NEW YORK, May 08, 2017 (GLOBE NEWSWIRE) — National General Holdings Corp. (NASDAQ:NGHC) today reported first quarter 2017 net income of $34.1 million or $0.31 per diluted share, compared to $52.7 million or $0.49 per diluted share in the first quarter of 2016. First quarter 2017 operating earnings(1) was $41.3 million or $0.38 per diluted share, compared to $53.7 million or $0.50 per diluted share in the first quarter of 2016.

First Quarter 2017 Highlights Versus First Quarter 2016*

  • Net written premium grew $340.5 million or 45.7% to $1,085.0 million, driven by added premiums from the acquisitions of Direct General which closed on November 1, 2016, Standard Property and Casualty Insurance Company (f/k/a Standard Mutual) which closed on October 7, 2016 and Century-National which closed on June 1, 2016, organic growth within our P&C business of 13.1%, or 24.1% excluding the decline in lender-placed premiums, and continued growth of our A&H segment, both domestic and international.
  • The overall combined ratio(10,14) was 94.4% compared to 91.3% in the prior year’s quarter, excluding non-cash amortization of intangible assets. The P&C segment reported an increase in combined ratio to 96.0% from 90.9% in the prior year’s quarter, which was elevated by West Coast weather events as described below and an increase in expenses related to a $11.2 million increase in professional fees compared to the prior year’s quarter and continued investment in our platform. The A&H segment reported a combined ratio of 84.9% compared to 93.1% in the prior year’s quarter, driven by strong results across the book.
  • Total revenues grew by $279.9 million or 36.1% to $1,055.8 million, primarily driven by the aforementioned premium growth, service and fee income growth of $38.9 million or 40.1%, and net investment income growth of $4.1 million or 18.9%.
  • Shareholders’ equity was $1.93 billion and fully diluted book value per share was $13.83 at March 31, 2017, growth of 2.1% and 2.3%, respectively, from December 31, 2016. Our trailing twelve month operating return on average equity (ROE)(16) was 10.7% as of March 31, 2017.
  • First quarter 2017 operating earnings exclude the following material items, net of tax: $6.4 million or $0.06 per share of bargain purchase gain and $13.9 million or $0.13 per share of non-cash amortization of intangible assets.
  • First quarter 2017 operating earnings include approximately $8.9 million or $0.05 per share of losses related to unusually high levels of precipitation on the West Coast in January and February.

Barry Karfunkel, National General’s President and CEO, stated: “The first quarter saw strong organic growth in our Property and Casualty segment, especially in our auto book, as we continue to take advantage of the current market dislocation.  The opportunity that we are seeing in the market is exceptional, and we are excited to be in a position to benefit from it.  Our Accident and Health segment had another strong quarter, as the segment has built the scale to be a significant contributor to earnings moving forward.  Internally, we remain focused on integrating recent acquisitions and enhancing the capabilities of our state-of-the-art platform.”

*NOTE: Unless specified otherwise, discussion of our first quarter 2017 and 2016 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 First Quarter 2017 as Compared to First Quarter 2016

Gross written premium grew 43.8% to $1,173.7 million, net written premium grew 45.7% to $1,085.0 million, and net earned premium grew 34.5% to $881.1 million. Premium growth was driven by several key factors: underlying organic growth within our P&C segment, continued growth of our A&H segment, additional premiums from the acquisitions of Direct General which closed on November 1, 2016, Standard Property and Casualty Insurance Company (f/k/a Standard Mutual) which closed on October 7, 2016 and Century-National which closed on June 1, 2016.

Service and fee income grew 40.1% to $135.9 million, driven by added service and fee income from our recent completed transactions, primarily the Direct General acquisition which contributed an additional $33.3 million in the quarter, partially offset by a slight decrease in our A&H segment. Other revenue in the first quarter of 2017 included a $9.8 million pre-tax bargain purchase gain related to recent acquisitions.

Excluding non-cash amortization of intangible assets, the combined ratio(10,14,15) was 94.4% with a loss ratio(15) of 66.8% and an expense ratio(10,13,15) of 27.6%, compared to a prior year combined ratio of 91.3% with a loss ratio of 62.5% and an expense ratio of 28.8%. In the current year’s quarter, certain costs associated with claims handling were reclassified from general and administrative expenses to loss adjustment expenses resulting in an increase in loss and loss adjustment expense ratio and a decrease in expense ratio in corresponding amounts(15).

