...despite the large secondary offering during the quarter and subsequent share count rise (about 60% this qtr), they were still able to grow earnings sequentially by a good chunk......46/eps for the qtr.
Growth was fantastic...no other FL based insurer (maybe any insurer) comes close. Net premiums grew 76% and gross premiums grew 104% year over year. Net Income grew from $4.3 million to $12.7 million for the full year. Policy count grew from 61,102 on 1/1/13 to 116,401 on 12/31.
Even more important, in the CC they stated that growth continues to be storng on a forward looking basis. They added another 17,000 policies in January and February of this year...and think the 3000 new policies per week can continue.
The above growth was 100% intrinsic; they added no policies from Citizens...which is kind of amazing. Whats left in Citizens are overall lower quality.....older homes, with many in the 'three county area' that take the hardest hits from hurricanes. I believe they stated that only 17% of FNHC policies are in that area despite their large popluation.
FNHC (and UIHC in an earlier conf call) stated that it looks like the reinsurrance market will be good for them once more.....I believe they said they expect rates on a equal policy count basis to be down over 5%, maybe closer to 10%....although most carriers will use the depressed price to increase their coverage.
Because of the lower costs, mostly due to reinsurrance and in FNHC's case due to the higher quality of their policy portfolio, they are actually requesting a 1/10 of one perc
ent rate decrease from the State of Florida this year. In comparison, UIHC has requested a 4% rate increase.
And FNHC is STILL the CHEAPEST Florida insurer based on it price to book tangible book basis....despite FNHC having the highest growth. FNHC is around 1.7 price to book, while zero growth UVE trades at a 2.7 price to tangible book, and HCI trades at a 3.4 price to tangible book.
There reason there is no announcement of a dividend increase is because they will not raise the divided any time in the foreseeable future. They went through the effort of selling more stock to raise capital. They pretty much need the money that they have. To put it in simple terms, the reason they sold more stock was to cover the rapid increased policy count. There are regulations which specify how much money you need to hold to cover the costs of the insurance that you write. So to pay out more money in dividends hinders their ability to support this rapid policy growth that we're experiencing now and for the past several quarters.
As for the current stock price, we are still way undervalued by my calculations, and there is in my opinion absolutely no reason to sell even at the new highs of $16. There are plenty of business reasons why this is a solid company selling at a discount, but to keep things simple, even just looking at policy count alone and where that number has been, where it is today, and where it's going, it's hard not to think that $16 is a bargain price.
Thanks s12 and fabulous....the pps is moving nicely in the past few weeks and with your continued analysis, I am encouraged to keep holding. Again, way back, 7 years ago, I bought some FNHC at $18 per share. So it would be wonderful to reach that point again. But as it already is, I am up about 50% on my overall investment in FNHC, since I "doubled down" a couple of times over the past 2 years. Who knows? This might be a lifetime keeper, if they keep growing and at some point reward the long time holders with some divvy increase. Then again, a la Warren Buffet's strategy, we don't need divvies or stock splits, as long as the pps keeps doubling every few years. A nice retirement plan. -Scott
Agree with your excellent analysis, fabulous. Hopefully the stock price will stay at a minimum pps of $15. The price in the last quarter was, to say the least, very, very choppy. I see that my first purchases in FNHC were $18 or so, back 5-6 years. I've picked up more along the way, in the 5, 6, 7 range. So, nicely above water now. Question: why not announce a divvy increase? Even a nominal one? -Scott
I was just about to post, but s12stocks answered it. FNHC could bump up the divvy by a small amount; but they think its a better investment to utiize all cash on hand to fund their tremendous growth. And as long as growth continues at a strong pace.....with the associated rise in earings per share and share price, then I agree with FNHC.
Of course they should revisit that question as soon as growth stabilizes to some normal level. At that point, they should be able to raise the divvy dramatically.