Florida based primary insurer FedNat has reported a net loss of $20.7 million for the third quarter, down from a net income of $4.7 million in the prior year quarter.
The company also sank to an operating loss of $21.5 million after a $4.3 million profit in the prior year period.
A combined ratio of 154.3%, up 48.8 percentage points, including 45.8 points of net catastrophe losses in the period.
Catastrophe losses from Hurricanes Laura and Sally as well as other severe weather events, which together impacted Florida, Louisiana and other states, generated $44.9 million of claims.
Upon releasing its results, FedNat also announced the launch of a strategic review committee to oversee a review of the company’s business plan, capital deployment, geographic footprint and long-term strategy.
It’s hooped this will identify strategic alternatives in an effort to create enhanced value for the stakeholders, in particular its shareholders.
Gross written premiums for the quarter increased 13.2% to $180.2 million, including $28.3 million from Maison.
Quarter-end Florida homeowners in-force policies decreased 8.4%.
There was also a 94.9% increase in non-Florida homeowners in-force policies to approximately 152,000, in-line with FedNat’s diversification strategy.
Total revenue decreased $2.2 million to $97.3 million, compared with $99.5 million for the same period last year.
The slight decrease was driven by lower net premiums earned as increases in ceded premiums outpaced the growth in gross premiums earned.
Additionally, lower net investment income was offset by higher policy fees and higher brokerage income, all of which are discussed in further detail below.
Gross premiums written increased $21.1 million to $180.2 million in the quarter compared with $159.1 million for the same three-month period last year.
Ceded premiums increased $41.8 million, or 71.9%, to $100.0 million in the quarter, compared to $58.2 million the same three-month period last year.
The increase was driven by approximately $26 million higher excess of loss reinsurance spend, as property exposures increased, including from the Maison acquisition.
Net investment income decreased $1.7 million, or 40.9%, to $2.4 million, as compared to $4.1 million during Q3 2919.
“FedNat’s results in the third quarter were impacted by an elevated number of severe weather events during this year’s hurricane season,” said Mr. Michael H. Braun, FedNat’s Chief Executive Officer.
“Our strong reinsurance program and additional reinsurance purchases during the quarter enabled us to maintain over $140 million of capital in our insurance companies as of September 30, 2020 with liquidity over $60 million at the holding company.”
“We remain committed to proactively managing our capital while focusing for the remainder of 2020 and throughout 2021 on continuing to implement increased rates in our homeowners business in Florida and non-Florida markets.
“We are also restricting business and shrinking our book in Florida as appropriate until our rates meet our profitability targets. Based on rate increases we have already implemented in 2020 and anticipated rate increases in the balance of 2020 and in 2021, we expect to generate over $65 million in incremental additional premium in 2021 as compared to 2020.”
