Florida-based primary insurer FedNat Holding Company has reported a combined ratio for the third quarter of 105.5%, driven by 3.4 points of higher net catastrophe losses and 6.8 points from higher catastrophe reinsurance ceded premiums.
The firm in the previous quarter of this year cited “severe and unusual” cat events for driving a 101.5% CR, up from 99% in Q2 2018.
Net income for the third quarter stands at $4.7 million, down 41%, or $3.3 million, from the prior year quarter.
The firm’s 2019-2020 excess of loss reinsurance program annual costs increased $14 million to $179 million, as a result of recent growth in the size of our homeowners book of business.
Adjusted operating income of $4.3 million represents a 42% decline, or $3 million, against the same period in 2018.
FedNat has also reported $7 million of claims, net of recoveries, from Hurricane Dorian, Hurricane Barry and Tropical Storm Imelda impacting South Carolina, Florida and other states.
There was a 14.5% increase in gross written premiums to $159.1 million, including FedNat Insurance Company growth of 2% in Florida.
Net premiums earned decreased to $87.4 million, including $8 million quarter over quarter reduction primarily due to incremental costs from the new excess of loss reinsurance program.
“FedNat delivered solid third quarter results and made significant progress on our strategies to improve profitability and enhance shareholder value,” said Michael H. Braun, Chief Executive Officer.
“We’re encouraged by the performance of our core homeowners line of business, and continued earnings growth in our non-Florida book as we continue to expand our presence in select coastal states where we see opportunity.
“To this end, FedNat is set to continue our operational growth in these coastal states upon the completion of our Maison acquisition, which is set to close in December. Consistent with our core focus, this acquisition is in the homeowners line of business and is in markets where we already have operations, including Texas and Louisiana.”
The Maison deal is part of FedNat’s plans to expand outside of Florida, and the deal is set to increase its top line by 17%, with much of the focus on Louisiana, Texas, and to a lesser extent, Florida.
Quarter-end Florida homeowners in-force policies of approximately 237,000.
90.2% increase in non-Florida homeowners in-force policies to approximately 78,000.
“Further, we have a more optimistic outlook in our home, Florida market with Assignment of Benefits (AOB) reform in effect, which should pave the way for an improved operating environment as we enter the new year,” Braun added.
“With this backdrop, we remain focused on strengthening our homeowners business throughout the southeast of the United States. This strategic roadmap sets the stage to unlock value and enhance shareholder value for years to come.”
