Form 8-K National General Holding For: Feb 10

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February 10, 2015 4:35 PM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section�13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 10, 2015
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NATIONAL GENERAL HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
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Delaware
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001-36311
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27-1046208
(State or other jurisdiction
of incorporation or organization)
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(Commission
File Number)
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(I.R.S. Employer
Identification Number)



59 Maiden Lane, 38th Floor
New York, New York 10038
(Address of principal executive offices) (zip code)
(212) 380-9500
(Registrants telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




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Item�2.02����
Results of Operations and Financial Condition

On February 10, 2015, National General Holdings Corp. issued a press release announcing its results of operations for the year ended December 31, 2014 and the scheduling of a conference call on February 11, 2015 with respect thereto. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The press release is furnished and not filed pursuant to instruction B.2 of Form 8-K.

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Item�9.01
Financial Statements And Exhibits.
(d) Exhibits.
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Exhibit Number
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Description
99.1

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Press release dated February 10, 2015.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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NATIONAL GENERAL HOLDINGS CORP.
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Date: February 10, 2015
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By:
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/s/ Jeffrey Weissmann
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Jeffrey Weissmann
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General Counsel and Secretary



��������

National General Holdings Corp. Reports Fourth Quarter 2014 Results;
Operating Earnings(1) Per Share Grows 106% to $0.30

NEW YORK, February 10, 2015 (GLOBE NEWSWIRE) -- National General Holdings Corp. (NASDAQ: NGHC) today reported fourth quarter 2014 operating earnings(1) of $28.3 million or $0.30 per diluted share, compared to $11.6 million or $0.14 per diluted share in the fourth quarter of 2013. Net income was $11.2 million or $0.12 per diluted share, compared to $7.9 million or $0.10 per diluted share in the fourth quarter of 2013.
Full year 2014 operating earnings(1) were $125.3 million or $1.34 per diluted share, compared to $46.2 million or $0.67 per diluted share in 2013. Full year 2014 net income was $100.0 million or $1.07 per diluted share, compared to $40.2 million or $0.59 per diluted share in 2013.
Fourth Quarter 2014 Highlights Versus Fourth Quarter 2013*
"
Net written premium grew by $204.9 million or 101.6% to $406.5 million, driven by the run-off of our third-party quota share treaty, assumed premiums from Tower Personal Lines, additional premiums from other acquisitions completed during the past year, underlying organic growth within our P&C business, and continued expansion of our A&H segment.
"
The combined ratio was 94.2% compared to 98.5% in the prior year's quarter, excluding non-cash amortization of intangible assets and impairment of goodwill. The 4.3 point combined ratio improvement was driven by a reduction in both the loss and expense ratios within our P&C segment, while our A&H segment posted a reduced loss ratio but an increased expense ratio due to our continued investment in the expansion of this segment.
"
Total revenues grew $205.1 million or 76.1% to $474.4 million, driven by the aforementioned premium growth, service and fee income growth of $22.8 million or 66.1% (including Attorney-in-Fact management fees of $8.4 million), and net investment income growth of $7.3 million or 83.2%, partially offset by a $14.0 million or 99.7% decline in ceding commission income reflecting the run-off of our terminated third-party quota share.
"
Shareholders' equity was $1.06 billion and fully diluted book value per share was $10.48 at December 31, 2014, growth of 0.9% and 0.8%, respectively, from September 30, 2014. Annualized operating return on average equity (ROE) was 11.3% for the fourth quarter and 14.1% for the full year ended December 31, 2014.
"
Fourth quarter 2014 operating earnings exclude the following items, net of tax: $15.8 million or $0.16 per share of non-cash impairment of goodwill, $2.8 million or $0.03 per share of equity in earnings of unconsolidated subsidiaries, $1.9 million or $0.02 per share of non-cash amortization of intangible assets, $1.5 million or $0.02 per share of other than temporary impairment losses, $0.7 million or $0.01 per share of foreign exchange losses, and $0.1 million or less than $0.01 per share of realized investment losses. Additionally, fourth quarter 2014 net income and operating earnings include a $1.3 million pre-tax expense relating to a sliding scale adjustment on our terminated third-party quota share, which is reported within the acquisition costs and other underwriting expenses line item.

Michael Karfunkel, National General's Chairman and CEO, stated: "Our fourth quarter results were a strong finish to a transformational year at National General. We continue to deliver significant top line growth and solid underwriting profitability, and are well positioned to continue these trends going forward. Within P&C, our legacy business continues to perform at a high level, and the addition of the homeowners product has already proven to be a positive contributor to our business, greatly increasing the overall value of our franchise. Within A&H, the quarter included increased expenses relating to our commitment to building this business from the ground up, and we believe we have significant momentum heading into 2015, a year in which we expect to see the fruits of our labor. We continue to focus our efforts on profitably growing our business both organically and through additional accretive M&A opportunities, maintaining an intense emphasis on disciplined expense management, and delivering strong returns to our shareholders.


*NOTE: Unless specified otherwise, discussion of our fourth quarter 2014 results does 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. Attorney-in-Fact management fees referenced within this release are eliminated in consolidated financial results.



