Florida-based FedNat Holding Company has posted a combined ratio of 101.5% for the second quarter of 2019, up from 99% in Q2 2018, as hail and wind related storms from twelve catastrophe events hit the states it writes property business.
Overall, losses and loss adjustment expenses in Q2 increased $17.7 million, or 37.4%, to $65.3 million, compared with $47.6 million for the same three-month period last year.
Michael H. Braun, the Company’s Chief Executive Officer, described the cat events as “severe and unusual” but said that FedNat has made “great progress” towards achieving its strategies in the second quarter.
“Our geographic diversification strategy is enhancing our operating metrics and our non-Florida business continued its strong growth in gross premiums earned and written,” Braun said.
FedNat had previously reported a net loss of $3.9 million for the first-quarter of 2019, citing that progress was masked by $18.7 million of claims from the Brevard County, Florida hail storm.
Net loss ratio increased 13.9% to 70.8% compared to 56.9% in the second quarter of 2018.
FedNat says the higher ratio was primarily the result of the aforementioned of hail and wind related storms. Of these losses, $15.5 million related to non-Florida business.
FedNat announced that it had modestly grown its catastrophe reinsurance program at the recent July renewals, increasing its aggregate reinsurance limit from $1.79 billion to $1.84 billion.
Gross premiums written (GPW) increased $2.5 million, or 1.5%, to $169.2 million compared with $166.7 million for the same period last year.
GPW increased due to the growth in homeowners non-Florida, partially offset by the decline in the non-core businesses FedNat are exiting, automobile and commercial general liability, as well as a decline in homeowners Florida.
FedNat states its homeowners non-Florida business continues to show “exceptional growth” year over year, especially in the state of Texas, which has allowed the company to leverage its infrastructure and diversify insurance risk. Overall, Homeowners grew 5.5%.
“We believe that the recent AOB reform legislation, now in effect, will have a very positive impact on our Florida business, and create a much more favorable operating environment,” Braun remarked.
“Additionally, the pending acquisition of Maison will strengthen our core book of business and significantly accelerate our diversification strategy.”
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.
“The acquisition is scheduled to close in December 2019. In the second quarter, we also made the necessary steps needed to further wind down our non-core auto and commercial general liability businesses,” Braun added.
“Looking ahead, we believe we are well-positioned to benefit from the many positive developments as we enter the second half of the year and into 2020.”