FedNat Holding Company
Q4 2017 Earnings Call Transcript

Published: 14 Mar 2018

[Operator:]

Good morning, and welcome to the Federated National Holding Company's Fourth Quarter and Year-End 2017 Financial Results Conference Call. My name is Takia, and I will be your operator today. Please note that today's call is being recorded. [Operator Instructions] Statements in this conference call that are not historical facts are forward-looking statements. Words such as anticipate, believe, budget, contemplate, continue, could, envision, estimate, expect, guidance, indicate, intend, may, might, plan, possibly, potential, predict, probably, pro forma, project, seek, should, target or will and other similar words or phrases are intended to identify forward-looking statements. The matters discussed on this call that are forward-looking statements are based on current management expectations involving risks and uncertainties that may result in these expectations not being realized. Actual events, outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements made on this call due to numerous risks and uncertainties including, but not limited to, the risks and uncertainties described in this conference call, our press release issued yesterday and other filings made by the company with the SEC from time to time. Forward-looking statements made during this conference call speak only as of today's date, and Federated National Holding Company specifically disclaims any obligation to update or revise any forward-looking statements to reflect new information, future events or circumstances or otherwise. Now at this time, I would like to turn the conference over to Mr. Michael Braun, Chief Executive Officer and President of Federated National Holding Company. Please go ahead, sir.

[Michael Braun:]

