FedNat Holding Company Reports Fourth Quarter and Full Year 2019 Results

Wednesday, 26. February 2020 22:01

SUNRISE, Fla., Feb. 26, 2020 (GLOBE NEWSWIRE) -- FedNat Holding Company (the “Company”) (Nasdaq: FNHC) today reported results for the three and twelve months ended December 31, 2019.

Q4 2019 highlights (as measured against the same three-month period last year, except where noted):

  • Net loss of $6.9 million or $0.51 per diluted share
  • Adjusted operating loss of $7.9 million of $0.59 per diluted share.
  • $4.5 million of claims, net of recoveries, pre-tax, from Tropical Storms Olga and Nestor as well as other severe weather events impacting Texas, Florida and other states, as previously communicated.
  • $12.0 million of claims, net of recoveries, pre-tax for adverse prior year reserve development, including $8.0 million of non-core losses, as previously communicated.
  • $5.0 million of claims, net of recoveries, pre-tax, for current year strengthening in homeowners Florida, as a result of continued impact from assignment of benefits and related litigation costs, as previously communicated.
  • Gross written premiums of $150.1 million, including $6.6 million from Maison.
  • Net premiums earned increased 4.5% to $95.2 million, including $4.1 million from Maison.
  • Combined ratio of 122.1%, up 3.8 points, representing 4.7 points of net catastrophe losses in the period, 12.6 points of adverse development and 5.3 points from current accident year reserve strengthening.
  • Quarter-end Florida homeowners in-force policies of approximately 241,000.
  • 202.3% increase in non-Florida homeowners in-force policies to approximately 133,000.
  • Book value per share increased 2.4% to $17.25 as compared to $16.84 as of December 31, 2018, due primarily to unrealized gains on our bond portfolio, partially offset by the acquisition of Maison and dividends declared.
  • Repurchased 238,000 shares of common stock at a total of $3.9 million during the fourth quarter of 2019.

“The claims environment in the Florida homeowners market remains challenging, even despite the enactment of AOB reform on July 1, 2019,” said Mr. Michael H. Braun, the Company’s Chief Executive Officer. "Increased litigation costs were a major factor in the reserve strengthening in our Florida homeowners line and also contributed to the adverse development in our non-core lines, which continue to be in run-off. While FedNat has been a leader in taking rate in Florida homeowners and ensuring stringent underwriting practices, nonetheless at this time we have a cautious near-term outlook in this market and do not expect our Florida policy count to grow in 2020."

Mr. Braun added, "Following the successful acquisition of Maison in 2019, we have expanded our presence in more stable and profitable coastal homeowners markets outside of Florida. Our non-Florida book of business was profitable in the fourth quarter, including Maison's contribution for the month of December. We believe our non-Florida growth opportunities position FedNat for improved financial performance in 2020, and long-term profitable growth. FedNat's balance sheet remains strong and will enable us to continue our commitment to returning value to shareholders through growth, as appropriate, and our dividend and share repurchases.”

Consolidated

  • Net loss of $6.9 million or $0.51 per diluted share during the fourth quarter of 2019, as compared to net loss of $9.3 million or $0.73 per diluted share during the fourth quarter of 2018. The fourth quarter was significantly impacted by (all amounts on a pre-tax basis) $4.5 million of claims, net of recoveries from catastrophe severe weather events, $12.0 million of claims, net of recoveries, for adverse prior year reserve development, including $8.0 million of non-core losses, and $5.0 million of claims, net of recoveries, for current year strengthening, as previously communicated.
  • Compared to September 30, 2019, book value per share decreased $1.20 to $17.25 at December 31, 2019. The decrease was predominantly driven by the acquisition of Maison of $0.57 per share, a net loss of $0.51 per share, as noted above, and dividends declared of $0.09 per share.

