Florida based primary insurer FedNat has posted a net loss of $50.4 million for the second quarter of 2021, as its performance was impacted by catastrophe losses such as Winter Storm Uri as well as higher reinsurance costs.
The net loss was driven by approximately $34.2 million of current quarter net catastrophe losses and approximately $10.4 million of prior period reserve strengthening.
FedNat’s ceded premiums also increased by $74.6 million, or 109.0%, to $143.0 million in Q2 due to a $30 million higher excess of loss reinsurance spend, driven by higher rate-on-line prices and supplemental coverage to backfill gaps in coverage.
The company reported $196.3 million in gross written premiums, compared to $205.4 million for Q2 2020.
FedNat also posted its combined ratio at 283.5% compared to 147.9% for the same prior year period.
Michael Braun, FedNat’s Chief Executive Officer commented: “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 minimise the impact of weather losses on the statutory capital of our insurance companies. Through these actions and with the down streaming of capital, we continued to maintain appropriate capital positions at our insurance companied.
“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 realised in the future; however, the timing of this recognition will depend on the timing of pre-tax income we earn in future quarters.”
“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.”
“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,” he added.
