Imo the selloff is due to what I said a few days ago..
First, as stated in the Conf Call, FNHC needs to raise cash in order to fund their spectacular growth. Some (or all) may come by way of an equity raise, and investors dont like getting ahead of stock offerings.
Second, also from the CC, the Sept qtr may be a tough one. Its always seasonally weaker....but this time FNHC stated in the CC that their reinsurance costs will go up an abnormal amount. Some of that was seen in the June quarter, but the brunt (2/3's of it) will hit the Sept qtr. Now, their rates are decent and the coverage is really good, however FNHC stated in the CC that for the first time they will aggressively add policies during Hurricane season (in the past they have not added policies b/c the risk is too high once reinsurrance is set). Therefore, FNHC had to purchase enuf reinsurance to cover what they estimate their policy count will be after they add all those policies (plus the tremendous growth in policy count that had occured year over year prior to hurricane season). While other Fl based insurers with no growth, like UVE, lowered their reinsurance bills, and others with decent growth (lower than FNHC), like UIHC, got flat rates, FNHC will be hit in the September quarter. Also, when you are growing as fast as FNHC, there are some upfront costs that may not be repeated as you acquire policies (like commissions/sales/marketing).
Now, in the mid term this is great news for FNHC because this tremendous policy growth will eventually lead to outsized eps numbers, and that may happen soon, maybe by the December quarter.
Nevetheless, imo, thats the reason for the selloff. Of course I could always be wrong.
Buying now seem like a good opportunity....especially considering that so far this hurricane season has been super light. And FNHC is TRADING UNDER BOOK, while UIHC, UVE, and HCI are trading between 1.45 an 2.65 times tangible book value! And FNHC is growing fastest by far!
i wonder how much this company is really exposed to a hurricane. it was mentioned this company is very conservative & usually this type of company LIMITS ( NOT REMOVE) their exposure by not writing policies in certain areas, IF THEY CAN- DEPENDING ON THE LAWS.
matsky, they are basically a Florida Property and Casualty insurere, so they are exposed to Hurricanes. Now, they have fewer policies in the most effected areas of South Florida then in the past, and they are super conservative....they probably have the best reinsurance coverage of the Florida insurers......so thats great. Nevertheless, being a Florida carrier, they are exposed to Hurricane season.
But, there have been virtually no major storms (let alone hurricanes) so far this season in Florida (there was one storm in June...but that effected last qtr). We are just about 65% through hurricane season.
Blank S-3 was filed on Friday, Sept 20. I'm a little surprised the company didn't make an announcement. We'll soon find out what they are planning. They should stop the dividend if they are going to claim they need additional capital.
mutiny, the company did announce that they'd be doing a raise in the last earnings call, so imo, not a surprise. As for the dividend, I dont see why they'd stop it. First of all, most other insurer's (if not all) continued their dividends during secondaries. And ALL of FNHC's publically traded competitors continued with their dividend during recent cash raises, including UVE, UIHC, and HCI. And of course FNHC has stated that they are raising cash because they are growing so fast, and expect to continue to grow and gain market share from the FL competitors I just mentioned well into the future.
Good info, I'd been wondering why FNHC was trading so much lower than similar insurers, particularly HCI, which I'm still kicking myself for not buying when it was in the early growth trajectory that FNHC itself seems to be approaching.