NGHC - National General Holdings Corp. Reports Second Quarter 2020 Results

July, 31 2020 09:05 AM National General Holdings Corp

NEW YORK, July 31, 2020 (GLOBE NEWSWIRE) -- National General Holdings Corp. (Nasdaq: NGHC) reported second quarter 2020 net income of $157.6 million or $1.37 per diluted share, compared to net income of $69.0 million or $0.60 per diluted share in the second quarter of 2019. Second quarter 2020 operating earnings (non-GAAP)⁽¹⁾ were $157.6 million or $1.36 per diluted share compared to $78.1 million or $0.67 per diluted share in the second quarter of 2019.

Second Quarter 2020 Highlights versus Second Quarter 2019*

Gross written premium grew by $50.4 million to $1,243.2 million compared to the prior year’s quarter due to our P&C segment growth of 3.2%, driven by the acquisition of National Farmers Union Property and Casualty Company (“Farmers Union Insurance”) in the third quarter of 2019, and organic growth, largely offset by the premium refund provided due to lower miles driven as a result of the COVID-19 pandemic; and our A&H domestic segment growth of 20.2%, excluding our previously sold A&H international business.
The overall combined ratio^(11,12) was 80.5% compared to 90.9% in the prior year’s quarter, excluding non-cash amortization of intangible assets. The P&C segment reported an improved combined ratio to 83.6% from 92.6% in the prior year’s quarter driven by our continued strong underwriting and recent declines in miles driven. The P&C combined ratio includes prior year unfavorable loss development of $8.6 million compared to $10.4 million unfavorable loss development in the prior year’s quarter, and $35.3 million of catastrophe losses related to weather-related events compared to $18.4 million of catastrophe losses in the prior year’s quarter. The A&H segment reported a decrease in the combined ratio to 65.0% from 82.6% in the prior year’s quarter, driven by strong operating results in our small group self-funded and individual products, absence of our international business which was sold in the fourth quarter of 2019, and growth in service and fee income of 51.3%. The A&H combined ratio includes $11.4 million of favorable loss development compared to $8.1 million of favorable loss development in the prior year’s quarter.
Stockholders’ equity was $3.0 billion and fully diluted book value per share was $22.02 at June 30, 2020, growth of 13.0% and 15.5%, respectively, from December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $20.40 at June 30, 2020, growth of 10.7%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE)⁽¹³⁾ was 18.1% as of June 30, 2020.
Second quarter of 2020 operating earnings (non-GAAP)⁽¹⁾excludes the following, net of tax: $0.1 million loss on equity method investments, $4.4 million or $0.04 per share of net gain on investments and $4.2 million or $0.04 per share of non-cash amortization of intangible assets.
Repurchased 459,083 shares during the second quarter of 2020 as part of our share repurchase program.
Agreement announced on July 7, 2020 to be acquired by Allstate for expected total consideration of $34.50 per share cash (consisting of $32.00 in cash and an up to $2.50 per share closing dividend), subject to shareholder and regulatory approval and other customary closing conditions.

Barry Karfunkel, National General’s CEO, stated: “Our well diversified platform continues to perform well. With our recently announced agreement to be acquired by Allstate, we look forward to contributing to the greater Allstate. I want to personally thank each and every one of the National General team members for their outstanding and continued work during these unprecedented times and for their continuing contribution to the success of the pending acquisition.”

*NOTE: Unless specified otherwise, discussion of our second quarter 2020 and 2019 results do not include financial results from the Reciprocal Exchanges, which are presented within our consolidated financial results within this release but are not included in net income available to NGHC common stockholders.

Overview of Second Quarter 2020 as Compared to Second Quarter 2019

Property & Casualty - Gross written premium grew by 3.2% to $1,053.5 million, net written premium increased by 0.4% to $789.4 million, and net earned premium increased by 2.9% to $842.0 million. P&C gross written premium growth was driven by $47.7 million of added premiums from the acquisition of Farmers Union Insurance, and organic growth, largely offset by the premium refund provided due to lower miles driven as a result of the COVID-19 pandemic. Service and fee income was $112.0 million compared to $113.1 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio^(11,12) was 83.6% with a loss and LAE ratio of 59.8% and an expense ratio^(10,12)of 23.8%, versus a prior year combined ratio of 92.6% with a loss and LAE ratio of 72.6% and an expense ratio of 20.0%. The loss and LAE ratio was impacted by pre-tax catastrophe losses of approximately $35.3 million primarily related to weather-related events in the second quarter of 2020, compared to $18.4 million of losses in the second quarter of 2019. Unfavorable loss development was $8.6 million in the second quarter of 2020 primarily driven by small business auto, compared to unfavorable loss development of $10.4 million in the second quarter of 2019.
Accident & Health - Gross written premium grew by $18.0 million compared to the prior year’s quarter due to growth in both our small group self-funded and individual products. Excluding our A&H international business, our A&H domestic segment grew by 20.2% to $189.7 million. Service and fee income grew 51.3% to $80.1 million compared to $52.9 million in the prior year’s quarter. Excluding non-cash amortization of intangible assets, the combined ratio^(11,12) was 65.0% with a loss and LAE ratio of 39.5% and an expense ratio^(10,12) of 25.5%, versus a prior year combined ratio of 82.6% with a loss and LAE ratio of 52.0% and an expense ratio of 30.6%. The loss and LAE ratio reflects strong performance in both small group self-funded and individual products. Favorable loss development was $11.4 million in the second quarter of 2020, compared to favorable loss development of $8.1 million in the second quarter of 2019.
Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $98.4 million, net written premium was $57.3 million, and net earned premium was $54.8 million. Reciprocal Exchanges combined ratio^(11,12) excluding non-cash amortization of intangible assets was 83.1% with a loss and LAE ratio of 54.8% and an expense ratio^(10,12)of 28.3%.

