, $0.01 par
value: 1,000,000 shares authorized |
— |
|
|
— |
|
Common stock, $0.01 par value: 50,000,000 shares authorized;
17,442,845 and 13,717,908 shares issued and outstanding,
respectively |
174 |
|
|
137 |
|
Additional paid-in
capital |
185,578 |
|
|
169,298 |
|
Accumulated other
comprehensive income (loss) |
5,073 |
|
|
11,386 |
|
Retained earnings
(deficit) |
(92,411 |
) |
|
(22,661 |
) |
Total shareholders’ equity |
98,414 |
|
|
158,160 |
|
Total liabilities and shareholders' equity |
$ |
1,355,970 |
|
|
$ |
1,428,537 |
|
|
|
|
|
|
|
|
|
FEDNAT HOLDING COMPANY AND SUBSIDIARIESGAAP to
Non-GAAP Reconciliations(Dollars in thousands)(Unaudited)
|
As of or For the |
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
$ |
59,038 |
|
|
$ |
134,019 |
|
|
$ |
111,786 |
|
|
$ |
249,718 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized investment gains (losses) |
159 |
|
|
10,383 |
|
|
251 |
|
|
7,558 |
|
Adjusted operating revenues |
$ |
58,879 |
|
|
$ |
123,636 |
|
|
$ |
111,535 |
|
|
$ |
242,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
(Loss) |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(50,369 |
) |
|
$ |
(21,479 |
) |
|
$ |
(69,750 |
) |
|
$ |
(19,346 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized investment gains (losses) |
178 |
|
|
6,659 |
|
|
251 |
|
|
4,527 |
|
Acquisition and strategic costs |
(8 |
) |
|
1 |
|
|
(17 |
) |
|
(26 |
) |
Amortization of identifiable intangibles |
(45 |
) |
|
(17 |
) |
|
(75 |
) |
|
(45 |
) |
Adjusted operating income (loss) |
$ |
(50,494 |
) |
|
$ |
(28,122 |
) |
|
$ |
(69,909 |
) |
|
$ |
(23,802 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income tax rate assumed for
reconciling items above |
(7.30 |
)% |
|
35.74 |
% |
|
— |
% |
|
40.10 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Per Common
Share |
|
|
|
|
|
|
|
|
|
|
|
Book value |
$ |
5.64 |
|
|
$ |
16.18 |
|
|
$ |
5.64 |
|
|
$ |
16.18 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
AOCI |
0.29 |
|
|
1.05 |
|
|
0.29 |
|
|
1.05 |
|
Book value, excluding AOCI |
$ |
5.35 |
|
|
$ |
15.13 |
|
|
$ |
5.35 |
|
|
$ |
15.13 |
|
Contacts
Michael H. Braun, CEO (954) 308-1322,
Ronald Jordan, CFO (954) 308-1363,
Bernard Kilkelly, Investor Relations (954) 308-1409,
or investorrelations@fednat.com
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