Fednat Holding Company (OTC:FNHC)

First Quarter 2014 Results

• Total revenues increased $27.8 million, or 127.4%, to $49.7 million for the three months ended March 31, 2014, compared with $21.9 million for the same three-month period last year.
• EPS for Q1 2014 were $0.74 vs $0.29 in the prior year.

Mr. Michael H. Braun, the Company's Chief Executive Officer and President, said, "We are off to a great start in 2014 thanks to our continued disciplined underwriting, expense control, and quality customer service to our policyholders and independent partner agents, who wrote $48.3 million of new homeowner voluntary business during the first quarter.

The expense associated with our annual catastrophe reinsurance contracts, which became effective in July 2013, is allocated equally over the contract period, which runs through the second quarter of 2014. Our rapid growth in earned premium during the fourth quarter of 2013 and first quarter of 2014 has temporarily reduced our ceded premium "reinsurance expenses" to approximately 33% verses a more normalized range of approximately 40% of gross premiums earned. This trend will further continue through the second quarter of 2014 and then should return to a more normalized range with the new reinsurance contracts starting in the third quarter.

Our plan remains focused on supporting growth strategies with disciplined underwriting, prudent risk management, exceptional customer service, maintaining strong capital ratios and enhancing shareholder value. Our overall performance this quarter reflected our ability to manage the business in a way that delivers bottom-line results."

Fourth Quarter 2013 Results

• Total revenues increased $20.0 million, or 100.7%, to $39.8 million for the three months ended December 31, 2013, compared with $19.8 million for the same three-month period last year.
• The Company reported EPS of $0.46 per share, compared with $0.13 in the same three-month period last year.

Mr. Michael H. Braun, the Company's Chief Executive Officer and President, said, "Our performance in 2013 reflects the effort and momentum that our team has been building on over the past few years. As I mentioned when we reported full year 2012, the actions we have taken to build our brand would position us to accelerate our growth trajectory which is evident in our reported results. Our performance for the year was strong across a majority of our measured metrics, including; gross written premium, net premiums earned, revenue and operating expenses, and as a result, solid earnings performance. Serving our policyholders and agents remains our top priority and has generated significant goodwill in the marketplace. This has resulted in significant policy count and top line growth. Capitalizing on our performance during the past several years, we enter 2014 with significant momentum and the flexibility to make further investments in our business model."

Third Quarter 2013 Results

• The company reported revenue of $31.9 million, compared to $17.3 million in the same quarter 2012.
• The company reported EPS of $0.39, compared to $0.09 for the same quarter 2012.

Mr. Michael H. Braun, the Company's Chief Executive Officer and President, said, "I am pleased to report another successful quarter which included significant growth in policy count, premium and net income. I see opportunities for us to continue growing our business while remaining committed to the discipline that has helped generate our results during the third quarter and first nine months of 2013. We believe that our business model, capabilities, and relationships are unique in our marketplace. While we'll always face competition and challenges, I'm very pleased with and proud of the position of the Company today."

Second Quarter 2013 Results

• Total revenues increased $11.4 million, or 67.5%, to $28.2 million, compared with $16.8 million for the same three-month period last year. 
• Reported net income of $2.5 million, or $0.32 per share undiluted and $0.31 per share diluted, compared with net income of $1.4 million, or $0.18 per share both undiluted and diluted for the same three-month period last year.

Mr. Michael H. Braun, the Company's Chief Executive Officer and President, said "Key performance metrics in the second quarter continued to improve. We experienced tremendous growth in written premiums, revenue and earned premium. We continued to build our policy base while maintaining our stringent underwriting criteria. Our policy count, which increased 59% year over year, grew an additional 7% in July to approximately 90,000. The profitability of the policies we are writing has given us the flexibility to make investments designed to expand the business model into other lines and states. We continue to believe that maintaining a lean operating structure is critical to delivering shareholder value; hence we are pleased to announce that we have maintained our operating costs as a percentage of revenue at 40% despite our rapid growth. Through our actions, we believe we have set the stage for sustainable financial results over the long term."