Second quarter of 2020 net investment income decreased to $30.5 million, compared to $35.9 million in the second quarter of 2019. Total investments and cash and cash equivalents (including restricted cash) were $5.2 billion as of June 30, 2020. Accumulated other comprehensive income increased to a $186.9 million gain at June 30, 2020, from a $74.5 million gain at December 31, 2019, primarily due to market improvement.

Interest expense was $11.8 million, down from $12.9 million in the prior year’s quarter. Debt was $682.3 million at June 30, 2020, compared to $686.0 million at December 31, 2019.

The second quarter of 2020 provision for income taxes was $49.0 million and the effective tax rate for the quarter was 22.7% compared with income taxes of $22.3 million and an effective rate of 22.2% in the second quarter of 2019.

Stockholders’ equity was $2,995.1 million at June 30, 2020, growth of 13.0% from $2,649.5 million at December 31, 2019. Fully diluted book value per share was $22.02 at June 30, 2020, growth of 15.5% from $19.06 at December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $20.40 at June 30, 2020, growth of 10.7%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE)⁽¹³⁾ was 18.1% as of June 30, 2020.

Year-to-Date P&C Segment Notable Large Losses
Year

Quarter

Event

P&C Notable Large Losses and LAE ($ millions)

P&C Loss and LAE Ratio Points*

EPS Impact After Tax
2020

Q2

Weather-related Events

$35.3

4.2%

$0.24
2020

Q1

Weather-related Events

$8.1

0.9%

$0.06











2019

Q2

Weather-related Events

$18.4

2.2%

$0.13
2019

Q1

Winter Weather

$12.1

1.6%

$0.08

* Loss and LAE ratio points related to P&C net earned premium in quarter the loss event was recorded.

Additional item -

Homeowners Quota Share - Effective July 1, 2020, we cede 20.0% of net liability and receive a 37.0% ceding commission on in-force, new and renewal business, under our homeowners quota share reinsurance agreement.

About National General Holdings Corp.

National General Holdings Corp. (NASDAQ: NGHC), headquartered in New York City, is a specialty personal lines insurance holding company. National General traces its roots to 1939, has a financial strength rating of A- (excellent) from A.M. Best, and provides personal and commercial automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, supplemental health and other niche insurance products.

IMPORTANT INFORMATION FOR INVESTORS

Additional Information and Where to Find It

This communication may be deemed solicitation material in respect of the proposed acquisition of National General Holdings Corp. (the “Company”) by The Allstate Corporation. In connection with the merger, the Company plans to file with the Securities and Exchange Commission and furnish its stockholders a proxy statement. Additionally, the Company will file other relevant materials with the Securities and Exchange Commission in connection with the proposed transaction.

The materials to be filed by the Company with the Securities and Exchange Commission may be obtained free of charge at the Securities and Exchange Commission’s web site at www.sec.gov. In addition, stockholders also may obtain free copies of the proxy statement, when available, from the Company by contacting National General Holdings Corp. Investor Relations at 59 Maiden Lane, 38th Floor New York, New York 10038, telephone number (212) 380-9462 or InvestorRelations@ngic.com.

INVESTORS AND STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES TO THE MERGER.

Participants in the Solicitation

The Company and its directors, executive officers and other members of management and employees, under the Securities and Exchange Commission rules, may be deemed to be participants in the solicitation of proxies of the Company’s stockholders in connection with the proposed merger. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of certain of the Company’s executive officers and directors in the solicitation by reading the Company’s proxy statement for its 2020 annual meeting of stockholders and the proxy statement and other relevant materials which may be filed with the Securities and Exchange Commission in connection with the merger when and if they become available. Information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the proxy statement relating to the merger when and if it becomes available. Additional information regarding the Company’s executive officers and directors in the solicitation is available by reading the Company’s proxy statement for its 2020 annual meeting of stockholders.

Forward Looking Statements

This news release contains “forward-looking statements” that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company’s current expectations and beliefs concerning future developments and their potential effects on the Company. Forward-looking statements can generally be identified by the use of forward-looking terminology, such as “may,” “will,” “plan,” “expect,” “project,” “intend,” “estimate,” “anticipate” and “believe” or their variations or similar terminology. There can be no assurance that actual developments will be those anticipated by us. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, plans and expectations related to our proposed merger with The Allstate Corporation (“Allstate”), including anticipated timing for closing of the merger, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Allstate, the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, the possibility that competing offers will be made, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the potential effect of changes in LIBOR reporting practices, the effects of pandemics or other widespread health problems such as the ongoing COVID-19 pandemic on our business, including our investment portfolio, and the national and global economy generally, the effect of the performance of financial markets on our investment portfolio, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, estimates of the fair value of investments, development of claims and the effect on loss reserves, large loss activity including hurricanes and wildfires, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, the effect of unpredictable catastrophic losses, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, the effects of tax reform, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with third party vendors or agencies, breaches in data security or other disruptions involving our technology, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. The Company undertakes no obligation to publicly update any forward-looking statement except as may be required by law. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected, is contained in the Company’s filings with the Securities and Exchange Commission.

Income Statement - Second Quarter
$ in thousands
(Unaudited)



Three Months Ended June 30,


2020


2019



NGHC

Reciprocal Exchanges

Consolidated


NGHC

Reciprocal Exchanges

Consolidated

Revenues:














Gross written premium

$
1,243,165


$
98,436


$
1,341,601



$
1,192,762


$
121,146


$
1,313,908


Net written premium

957,640


57,268


1,014,908



939,178


56,220


995,398


Net earned premium

1,010,782


54,785


1,065,567



984,021


46,630


1,030,651

















Ceding commission income

35,530


11,110


46,640



43,346


16,846


60,192


Service and fee income

192,023


2,336


180,592

^(A)

166,049


1,516


148,908

^(G)
Net investment income

30,523


2,012


31,175

^(B)

35,949


2,124


35,131

^(H)
Net gain (loss) on investments

5,511


(353
)

5,158



(5,274
)

44


(5,230
)

Total revenues

$
1,274,369


$
69,890


$
1,329,132

^(C)

$
1,224,091


$
67,160


$
1,269,652

^(I)















