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press release

July 31, 2020, 9:19 a.m. EDT

National General Holdings Corp. Reports Second Quarter 2020 Results

NEW YORK, July 31, Jul 31, 2020 (GLOBE NEWSWIRE via COMTEX) -- NEW YORK, July 31, 2020 (GLOBE NEWSWIRE) -- National General Holdings Corp. /zigman2/quotes/202458366/composite NGHC +0.06% reported second quarter 2020 net income of $157.6 million or $1.37 per diluted share, compared to net income of $69.0 million or $0.60 per diluted share in the second quarter of 2019. Second quarter 2020 operating earnings (non-GAAP) [(1)] were $157.6 million or $1.36 per diluted share compared to $78.1 million or $0.67 per diluted share in the second quarter of 2019.

Second Quarter 2020 Highlights versus Second Quarter 2019*

  • Gross written premium grew by $50.4 million to $1,243.2 million compared to the prior year's quarter due to our P&C segment growth of 3.2%, driven by the acquisition of National Farmers Union Property and Casualty Company ("Farmers Union Insurance") in the third quarter of 2019, and organic growth, largely offset by the premium refund provided due to lower miles driven as a result of the COVID-19 pandemic; and our A&H domestic segment growth of 20.2%, excluding our previously sold A&H international business.

  • The overall combined ratio [(11,12)] was 80.5% compared to 90.9% in the prior year's quarter, excluding non-cash amortization of intangible assets. The P&C segment reported an improved combined ratio to 83.6% from 92.6% in the prior year's quarter driven by our continued strong underwriting and recent declines in miles driven. The P&C combined ratio includes prior year unfavorable loss development of $8.6 million compared to $10.4 million unfavorable loss development in the prior year's quarter, and $35.3 million of catastrophe losses related to weather-related events compared to $18.4 million of catastrophe losses in the prior year's quarter. The A&H segment reported a decrease in the combined ratio to 65.0% from 82.6% in the prior year's quarter, driven by strong operating results in our small group self-funded and individual products, absence of our international business which was sold in the fourth quarter of 2019, and growth in service and fee income of 51.3%. The A&H combined ratio includes $11.4 million of favorable loss development compared to $8.1 million of favorable loss development in the prior year's quarter.

  • Stockholders' equity was $3.0 billion and fully diluted book value per share was $22.02 at June 30, 2020, growth of 13.0% and 15.5%, respectively, from December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $20.40 at June 30, 2020, growth of 10.7%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE) [(13)] was 18.1% as of June 30, 2020.

  • Second quarter of 2020 operating earnings (non-GAAP) [(1) ] excludes the following, net of tax: $0.1 million loss on equity method investments, $4.4 million or $0.04 per share of net gain on investments and $4.2 million or $0.04 per share of non-cash amortization of intangible assets.

  • Repurchased 459,083 shares during the second quarter of 2020 as part of our share repurchase program.

  • Agreement announced on July 7, 2020 to be acquired by Allstate for expected total consideration of $34.50 per share cash (consisting of $32.00 in cash and an up to $2.50 per share closing dividend), subject to shareholder and regulatory approval and other customary closing conditions.

Barry Karfunkel, National General's CEO, stated: "Our well diversified platform continues to perform well. With our recently announced agreement to be acquired by Allstate, we look forward to contributing to the greater Allstate. I want to personally thank each and every one of the National General team members for their outstanding and continued work during these unprecedented times and for their continuing contribution to the success of the pending acquisition."

*NOTE: Unless specified otherwise, discussion of our second quarter 2020 and 2019 results do 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.

Overview of Second Quarter 2020 as Compared to Second Quarter 2019

  • Property & Casualty - Gross written premium grew by 3.2% to $1,053.5 million, net written premium increased by 0.4% to $789.4 million, and net earned premium increased by 2.9% to $842.0 million. P&C gross written premium growth was driven by $47.7 million of added premiums from the acquisition of Farmers Union Insurance, and organic growth, largely offset by the premium refund provided due to lower miles driven as a result of the COVID-19 pandemic. Service and fee income was $112.0 million compared to $113.1 million in the prior year's quarter. Excluding non-cash amortization of intangible assets, the combined ratio [(11,12)] was 83.6% with a loss and LAE ratio of 59.8% and an expense ratio [(10,12) ] of 23.8%, versus a prior year combined ratio of 92.6% with a loss and LAE ratio of 72.6% and an expense ratio of 20.0%. The loss and LAE ratio was impacted by pre-tax catastrophe losses of approximately $35.3 million primarily related to weather-related events in the second quarter of 2020, compared to $18.4 million of losses in the second quarter of 2019. Unfavorable loss development was $8.6 million in the second quarter of 2020 primarily driven by small business auto, compared to unfavorable loss development of $10.4 million in the second quarter of 2019.