Good morning. Welcome to our fourth quarter and full-year 2017 conference call. I will start off by discussing our 2017 highlights including a few comments on our fourth quarter results and then update you on a number of strategic and operational initiatives underway as we position the company for improved performance and continued value creation moving forward. Ron will then provide a more detailed review of our financial results for the quarter. Overall 2017 had some challenges including that the fact that we faced two major hurricanes, Irma and Harvey and experienced multiple smaller storms throughout the year. Claims from Irma, which was the largest category five storms in the Atlantic Ocean in more than a decade, continue to come in with the total claim count having passed the 31,000 mark this past week. Overall as I said, last quarter I am very pleased with how our team performed in handling such an event for the benefit of our policyholders. For the full year we reported earnings of $8 million or $0.60 per share on revenue of 392 million. Fourth quarter earnings were $6.3 million or $0.48 per share on 102 million revenue. We once again demonstrated the strength of our reinsurance program and to-date have utilized less than 25% of our $1.5 billion single event reinsurance limit. For the full year total revenue from Homeowners grew 28% to $321 million. We continue to focus on controlling expenses with our growth and net expense ratios coming in at 25.5% and 40.4% respectively for the year. Book value per share excluding non-controlling interest grew to $16.29 from last year's $16.01. And looking at our fourth quarter results, total revenue excluding realized investment gains grew 14% over last year's fourth quarter and 10% from the third quarter. The strong year-over-year increase was driven by a 21% improvement in homeowners. Auto was a headwind and I'll talk more about our strategic exit from that business in a moment. The expense control was solid in the quarter with a gross revenue ratio at 25%. We have taken significant action to manage growth, improve our underwriting profitability and position the company for continued opportunities in the years to come. We are focused our resources and attention on where our strength lies. Building and managing a quality organic homeowner's book, leveraging our loan term market presence in Florida, our broad agent network and partnership ecosystem, and our strong underwriting and claims capabilities. This strategy has resulted in a couple of important puts and takes for the company. First, we're exiting the Auto insurance base as previously reported and as newly announced in last night's release, we will also be exiting the commercial general liability market. Each of these actions are subject to obtaining the appropriate regulatory approvals. Auto was a significant drag on earnings and as required a disproportionate share of the company's staff and resources. We have already reduced exposures in the business and anticipate it being much smaller part of our results on a go-forward basis. We currently have two active Auto programs also which are performing reasonably well. And commercial general liability was a small market for us representing less than 2% of our gross written premiums for 2017 and one we believe offers limited value creation opportunity. As we continue to build our Homeowners property business, we are focused on creating runway for additional, sustainable profitable growth over the next couple of years. We are long in Florida property and we think it's a good time to be so. It's a growing market, it's fragmented and we are well positioned with a strong agent network, solid underwriting and claims and 80 plus reinsurance partners who want to work with us. Additionally we have mitigated the AOB issue, ultimately as we address it proactively and in terms of our pricing. This year will benefit from the first full year of our initial rate increase related to AOB from 2016, and as a further earn-out from our 2017 increase. On a combined basis our 2016 and 2017 rate increases address the estimated aggregate impact of AOB. And we're setting this nature expanding our share over the Florida market in the coming years. In the first quarter we closed on the acquisition of the minority interests of Monarch including Monarch National Insurance Company which continues to operate as a subsidiary in the Federated National Group. We're excited about the opportunity with respect to the long term strategy for this company which has developed presence and the risk adjusted class of the Florida Homeowners market where we are currently underway and has the largest segment of the $9 billion plus Florida homeowner market. We’ll also be executing on opportunities to build order books through geographic diversification within in Florida and selectively in neighboring markets. Internally we have continued to strengthen our team. We have added experienced insurance industry, talent to our exposure management and financial team and improved our financial reporting and investor transparency. We've also increased investments in technology solutions that streamline improve key processes in underwriting at claims which has in part enabled us to reduce first staff from Ohio 431 people to the current 381 people which has been achieved mostly through attrition. Overall, we feel great about our economic strategic focus which centers on our core strengths namely quality underwriting and servicing Homeowners insurance. Now as we turn to 2018, we are focused on continued walking and tackling. We are focused on our 2018-2019 catastrophe reinsurance program in particular. We have a strong program in place for 2017 and to-date have utilized less than 25% of that program despite having experienced multiple storms. Additionally, we have entered contracts for coverage under the Florida Hurricane Cat Fund for the upcoming winter season. Efforts to the remainder of our 2018-2019 program are in the early stages and we're confident that the long-term partnership approach that we take with our traditional reinsurance partners will continue to serve the company and our shareholders well. While it's too early to forecast what pricing will come in, it appears that there's plenty of capital buying for shelf space in the reinsurance market. Lastly, let me talk about our reinsurance program. Our stock has traded below our book value and below the multiple in the valuations of our peers. Therefore in the fourth quarter we reported 76,000 shares at a cost of 1.2 million. For the full calendar year we purchased 654,000 shares deploying 10 .6 million of capital combined with the 4.3 million in dividends paid to shareholders total capital return to shareholders was approximately 15 million for calendar 2017. We've also had a strong presence in the market thus far in 2018 heading purchase an additional 280,000 shares at a total cost of $4.3 million on a quarterly basis. We remain committed to being opportunistic with our share repurchase program and will continue to utilize it whether it disconnects between the market price and the price that we feel represent an accretive transactions for our shareholders. Wrapping up, we're moving into 2018 with strong strategic focus of Homeowners and a commitment to increasing our operational proficiency. I'm excited about the opportunities for the company in the coming years. I would like to turn the call over to Ron.

[Ron Jordan:]

