National General Holdings Corp
National General — Q4 2013 Earnings Presentation
30 slides from National General's earnings presentation, Mar 25, 2014
Slide 1: Investor Presentation Fourth Quarter 2013
NASDAQ:NGHC Investor Presentation Fourth Quarter 2013
Slide 2: Forward Looking Statements
Forward Looking Statements 2 This presentation contains certain forward-looking statements that are intended to be covered by the safe harbors created by The Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this presentation are fo
Slide 3: National General Holdings Corp. Key Statistics
National General Holdings Corp. Key Statistics 3 Ticker Symbol* NGHC Current Price $14.00 (as of close of trading on 3/20/2014) Market Capitalization $1.3 billion Dividend $0.01 per share quarterly / 0.3% annual dividend yield 12/31/13 BVPS $8.08 ($8.80 pro forma for 144A follow on offering) Price/B
Slide 4: Ownership Structure and Affiliate Relationships
Ownership Structure and Affiliate Relationships 4 Significant management ownership aligns with interests of investors Chairman/CEO and family own 48.8% of the company National General Holdings Corp. NASDAQ: NGHC – $1.3 bn market cap Personal Lines P&C holding company Legacy GMAC auto insur
Slide 5: National General Historical Overview
National General Historical Overview 5 Michael Karfunkel/ Legacy Companies Over 40 years experience in the financial services industry Holds significant interests in insurance, banking and real estate companies Co-Founder and former President/Co-Owner of American Stock Transfer & Trust Company
Slide 6: National General Today
National General Today 6 National General Top 20 writer of U.S. personal auto insurance $1.3 bn of GWP in 2013 “A-” rating from A.M. Best 2,100 employees Over 1 million customers Over a dozen affinity relationships Over 19,000 independent agents & brokers $2.8 billion of assets Tower
Slide 7: Product Mix
Product Mix 7 2013 Product Mix $1.3 billion GWP 97% 3% 2013 Product Mix Pro Forma for Tower Personal Lines Acquisition Broad mix of business in multiple locations minimizes risk. Sub-standard and commercial auto primarily offered through independent agents. Standard and preferred auto primaril
Slide 8: Geographic Distribution
Geographic Distribution 8 We believe that our geographic and product mix creates limited exposure to catastrophic events. We are licensed to operate in 50 states and the District of Columbia. 6 key states comprise nearly 75% of our total GWP. 2013 Geographic Mix $1.3 billion GWP North Carolina
Slide 9: Key Metrics
Key Metrics ($ in millions) 9 $1,178.9 $1,351.9 $1,338.8 $322.5 $317.7 2011 2012 2013 4Q12 4Q13 Gross Premium Written $31.2 $19.3 $60.2 ($5.4) $6.8 2011 2012 2013 4Q12 4Q13 Pre-QS P&C Underwriting Income $30.7 $26.7 $46.8 ($0.0) $10.1 2011 2012 2013 4Q12 4Q13 Operating Earnings $361.6 $413.0 $642.9
Slide 10: Our Advantage
Our Advantage 10 Proven Leadership and Experienced Management Team Highly experienced and capable management team History of creating shareholder value in previous ventures Focus on Profitability, Disciplined Underwriting and Expense Management Better risk selection Improved margins Sophis
Slide 11: Management Team
Management Team 11 Name Background Michael Karfunkel Chairman, Chief Executive Officer Over 40 years experience in the financial services industry Holds significant interests in insurance, banking and real estate companies Co-Founder and former President and Co-Owner of American Stock Transfer
Slide 12: Illustrative ROE Target
Illustrative ROE Target 12 We are targeting a medium-term ROE of at least 15% across market cycles Near Term Earnings Drivers Completion of quota share run-off Reinsurance of Tower Integration of Tower personal lines business Real estate cost savings Legacy system retirement Increased A&
Slide 13: The Companies and Partners of National General
The Companies and Partners of National General 13 * *Tower Group Personal Lines acquisition expected to close Summer of 2014.