1


Overview of Fourth Quarter 2014 as Compared to Fourth Quarter 2013
Gross written premium grew 45.7% to $462.8 million, net written premium grew 101.6% to $406.5 million, and net earned premium grew 88.0% to $404.6 million. Premium growth was driven by several key factors: a continued increase in net retention due to the run-off of our terminated third party quota share, which was 100% complete as of July 31, 2014; new and renewal business from the Tower Personal Lines book; additional premiums from other acquisitions completed during the past year; underlying organic growth within our P&C segment; and continued expansion of our A&H segment.
Ceding commission income decreased to $0.0 million from $14.0 million in the prior year's quarter, reflecting the run-off of our terminated third-party quota share. Service and fee income grew 66.1% to $57.3 million, driven by strong growth in the P&C segment, including management fees of $8.4 million related to the Attorneys-in-Fact that manage the Reciprocal Exchanges, partially offset by a modest decline in A&H service and fee income.
Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 94.2% with a loss ratio of 68.2% and an expense ratio of 26.1%, versus a prior year combined ratio of 98.5% with a loss ratio of 70.6% and an expense ratio of 27.9%. The improved loss ratio was driven by a reduction in both the P&C and A&H loss ratios, while the expense ratio decrease was the result of an improved P&C expense ratio, partially offset by an elevated A&H expense ratio due to our continued investment in the expansion of this segment.
Underwriting results detailed by each of our business segments are as follows:
"
Property & Casualty - Gross written premium grew 42.4% to $440.3 million, net written premium grew 98.8% to $384.2 million, and net earned premium grew 80.8% to $374.0 million. P&C premium growth was driven by four key factors: (1) a continued increase in net retention due to the run-off of our terminated third party quota share, which was 100% complete as of July 31, 2014; (2) the addition of new and renewal business from Tower Personal Lines, which produced $79.6 million in net written premiums during the quarter; (3) additional premiums from other acquisitions completed during the past year, which contributed $31.0 million in net written premium during the quarter ($26.1 million from Imperial and $4.9 million from Personal Express Insurance Company); and (4) underlying organic growth of 1.1%. Ceding commission income decreased to $0.0 million from $14.0 million in the prior year's quarter, reflecting the run-off of our terminated third-party quota share. Service and fee income grew 120.0% to $43.5 million, driven by increased premium volume in the quarter, the addition of service and fee income from acquisitions completed during the past year, and the addition of $8.4 million of fees earned by the Attorneys-in-Fact that manage the Reciprocal Exchanges. Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 92.8% with a loss ratio of 66.5% and an expense ratio of 26.3%, versus a prior year combined ratio of 97.1% with a loss ratio of 68.9% and an expense ratio of 28.2%. The quarter's improved underwriting profitability was driven primarily by business mix changes, most notably the addition of homeowners, as well as a reduction in our underlying expense ratio resulting from expense reduction initiatives and technology enhancements enacted in recent years. Additionally, fourth quarter 2014 P&C underwriting results include a $1.3 million expense relating to a sliding scale adjustment on our terminated third-party quota share, reported within the acquisition costs and other underwriting expenses line item.
"
Accident & Health - Gross written premium grew to $22.5 million, net written premium grew to $22.4 million, and net earned premium grew to $30.5 million, from $8.5 million, $8.4 million, and $8.4 million, respectively, in the prior year's quarter. A&H premium growth was driven by continued progress in the expansion of our domestic business, with a total of $9.8 million in net written premium at our U.S. underwriting subsidiaries, as well as the addition of $12.6 million of premium from EuroAccident (our Swedish group life and health MGA). Service and fee income declined 6.3% to $13.8 million, with strong growth at VelaPoint (our call center general agency) and TABS (our domestic stop loss business) offset by a decline at EuroAccident. We note that EuroAccident fee income going forward will be eliminated in consolidation as it is now being written on National General paper. Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 112.1% with a loss ratio of 88.8% and an expense ratio of 23.3%, versus a prior year combined ratio of 133.2% with a loss ratio of 112.1% and an expense ratio of 21.0%. The decrease in the fourth quarter loss ratio reflects the continued maturation of the A&H business, while the higher expense ratio included increased expenses related to our continued investment in the expansion of our A&H business, most notably added expenses related to open enrollment, which began on November 15, 2014. Importantly, while many of the

2


associated costs for A&H policies written during open enrollment are incurred up front, revenue is not recognized until after the effective date of the policy, which is predominantly in 2015.
"
Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $60.0 million, net written premium was $45.9 million, and net earned premium was $40.9 million. Excluding non-cash amortization of intangible assets, the combined ratio was 74.6% with a loss ratio of 52.2% and an expense ratio of 22.4%.

Investment income grew 83.2% to $16.0 million, reflecting an increase in the size of our investment portfolio, mainly as a result of our capital raising actions in the first half of 2014, as well as $2.2 million of interest earned on our credit agreement with ACP Re. Fourth quarter 2014 results included $0.1 million of net realized investment losses compared with a loss of $0.3 million in the fourth quarter of 2013, as well as an other than temporary impairment loss of $2.2 million compared to a loss of $2.9 million in the fourth quarter of 2013. Total cash, cash equivalents and investments were $1.75 billion as of December 31, 2014. Accumulated other comprehensive income (AOCI) declined modestly to $20.2 million at December 31, 2014 from $20.9 million at September 30, 2014.
Other revenue was a loss of $1.2 million in the fourth quarter of 2014, with no corresponding amount in the prior years quarter, primarily resulting from a $1.1 million foreign exchange loss from currency fluctuations within our European subsidiaries.
Interest expense of $4.5 million increased from $0.6 million in the prior years quarter due to an increased amount of debt on our balance sheet. Debt was $255.6 million as of December 31, 2014, up from $81.1 million at December 31, 2013, primarily as a result of our $250 million May 2014 senior note issuance.
Equity in earnings of unconsolidated subsidiaries (predominantly our investment in Life Settlement Entities) was $4.3 million in the fourth quarter versus $1.7 million in the prior year's quarter, reflecting fair value adjustments on life settlement contracts.
The fourth quarter 2014 provision for income taxes was $4.7 million and the effective tax rate for the quarter was 37.2%. Included in the fourth quarter 2014 provision for income taxes was a $4.6 million benefit attributable to a reduction of the deferred tax liability associated with the equalization reserves of our Luxembourg Reinsurance Company subsidiaries. Excluding this item and the $15.8 million non-cash impairment of goodwill, which is not tax deductible, the adjusted 2014 fourth quarter effective tax rate was 32.7%.
National General Holding Corp.'s shareholders' equity was $1,060.8 million at December 31, 2014, growth of 0.9% from $1,051.3 million at September 30, 2014. Fully diluted book value per share was $10.48 at December 31, 2014, growth of 0.8% from $10.40 at September 30, 2014, and growth of 31.7% from $7.96 at December 31, 2013. Annualized operating return on average equity (ROE) was 11.3% for the fourth quarter and 14.1% for the year ended December 31, 2014.