Thanks Mike. As mike mentioned, we've taken a number of strategic steps to improve our financial results in 2018 and beyond. I’d like to take you through the 4Q '17 numbers in a bit more detail, provide some color on our 10-K filing last night, and comment on our balance sheet including our capital and liquidity. So turning to 4Q '17, as Mike mentioned our net income was $6.3 million or $0.48 per diluted share, a significant improvement over the $8.8 million loss which was $0.65 per share in 4Q '16 which of course included the impact of Hurricane Matthew. Our full-year earnings increased to $8 million or $0.60 per diluted share compared to $1 million or $0.07 per share in 2016. Investment gains and losses were essentially zero in the quarter and $5.6 million after tax for the full year 2017. Full-year earnings excluding realized gains was $2.4 million or $0.18 per diluted share compared to a loss excluding the realized gains of $1 million or $0.07 last year. While in total that is modest year-over-year growth, it's worth noting that homeowners' earnings increased almost $7 million between those two periods with automobile dragging our consolidated earnings back down to a smaller overall increase. We will not experience headwinds like this from Auto in 2018. Delving further into our earnings for the quarter, Homeowners recorded a profit of $7.4 million, a favorable swing of $15.2 million from 4Q '16 and $15.7 million from 3Q '17 with both historical periods being impacted by hurricanes. The fourth quarter was pretty quiet for the weather standpoint with incurred losses of 1.5 million pretax from Hurricane Nate and other storms. The Homeowners net loss ratio was 59% compared to 55% for 4Q '16 and 60% for 3Q '17 respectively when adjusting each period for the impact of our retentions on Hurricane's Matthew and Irma. Growth losses in the quarter were impacted by $40 million of an increase to our estimated ultimate loss from Hurricane Irma which now stands at $350 million as of year-end with the increase being fully seated under our reinsurance program. So this increase had no impact on the company's 4Q earnings given that we had recorded our full per event retention during the third quarter. However these additional cat losses added 30 points to our Homeowners gross loss ratio for the quarter. Matthew last year in the fourth quarter added 37.2 that gross loss ratio and in the third quarter of 2017 Irma added 236 points to our third quarter gross loss ratio. In the fourth quarter of 2017 we earned $1.6 million of incremental claims handling revenue, pre-tax from handling of catastrophe claims which appears in our consolidated financial statements as a reduction to net losses and LAE. As I move on from Homeowners a quick side comment, and almost a statement of the obvious but with our ongoing withdrawal from Auto and last night's announcement that we will be exiting CGL, the Homeowners line of business along with investment income and corporate expenses in the other line of business really represent the future of FedNat both in terms of earnings and growth opportunities. With that said, let me go ahead and touch briefly on 4Q results in Auto and the other lines of business. In Auto, gross written premium was down 52% from 4Q '16 and 11% from 3Q '17 reflecting management's decision to exit from this business. We lost $2.2 million in Auto in the quarter compared to a loss of $1.2 million in both 4Q '16 and 3Q '17. The quarter's results for Auto were impacted by reinsurance session adjustments netting to about 600,000 unfavorable after-tax. I’ll come back to these adjustments in a moment. 4Q '17 our results also included $1.5 million of reserve strengthening pretax related to prior periods which puts us in a better reserve position for Auto for the coming quarters as the business runs off. Auto has been a significant drag on our earnings over the past two years and we believe that drag is largely behind us moving into 2018. Our other line of business which includes CGL, flood, investment results and corporate and support expenses contributed net income of $1.1 million to the quarter excluding realized gain loss as compared to a loss of $400,000 for 4Q '16 and net income of 800,000 for 3Q '17. CGL, commercial general liability experienced a larger loss in the fourth quarter of 2017 of $1 million pretax net of per risk reinsurance protection. The other line of business also includes $1 million after-tax of income in a catastrophe claims handling company that is an equity method investees of ours of which we own 33%. Elevating back to a companywide view, expenses behaved well on the quarter with our growth in net expense ratios coming in at some of their lowest levels in the past five quarters at 25% and 38% respectively. Now for some color on our 10-K filed last night. You will notice that the historical periods on our earnings release and 10-K have been adjusted from previously reported figures. Footnote 1 of our 10-K provides background and details related to these adjustments. But in the course of preparing for and completing our year-end closing process, we updated a couple of our accounting policy most notably on the timing of revenue recognition of direct written policy fees and while less material also on admin fee revenue recognition in auto. Under our new policies, such