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Edited Transcript of NGHC earnings conference call or presentation 7-May-19 1:00pm GMT

Q1 2019 National General Holdings Corp Earnings Call

New York May 14, 2019 (Thomson StreetEvents) -- Edited Transcript of National General Holdings Corp earnings conference call or presentation Tuesday, May 7, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Barry Samuel Karfunkel

National General Holdings Corp. - CEO & Co-Chairman

* Christine Amanda Worley

National General Holdings Corp. - Director of IR

* Michael Hal Weiner

National General Holdings Corp. - Executive VP & CFO

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Conference Call Participants

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* Adam Klauber

William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Financial Services and Technology

* Bijan Moazami

Compass Point Research & Trading, LLC, Research Division - Analyst

* Matthew John Carletti

JMP Securities LLC, Research Division - MD and Senior Analyst

* Randolph Binner

B. Riley FBR, Inc., Research Division - Analyst

* Sean Keller Reitenbach

Keefe, Bruyette, & Woods, Inc., Research Division - Associate

* Yaron Joseph Kinar

Goldman Sachs Group Inc., Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to the 1Q 2019 quarterly earnings call. (Operator Instructions)

It is now my pleasure to turn the floor over to your host, Christine Worley. Ma'am, the floor is yours.

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Christine Amanda Worley, National General Holdings Corp. - Director of IR [2]

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Thank you. Good morning, and welcome to the National General Holdings Corp. First Quarter 2019 Earnings Conference Call. My name is Christine Worley, and I am the Director of Investor Relations at National General. With me this morning are Barry Karfunkel, Chief Executive Officer; and Mike Weiner, Chief Financial Officer. Before Mr. Karfunkel and Mr. Weiner review our results, please note the following with respect to forward-looking statements. Members of our management team may include statements other than historical facts in their remarks. Such statements may include the plans and objectives of management for future operations, including those relating to future changes in the company's business activities and earnings results or potential. These statements are based on current expectations and involve assumptions that are difficult or impossible to predict accurately, many of which are beyond our control. There can be no assurance that actual developments will be consistent with these assumptions. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including the factors set forth in our filings with the Securities and Exchange Commission.

The projections and statements in this presentation speak only as of the date of this presentation, as we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except may be required by law.

Our management will refer to financial statements that are not derived from generally accepted accounting principles, or GAAP. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures and related information is provided in the press release for our first quarter 2019 earnings, which is available in the Investor Relations section of our website at www.nationalgeneral.com.

It is now my pleasure to turn the call over to our CEO, Mr. Barry Karfunkel.

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [3]

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Good morning, and thank you for joining our first quarter earnings conference call. I'm pleased to report that our Q1 operating results were the strongest quarterly results in our history. I'd like to provide some added color around the performance of our various lines of business.

Our Property & Casualty segment experienced extremely strong operating results, with slowing year-over-year growth in our personal auto line of business, primarily due to a softening in market where we remained disciplined and refused to chase top line growth, offset by the continued expansion of our direct-to-consumer business as well as continued state expansion via the Nationwide-exclusive agent distribution.

Our homeowners growth rate has slowed down, driven by underwriting actions being taken in California to respond to cat experienced over the past 2 years as well as non-cat water losses. Outside of California, we've been growing moderately.

Our lender-placed business experienced a 10% year-over-year top line decrease, driven by a flat cancel of an account that was acquired. That single account aside, the business has grown nicely, and we have a solid pipeline.

Our Accident & Health segment continues to report robust earnings. Our individual line grew at a slower pace than we anticipated, partially due to lower year-over-year shopping in both ACA and non-ACA health plans. Our group stop loss continues to perform well. Due to the uniqueness of this line of business, we foresee this is -- this being the business that could grow nicely at solid margins for the years to come. We're looking forward to closing down on our acquisition of National Farmers Union Insurance and welcoming their employees to the National General family. I believe that there is a strong opportunity to grow the niche small farm owners business into a strong line for National General, which would greatly benefit from our IT and sophisticated product pricing capabilities going forward.