Revenues

  • Total revenue increased $12.6 million or 13.0%, to $109.0 million for the three months ended December 31, 2019, compared with $96.4 million for the three months ended December 31, 2018. The increase was primarily driven by $4.1 million of higher net premiums earned (as discussed further below) $7.1 million of additional investment gains in the current period as compared to the prior year as well as higher other income.
  • Gross written premiums increased $22.5 million, or 17.6%, to $150.1 million in the quarter, compared with $127.6 million for the same three-month period last year. Gross premiums written increased due to the growth in homeowners non-Florida, including $6.6 million from Maison. Our non-Florida business continues to show exceptional growth year over year, especially in the state of Texas, and now with Maison’s book of business, will allow us to leverage our infrastructure and diversify insurance risk.
  • Gross premiums earned increased $15.4 million, or 10.9%, to $157.2 million for the three months ended December 31, 2019, as compared to $141.8 million for the three months ended December 31, 2018. The higher gross premiums earned was driven by a 12.5% increase in earned premiums in Homeowners, which includes $7.9 million from Maison, partially offset by the results of our decision to exit the Automobile and commercial general liability lines.
  • Ceded premiums increased $11.3 million, or 22.4%, to $62.0 million in the quarter, compared to $50.7 million the same three-month period last year. The increase was driven by $7.5 million higher excess of loss reinsurance spend in Homeowners, as this years’ program became effective July 1, 2019 at a higher rate on-line than the program in the previous year and $3.8 million from Maison. These items were slightly offset by lower ceded premiums in Automobile as we have exited that line of business.

Expenses

  • Losses and loss adjustment expenses (“LAE”) increased $6.5 million, or 9.0%, to $78.8 million for the three months ended December 31, 2019, compared with $72.3 million for the same three-month period last year. The net loss ratio increased 3.4 percentage points, to 82.8% in the current quarter, compared to 79.4% in the fourth quarter of 2018. The higher ratio was primarily the result of the increase in reinsurance spend, which reduces the net earned premium denominator of the loss ratio calculation. The fourth quarter of 2019 included $12.0 million of adverse prior year reserve development, including $8.0 million from non-core lines, as we exit these lines, as well as $6.0 million of catastrophe net losses from Tropical Storms Olga and Nestor and other catastrophe weather events ($3.0 million of these losses relate to non-Florida, which is subject to a 50% profit-sharing agreement) and $5.0 million of reserve strengthening in the current accident year. After a complete analysis of recent emerging trends, we recorded additional losses in current and prior accident years as a result of higher than expected tail trends in weather-related claims and higher litigation claims driving higher than expected severity in homeowners Florida. The adverse experience in our non-core lines was driven by claim reopenings across the remaining active claims in Automobile and high severity claims as well as late reported new claims across several accident years in our commercial general liability line of business. Additionally, higher homeowners gross premiums earned across periods drove additional losses of approximately $7.0 million. These items were offset by $23.7 million of net loss from Hurricane Michael and $6.5 million of non-core losses in the fourth quarter of 2018.
  • The net expense ratio increased 0.4 percentage points, to 39.3% in the current quarter, as compared to 38.9% in the fourth quarter of 2018. Commissions and other underwriting expenses increased $1.9 million, or 6.4%, to $31.5 million for the three months ended December 31, 2019, compared with $29.6 million for the three months ended December 31, 2018. The slight increase is made up of higher acquisition costs from overall higher premiums, which were partially offset by lower profit share costs because of higher catastrophe losses in FNIC’s non-Florida book of business, as referenced above.
  • General and administrative expenses increased $0.1 million, or 0.5%, to $5.9 million for the three months ended December 31, 2019, compared with $5.8 million for the three months ended December 31, 2018. However, excluding deal costs, general and administrative expenses decreased $0.3 million to $5.2 million in the fourth quarter of 2019, compared with $5.5 million for the fourth quarter of 2018. The current quarter includes $0.7 million due diligence related costs related to the Maison acquisition, which was finalized in the quarter.
  • Interest expense increased $0.9 million to $1.9 million for the three months ended December 31, 2019, compared with $1.0 million in the prior year period, due to the Company having a higher outstanding debt in the current quarter as compared to the same quarter in the prior year.