revenues are recognized over the term of the underlying reinsurance policies in a manner similar to the way written premiums are now, whereas they were previously recognized upfront at policy issuance. This change has a modest impact on any particular accounting periods both past and future because of the offsetting impact from the beginning and end of each accounting period but also resulted in a cumulative deferral of revenue into 2018. Other items included in the historic adjustments are detailed in note 1 in our 10-K and include a change to our deferred acquisition costs amortization, historical corrections related to reinsurance coverages in our auto line of business, and other items that had already been corrected and disclosed in previous public filings. In assessing these items the company came to a conclusion that no historical reporting periods were maturely in a state of and as such no amendment to any previous SEC filing is required. In this circumstance, the proper treatment is to restate the historical periods in the go-forward filings in which they need to appear as prior period information. With that said, I would point out that our 10-K includes all eight quarters of 2016 and 2017 on the adjusted basis and between footnote 1 and footnote 16 in that document you can see those quarterly numbers. I would also like to point out that the deferred revenue and the DAC changes are a matter of timing of accounting recognition with no economic impact on our earnings power or on our cash flows. Similarly the corrections related to our auto have no notable implications for our go-forward earnings as virtually no unearned premiums remain under the impact of programs. And loss reserves have been fully adjusted to the resulting quota share percentages. It's important to recognize that earnings in our homeowners line of business which again is the future of FedNat were not impacted by more than 300,000 or so in any quarter of 2017 or 2016 by any of these adjustments. Lastly on this topic let me just say that the interim period results for 2017 both quarterly and year-to-date on a line of business basis will be included as prior year compared information as we file our 2018 quarterly earnings releases and 10-Qs in the coming months. Turning to the balance sheet. As you know the company accessed the capital markets in the fourth quarter completing the placement our $45 million of senior notes. Our 12/31 balance sheet reflects $49 million of debt that figure includes $5 million associated with the Monarch JV which was paid off upon the purchase of the minority interests in mid-February and that $5 million was paid off with assets that were resident inside Monarch really did not come from the proceeds of the senior note offering. As such, our go forward debt consist of $45 million, $20 million of which is fixed rate and due in five years with the other $25 million floating on three months LIBOR with a 10 year maturity. We do not currently intend to hedge our exposure to three months LIBOR with derivative instruments, however we are taking positions in floating rate assets in our investment portfolio with the stated intent to economically offset a portion of future increases in interest expense from rising interest rates. Speaking of investments, our investment portfolio is conservatively positioned and performing well with the carrying value of $444 million as of year-end. Over 96% of that amount is invested in fixed income securities that have a composite S&P rating of A minus. Combined with our $86 million cash positions on a consolidated basis at year-end, we have $530 million of cash and investments on our balance sheet. Turning to stats to surplus and liquidity, note that as of February 21 Federated National Insurance Company now owns a 100% of Monarch National Insurance Company and this stacking structure enables more efficient use of capital and surplus inside of MNIC. Shortly before year-end, FNHC contributed its existing 42.4% ownership of Monarch to FNIC and then it was FNIC that purchased on February 21 the remaining minority interests in Monarch for $17 million in cash. FNIC's ending surplus positioned benefited from a year-end capital infusion of $30 million in cash and securities, $17 million of which effectively reimburses FNIC for that purchase of the minority interest that I just mentioned. Anticipation of this transaction was one of the reasons for the holding company’s borrowing activity in 4Q and the sizing there of. In terms of non-insurance liquidity after that year-end capital infusion into FNIC, our holdco and other non-insurance entities together have liquidity of approximately $50 million heading into 2018. As I wrap up one hot topic that I haven't mentioned yet is tax reform. Tax reform actually had a minimal impact on our 4Q and full year 2017 results. Our net deferred tax position at year-end was an asset of less than a $0.5 million. So revaluing the first of the 21% perspective federal rate had a negligible impact on net income in these periods. The bigger story from tax reform of course is that our 2018 effective tax rate will drop by 14 points to the 24% to 25% range, that's down from 38% to 39% range before. So that will have a notable beneficial impact on our go forward earnings. With that let me turn the call back over to Mike.

