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Federated National Holding Company Message Board

  • run_baldhead_run run_baldhead_run May 27, 2013 10:45 AM Flag

    FNHC's HUGE ORGANIC GROWTH RATE (respsonse to Scott)...

    Scott, I dont see why it cant hit $12 pretty soon. Their policy growth rate is tremendous. They had a 41% increase in homeowners policy count in the past year, which led to a 48% increase in revenue. And as someone mentioned in an earlier post, in the Conf Call, the CEO stated that in just the thirty-nine days between March 31 (the end of last quarter) and the date they gave the Conf Call (May 9), they added another 13,000 policies! So they grew from 67,000 homeowners policies to 80,000 policies in about five and a half weeks. Thats 2500 new policies each week on top of a base of 67,000 policies, 3.5% growth per week. Plus they said they expect growth to be very strong through 2014.

    They have a stronger price to book value then either HCI or UVE. And with their huge growth rate, which should result in very very strong earnings growth over the next year, they deserve a higher multiple then their competitors.

    Plus, FNHC is doing all this without the takeouts of Citizens policies used by UVE and HCI. If you exclude takeouts, FNHC has a far higher growth rate than any of their competitors, right? FNHC is gaining market share purely through organic growth.

    In the CC, FNHC seems to believe that these 'takeouts' are riskier than the policies they look at and add on an individual basis. HCI has strong growth, but thats helped dramatically for the past several years because they are adding Citizens (state owned) policies. According to FNHC, as I just said, those policies are riskier....and according to the FNHC conf call, the laws are changing, insurance companies wil no longer just be able to add Citizens policies in huge blocks. This makes FNHC's organic growth rate all the more impressive.

    FNHC deserves a premium to other Florida based insurer's on a price to book basis, and a price to earnings basis because of their huge organic growth rate......and conservative low risk managment, imo.

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    • Run....thanks so much for your reply and your analysis. I now more clearly see why you think FNHC could hit $12.50. In my opinion, we probably need another good quarterly report, confirming the excellent growth in policy count. Those of us holding for a long time, have grown a bit weary of promises. And lack of insider buying in the past 1-2 years when FNHC recently was at $6, $7. I essentialy doubled down on it...why didn't (m)any of the officers? But PR has been one of their glaring weaknesses, in my opinion, over the past several years. And, thankfully, what they had been predicting, a turnaround, is now coming to pass. So I don't want to be overly critical of management.

      By the way, what is your thought on the likelihood of them increasing their quarterly divy soon? -Scott

      • 1 Reply to scottr2958
      • I feel they are more eager to build up there capital surplus and write more policies then pay a huge dividend. Braun said in the CC that capital surplus was at 55 mil up 5 mil from the previous quarter and he said they could write 5-6 times capital surplus 275-330 mil What it HCI doing right now in total written premiums? When you look at that number you can see the massive growth FNHC is planning. Good luck to all I would not complain if this went to 34 like HCI.

        Sentiment: Strong Buy

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