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Hurricane Michael drives Q4 loss for FedNat while Irma estimate rises

28th February 2019 - Author: Luke Gallin

FedNat Holding Company has reported a net loss of $9.3 million for the fourth-quarter of 2018, which includes a $23.7 million pre-tax catastrophe hit, mostly driven by Hurricane Michael.

FedNat logoOverall, Hurricane Michael resulted in a gross loss of $275 million for the firm, with its net loss hitting $23 million. The remaining catastrophe loss experience was a result of other severe weather events, says FedNat.

The $9.3 million Q4 net loss compares to $6.3 million of net income recorded in the fourth-quarter of 2017, and was driven by the negative financial impact of Hurricane Michael.

As well as its exposure to Michael, FedNat has revealed that it’s also increased its loss estimate for Hurricane Irma from $634 million to $695 million across its two insurance companies. However, this had no impact on net income as FedNat is already above the retention.

During the quarter, FedNat maintained its focus on profitability and underwriting exposure, subsequently reporting a decline in gross written premiums to $127.6 million and a decrease in gross premiums earned $141.8 million. The company explains that the decrease is mostly a result of the fact it is exiting non-core lines of business, being automobile and commercial general liability lines.

RMS

Ceded premiums also declined in Q4, falling to $50.7 million compared with $64.4 million in Q4 2017. The firm explains that this is driven by reduced homeowners excess of loss reinsurance costs, and lower ceded premiums in automobile as a result of lower premiums earned during the quarter.

In light of recent catastrophe events, FedNat’s loss ratio weakened to 79.4% in Q4, but improved to 64.3% for the full-year.

The combined ratio weakened in Q4 to 118.3% but strengthened in the full-year, ending 2018 at 104.6%, compared with 114.7% in 2017.

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