Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Federated National Holding Company (NASDAQ:FNHC)

Joint Venture Conference Call

July 21, 2014 4:00 PM ET

Executives

Michael Braun - President and CEO

Peter Prygelski - CFO and Treasurer

Analysts

Arash Soleimani - KBW

Ryan Byrnes - Janney Capital

Doug Ruth - Lenox Financial

Samir Khare - Capital Returns Management

Tom Harman - BestWeek Insurance

Operator

Good day, ladies and gentlemen and welcome to the Federated National Holding Company Discusses Joint Venture Conference Call. At this time, all participant lines are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference is being recorded.

Statements in this conference call that are not historical facts are forward-looking statements. Without limiting the generality of the foregoing words such as anticipate, belief, 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 or the negative thereof or other variations thereon and similar words or phrases or comparable terminology 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 forecast in 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 today and other filings made by the Company with the SEC from time-to-time.

Forward-looking statements made during this presentation speak only as of the date on which they are made 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.

I would now like to introduce the host for today’s conference Mr. Michael Braun, President and CEO of Federated National. Sir, you may begin.

Michael Braun

Good afternoon. Federated National Holding Company is pleased to have announced earlier today, a joint venture to form a new Florida-based Property & Casualty Insurance carrier to be named Monarch National Insurance Company. The Company’s co-ventures are C.A. Bancorp, a publicly traded Canadian merchant bank and Transatlantic Reinsurance Company. The organization of Monarch is subject to the receipt of regulatory approvals and other customary conditions.

Monarch National will seek to ensure single-family homes and condominium units in the standard market within Florida, that don’t normally fit within Federated National’s preferred book of business. This is a great opportunity for us to provide our partner agents with an additional market in Florida’s $10 billion personal property marketplace. This will also enhance our distribution effectiveness and further enable us to control our overhead costs with increased economies of scale.

This is a great opportunity for us to partner with two quality organizations that are interested in the Florida homeowner’s insurance market and believe in Federated National’s platform to capitalize on that opportunity. Additional property capacity is capital intensive and has been long sought after in the Florida marketplace. We are proud that we will have both a significant ownership stake in Monarch National and also provide managing general agent and claims administration services to the new venture.

I’m joined on the call by Pete Prygelski, our Chief Financial Officer, and we’re glad to open it up to your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Arash Soleimani with KBW. Your line is now open.

Arash Soleimani - KBW

Thank you. Just a few quick questions, will this be accounted for into the equity method?

Peter Prygelski

Yes. It’s going to be consolidated, Arash.

Arash Soleimani - KBW

Okay.

Peter Prygelski

They’re on 42% of it, but Mike and I are the two named officers of the newly formed company and we are also going to be on the subsidiaries, the insurance company which is a subsidiary of the LLC will be on that ward also. So we will be directing operations as well as having a 42% ownership. So it is a fully consolidated within FNHC.

Arash Soleimani - KBW

Okay, so we consolidate it and then they will just be a minority interest line that backs out the other…

Peter Prygelski

58% correct.

Arash Soleimani - KBW

58% okay.

Peter Prygelski

Yes exactly.

Arash Soleimani - KBW

Okay, perfect. Okay so -- and what type of premium volumes should we expect to see coming out of this when it launches?

Michael Braun

Well, this is Mike. We will be writing voluntary business, we hope to go live January 1st. We’re not going to give you specific targets that we’re looking for, but we think we can penetrate the market fairly quick. Federated National obviously has been in the market for a long period of time and I think we’ve been doing very well. One of the challenges that we have is that our underwriting is tough and not a lot of risk that we look at qualifies. So therefore we’re turning business away. So we think this is a great opportunity for us to provide more capacity to the agents and the agents’ number one statement to us seems to be that they’re looking for us to afford them more coverage, more capacity. So we kind of think this is a win-win for all involved.

Arash Soleimani - KBW

And when you say that it didn’t meet the typical standards of Federated National, what is it about those policies that wouldn’t have allowed Federated to write them directly?

Michael Braun

Well I would say that we’ve really evolved into a writing business that what I would call is preferred. This is a business that models very well from both a Cat and ALP perspective. ALP is all of apparels that is typical homeowner type losses. So we’ve done very well with that book. The problem is and the analogy I would use is that it is like we have a net out there to capture that business but what makes that program so successful can inhibit our growth in the future. So rather than moving the net, trying to make the net bigger what we’re doing is we will have another net out there in the marketplace, there is a lot of good quality business out there that we’re not able to capture. And this really neither of these two carriers whether its Federated National not Monarch too I believe will be competing with the Citizens type business, the business that Citizens attract in the state. This is a business that we’re going to be writing in an organic manner through our voluntary agents.

Arash Soleimani - KBW

And did you say it was preferred business?