Overall, our Q1 results represents a strong start to 2019. We continue to invest in impressive capabilities that we believe will continue to widen the gap between us and our competitors with operational efficiencies, product sophistication and marketing capabilities. We expect these capabilities to drive top and bottom line results in future quarters. With that it is my pleasure to turn the call over to Mike Weiner for a more detailed review of our financial results.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [4]

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Thank you, Barry. First quarter 2019 net income was $83.9 million compared to net income of $60.3 million in the first quarter of 2018. Operating earnings were $89.7 million versus $67.6 million in last year's quarter. Operating diluted EPS was $0.77 compared to $0.62 in the prior year quarter. Our results this quarter were impacted by $12.1 million of winter weather losses that compares to $14.2 million of losses from events in first quarter of 2018. First quarter 2019 included $16.4 million of favorable reserve development versus $18.6 million of favorable reserve development in first quarter 2018. Our first quarter 2019 P&C results reflect a reduction in our auto quota share session to 7% from 15%, and that's as of January 1 of this year. Trailing 12 months operating return on average equity was 14.7% as of March 31, 2019, and our fully diluted book value per share grew at 7.4% sequentially to $16.38 as of quarter end March 31, 2019.

Now I'd like to give some additional details about our 2 operating segments. First within our Property & Casualty segment. Gross written premium grew 3.8% to $1.1 billion, driven by organic growth in our homeowners product, up 7.6% and our auto -- personal auto product, up 5.7%. Service and fee income grew 8.9% to $119.4 million, driven by underlying premium growth. The Property & Casualty combined ratio was 90.1%. That's versus first quarter of 2018 at 90.9%. That -- this excludes amortization of intangible assets. The loss ratio was 69.4% compared to 70.6% in 1Q '18, reflecting lower accident year loss ratio, primarily in our monoline auto book.

The P&C loss ratio was also impacted by $5.5 million of favorable development, which compares to $15.2 million of favorable development in 1Q '18. The lower favorable development this quarter was driven by lower frequency in our property book as well as slightly favorable development in both 2017 and 2018 cat events. The expense ratio is 20.7%, which compared to 20.3% in 1Q '18.

Overall, in our auto book, net trend as defined as loss trend divided by premium trend, are moderately favorable, thereby helping the year-over-year accident year results. We attribute this to continued favorable frequency trends reflecting pricing segmentation and better risk selection from our RAD 5.0 product, which we began to implement roughly 2 years ago as well as mix shift. Severity trends are moderately better than industry, which we attribute to a mix shift as well as continued claims initiatives.

Now within our Accident & Health segment, gross written premium grew 10.6% to $258.5 million, which benefited from strong growth across both our domestic group and individual products. Service and fee income was $61 million versus $45.2 million in first quarter 2018. The growth was driven primarily by third-party agency distribution fees as well as group benefit administration. Accident & Health combined ratio was 84.2% versus 90% in 1Q '18, excluding noncash amortization of intangible assets. The loss ratio was 52.5% versus 59.3% in the prior year quarter. The loss ratio reflects continued improvement in the current accident year loss ratio for both the small group self-funded and individual products as well as the impact of $10.9 million of favorable development compared to $3.4 million in favorable development in 1Q '18. The expense ratio was 31.7%. That's versus 30.7% in the prior year quarter. I'd like to echo Barry's excitement about our strong quarter, in particular given the similar cats that happened on a year-over-year basis.

I'd now like to turn the call over to the moderator to open the floor for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question is coming from Matt Carletti.

