Federated National Holding Co. :FNHC-US: Earnings Analysis: Q2, 2017 By the Numbers : September 22, 2017

Federated National Holding Co. reports financial results for the quarter ended June 30, 2017.

We analyze the earnings along side the following peers of Federated National Holding Co. – Progressive Corporation, Heritage Insurance Holdings, Inc., HCI Group, Inc., United Insurance Holdings Corp., Universal Insurance Holdings, Inc. and Erie Indemnity Company Class A (PGR-US, HRTG-US, HCI-US, UIHC-US, UVE-US and ERIE-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 97.56 million, Net Earnings of USD 4.95 million.
  • Year-on-year change in operating cash flow of 0.79% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-06-30 2017-03-31 2016-12-31 2016-09-30 2016-06-30
Relevant Numbers (Quarterly)
Revenues (mil) 97.56 92.92 88.57 83.79 75.06
Revenue Growth (%YOY) 29.97 34.75 41.61 15.41 27.68
Earnings (mil) 4.95 3.15 -12.12 1.39 0.99
Earnings Growth (%YOY) 398.99 -67.02 -230.64 -86.84 -91.55
Net Margin (%) 5.07 3.38 -13.68 1.66 1.32
EPS 0.37 0.23 -0.89 0.1 0.07
Return on Equity (%) 2.06 1.31 -4.83 0.53 0.38
Return on Assets (%) 2.45 1.55 -6.14 0.76 0.57

Access our Ratings and Scores for Federated National Holding Co.

Market Share Versus Profits

Revenues History
Earnings History

FNHC-US’s change in revenue this period compared to the same period last year of 29.97% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that FNHC-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.99% and earnings by 57.23% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s earnings growth has been influenced by the following factors: (1) Year-on-year improvements in premiums earned as a percent of total revenues from 79.99% to 85.24% and (2) underwriting policy improvements. As a result, its loss ratio improved from 113.36% to 87.71% year-on-year. In addition, premiums earned as a percent of revenues were 84.47% and the loss ratio 89.88% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

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Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

FNHC-US’s change in operating cash flow of 0.79% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins after interest from 2.54% to 7.52% and (2) One-time items. The company’s pretax margins are now 7.43% compared to 2.42% for the same period last year.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Federated National Holding Co.

Company Profile

Federated National Holding Co. engages in the provision of insurance services. It offers underwriting services to homeowner’s property, casualty, commercial, general liability, fire, flood, and accident insurances. The company was founded by Edward J. Lawson and Michele V. Lawson in 1991 and is headquartered in Sunrise, FL.

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