Underwriting results detailed by each of our business segments are as follows:

  • Property & Casualty – Gross written premium grew by 48.4% to $981.7 million, net written premium grew by 50.5% to $903.9 million, and net earned premium grew by 35.8% to $752.2 million. P&C net written premium growth was driven by several key factors: organic growth of 13.1%, or 24.1% excluding the decline in lender-placed premiums, the addition of $160.9 million from the Direct General acquisition, the addition of $10.9 million from the Standard Property and Casualty Insurance Company acquisition and the addition of $52.8 million from the Century-National acquisition, partially offset by a decrease in our lender-placed auto premiums. Service and fee income grew 63.2% to $103.6 million, driven by increased premium volume in the quarter, and the addition of service and fee income from acquisitions completed during the prior year, particularly Direct General. Excluding non-cash amortization of intangible assets, the combined ratio(10,14) was 96.0% with a loss ratio of 69.3% and an expense ratio(10,13) of 26.7%, versus a prior year combined ratio of 90.9% with a loss ratio of 60.0% and an expense ratio of 30.9%. The loss ratio was impacted by pre-tax catastrophe losses of approximately $8.9 million related to unusually high levels of precipitation on the West Coast in January and February. In the current year’s quarter, the reclassification of certain costs associated with claims handling from general and administrative expenses to loss adjustment expenses impacted both the loss and expense ratios by identical amounts(15).
     
  • Accident & Health – Gross written premium grew to $192.0 million, net written premium grew to $181.1 million, and net earned premium grew to $128.9 million, from $154.9 million, $143.8 million, and $100.9 million, respectively, in the prior year’s quarter. The A&H net written premium increase was driven by the continued growth across the entire book. Service and fee income was $32.3 million compared to $33.5 million in the prior year’s quarter. The decline in service and fee income primarily relates to a shift in mix of our domestic business. Excluding non-cash amortization of intangible assets, the combined ratio(10,14) was 84.9% with a loss ratio(15) of 51.9% and an expense ratio(10,13,15) of 33.0%, versus a prior year combined ratio of 93.1% with a loss ratio of 75.7% and an expense ratio of 17.4%. The improvement in our loss ratio reflects the strong performance across our entire book.
     
  • Reciprocal Exchanges – Results for the Reciprocal Exchanges are not included in net income available to NGHC common stockholders. Gross written premium was $82.2 million, net written premium was $41.7 million, and net earned premium was $39.0 million. Reciprocal Exchanges combined ratio(10,14,15) excluding non-cash amortization of intangible assets was 105.0% with a loss ratio of 72.0% and an expense ratio(10,13) of 33.0%.

Investment income grew 18.9% to $25.8 million, reflecting an increase in the size of our investment portfolio as compared to the prior year’s quarter. First quarter 2017 results included $0.2 million of net realized investment losses compared to a gain of $3.6 million in the first quarter of 2016. Total investments and cash equivalents were $3.8 billion as of March 31, 2017. Accumulated other comprehensive income increased to $19.9 million at March 31, 2017 from $12.7 million at December 31, 2016.

Interest expense was $11.5 million, up from $9.1 million in the prior year’s quarter due to an increased amount of debt on our balance sheet. Debt was $746.0 million at March 31, 2017, up from $446.2 million at March 31, 2016, as a result of our borrowings under our credit facility, our June 2016 promissory note for the acquisition of Century-National, and debt assumed from our prior acquisitions.

Earnings of equity investments (predominantly our investment in Life Settlement Entities and alternative investments) was a $5.0 million gain in the first quarter of 2017 versus a $6.7 million gain in the prior year’s quarter.

The first quarter of 2017 provision for income taxes was $15.8 million and the effective tax rate for the quarter was 29.8%.

National General Holding Corp.’s shareholders’ equity was $1,933.2 million at March 31, 2017, growth of 2.1% from $1,893.8 million at December 31, 2016. Fully diluted book value per share was $13.83 at March 31, 2017, growth of 2.3% from $13.52 at December 31, 2016. Our trailing twelve month operating return on average equity (ROE)(16) was 10.7% as of March 31, 2017.