Luxembourg Reinsurance Companies (LRC)
"
Included in the fourth quarter 2014 provision for income taxes was a $4.6 million benefit attributable to a reduction of the deferred tax liability (DTL) associated with the equalization reserves of our LRC subsidiaries. For the full year 2014, the provision for income taxes included a benefit of $21.1 million attributable to a reduction of the DTL associated with the equalization reserves of our LRC subsidiaries. As of December 31, 2014, the DTL associated with our LRC subsidiaries was $40.5 million.
"
Fourth quarter 2014 results include a $15.8 million expense related to a non-cash impairment of goodwill ($9.4 million attributed to the P&C segment and $6.4 million attributed to the A&H segment), compared to an expense of $1.4 million in the fourth quarter of 2013 (entirely attributed to the P&C segment). Both the 2014 and 2013 non-cash impairment of goodwill expenses relate to goodwill balances associated with our LRC subsidiaries. The remaining goodwill balance associated with LRC subsidiaries stood at $25.9 million as of December 31, 2014.
"
The full year 2014 net benefit related to our LRC subsidiaries was $5.3 million, including the benefit attributable to a reduction in DTL and the expense related to non-cash impairment of goodwill.

Healthcare Solutions Team Acquisition
On January 26, 2015 we announced that we had closed upon the acquisition of Healthcare Solutions Team, LLC ("HST"), an Illinois based healthcare insurance managing general agency, for cash consideration. The purchase

3


price for the transaction includes an upfront cash payment of $15 million and potential future earn out payments based on HSTs overall profitability. Based in Lombard, Illinois, HST was created in 2007 with the goal of providing families, individuals and groups with the best health insurance coverage for their needs and budgets. HST partners with approximately 500 independent agents across the country to provide a wide range of products to customers. In addition to health care insurance, HST offers an array of coverages including: short-term medical coverage; critical illness plans; dental insurance; Medicare supplements and life insurance; simple Health Savings Accounts (HSA); small business, self-employed and group health care; and major medical plans for individuals and families.
�
Conference Call
On Wednesday, February 11, 2015 at 11:00 AM ET, Chairman and Chief Executive Officer Michael Karfunkel and Chief Financial Officer Mike Weiner will review these results via a conference call that may be accessed as follows:
Toll-Free U.S. Dial-in: ��������888-267-2860
International Dial-in:���� ����973-413-6102
Conference Entry Code: ����842046
Webcast Registration: ��������http://ir.nationalgeneral.com/events.cfm

A replay of the conference call will be accessible from 2:00 PM ET on Wednesday, February 11, 2015 to 11:59 PM ET on Wednesday, February 25, 2015 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 842046. In addition, a replay of the webcast can also be retrieved at http://ir.nationalgeneral.com/events.cfm.

About National General Holdings Corp.
National General Holdings Corp., 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, recreational vehicle, motorcycle, homeowners, supplemental health, and other niche insurance products.

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 the Company. 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, 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 effect of the performance of financial markets on our investment portfolio, estimates of the fair value of life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, 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, 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, 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.


4




Income Statement - Fourth Quarter
$ in thousands
(Unaudited)
�
�
Three Months Ended December 31,
�
�
2014
�
�
2013
�
�
NGHC
�
Reciprocal Exchanges
�
Consolidated
�
�
NGHC
Revenues:
�
�
�
�
�
�
�
�
�
Gross written premium
�
$
462,848

�
$
60,049

�
$
522,897

�
�
$
317,739

Ceded premiums (related parties - $1,005 in 2014 and $77,808 in 2013)
�
(56,306
)
�
(14,178
)
�
(70,484
)
�
�
(116,066
)
Net written premium
�
406,542

�
45,871

�
452,413

�
�
201,673

Net earned premium
�
404,566

�
40,930

�
445,496

�
�
215,234

�
�
�
�
�
�
�
�
�
�
Ceding commission income (primarily related parties)
�
48

�
4,750

�
4,798

�
�
13,999

Service and fee income
�
57,269

�
117

�
48,979

(A)�
�
34,488

Net investment income
�
15,969

�
1,799

�
17,768

�
�
8,715

Net realized gain/(loss) on investments
�
(91
)
�


�
(91
)
�
�
(263
)
Other than temporary impairment loss
�
(2,244
)
�


�
(2,244
)
�
�
(2,869
)
Other revenue
�
(1,153
)
�


�
(1,153
)
�
�


Total revenues
�
$
474,364

�
$
47,596

�
$
513,553

(B)�
�
$
269,304

�
�
�
�
�
�
�
�
�
�
Expenses:
�
�
�
�
�
�
�
�
�
Loss and loss adjustment expense
�
$
275,727

�
$
21,368

�
$
297,095

�
�
$
151,994

Acquisition costs and other underwriting expenses
�
76,389

�
5,994

�
82,383

�
�
40,622

General and administrative
�
105,122

�
10,156

�
106,871

(C)�
�
71,102

Interest expense
�
4,463

�
5,452

�
9,915

�
�
586

Total expenses
�
$
461,701

�
$
42,970

�
$
496,264

(D)�
�
$
264,304

�
�
�
�
�
�
�
�
�
�
Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries
�
$
12,663

�
$
4,626

�
$
17,289

�
�
$
5,000

Provision for income taxes
�
4,715

�
1,375

�
6,090

�
�
(1,252
)
Income before equity in earnings (losses) of unconsolidated subsidiaries
�
7,948

�
3,251

�
11,199

�
�
6,252

Equity in earnings (losses) of unconsolidated subsidiaries
�
4,278

�


�
4,278

�
�
1,726

Net income before non-controlling interest and dividends on preferred shares
�
12,226

�
3,251

�
15,477

�
�
7,978

Less: net income attributable to non-controlling interest
�
29

�
3,251

�
3,280

�
�
38

Net income before dividends on preferred shares
�
12,197

�


�
12,197

�
�
7,940

Less: dividends on preferred shares
�
1,031

�


�
1,031

�
�


Net income available to common stockholders
�
$
11,166

�
$


�
$
11,166

�
�
$
7,940


NOTE: Consolidated column includes eliminations as follows: (A) $(8,407), (B) $(8,407), (C) $(8,407), and (D) $(8,407).