Michael Braun

Well that’s a classification that I would put on our existing business that it is a preferred type business. It is a type of business that like I said it models very well the ALP losses, I think we’re doing a very good job with that. With that it’s made our rates very attractive and we can’t orates all the business that we’re looking at because really the rate can be not sufficient to cover a lot of other risks that we’re looking at. So what we need is more flexibility and that’s the idea of a second program out there is you have the ability to be able to write more business out there.

Arash Soleimani - KBW

Thanks. And then lastly did you consider consolidating this into your financials as you expect it I guess materially sort of change the net loss and expense ratios that Federated would have otherwise had on its own?

Michael Braun

No, if anything we will gain from economies of scale, but marginally, so not to the negative and possibly to the positive.

Arash Soleimani - KBW

So, on the expense ratio side you think it could be on the positive then?

Michael Braun

Yes.

Operator

Thank you. Our next question comes from the line of Ryan Byrnes with Janney Capital. Your line is open.

Ryan Byrnes - Janney Capital

Great, thanks guys. First question is how does this effect Federated’s statutory capital? With the $14 million you guys are putting into Monarch. Does that -- how does that come out of the Federated capital there? I just want to see how that played out.

Michael Braun

No the investment we’re making in Monarch will come from the holding company and not from FNIC, so until no impact on Federated National insurance company surplus.

Ryan Byrnes - Janney Capital

Got you. And then the MGA Agreement that Federated’s going have with Monarch. You said it is 4% of premiums. Is it net premiums on Monarch or is it gross premiums just trying to parse that out a little bit?

Michael Braun

It’s 4% of gross premiums written and 3.6% of earned premium.

Peter Prygelski

Hey Ryan it’s the exact same thing that we have for Federated National Insurance Company.

Ryan Byrnes - Janney Capital

Okay. And then for your underwriters that are not Federated will they now be underwriting for both books and I guess the question is your underwriters have to wear two separate hats and how will they decide if there is a border line risk between a Federated preferred and a standard line Monarch. How to they decide where to put that risk, into which portfolio?

Michael Braun

The agent decides where to put the policy. So in other words we will be underwriting business from Federated National alongside Monarch National, but both be written and the agents will get two quotes and they’ll make the decision where to place the business.

Ryan Byrnes - Janney Capital

Got you, great thanks that is all I had guys.

Michael Braun

Thanks, Ryan.

Operator

Thank you. Our next question comes from the line of Douglas Ruth with Lenox Financial. Your line is open.

Doug Ruth - Lenox Financial

Hi. Good afternoon.

Michael Braun

Good afternoon, Doug.

Doug Ruth - Lenox Financial

Could you give us a little additional color where exactly the idea came from to create the company?

Michael Braun

Sure there is a couple of things Doug that, as you know we’ve been committed to the voluntary business for a long time. And we really invest heavily in our partnership with our agents. And we think we really do an excellent job with that. One of the challenges is that the agents continuously reach out and say the service is great, underwriting is great, the claims, the handling is great the challenge is why won’t you guys take more business and really that’s the one part, the other part of it is, is that we know that a lot of people are looking to get into the Florida marketplace but the question becomes how do you get into the Florida marketplace, because I think it’s a challenging marketplace and you really have to be partnered with people that understand the market.

So really those two needs matched as we have been talking to our partners which is CAB and TransRe over the last six months plus and we really think we came up with something that’s really going to benefit everyone it’s going to benefit the policyholders of Federated National because we’ll be able to continue to go ahead and continue to write that business, also they are soon to be policyholders of Monarch National and we think we’re going to do a good job with our shareholders as well because we can do so profitably and I think it will also benefit CAB and TransRe as well because I think it’s going to be a successful enterprise.

Doug Ruth - Lenox Financial

Okay. And how exactly did you choose the partners that you have chosen?

Michael Braun

Well, there is a lot of people out in the marketplace that have ideas of getting into the Florida to sort that out take some time, but we are always talking to different people that may have interest in Florida and we think we found the best part was out there.

Doug Ruth - Lenox Financial

Okay. Will this be dilutive to the current shareholders at all?

Peter Prygelski

Doug I think that to answer that question we’re going to share in as Ryan, the last caller mentioned our MGA agreement provides for us to make 7.6% of some points of incentive premiums we also get the $25 policy fee and we share in 42% of the profit or loss of the new carrier Mike and I both believe that that carrier is going to be successful just like FNIC is, so I only see it being accretive based on what we’re looking at today that it’s going to be accretive both from the fees we’re going to get as well as the profit we’re going to share in.