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Matthew John Carletti, JMP Securities LLC, Research Division - MD and Senior Analyst [2]

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Matt Carletti with JMP. Just a couple questions. Barry, you made a comment in your opening comments about I think the short-term medical and some of the A&H products and seeing a little bit less shopping going on than you anticipated. Can expand on that a little bit kind of what you're seeing? And then what you expect going forward?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [3]

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Yes, sure. So as the government used to market during open enrollment period, the various Affordable Care Act plans and that open enrollment was open for business, that's no longer the case. That is definitely driving lower shopping nowadays with most probably the uninsured market growing a bit. As far as the -- how we see that going forward, we've got various marketing efforts as well as marketing assets that we plan on utilizing to drive growth, but that is macro trend.

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Matthew John Carletti, JMP Securities LLC, Research Division - MD and Senior Analyst [4]

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Okay. Great. And then shifting to actually the comments you made on LPI. You mentioned, losing a small client and then also a strong pipeline. Can you give a little bit of color there about what happened? And what you expect going forward?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [5]

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Sure. There was a single client that was acquired by another servicer. So that business was canceled at that point in time. And going forward, we've got a nice pipeline. We plan on onboarding a couple of accounts later on this year. As you know, the dynamic of loading an account, it takes roughly close to a year for new premium to materialize once a account is onboarded, so the effect of -- the P&L impact of loading those clients will be a little further out, but we like the way we're positioned in that business.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [6]

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Yes. I would just say that also LPI, the rights kind of tag along with the servicing rights. So in this particular circumstances, the servicing company was procured by another company. So those tag along servicing right -- LPI rights went with that.

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Matthew John Carletti, JMP Securities LLC, Research Division - MD and Senior Analyst [7]

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All right. Great. And then last one, actually a bigger piece of the business. Just -- can you just update us on what you're seeing in the nonstandard auto market from a competitive standpoint kind of from others in the market? And how this impacting you?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [8]

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Sure. So there are a couple of markets that are extremely soft. For example, Florida has, historically, been one of the hardest markets. And now it's got to be the most probably one of the softest markets in the U.S. Low year-over-year increases -- rate increases or decreases from carriers actually stemming shopping activity, which is really felt by the independent agency community. So the year-over-year new business is, call it, a little more challenging to come by than it's been in years past. That being said, we remain vigilant with our underwriting, with our pricing. The seeds of every hard market are always planted in a soft market. So we are not going to -- we are definitely going to hold by our discipline.

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Operator [9]

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And the next question is coming from Randy Binner.

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Randolph Binner, B. Riley FBR, Inc., Research Division - Analyst [10]

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B. Riley is the firm. And so I've -- I guess maybe to pick up on a similar line of questioning, the -- so the California, your -- where would you say you're in the process of trimming exposure and re-underwriting books there as it relates to natural catastrophes and fire loss, but also, I think, you mentioned that there was some attritional loss out there if I heard it right in the call. So can you kind of dimension where that process is because I feel like California is a pretty significant marginal kind of driver for top line. So it'd be nice to understand the dynamic out there better.

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [11]

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Sure. So we started nonrenewing book of business, I believe perhaps, end of Q4, beginning of Q1 over here, which had last 12 months from the -- from time at which the process started. And I believe overall, California is the largest -- is the first or second largest state for our property business. And so yes, overall, it's had the impact of keeping our overall growth much lower than what it's been in the past on -- California business is growing but at a moderate level. And we are I guess that's the way it's playing out in the first quarter.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [12]

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Yes. Can I just add 2 really quick points on that. Point one is that also in the first quarter -- it was not NatGen specific. First quarter, we had a lot of raining -- rain activity there. They're not really classified as large PCS cats. It was a very wet first quarter. That's what kind of drove out some of the attritional or nonlarge cat there, but we've seen -- the actions we've taken, I think, we're early on versus a lot of the competitors with regard to the re-underwriting or nonrenewal in California. And that's in order to our benefit for us, and we just on 5/1 did our cat tower on very favorable terms on a year-over-year basis. And we got a lot of credit for that, so we feel good.

