National General
05/02/16
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National General Holdings Corp. Reports First Quarter 2016 Results

NEW YORK, May 02, 2016 (GLOBE NEWSWIRE) -- National General Holdings Corp. (NASDAQ:NGHC) today reported first quarter 2016 operating earnings(1) of $53.7 million or $0.50 per diluted share, compared to $43.0 million or $0.45 per diluted share in the first quarter of 2015. Net income was $52.7 million or $0.49 per diluted share, compared to $41.7 million or $0.43 per diluted share in the first quarter of 2015. 

First Quarter 2016 Highlights Versus First Quarter 2015*

On April 27, National General announced with deep sadness the passing of Michael Karfunkel, who founded National General in 2009 and served as Chairman and Chief Executive Officer.  His extraordinary leadership and passionate commitment will be remembered by those who were fortunate to work with him.  The Board of Directors has appointed Barry Karfunkel, National General's President, to serve as Chief Executive Officer.  The Board is confident in Barry's ability to work cohesively with the Company's senior management team to ensure the continuity of National General's strategic plan.  Barry has been part of the management team at National General since its founding, and during that time worked closely with Michael to craft and execute the Company's strategic vision.

*NOTE: Unless specified otherwise, discussion of our first quarter 2016 and 2015 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. Attorney-in-Fact management fees referenced within this release are eliminated in consolidated financial results.

Overview of First Quarter 2016 as Compared to First Quarter 2015

Gross written premium grew 39.3% to $816.2 million, net written premium grew 45.6% to $744.6 million, and net earned premium grew 49.8% to $654.9 million. Premium growth was driven by several key factors: underlying organic growth within our P&C business, continued expansion of our A&H segment, additional premiums from the National General Lender Services (formerly QBE Lender-Placed Insurance) and Assurant Health acquisitions which closed on October 1, 2015, and added premium volume from Assigned Risk Solutions (ARS), which we began writing on National General paper during the quarter.

Ceding commission income was a loss of $1.9 million reflecting a sliding scale adjustment related to third-party quota share which was terminated in 2013. Service and fee income grew 54.7% to $96.9 million, driven by added service and fee income from recently completed acquisitions, underlying growth within our A&H segment, and growth in management fees related to the Attorneys-in-Fact that manage the Reciprocal Exchanges (which were $9.6 million in the first quarter of 2016 compared to $8.6 million in the prior year's quarter).

Excluding non-cash amortization of intangible assets and impairment of goodwill, the combined ratio was 91.3% with a loss ratio of 62.5% and an expense ratio of 28.8%, compared to a prior year combined ratio of 91.2% with a loss ratio of 63.7% and an expense ratio of 27.5%. The P&C segment reported an improved combined ratio, while the A&H segment reported an increase in the combined ratio from the prior year's quarter. 

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

Investment income grew 53.6% to $21.7 million, reflecting an increase in the size of our investment portfolio as compared to the prior year's quarter. First quarter 2016 results included $3.6 million of net realized investment gains compared with a gain of $1.5 million in the first quarter of 2015.  The first quarter included no other than temporary impairment losses versus OTTI losses of $1.0 million in the prior year's quarter. Total investments and cash equivalents were $2.8 billion as of March 31, 2016.  Accumulated other comprehensive income (AOCI) increased to $4.5 million at March 31, 2016 from $(19.4) million at December 31, 2015. 

Other revenue was $0.7 million in the first quarter of 2016 compared to $1.2 million in the prior year's quarter, with the current quarter driven by a $0.6 million foreign exchange gain from currency fluctuations within our European subsidiaries. 

Interest expense was $9.1 million, up from $5.4 million in the prior year's quarter due to an increased amount of debt on our balance sheet. Debt was $446.2 million at March 31, 2016, up from $255.0 million at March 31, 2015 as a result of our August 2015 issuance of $100 million of subordinated notes and our October 2015 issuance of $100 million of senior unsecured notes. 

Equity in earnings of unconsolidated subsidiaries (predominantly our investment in Life Settlement Entities and Real Estate investments) was a $6.7 million gain in the first quarter of 2016 versus a $5.0 million gain in the prior year's quarter, reflecting fair value adjustments on life settlement contracts and income from our real estate investments. 

The first quarter 2016 provision for income taxes was $18.1 million and the effective tax rate for the quarter was 26.5%. Included in the first quarter 2016 provision for income taxes was a $1.8 million benefit attributable to a reduction of the deferred tax liability associated with the equalization reserves of our Luxembourg Reinsurance Company (LRC) subsidiaries.  Excluding this benefit, the adjusted 2016 first quarter effective tax rate was 29.2%.  As of March 31, 2016, the remaining DTL associated with our LRC subsidiaries was $12.0 million.

