FedNat 2019 results hit by cat losses, adverse reserve development
US insurer FedNat Holding's performance in 2019 was significantly impacted by higher catastrophe losses, adverse loss experience and higher reinsurance costs in the second half of the year. The company's CEO believes that its non-Florida growth opportunities will position FedNat to improve financial performance in 2020.
FedNat's full year 2019 net income was $1.0 million, down from the net income of $14.9 million a year earlier.
The company recorded a net loss of $6.9 million in the fourth quarter of 2019, compared to a net loss of $9.3 million in Q4 2018. The figures were mainly hit by $4.5 million of claims net of recoveries from catastrophe severe weather events, $12 million of claims net of recoveries for adverse prior year reserve development, including $8 million of non-core losses, and $5 million of claims net of recoveries for current year strengthening.
Gross written premiums for the quarter was $150.1 million, including $6.6 million from Maison. FedNat announced in February 2019 that it will acquire all 1347 PIH’s homeowners insurance operations, consisting of Maison Insurance Company, Maison Managers, and ClaimCor.
The company's combined ratio for the period reached 122.1 percent, up 3.8 points from the prior year quarter.
“The claims environment in the Florida homeowners market remains challenging, even despite the enactment of AOB reform on July 1, 2019,” said Michael Braun, FedNat’s chief executive officer. "Increased litigation costs were a major factor in the reserve strengthening in our Florida homeowners line and also contributed to the adverse development in our non-core lines, which continue to be in run-off. While FedNat has been a leader in taking rate in Florida homeowners and ensuring stringent underwriting practices, nonetheless at this time we have a cautious near-term outlook in this market and do not expect our Florida policy count to grow in 2020."
Braun added: "Following the successful acquisition of Maison in 2019, we have expanded our presence in more stable and profitable coastal homeowners markets outside of Florida. Our non-Florida book of business was profitable in the fourth quarter, including Maison's contribution for the month of December. We believe our non-Florida growth opportunities position FedNat for improved financial performance in 2020, and long-term profitable growth. FedNat's balance sheet remains strong and will enable us to continue our commitment to returning value to shareholders through growth, as appropriate, and our dividend and share repurchases.”
