Weather events force Federated National into loss as it buys more reinsurance

Multiple weather events and higher costs of handling homeowners’ claims in Florida meant that Federated National Holding Company, a Florida-based retail and commercial insurer, reported a loss in 2016. But underlying growth has also meant it is buying more reinsurance.

The company’s combined ratio jumped to 120.7 percent in 2016 compared to 87.9 percent in 2015.

Overall, the company reported a net loss of $0.2 million for 2016 compared with net income of $40.9 million in 2015. In the fourth quarter its net loss was $12.1 million.

Michael Braun, the company’s CEO, said: “The quarter’s results were impacted by $21.4 million in losses, net of our reinsurance programmes, related to Hurricane Matthew, which impacted Florida and South Carolina in the month of October.” The $21.4 million included an $18.45 million retention from the excess-of-loss property catastrophe reinsurance.

"The year was challenging for the Company based on a significant increase in losses from multiple weather events and separately from the inflated costs of handling homeowners’ claims in Florida,” Braun noted.

In 2016, losses and loss adjustment expenses (LAE) increased 79.5 percent to $187.3 million, driven by increased written premiums in the company’s homeowners' and personal automobile lines of business, catastrophe losses resulting from a series of tornados and severe weather events and an increase in its Florida homeowners’ attritional loss ratio.

Overall, gross written premiums increased 22.6 percent to $605.5 million in 2016, reflecting market share growth in homeowners and personal automobile lines of business.

The company also increased the amount of reinsurance it bought in the third quarter when ceded premiums earned increased by $9 million, or 13.3 percent, to $76.9 million for the three months ended December 31, 2016, driven by the additional excess-of-loss reinsurance costs purchased for the 2016 – 2017 reinsurance programme, and the additional ceded premiums related to premium growth in our personal automobile line of business. This was partly offset by the unwinding of a 30 percent property quota share agreement in July 2016.