National General Holding Corp.'s shareholders' equity was $1.56 billion at March 31, 2016, growth of 23.7% from $1.26 billion at March 31, 2015.  Fully diluted book value per share was $12.34 at March 31, 2016, growth of 12.6% from $10.96 at March 31, 2015.  Annualized operating return on average equity (ROE) was 16.3% for the first quarter 2016.

Additional Items

Conference Call

On Tuesday, May 3, 2016 at 11:00 AM ET 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: 888-267-2860
International Dial-in: 973-413-6102
Conference Entry Code: 445263
Webcast Registration: http://ir.nationalgeneral.com/events.cfm

A replay of the conference call will be accessible from 2:00 PM ET on Tuesday, May 3, 2016 to 11:59 PM ET on Tuesday, May 17, 2016 by dialing either 800-332-6854 (toll-free) within the U.S. or 973-528-0005 outside the U.S. and entering passcode 445263. 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, 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.


 
Income Statement - First Quarter
$ in thousands
(Unaudited)
 
  Three Months Ended March 31, 
  2016  2015 
  NGHC Reciprocal Exchanges Consolidated  NGHC Reciprocal Exchanges Consolidated 
Revenues:              
Gross written premium $816,194  $68,322  $883,626 (A) $585,808  $61,237  $643,455 (H)
Ceded premiums (related parties $408, $890, $408 for 2016; $348, $3,590, $348 for 2015) (71,607) (34,121) (104,838)(B) (74,420) (42,600) (113,430)(I)
Net written premium 744,587  34,201  778,788   511,388  18,637  530,025  
Net earned premium 654,920  35,168  690,088   437,269  41,896  479,165  
               
Ceding commission income/(loss) (1,895) 17,324  15,429   1,053  4,027  5,080  
Service and fee income 96,944  2,611  89,965 (C) 62,653  795  54,870 (J)
Net investment income 21,670  2,172  23,842   14,109  2,039  16,148  
Net realized gain/(loss) on investments 3,617  (1,440) 2,177   1,510  693  2,203  
Other than temporary impairment loss        (1,016)   (1,016) 
Other revenue 701    701   1,245    1,245  
Total revenues $775,957  $55,835  $822,202 (D) $516,823  $49,450  $557,695 (K)
               
Expenses:              
Loss and loss adjustment expense $409,050  $21,249  $430,299   $278,682  $28,004  $306,686  
Acquisition costs and other underwriting expenses 112,899  12,287  125,158 (E) 86,629  3,261  89,885 (L)
General and administrative expenses 176,627  14,640  181,705 (F) 99,876  14,384  105,687 (M)
Interest expense 9,141  2,052  11,193   5,383  3,697  9,080  
Total expenses $707,717  $50,228  $748,355 (G) $470,570  $49,346  $511,338 (N)
               
Income before provision/(benefit) for income taxes and equity in earnings (losses) of unconsolidated subsidiaries $68,240  $5,607  $73,847   $46,253  $104  $46,357  
Provision/(benefit) for income taxes 18,083  (301) 17,782   8,419  (32) 8,387  
Income before equity in earnings (losses) of unconsolidated subsidiaries 50,157  5,908  56,065   37,834  136  37,970  
Equity in earnings (losses) of unconsolidated subsidiaries 6,682    6,682   4,958    4,958  
Net income before non-controlling interest and dividends on preferred shares 56,839  5,908  62,747   42,792  136  42,928  
Less: net income attributable to non-controlling interest 12  5,908  5,920   24  136  160  
Net income before dividends on preferred shares 56,827    56,827   42,768    42,768  
Less: dividends on preferred shares 4,125    4,125   1,031    1,031  
Net income available to common stockholders $52,702  $  $52,702   $41,737  $  $41,737  


NOTE
: Consolidated column includes eliminations as follows: (A) $(890), (B) $890, (C) $(9,590), (D) $(9,590), (E) $(28), (F) $(9,562), (G) $(9,590), (H) $(3,590), (I) $3,590, (J) $(8,578), (K) $(8,578), (L) $(5), (M) $(8,573), and (N) $(8,578).