Line of Business Results

  • Homeowners net loss for the current quarter was $2.3 million, which included 6.5% growth in net premiums earned compared to the fourth quarter of 2018. The combined ratio for the current quarter was 111.4%, which includes (all amounts on a pre-tax basis) $4.0 million, net, of prior year development, $5.0 million, net, of current year strengthening and $4.5 million of catastrophe losses, net of reinsurance and profit share recoveries.
  • Automobile's net loss for the fourth quarter of 2019 was $1.8 million, as compared with a loss of $4.0 million in the prior year quarter, primarily driven by lower adverse prior year development, as we exit this line of business.
  • Other’s net loss of $2.8 million in the fourth quarter of 2019, was driven by (all amounts on a pre-tax basis) $5.4 million of prior year adverse development in our commercial general liability book of business, and $1.9 million of interest expense, partially offset by net investment income of $3.9 million and investment gains of $2.0 million.

2019 vs. 2018 Full Year Results

  • The Company reported net income of $1.0 million, or $0.08 per diluted share, for 2019 as compared to net income of $14.9 million, or $1.16 per diluted share, for 2018. The performance in 2019 is the result of higher losses from catastrophe events, adverse loss experience and higher reinsurance costs in the second half of 2019.
  • The Company's adjusted operating income (loss) was $(0.4) million or $(0.03) per diluted share in 2019, as compared to adjusted operating income of $20.0 million or $1.55 per diluted share in 2018.

Stock Repurchase Program

  • During the fourth quarter of 2019, the Company repurchased 238,000 shares of common stock for $3.9 million at an average price per share of $16.27. As of February 25, 2020, in the first quarter of 2020, the Company has repurchased 188,111 shares of common stock for $3.0 million at an average price per share of $15.74.

Subsequent Event/Premium Rate Activity

  • The Company applied for and was approved by the Florida Office of Insurance regulation (“OIR”) for a state-wide average rate increase of 2.8% for Florida homeowners multiple-peril insurance policies, which is expected to become effective for new and renewal policies on March 15, 2020.
  • The Company applied for and is awaiting approval by the Florida OIR for a state-wide average rate increase of 7.4% for Florida homeowners multiple-peril insurance policies, which, subject to approval, would be expected to become effective for new and renewal policies on June 15, 2020.
  • There are other rate actions being taken across our books of business. For further detail and information related to these rate actions, please refer to the Form 8-K published with the U.S. Securities and Exchange Commission on February 19, 2020.

Conference Call Information

The Company will hold an investor conference call at 9:00 AM (ET) Thursday, February 27, 2020. 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: 4880838

A live webcast of the call will be available online via the “Presentations and Events” section of the Company’s website at FedNat.com or interested parties can click on the following link:

http://www.fednat.com/investor-relations/investor-presentations/

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 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 our wholly owned subsidiaries, is authorized to underwrite, and/or place homeowners multi-peril, federal flood and other lines of insurance in Florida and other states. We market, distribute and service our own and third-party insurers’ products and other services through a network of independent and general agents.

The Company’s supplemental line of business information is designed to afford users greater transparency into our results. The “Homeowners” line of business consists of our homeowners and fire property and casualty insurance business, which currently operates in Florida, Alabama, Texas, Louisiana and South Carolina. The “Automobile” line of business consists of our nonstandard personal automobile insurance business which operated in Georgia, Texas, Alabama, and Florida. The “Other” line of business primarily consists of our commercial general liability and federal flood businesses, along with corporate and investment operations.

Forward-Looking Statements /Safe Harbor 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 accurately; 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.

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


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Financial Highlights
(Dollars in thousands, except per share data)
(Unaudited)

  As of or For the
  Three Months Ended Twelve Months Ended
  2019 2018 % Change 2019 2018 % Change
Net Income (Loss) Attributable to Common Shareholders            
Net income (loss):            
Homeowners $(2,316)  $(1,354)  71.0 % $5,665   $22,175   (74.5)%
Automobile (1,799)  (3,980)  (54.8)% (4,040)  (5,648)  (28.5)%
Other (2,778)  (3,971)  (30.0)% (614)  (1,599)  (61.6)%
Consolidated $(6,893)  $(9,305)  (25.9)% $1,011   $14,928   (93.2)%
             
