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FedNat posts $25mn Q3 loss as CR hits 165%

9th November 2021 - Author: Charlie Wood

FedNat has announced a net loss of $24.8 million in the third quarter, a further slide from the $20.7 million loss posted in the prior year period.

FedNat HoldingMeanwhile, the company’s combined ratio reached 165.4%, driven primarily by 37.7 points of net catastrophe losses in the period.

Losses and loss adjustment expenses (LAE) decreased $39.4 million to $59.6 million, also for the quarter.

This compares with $99 million last year; driven by higher ceded losses under quota-share reinsurance treaties and lower net catastrophe losses.

Concurrent to it’s quarterly results, FedNat has announced an intention to refocus operations on the Florida market, the company’s historical focus since its founding in 1992.

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In conjunction with this decision, FedNat has elected to commence an orderly runoff of the insurance operations of Maison Insurance Company.

Maison expects to begin non-renewing its Louisiana policies on their anniversary dates beginning in January 2022 and its Texas policies beginning in February 2022. The nonrenewal of Maison’s Florida policies is expected to begin in June 2022.

The firm’s net loss ratio decreased 7.9%, to 110.6% in the current quarter, down from 118.5% in the third and driven primarily by lower net catastrophe losses.

The current quarter included approximately $20.3 million of catastrophe losses, net of reinsurance, driven by Hurricane Ida as well as other severe weather events, which together impacted Louisiana, Florida and Texas.

By comparison, the third quarter of 2020 catastrophe net losses were $38.3 million, net of reinsurance, and included Hurricanes Laura and Sally as well as other severe weather events.

Additionally, higher ceded losses through FedNat’s quota-share treaties and lower attritional losses in FNIC’s Florida book of business drove lower current accident year losses, excluding catastrophes, compared to the prior year.

$157 million of gross written premiums, compared to $180.2 million, reflecting exposure management initiatives.

Gross expense ratio was 25.9%, up from 20.6%, while pre-tax losses decreased 26.1% to $24.8 million after having hit $33.5 million in 2020.

Loss before income taxes decreased 26.1% to $24.8 million as compared to $33.5 million.
$20.0 million or $1.15 per diluted share of claims, net of reinsurance recoveries and fee income, driven by Hurricane Ida, as well as other severe weather events, primarily impacting Louisiana, Florida and Texas.

“Our results were significantly impacted by catastrophe weather events that primarily impacted Louisiana and Texas,” said CEO Braun.

“At the same time, the profitability of our Florida homeowners business continued to improve as a result of ongoing rate increases and underwriting actions we have taken to reduce our policy count and insured exposure.

“Over the past five years, our exposure management efforts have reduced our Florida book by over a third from 272,000 policies-in-force in 2017 to 168,000 at the end of the third quarter of 2021, yet our in-force premiums remained fairly stable at approximately $430 million due to multiple rounds of rate increases.

“The benefits of these underwriting actions and rate increases are clearly evident in our Florida homeowners attritional loss ratio, which declined to 39% in the third quarter of 2021 as compared to 44% a year ago.”

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