2012 full year highlights include:

• Net income of $4.3 million compared with a loss of $0.4 million in 2011
• Gross written premiums increased by $21.2 million, or 21.6%, compared with the same twelve months the prior year
• Net premiums earned increased by $10.9 million, or 22.3%, compared with the same twelve months the prior year
• Growth of unearned premiums at year-end by $11.1 million, or 23.1%, compared to December 31, 2011
• Book value increased to $8.26 at December 31, 2012, compared with $7.32 at December 31, 2011, a 13% improvement
• Homeowners' policy count grew from 43,793 at the start of 2012 to 61,102 at December 31, 2012, or a 40% increase
• Continued improvement in underwriting results; loss ratio improved to 50.9% for the full year 2012, compared with 63.7% for the full year 2011

Mr. Michael H. Braun, the Company's Chief Executive Officer and President, said, "2012 marked a turning point for our company; the actions we have taken over the past few years have built a solid foundation for continued growth. This foundation includes four key pillars: disciplined underwriting, risk management, expense control and product distribution. Disciplined underwriting has resulted in an overall improvement of our loss ratios by 12.8%, and by applying solid risk management principles we have geographically diversified our book of business resulting in a more efficient and cost effective reinsurance structure. While total revenues grew by 14%, operating, underwriting and salary expense as a percentage of revenue decreased 3%; as a management team we strive to minimize our operating costs while not adversely impacting the underlying business. During 2012, we also improved our product distribution channels, a testament to the positive reputation we have fostered in the insurance community, which enabled us to grow our policy count by approximately 40%.

Our annual results reflect focused execution on these four pillars and have poised us to accelerate this trajectory in 2013 and beyond. Finally, I am pleased to announce that the Board has approved a dividend increase of 50%. The dividend of $.03 per share will be paid on June 3, 2013 to shareholders on record as of May 6, 2013. This action reflects both our commitment to returning capital to our shareholders and the Board's confidence in our business plan."

First quarter ended March 31, 2013:

Highlights (as measured against the same three month period last year) include:

• 123% increase in earnings per share
• 48% increase in revenue
• 47% increase in gross premiums written
• 47% increase in net premiums earned
• 41% growth in homeowners policy count to approximately 67,000 policies
• 13% growth in book value

Mr. Michael H. Braun, the Company's Chief Executive Officer and President, said, "Results in the first quarter reflect our company's focused execution on the four key pillars discussed with our year-end results. Our approach to growing the top line has revolved around disciplined underwriting and sound risk management techniques that will allow us to grow our book of business significantly throughout 2013. During the first quarter we improved our operational efficiency by reducing our operating costs by 10% as a percentage of revenue, as measured against the same three month period last year. Managing our business in the most cost effective and efficient manner is very much a cornerstone of our company's culture. The increase in policy count and the profitability of those policies reflects the continued expansion and quality of our product distribution channels. We are pleased with the first quarter's results and the underlying key performance metrics indicate sustained quality growth in future quarters."

First Quarter 2013 Financial Review

• For the three months ended March 31, 2013, the Company reported net income of $2.3 million, or $0.29 per share on 7.98 million average undiluted and 8.13 million average diluted shares outstanding, compared with net income of $1.1 million, or $0.13 per share on 7.95 million average undiluted and 7.96 million average diluted shares outstanding in the same three-month period last year.
  
• Gross premiums written increased $14.5 million, or 46.5%, to $45.8 million for the three months ended March 31, 2013, compared with $31.3 million for the same three-month period last year. Homeowners' gross premiums written increased $12.5 million, or 46.4%, to $39.6 million for the three months ended March 31, 2013, compared with $27.1 million for the same three-month period last year.
  
• Unearned premiums increased $14.3 million, or 24.2%, to $73.3 million as of March 31, 2013, compared with $59.0 million as of December 31, 2012.
  
• Net premiums earned increased $6.0 million, or 46.6%, to $18.8 million for the three months ended March 31, 2013, compared with $12.8 million for the same three-month period last year.
  
• Total revenues increased $7.2 million, or 48.3%, to $21.9 million for the three months ended March 31, 2013, compared with $14.7 million for the same three-month period last year.