 
 
Earnings and Per Share Data
$ in thousands, except shares and per share data
(Unaudited)
 
 Three Months Ended March 31,
 2016 2015
Net income available to common stockholders$52,702  $41,737 
  Basic net income per common share$0.50  $0.45 
  Diluted net income per common share$0.49  $0.43 
    
Operating earnings attributable to NGHC(1)$53,734  $43,017 
  Basic operating earnings per common share(1)$0.51  $0.46 
  Diluted operating earnings per common share(1)$0.50  $0.45 
    
Dividends declared per common share$0.03  $0.02 
    
Weighted average number of basic shares outstanding105,597,594  93,454,236 
Weighted average number of diluted shares outstanding108,266,508  96,087,952 
Shares outstanding, end of period105,714,916  93,495,258 
Fully diluted shares outstanding, end of period108,383,830  96,128,974 
    
Book value per share$12.65  $11.27 
Fully diluted book value per share$12.34  $10.96 
        


Reconciliation of Net Income to Operating Earnings (Non-GAAP)
$ in thousands, except per share data
(Unaudited)
 
 Three Months Ended March 31,
 2016 2015
    
Net income available to common stockholders$52,702  $41,737 
Add (subtract) net of tax:   
Net realized (gain)/loss on investments(2,351) (982)
Other than temporary impairment losses  661 
Foreign exchange (gain)/loss(403) (277)
Equity in (earnings)/losses of unconsolidated subsidiaries (other than LSC Entities and Real Estate investments)104  104 
Non-cash amortization of intangible assets3,682  1,774 
Non-cash impairment of goodwill   
Operating earnings attributable to NGHC (1)$53,734  $43,017 
    
Operating earnings per common share:   
Basic operating earnings per common share$0.51  $0.46 
Diluted operating earnings per common share$0.50  $0.45 
        


Balance Sheet
$ in thousands
(Unaudited)
 
  March 31, 2016 (unaudited)  December 31, 2015 (audited)
ASSETS NGHC Reciprocal
Exchanges
 Consolidated  NGHC Reciprocal
Exchanges
 Consolidated
Total investments $2,538,144  $255,601  $2,738,662 (A) $2,425,168  $242,542  $2,667,710 
Cash and cash equivalents 272,076  2,673  274,749   273,884  8,393  282,277 
Premiums and other receivables, net (2) 834,385  52,922  886,417 (B) 702,439  56,194  758,633 
Reinsurance recoverable on unpaid losses (3) 794,485  43,401  837,886   794,091  39,085  833,176 
Intangible assets, net 338,466  4,710  343,176   344,073  4,825  348,898 
Goodwill 119,553    119,553   112,414    112,414 
Other 478,930  101,506  580,436   459,619  100,665  560,284 
Total assets $5,376,039  $460,813  $5,780,879 (C) $5,111,688  $451,704  $5,563,392 
LIABILITIES AND STOCKHOLDERS' EQUITY             
Liabilities:             
Unpaid loss and loss adjustment expense reserves $1,646,440  $137,093  $1,783,533   $1,623,232  $132,392  $1,755,624 
Unearned premiums 1,144,830  143,194  1,288,024   1,046,313  146,186  1,192,499 
Reinsurance payable (4) 71,370  11,982  82,462 (D) 54,815  14,357  69,172 
Accounts payable and accrued expenses (5) 298,305  16,400  305,277 (E) 265,057  19,845  284,902 
Notes payable (6) 446,244  45,655  446,244 (F) 446,061  45,476  491,537 
Other 211,336  72,764  284,100   162,189  70,829  233,018 
Total liabilities $3,818,525  $427,088  $4,189,640 (G) $3,597,667  $429,085  4,026,752 
Stockholders' equity:             
Common stock (7) $1,057  $  $1,057   $1,056  $  $1,056 
Preferred stock (8) 220,000    220,000   220,000    220,000 
Additional paid-in capital 870,116    870,116   900,114    900,114 
Accumulated other comprehensive income/(loss) 4,534    4,534   (19,414)   (19,414)
Retained earnings 461,574    461,574   412,044    412,044 
Total National General Holdings Corp. stockholders' equity 1,557,281    1,557,281   1,513,800    1,513,800 
Non-controlling interest 233  33,725  33,958   221  22,619  22,840 
Total stockholders' equity 1,557,514  33,725  1,591,239   1,514,021  22,619  1,536,640 
Total liabilities and stockholders' equity $5,376,039  $460,813  $5,780,879 (H) $5,111,688  $451,704  $5,563,392 