Year-to-Date P&C Segment Notable Large Losses
    P&C Notable Large
Losses and ALAE

($ millions)
  P&C Loss Ratio
Points*
  EPS Impact After
Tax
Q1 West Coast Storms $ 8.9   1.2 %   $ 0.05

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

Conference Call

On Monday, May 8, 2017 at 11:00 AM ET, President and Chief Executive Officer Barry Karfunkel and Chief Financial Officer Mike Weiner will review results and discuss business conditions via a conference call that may be accessed as follows:

Toll-Free U.S. Dial-in:    888-267-2845
International Dial-in:    973-413-6102
Conference Entry Code:   170847
Webcast Registration:   http://ir.nationalgeneral.com/events.cfm

A replay of the conference call will be accessible from 2:00 PM ET on Monday, May 8, 2017 to 11:59 PM ET on Monday, May 22, 2017 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 170847. 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, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, 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, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, estimates of the fair value of our 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 with AmTrust Financial Services, Inc., ACP Re Ltd., Maiden Holdings, Ltd., or third party 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 – First Quarter
$ in thousands
(Unaudited)
 
    Three Months Ended March 31,
    2017     2016 (1)
    NGHC   Reciprocal
Exchanges
  Consolidated     NGHC   Consolidated
Revenues:                      
Gross written premium   $ 1,173,654     $ 82,216     $ 1,255,069   (A)   $ 816,194     $ 816,194  
Net written premium   1,085,038     41,701     1,126,739       744,587     744,587  
Net earned premium   881,139     39,032     920,171       654,920     654,920  
                       
Ceding commission income (loss)   2,747     17,247     19,994       (1,895 )   (1,895 )
Service and fee income   135,863     2,080     125,942   (B)   96,944     96,944  
Net investment income   25,769     2,884     26,390   (C)   21,670     21,670  
Net gain (loss) on investments   (161 )       (161 )     3,617     3,617  
Bargain purchase gain and other revenue   10,450         10,450       701     701  
Total revenues   $ 1,055,807     $ 61,243     $ 1,102,786   (D)   $ 775,957     $ 775,957  
                       
Expenses:                      
Loss and loss adjustment expense   $ 588,225     $ 28,100     $ 616,325       $ 409,050     $ 409,050  
Acquisition costs and other underwriting expenses   161,121     14,180     175,301       112,899     112,899  
General and administrative expenses   242,083     25,103     255,185   (E)   176,627     176,627  
Interest expense   11,545     2,263     11,545   (F)   9,141     9,141  
Total expenses   $ 1,002,974     $ 69,646     $ 1,058,356   (G)   $ 707,717     $ 707,717  
                       
Income (loss) before provision (benefit) for income taxes and earnings of equity method investments   $ 52,833     $ (8,403 )   $ 44,430       $ 68,240     $ 68,240  
Provision (benefit) for income taxes   15,766     (2,248 )   13,518       18,083     18,083  
Income (loss) before earnings of equity method investments   37,067     (6,155 )   30,912       50,157     50,157  
Earnings of equity method investments   4,954         4,954       6,682     6,682  
Net income (loss) before non-controlling interest and dividends on preferred shares   42,021     (6,155 )   35,866       56,839     56,839  
Less: net income (loss) attributable to non-controlling interest   30     (6,155 )   (6,125 )     12     12  
Net income before dividends on preferred shares   41,991         41,991       56,827     56,827  
Less: dividends on preferred shares   7,875         7,875       4,125     4,125  
Net income available to common stockholders   $ 34,116     $     $ 34,116       $ 52,702     $ 52,702  

NOTES:
(1) The Reciprocal Exchanges did not meet the criteria for consolidation under GAAP for the Three Months Ended March 31, 2016.
Consolidated column includes eliminations as follows: (A) $(801), (B) $(12,001), (C) $(2,263), (D) $(14,264), (E) $(12,001), (F) $(2,263) and (G) $(14,264).

Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)
 
  Three Months Ended March 31,
  2017   2016
Net income available to common stockholders $ 34,116     $ 52,702  
Basic net income per common share $ 0.32     $ 0.50  
Diluted net income per common share $ 0.31     $ 0.49  
       
Operating earnings attributable to NGHC(1) $ 41,285     $ 53,734  
Basic operating earnings per common share(1) $ 0.39     $ 0.51  
Diluted operating earnings per common share(1) $ 0.38     $ 0.50  
       
Dividends declared per common share $ 0.04     $ 0.03  
       
Weighted average number of basic shares outstanding 106,467,599     105,597,594  
Weighted average number of diluted shares outstanding 109,166,681     108,266,508  
Shares outstanding, end of period 106,502,250     105,714,916  
Fully diluted shares outstanding, end of period 109,378,890     108,383,830  
       
Book value per share $ 14.21     $ 12.97  
Fully diluted book value per share $ 13.83     $ 12.65  

Reconciliation of Net Income to Operating Earnings (Non-GAAP)
$ in thousands, except per share data
(Unaudited)
 
    Three Months Ended March 31,
    2017   2016
         
Net income available to common stockholders   $ 34,116     $ 52,702  
Add (subtract):        
Net (gain) loss on investments   161     (3,617 )
Foreign exchange gain   (649 )   (620 )
Bargain purchase gain   (9,801 )    
Equity in (earnings) losses of unconsolidated subsidiaries (other than LSC investment and certain Real Estate investments)   (18 )   161  
Non-cash amortization of intangible assets   21,337     5,664  
Income tax at 35%   (3,861 )   (556 )
Operating earnings attributable to NGHC (1)   $ 41,285     $ 53,734  
         
Operating earnings per common share:        
Basic operating earnings per common share   $ 0.39     $ 0.51  
Diluted operating earnings per common share   $ 0.38     $ 0.50  

Balance Sheet  
$ in thousands  
   
    March 31, 2017 (unaudited)     December 31, 2016 (audited)  
ASSETS   NGHC   Reciprocal
Exchanges
  Consolidated     NGHC   Reciprocal
Exchanges
  Consolidated  
Total investments (2)   $ 3,612,923     $ 311,818     $ 3,835,696   (A)   $ 3,456,112     $ 306,345     $ 3,673,449   (J)
Cash and cash equivalents   202,659     6,985     209,644       212,894     7,405     220,299    
Premiums and other receivables, net   1,351,938     43,972     1,394,309   (B)   1,044,272     47,198     1,090,669   (K)
Reinsurance recoverable (3)   896,566     71,521     968,087       892,264     55,972     948,236    
Intangible assets, net   435,082     3,820     438,902       456,695     11,025     467,720    
Goodwill   173,528         173,528       155,290         155,290    
Other (4)   648,654     97,282     737,312   (C)   621,679     89,764     689,318   (L)
Total assets   $ 7,321,350     $ 535,398     $ 7,757,478   (D)   $ 6,839,206     $ 517,709     $ 7,244,981   (M)
LIABILITIES AND STOCKHOLDERS’ EQUITY                            
Liabilities:                            
Unpaid loss and loss adjustment expense reserves   $ 2,129,116     $ 139,085     $ 2,268,201       $ 2,127,997     $ 137,075     $ 2,265,072    
Unearned premiums   1,687,462     167,356     1,854,818       1,472,299     163,326     1,635,625    
Reinsurance payable (5)   98,413     37,638     134,450   (E)   78,949     20,662     98,810   (N)
Accounts payable and accrued expenses (6)   471,533     14,202     477,111   (F)   330,210     13,179     336,991   (O)
Debt   745,962     89,045     745,962   (G)   752,001     89,008     752,001   (P)
Other   255,627     61,726     317,353       183,921     62,784     230,978   (Q)
Total liabilities   $ 5,388,113     $ 509,052     $ 5,797,895   (H)   $ 4,945,377     $ 486,034     $ 5,319,477   (R)
Stockholders’ equity:                            
Common stock (7)   $ 1,065     $     $ 1,065       $ 1,064     $     $ 1,064    
Preferred stock (8)   420,000         420,000       420,000         420,000    
Additional paid-in capital   917,057         917,057       914,706         914,706    
Accumulated other comprehensive income   19,880         19,880       12,710         12,710    
Retained earnings   574,962         574,962       545,106         545,106    
Total National General Holdings Corp. stockholders’ equity   1,932,964         1,932,964       1,893,586         1,893,586    
Non-controlling interest   273     26,346     26,619       243     31,675     31,918    
Total stockholders’ equity   $ 1,933,237     $ 26,346     $ 1,959,583       $ 1,893,829     $ 31,675     $ 1,925,504    
Total liabilities and stockholders’ equity   $ 7,321,350     $ 535,398     $ 7,757,478   (I)   $ 6,839,206     $ 517,709     $ 7,244,981   (S)

