SUNRISE, Fla., May 04, 2021 (GLOBE NEWSWIRE) -- FedNat Holding Company (the Company) (NASDAQ:FNHC) today reported results for the three months ended March31, 2021.
Q1 2021 highlights (as measured against the same three-month period last year, except where noted):
- Net loss of $19.4 million or $(1.35) per diluted share compared to net income of $2.1 million or $0.15 per diluted share.
- Adjusted operating loss of $19.4 million or $(1.35) per diluted share as compared to adjusted operating income of $4.3 million or $0.30 per diluted share.
- $18.3 million of claims, net of reinsurance recoveries, pre-tax, from catastrophe losses driven primarily by Winter Storm Uri (Uri), which caused heavy residential damage in Texas, as previously communicated.
- $174.2 million of gross written premiums, compared to $173.0 million.
- Gross loss ratio, excluding catastrophe losses, of 36.5% and gross expense ratio of 26.0%, as compared to 38.4% and 25.9%, respectively, in the first quarter of 2020.
- Combined ratio of 189.0%, up 83.7 percentage points, including 33.0 points of net catastrophe losses in the period.
- $13.6 million of incremental ceded premiums related to additional excess-of-loss reinsurance purchases and reinstatement premiums from 2020/2021 treaty year retention events.
- Florida homeowners in-force policies decreased 17.9% to approximately 197,000, while Florida gross premiums written increased 0.4%, reflecting continued execution of our strategy to limit our Florida exposure while increasing revenue per policy, until rates more accurately reflect increased costs of claims and reinsurance.
- 6.4% increase in non-Florida homeowners in-force policies to approximately 149,000, in-line with our geographic diversification strategy.
- On March 15, 2021, the Company closed an underwritten public offering of 3,500,000 shares of its common stock for net proceeds of approximately $15.1 million. Subsequent to the first quarter, on April 20, 2021, FedNat raised $21.0 million from a convertible notes offering.
- Non-insurance company liquidity of $71 million at March31, 2021.
- Book value per share decreased $3.03, or 26.3%, to $8.50 as compared to $11.53 as of December31, 2020, due primarily to a net loss of $(1.35) per share, issuance of common stock of $1.05 per share and unrealized losses on our fixed-income portfolio of $(0.50) per share, each for the three months ended March31, 2021.
Mr. Michael H. Braun, FedNat's Chief Executive Officer, said Our first quarter results were impacted by higher-than-expected catastrophe losses primarily from Winter Storm Uri which caused heavy residential damage in Texas in February. I want to thank our dedicated staff for continuing to demonstrate FedNat's commitment to providing our policyholders and partner agents with the highest quality service in their time of need.
Mr. Braun continued, This winter storm was the sixth severe weather event to impact FedNat since July 1, which has resulted in challenging times for the Company financially. To meet these challenges, FedNat took action to conserve liquidity at the holding company and maintain appropriate capital positions at our insurance companies. FedNat recently completed two capital raising transactions which raised gross proceeds of $38 million and purchased additional reinsurance coverage to help provide more protection and statutory surplus relief for our insurance companies. We continue to execute on our initiatives to improve the profitability of our homeowners business and build long-term value, including implementation of rate increases in both our Florida and non-Florida markets and reducing our Florida book of business until rates are more adequate. Based on the in-force book as of the fourth quarter of 2020, these rate increases would contribute over $90 million in incremental gross earned premium in 2021 and over $230 million of cumulative incremental premium in 2021 and 2022, as compared to 2020, when fully earned out in the first quarter of 2022. However, these multiple rate increases afford us the opportunity to hold our total in-force premiums flat while reducing our total policy counts and total insured values.
Mr. Braun further added, Insurance legislation was recently passed in Florida and now awaits the governor's signature. We are hopeful that this legislation will slow the persistently increasing cost of operating in Florida; however, we will remain cautious until we see evidence of potential benefits over the second half of 2021. In addition, as a result of our continued exposure management efforts to reduce our property exposures, we expect a reduction in the total spend on our catastrophe reinsurance program beginning July 1, 2021 due to our smaller portfolio of business. While we recognize there is pressure on reinsurance pricing, particularly on the working layers of our program, our lower anticipated total reinsurance spend beginning July 1 is a direct result of our smaller book of business, along with the cost of our recent subsequent purchases being fully recognized by June 30.