Federated National decreases its reinsurance spend in Q2

Federated National Holding Company lowered its reinsurance spend in the second quarter of 2017; the decrease was mainly due to the expiration of a Florida-only property quota share but the company did buy additional excess-of-loss reinsurance.

Total revenues at the insurer increased by $25.6 million, or 35.6 percent, to $97.6 million for the three months ended June 30, 2017, compared with $71.9 million for the same three-month period last year.

Its gross written premiums decreased by $2.5 million, or 1.5 percent, to $168.7 million in the quarter, compared with $171.2 million for the same three-month period last year. The decrease was driven by automobile, which decreased $8.4 million, offset by homeowners increasing $6 million.

The automobile decrease was related to moving two programmes into run-off during the second half of 2016, plus a third programme in the first quarter of 2017, thus reducing the premiums being written this quarter.

Homeowners’ non-Florida continued to have significant growth in 2017, specifically in Louisiana and Texas, with Texas beginning to write policies in the first quarter of 2017.

The company’s ceded premiums earned decreased by $9.9 million, or 12.8 percent, to $67.4 million in the quarter, compared with the same three-month period last year.

The decrease in ceded premiums earned was driven primarily by the expiration of the 30 percent Florida-only property quota share treaty, which ended on July 1, 2016.

The company said the effect of this expiration was partially offset by additional excess-of-loss reinsurance costs purchased for the 2016-2017 reinsurance programs, which became effective on June 1, 2016 and July 1, 2016.

Additionally, in automobile, ceded premiums as a percentage of gross premiums earned decreased to 65 percent this quarter compared with 79 percent in the same period last year. This decrease is the result of one of its auto programmes exceeding the premium limit in the related reinsurance treaty. This programme was terminated effective July 1, 2017.

Together, the increase in gross earned premium and the decrease in ceded premiums drove net premiums earned of $83.2 million, a $23.1 million increase, or 38.5 percent, from the same three-month period last year.

Michael Braun, the company’s chief executive, said: “Our net income of $4.9 million for the second quarter includes an expense of $2.8 million in claims, net of reinsurance, related to multiple severe weather events that impacted our policyholders.

“During the quarter, we also achieved multiple initiatives including finalization of our excess-of-loss catastrophe reinsurance program, replacement of our 10% Florida homeowners quota share treaty, and implementation of actions to improve underwriting results in our automobile book of business.

“We also continued with our previously announced share repurchase program. Our 2016 statewide average rate increase of 5.6% on our Florida homeowners’ book of business will be fully reflected in our earned premium for the third quarter, and our additional statewide average rate increase of 9.9% takes effect beginning August 1st.

“We are also pleased to provide enhanced disclosures this quarter via the presentation of our results by line of business basis, demonstrating our continued commitment to transparency with the investing community. It is our intent to provide this supplemental information on an ongoing basis.”

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