  • Accident & Health - Gross written premium grew by $18.0 million compared to the prior year's quarter due to growth in both our small group self-funded and individual products. Excluding our A&H international business, our A&H domestic segment grew by 20.2% to $189.7 million. Service and fee income grew 51.3% to $80.1 million compared to $52.9 million in the prior year's quarter. Excluding non-cash amortization of intangible assets, the combined ratio [(11,12)] was 65.0% with a loss and LAE ratio of 39.5% and an expense ratio [(10,12)] of 25.5%, versus a prior year combined ratio of 82.6% with a loss and LAE ratio of 52.0% and an expense ratio of 30.6%. The loss and LAE ratio reflects strong performance in both small group self-funded and individual products. Favorable loss development was $11.4 million in the second quarter of 2020, compared to favorable loss development of $8.1 million in the second quarter of 2019.

  • Reciprocal Exchanges - Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $98.4 million, net written premium was $57.3 million, and net earned premium was $54.8 million. Reciprocal Exchanges combined ratio [(11,12)] excluding non-cash amortization of intangible assets was 83.1% with a loss and LAE ratio of 54.8% and an expense ratio [(10,12) ] of 28.3%.

Second quarter of 2020 net investment income decreased to $30.5 million, compared to $35.9 million in the second quarter of 2019. Total investments and cash and cash equivalents (including restricted cash) were $5.2 billion as of June 30, 2020. Accumulated other comprehensive income increased to a $186.9 million gain at June 30, 2020, from a $74.5 million gain at December 31, 2019, primarily due to market improvement.

Interest expense was $11.8 million, down from $12.9 million in the prior year's quarter. Debt was $682.3 million at June 30, 2020, compared to $686.0 million at December 31, 2019.

The second quarter of 2020 provision for income taxes was $49.0 million and the effective tax rate for the quarter was 22.7% compared with income taxes of $22.3 million and an effective rate of 22.2% in the second quarter of 2019.

Stockholders' equity was $2,995.1 million at June 30, 2020, growth of 13.0% from $2,649.5 million at December 31, 2019. Fully diluted book value per share was $22.02 at June 30, 2020, growth of 15.5% from $19.06 at December 31, 2019. Excluding accumulated other comprehensive income, fully diluted book value per share was $20.40 at June 30, 2020, growth of 10.7%, from December 31, 2019. Our trailing twelve-month operating return on average equity (ROE) [(13)] was 18.1% as of June 30, 2020.

Year-to-Date P&C Segment Notable Large Losses
Year Quarter Event P&C Notable Large Losses and LAE
($ millions)
P&C Loss and LAE Ratio Points* EPS Impact After Tax
2020 Q2 Weather-related Events $35.3 4.2% $0.24
2020 Q1 Weather-related Events $8.1 0.9% $0.06
2019 Q2 Weather-related Events $18.4 2.2% $0.13
2019 Q1 Winter Weather $12.1 1.6% $0.08

* Loss and LAE ratio points related to P&C net earned premium in quarter the loss event was recorded.

Additional item -

Homeowners Quota Share - Effective July 1, 2020, we cede 20.0% of net liability and receive a 37.0% ceding commission on in-force, new and renewal business, under our homeowners quota share reinsurance agreement.

About National General Holdings Corp.

National General Holdings Corp. /zigman2/quotes/202458366/composite NGHC +0.06% , 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, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, supplemental health and other niche insurance products.


IMPORTANT INFORMATION FOR INVESTORS

Additional Information and Where to Find It

This communication may be deemed solicitation material in respect of the proposed acquisition of National General Holdings Corp. (the "Company") by The Allstate Corporation. In connection with the merger, the Company plans to file with the Securities and Exchange Commission and furnish its stockholders a proxy statement. Additionally, the Company will file other relevant materials with the Securities and Exchange Commission in connection with the proposed transaction.

The materials to be filed by the Company with the Securities and Exchange Commission may be obtained free of charge at the Securities and Exchange Commission's web site at www.sec.gov . In addition, stockholders also may obtain free copies of the proxy statement, when available, from the Company by contacting National General Holdings Corp. Investor Relations at 59 Maiden Lane, 38th Floor New York, New York 10038, telephone number (212) 380-9462 or InvestorRelations@ngic.com.

INVESTORS AND STOCKHOLDERS OF THE COMPANY ARE URGED TO READ THE PROXY STATEMENT AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES TO THE MERGER.