5




Income Statement - Year to Date
$ in thousands
(Unaudited)
�
�
Twelve Months Ended December 31,
�
�
2014
�
�
2013
�
�
NGHC
�
Reciprocal Exchanges
�
Consolidated
�
�
NGHC
Revenues:
�
�
�
�
�
�
�
�
�
Gross written premium
�
$
2,065,065

�
$
70,042

�
$
2,135,107

�
�
$
1,338,755

Ceded premiums (related parties - $44,936 in 2014 and $501,067 in 2013)
�
(248,117
)
�
(16,966
)
�
(265,083
)
�
�
(659,439
)
Net written premium
�
1,816,948

�
53,076

�
1,870,024

�
�
679,316

Net earned premium
�
1,585,598

�
47,622

�
1,633,220

�
�
688,066

�
�
�
�
�
�
�
�
�
�
Ceding commission income (primarily related parties)
�
7,643

�
4,787

�
12,430

�
�
87,100

Service and fee income
�
178,333

�
139

�
168,571

(A)�
�
127,541

Net investment income
�
50,627

�
1,799

�
52,426

�
�
30,808

Net realized gain/(loss) on investments
�
(648
)
�


�
(648
)
�
�
1,200

Other than temporary impairment loss
�
(2,244
)
�


�
(2,244
)
�
�
(2,869
)
Other revenue
�
(1,660
)
�


�
(1,660
)
�
�
16

Total revenues
�
$
1,817,649

�
$
54,347

�
$
1,862,095

(B)�
�
$
931,862

�
�
�
�
�
�
�
�
�
�
Expenses:
�
�
�
�
�
�
�
�
�
Loss and loss adjustment expense
�
$
1,026,346

�
$
26,719

�
$
1,053,065

�
�
$
462,124

Acquisition costs and other underwriting expenses
�
308,822

�
6,267

�
315,089

�
�
134,887

General and administrative
�
346,696

�
11,967

�
348,762

(C)�
�
280,552

Interest expense
�
12,012

�
5,724

�
17,736

�
�
2,042

Total expenses
�
$
1,693,876

�
$
50,677

�
$
1,734,652

(D)�
�
$
879,605

�
�
�
�
�
�
�
�
�
�
Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries
�
$
123,773

�
$
3,670

�
$
127,443

�
�
$
52,257

Provision for income taxes
�
22,712

�
1,164

�
23,876

�
�
11,140

Income before equity in earnings (losses) of unconsolidated subsidiaries
�
101,061

�
2,506

�
103,567

�
�
41,117

Equity in earnings (losses) of unconsolidated subsidiaries
�
1,180

�


�
1,180

�
�
1,274

Net income before non-controlling interest and dividends on preferred shares
�
102,241

�
2,506

�
104,747

�
�
42,391

Less: net income attributable to non-controlling interest
�
(2
)
�
2,506

�
2,504

�
�
82

Net income before dividends on preferred shares
�
102,243

�


�
102,243

�
�
42,309

Less: dividends on preferred shares
�
2,291

�


�
2,291

�
�
2,158

Net income available to common stockholders
�
$
99,952

�
$


�
$
99,952

�
�
$
40,151


NOTE: Consolidated column includes eliminations as follows: (A) $(9,901), (B) $(9,901), (C) $(9,901), and (D) $(9,901).














6




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

�
Three Months Ended December 31,
�
�
Twelve Months Ended December 31,
�
2014
�
2013
�
�
2014
�
2013
Net income available to common stockholders
$
11,166

�
$
7,940

�
�
$
99,952

�
$
40,151

��Basic net income per common share
$
0.12

�
$
0.10

�
�
$
1.09

�
$
0.62

��Diluted net income per common share*
$
0.12

�
$
0.10

�
�
$
1.07

�
$
0.59

�
�
�
�
�
�
�
�
�
Operating earnings attributable to NGHC(1)
$
28,297

�
$
11,585

�
�
$
125,306

�
$
46,154

��Basic operating earnings per common share(1)
$
0.30

�
$
0.15

�
�
$
1.37

�
$
0.71

��Diluted operating earnings per common share(1)*
$
0.30

�
$
0.14

�
�
$
1.34

�
$
0.67

�
�
�
�
�
�
�
�
�
Dividends declared per common share
$
0.02

�
$
0.01

�
�
$
0.05

�
$
0.01

�
�
�
�
�
�
�
�
�
Weighted average number of basic shares outstanding
93,411,409

�
79,719,219

�
�
91,499,122

�
65,017,579

Weighted average number of diluted shares outstanding
95,916,749

�
80,711,272

�
�
93,515,483

�
71,801,613

Shares outstanding, end of period
93,427,382

�
79,731,800

�
�
93,427,382

�
79,731,800

Fully diluted shares outstanding, end of period
95,932,723

�
80,723,853

�
�
95,624,982

�
81,368,306

�
�
�
�
�
�
�
�
�
Book value per share
$
10.77

�
$
8.06

�
�
$
10.77

�
$
8.06

Fully diluted book value per share
$
10.48

�
$
7.96

�
�
$
10.52

�
$
7.90


Reconciliation of Net Income to Operating Earnings (Non-GAAP)
$ in thousands, except per share data
(Unaudited)
�
�
Three Months Ended December 31,
�
�
Twelve Months Ended December 31,
�
�
2014
�
2013
�
�
2014
�
2013
�
�
�
�
�
�
�
�
�
�
Net income available to common stockholders
�
$
11,166

�
$
7,940

�
�
$
99,952

�
$
40,151

Add (subtract) net of tax:
�
�
�
�
�
�
�
�
�
��Net realized (gain)/loss on investments
�
59

�
171

�
�
421

�
(780
)
��Other than temporary impairment losses
�
1,459

�
1,865

�
�
1,459

�
1,865

Foreign exchange (gain)/loss
�
723

�
130

�
�
1,088

�
130

��Equity in (earnings)/losses of unconsolidated subsidiaries
�
(2,781
)
�
(1,122
)
�
�
(767
)
�
(828
)
��Non-cash amortization of intangible assets
�
1,879

�
1,156

�
�
7,361

�
4,172

��Non-cash impairment of goodwill
�
15,792

�
1,445

�
�
15,792

�
1,445

Operating earnings attributable to NGHC
�
$
28,297

�
$
11,585

�
�
$
125,306

�
$
46,154

�
�
�
�
�
�
�
�
�
�
Operating earnings per common share:
�
�
�
�
�
�
�
�
�
��Basic operating earnings per common share
�
$
0.30

�
$
0.15



$
1.37

�
$
0.71

��Diluted operating earnings per common share*
�
$
0.30

�
$
0.14



$
1.34

�
$
0.67


* NOTE: Diluted net income per common share and diluted operating earnings per common share for Three Months and Twelve Months Ended December 31, 2013 are adjusted for preferred dividends of $0 and $2,158, respectively, from the 8% cumulative convertible Series A Preferred stock converted on June 5, 2013.