Slide 14: History of Disciplined Growth
History of Disciplined Growth 14 1939: Motors Insurance Corporation (“MIC”) is formed by GMAC 1980: MIC, as subsidiary of MIC General Insurance Group (“MICG”) starts offering automobile liability insurance to GM employees 1991: GMAC Insurance purchases the National General Insurance Companies, allow
Slide 15: Fee Income
Fee Income 15 Service and Fee Revenue ($ in millions) $53.5 $66.1 $93.7 $127.5 $24.8 $34.5 2010* 2011 2012 2013 4Q12 4Q13 We charge policy service fees (including fees for installment or renewal policies, non- sufficient funds, late payments, cancellations and various financial responsibility fili
Slide 16: Expanding A&H Business is an Opportunity
Expanding A&H Business is an Opportunity 16 A&H Segment operates in the U.S. and Europe. Following the implementation of PPACA we expect significant demand for supplemental products. We believe our combination of P&C and A&H distribution is a significant competitive advantage. Currently $74
Slide 17: Reduced Reliance on Reinsurance
Reduced Reliance on Reinsurance 17 Termination of our 50% quota share agreement to retain 100% of the GWP will lead to increased retained premium and underwriting income in 2014 and beyond. $ 5 .7 m m UW In c o m e $ 1 0 .1 m m UW I n c o m e $ 6 .4 m m U W Inc o m e $ 3 .6 m m U W Inc o m e 9 0 % 9
Slide 18: Conservative Investment Portfolio
Conservative Investment Portfolio 18 AAA 7.7% AA+, AA, AA- 41.4% A+, A, A- 20.1% BBB+, BBB, BBB- 23.2% BB+ or lower 4.1% US Treasury 3.5% 2013 Average Yield: 3.9% Composition by Asset Class ($ in millions) Fixed Income Composition by Ratings Fixed Income Portfolio * Equity Investments in Unconsolida
Slide 19: Capital Position
Capital Position 19 A portion of the new equity raised in the February 144A Private Placement to be contributed to regulated insurance companies to support 100% retention of business. We expect to raise $200 mm in additional debt in 2Q 2014 to support the acquisition of the Tower Personal Lines
Slide 20: Investment Opportunity
Investment Opportunity 20 We are a diversified insurance holding company with the ability to leverage a unique portfolio of differentiated products to generate industry leading underwriting and overall profitability, driven by: Strong Premium Growth – through continued selective acquisitions, the
Slide 21: Appendix
Appendix
Slide 22: Summary Income Statement
Summary Income Statement ($ in thousands) 22 2012 2013 %Chg 4Q12 4Q13 %Chg Revenues: Gross premium written $1,351,925 $1,338,755 -1.0% $322,527 $317,739 -1.5% Net premium written 632,494 679,316 7.4% 141,136 201,673 42.9% Change in unearned premiums (58,242) 8,750 -115.0% 9,942 13,561 36.4% Net earn
Slide 23: Balance Sheet Highlights
23 2011 2012 2013 Assets Cash and investments $961 $992 $1,117 Premiums and other receivables, net 388 450 449 Deferred acquisition costs 58 60 60 Reinsurance recoverable on unpaid losses 921 991 951 Prepaid reinsurance premiums 74 54 51 Premises and equipment, net 21 31 30 Goodwill & Intangible ass
Slide 24: Non-GAAP Reconciliation
24 Non-GAAP Reconciliation ($ in thousands) Non-GAAP Financial Measures 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 s
Slide 25: Segment Performance Quarter/Quarter
Segment Performance Quarter/Quarter ($ in thousands) 25 P&C A&H Corporate P&C A&H Corporate Gross premium written- Direct $316,307 $6,220 - $309,220 $8,519 - Net premium written 135,109 6,027 - 193,284 8,389 - Change in unearned premiums 9,941 1 - 13,565 (4) - Net earned premium 145,050 6,028 - 206,
Slide 26: Segment Performance Year/Year
26 Segment Performance Year/Year ($ in thousands) Full Year 2012 Full Year 2013 P&C A&H Corporate P&C A&H Corporate Gross premium written- Direct $1,343,658 $8,267 - $1,305,254 $33,501 - Net premium written 624,453 8,041 - 646,100 33,216 - Change in unearned premiums (58,243) 1 - 8,749 1 - Net earne
Slide 27: Luxembourg Reinsurance Companies
Luxembourg Reinsurance Companies 27 We have purchased three Luxembourg Reinsurance Companies (LRC) since 2012. Purchasing an LRC is not unique to NGHC or AmTrust, and LRC’s are not significant to our bottom-line. From an accounting standpoint, the treatment of LRCs strictly adheres to GAAP acc
Slide 28: Life Settlement Contracts (LSC)
Life Settlement Contracts (LSC) 28 A life settlement contract (LSC) is a contract between the owner of a life insurance policy and a third party who obtains the ownership and beneficiary rights of the underlying life insurance policy. As of December 31, 2013, we have a 50% ownership interest in
Slide 29: Additional Disclosures
Additional Disclosures 29 (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, equity in earnings (losses) of
Slide 30: National General Holdings Corp.
National General >> Holdings Corp. NASDAQ:NGHC
National General Holdings — Q4 2013 Earnings Presentation on 6ix