Participants in the Solicitation

The Company and its directors, executive officers and other members of management and employees, under the Securities and Exchange Commission rules, may be deemed to be participants in the solicitation of proxies of the Company's stockholders in connection with the proposed merger. Investors and security holders may obtain more detailed information regarding the names, affiliations and interests of certain of the Company's executive officers and directors in the solicitation by reading the Company's proxy statement for its 2020 annual meeting of stockholders and the proxy statement and other relevant materials which may be filed with the Securities and Exchange Commission in connection with the merger when and if they become available. Information concerning the interests of the Company's participants in the solicitation, which may, in some cases, be different than those of the Company's stockholders generally, will be set forth in the proxy statement relating to the merger when and if it becomes available. Additional information regarding the Company's executive officers and directors in the solicitation is available by reading the Company's proxy statement for its 2020 annual meeting of stockholders.


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 us. 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, plans and expectations related to our proposed merger with The Allstate Corporation ("Allstate"), including anticipated timing for closing of the merger, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with Allstate, the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, the possibility that competing offers will be made, 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 potential effect of changes in LIBOR reporting practices, the effects of pandemics or other widespread health problems such as the ongoing COVID-19 pandemic on our business, including our investment portfolio, and the national and global economy generally, the effect of the performance of financial markets on our investment portfolio, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, estimates of the fair value of investments, development of claims and the effect on loss reserves, large loss activity including hurricanes and wildfires, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, the effect of unpredictable catastrophic losses, 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, the effects of tax reform, 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 with third party vendors or agencies, 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.


Income Statement - Second Quarter
$ in thousands
(Unaudited)

Three Months Ended June 30,
2020 2019
NGHC Reciprocal Exchanges Consolidated NGHC Reciprocal Exchanges Consolidated
Revenues:
Gross written premium $ 1,243,165 $ 98,436 $ 1,341,601 $ 1,192,762 $ 121,146 $ 1,313,908
Net written premium 957,640 57,268 1,014,908 939,178 56,220 995,398
Net earned premium 1,010,782 54,785 1,065,567 984,021 46,630 1,030,651
Ceding commission income 35,530 11,110 46,640 43,346 16,846 60,192
Service and fee income 192,023 2,336 180,592 [(A)] 166,049 1,516 148,908 [(G)]
Net investment income 30,523 2,012 31,175 [(B)] 35,949 2,124 35,131 [(H)]
Net gain (loss) on investments 5,511 (353 ) 5,158 (5,274 ) 44 (5,230 )
Total revenues $ 1,274,369 $ 69,890 $ 1,329,132 [(C)] $ 1,224,091 $ 67,160 $ 1,269,652 [(I)]
Expenses:
Loss and loss adjustment expense $ 570,439 $ 30,007 $ 600,446 $ 680,246 $ 35,289 $ 715,535
Acquisition costs and other underwriting expenses 219,278 10,100 229,378 185,951 8,175 194,126
General and administrative expenses 257,318 18,858 262,409 [(D)] 244,827 21,597 247,767 [(J)]
Interest expense 11,779 1,360 11,779 [(E)] 12,925 2,942 12,925 [(K)]
Total expenses $ 1,058,814 $ 60,325 $ 1,104,012 [(F)] $ 1,123,949 $ 68,003 $ 1,170,353 [(L)]
Income (loss) before provision (benefit) for income taxes $ 215,555 $ 9,565 $ 225,120 $ 100,142 $ (843 ) $ 99,299
Provision (benefit) for income taxes 48,981 1,526 50,507 22,266 (25 ) 22,241
Net income (loss) before non-controlling interest and dividends on preferred shares 166,574 8,039 174,613 77,876 (818 ) 77,058
Less: net income (loss) attributable to noncontrolling interest -- 8,039 8,039 -- (818 ) (818 )
Net income before dividends on preferred shares 166,574 -- 166,574 77,876 -- 77,876
Less: dividends on preferred shares 8,925 -- 8,925 8,925 -- 8,925
Net income available to common stockholders $ 157,649 $ -- $ 157,649 $ 68,951 $ -- $ 68,951

NOTES: Consolidated column includes eliminations as follows: (A) $(13,767), (B) $(1,360), (C) $(15,127), (D) $(13,767), (E) $(1,360), (F) $(15,127), (G) $(18,657), (H) $(2,942), (I) $(21,599), (J) $(18,657), (K) $(2,942) and (L) $(21,599).

Income Statement - Year To Date
$ in thousands
(Unaudited)

