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Federated National Holding Company Message Board

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  • IMHO, we are at the beginning of an up-leg in share valuation, Since reinsurance issue is behind us for the next 12 months, barring any unforeseen natural disasters, better than analyst's projected earnings are more than likely to materialize. Share price appreciation in the range of 20 to 40 pct in the not too distant future seem reasonable. I'm hopeful.
    Best regards,

  • Reply to

    Beginning of an Up-leg?

    by huahua777 Jul 15, 2015 11:13 AM

    Hua...just based on price action alone, over the past two years, we have been sitting at the $24-25 range, for an exceptionally long time. Early morning news about FNHC changing accountants probably won't help the stock today (Friday). But as you say, reinsurance is now behind us. Let us hope for a quiet hurricane season. Even with some average activity in storm damage, things should be OK. Returning to at least $30 per share in the next few months should not be difficult. Eager to see this quarter's report. -Scott

  • Looks like the old glory earning days are back but no change in dividends? HCI and UVE have higher dividends. Also all these guys pay 30+% in income taxes. Is that norm?

    Sentiment: Buy

  • Does anyone know the status of the C&D issued to FedNat by the FL OIR a couple of months ago for using an unapproved CAT model? I am wondering if they will address it in the conf call.

    Sentiment: Strong Sell

  • Reply to

    Beginning of an Up-leg?

    by huahua777 Jul 15, 2015 11:13 AM

    Yea, reinsurance is behind us but the trailer is more loaded than it was, 40% quota share? When do they stop thinking like a micro-insurer? I simply do not trust these guys with the ceding commission given their history. I think there is more transactional activity on the books of the reinsurance broker than on the company with respect to that. I see it stagnant at $20-$25 and in the teens if/when a storm hits. No dividend in site.

    Sentiment: Strong Sell

  • Reply to

    No change in Dividend?

    by jatink Aug 5, 2015 4:46 PM

    I am not sure if 30 is the norm; compare UIHC, HCI, HRTG, UVE etc. Dividends remain lame, I think we should invest in their reinsurers, esp w that 40% QS which I guess they will move to 50% next year. I don't expect growth and I don't expect dividends as long as Lawson still has his hand in the company.

    Sentiment: Strong Sell

  • ...a very strong second quarter, with once again, nice policy growth. Probably the best quarter of any of their Florida competitors (HRTG, UVE, UIHC, HCI, yada yada yada). On an organic basis (no Citizens), FNHC continues to be the fastest grower of Homeowner Policies in Florida....by far. Its kind of amazing that they've kept it up for this long. Next quarter should again show strong policy growth, in the Conf Call they stated that for the month of July they were averaging over 4,000 new policies per week vs their longer term average of 3,000. So the nice July spike in policy count should lead to excellent policy growth next quarter.

    Policy Count by quarter:
    15 q2 = 212,500
    15 q1 = 196,900
    14 q4 = 182,557
    14 q3 = 167,600
    14 q2 = 152,600
    14 q1 = 134,100
    13 q4 = 116,400
    13 q3 = 110,300

    best.

  • Yes, its the Allstate iVantage program you are referring to that feeds the policy numbers. And what they were doing was single risk modeling on each risk in order to get the better risks. Basically, the computer would score (price) the reinsurance costs on the front end for profitability. But they got a cease and desist from regulators some time back on that. Monarch will be a good addition because it will create a second risk portfolio and just because a risk does not model into FedNat well doesn't mean it won't model into Monarch well. Those models have a lot of moving parts to them and only the reinsurers know specifically how they cost a risk written. Diversity will work well for them.

    On the upside of the competitor's geographic spread, I think that is done to ease the concentration of risk within the cat model. FedNat is only doing their expansion through SageSure as a fronting company and I don't think SageSure writings are being blended, mainly because I think that portfolio is being managed separately.

    I will differ from you in that IMO it is ASI who has been the best managed in the last years. And some of the private companies have been far better managed than FedNat. I still like HRTG, and of course their Pres. is former CEO of FedNat (and also related to Braun). I also like HCI and of course FedNat snubbed their merger discussion some years ago when they were coming back from near bankruptcy.

