Florida based primary insurer FedNat has posted a net loss of $21.5 million in the second quarter of 2020, following heavy catastrophe losses.
The company confirmed that it had incurred $48.3 million of catastrophe costs during the quarter, after warning ahead of the loss back in July.
Cat losses were driven by fourteen weather events, impacting Florida, Texas and Louisiana, including Tropical Storm Cristobal and a Florida panhandle wildfire.
These caused FedNat combined ratio to shoot up 46.4 points to 147.9%, including 43.3 points of net cat losses and 6.7 points of prior year development.
Overall, losses and loss adjustment expenses increased $64.6 million, or 98.8%, to $129.9 million for the three months ended June 30, 2020, compared with $65.3 million for the same period last year.
The net loss ratio increased 45.7 percentage points, to 116.5% in the current quarter, as compared to 70.8% in the second quarter of 2019.
Weather-related net losses totaled $59.2 million, but were reduced due to the 50% profit-sharing agreement that FedNat had for its $22.0 million of non-Florida losses.
Total revenue increased $28.7 million or 27.3%, to $134.0 million due to net premiums growth, including the effect of the acquisition of Maison and net investment gains.
Gross premiums written increased $36.2 million, or 21.4%, to $205.4 million in the quarter, driven by organic non-Florida growth.
Ceded premiums similarly increased $19.5 million, or 39.9%, to $68.4 million in the quarter, driven by higher excess of loss reinsurance spend primarily related to increased property exposures in FedNat’s non-Florida business, including from the Maison acquisition.
Net investment income, meanwhile, decreased $1.0 million, or 21.6%, to $3.3 million, owing to the lower interest rate environment in 2020.
“Our second quarter results were impacted by a high number of severe weather events in Florida, and across the Southeast, including fourteen industry events, which included Tropical Storm Cristobal,” said FedNat CEO Michael H. Braun.
“The claims environment in the Florida homeowners market continues to be challenging, and as a result we decided to proactively strengthen our property reserves for the 2019 accident year. We are also taking action to mitigate the difficult claims environment by continuing to raise rates and restrict new business in Florida until our rates more accurately reflect our increased cost of doing business primarily as a result of claims severity and reinsurance costs,” he continued.
“The profitability of our non-Florida homeowners business, excluding the impact of these recent severe weather events, continues to meet our expectations and we remain focused on our long-term growth strategy of expanding profitably in more attractive coastal homeowners markets outside of Florida.”