NOTES:
Consolidated column includes eliminations as follows: (A) $(89,045), (B) $(1,601), (C) $(8,624), (D) $(99,270), (E) $(1,601), (F) $(8,624), (G) $(89,045), (H) $(99,270), (I) $(99,270), (J) $(89,008), (K) $(801), (L) $(22,125), (M) $(111,934), (N) $(801), (O) $(6,398), (P) $(89,008), (Q) $(15,727), (R) $(111,934) and (S) $(111,934).

Segment Information – First Quarter
$ in thousands
(Unaudited)
 
    Three Months Ended March 31,
    2017     2016
    P&C   A&H   NGHC     Reciprocal
Exchanges
    P&C   A&H   NGHC
Gross written premium   $ 981,699     $ 191,955     $ 1,173,654       $ 82,216       $ 661,337     $ 154,857     $ 816,194  
Net written premium   903,924     181,114     1,085,038       41,701       600,774     143,813     744,587  
Net earned premium   752,213     128,926     881,139       39,032       554,048     100,872     654,920  
                                 
Ceding commission income (loss)   2,460     287     2,747       17,247       (2,264 )   369     (1,895 )
Service and fee income   103,590     32,273     135,863       2,080       63,488     33,456     96,944  
Total underwriting revenues   $ 858,263     $ 161,486     $ 1,019,749       $ 58,359       $ 615,272     $ 134,697     $ 749,969  
                                 
Loss and loss adjustment expense   521,334     66,891     588,225       28,100       332,659     76,391     409,050  
Acquisition costs and other   129,631     31,490     161,121       14,180       91,659     21,240     112,899  
General and administrative   196,870     45,213     242,083       25,103       144,694     31,933     176,627  
Total underwriting expenses   $ 847,835     $ 143,594     $ 991,429       $ 67,383       $ 569,012     $ 129,564     $ 698,576  
                                 
Underwriting income (loss)   10,428     17,892     28,320       (9,024 )     46,260     5,133     51,393  
Non-cash amortization of intangible assets   19,734     1,603     21,337       7,069       3,847     1,817     5,664  
Underwriting income before amortization and impairment   $ 30,162     $ 19,495     $ 49,657       $ (1,955 )     $ 50,107     $ 6,950     $ 57,057  
                                 
Underwriting ratios                                
Loss and loss adjustment expense ratio (9)   69.3 %   51.9 %   66.8 %     72.0 %     60.0 %   75.7 %   62.5 %
Operating expense ratio (Non-GAAP) (10,11)   29.3 %   34.2 %   30.0 %     51.1 %     31.6 %   19.2 %   29.7 %
Combined ratio (Non-GAAP) (10,12)   98.6 %   86.1 %   96.8 %     123.1 %     91.6 %   94.9 %   92.2 %
                                 
Underwriting ratios (before amortization and impairment)                                
Loss and loss adjustment expense ratio (9)   69.3 %   51.9 %   66.8 %     72.0 %     60.0 %   75.7 %   62.5 %
Operating expense ratio (Non-GAAP) (10,13)   26.7 %   33.0 %   27.6 %     33.0 %     30.9 %   17.4 %   28.8 %
Combined ratio before amortization and impairment (Non-GAAP) (10,14)   96.0 %   84.9 %   94.4 %     105.0 %     90.9 %   93.1 %   91.3 %

Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)
 