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Randolph Binner, B. Riley FBR, Inc., Research Division - Analyst [13]

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Yes, I guess the -- thanks for all that comments. I guess I'm just trying to level set what we wish -- is this the right level of production in California we saw in the first quarter? Or would it keep kind of going down in the second quarter? I'm just trying to get a sense of the kind of how to think about the timing.

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [14]

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Sure. So our -- most probably our new business production is good and most probably stays flat in -- for the rest of the year as it has in Q1. Our renewal block will definitely be impacted by our nonrenewal actions that were taken over there. And we're going to focus on allocating our capital to areas that we believe we could get attractive returns on.

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Randolph Binner, B. Riley FBR, Inc., Research Division - Analyst [15]

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Okay. And that would be non-California. So there's pocket in other parts of the country where homeowners are still attractive on price and competition?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [16]

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Yes, definitely.

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Randolph Binner, B. Riley FBR, Inc., Research Division - Analyst [17]

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Let me -- then on A&H, what's the -- what is the nature of the marketing that you're going to do to drive growth there? And could you -- does your platform have the ability to maybe toggle to other supplemental products that might be in more -- in demand or easier to sell, given kind of lower foot traffic around these government exchanges?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [18]

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Sure. So we obviously onboarded a significant direct-to-consumer marketing capability when we acquired Direct General, which is going to be a significant -- which is -- which we plan on leveraging to drive future growth. We've acquired certain, for example, a lead generation company that has couple of lead generation assets that we've integrated thus far into our marketing efforts we do have a very significant -- we are most -- probably one of the top 3 individual health insurance agencies in the country with, by owning our VelaPoint health solutions team and other brokerage assets that we've got that market our individual products.

As far as the actual product goes and what we could sell our core product in the individual health insurance space is going to -- is our short-term medical. To a lesser extent, there's a little bit of fixed indemnity limited medical plans in the other supplemental products that help bridge the gap as far as those deductibles in the event of accidents, critical illnesses, et cetera. We've been spending time upgrading and justification of our products and introducing new benefits to our core major medical products, but that's what we go to battle with.

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Operator [19]

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And the next question is coming from Yaron Kinar.

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Yaron Joseph Kinar, Goldman Sachs Group Inc., Research Division - Research Analyst [20]

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Yaron Kinar with Goldman Sachs. Mike, I just want to make sure I understood a comment you made earlier correctly. Did you say that you are in relatively early stages of re-underwriting or trimming your California homeowners business relative to your peer?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [21]

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It started towards the end of -- the nonrenewal activity started at the end of Q4 or beginning of Q1. So I guess, being that those actions take 12 months to nonrenewal block of business, we are in the beginning of that, yes.

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Yaron Joseph Kinar, Goldman Sachs Group Inc., Research Division - Research Analyst [22]

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I guess, my question was specifically on where you are relative to peers, not so much where you are relative to your process.

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [23]

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Oh, from our indications out there and talking to some of our sales folks there, we communicated, I think, relatively early on with our agents -- our agent task force out there. I think we are one of the earlier leaders in doing such, starting that in the fourth quarter.

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Yaron Joseph Kinar, Goldman Sachs Group Inc., Research Division - Research Analyst [24]

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Got it. So actually, you're ahead of peers.

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [25]

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Again, there's no great metric for it, but we just go out, we talk to our agents, and we did a large communication and planned with them in explaining what we're doing, and they were very, very pleased with how we communicated it.

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Yaron Joseph Kinar, Goldman Sachs Group Inc., Research Division - Research Analyst [26]

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Got it. Then my next question is on we've heard a lot of -- or we're seeing a lot of headlines around universal Medicare, universal health care. Can you maybe talk about how you're seeing that? And what impact it would have on your business should it actually go through?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [27]

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Obviously, we're -- it would have a impact on our core major -- on our core medical products. I believe that supplemental lines of business, obviously, assuming that we go full universal Medicare, no deductibles, and the government starts eating the expenses from $1 item -- foresee that happening, but you never know. So there's always going to be products I believe to pivot to and being that we own such a significant insurance agency, we have the added benefit of really hearing directly from the consumers what they need, what they want and crafting our products appropriately.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [28]

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We also own a small business in Sweden that provides many of these type of products to a more nationalized system. We think we can lean on their experiences as well as if we needed to pivot and sell other products there. So I think if one thing we've shown over the last couple of years in this space, as the health care space continues to change, NatGen is able to change very quickly, and we have products and services out there to meet the consumer needs within the regulatory framework.