Adjusted operating income (loss):            
Homeowners $(2,306)  $(1,049)  119.8 % $5,912   $23,663   (75.0)%
Automobile (1,799)  (3,979)  (54.8)% (4,035)  (5,578)  (27.7)%
Other (3,820)  91   NCM (2,238)  1,905   (217.5)%
Consolidated $(7,925)  $(4,937)  60.5 % $(361)  $19,990   (101.8)%
             
Per Common Share            
Net income (loss) - diluted $(0.51)  $(0.73)  (29.4)% $0.08   $1.16   (93.3)%
Adjusted operating income (loss) - diluted (0.59)  (0.39)  53.0 % (0.03)  1.55   (101.8)%
Dividends declared 0.09   0.08   12.5 % 0.33   0.24   37.5 %
Book value 17.25   16.84   2.4 % 17.25   16.84   2.4 %
Book value, excluding AOCI 16.54   17.13   (3.5)% 16.54   17.13   (3.5)%
             
Return to Shareholders            
Repurchases of common stock $3,867   $   NCM $3,867   $5,061   (23.6)%
Dividends declared 1,176   1,043   12.8 % 4,309   3,120   38.1 %
  $5,043   $1,043   383.5 % $8,176   $8,181   (0.1)%
             
Revenue            
Total revenues $108,987   $96,442   13.0 % $414,961   $396,093   4.8 %
Adjusted operating revenues 106,953   101,502   5.4 % 407,877   400,237   1.9 %
Gross premiums written 150,074   127,613   17.6 % 610,608   567,764   7.5 %
Gross premiums earned 157,201   141,781   10.9 % 582,334   580,020   0.4 %
Net premiums earned 95,188   91,098   4.5 % 363,652   355,257   2.4 %
             
Ratios to Net Premiums Earned            
Net loss ratio 82.8 % 79.4 %   75.1 % 64.3 %  
Net expense ratio 39.3 % 38.9 %   35.9 % 40.3 %  
Combined ratio 122.1 % 118.3 %   111.0 % 104.6 %  
             
In-Force Homeowners Policies            
Florida 241,000 247,000 (2.4)% 241,000 247,000 (2.4)%
Non-Florida 133,000 44,000 202.3 % 133,000 44,000 202.3 %
  374,000 291,000 28.5 % 374,000 291,000 28.5 %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)

  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2019 2018 2019 2018
Revenues:        
Net premiums earned $95,188   $91,098   $363,652   $355,257  
Net investment income 3,864   3,402   15,901   12,460  
Net realized and unrealized investment gains (losses) 2,034   (5,060)  7,084   (4,144) 
Direct written policy fees 2,892   2,681   10,200   13,366  
Other income 5,009   4,321   18,124   19,154  
Total revenues 108,987   96,442   414,961   396,093  
         
Costs and expenses:        
Losses and loss adjustment expenses 78,796   72,318   273,080   228,416  
Commissions and other underwriting expenses 31,539   29,642   107,189   121,109  
General and administrative expenses 5,867   5,838   23,203   22,183  
Interest expense 1,916   1,038   10,776   4,177  
Total costs and expenses 118,118   108,836   414,248   375,885  
         
Income (loss) before income taxes (9,131)  (12,394)  713   20,208  
Income tax expense (benefit) (2,238)  (3,089)  (298)  5,498  
Net income (loss) (6,893)  (9,305)  1,011   14,710  
Net income (loss) attributable to non-controlling interest          (218) 
Net income (loss) attributable to FedNat Holding Company shareholders $(6,893)  $(9,305)  $1,011   $14,928  
         
Net Income (Loss) Per Common Share        
Basic $(0.51)  $(0.73)  $0.08   $1.17  
Diluted $(0.51)  $(0.73)  $0.08   $1.16  
         
Weighted Average Number of Shares of Common Stock Outstanding        
Basic 13,409   12,777   12,977   12,775  
Diluted 13,409   12,777   13,023   12,867  
         
Dividends Declared Per Common Share $0.09   $0.08   $0.33   $0.24  


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics
(Unaudited)

  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2019 2018 2019 2018
  (In thousands)
Gross premiums written:        
Homeowners Florida $104,536   $102,834   $451,856   $458,652 
Homeowners non-Florida 42,163   21,941   142,485   81,037 
Automobile    (25)  (1)  8,603 
Commercial general liability (24)  (135)  (145)  5,384 
Federal flood 3,399   2,998   16,413   14,088 
Total gross premiums written $150,074   $127,613   $610,608   $567,764 