Expenses:














Loss and loss adjustment expense

$
570,439


$
30,007


$
600,446



$
680,246


$
35,289


$
715,535


Acquisition costs and other underwriting expenses

219,278


10,100


229,378



185,951


8,175


194,126


General and administrative expenses

257,318


18,858


262,409

^(D)

244,827


21,597


247,767

^(J)
Interest expense

11,779


1,360


11,779

^(E)

12,925


2,942


12,925

^(K)
Total expenses

$
1,058,814


$
60,325


$
1,104,012

^(F)

$
1,123,949


$
68,003


$
1,170,353

^(L)















Income (loss) before provision (benefit) for income taxes

$
215,555


$
9,565


$
225,120



$
100,142


$
(843
)

$
99,299


Provision (benefit) for income taxes

48,981


1,526


50,507



22,266


(25
)

22,241


Net income (loss) before non-controlling interest and dividends on preferred shares

166,574


8,039


174,613



77,876


(818
)

77,058


Less: net income (loss) attributable to noncontrolling interest

—


8,039


8,039



—


(818
)

(818
)

Net income before dividends on preferred shares

166,574


—


166,574



77,876


—


77,876


Less: dividends on preferred shares

8,925


—


8,925



8,925


—


8,925


Net income available to common stockholders

$
157,649


$
—


$
157,649



$
68,951


$
—


$
68,951

NOTES: Consolidated column includes eliminations as follows: (A) $(13,767), (B) $(1,360), (C) $(15,127), (D) $(13,767), (E) $(1,360), (F) $(15,127), (G) $(18,657), (H) $(2,942), (I) $(21,599), (J) $(18,657), (K) $(2,942) and (L) $(21,599).

Income Statement - Year To Date
$ in thousands
(Unaudited)



Six Months Ended June 30,


2020


2019



NGHC

Reciprocal Exchanges

Consolidated


NGHC

Reciprocal Exchanges

Consolidated

Revenues:














Gross written premium

$
2,627,866


$
190,289


$
2,818,155



$
2,596,971


$
226,715


$
2,823,686


Net written premium

2,111,948


112,563


2,224,511



2,054,887


105,175


2,160,062


Net earned premium

2,028,390


112,383


2,140,773



1,902,520


92,288


1,994,808

















Ceding commission income

72,121


24,824


96,945



94,346


35,380


129,726


Service and fee income

383,180


3,493


360,033

^(A)

346,437


2,886


314,415

^(G)
Net investment income

60,270


4,195


61,418

^(B)

70,232


4,294


68,576

^(H)
Net gain (loss) on investments

(557
)

(1,146
)

(1,703
)


(4,508
)

(700
)

(5,208
)

Total revenues

$
2,543,404


$
143,749


$
2,657,466

^(C)

$
2,409,027


$
134,148


$
2,502,317

^(I)















Expenses:














Loss and loss adjustment expense

$
1,220,070


$
72,374


$
1,292,444



$
1,290,030


$
77,314


$
1,367,344


Acquisition costs and other underwriting expenses

437,023


20,597


457,620



389,284


16,760


406,044


General and administrative expenses

518,197


38,421


529,978

^(D)

487,660


43,109


495,861

^(J)
Interest expense

23,559


3,047


23,559

^(E)

25,924


5,950


25,924

^(K)
Total expenses

$
2,198,849


$
134,439


$
2,303,601

^(F)

$
2,192,898


$
143,133


$
2,295,173

^(L)















Income (loss) before provision (benefit) for income taxes

$
344,555


$
9,310


$
353,865



$
216,129


$
(8,985
)

$
207,144


Provision (benefit) for income taxes

77,222


1,457


78,679



46,495


(1,748
)

44,747


Net income (loss) before non-controlling interest and dividends on preferred shares

267,333


7,853


275,186



169,634


(7,237
)

162,397


Less: net income (loss) attributable to noncontrolling interest

—


7,853


7,853



—


(7,237
)

(7,237
)

Net income before dividends on preferred shares

267,333


—


267,333



169,634


—


169,634


Less: dividends on preferred shares

16,800


—


16,800



16,800


—


16,800


Net income available to common stockholders

$
250,533


$
—


$
250,533



$
152,834


$
—


$
152,834

NOTES: Consolidated column includes eliminations as follows: (A) $(26,640), (B) $(3,047), (C) $(29,687), (D) $(26,640), (E) $(3,047), (F) $(29,687) (G) $(34,908), (H) $(5,950), (I) $(40,858), (J) $(34,908), (K) $(5,950) and (L) $(40,858).

Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)


Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019
Net income available to common stockholders
$
157,649


$
68,951


$
250,533


$
152,834

Basic net income per common share
$
1.39


$
0.61


$
2.21


$
1.35

Diluted net income per common share
$
1.37


$
0.60


$
2.17


$
1.33









Operating earnings attributable to NGHC (non-GAAP)⁽¹⁾
$
157,643


$
78,140


$
263,402


$
167,856

Basic operating earnings per common share (non-GAAP)⁽¹⁾
$
1.39


$
0.69


$
2.32


$
1.48

Diluted operating earnings per common share (non-GAAP)⁽¹⁾
$
1.36


$
0.67


$
2.27


$
1.45









Dividends declared per common share
$
0.05


$
0.04


$
0.10


$
0.08









Weighted average number of basic shares outstanding
113,542,628


113,178,552


113,549,952


113,097,084

Weighted average number of diluted shares outstanding
115,720,069


116,050,267


115,898,110


116,062,721

Shares outstanding, end of period
113,397,545


113,215,632





Fully diluted shares outstanding, end of period
115,574,986


116,087,347





Book value per share
$
22.44


$
17.92





Fully diluted book value per share
$
22.02


$
17.48

Reconciliation of Net Income to Operating Earnings (Non-GAAP)^(1)(13)
$ in thousands, except per share data
(Unaudited)


Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019
Net income available to common stockholders
$
157,649


$
68,951


$
250,533


$
152,834

Add (subtract):