Six Months Ended June 30,
2020 2019
NGHC Reciprocal Exchanges Consolidated NGHC Reciprocal Exchanges Consolidated
Revenues:
Gross written premium $ 2,627,866 $ 190,289 $ 2,818,155 $ 2,596,971 $ 226,715 $ 2,823,686
Net written premium 2,111,948 112,563 2,224,511 2,054,887 105,175 2,160,062
Net earned premium 2,028,390 112,383 2,140,773 1,902,520 92,288 1,994,808
Ceding commission income 72,121 24,824 96,945 94,346 35,380 129,726
Service and fee income 383,180 3,493 360,033 [(A)] 346,437 2,886 314,415 [(G)]
Net investment income 60,270 4,195 61,418 [(B)] 70,232 4,294 68,576 [(H)]
Net gain (loss) on investments (557 ) (1,146 ) (1,703 ) (4,508 ) (700 ) (5,208 )
Total revenues $ 2,543,404 $ 143,749 $ 2,657,466 [(C)] $ 2,409,027 $ 134,148 $ 2,502,317 [(I)]
Expenses:
Loss and loss adjustment expense $ 1,220,070 $ 72,374 $ 1,292,444 $ 1,290,030 $ 77,314 $ 1,367,344
Acquisition costs and other underwriting expenses 437,023 20,597 457,620 389,284 16,760 406,044
General and administrative expenses 518,197 38,421 529,978 [(D)] 487,660 43,109 495,861 [(J)]
Interest expense 23,559 3,047 23,559 [(E)] 25,924 5,950 25,924 [(K)]
Total expenses $ 2,198,849 $ 134,439 $ 2,303,601 [(F)] $ 2,192,898 $ 143,133 $ 2,295,173 [(L)]
Income (loss) before provision (benefit) for income taxes $ 344,555 $ 9,310 $ 353,865 $ 216,129 $ (8,985 ) $ 207,144
Provision (benefit) for income taxes 77,222 1,457 78,679 46,495 (1,748 ) 44,747
Net income (loss) before non-controlling interest and dividends on preferred shares 267,333 7,853 275,186 169,634 (7,237 ) 162,397
Less: net income (loss) attributable to noncontrolling interest -- 7,853 7,853 -- (7,237 ) (7,237 )
Net income before dividends on preferred shares 267,333 -- 267,333 169,634 -- 169,634
Less: dividends on preferred shares 16,800 -- 16,800 16,800 -- 16,800
Net income available to common stockholders $ 250,533 $ -- $ 250,533 $ 152,834 $ -- $ 152,834

NOTES: Consolidated column includes eliminations as follows: (A) $(26,640), (B) $(3,047), (C) $(29,687), (D) $(26,640), (E) $(3,047), (F) $(29,687) (G) $(34,908), (H) $(5,950), (I) $(40,858), (J) $(34,908), (K) $(5,950) and (L) $(40,858).


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

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net income available to common stockholders $ 157,649 $ 68,951 $ 250,533 $ 152,834
Basic net income per common share $ 1.39 $ 0.61 $ 2.21 $ 1.35
Diluted net income per common share $ 1.37 $ 0.60 $ 2.17 $ 1.33
Operating earnings attributable to NGHC (non-GAAP) [(1)] $ 157,643 $ 78,140 $ 263,402 $ 167,856
Basic operating earnings per common share (non-GAAP) [(1)] $ 1.39 $ 0.69 $ 2.32 $ 1.48
Diluted operating earnings per common share (non-GAAP) [(1)] $ 1.36 $ 0.67 $ 2.27 $ 1.45
Dividends declared per common share $ 0.05 $ 0.04 $ 0.10 $ 0.08
Weighted average number of basic shares outstanding 113,542,628 113,178,552 113,549,952 113,097,084
Weighted average number of diluted shares outstanding 115,720,069 116,050,267 115,898,110 116,062,721
Shares outstanding, end of period 113,397,545 113,215,632
Fully diluted shares outstanding, end of period 115,574,986 116,087,347
Book value per share $ 22.44 $ 17.92
Fully diluted book value per share $ 22.02 $ 17.48


Reconciliation of Net Income to Operating Earnings (Non-GAAP)(1)(13)
$ in thousands, except per share data
(Unaudited)

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Net income available to common stockholders $ 157,649 $ 68,951 $ 250,533 $ 152,834
Add (subtract):
Equity in (earnings) losses of equity method investments 160 (731 ) 3,888 203
Net (gain) loss on investments (5,511 ) 5,274 557 4,508
Non-cash amortization of intangible assets 5,343 7,089 11,845 14,305
Income tax expense (benefit) 2 (2,443 ) (3,421 ) (3,994 )
Operating earnings attributable to NGHC (non-GAAP)(1) $ 157,643 $ 78,140 $ 263,402 $ 167,856
Operating earnings per common share (non-GAAP)(1):
Basic operating earnings per common share (non-GAAP)(1) $ 1.39 $ 0.69 $ 2.32 $ 1.48
Diluted operating earnings per common share (non-GAAP)(1) $ 1.36 $ 0.67 $ 2.27 $ 1.45


Balance Sheet
$ in thousands
(Unaudited)