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Yaron Joseph Kinar, Goldman Sachs Group Inc., Research Division - Research Analyst [29]

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Got it. And maybe one final one before I re-queue. Can you talk about the rationale for adding the quota share agreement in those, I'm assuming that's Swedish operations?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [30]

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Sure. Really for volatility protection in capital and some capital relief. The business has grown -- grow nicely over there. So with some of the Solvency II metrics out there, just a more effective way to reduce volatility and capitalize that business in Sweden.

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Operator [31]

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And the next question is coming from Bijan Moazami.

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Bijan Moazami, Compass Point Research & Trading, LLC, Research Division - Analyst [32]

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It's Bijan Moazami, Compass Point Research. Couple of questions. First, if you guys can comment about your acquisition pipelines, in particular what kind of opportunities you see? Your sister company Atlas sold a number of entities, including their crop business, was there anything there that was of interest to you?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [33]

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No. There's nothing of interest. Just as reminder, we're a independent publicly traded company. And we are -- the overall M&A activity is quieter now than it's usually been. We maintain dialogue with individuals in the marketplace, but things are quiet generally. And any acquisition activities are really focused on enhancing current lines of business as opposed to really seeking new entry points to other lines of business.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [34]

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I think a nice example of that was what we are doing with National Farmers Union, which we hope to close relatively shortly, really deepening our penetration in the property and the package space.

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Bijan Moazami, Compass Point Research & Trading, LLC, Research Division - Analyst [35]

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Are you guys still looking to be buying agencies and distribution for A&H?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [36]

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Yes. Those agencies are a little bolt-on acquisitions that we will make all the time, and aren't even worthy of communication. Direct General acquires agencies all the time. We've acquired marketing assets of -- from A&H. So those are just little tuck-in acquisitions that are normal course of business for us.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [37]

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Also -- you might also noticed, Bijan, in our disclosure this quarter, in our press release, we break out our fee-based income where some of those revenues associated with that come. So you'll see a third-party fee component that really bifurcated out of the service and fee income in our A&H business. You can kind of see where that all flows through.

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Bijan Moazami, Compass Point Research & Trading, LLC, Research Division - Analyst [38]

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Also on the auto line, could you comment a little bit about the kind of frequency and severity trends that you're seeing in the marketplace? And also if you could talk a little bit about the exclusive agency distribution that you're using? How many of those you have? And what we should be expecting there?

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [39]

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The -- let me talk about frequency and severity, you can about the distribution, Barry. So yes, we're seeing continuously favorable frequency trends us -- even better than looking at an industry fast track data. Again, it really relates to just better risk selection of our new products that we've rolled out about 2 years ago. And quarter of the quarter, we're getting better risk selection in terms of overall mix we were doing. Severity, continue to be moderately better than the industry trends. Again, we look at either on a sequential of trailing 12 months, rolling multiple year basis. And on the severity stuff that we're seeing, some of it's mix shift in the businesses that we read in, but some of it's also some of the early claim settlement practices we've continued to implement over the last couple of quarters. That's really helped us really crave these strong accident year results.

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [40]

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There was a question, can you please repeat the question regarding the...