Equity in (earnings) losses of equity method investments
160


(731
)

3,888


203

Net (gain) loss on investments
(5,511
)

5,274


557


4,508

Non-cash amortization of intangible assets
5,343


7,089


11,845


14,305

Income tax expense (benefit)
2


(2,443
)

(3,421
)

(3,994
)
Operating earnings attributable to NGHC (non-GAAP)⁽¹⁾
$
157,643


$
78,140


$
263,402


$
167,856









Operating earnings per common share (non-GAAP)⁽¹⁾:







Basic operating earnings per common share (non-GAAP)⁽¹⁾
$
1.39


$
0.69


$
2.32


$
1.48

Diluted operating earnings per common share (non-GAAP)⁽¹⁾
$
1.36


$
0.67


$
2.27


$
1.45

Balance Sheet
$ in thousands
(Unaudited)



June 30, 2020


December 31, 2019

ASSETS

NGHC

Reciprocal Exchanges

Consolidated


NGHC

Reciprocal Exchanges

Consolidated

Total investments ⁽²⁾

$
4,853,180


$
340,103


$
5,085,750

^(A)

$
4,632,960


$
329,494


$
4,854,998

^(H)
Cash and cash equivalents, including restricted cash

334,771


237


335,008



163,480


983


164,463


Premiums and other receivables, net

1,438,085


49,649


1,487,734



1,373,089


55,859


1,428,948


Reinsurance balances

1,614,713


196,005


1,810,718



1,745,036


225,019


1,970,055


Intangible assets, net

347,686


3,135


350,821



362,598


3,225


365,823


Goodwill

179,328


—


179,328



179,328


—


179,328


Other ⁽³⁾

776,916


29,364


768,484

^(B)

798,675


29,070


792,919

^(I)
Total assets

$
9,544,679


$
618,493


$
10,017,843

^(C)

$
9,255,166


$
643,650


$
9,756,534

^(J)
LIABILITIES AND STOCKHOLDERS’ EQUITY














Liabilities:














Unpaid loss and loss adjustment expense reserves

$
2,626,314


$
200,270


$
2,826,584



$
2,680,628


$
205,786


$
2,886,414


Unearned premiums and other revenue

2,102,044


226,403


2,328,447



2,059,688


252,553


2,312,241


Reinsurance payable

437,989


23,907


461,896



527,155


35,689


562,844


Accounts payable and accrued expenses

320,176


45,549


327,929

^(D)

306,869


43,323


315,366

^(K)
Debt

682,266


107,533


682,266

^(E)

686,006


107,456


686,006

^(L)
Other

380,766


30,279


411,045



345,366


30,803


376,169


Total liabilities

$
6,549,555


$
633,941


$
7,038,167

^(F)

$
6,605,712


$
675,610


$
7,139,040

^(M)
Stockholders’ equity:














Preferred stock ⁽⁴⁾

$
450,000


$
—


$
450,000



$
450,000


$
—


$
450,000


Common stock ⁽⁵⁾

1,139


—


1,139



1,134


—


1,134


Treasury stock, at cost ⁽⁶⁾

(8,482
)

—


(8,482
)


—


—


—


Additional paid-in capital

1,069,152


—


1,069,152



1,065,634


—


1,065,634


Accumulated other comprehensive income

186,864


—


186,864



74,548


—


74,548


Retained earnings

1,296,451


—


1,296,451



1,058,138


—


1,058,138


Total National General Holdings Corp. stockholders’ equity

2,995,124


—


2,995,124



2,649,454


—


2,649,454


Noncontrolling interest

—


(15,448
)

(15,448
)


—


(31,960
)

(31,960
)

Total stockholders’ equity

$
2,995,124


$
(15,448
)

$
2,979,676



$
2,649,454


$
(31,960
)

$
2,617,494


Total liabilities and stockholders’ equity

$
9,544,679


$
618,493


$
10,017,843

^(G)

$
9,255,166


$
643,650


$
9,756,534

^(N)

NOTES: Consolidated column includes eliminations as follows: (A) $(107,533), (B) $(37,796), (C) $(145,329), (D) $(37,796), (E) $(107,533), (F) $(145,329), (G) $(145,329) (H) $(107,456), (I) $(34,826), (J) $(142,282), (K) $(34,826), (L) $(107,456), (M) $(142,282) and (N) $(142,282).

Segment Information - Second Quarter
$ in thousands
(Unaudited)



Three Months Ended June 30,


2020


2019


P&C

A&H

NGHC


Reciprocal Exchanges


P&C

A&H

NGHC


Reciprocal Exchanges
Gross written premium

$
1,053,508


$
189,657


$
1,243,165



$
98,436



$
1,021,090


$
171,672


$
1,192,762



$
121,146

Net written premium

789,428


168,212


957,640



57,268



786,471


152,707


939,178


56,220

Net earned premium

841,985


168,797


1,010,782



54,785



817,972


166,049


984,021



46,630





















Ceding commission income

35,059


471


35,530



11,110



39,418


3,928


43,346



16,846

Service and fee income

111,955


80,068


192,023



2,336



113,112


52,937


166,049



1,516

Total underwriting revenues

$
988,999


$
249,336


$
1,238,335



$
68,231



$
970,502


$
222,914


$
1,193,416



$
64,992





















Loss and loss adjustment expense ^(A)

503,784


66,655


570,439



30,007



593,922


86,324


680,246



35,289

Acquisition costs and other underwriting expenses

152,384


66,894


219,278



10,100



137,950


48,001


185,951



8,175

General and administrative expenses

199,327


57,991


257,318



18,858



183,535


61,292


244,827



21,597

Total underwriting expenses

$
855,495


$
191,540


$
1,047,035



$
58,965



$
915,407


$
195,617


$
1,111,024



$
65,061





















Underwriting income (loss)

133,504


57,796


191,300



9,266



55,095


27,297


82,392



(69
)
Non-cash amortization of intangible assets

4,041


1,302


5,343



30



5,412


1,677


7,089



12

Underwriting income (loss) before amortization and impairment

$
137,545


$
59,098


$
196,643



$
9,296



$
60,507


$
28,974


$
89,481



$
(57
)




