    Three Months Ended March 31,
    2017     2016
    P&C   A&H   NGHC     Reciprocal
Exchanges
    P&C   A&H   NGHC
Total underwriting expenses   $ 847,835     $ 143,594     $ 991,429       $ 67,383       $ 569,012     $ 129,564     $ 698,576  
Less: Loss and loss adjustment expense   521,334     66,891     588,225       28,100       332,659     76,391     409,050  
Less: Ceding commission income (loss)   2,460     287     2,747       17,247       (2,264 )   369     (1,895 )
Less: Service and fee income   103,590     32,273     135,863       2,080       63,488     33,456     96,944  
Operating expense   220,451     44,143     264,594       19,956       175,129     19,348     194,477  
Net earned premium   $ 752,213     $ 128,926     $ 881,139       $ 39,032       $ 554,048     $ 100,872     $ 654,920  
Operating expense ratio (Non-GAAP)   29.3 %   34.2 %   30.0 %     51.1 %     31.6 %   19.2 %   29.7 %
                                 
Total underwriting expenses   $ 847,835     $ 143,594     $ 991,429       $ 67,383       $ 569,012     $ 129,564     $ 698,576  
Less: Loss and loss adjustment expense   521,334     66,891     588,225       28,100       332,659     76,391     409,050  
Less: Ceding commission income (loss)   2,460     287     2,747       17,247       (2,264 )   369     (1,895 )
Less: Service and fee income   103,590     32,273     135,863       2,080       63,488     33,456     96,944  
Less: Non-cash amortization of intangible assets   19,734     1,603     21,337       7,069       3,847     1,817     5,664  
Operating expense before amortization and impairment   200,717     42,540     243,257       12,887       171,282     17,531     188,813  
Net earned premium   $ 752,213     $ 128,926     $ 881,139       $ 39,032       $ 554,048     $ 100,872     $ 654,920  
Operating expense ratio before amortization and impairment (Non-GAAP)   26.7 %   33.0 %   27.6 %     33.0 %     30.9 %   17.4 %   28.8 %

Premiums by Business Line
$ in thousands
(Unaudited)
 
    Three Months Ended March 31,
    Gross Written Premium     Net Written Premium     Net Earned Premium
    2017   2016   Change     2017   2016   Change     2017   2016   Change
Property & Casualty                                        
Personal Auto   $ 647,181     $ 385,198     68.0 %     $ 596,879     $ 335,326     78.0 %     $ 454,415     $ 271,997     67.1 %
Homeowners   114,725     70,301     63.2 %     104,545     65,876     58.7 %     104,129     74,439     39.9 %
RV/Packaged   44,754     39,603     13.0 %     44,519     39,456     12.8 %     40,650     37,519     8.3 %
Small Business Auto   86,376     50,151     72.2 %     79,208     44,993     76.0 %     63,241     43,844     44.2 %
Lender-placed insurance   76,270     111,997     (31.9 )%     72,832     111,997     (35.0 )%     83,741     122,806     (31.8 )%
Other   12,393     4,087     203.2 %     5,941     3,126     90.1 %     6,037     3,443     75.3 %
Property & Casualty   981,699     661,337     48.4 %     903,924     600,774     50.5 %     752,213     554,048     35.8 %
                                         
Accident & Health   191,955     154,857     24.0 %     181,114     143,813     25.9 %     128,926     100,872     27.8 %
Total National General   $ 1,173,654     $ 816,194     43.8 %     $ 1,085,038     $ 744,587     45.7 %     $ 881,139     $ 654,920     34.5 %
                                         
Reciprocal Exchanges                                        
Personal Auto   $ 28,159     $     NA     $ 17,106     $     NA     $ 16,117     $     NA
Homeowners   53,327         NA     24,216         NA     22,538         NA
Other   730         NA     379         NA     377         NA
Reciprocal Exchanges (A)   $ 82,216     $     NA     $ 41,701     $     NA     $ 39,032     $     NA
                                         
Consolidated Total (B)   $ 1,255,069     $ 816,194     53.8 %     $ 1,126,739     $ 744,587     51.3 %     $ 920,171     $ 654,920     40.5 %

NOTES:
(A) The Reciprocal Exchanges did not meet the criteria for consolidation under GAAP for the Three Months Ended March 31, 2016.
(B) Consolidated Total includes eliminations between National General and the Reciprocal Exchanges of $(277) in 2017 Personal Auto and $(524) in 2017 Homeowners Gross Written Premium.