7




Balance Sheet
$ in thousands
(Unaudited)
�
�
December�31, 2014
�
�
December�31, 2013
�
�
(unaudited)
�
�
(audited)
ASSETS
�
NGHC
�
Reciprocal Exchanges
�
Consolidated
�
�
NGHC
Investments:
�
�
�
�
�
�
�
�
�
Fixed maturities, available-for-sale, at fair value (amortized cost $1,317,772, $222,121, $1,539,893 and $757,188, respectively)

�
$
1,361,099

�
$
222,739

�
$
1,583,838

�
�
$
766,589

Equity securities, available-for-sale, at fair value (cost $52,272, $2,752, $55,024 and $6,939, respectively)
�
45,802

�
2,817

�
48,619

�
�
6,287

Short-term investments
�
50

�
10,490

�
10,540

�
�


Equity investment in unconsolidated subsidiaries
�
155,900

�


�
155,900

�
�
133,193

Other investments
�
17,752

�


�
17,752

�
�
2,893

Securities pledged (amortized cost $47,546, $0, $47,546 and $133,013, respectively)
�
49,456

�


�
49,456

�
�
133,922

Total investments
�
1,630,059

�
236,046

�
1,866,105

�
�
1,042,884

Cash and cash equivalents
�
123,178

�
9,437

�
132,615

�
�
73,823

Accrued investment income
�
12,553

�
1,898

�
14,451

�
�
9,263

Premiums and other receivables, net
�
699,553

�
58,238

�
757,791

�
�
449,252

Deferred acquisition costs
�
121,514

�
4,485

�
125,999

�
�
60,112

Reinsurance recoverable on unpaid losses (2)
�
888,215

�
23,583

�
911,798

�
�
950,828

Prepaid reinsurance premiums
�
75,837

�
26,924

�
102,761

�
�
50,878

Notes receivable from related party
�
125,000

�


�
125,000

�
�


Due from affiliate
�
5,129

�


�
5,129

�
�
4,785

Premises and equipment, net
�
30,583

�


�
30,583

�
�
29,535

Intangible assets, net
�
237,404

�
11,433

�
248,837

�
�
86,564

Goodwill
�
71,818

�


�
71,818

�
�
70,351

Prepaid and other assets
�
48,083

�
71

�
48,154

�
�
9,240

Total assets
�
$
4,068,926

�
$
372,115

�
$
4,441,041

�
�
$
2,837,515

LIABILITIES AND STOCKHOLDERS EQUITY
�
�
�
�
�
�
�
�
�
Liabilities:
�
�
�
�
�
�
�
�
�
Unpaid loss and loss adjustment expense reserves
�
$
1,450,305

�
$
105,217

�
$
1,555,522

�
�
$
1,259,241

Unearned premiums
�
744,438

�
119,998

�
864,436

�
�
476,232

Unearned service contract and other revenue
�
8,527

�


�
8,527

�
�
7,319

Reinsurance payable (3)
�
97,830

�
13,811

�
111,641

�
�
93,534

Accounts payable and accrued expenses
�
299,778

�
17,691

�
317,469

�
�
91,143

Due to affiliate
�


�
1,552

�
1,552

�
�


Securities sold under agreements to repurchase, at contract value
�
46,804

�


�
46,804

�
�
109,629

Deferred tax liability
�
29,133

�
38,402

�
67,535

�
�
24,476

Income tax payable
�
29,532

�
1,059

�
30,591

�
�
1,987

Notes payable (Reciprocal Exchanges owed to related party - $48,374)
�
255,631

�
48,374

�
304,005

�
�
81,142

Other liabilities
�
46,114

�
5,710

�
51,824

�
�
49,945

Total liabilities
�
$
3,008,092

�
$
351,814

�
$
3,359,906

�
�
$
2,194,648

Stockholders equity:
�
�
�
�
�
�
�
�
�
Common stock (4)
�
$
934

�
$


�
$
934

�
�
$
797

Preferred stock (5)
�
55,000

�


�
55,000

�
�


Additional paid-in capital
�
691,790

�


�
691,790

�
�
437,006

Retained earnings
�
292,832

�


�
292,832

�
�
197,552

Accumulated other comprehensive income
�
20,192

�


�
20,192

�
�
7,425

Total National General Holdings Corp. stockholders' equity
�
1,060,748

�


�
1,060,748

�
�
642,780

Non-controlling interest
�
86

�
20,301

�
20,387

�
�
87

Total stockholders equity
�
1,060,834

�
20,301

�
1,081,135

�
�
642,867

Total liabilities and stockholders equity
�
$
4,068,926

�
$
372,115

�
$
4,441,041

�
�
$
2,837,515



8




Segment Information - Fourth Quarter
$ in thousands
(Unaudited)
�
�
Three Months Ended December 31,
�
�
2014
�
�
�
�
�
2013
�
�
P&C
�
A&H
�
NGHC
�
�
Reciprocal Exchanges
�
�
P&C
�
A&H
�
NGHC
Gross written premium
�
$
440,322

�
$
22,526

�
$
462,848

�
�
$
60,049

�
�
$
309,220

�
$
8,519

�
$
317,739

Net written premium
�
384,153

�
22,389

�
406,542

�
�
45,871

�
�
193,284

�
8,389

�
201,673

Net earned premium
�
374,034

�
30,532

�
404,566

�
�
40,930

�
�
206,849

�
8,385

�
215,234

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�Ceding commission income (primarily related parties)
�
48

�


�
48

�
�
4,750

�
�
13,999

�


�
13,999

�Service and fee income
�
43,458

�
13,811

�
57,269

�
�
117

�
�
19,756

�
14,732

�
34,488

�Total underwriting revenue
�
$
417,540

�
$
44,343

�
$
461,883

�
�
$
45,797

�
�
$
240,604

�
$
23,117

�
$
263,721

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�Loss and loss adjustment expense
�
$
248,606

�
$
27,121

�
$
275,727

�
�
$
21,368

�
�
$
142,591

�
$
9,403

�
$
151,994

�Acquisition costs and other
�
68,771

�
7,618

�
76,389

�
�
5,994

�
�
33,659

�
6,963

�
40,622

�General and administrative
�
84,577

�
20,545

�
105,122

�
�
10,156

�
�
60,669

�
10,433

�
71,102

�Total underwriting expenses
�
$
401,954

�
$
55,284

�
$
457,238

�
�
$
37,518

�
�
$
236,919

�
$
26,799

�
$
263,718

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Underwriting income (loss)
�
$
15,586