Underwriting ratios



















Loss and loss adjustment expense ratio ⁽⁷⁾

59.8
%

39.5
%

56.4
%


54.8
%


72.6
%

52.0
%

69.1
%


75.7
%
Operating expense ratio (Non-GAAP) ⁽⁸⁾

24.3
%

26.3
%

24.6
%


28.3
%


20.7
%

31.6
%

22.5
%


24.5
%
Combined ratio (Non-GAAP) ⁽⁹⁾

84.1
%

65.8
%

81.0
%


83.1
%


93.3
%

83.6
%

91.6
%


100.2
%




















Underwriting ratios (before amortization and impairment)



















Loss and loss adjustment expense ratio ⁽⁷⁾

59.8
%

39.5
%

56.4
%


54.8
%


72.6
%

52.0
%

69.1
%


75.7
%
Operating expense ratio (Non-GAAP) ⁽¹⁰⁾

23.8
%

25.5
%

24.1
%


28.3
%


20.0
%

30.6
%

21.8
%


24.4
%
Combined ratio before amortization and impairment (Non-GAAP) ⁽¹¹⁾

83.6
%

65.0
%

80.5
%


83.1
%


92.6
%

82.6
%

90.9
%


100.1
%

(A) Loss and loss adjustment expenses for the three months ended June 30, 2020 included $8,584 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $11,430 of favorable loss development in the A&H segment, versus $10,396 of unfavorable loss development in the P&C segment, and $8,135 of favorable loss development in the A&H segment for the three months ended June 30, 2019.

Segment Information - Year To Date
$ in thousands
(Unaudited)



Six Months Ended June 30,


2020


2019


P&C

A&H

NGHC


Reciprocal Exchanges


P&C

A&H

NGHC


Reciprocal Exchanges
Gross written premium

$
2,251,184


$
376,682


$
2,627,866



$
190,289



$
2,166,755


$
430,216


$
2,596,971



$
226,715

Net written premium

1,775,520


336,428


2,111,948



112,563



1,701,999


352,888


2,054,887


105,175

Net earned premium

1,694,887


333,503


2,028,390



112,383



1,574,891


327,629


1,902,520



92,288





















Ceding commission income

71,090


1,031


72,121



24,824



87,827


6,519


94,346



35,380

Service and fee income

222,588


160,592


383,180



3,493



232,488


113,949


346,437



2,886

Total underwriting revenues

$
1,988,565


$
495,126


$
2,483,691



$
140,700



$
1,895,206


$
448,097


$
2,343,303



$
130,554





















Loss and loss adjustment expense ^(A)

1,071,814


148,256


1,220,070



72,374



1,118,957


171,073


1,290,030



77,314

Acquisition costs and other underwriting expenses

301,658


135,365


437,023



20,597



283,435


105,849


389,284



16,760

General and administrative expenses

400,454


117,743


518,197



38,421



367,730


119,930


487,660



43,109

Total underwriting expenses

$
1,773,926


$
401,364


$
2,175,290



$
131,392



$
1,770,122


$
396,852


$
2,166,974



$
137,183





















Underwriting income (loss)

214,639


93,762


308,401



9,308



125,084


51,245


176,329



(6,629
)
Non-cash amortization of intangible assets

9,228


2,617


11,845



60



10,897


3,408


14,305



23

Underwriting income (loss) before amortization and impairment

$
223,867


$
96,379


$
320,246



$
9,368



$
135,981


$
54,653


$
190,634



$
(6,606
)




















Underwriting ratios



















Loss and loss adjustment expense ratio ⁽⁷⁾

63.2
%

44.5
%

60.1
%


64.4
%


71.0
%

52.2
%

67.8
%


83.8
%
Operating expense ratio (Non-GAAP) ⁽⁸⁾

24.1
%

27.4
%

24.6
%


27.3
%


21.0
%

32.1
%

22.9
%


23.4
%
Combined ratio (Non-GAAP) ⁽⁹⁾

87.3
%

71.9
%

84.7
%


91.7
%


92.0
%

84.3
%

90.7
%


107.2
%




















Underwriting ratios (before amortization and impairment)



















Loss and loss adjustment expense ratio ⁽⁷⁾

63.2
%

44.5
%

60.1
%


64.4
%


71.0
%

52.2
%

67.8
%


83.8
%
Operating expense ratio (Non-GAAP) ⁽¹⁰⁾

23.6
%

26.6
%

24.1
%


27.3
%


20.3
%

31.1
%

22.2
%


23.4
%
Combined ratio before amortization and impairment (Non-GAAP) ⁽¹¹⁾

86.8
%

71.1
%

84.2
%


91.7
%


91.3
%

83.3
%

90.0
%


107.2
%

(A) Loss and loss adjustment expenses for the six months ended June 30, 2020 included $13,055 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $16,238 of favorable loss development in the A&H segment, versus $4,882 of unfavorable loss development in the P&C segment, and $18,987 of favorable loss development in the A&H segment for the six months ended June 30, 2019.

