National General (NGHC) Tops Q4 EPS by 11c, Revenues Beat

National General (NASDAQ: NGHC) reported Q4 EPS of $0.72, $0.11 better than the analyst estimate of $0.61. Revenue for the quarter came in at $1.31 billion versus the consensus estimate of $1.28 billion.

Fourth Quarter 2019 Highlights versus Fourth Quarter 2018*

• Gross written premium grew $46.1 million or 3.9% to $1,221.8 million, primarily driven by the acquisition of National Farmers Union Property and Casualty Company (“Farmers Union Insurance”) which closed on August 1, 2019, and continued organic growth in our A&H segment of 7.5%, partially offset by the impact of the Euro Accident Health and Care Insurance (“Euroaccident”) sale which closed on December 2, 2019.
• The overall combined ratio(12,13) was 91.4% in the fourth quarter compared to 95.9% in the prior year’s quarter and 91.0% for the full year compared to 92.6% in 2018, excluding non-cash amortization of intangible assets. The P&C segment reported a decrease in combined ratio to 94.2% from 100.5% in the prior year’s quarter. The combined ratio includes $9.2 million of catastrophe losses related to weather-related events compared to $59.0 million of Hurricane Michael and California fires catastrophe losses in the prior year’s quarter. The A&H segment reported an increase in combined ratio to 77.1% from 73.6% in the prior year’s quarter.
• Service and fee income grew 10.5% to $179.3 million, driven by organic growth primarily in our group administration fees and third party technology services fees within our A&H segment.
• Stockholders’ equity was $2.65 billion and fully diluted book value per share was $19.06 at December 31, 2019, growth of 19.3% and 25.0%, respectively, from December 31, 2018. Our trailing twelve month operating return on average equity (ROE)(14) was 16.1% as of December 31, 2019.
• Fourth quarter 2019 operating earnings (non-GAAP)(1) excludes the following items, net of tax: $3.4 million or $0.03 per share earnings from equity method investments, $33.8 million or $0.29 per share of net gain on investments (including $20.9 million gain on the sale of Euroaccident, net of tax), $10.7 million or $0.09 per share of non-cash amortization of intangible assets and $11.3 million or $0.10 per share of other expenses reflecting an acquisition related arbitration award.

Barry Karfunkel, National General’s CEO, stated: “2019 was an exceptional year for National General generating a 91.0% combined ratio, $319.2 million of operating earnings, ROE of 16.1% and growth in diluted book value per share of 25.0%. While our P&C segment earnings were negatively impacted by reserve strengthening within our small business auto product line, the P&C segment continued its strong performance via both our independent agency and direct to consumer distribution channels. Our A&H segment reported very strong profitability within our group and individual products. I am pleased with the continued execution of our strategy of focused underwriting discipline and long term growth initiatives.”

For earnings history and earnings-related data on National General (NGHC) click here.

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