    I have to say the Florida market is much more exciting than all the others combined.

    Sentiment: Strong Sell

  • Well, look, I did know that many of his former execs were still running FNHC....didnt know some are relatives. Still, to me, they seem like a conservative outfit...and their growth has a lot to do with their relationship with State Farm, where FNHC gets their Florida leads (or whatever that large ins company is). I didnt get the impression that these growth policies were risky...I mean FNHC has stated that they turn down or cant accept some ridiculous number of potential customers b/c of their risk profile. The Monarch initiative started b/c they have such a huge number of these potential customers, that they needed a second company that could handle these leads at a higher risk adjusted price.

    I think they have been the best managed of the FL based Prop and Cas companies over the past three or so years, being far more conservative then others (in quota share), yet able to drive huge growth without having to utilize the Citizens cesspool.

    As an investor/trader, I dont like when all their competitors, like UVE, UIHC, now HRTG starting to do it.....make strong strides to add lots of other states. Thats why UIHC got kilt (b/c of exposure to Massachusetts in winter, and then Texas in the second quarter). Now, I'm not saying how they should run their companies.....it may (or may not) be a smart thing to do long term . But I prefer Florida only rather than adding georgraphy, b/c its easy to follow...I know when the storms are hitting, or expected to hit, I know when the season ends,.....sure, you can get kilt holding at the wrong time, but its super easy to trade.

    I understand not liking FL insurers as a whole....they've moved up a ton, pricing/competitive pressures, gotta be a storm sometime, as a group they trade a a high price/bk....but I think of the bunch FNHC is well run, price to book is decent, growing faster than the others, got Monarch, and has pulled back.

    Anyway, I do consider FNHC as trading material, and not a long term buy.

    best.

  • I understand sticking with Florida, as long as the company gets the price they need to make a profit which they have been for the past years. The problems with states like Massachusetts is getting a firm premium. Their residual market has been loaded up in years past because private companies can't get rate. I am watching HRTG to see if they are able to get the price they need; can they compete with the wind pool and make money? It will be interesting to see.

    American Strategic was private under ARX Holding but now public under PGR. I had a position in HRTG but sold at 24, thought about going back in at 19 but uneasy about managements commitment; seems like Gordon Gecko is running the company. As for NSEC, I know Jack Brunson personally and he will continue to operate the company conservatively as they always have. NSEC is opposite of FL insurers. They steer clear of the coast and write lower valued risks.

    I liked UIHC and sold out at about 23 when the Investors Business Daily RS rating fell under 80. I actually was excited about Deepak Mennon going there from ASI but I really lost interest in the company when it dropped like a rock. Looks like they need FNHC's quota share arrangement LOL. TX is going to be tough for anyone playing the triple-header (Hail/Hurricane/Hornado). Haven't looked closely at their tail exposure; they may have under reserved their Incurred But Not Reported (IBNR), that will bite one in the butt, quickly. I am still looking at UIHC and HRTG to see if I can rekindle my interest.

    One I watch but have no interest in is HIC.....I think something may happen on that soon, somebody may buy Kingsway's interest out.

    Sentiment: Strong Sell

  • With the growth rate, that makes sense to put the cash toward surplus rather that paying it out. Surplus will lead to more capacity, but they already have that with the quota share. And with Monarch they do have some partner capital. I think the quantity over quality will bite them in the butt in the long run, therefore I am short. I was long at 18 buy in, then after it went +30 and maxed I sold 75% at 30 on the downslide. Still have a few of those shares.

    Fact is Lawson is still very much a part of the company, his name is just not on anything. He's like a god around there, a spirit that you don't see. Braun is pretty much his "hey boy". His nephew Steve Young runs operations and his daughter runs risk management with former CFO Gordon Jennings. They keep Jennings pretty much out of sight and mind because of his involvement, like Lawson, in those class action suits (disseminating false guidance) years ago. Braun just acts as the face of the company and is really more of a liaison between the real management and the board of directors.