June 30, 2020 December 31, 2019
ASSETS NGHC Reciprocal Exchanges Consolidated NGHC Reciprocal Exchanges Consolidated
Total investments [(2)] $ 4,853,180 $ 340,103 $ 5,085,750 [(A)] $ 4,632,960 $ 329,494 $ 4,854,998 [(H)]
Cash and cash equivalents, including restricted cash 334,771 237 335,008 163,480 983 164,463
Premiums and other receivables, net 1,438,085 49,649 1,487,734 1,373,089 55,859 1,428,948
Reinsurance balances 1,614,713 196,005 1,810,718 1,745,036 225,019 1,970,055
Intangible assets, net 347,686 3,135 350,821 362,598 3,225 365,823
Goodwill 179,328 -- 179,328 179,328 -- 179,328
Other [(3)] 776,916 29,364 768,484 [(B)] 798,675 29,070 792,919 [(I)]
Total assets $ 9,544,679 $ 618,493 $ 10,017,843 [(C)] $ 9,255,166 $ 643,650 $ 9,756,534 [(J)]
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves $ 2,626,314 $ 200,270 $ 2,826,584 $ 2,680,628 $ 205,786 $ 2,886,414
Unearned premiums and other revenue 2,102,044 226,403 2,328,447 2,059,688 252,553 2,312,241
Reinsurance payable 437,989 23,907 461,896 527,155 35,689 562,844
Accounts payable and accrued expenses 320,176 45,549 327,929 [(D)] 306,869 43,323 315,366 [(K)]
Debt 682,266 107,533 682,266 [(E)] 686,006 107,456 686,006 [(L)]
Other 380,766 30,279 411,045 345,366 30,803 376,169
Total liabilities $ 6,549,555 $ 633,941 $ 7,038,167 [(F)] $ 6,605,712 $ 675,610 $ 7,139,040 [(M)]
Stockholders' equity:
Preferred stock [(4)] $ 450,000 $ -- $ 450,000 $ 450,000 $ -- $ 450,000
Common stock [(5)] 1,139 -- 1,139 1,134 -- 1,134
Treasury stock, at cost [(6)] (8,482 ) -- (8,482 ) -- -- --
Additional paid-in capital 1,069,152 -- 1,069,152 1,065,634 -- 1,065,634
Accumulated other comprehensive income 186,864 -- 186,864 74,548 -- 74,548
Retained earnings 1,296,451 -- 1,296,451 1,058,138 -- 1,058,138
Total National General Holdings Corp. stockholders' equity 2,995,124 -- 2,995,124 2,649,454 -- 2,649,454
Noncontrolling interest -- (15,448 ) (15,448 ) -- (31,960 ) (31,960 )
Total stockholders' equity $ 2,995,124 $ (15,448 ) $ 2,979,676 $ 2,649,454 $ (31,960 ) $ 2,617,494
Total liabilities and stockholders' equity $ 9,544,679 $ 618,493 $ 10,017,843 [(G)] $ 9,255,166 $ 643,650 $ 9,756,534 [(N)]

NOTES: Consolidated column includes eliminations as follows: (A) $(107,533), (B) $(37,796), (C) $(145,329), (D) $(37,796), (E) $(107,533), (F) $(145,329), (G) $(145,329) (H) $(107,456), (I) $(34,826), (J) $(142,282), (K) $(34,826), (L) $(107,456), (M) $(142,282) and (N) $(142,282).


Segment Information - Second Quarter
$ in thousands
(Unaudited)

Three Months Ended June 30,
2020 2019
P&C A&H NGHC Reciprocal
Exchanges
P&C A&H NGHC Reciprocal Exchanges
Gross written premium $ 1,053,508 $ 189,657 $ 1,243,165 $ 98,436 $ 1,021,090 $ 171,672 $ 1,192,762 $ 121,146
Net written premium 789,428 168,212 957,640 57,268 786,471 152,707 939,178 56,220
Net earned premium 841,985 168,797 1,010,782 54,785 817,972 166,049 984,021 46,630
Ceding commission income 35,059 471 35,530 11,110 39,418 3,928 43,346 16,846
Service and fee income 111,955 80,068 192,023 2,336 113,112 52,937 166,049 1,516
Total underwriting revenues $ 988,999 $ 249,336 $ 1,238,335 $ 68,231 $ 970,502 $ 222,914 $ 1,193,416 $ 64,992
Loss and loss adjustment expense [(A)] 503,784 66,655 570,439 30,007 593,922 86,324 680,246 35,289
Acquisition costs and other underwriting expenses 152,384 66,894 219,278 10,100 137,950 48,001 185,951 8,175
General and administrative expenses 199,327 57,991 257,318 18,858 183,535 61,292 244,827 21,597
Total underwriting expenses $ 855,495 $ 191,540 $ 1,047,035 $ 58,965 $ 915,407 $ 195,617 $ 1,111,024 $ 65,061
Underwriting income (loss) 133,504 57,796 191,300 9,266 55,095 27,297 82,392 (69 )
Non-cash amortization of intangible assets 4,041 1,302 5,343 30 5,412 1,677 7,089 12
Underwriting income (loss) before amortization and impairment $ 137,545 $ 59,098 $ 196,643 $ 9,296 $ 60,507 $ 28,974 $ 89,481 $ (57 )
Underwriting ratios
Loss and loss adjustment expense ratio [(7)] 59.8 % 39.5 % 56.4 % 54.8 % 72.6 % 52.0 % 69.1 % 75.7 %
Operating expense ratio (Non-GAAP) [(8)] 24.3 % 26.3 % 24.6 % 28.3 % 20.7 % 31.6 % 22.5 % 24.5 %
Combined ratio (Non-GAAP) [(9)] 84.1 % 65.8 % 81.0 % 83.1 % 93.3 % 83.6 % 91.6 % 100.2 %
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio [(7)] 59.8 % 39.5 % 56.4 % 54.8 % 72.6 % 52.0 % 69.1 % 75.7 %
Operating expense ratio (Non-GAAP) [(10)] 23.8 % 25.5 % 24.1 % 28.3 % 20.0 % 30.6 % 21.8 % 24.4 %
Combined ratio before amortization and impairment (Non-GAAP) [(11)] 83.6 % 65.0 % 80.5 % 83.1 % 92.6 % 82.6 % 90.9 % 100.1 %