�
$
(10,941
)
�
$
4,645

�
�
$
8,279

�
�
$
3,685

�
$
(3,682
)
�
$
3

Non-cash impairment of goodwill
�
9,419

�
6,373

�
15,792

�
�


�
�
1,445

�


�
1,445

Non-cash amortization of intangible assets
�
2,026

�
864

�
2,890

�
�
2,115

�
�
877

�
902

�
1,779

Underwriting income (loss) before amortization and impairment
�
$
27,031

�
$
(3,704
)
�
$
23,327

�
�
$
10,394

�
�
$
6,007

�
$
(2,780
)
�
$
3,227

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Underwriting ratios
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Loss and loss adjustment expense ratio (6)
�
66.5
%
�
88.8
%
�
68.2
%
�
�
52.2
%
�
�
68.9
%
�
112.1
%
�
70.6
%
Operating expense ratio (Non-GAAP) (7,8)
�
29.4
%
�
47.0
%
�
30.7
%
�
�
27.6
%
�
�
29.3
%
�
31.8
%
�
29.4
%
Combined ratio (Non-GAAP) (7,9)
�
95.8
%
�
135.8
%
�
98.9
%
�
�
79.8
%
�
�
98.2
%
�
143.9
%
�
100.0
%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Underwriting ratios (before amortization and impairment)
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Loss and loss adjustment expense ratio (6)
�
66.5
%
�
88.8
%
�
68.2
%
�
�
52.2
%
�
�
68.9
%
�
112.1
%
�
70.6
%
Operating expense ratio�(Non-GAAP) (7,10)
�
26.3
%
�
23.3
%
�
26.1
%
�
�
22.4
%
�
�
28.2
%
�
21.0
%
�
27.9
%
Combined ratio (Non-GAAP) (7,9)
�
92.8
%
�
112.1
%
�
94.2
%
�
�
74.6
%
�
�
97.1
%
�
133.2
%
�
98.5
%

NOTE: Loss and loss adjustment expense ratio and operating expense ratio may not sum to combined ratio due to rounding.

9




Segment Information - Year to Date
$ in thousands
(Unaudited)
�
�
Twelve Months Ended December 31,
�
�
2014
�
�
2013
�
�
P&C
�
A&H
�
NGHC
�
�
Reciprocal Exchanges
�
�
P&C
�
A&H
�
NGHC
Gross written premium
�
$
1,924,666

�
$
140,399

�
$
2,065,065

�
�
$
70,042

�
�
$
1,305,254

�
$
33,501

�
$
1,338,755

Net written premium
�
1,676,946

�
140,002

�
1,816,948

�
�
53,076

�
�
646,100

�
33,216

�
679,316

Net earned premium
�
1,465,122

�
120,476

�
1,585,598

�
�
47,622

�
�
654,849

�
33,217

�
688,066

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�Ceding commission income (primarily related parties)
�
7,643

�


�
7,643

�
�
4,787

�
�
87,100

�


�
87,100

�Service and fee income
�
119,876

�
58,457

�
178,333

�
�
139

�
�
82,752

�
44,789

�
127,541

�Total underwriting revenue
�
$
1,592,641

�
$
178,933

�
$
1,771,574

�
�
$
52,548

�
�
$
824,701

�
$
78,006

�
$
902,707

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�Loss and loss adjustment expense
�
$
940,457

�
$
85,889

�
$
1,026,346

�
�
$
26,719

�
�
$
435,989

�
$
26,135

�
$
462,124

�Acquisition costs and other
�
254,130

�
54,692

�
308,822

�
�
6,267

�
�
110,509

�
24,378

�
134,887

�General and administrative
�
290,079

�
56,617

�
346,696

�
�
11,967

�
�
252,345

�
28,207

�
280,552

�Total underwriting expenses
�
$
1,484,666

�
$
197,198

�
$
1,681,864

�
�
$
44,953

�
�
$
798,843

�
$
78,720

�
$
877,563

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Underwriting income (loss)
�
$
107,975

�
$
(18,265
)
�
$
89,710

�
�
$
7,595

�
�
$
25,858

�
$
(714
)
�
$
25,144

Non-cash impairment of goodwill
�
9,419

�
6,373

�
15,792

�
�


�
�
1,445

�


�
1,445

Non-cash amortization of intangible assets
�
5,208

�
6,117

�
11,325

�
�
2,468

�
�
4,590

�
1,828

�
6,418

Underwriting income (loss) before amortization and impairment
�
$
122,602


$
(5,775
)
�
$
116,827

�
�
$
10,063

�
�
$
31,893

�
$
1,114

�
$
33,007

�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Underwriting ratios
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Loss and loss adjustment expense ratio (6)
�
64.2
%
�
71.3
%
�
64.7
%
�
�
56.1
%
�
�
66.6
%
�
78.7
%
�
67.2
%
Operating expense ratio (Non-GAAP) (7,8)
�
28.4
%
�
43.9
%
�
29.6
%
�
�
27.9
%
�
�
29.5
%
�
23.5
%
�
29.2
%
Combined ratio (Non-GAAP) (7,9)
�
92.6
%
�
115.2
%
�
94.3
%
�
�
84.1
%
�
�
96.1
%
�
102.1
%
�
96.3
%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Underwriting ratios (before amortization and impairment)
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Loss and loss adjustment expense ratio (6)
�
64.2
%
�
71.3
%
�
64.7
%
�
�
56.1
%
�
�
66.6
%
�
78.7
%
�
67.2
%
Operating expense ratio�(Non-GAAP) (7,10)
�
27.4
%
�
33.5
%
�
27.9
%
�
�
22.8
%
�
�
28.6
%
�
18.0
%
�
28.0
%
Combined ratio (Non-GAAP) (7,9)
�
91.6
%
�
104.8
%
�
92.6
%
�
�
78.9
%
�
�
95.1
%
�
96.6
%
�
95.2
%

NOTE: Loss and loss adjustment expense ratio and operating expense ratio may not sum to combined ratio due to rounding.