    Lawson is considered by most to be an amateur gambler but considers himself a pro. He did win a bracelet nearly 10 years ago and has placed in some final tables since then, but like I always say, never discount luck. By and large, I think he plays every day and loses far more than he wins but the company manages to keep him funded to keep him out of the office and off the radar. He still has plenty of DNA in the building in order to maintain control.. Just my opinion there.

    Sentiment: Strong Sell

  • hey fieldman, on the divvy, I think they've mad it clear that at least in the short term, they weren't going to raise the divvy to anything very high. B/c they are growing much more rapidly then most of the other FL carriers, they need cash/assets to fund that growth. Obviously they also invested a lot of cash in their Monarch initiative, and hopefully shrareholders will start reaping the benefits in additional eps in 2016. Yes, I agree they are very conservative with the cash, and I'm certainly not pro increasing the quota share pecent...but it is only by ten percent, and hopefully that will be the last time they increase it. I think while many of the current execs worked under Lawson.....they learned the hard way that his high risk gambling ways were not good longterm, so they have gone the other way. Going for growth (which they've continue to succeed at) while holding risk down.

    Lawson has been out for a very long time at this point....he wasnt even really there his last year or two, he was playing poker on the professional tour more than staying in the office. Its not the name change that has helped the, but the complete change in corporate culture from Lawon's wild west times.

    Why do you even bring up Lawson when he hasnt been at FNHC in years and years?

    Are you long, short or out? Btw, any of those three options is fine by me.....I dont dislike shorts (unless their obnoxious).

    best.

  • So Poodle, when do you expect we'll see a decent dividend with all of this growth? It seems they keep increasing surplus but also increasing the quota share percentage......something about that does not pass the smell test....does Ted Lawson own a reinsurance company now? And I agree it is amazing they've kept it up this long, especially with the reputation American Vehicle had....name change and agent's short term memories have worked to their advantage.

    Sentiment: Strong Sell

  • I meant PIH not HIC

  • fieldman, I'm not saying the move by others to add policies o/s of Florida doesnt make sense...it may be the right thing to do. I'm just saying as an investor, I prefer all In Florida (or at least Florida plus a few neighbors). And thats b/c, purely on share price, if a Hurricane hits they all go down, whether yer 98% Florida or 58% Florida. At the same time, you add risk in times when Florida is virtually risk free (like UIHC in the winter an early spring b/c of Massachuettes and Texas). Just easier to trade, imo...obviously thats completely selfish.

    Is ASI publicly traded?......I mean my universe is only companies that trade publicly? The only predominantly Florida P&C insurers I know are HCI, HRTG, UIHC, UVE, and HRTG. I do like HRTG at these levels after it got earnings wacked. But their growth is purely from Citizens and buyouts. Do you agree with theory that Citizens policies (at this point) are low quality overall, since they've been picked at for years? And of course, HRTG has even stated in the last CC that they wont be getting much growth anymore from the Citizens pool. HCI looks cheap, and I bought a very small amount when it dipped at $19.51 after earnings....but too teeny to really matter. There are some carriers that have a minority of policies in Fl (like NSEC), but I dont consider those Florida insurers.

    Not sure about UIHC' management, just b/c of the past development problems they have had (my term is probably incorrect but I mean older policies that come back to bite them in the butt). However, UIHC has gotten creamed b/c of getting first hit by the worst winter weather in Boston in Years in q1 (even thought its a small percent of total, they got wacked their in winter)....and then the Texas storms/hail/flooding/roof damage hurt them in q2. Seems real cheap to me at these levels. You have any feel about them?

    best.

  • In the company's 2015 Q1 conference call, they state "Tri-County is not a big portion of our book, it’s about 19% of our exposure." If tri-county is not a big part of their exposure, what is? With the vast amount of this company's business sitting in Florida, which has 67 counties, I'd say a 19% concentration in three of those counties is a huge portion. Braun always seems to underplay anything adverse. It will be interesting to see if Danny flirts with tri-county. I see the stock at

    Sentiment: Strong Sell

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