(A) Loss and loss adjustment expenses for the three months ended June 30, 2020 included $8,584 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $11,430 of favorable loss development in the A&H segment, versus $10,396 of unfavorable loss development in the P&C segment, and $8,135 of favorable loss development in the A&H segment for the three months ended June 30, 2019.

Segment Information - Year To Date
$ in thousands
(Unaudited)

Six Months Ended June 30,
2020 2019
P&C A&H NGHC Reciprocal
Exchanges
P&C A&H NGHC Reciprocal Exchanges
Gross written premium $ 2,251,184 $ 376,682 $ 2,627,866 $ 190,289 $ 2,166,755 $ 430,216 $ 2,596,971 $ 226,715
Net written premium 1,775,520 336,428 2,111,948 112,563 1,701,999 352,888 2,054,887 105,175
Net earned premium 1,694,887 333,503 2,028,390 112,383 1,574,891 327,629 1,902,520 92,288
Ceding commission income 71,090 1,031 72,121 24,824 87,827 6,519 94,346 35,380
Service and fee income 222,588 160,592 383,180 3,493 232,488 113,949 346,437 2,886
Total underwriting revenues $ 1,988,565 $ 495,126 $ 2,483,691 $ 140,700 $ 1,895,206 $ 448,097 $ 2,343,303 $ 130,554
Loss and loss adjustment expense [(A)] 1,071,814 148,256 1,220,070 72,374 1,118,957 171,073 1,290,030 77,314
Acquisition costs and other underwriting expenses 301,658 135,365 437,023 20,597 283,435 105,849 389,284 16,760
General and administrative expenses 400,454 117,743 518,197 38,421 367,730 119,930 487,660 43,109
Total underwriting expenses $ 1,773,926 $ 401,364 $ 2,175,290 $ 131,392 $ 1,770,122 $ 396,852 $ 2,166,974 $ 137,183
Underwriting income (loss) 214,639 93,762 308,401 9,308 125,084 51,245 176,329 (6,629 )
Non-cash amortization of intangible assets 9,228 2,617 11,845 60 10,897 3,408 14,305 23
Underwriting income (loss) before amortization and impairment $ 223,867 $ 96,379 $ 320,246 $ 9,368 $ 135,981 $ 54,653 $ 190,634 $ (6,606 )
Underwriting ratios
Loss and loss adjustment expense ratio [(7)] 63.2 % 44.5 % 60.1 % 64.4 % 71.0 % 52.2 % 67.8 % 83.8 %
Operating expense ratio (Non-GAAP) [(8)] 24.1 % 27.4 % 24.6 % 27.3 % 21.0 % 32.1 % 22.9 % 23.4 %
Combined ratio (Non-GAAP) [(9)] 87.3 % 71.9 % 84.7 % 91.7 % 92.0 % 84.3 % 90.7 % 107.2 %
Underwriting ratios (before amortization and impairment)
Loss and loss adjustment expense ratio [(7)] 63.2 % 44.5 % 60.1 % 64.4 % 71.0 % 52.2 % 67.8 % 83.8 %
Operating expense ratio (Non-GAAP) [(10)] 23.6 % 26.6 % 24.1 % 27.3 % 20.3 % 31.1 % 22.2 % 23.4 %
Combined ratio before amortization and impairment (Non-GAAP) [(11)] 86.8 % 71.1 % 84.2 % 91.7 % 91.3 % 83.3 % 90.0 % 107.2 %

(A) Loss and loss adjustment expenses for the six months ended June 30, 2020 included $13,055 of unfavorable loss development on prior accident year loss and loss adjustment expense reserves in the P&C segment, and $16,238 of favorable loss development in the A&H segment, versus $4,882 of unfavorable loss development in the P&C segment, and $18,987 of favorable loss development in the A&H segment for the six months ended June 30, 2019.