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Bijan Moazami, Compass Point Research & Trading, LLC, Research Division - Analyst [41]

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Yes, the second, you mentioned a little bit about exclusive agents, they're selling products for you. If you could just comment a little bit there. I don't know much about that particularly distribution channel in particular, how many of those agencies you might have?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [42]

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Okay, sure. So we've -- what I talked about with respect to exclusive agents is that towards the -- into December of 2016, we acquire the renewal rights to Nationwide's nonstandard book of business. As we felt of that, we are the primary nonstandard option many Nationwide exclusive agencies. So we've been expanding our state footprint within a, call it, relatively a sheltered distribution point for us as well as leveraging our own direct-to-consumer capabilities via Direct General.

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Operator [43]

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And the next question is coming from Sean Reitenbach.

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Sean Keller Reitenbach, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [44]

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Sean Reitenbach, KBW. Looking at the segment expense ratios, it looks like the acquisition cost ratio has increased year-over-year in both P&C and more significantly in A&H. What drove the year-over-year higher acquisition cost ratios? And where do you see them going forward?

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [45]

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Yes, both of those -- few things going on there. Both of those acquisition expense ratio is really driven by mix. So you'll notice in the P&C, we've had a higher disproportioned amount of growth in our higher commission businesses like some of the property businesses as well as a continuing mix shift in the A&H side. So you'll see where that -- they'll be a -- there's a slight percentage increase on a year-over-year basis on that.

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Sean Keller Reitenbach, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [46]

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Okay. Great.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [47]

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Mix shift of the products.

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Sean Keller Reitenbach, Keefe, Bruyette, & Woods, Inc., Research Division - Associate [48]

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And then, in A&H, grew a little bit in 1Q '19, is that mostly related to the individual line growth? Or is there some other headwinds in other parts of the book that you weren't expecting? And also what does the A&H pricing environment look like for NGHCs lines of businesses?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [49]

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Sure. So as I mentioned in my prepared remarks, the overall shopping for individual products has slowed this open enrollment due to what we attribute to a lack of marketing by the federal government for open enrollment period. As far as pricing abilities remains robust where we feel confident with our products, with the way they're priced and feel good about the continued margins from our Accident & Health segment.

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Michael Hal Weiner, National General Holdings Corp. - Executive VP & CFO [50]

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Yes. And if you actually look, we're actually now giving it a little bit more detail in terms of the bifurcated premium. So if you look at Page 11 of our press release, we have it out there as well for historical periods, you can look at the growth in premium. So our group business grew about approximately 16%, our individual products grew at 12% and our international business grew about 6%. So pretty good growth rate, just not what they were historically, but very strong.

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Operator [51]

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And the next question is coming from Adam Klauber.

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Adam Klauber, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Financial Services and Technology [52]

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Follow-up on the nonstandard, you mentioned that Florida has gotten more competitive, is the competition coming from more nonstandard dedicated companies, MGAs or standard carriers? And then are other states getting more competitive also nonstandard?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [53]

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Sure. So the competition is really coming from across the board and specifically from nonstandard-focused distribution that we see into. Florida was just an example. There are many states that are seeing a lot of market softness as well.

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Adam Klauber, William Blair & Company L.L.C., Research Division - Partner & Co-Group Head of Financial Services and Technology [54]

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Okay. And then, on the A&H business, is the combined ratio on 85%, is that a pretty -- within a range, is that a pretty good combined ratio we should expect for this business?

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Barry Samuel Karfunkel, National General Holdings Corp. - CEO & Co-Chairman [55]

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No. I think it's probably on the low side. So the way I kind of think about it, if you subtract the PPD that we had in this current quarter and you kind of spread it out throughout the year a little. So it's hard to predict, those kind of things, you get to about a 90%. So that gets us back to really more of what we're targeting for that business. We've had some continued favorable results in that business. But in terms of our pricing and going forward, we think the business should be running about 5 points higher than it is now.

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Operator [56]

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And there were no further questions from the queue.

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Christine Amanda Worley, National General Holdings Corp. - Director of IR [57]

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Thank you very much for joining us on this earnings call. We look forward to speaking with you next quarter.

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Operator [58]

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Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.