Reconciliation of Operating Expense Ratio (Non-GAAP)^(8,10,12)
$ in thousands
(Unaudited)



Three Months Ended June 30,


2020


2019


P&C

A&H

NGHC


Reciprocal Exchanges


P&C

A&H

NGHC


Reciprocal Exchanges
Total underwriting expenses

$
855,495


$
191,540


$
1,047,035



$
58,965



$
915,407


$
195,617


$
1,111,024



$
65,061

Less: Loss and loss adjustment expense

503,784


66,655


570,439



30,007



593,922


86,324


680,246



35,289

Less: Ceding commission income

35,059


471


35,530



11,110



39,418


3,928


43,346



16,846

Less: Service and fee income

111,955


80,068


192,023



2,336



113,112


52,937


166,049



1,516

Operating expense (Non-GAAP) ⁽⁸⁾

204,697


44,346


249,043



15,512



168,955


52,428


221,383



11,410

Net earned premium

$
841,985


$
168,797


$
1,010,782



$
54,785



$
817,972


$
166,049


$
984,021



$
46,630

Operating expense ratio (Non-GAAP) ⁽⁸⁾

24.3
%

26.3
%

24.6
%


28.3
%


20.7
%

31.6
%

22.5
%


24.5
%




















Total underwriting expenses

$
855,495


$
191,540


$
1,047,035



$
58,965



$
915,407


$
195,617


$
1,111,024



$
65,061

Less: Loss and loss adjustment expense

503,784


66,655


570,439



30,007



593,922


86,324


680,246



35,289

Less: Ceding commission income

35,059


471


35,530



11,110



39,418


3,928


43,346



16,846

Less: Service and fee income

111,955


80,068


192,023



2,336



113,112


52,937


166,049



1,516

Less: Non-cash amortization of intangible assets

4,041


1,302


5,343



30



5,412


1,677


7,089



12

Operating expense before amortization and impairment (Non-GAAP) ⁽¹⁰⁾

200,656


43,044


243,700



15,482



163,543


50,751


214,294



11,398

Net earned premium

$
841,985


$
168,797


$
1,010,782



$
54,785



$
817,972


$
166,049


$
984,021



$
46,630

Operating expense ratio before amortization and impairment (Non-GAAP) ⁽¹⁰⁾

23.8
%

25.5
%

24.1
%


28.3
%


20.0
%

30.6
%

21.8
%


24.4
%

Reconciliation of Operating Expense Ratio (Non-GAAP)^(8,10,12)
$ in thousands
(Unaudited)



Six Months Ended June 30,


2020


2019


P&C

A&H

NGHC


Reciprocal Exchanges


P&C

A&H

NGHC


Reciprocal Exchanges
Total underwriting expenses

$
1,773,926


$
401,364


$
2,175,290



$
131,392



$
1,770,122


$
396,852


$
2,166,974



$
137,183

Less: Loss and loss adjustment expense

1,071,814


148,256


1,220,070



72,374



1,118,957


171,073


1,290,030



77,314

Less: Ceding commission income

71,090


1,031


72,121



24,824



87,827


6,519


94,346



35,380

Less: Service and fee income

222,588


160,592


383,180



3,493



232,488


113,949


346,437



2,886

Operating expense (Non-GAAP) ⁽⁸⁾

408,434


91,485


499,919



30,701



330,850


105,311


436,161



21,603

Net earned premium

$
1,694,887


$
333,503


$
2,028,390



$
112,383



$
1,574,891


$
327,629


$
1,902,520



$
92,288

Operating expense ratio (Non-GAAP) ⁽⁸⁾

24.1
%

27.4
%

24.6
%


27.3
%


21.0
%

32.1
%

22.9
%


23.4
%




















Total underwriting expenses

$
1,773,926


$
401,364


$
2,175,290



$
131,392



$
1,770,122


$
396,852


$
2,166,974



$
137,183

Less: Loss and loss adjustment expense

1,071,814


148,256


1,220,070



72,374



1,118,957


171,073


1,290,030



77,314

Less: Ceding commission income

71,090


1,031


72,121



24,824



87,827


6,519


94,346



35,380

Less: Service and fee income

222,588


160,592


383,180



3,493



232,488


113,949


346,437



2,886

Less: Non-cash amortization of intangible assets

9,228


2,617


11,845



60



10,897


3,408


14,305



23

Operating expense before amortization and impairment (Non-GAAP) ⁽¹⁰⁾

399,206


88,868


488,074



30,641



319,953


101,903


421,856



21,580

Net earned premium

$
1,694,887


$
333,503


$
2,028,390



$
112,383



$
1,574,891


$
327,629


$
1,902,520



$
92,288

Operating expense ratio before amortization and impairment (Non-GAAP) ⁽¹⁰⁾

23.6
%

26.6
%

24.1
%


27.3
%


20.3
%

31.1
%

22.2
%


23.4
%

Premiums by Product Line
$ in thousands
(Unaudited)


Three Months Ended June 30,

Gross Written Premium


Net Written Premium


Net Earned Premium

2020

2019

Change


2020

2019

Change


2020

2019

Change
Property & Casualty



















Personal Auto
$
612,927


$
611,312


0.3
%


$
533,242


$
511,952


4.2
%


$
561,548


$
542,834


3.4
%
Homeowners
205,211


190,037


8.0
%


84,257


108,404


(22.3
)%


99,368


102,008


(2.6
)%
RV/Packaged
57,801


61,314


(5.7
)%


55,882


58,167


(3.9
)%


46,956


49,411


(5.0
)%
Small Business Auto
60,717


83,829


(27.6
)%


46,429


65,420


(29.0
)%


53,733


60,059


(10.5
)%
Lender-placed insurance
103,922


58,859


76.6
%


64,674


37,214


73.8
%


71,102


60,278


18.0
%
Other
12,930


15,739


(17.8
)%


4,944


5,314


(7.0
)%


9,278


3,382


174.3
%
Total Premium
$
1,053,508


$
1,021,090


3.2
%


$
789,428


$
786,471


0.4
%


$
841,985


$
817,972


2.9
%




















Accident & Health



















Group
89,467


75,036


19.2
%


69,217


57,960


19.4
%


69,232


57,949


19.5
%
Individual
100,190


82,799


21.0
%


98,995


82,652


19.8
%


99,565


83,916


18.6
%
Total Premium Domestic
$
189,657


$
157,835


20.2
%


$
168,212


$
140,612


19.6
%


$
168,797


$
141,865


19.0
%
International
—


13,837


(100.0
)%


—


12,095


(100.0
)%


—


24,184


(100.0
)%




















Total National General
$
1,243,165


$
1,192,762


4.2
%


$
957,640


$
939,178


2.0
%


$
1,010,782


$
984,021


2.7
%
Total National General (A)
$
1,243,165


$
1,178,925


5.4
%


$
957,640


$
927,083


3.3
%


$
1,010,782


$
959,837


5.3
%




















Reciprocal Exchanges



















Personal Auto
$
37,382


$
43,984


(15.0
)%


$
34,281


$
18,661


83.7
%


$
31,714


$
16,093


97.1
%
Homeowners
60,160


76,140


(21.0
)%


22,667


37,211


(39.1
)%


22,741


30,225


(24.8
)%
Other
894


1,022


(12.5
)%


320


348


(8.0
)%


330


312


5.8
%
Total Premium
$
98,436


$
121,146


(18.7
)%


$
57,268


$
56,220


1.9
%


$
54,785


$
46,630


17.5
%




















Consolidated Total
$
1,341,601


$
1,313,908


2.1
%


$
1,014,908


$
995,398


2.0
%


$
1,065,567


$
1,030,651


3.4
%

(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.