10





Reconciliation of Operating Expense Ratio and Operating Expense Ratio Before Amortization (Non-GAAP)
$ in thousands
(Unaudited
�
�
Three Months Ended December 31,
�
�
2014
�
�
2013
�
�
P&C
�
A&H
�
NGHC
�
�
Reciprocal Exchanges
�
�
P&C
�
A&H
�
NGHC
Total underwriting expenses
�
$
401,954

�
$
55,284

�
$
457,238

�
�
$
37,518

�
�
$
236,919

�
$
26,799

�
$
263,718

Less: Loss and loss adjustment expense
�
248,606

�
27,121

�
275,727

�
�
21,368

�
�
142,591

�
9,403

�
151,994

Less: Ceding commission income
�
48

�


�
48

�
�
4,750

�
�
13,999

�


�
13,999

Less: Service and fee income
�
43,458

�
13,811

�
57,269

�
�
117

�
�
19,756

�
14,732

�
34,488

Operating expense
�
109,842

�
14,352

�
124,194

�
�
11,283

�
�
60,573

�
2,664

�
63,237

Net earned premium
�
$
374,034

�
$
30,532

�
$
404,566

�
�
$
40,930

�
�
$
206,849

�
$
8,385

�
$
215,234

Operating expense ratio (Non-GAAP)
�
29.4
%
�
47.0
%
�
30.7
%
�
�
27.6
%
�
�
29.3
%
�
31.8
%
�
29.4
%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Total underwriting expenses
�
$
401,954

�
$
55,284

�
$
457,238

�
�
$
37,518

�
�
$
236,919

�
$
26,799

�
$
263,718

Less: Loss and loss adjustment expense
�
248,606

�
27,121

�
275,727

�
�
21,368

�
�
142,591

�
9,403

�
151,994

Less: Ceding commission income
�
48

�


�
48

�
�
4,750

�
�
13,999

�


�
13,999

Less: Service and fee income
�
43,458

�
13,811

�
57,269

�
�
117

�
�
19,756

�
14,732

�
34,488

Less: Non-cash impairment of goodwill
�
9,419

�
6,373

�
15,792

�
�


�
�
1,445

�


�
1,445

Less: Non-cash amortization of intangible assets
�
2,026

�
864

�
2,890

�
�
2,115

�
�
877

�
902

�
1,779

Operating expense before amortization and impairment
�
98,397

�
7,115

�
105,512

�
�
9,168

�
�
58,251

�
1,762

�
60,013

Net earned premium
�
$
374,034

�
$
30,532

�
404,566

�
�
40,930

�
�
$
206,849

�
$
8,385

�
$
215,234

Operating expense ratio before amortization and impairment (Non-GAAP)
�
26.3
%
�
23.3
%
�
26.1
%
�
�
22.4
%
�
�
28.2
%
�
21.0
%
�
27.9
%
�
�
Twelve Months Ended December 31,
�
�
2014
�
�
2013
�
�
P&C
�
A&H
�
NGHC
�
�
Reciprocal Exchanges
�
�
P&C
�
A&H
�
NGHC
Total underwriting expenses
�
$
1,484,666

�
$
197,198

�
$
1,681,864

�
�
$
44,953

�
�
$
798,843

�
$
78,720

�
$
877,563

Less: Loss and loss adjustment expense
�
940,457

�
85,889

�
1,026,346

�
�
26,719

�
�
435,989

�
26,135

�
462,124

Less: Ceding commission income
�
7,643

�


�
7,643

�
�
4,787

�
�
87,100

�


�
87,100

Less: Service and fee income
�
119,876

�
58,457

�
178,333

�
�
139

�
�
82,752

�
44,789

�
127,541

Operating expense
�
416,690

�
52,852

�
469,542

�
�
13,308

�
�
193,002

�
7,796

�
200,798

Net earned premium
�
$
1,465,122

�
$
120,476

�
$
1,585,598

�
�
$
47,622

�
�
$
654,849

�
$
33,217

�
$
688,066

Operating expense ratio (Non-GAAP)
�
28.4
%
�
43.9
%
�
29.6
%
�
�
27.9
%
�
�
29.5
%
�
23.5
%
�
29.2
%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Total underwriting expenses
�
$
1,484,666

�
$
197,198

�
$
1,681,864

�
�
$
44,953

�
�
$
798,843

�
$
78,720

�
$
877,563

Less: Loss and loss adjustment expense
�
940,457

�
85,889

�
1,026,346

�
�
26,719

�
�
435,989

�
26,135

�
462,124

Less: Ceding commission income
�
7,643

�


�
7,643

�
�
4,787

�
�
87,100

�


�
87,100

Less: Service and fee income
�
119,876

�
58,457

�
178,333

�
�
139

�
�
82,752

�
44,789

�
127,541

Less: Non-cash impairment of goodwill
�
9,419

�
6,373

�
15,792

�
�


�
�
1,445

�


�
1,445

Less: Non-cash amortization of intangible assets
�
5,208

�
6,117

�
11,325

�
�
2,468

�
�
4,590

�
1,828

�
6,418

Operating expense before amortization and impairment
�
402,063

�
40,362

�
442,425

�
�
10,840

�
�
186,967

�
5,968

�
192,935

Net earned premium
�
$
1,465,122

�
$
120,476

�
$
1,585,598

�
�
$
47,622

�
�
$
654,849

�
$
33,217

�
$
688,066

Operating expense ratio before amortization and impairment (Non-GAAP)
�
27.4
%
�
33.5
%
�
27.9
%
�
�
22.8
%
�
�
28.6
%
�
18.0
%
�
28.0
%



11






Premiums by Business Line
$ in thousands
(Unaudited)
�
�
Three Months Ended December 31,
�
�
Gross Written Premium
�
�
Net Written Premium
�
�
Net Earned Premium
�
�
2014
�
2013
�
Change
�
�
2014
�
2013
�
Change
�
�
2014
�
2013
�
Change
Property & Casualty
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
��Personal Auto
�
$288,565
�
$240,890
�
19.8%
�
�
$252,284
�
$145,917
�
72.9%
�
�
$259,599
�
$155,904
�
66.5%
��Homeowners
�
76,330

�
992

�
NA
�
�
60,396

�
992

�
NA
�
�
38,778

�
326

�
NA
��RV/Packaged
�
33,370

�
35,648

�
(6.4)%
�
�
33,193

�
25,298

�
31.2%
�
�
37,841

�
28,344

�
33.5%
��Commercial Auto
�
38,951

�
29,841

�
30.5%
�
�
35,993

�
19,680

�
82.9%
�
�
33,918

�
19,456

�
74.3%
��Other
�
3,106

�
1,849

�
68.0%
�
�
2,287

�
1,397

�
63.7%
�
�
3,898

�
2,819

�
38.3%
Property & Casualty Total
�
440,322

�
309,220

�
42.4%
�
�
384,153

�
193,284

�
98.8%
�
�
374,034

�
206,849

�
80.8%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Accident & Health
�
22,526