NOTE
: Consolidated column includes eliminations as follows: (A) $(55,083), (B) $(890), (C) $(55,973), (D) $(890), (E) $(9,428), (F) $(45,655), (G) $(55,973), and (H) $(55,973)


 
Segment Information - First Quarter
$ in thousands
(Unaudited)
 
  Three Months Ended March 31,
  2016  2015
  P&C A&H NGHC  Reciprocal
Exchanges
  P&C A&H NGHC  Reciprocal
Exchanges
Gross written premium $661,337  $154,857  $816,194   $68,322   $510,451  $75,357  $585,808   $61,237 
Net written premium 600,774  143,813  744,587   34,201   444,260  67,128  511,388   18,637 
Net earned premium 554,048  100,872  654,920   35,168   406,094  31,175  437,269   41,896 
                    
Ceding commission income/(loss) (2,264) 369  (1,895)  17,324   771  282  1,053   4,027 
Service and fee income 63,488  33,456  96,944   2,611   45,234  17,419  62,653   795 
 Total underwriting revenue 615,272  134,697  749,969   55,103   452,099  48,876  500,975   46,718 
                    
Loss and loss adjustment expense 332,659  76,391  409,050   21,249   258,579  20,103  278,682   28,004 
Acquisition costs and other 91,659  21,240  112,899   12,287   75,337  11,292  86,629   3,261 
General and administrative 144,694  31,933  176,627   14,640   85,729  14,147  99,876   14,384 
 Total underwriting expenses 569,012  129,564  698,576   48,176   419,645  45,542  465,187   45,649 
                    
Underwriting income/(loss) 46,260  5,133  51,393   6,927   32,454  3,334  35,788   1,069 
Non-cash impairment of goodwill                   
Non-cash amortization of intangible assets 3,847  1,817  5,664   35   2,019  710  2,729   2,252 
Underwriting income/(loss) before amortization and impairment $50,107  $6,950  $57,057   $6,962   $34,473  $4,044  $38,517   $3,321 
                    
Underwriting ratios                   
Loss and loss adjustment expense ratio (9) 60.0% 75.7% 62.5%  60.4%  63.7% 64.5% 63.7%  66.8%
Operating expense ratio  (Non-GAAP) (10,11) 31.6% 19.2% 29.7%  19.9%  28.3% 24.8% 28.1%  30.6%
Combined ratio (Non-GAAP) (10,12) 91.7% 94.9% 92.2%  80.3%  92.0% 89.3% 91.8%  97.4%
                    
Underwriting ratios (before amortization and impairment)                   
Loss and loss adjustment expense ratio (9) 60.0% 75.7% 62.5%  60.4%  63.7% 64.5% 63.7%  66.8%
Operating expense ratio  (Non-GAAP) (10,13) 30.9% 17.4% 28.8%  19.8%  27.8% 22.5% 27.5%  25.2%
Combined ratio (Non-GAAP) (10,12) 91.0% 93.1% 91.3%  80.2%  91.5% 87.0% 91.2%  92.1%
                            

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


 
Reconciliation of Operating Expense Ratio (Non-GAAP)
$ in thousands
(Unaudited)
 
  Three Months Ended March 31,
  2016  2015
  P&C A&H NGHC  Reciprocal Exchanges  P&C A&H NGHC  Reciprocal Exchanges
Total underwriting expenses $569,012  $129,564  $698,576   $48,176   $419,645  $45,542  $465,187   $45,649 
Less: Loss and loss adjustment expense 332,659  76,391  409,050   21,249   258,579  20,103  278,682   28,004 
Less: Ceding commission income/(loss) (2,264) 369  (1,895)  17,324   771  282  1,053   4,027 
Less: Service and fee income 63,488  33,456  96,944   2,611   45,234  17,419  62,653   795 
Operating expense 175,129  19,348  194,477   6,992   115,061  7,738  122,799   12,823 
Net earned premium $554,048  $100,872  $654,920   $35,168   $406,094  $31,175  $437,269   $41,896 
Operating expense ratio (Non-GAAP) 31.6% 19.2% 29.7%  19.9%  28.3% 24.8% 28.1%  30.6%
                    