Premiums by Product Line
$ in thousands
(Unaudited)


Six Months Ended June 30,

Gross Written Premium


Net Written Premium


Net Earned Premium

2020

2019

Change


2020

2019

Change


2020

2019

Change
Property & Casualty



















Personal Auto
$
1,407,424


$
1,377,993


2.1
%


$
1,235,549


$
1,170,872


5.5
%


$
1,141,050


$
1,053,388


8.3
%
Homeowners
370,464


342,079


8.3
%


172,800


193,649


(10.8
)%


190,851


186,066


2.6
%
RV/Packaged
110,929


113,165


(2.0
)%


107,860


109,764


(1.7
)%


96,248


99,716


(3.5
)%
Small Business Auto
133,469


169,707


(21.4
)%


105,028


139,606


(24.8
)%


113,158


127,692


(11.4
)%
Lender-placed insurance
199,366


134,797


47.9
%


142,143


79,284


79.3
%


140,769


101,996


38.0
%
Other
29,532


29,014


1.8
%


12,140


8,824


37.6
%


12,811


6,033


112.3
%
Total Premium
$
2,251,184


$
2,166,755


3.9
%


$
1,775,520


$
1,701,999


4.3
%


$
1,694,887


$
1,574,891


7.6
%




















Accident & Health



















Group
177,005


139,974


26.5
%


138,688


111,910


23.9
%


138,702


111,912


23.9
%
Individual
199,677


166,991


19.6
%


197,740


166,775


18.6
%


194,801


166,151


17.2
%
Total Premium Domestic
$
376,682


$
306,965


22.7
%


$
336,428


$
278,685


20.7
%


$
333,503


$
278,063


19.9
%
International
—


123,251


(100.0
)%


—


74,203


(100.0
)%


—


49,566


(100.0
)%




















Total National General
$
2,627,866


$
2,596,971


1.2
%


$
2,111,948


$
2,054,887


2.8
%


$
2,028,390


$
1,902,520


6.6
%
Total National General (A)
$
2,627,866


$
2,473,720


6.2
%


$
2,111,948


$
1,980,684


6.6
%


$
2,028,390


$
1,852,954


9.5
%




















Reciprocal Exchanges



















Personal Auto
$
69,191


$
80,846


(14.4
)%


$
63,355


$
34,306


84.7
%


$
64,637


$
31,954


102.3
%
Homeowners
119,396


143,940


(17.1
)%


48,592


70,227


(30.8
)%


47,074


59,716


(21.2
)%
Other
1,702


1,929


(11.8
)%


616


642


(4.0
)%


672


618


8.7
%
Total Premium
$
190,289


$
226,715


(16.1
)%


$
112,563


$
105,175


7.0
%


$
112,383


$
92,288


21.8
%




















Consolidated Total
$
2,818,155


$
2,823,686


(0.2
)%


$
2,224,511


$
2,160,062


3.0
%


$
2,140,773


$
1,994,808


7.3
%

(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.

Fee Income
$ in thousands
(Unaudited)


Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

Change

2020

2019

Change
Property & Casualty











Service and Fee Income
$
111,955


$
113,112


(1.0
)%

$
222,588


$
232,488


(4.3
)%
Ceding Commission Income
35,059


39,418


(11.1
)%

71,090


87,827


(19.1
)%
Property & Casualty
$
147,014


$
152,530


(3.6
)%

$
293,678


$
320,315


(8.3
)%












Accident & Health











Service and Fee Income











Group
$
43,241


$
32,862


31.6
%

$
83,723


$
63,236


32.4
%
Individual
2,265


1,242


82.4
%

4,482


3,378


32.7
%
Medicare Sales
11,078


5,159


114.7
%

22,790


12,260


85.9
%
Third Party Fee
23,484


13,674


71.7
%

49,597


35,075


41.4
%
Total Service and Fee Income
80,068


52,937


51.3
%

160,592


113,949


40.9
%
Ceding Commission Income
471


3,928


(88.0
)%

1,031


6,519


(84.2
)%
Accident and Health
$
80,539


$
56,865


41.6
%

$
161,623


$
120,468


34.2
%












Total National General
$
227,553


$
209,395


8.7
%

$
455,301


$
440,783


3.3
%












Reciprocal Exchanges











Service and Fee Income
$
2,336


$
1,516


54.1
%

$
3,493


$
2,886


21.0
%
Ceding Commission Income
11,110


16,846


(34.0
)%

24,824


35,380


(29.8
)%
Reciprocal Exchanges
$
13,446


$
18,362


(26.8
)%

$
28,317


$
38,266


(26.0
)%












Consolidated Total ^(A)
$
227,232


$
209,100


8.7
%

$
456,978


$
444,141


2.9
%

NOTES: (A) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges in Service and Fee Income of $(13,767) and $(18,657) in the three months ended June 30, 2020 and 2019, respectively, and $(26,640) and $(34,908) in the six months ended June 30, 2020 and 2019, respectively.