  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2019 2018 2019 2018
  (In thousands)
Gross premiums earned:        
Homeowners Florida $114,249   $116,614  $452,730  $473,121 
Homeowners non-Florida 38,908   19,499  112,836  66,571 
Automobile    526  26  18,402 
Commercial general liability (24)  1,650  1,669  8,794 
Federal flood 4,068   3,492  15,073  13,132 
Total gross premiums earned $157,201   $141,781  $582,334  $580,020 


  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2019 2018 2019 2018
  (In thousands)
Net premiums earned:        
Homeowners $95,212   $89,390  $362,183  $342,247 
Automobile    132  6  4,658 
Commercial general liability (24)  1,576  1,463  8,352 
Total net premiums earned $95,188   $91,098  $363,652  $355,257 


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Selected Operating Metrics (continued)
(Unaudited)

  Three Months Ended Twelve Months Ended
 December 31, December 31,
 2019 2018 2019 2018
 (In thousands)
Commissions and other underwriting expenses:        
Homeowners Florida $13,152   $13,897   $52,962   $56,693  
All others 7,695   5,460   25,491   19,948  
Ceding commissions (3,235)  (3,966)  (12,128)  (12,743) 
Total commissions 17,612   15,391   66,325   63,898  
         
Automobile    93   3   4,322  
Homeowners non-Florida 1,028   793   3,365   2,147  
Total fees 1,028   886   3,368   6,469  
         
Salaries and wages 3,024   2,997   12,114   14,279  
Other underwriting expenses 9,875   10,368   25,382   36,463  
Total commissions and other underwriting expenses $31,539   $29,642   $107,189   $121,109  


  Three Months Ended Twelve Months Ended
  December 31, December 31,
  2019 2018 2019 2018
         
Net loss ratio 82.8% 79.4% 75.1% 64.3%
Net expense ratio 39.3% 38.9% 35.9% 40.3%
Combined ratio 122.1% 118.3% 111.0% 104.6%
Gross loss ratio 100.8% 277.6% 120.5% 149.8%
Gross expense ratio 25.9% 27.8% 24.5% 26.9%


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheet
(Unaudited)

  December 31,
  2019 2018
ASSETS (In thousands)
Investments:    
Debt securities, available-for-sale, at fair value (amortized cost of $512,645 and $433,664, respectively) $526,265  $428,641  
Debt securities, held-to-maturity, at amortized cost 4,337  5,126  
Equity securities, at fair value 20,039  17,758  
Total investments 550,641  451,525  
Cash and cash equivalents 133,361  64,423  
Prepaid reinsurance premiums 145,659  108,577  
Premiums receivable, net of allowance of $159 and $77, respectively 41,422  29,791  
Reinsurance recoverable, net 209,615  211,424  
Deferred acquisition costs and value of business acquired, net 56,136  39,436  
Income taxes, net 2,552  5,220  
Goodwill 10,997    
Other assets 28,633  14,975  
Total assets $1,179,016  $925,371  
    
LIABILITIES AND SHAREHOLDERS’ EQUITY    
Liabilities    
Loss and loss adjustment expense reserves $324,362  $296,230  
Unearned premiums 360,870  281,992  
Reinsurance payable 102,467  63,599  
Long-term debt, net of deferred financing costs of $1,478 and $596, respectively 98,522  44,404  
Deferred revenue 6,856  4,585  
Other liabilities 37,246  19,302  
Total liabilities 930,323  710,112  
Shareholders' Equity    
Preferred stock, $0.01 par value: 1,000,000 shares authorized     
Common stock, $0.01 par value: 25,000,000 shares authorized; 14,414,821 and 12,784,444 shares issued and outstanding, respectively 144  128  
Additional paid-in capital 167,677  141,128  
Accumulated other comprehensive income (loss) 10,281  (3,750) 
Retained earnings 70,591  77,753  
Total shareholders’ equity attributable to FedNat Holding Company shareholders 248,693  215,259  
Non-controlling interest     
Total shareholders’ equity 248,693  215,259  
Total liabilities and shareholders' equity $1,179,016  $925,371  