�
8,519

�
164.4%
�
�
22,389

�
8,389

�
166.9%
�
�
30,532

�
8,385

�
264.1%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Total National General
�
462,848

�
317,739

�
45.7%
�
�
406,542

�
201,673

�
101.6%
�
�
404,566

�
215,234

�
88.0%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Reciprocal Exchanges
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
��Personal Auto
�
28,106

�

�
NA
�
�
28,012

�

�
NA
�
�
24,362

�

�
NA
��Homeowners
�
28,015

�

�
NA
�
�
14,491

�

�
NA
�
�
13,558

�

�
NA
��Other
�
3,928

�

�
NA
�
�
3,368

�

�
NA
�
�
3,010

�

�
NA
Reciprocal Exchanges Total
�
60,049

�

�
NA
�
�
45,871

�

�
NA
�
�
40,930

�

�
NA
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Consolidated Total
�
$522,897
�
$317,739
�
64.6%
�
�
$452,413
�
$201,673
�
124.3%
�
�
$445,496
�
$215,234
�
107.0%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Twelve Months Ended December 31,
�
�
Gross Written Premium
�
�
Net Written Premium
�
�
Net Earned Premium
�
�
2014
�
2013
�
Change
�
�
2014
�
2013
�
Change
�
�
2014
�
2013
�
Change
Property & Casualty
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
��Personal Auto
�
$
1,241,575

�
$
1,016,728

�
22.1%
�
�
$
1,047,795

�
$
487,311

�
115.0%
�
�
$
979,082

�
$
502,160

�
95.0%
��Homeowners
�
366,997

�
1,389

�
NA
�
�
333,586

�
1,389

�
NA
�
�
204,285

�
444

�
NA
��RV/Packaged
�
153,553

�
158,300

�
(3.0)%
�
�
148,456

�
88,553

�
67.6%
�
�
147,587

�
88,494

�
66.8%
��Commercial Auto
�
146,124

�
116,774

�
25.1%
�
�
132,002

�
61,163

�
115.8%
�
�
118,759

�
54,913

�
116.3%
��Other
�
16,417

�
12,063

�
36.1%
�
�
15,107

�
7,684

�
96.6%
�
�
15,409

�
8,838

�
74.3%
Property & Casualty Total
�
1,924,666

�
1,305,254

�
47.5%
�
�
1,676,946

�
646,100

�
159.5%
�
�
1,465,122

�
654,849

�
123.7%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Accident & Health
�
140,399

�
33,501

�
319.1%
�
�
140,002

�
33,216

�
321.5%
�
�
120,476

�
33,217

�
262.7%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Total National General
�
2,065,065

�
1,338,755

�
54.3%
�
�
1,816,948

�
679,316

�
167.5%
�
�
1,585,598

�
688,066

�
130.4%
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Reciprocal Exchanges
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
��Personal Auto
�
32,436

�

�
NA
�
�
32,075

�

�
NA
�
�
28,405

�

�
NA
��Homeowners
�
33,028

�

�
NA
�
�
17,127

�

�
NA
�
�
15,779

�

�
NA
��Other
�
4,578

�

�
NA
�
�
3,874

�

�
NA
�
�
3,438

�

�
NA
Reciprocal Exchanges Total
�
70,042

�

�
NA
�
�
53,076

�

�
NA
�
�
47,622

�

�
NA
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
�
Consolidated Total
�
$2,135,107
�
$1,338,755
�
59.5%
�
�
$1,870,024
�
$679,316
�
175.3%
�
�
$
1,633,220

�
$688,066
�
137.4%



��

12




Additional Disclosures

(1) References to operating earnings and basic and diluted operating EPS are Non-GAAP financial measures defined by the Company as net income and basic earnings per share excluding after-tax net realized investment gain or loss on securities, foreign exchange gain or loss, equity in earnings or losses of unconsolidated subsidiaries, non-cash amortization of intangible assets, and non-cash impairment of goodwill. The Company believes operating earnings and basic and diluted operating EPS are more relevant measures of the Companys profitability because operating earnings and basic and diluted operating EPS contain the components of net income upon which the Companys management has the most influence and excludes factors outside managements 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 measures to the most directly comparable GAAP measure.
(2)Reinsurance recoverable on unpaid losses includes $88,970 and $176,241 from related parties at December 31, 2014 and December 31, 2013, respectively; includes $23,583 relating to Reciprocal Exchanges at December 31, 2014.
(3)Reinsurance payable includes $26,241 and $76,360 to related parties at December 31, 2014 and December 31, 2013, respectively; includes $13,811 relating to Reciprocal Exchanges at December 31, 2014.
(4) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 93,427,382 shares - December 31, 2014; authorized 150,000,000 shares, issued and outstanding 79,731,800 shares - December 31, 2013.
(5) Preferred stock: $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,200,000 shares and 0 shares - December 31, 2014 and December 31, 2013.
(6) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expenses by net earned premium.
(7) Operating expense ratio and combined ratio are considered non-GAAP financial measures under applicable SEC rules because a component of those ratios, operating expense, is calculated by offsetting acquisition and other underwriting costs and general and administrative expense by ceding commission income and service and fee income. Management uses operating expense ratio (non-GAAP) and combined ratio (non-GAAP) to evaluate financial performance against historical results and establish targets on a consolidated basis. The Company believes this presentation enhances the understanding of our results by eliminating what we believe are volatile and unusual events and presenting the ratios with what we believe are the underlying run rates of the business.�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 measures to the most directly comparable GAAP measure.
(8) Operating expense ratio (non-GAAP) is calculated by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expense less ceding commission income and service and fee income.
(9) Combined ratio (non-GAAP) is calculated by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) together.
(10) Operating expense ratio (non-GAAP) before amortization and impairment is calculated 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 expense less ceding commission income and service and fee income less non-cash amortization of intangible assets and non-cash impairment of goodwill.


Investor Contact
Dean Evans
Director of Investor Relations
Phone: 212-380-9462


13


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