Reconciliation of Operating Expense Ratio (Non-GAAP)(8,10,12)
$ in thousands
(Unaudited)

Three Months Ended June 30,
2020 2019
P&C A&H NGHC Reciprocal Exchanges P&C A&H NGHC Reciprocal Exchanges
Total underwriting expenses $ 855,495 $ 191,540 $ 1,047,035 $ 58,965 $ 915,407 $ 195,617 $ 1,111,024 $ 65,061
Less: Loss and loss adjustment expense 503,784 66,655 570,439 30,007 593,922 86,324 680,246 35,289
Less: Ceding commission income 35,059 471 35,530 11,110 39,418 3,928 43,346 16,846
Less: Service and fee income 111,955 80,068 192,023 2,336 113,112 52,937 166,049 1,516
Operating expense (Non-GAAP) [(8)] 204,697 44,346 249,043 15,512 168,955 52,428 221,383 11,410
Net earned premium $ 841,985 $ 168,797 $ 1,010,782 $ 54,785 $ 817,972 $ 166,049 $ 984,021 $ 46,630
Operating expense ratio (Non-GAAP) [(8)] 24.3 % 26.3 % 24.6 % 28.3 % 20.7 % 31.6 % 22.5 % 24.5 %
Total underwriting expenses $ 855,495 $ 191,540 $ 1,047,035 $ 58,965 $ 915,407 $ 195,617 $ 1,111,024 $ 65,061
Less: Loss and loss adjustment expense 503,784 66,655 570,439 30,007 593,922 86,324 680,246 35,289
Less: Ceding commission income 35,059 471 35,530 11,110 39,418 3,928 43,346 16,846
Less: Service and fee income 111,955 80,068 192,023 2,336 113,112 52,937 166,049 1,516
Less: Non-cash amortization of intangible assets 4,041 1,302 5,343 30 5,412 1,677 7,089 12
Operating expense before amortization and impairment (Non-GAAP) [(10)] 200,656 43,044 243,700 15,482 163,543 50,751 214,294 11,398
Net earned premium $ 841,985 $ 168,797 $ 1,010,782 $ 54,785 $ 817,972 $ 166,049 $ 984,021 $ 46,630
Operating expense ratio before amortization and impairment (Non-GAAP) [(10)] 23.8 % 25.5 % 24.1 % 28.3 % 20.0 % 30.6 % 21.8 % 24.4 %

Reconciliation of Operating Expense Ratio (Non-GAAP)(8,10,12)
$ in thousands
(Unaudited)

Six Months Ended June 30,
2020 2019
P&C A&H NGHC Reciprocal Exchanges P&C A&H NGHC Reciprocal Exchanges
Total underwriting expenses $ 1,773,926 $ 401,364 $ 2,175,290 $ 131,392 $ 1,770,122 $ 396,852 $ 2,166,974 $ 137,183
Less: Loss and loss adjustment expense 1,071,814 148,256 1,220,070 72,374 1,118,957 171,073 1,290,030 77,314
Less: Ceding commission income 71,090 1,031 72,121 24,824 87,827 6,519 94,346 35,380
Less: Service and fee income 222,588 160,592 383,180 3,493 232,488 113,949 346,437 2,886
Operating expense (Non-GAAP) [(8)] 408,434 91,485 499,919 30,701 330,850 105,311 436,161 21,603
Net earned premium $ 1,694,887 $ 333,503 $ 2,028,390 $ 112,383 $ 1,574,891 $ 327,629 $ 1,902,520 $ 92,288
Operating expense ratio (Non-GAAP) [(8)] 24.1 % 27.4 % 24.6 % 27.3 % 21.0 % 32.1 % 22.9 % 23.4 %
Total underwriting expenses $ 1,773,926 $ 401,364 $ 2,175,290 $ 131,392 $ 1,770,122 $ 396,852 $ 2,166,974 $ 137,183
Less: Loss and loss adjustment expense 1,071,814 148,256 1,220,070 72,374 1,118,957 171,073 1,290,030 77,314
Less: Ceding commission income 71,090 1,031 72,121 24,824 87,827 6,519 94,346 35,380
Less: Service and fee income 222,588 160,592 383,180 3,493 232,488 113,949 346,437 2,886
Less: Non-cash amortization of intangible assets 9,228 2,617 11,845 60 10,897 3,408 14,305 23
Operating expense before amortization and impairment (Non-GAAP) [(10)] 399,206 88,868 488,074 30,641 319,953 101,903 421,856 21,580
Net earned premium $ 1,694,887 $ 333,503 $ 2,028,390 $ 112,383 $ 1,574,891 $ 327,629 $ 1,902,520 $ 92,288
Operating expense ratio before amortization and impairment (Non-GAAP) [(10)] 23.6 % 26.6 % 24.1 % 27.3 % 20.3 % 31.1 % 22.2 % 23.4 %