[Michael Braun:]

So to wrap up our prepared remarks, we've entered 2018 in a great position with our strategic vision, a strong dedicated team and a focus on further improving our operating performance. Operator, we are ready to begin the question-and-answer after which I will make a few closing remarks.

[Operator:]

[Operator Instructions] Our first question comes from the line of Samir Khare with Capital Returns. Your line is now open.

[Unidentified Analyst:]

This is Ed on asking questions for Samir this morning. On adverse development in the quarter, how much of the $4.7 million was related to Homeowners?

[Michael Braun:]

About 2.1 million of the 4.7 million pertains to Homeowners.

[Unidentified Analyst:]

And then on buybacks in the quarter, was there anything that limited you from buying additional shares in the quarter? Like could you guys bump up against an ADV cap or something?

[Michael Braun:]

No, we had a 10b-5 plan and we were just slow and methodical in it and we’ll continue to do so. Obviously the stock has been very low and we've been opportunistic and just being disciplined to spread that out slowly.

[Unidentified Analyst:]

And then just on lost PIKs for Homeowners, what are you guys thinking about in terms of 2018 initial PIKs, both on a gross and net basis?

[Ron Jordan:]

So right now we're sitting at 36.5% on a growth perspective. As we look into 2018, obviously the rate earning in is a big kind of key piece of that. At times on a quarterly basis we’ll look at that obviously as we move ahead in 2018 it will earn the 9.9% new rate, rate that kicked in on August 1, of 2017. We'll continue to earn in right in our results. And obviously our loss ratio will adjust accordingly.

[Michael Braun:]

And then on a net basis that tends to translate to about the 59-60 range.

[Unidentified Analyst:]

And then just thinking about the auto exit and thinking about the impact on gross earned premiums. When should we be thinking about that no longer being reflected in the financials? When would you guys be fully exited?

[Michael Braun:]

Yes we will - by the end of 2018, we will be fully exited from auto from our earned premium perspective.

[Ron Jordan:]

Ed, as you know we had about a half dozen programs, we're down to two programs and these are our best two programs. The challenge is, is that we just can't achieve the operational efficiency that we need. So we think that the noise in the income statement that you know the bad noise I should say that should come to an end. We should be able to exit it gradually throughout 2018. The book is getting smaller pretty quick as it is.

[Unidentified Analyst:]

Yes, absolutely. Just it was a modeling question definitely. And then just for Homeowners in the quarter, just wondering, how much do you guys cede to the quota share versus the XOL this quarter? Like was there any residual effect of like a legacy Homeowner quota share affecting the number like an experienced account unwind or something?

[Michael Braun:]

Yes. We continue to have - we have our 10% and 30% treaties that were effective in the 14 through 17 range. And those treaties while they have ended there are ongoing effects until we actually recapture and close those out. And then of course we have the new quota share that we entered 71 of 2017 net-net almost all of those I think it was 9 million lower sessions across all of those treaties from a quota share perspective? Erick did you want to add anything to that.

[Erick Fernandez:]

Yes, I was just going to say from the legacy quota shares the impact on ceded premiums in the quarter was 1.4 million.

[Operator:]

Our next question comes from the line at Douglas Ruth of Lenox. Your line is now open.

[Douglas Ruth:]

Good morning and congratulations on the improved results. Could you offer some commentary about what you think is what might happen with the reinsurance, the reinsurance buy for this year?

[Michael Braun:]

Yes, we're currently in the market and obviously this is a big time of the year for us in that regard. We just renewed our FHCF obviously which is through the state. But we also renewed silver alongside of that. So the FHCF we didn’t choose 90%, we chose 75% and that 75% that enabled us to do 15% in the private market and long story short the pricing was flat. So very encouraged on reinsurance pricing, don't know where it's going to be as we renew it, but there's clearly a lot of capital. We clearly have a big panel of 80 reinsurers. Our book has been flat in 2016 and 2017. And now in 2018 we’re actually maintaining our premiums with rate increases. However, our exposures are decreasing so how we purchased the reinsurance. So we’ll be actually purchasing less reinsurance and we think we're well-positioned for a good renewal. We’ll find out more in the next 90 days in terms of the actual pricing.