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business
(Unaudited)

 Three Months Ended December 31,
 2019 2018
 Homeowners Automobile Other Consolidated Homeowners Automobile Other Consolidated
 (Dollars in thousands)
Revenues:               
Gross premiums written$146,699   $   $3,375   $150,074   $124,775   $(25)  $2,863   $127,613  
Gross premiums earned153,157      4,044   157,201   136,113   526   5,142   141,781  
Ceded premiums(57,945)     (4,068)  (62,013)  (46,723)  (394)  (3,566)  (50,683) 
Net premiums earned95,212      (24)  95,188   89,390   132   1,576   91,098  
Net investment income      3,864   3,864         3,402   3,402  
Net realized and unrealized investment gains (losses)      2,034   2,034         (5,060)  (5,060) 
Direct written policy fees2,833      59   2,892   2,506   93   82   2,681  
Other income4,570   1   438   5,009   3,461   64   796   4,321  
Total revenues102,615   1   6,371   108,987   95,357   289   796   96,442  
                
Costs and expenses:               
Losses and loss adjustment expenses70,777   2,334   5,685   78,796   64,634   4,840   2,844   72,318  
Commissions and other underwriting expenses30,799      740   31,539   27,819   730   1,093   29,642  
General and administrative expenses4,498   50   1,319   5,867   4,718   50   1,070   5,838  
Interest expense      1,916   1,916         1,038   1,038  
Total costs and expenses106,074   2,384   9,660   118,118   97,171   5,620   6,045   108,836  
                
Income (loss) before income taxes(3,459)  (2,383)  (3,289)  (9,131)  (1,814)  (5,331)  (5,249)  (12,394) 
Income tax expense (benefit)(1,143)  (584)  (511)  (2,238)  (460)  (1,351)  (1,278)  (3,089) 
Net income (loss)$(2,316)  $(1,799)  $(2,778)  $(6,893)  $(1,354)  $(3,980)  $(3,971)  $(9,305) 
                
Ratios to net premiums earned:               
Net loss ratio74.3 % NCM NCM 82.8 % 72.3 % NCM 180.5 % 79.4 %
Net expense ratio37.1 %     39.3 % 36.4 %     38.9 %
Combined ratio111.4 %     122.1 % 108.7 %     118.3 %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Statements of Operations and Operating Metrics by Line of Business (continued)
(Unaudited)

 Year Ended December 31,
 2019 2018
 Homeowners Automobile Other Consolidated Homeowners Automobile Other Consolidated
 (Dollars in thousands)
Revenues:               
Gross premiums written$594,341   $(1)  $16,268   $610,608   $539,689   $8,603   $19,472   $567,764  
Gross premiums earned565,566   26   16,742   582,334   539,692   18,402   21,926   580,020  
Ceded premiums(203,383)  (20)  (15,279)  (218,682)  (197,445)  (13,744)  (13,574)  (224,763) 
Net premiums earned362,183   6   1,463   363,652   342,247   4,658   8,352   355,257  
Net investment income      15,901   15,901         12,460   12,460  
Net realized and unrealized investment gains (losses)      7,084   7,084         (4,144)  (4,144) 
Direct written policy fees9,915   3   282   10,200   8,484   4,322   560   13,366  
Other income15,202   19   2,903   18,124   14,021   1,148   3,985   19,154  
Total revenues387,300   28   27,633   414,961   364,752   10,128   21,213   396,093  
                
Costs and expenses:               
Losses and loss adjustment expenses257,297   5,128   10,655   273,080   206,062   11,617   10,737   228,416  
Commissions and other underwriting expenses104,071   51   3,067   107,189   111,103   5,751   4,255   121,109  
General and administrative expenses18,818   200   4,185   23,203   18,079   325   3,779   22,183  
Interest expense      10,776   10,776   100      4,077   4,177  
Total costs and expenses380,186   5,379   28,683   414,248   335,344   17,693   22,848   375,885  
                