Premiums by Product Line
$ in thousands
(Unaudited)

Three Months Ended June 30,
Gross Written Premium Net Written Premium Net Earned Premium
2020 2019 Change 2020 2019 Change 2020 2019 Change
Property & Casualty
Personal Auto $ 612,927 $ 611,312 0.3 % $ 533,242 $ 511,952 4.2 % $ 561,548 $ 542,834 3.4 %
Homeowners 205,211 190,037 8.0 % 84,257 108,404 (22.3 )% 99,368 102,008 (2.6 )%
RV/Packaged 57,801 61,314 (5.7 )% 55,882 58,167 (3.9 )% 46,956 49,411 (5.0 )%
Small Business Auto 60,717 83,829 (27.6 )% 46,429 65,420 (29.0 )% 53,733 60,059 (10.5 )%
Lender-placed insurance 103,922 58,859 76.6 % 64,674 37,214 73.8 % 71,102 60,278 18.0 %
Other 12,930 15,739 (17.8 )% 4,944 5,314 (7.0 )% 9,278 3,382 174.3 %
Total Premium $ 1,053,508 $ 1,021,090 3.2 % $ 789,428 $ 786,471 0.4 % $ 841,985 $ 817,972 2.9 %
Accident & Health
Group 89,467 75,036 19.2 % 69,217 57,960 19.4 % 69,232 57,949 19.5 %
Individual 100,190 82,799 21.0 % 98,995 82,652 19.8 % 99,565 83,916 18.6 %
Total Premium Domestic $ 189,657 $ 157,835 20.2 % $ 168,212 $ 140,612 19.6 % $ 168,797 $ 141,865 19.0 %
International -- 13,837 (100.0 )% -- 12,095 (100.0 )% -- 24,184 (100.0 )%
Total National General $ 1,243,165 $ 1,192,762 4.2 % $ 957,640 $ 939,178 2.0 % $ 1,010,782 $ 984,021 2.7 %
Total National General (A) $ 1,243,165 $ 1,178,925 5.4 % $ 957,640 $ 927,083 3.3 % $ 1,010,782 $ 959,837 5.3 %
Reciprocal Exchanges
Personal Auto $ 37,382 $ 43,984 (15.0 )% $ 34,281 $ 18,661 83.7 % $ 31,714 $ 16,093 97.1 %
Homeowners 60,160 76,140 (21.0 )% 22,667 37,211 (39.1 )% 22,741 30,225 (24.8 )%
Other 894 1,022 (12.5 )% 320 348 (8.0 )% 330 312 5.8 %
Total Premium $ 98,436 $ 121,146 (18.7 )% $ 57,268 $ 56,220 1.9 % $ 54,785 $ 46,630 17.5 %
Consolidated Total $ 1,341,601 $ 1,313,908 2.1 % $ 1,014,908 $ 995,398 2.0 % $ 1,065,567 $ 1,030,651 3.4 %

(A) Excludes A&H international product line which was sold in the fourth quarter of 2019.

Premiums by Product Line
$ in thousands
(Unaudited)

Six Months Ended June 30,
Gross Written Premium Net Written Premium Net Earned Premium
2020 2019 Change 2020 2019 Change 2020 2019 Change
Property & Casualty
Personal Auto $ 1,407,424 $ 1,377,993 2.1 % $ 1,235,549 $ 1,170,872 5.5 % $ 1,141,050 $ 1,053,388 8.3 %
Homeowners 370,464 342,079 8.3 % 172,800 193,649 (10.8 )% 190,851 186,066 2.6 %
RV/Packaged 110,929 113,165 (2.0 )% 107,860 109,764 (1.7 )% 96,248 99,716 (3.5 )%
Small Business Auto 133,469 169,707 (21.4 )% 105,028 139,606 (24.8 )% 113,158 127,692 (11.4 )%
Lender-placed insurance 199,366 134,797 47.9 % 142,143 79,284 79.3 % 140,769 101,996 38.0 %
Other 29,532 29,014 1.8 % 12,140 8,824 37.6 % 12,811 6,033 112.3 %
Total Premium $ 2,251,184 $ 2,166,755 3.9 % $ 1,775,520 $ 1,701,999 4.3 % $ 1,694,887 $ 1,574,891 7.6 %
Accident & Health
Group 177,005 139,974 26.5 % 138,688 111,910 23.9 % 138,702 111,912 23.9 %
Individual 199,677 166,991 19.6 % 197,740 166,775 18.6 % 194,801 166,151 17.2 %
Total Premium Domestic $ 376,682 $ 306,965 22.7 % $ 336,428 $ 278,685 20