[Douglas Ruth:]

And as far as what kind of rate increase do you think you might ask for the FedNat segment in this year?

[Michael Braun:]

That's something that we’re evaluating as we speak. We took 5.6 in 2016, 10 in 2017 that's about 16 plus. The driver has been AOB and that was about seven points. And you gross that up a few points and I think we’re in pretty good position. We’re still competitive in the marketplace. So it's too early to say how much rates will be impacted. We've updated obviously our new tax code. We got updated exposures in the book where we’ve contracted. We’ve had some non-renewals in place, we’ve updated some of our underwriting. We have a new algorithm out there with a GLM. So there is a lot of moving pieces, it’s bit early to say but I’ll say this, I believe the majority of the impact of AOB is behind us where it’s primarily priced in. We've obviously improved our claims handling, communicating with the insurance quickly and proactively. AOB, the legislative session just ended. It's not going away and the consumers are paying for it, unfortunately in the state here and that's the situation at hand. So I think it's in the rearview mirror, how it's impacting us in terms of our financial results. But from an operations perspective, its ongoing and we have a price accordingly.

[Douglas Ruth:]

And could you offer some more commentary on what you think the state is of the Florida market at this point?

[Michael Braun:]

Yes, we’re about 5% of the Florida market. I think we have great partnerships with our partner agents. Clearly they want to place the business with us and we're competitive. Our underwriting is strict, in the sense that we want to make sure we can write business that's sustainable. I don't see anything changing in the market in the last year or right now that's coming at us. There is just a lot of people vying for business and we're very comfortable with our business plan. Now in Florida we continue to grow. We did about 50 million of premium outside of Florida in 2017. Right now, we're anticipating that it will go up to about 75 million. So that's a 50% increase which sounds robust, but it's only a $25 million increase. So it's slow methodical is really our continued business plan.

[Douglas Ruth:]

And what do you need to happen in order to start ramping up the Monarch segment of the business?

[Michael Braun:]

Well, we just obviously closed on that in the last month or so. Well we've got control over that. So I think there's a great opportunity for us to expand in what I call the traditional market. And what I mean by that is there's well mitigated homes that Federated National does well with. There's the depop business, which is a whole other story which we really, where we're not in that space. But a typical home that was built before the mitigation credits came about, we are underweight in that space. And I still stand by the statement that we can do more to be bigger in that space. And that's the largest part of the Florida market. So we've got a few initiatives underway with Monarch that will roll out in ‘18. But I think there's a long runway ahead for Monarch for growth. We just have to tweak a few things as we go through in the underwriting and the pricing.

[Douglas Ruth:]

And can you give us an idea of how much insurance you're selling with Monarch per week at this point?

[Michael Braun:]

Yes, it's still slow. It's about a $30 million book. It's under 100,000 hours a week of new business. We have some non-renewals in there as well. Once again, I am happy with the structure of the program. But there is - it does need some further work in the sense that that space the pricing soft and I'm surprised how soft it is? But I think we'll have a lot more improvement on that throughout 2018.

[Douglas Ruth:]

And what's the status of your relationship with Allstate and with SageSure?

[Michael Braun:]

Yes, so Allstate is a fantastic partner. They are our largest producer in Florida, obviously I think everything's going well with them. Since, we've been partnered with them for the last four or five years. They're great partner to have. SageSure is our partner in non-Florida and we're through of them as well. They continue to grow their book of business with us, as well as they have other partners that they work with. They are a fast growing company and they do a great job.

[Douglas Ruth:]

Is there any way to quantify what the loss might be from the Auto for 2018?

[Michael Braun:]

You know it's difficult. We think that we've got most of that behind us. It's a short tail product that we sell. We think it's behind us, impossible to say what it will be in the future exactly. But I don't think you're going to see much impact in any of our future quarters as it relates to Auto.

