FedNat Holding Company

FedNat said first-quarter 2022 results were impacted by $31 million of net catastrophe losses, including $19 million from severe weather in Florida; Ron Jordan cited $29.2 million of catastrophe losses, gross losses of approximately $32 million, and about $2 million of net adverse reserve development related to Hurricane Laura. Excluding catastrophe losses and reserve strengthening, management said adjusted operating income would have been approximately $2.3 million, or $0.13 per share. Florida attritional loss ratio improved to approximately 32% from 38% a year ago, and Ron Jordan said the comparable attritional loss ratio was 27.8% versus 36.5% in last year’s first quarter; the comparable combined ratio excluding catastrophes was about 118% versus 157% in the prior-year quarter. Forward-lookingly, management did not give formal quarterly or full-year financial guidance, but said it expects the non-Florida runoff to accelerate in Q2 and that a successful plan could support a smaller Florida-only reinsurance program and a rightsized capital structure.

Mike Braun said the company’s strategy is to exit non-Florida markets, including Maison’s runoff, and refocus on Florida, where FedNat believes it has scale, underwriting strength, claims capability and agent relationships. He tied the strategic shift to the Demotech downgrade and Florida OIR action plan, saying the company could become much smaller if approved, but potentially also financially stronger and less volatile. His tone was candid and defensive about the challenges, while emphasizing that management is in active dialogue with regulators and is trying to preserve policyholder service during the transition.

Ron Jordan emphasized that the quarter was dominated by catastrophe activity and reserve strengthening, but said underlying performance improved as rate increases continued to earn into the book. He noted $47 million of holding-company liquidity at March 31, total investments of about $276 million, total cash and investments of about $92 million, and investment discipline focused on higher-quality liquid bonds and a few preferred securities with no common stock exposure. He also said Monarch National and Maison maintained surplus with RBC ratios of 300% or above.

Analysts asked for more detail on the Florida OIR action plan, timing for a response, and whether the upcoming Florida special session could help the market. Management said it could not share specifics publicly yet, expects an update in the coming weeks rather than months, and said regulators have been receptive. On the legislative front, Braun said it is early but suggested the session may focus more on litigation, social inflation, and reinsurance availability than on rate action alone. He also said current weather in Q2 has been quieter than March, while the book continues to shrink by roughly 400 to 500 policies per day.