FedNat Holding Company has reported a net loss of $3.9 million for the first-quarter of 2019, citing that progress was masked by $18.7 million of claims from the Brevard County, Florida hail storm.
The $3.9 million net loss compares to net income of $7.5 million in the first-quarter of 2018. Within its homeowners business line, FedNat has reported a net loss of $1.4 million for the quarter, which includes $18.7 million of pre-tax losses, net of recoveries, from the hail event.
Excluding the impact of the hail storm, the segment would have produced net income of $12.5 million in the quarter, with a combined ratio of 87.5%.
The firm announced last month that the March 27th storm resulted in $11 million of weather-related losses, net of quota share reinsurance, so it appears this has increased to just under $19 million.
FedNat’s catastrophe reinsurance cover only provides protection on an event if covered losses from the event exceed $20 million for FedNat Insurance and $3 million for Monarch.
Overall, losses and loss adjustment expenses increased by 45.1% to $66.8 million, while the net loss ratio increased to 75.3%, in Q1 2019. FedNat explains that the higher ratio is a result of the $19 million of weather-related losses experienced in the period.
Outside of homeowners, FedNat’s automobile business segment recorded a net loss of $0.7 million, which includes $0.6 million of adverse development.
The other’s segment recorded a net loss of $1.8 million in Q1 2019, compared with net income of $0.6 million in the first-quarter of 2018.
“FedNat continued to make excellent progress on its strategies to drive profitable growth in the first quarter. While that progress was masked by the impact of a large hail storm that impacted Brevard County in Florida, I’m nonetheless very pleased with the continued fundamental improvement in our core homeowners business performance,” said Michael Braun, FedNat’s Chief Executive Officer (CEO).
“Highlights in the quarter included more than five percentage points of improvement in our net expense ratio, strong growth in our non-Florida homeowners book, and of course, the February announcement of our pending acquisition of the Maison businesses, which will further strengthen and diversify our Company when we complete the transaction, which is anticipated to be during the second quarter.
“We are also greatly encouraged by Florida’s recent passage of legislation to regulate Assignment of Benefit rules, a move that is a huge win for all policyholders within the state of Florida, regardless of who they insure their homes with, and will significantly enhance our industry’s ability to serve Florida homeowners affordably and more effectively. Collectively these developments, along with our ongoing focus on performance improvement, position FedNat for attractive opportunity to drive profitable growth for our shareholders in the quarters to come,” he added.
FedNat also announced a decline in gross written premiums to $132.2 million in the quarter as it focuses on profitability and managing its underwriting exposure. The main driver was a decline in premiums in non-core businesses it’s exiting, being automobile and commercial general liability, and also a decrease in the Florida homeowners book.
These reductions were somewhat offset by growth in homeowners non-Florida, which continues to show robust year-on-year growth.
As a result of the reductions noted above, gross premiums earned declined by $8 million in the first-quarter of 2019 to $138.4 million. At the same time, ceded premiums fell by almost 23% to $49.6 million in Q1 2019, when compared with the previous year.