[Douglas Ruth:]

Will there be any cost to exit the commercial general liability insurance?

[Michael Braun:]

Same thing. I think we’re in great shape there as well, both these programs the Auto and the CGL we've got adequate reserves on both programs. I don't think you're going to see much if anything on either Auto or CGL on a go forward basis and the income statement in terms of, obviously profitability. But to your point, I don't see losses coming through, anything meaningful in the future quarters. And hopefully that's the case.

[Ron Jordan:]

And Doug from a claims handling perspective, unlike Auto and CGL there was there was not any separate claims handling team. It's a common team with homeowners. So there is synergies there. And no sizable team that's impacted by that CGL exit.

[Douglas Ruth:]

I want to thank you folks. You know we asked you to make changes and you made the changes. We asked you to consider exiting the Auto and you did - you exited the Auto. We asked you to buy-back stock and you bought back stock. And I think the buy-out of Monarch will prove over a period of time to be a very smart decision. So I feel like - I concur with what you said. The company is positioned to do well in 2018. And we're looking forward to a much better year. So I thank you for what you've done.

[Michael Braun:]

Yes, we're very excited about 2018, Doug. Thank you very much.

[Operator:]

Our next question comes from the line of Jay Kumar of Midsouth Fund. Your line is now open.

[Jay Kumar:]

Any reason why you guys completely getting out of the Auto business?

[Michael Braun:]

Say again.

[Jay Kumar:]

Any reason why you're completely getting out of the Auto business?

[Michael Braun:]

Why we're exiting the Auto business?

[Jay Kumar:]

Yes.

[Michael Braun:]

We saw an opportunity in the Auto business going back three, four years ago. And basically, we entered it. We saw a great opportunity, but in the process of ramping it up, a lot of the assumptions that we had - we were not seeing the results, the corresponding results that we anticipated seeing. So therefore, when we grew the book, we had a auto book for many years. And when we went from about 10 million up to 70 million, we anticipated it going a lot smoother. And we had challenges not only on the inventory side, but on the adjusting side as well. So rather than continue growing it, I thought we could get it up to a couple hundred million dollars. We held it there for a period of time. But to continue growing it, it's going to require a lot more investments of time, of dollars into technology and so on. And we just didn't see the opportunity there that it would be generating the results for our shareholders.

[Jay Kumar:]

One other question, what's the typical raise in insurance pricing in the Florida market, year-on-year, what's the rate?

[Michael Braun:]

You are saying, how much did the pricing go up?

[Jay Kumar:]

Yes.

[Michael Braun:]

Well we're seeing pricing increase go up, single digit, 2%, 3%. We're seeing people go up 10%, 15%. So there's clearly pricing pressure on the consumer in Florida. And I would say the driver without a doubt is A or B. It's inflating the cost of claims and therefore you're seeing premiums increase.

[Operator:]

Next we have a follow up question from the line of Samir Khare of Capital Returns. Your line is now open.

[Samir Khare:]

Just a quick one on upcoming reinsurance purchasing decisions. How are you guys thinking about the quota share? Should we expect that to be renewed?

[Michael Braun:]

We're evaluating our entire reinsurance program in terms of excessive loss, in terms of the quarter share as well. So no decision has been made yet. That quarter share does renew on July 1 and we're evaluating it at this time.

[Operator:]

Thank you. And I'm showing no further questions in queue at this time. I would like to turn the conference back over to Mr. Michael Braun for closing remarks.

[Michael Braun:]

Yes. In conclusion, I want to thank our team across the organization for their hard work to provide excellent products and services to our policyholders in their time of need and to our partner agents and policyholders for the trust they place in us. I'm proud of our people and I'm excited about the opportunities ahead for the company in 2018. Thanks to each of you for your time this morning and your interest in Federated National. Feel free to reach out to Ron, Eric or myself with any follow up questions that you may have. Thank you.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This concludes today’s program. You may now disconnect. Everyone have a great day.