Total underwriting expenses $569,012  $129,564  $698,576   $48,176   $419,645  $45,542  $465,187   $45,649 
Less: Loss and loss adjustment expense 332,659  76,391  409,050   21,249   258,579  20,103  278,682   28,004 
Less: Ceding commission income/(loss) (2,264) 369  (1,895)  17,324   771  282  1,053   4,027 
Less: Service and fee income 63,488  33,456  96,944   2,611   45,234  17,419  62,653   795 
Less: Non-cash impairment of goodwill                   
Less: Non-cash amortization of intangible assets 3,847  1,817  5,664   35   2,019  710  2,729   2,252 
Operating expense before amortization and impairment 171,282  17,531  188,813   6,957   113,042  7,028  120,070   10,571 
Net earned premium $554,048  $100,872  $654,920   $35,168   $406,094  $31,175  $437,269   $41,896 
Operating expense ratio before amortization and impairment (Non-GAAP) 30.9% 17.4% 28.8%  19.8%  27.8% 22.5% 27.5%  25.2%


 
Premiums by Business Line
$ in thousands
(Unaudited)
 
  Three Months Ended March 31,
  Gross Written Premium  Net Written Premium  Net Earned Premium
   2016   2015  Change   2016   2015  Change   2016   2015  Change
Property & Casualty                    
  Personal Auto $385,198  $339,334   13.5%  $335,326  $295,243   13.6%  $271,997  $267,531   1.7%
  Homeowners   70,301   87,824   (20.0)%   65,876   70,390   (6.4)%   74,439    64,123   16.1%
  RV/Packaged  39,603   37,550   5.5%   39,456   36,894   6.9%    37,519    35,976   4.3%
  Commercial Auto  50,151   41,346   21.3%   44,993   37,993   18.4%    43,844    34,622   26.6%
  Lender-placed insurance  111,997      NA    111,997      NA     122,806    —   NA 
  Other  4,087   4,397   (7.1)%   3,126   3,740   (16.4)%    3,443    3,842   (10.4)%
Property & Casualty Total  661,337   510,451   29.6%   600,774   444,260   35.2%    554,048    406,094   36.4%
                     
Accident & Health  154,857   75,357   105.5%   143,813   67,128   114.2%    100,872   31,175   223.6%
Total National General  816,194   585,808   39.3%   744,587   511,388   45.6%    654,920   437,269   49.8%
                     
Reciprocal Exchanges                    
  Personal Auto  22,973   17,691   29.9%   12,025   16,606   (27.6)%    12,541   22,930   (45.3)%
  Homeowners  43,614   41,613   4.8%   20,704   (36)  NA     20,986   17,716   18.5%
  Other  1,735   1,933   (10.2)%   1,472   2,067   (28.8)%    1,641   1,250   31.3%
Reciprocal Exchanges Total  68,322   61,237   11.6%   34,201   18,637   83.5%    35,168   41,896   (16.1)%
Consolidated Total $883,626  $643,455   37.3%  $778,788  $530,025   46.9%  $690,088  $479,165   44.0%


NOTE
: Consolidated Total includes elimination of $(890) and $(3,590) within 2016 and 2015 Gross Written Premium, respectively.

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, other than temporary impairment losses, foreign exchange gain or loss, equity in earnings or losses of unconsolidated subsidiaries (other than LSC Entities and Real Estate investment gains or losses), 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 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) Premiums and other receivables, net (NGHC) includes $27,974 and $62,304 from related parties at March 31, 2016 and December 31, 2015, respectively.

(3) Reinsurance recoverable on unpaid losses (NGHC) includes $37,412 and $42,774 from related parties at March 31, 2016 and December 31, 2015, respectively.

(4) Reinsurance payable (NGHC) includes $30,964 and $31,923 due to related party at March 31, 2016 and December 31, 2015, respectively.

(5) Accounts payable and accrued expenses (NGHC) includes $41,849 and $51,755 to related parties at March 31, 2016 and December 31, 2015, respectively.

(6) Notes payable (Reciprocal Exchanges) includes $0 and $45,476 owed to related party at March 31, 2016 and December 31, 2015, respectively.

(7) Common stock: $0.01 par value - authorized 150,000,000 shares, issued and outstanding 105,714,916 shares - March 31, 2016; authorized 150,000,000 shares, issued and outstanding 105,554,331 shares - December 31, 2015.

(8) Preferred stock: $0.01 par value, authorized 10,000,000 shares, issued and outstanding 2,365,000 shares, at March 31, 2016 and December 31, 2014.

(9) Loss and loss adjustment expense ratio is calculated by dividing loss and loss adjustment expenses 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 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.

(11) 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.

(12) Combined ratio (non-GAAP) is calculated by adding the loss and loss adjustment expense ratio and the operating expense ratio (non-GAAP) together.

(13) 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
Email: Dean.Evans@NGIC.com