US cat losses push FedNat’s combined ratio upwards
Catastrophe losses from Hurricane Dorian, Hurricane Barry and Tropical Storm Imelda have driven the combined ratio for US insurance holding company FedNat Holding up 5.3 points to 105.5 percent, it announced in its Q3 results.
It said this figure, as measured against the same three-month period last year, is the result of 3.4 points of higher net catastrophe losses in the period and 6.8 points from higher catastrophe reinsurance ceded premiums, partially offset by 5 points from improved underwriting margins as a result of its decision to focus on homeowners and continued discipline over operating expenses.
The company reported a 14.5 percent increase in gross written premiums to $159.1 million, including FedNat Insurance Company growth of 2 percent in Florida.
Net premiums earned decreased to $87.4 million, including $8 million quarter over quarter reduction primarily due to incremental costs from the new excess of loss reinsurance program: as a result of recent growth in the size of the company’s homeowners book of business, its 2019-2020 excess of loss reinsurance program annual costs increased $14 million to $179 million, pursuant to its annual exposure adjustment.
The company’s net income is $4.7 million, while its adjusted operating income of $4.3 million.
It saw $7.0 million of claims, net of recoveries, from Hurricane Dorian, Hurricane Barry and Tropical Storm Imelda impacting South Carolina, Florida and other states.
“FedNat delivered solid third quarter results and made significant progress on our strategies to improve profitability and enhance shareholder value,” said CEO Michael Braun. “We’re encouraged by the performance of our core homeowners line of business, and continued earnings growth in our non-Florida book as we continue to expand our presence in select coastal states where we see opportunity.
“To this end, FedNat is set to continue our operational growth in these coastal states upon the completion of our Maison acquisition, which is set to close in December. Consistent with our core focus, this acquisition is in the homeowners line of business and is in markets where we already have operations, including Texas and Louisiana. Further, we have a more optimistic outlook in our home, Florida market with Assignment of Benefits (AOB) reform in effect, which should pave the way for an improved operating environment as we enter the new year. With this backdrop, we remain focused on strengthening our homeowners business throughout the southeast of the United States. This strategic roadmap sets the stage to unlock value and enhance shareholder value for years to come.”
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