Income (loss) before income taxes7,114   (5,351)  (1,050)  713   29,408   (7,565)  (1,635)  20,208  
Income tax expense (benefit)1,449   (1,311)  (436)  (298)  7,451   (1,917)  (36)  5,498  
Net income (loss)5,665   (4,040)  (614)  1,011   21,957   (5,648)  (1,599)  14,710  
Net income (loss) attributable to non-controlling interest            (218)        (218) 
Net income (loss) attributable to FNHC shareholders$5,665   $(4,040)  $(614)  $1,011   $22,175   $(5,648)  $(1,599)  $14,928  
                
Ratios to net premiums earned:               
Net loss ratio71.0 % NCM NCM 75.1 % 60.2 % 249.4 % 128.6 % 64.3 %
Net expense ratio34.0 %     35.9 % 37.8 %     40.3 %
Combined ratio105.0 %     111.0 % 98.0 %     104.6 %


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliations
(Dollars in thousands)
(Unaudited)

  As of or For the Three Months Ended December 31,
  2019 2018
  Homeowners Automobile Other Consolidated Homeowners Automobile Other Consolidated
Revenue                
Total revenues $102,615   $1   $6,371   $108,987   $95,357   $289   $796   $96,442  
Less:                
Net realized and unrealized investment gains (losses)       2,034   2,034         (5,060)  (5,060) 
Adjusted operating revenues $102,615   $1   $4,337   $106,953   $95,357   $289   $5,856   $101,502  
                 
Net Income (Loss)                
Net income (loss) $(2,316)  $(1,799)  $(2,778)  $(6,893)  $(1,354)  $(3,980)  $(3,971)  $(9,305) 
Less:                
Net realized and unrealized investment gains (losses)       1,535   1,535         (3,778)  (3,778) 
Acquisition and other costs       (493)  (493)  (305)  (1)  (284)  (590) 
Amortization of identifiable intangibles (10)        (10)             
Gain (loss) on early extinguishment of debt                        
Adjusted operating income (loss) $(2,306)  $(1,799)  $(3,820)  $(7,925)  $(1,049)  $(3,979)  $91   $(4,937) 
                 
Income tax rate assumed for reconciling items above 24.52 % 24.52 % 24.52 % 24.52 % 25.35 % 25.35 % 25.35 % 25.35 %
                 
Per Common Share                
Book value       $17.25         $16.84  
Less:                
AOCI       0.71         (0.29) 
Book value, excluding AOCI       $16.54         $17.13  


FEDNAT HOLDING COMPANY AND SUBSIDIARIES
GAAP to Non-GAAP Reconciliations (continued)
(Dollars in thousands)
(Unaudited)

  As of or For the Year Ended
  2019 2018
  Homeowners Automobile Other Consolidated Homeowners Automobile Other Consolidated
Revenue                
Total revenues $387,300   $28   $27,633   $414,961   $364,752   $10,128   $21,213   $396,093  
Less:                
Net realized and unrealized investment gains (losses)       7,084   7,084         (4,144)  (4,144) 
Adjusted operating revenues $387,300   $28   $20,549   $407,877   $364,752   $10,128   $25,357   $400,237  
                 
Net Income (Loss)                
Net income (loss) $5,665   $(4,040)  $(614)  $1,011   $22,175   $(5,648)  $(1,599)  $14,928  
Less:                
Net realized and unrealized investment gains (losses)       5,347   5,347         (3,094)  (3,094) 
Acquisition and other costs (237)  (5)  (1,025)  (1,267)  (1,488)  (70)  (410)  (1,968) 
Amortization of identifiable intangibles (10)        (10)             
Gain (loss) on early extinguishment of debt       (2,698)  (2,698)             
Adjusted operating income (loss) $5,912   $(4,035)  $(2,238)  $(361)  $23,663   $(5,578)  $1,905   $19,990  
                 
Income tax rate assumed for reconciling items above 24.52 % 24.52 % 24.52 % 24.52 % 25.35 % 25.35 % 25.35 % 25.35 %
                 
Per Common Share                
Book value       $17.25         $16.84  
Less:                
AOCI       0.71         (0.29) 
Book value, excluding AOCI       $16.54         $17.13  
                       

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