Additional Disclosures

(1) References to operating earnings and basic and diluted operating earnings per share (“EPS”) are non-GAAP financial measures defined by the Company as net income/loss and basic and diluted earnings per share excluding after-tax net gain or loss on investments (including credit loss on investments in debt securities and foreign exchange gain or loss), earnings or losses of equity method investments (related parties), deferred tax asset impairment, non-cash impairment of goodwill and non-cash amortization of intangible assets, and any significant non-recurring or infrequent items that may not be indicative of ongoing operations. The Company believes operating earnings and basic and diluted operating EPS are relevant measures of the Company’s profitability because operating earnings and basic and diluted operating EPS contain the components of net income upon which the Company’s management has the most influence and excludes factors outside management’s direct control and non-recurring items. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure.

(2) Total investments includes $235,458 and $238,841 from related parties at June 30, 2020 and December 31, 2019, respectively.

(3) Other includes $2,405 and $2,391 from related parties at June 30, 2020 and December 31, 2019, respectively.

(4) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - June 30, 2020; authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - December 31, 2019.

(5) Common stock: $0.01 par value - authorized 150,000,000 shares, issued 113,856,628 and outstanding 113,397,545 shares - June 30, 2020; authorized 150,000,000 shares, issued and outstanding 113,368,811 shares - December 31, 2019.

(6) Treasury stock, at cost: 459,083 shares - June 30, 2020.

(7) Loss and loss adjustment expense ratio (loss ratio) is calculated by dividing loss and loss adjustment expense by net earned premium.

(8) Operating expense ratio is a non-GAAP financial measure defined by the Company, which is commonly used in the insurance industry. The Company calculates the ratio by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expenses less ceding commission income and service and fee income. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business.

(9) Combined ratio is a non-GAAP financial measure defined by the Company, which is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio⁽⁷⁾ and the operating expense ratio (non-GAAP)⁽⁸⁾ together. The ratio is used as an indicator of the Company’s underwriting discipline, efficiency in acquiring and servicing its business, and overall underwriting profit. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss.

(10) Operating expense ratio before amortization and impairment is a non-GAAP financial measure defined by the Company, which is commonly used in the insurance industry. The Company calculates the ratio by dividing the operating expense before amortization and impairment by net earned premium. Operating expense before amortization and impairment consists of the sum of acquisition and other underwriting costs and general and administrative expenses less ceding commission income, service and fee income, non-cash amortization of intangible assets and non-cash impairment of goodwill. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its business. Management believes that this measure provides a more useful comparison to the operating expense ratio of other insurance companies involved in fewer acquisitions.

(11) Combined ratio before amortization and impairment is a non-GAAP financial measure defined by the Company, which is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio⁽⁷⁾ and the operating expense ratio before amortization and impairment (non-GAAP)⁽¹⁰⁾ together. The ratio is used as an indicator of the Company’s underwriting discipline, efficiency in acquiring and servicing its business, and overall underwriting profit. Management believes that this measure of underwriting profitability provides a more useful comparison to the combined ratio of other insurance companies involved in fewer acquisitions. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss.

(12) Combined ratio (non-GAAP), operating expense ratio (non-GAAP), combined ratio before amortization and impairment (non-GAAP) and operating expense ratio before amortization and impairment (non-GAAP) are considered non-GAAP financial measures under applicable SEC rules. Other companies may calculate these ratios differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure.

(13) Trailing twelve month operating return on average equity is the ratio of the previous twelve months operating earnings (non-GAAP) to average shareholders’ equity for the same twelve-month period. Average shareholders’ equity is the sum of the shareholders’ equity excluding preferred stock at the beginning and end of the period divided by two. In the opinion of the Company’s management this ratio is an important indicator of how well management creates value for its shareholders through its operating activities and capital management. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General. Please see the Non-GAAP Financial Measures table within this release for the reconciliation of net income to operating earnings, which is the Non-GAAP component of the operating return on average equity.

(14) Combined ratio excluding losses from various weather-related events, is calculated by taking the combined ratio as defined in Note 11, and adjusting it to exclude the total net losses of $35.3 million and $18.4 million from these events for the three months ended June 30, 2020 and 2019, respectively. The Company believes this measure enhances investors’ understanding of our results by eliminating what we believe are volatile and unusual events.

Year



Combined Ratio ⁽¹¹⁾

Impact of Weather-related Events

Combined Ratio Excluding Weather-related Events ⁽¹⁴⁾
2020

P&C Segment

83.6%

4.2%

79.4%









2020

Overall NGHC

80.5%

3.5%

77.0%


















2019

P&C Segment

92.6%

2.2%

90.4%









2019

Overall NGHC

90.9%

1.2%

89.7%

(15) Our products in the P&C segment include personal auto, homeowners, RV/Packaged, small business auto, lender-placed insurance and other products. The personal auto product includes policies for standard, preferred and nonstandard automobile insurance. The homeowners product includes multiple-peril policies and personal umbrella coverage to the homeowner. The RV/Packaged product offers policies that include RV automatic personal effects coverage, optional replacement cost coverage, RV storage coverage and full-time liability coverage. The small business auto product offers policies that include liability and physical damage coverage for light-to-medium duty commercial vehicles. The lender-placed insurance product offers fire, home and flood products, as well as collateral protection insurance and guaranteed asset protection products for automobiles. Our products and revenue in the A&H segment include group, individual and third party fees. The group product includes revenue from our small group self-funded product. The individual product line includes revenue from our supplemental products including short-term medical, accident/AD&D, hospital indemnity, cancer/critical illness, dental and term life insurance. Medicare fees include commission and general agent fees for selling Medicare policies issued by third-party insurance companies as well as revenue from our Medicare Supplement product. Third party fees include commission and general agent fees for selling policies issued by third-party insurance companies, fees generated through selling our technology products to third parties.

Investor Contact

Clifford Gallant
SVP of Capital Strategy and Investor Relations
Phone: 212-380-9462
Email: Clifford.Gallant@NGIC.COM

Company Name:	National General Holdings Corp
Stock Symbol:	NGHC
Market:	NASDAQ
Website:	nationalgeneral.com

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