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 gain or loss on investments, other-than-temporary impairment losses, foreign exchange gain or loss, bargain purchase gains, earnings of operating equity method investments (800 Superior, LLC and 4455 LBJ Freeway, LLC), non-cash impairment of goodwill and non-cash amortization of intangible assets. The Company believes operating earnings and basic and diluted operating EPS are relevant measures of the Company’s profitability because operating earnings and basic and diluted operating EPS contain the components of net income upon which the Company’s management has the most influence and excludes factors outside management’s 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) Total investments includes $405,889 and $390,688 in related parties at March 31, 2017 and December 31, 2016, respectively.

(3) Reinsurance recoverable includes $39,866 and $37,046 from related parties at March 31, 2017 and December 31, 2016, respectively.

(4) Other includes $1,160 and $1,298 from related parties at March 31, 2017 and December 31, 2016, respectively.

(5) Reinsurance payable includes $33,795 and $33,419 due to related parties at March 31, 2017 and December 31, 2016, respectively.

(6) Accounts payable and accrued expenses includes $32,011 and $29,271 to related parties at March 31, 2017 and December 31, 2016, respectively.

(7) Common stock: $0.01 par value – authorized 150,000,000 shares, issued and outstanding 106,502,250 shares – March 31, 2017; authorized 150,000,000 shares, issued and outstanding 106,428,092 shares – December 31, 2016.

(8) Preferred stock: $0.01 par value – authorized 10,000,000 shares, issued and outstanding 2,565,000 shares – March 31, 2017; authorized 10,000,000 shares, issued and outstanding 2,565,000 shares – December 31, 2016.

(9) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expense by net earned premium.

(10) 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 expenses 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.

(11) Operating expense ratio is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by dividing operating expense by net earned premium. Operating expense consists of the sum of acquisition and other underwriting costs and general and administrative expenses less ceding commission income and service and fee income. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its 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.

(12) Combined ratio is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) together. The ratio is used as an indicator of the Company’s underwriting discipline, efficiency in acquiring and servicing its business, and overall underwriting profit. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss. Other companies may calculate these measures differently, and therefore, their measures may not be comparable to those used by National General.

(13) Operating expense ratio before amortization and impairment is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio 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 expenses less ceding commission income and service and fee income less non-cash amortization of intangible assets and non-cash impairment of goodwill. The ratio is used as an indicator of the Company’s efficiency in acquiring and servicing its 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.

(14) Combined ratio before amortization and impairment is a non-GAAP measure defined by the Company, that is commonly used in the insurance industry. The Company calculates the ratio by adding the loss and loss adjustment expense ratio and the operating expense ratio before amortization and impairment (non-GAAP) together. The ratio is used as an indicator of the Company’s underwriting discipline, efficiency in acquiring and servicing its business, and overall underwriting profit. A combined ratio under 100% generally indicates an underwriting profit, while over 100% an underwriting loss. 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.

(15) In the current year’s quarter, certain costs associated with claims handling were prospectively reclassified from general and administrative expenses to loss adjustment expenses resulting in an increase in the loss and loss adjustment expense by $48.1 million and a corresponding decrease of $48.1 million in the general and administrative expense in the Property and Casualty segment and a $1.0 million reclassification from general and administrative expense to loss adjustment expense in the Accident and Health segment. Historically, the corresponding 2016 change to the Property and Casualty segment would have been: $25.9 million in Q1’16, $26.1 million in Q2’16, $28.2 million in Q3’16 and $39.4 million in Q4’16. The 2016 corresponding change to the Accident and Health segment would have been negligible. The Reciprocal Exchange corresponding change would have been: $0 in Q1’16, $3.9 million in Q2’16, $4.0 million in Q3’16, $4.4 million in Q4’16 and $4.3 million as reflected in Q1’17.

(16) Trailing twelve month operating return on average equity is the ratio of the previous twelve months operating earnings to average shareholders’ equity for the periods presented. Average shareholders’ equity is the sum of the shareholders’ equity excluding preferred stock at the beginning and end of the period presented divided by two. In the opinion of the Company’s management this ratio is an important indicator of how well management creates value for its shareholders through its operating activities and capital management. 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 net income to operating earnings, which is the Non-GAAP component of the operating return on average equity.

CONTACT: Investor Contact

Christine Worley
Director of Investor Relations
Phone: 212-380-9462
Email: Christine.Worley@NGIC.com
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