Michael Braun

And Doug to add to that given the Federated National we have another quarter where we wrote a lot of business we’ll be releasing the earnings soon and basically we wrote another $50 million of new business in the second quarter. We think we’re on a trajectory that is consistent that we might write in excess of 300 million maybe 350 million or more in 2014. This investment with Monarch is investment in the future of our companies and what I mean by that is, is that Federated National can’t continue on that trajectory forever it’s a big market it’s about $10 billion marketplace and Federated National at some point will slowdown I don’t if it’s going to be at the 500 million mark or maybe you fit to 750 million mark. But those ratios in forms are very competitive and we can only account for so much in the marketplace. So I believe that Monarch is going to be complementary to us in that regard that we are going to be able to capture good quality business that we were not able to capture before this. So I think it’s great for all parties involved including our shareholders.

Doug Ruth - Lenox Financial

Is there any way to give us any idea of what you’re thinking you might do with revenue for the first year or?

Michael Braun

I would put it this way that as I said in the past we quote over 200,000 policies in the first quarter and we’re only binding about 12% of that, there is clearly no shortage of business that we are looking at and I believe that the rates, rules and forms that we’re working on and will be presented to the Florida Office of Insurance Regulation is business that we will be able to capture. So I believe that we’ll be able to capture a lot more of that business that we’re currently not getting. I can’t specifically tell you if it’s going to be -- that we are going to get another 2% or another 10% or another 12% but it’s in that range where we think that we can write a quantity of business out of the gate that this is worth the investment of our time, our resources and partner’s resources, we get to look at a lot of business and we know what the market needs and wants and we think not only are we answering Federated National we think we can answer that with our new product which will be Monarch National and we’re hoping go live with that around January 1st.

Doug Ruth - Lenox Financial

Okay. And then I will just ask one final question, when you just as you talk about preferred and standard, could you give us a general idea of what the difference in premium might be between the two markets?

Michael Braun

Well that’s more of a statement that I’m using in adjective that I am using but clearly I would say that Federated National’s rates are very attractive and part of challenges is that the rates are so competitive that we can’t always take the risk. So what I mean by that is the average policy for Federated National is in the $1,800 to $2,000 range and there is a lot of variables there, but I would say for Monarch National I would expect that to be in the range of 10% to 20% higher. So having additional rate on those policies will enable us to take risk that would not normally be profitable in Federated National’s book, so it really opens us up to a much bigger world.

Doug Ruth - Lenox Financial

Okay. Well, thank you for answering my questions. It sounds like a wonderful opportunity.

Michael Braun

We’re really excited about it. Thank you, Doug.

Operator

(Operator Instructions) Our next question comes from the line of Samir Khare with Capital Returns Management. Your line is open.

Samir Khare - Capital Returns Management

Hi, good afternoon guys. Congratulations on the strategy.

Michael Braun

Thank you.

Samir Khare - Capital Returns Management

I just had a few high level questions, first in conversations you’ve had with C.A. Bancorp. Do you know what their angle is, is it to access a non-correlated asset class or is it the fees on AUM or both?

Michael Braun

Well, I think they’re pretty sharp organization and they’ve seen a great opportunity in Florida in the property market. And I think that they see an opportunity to partner up with a carrier that does a darn good job servicing business and as a successful platform. And I think we can have a real successful win-win with them. So they see that. It’s an opportunity for them to make money and to invest in the long run to make that happen. Our horizon is long, their horizon is long, as well as Transatlantic Re their horizon is long. It’s a considerable investment.

Samir Khare - Capital Returns Management

Okay. And is this Bancorp’s capital or is it capital they are managing for others?

Michael Braun

It’s a combination of us -- our investing of the 14 million CAB meaning that capital that they have accessible as well as Transatlantic.

Samir Khare - Capital Returns Management

Right, right but CAB’s capital that they have accessible is that their own or is it just sort of…?

Michael Braun

It maybe a combination I can’t say with certainty Samir, but I believe it’s primarily CAB’s but I can’t say with certainty.

Samir Khare - Capital Returns Management

Okay. And just looking at the minimum size of equity size for this new Monarch National sub, what is the minimum size of that, either Demotech or the OIR I was looking for?

Michael Braun

Basically the OIR requires new carriers to have 50 million of statutory surplus. Demotech requires a minimum of 25 of statutory surplus to start a carrier. So clearly we’re starting above the minimum of both of those. But as this program develops and if it takes off as we want it to, there is obviously opportunities and capital that we could use to grow the business even further.

Samir Khare - Capital Returns Management

Okay. And then just a couple of questions from the Right of First Refusal does this give Transatlantic preferential treatment on just the Monarch program or on Federated as well?

Michael Braun

No, it’s -- they only have the Right of First Refusal on Monarch National Insurance Company. Transatlantic is on Federated National’s catastrophe program but they like all of our other partners we have 46 partners on our reinsurance program. Everyone is the same that we have out there and to clarify on Transatlantic up to 15% of the program Transatlantic can have Right of First Refusal at markets’ terms. So, any reinsurance that the Board of Monarch National is interested in would be put out to market and we would get competitive rates. And based on equity valuing rate Transatlantic has the opportunity to participate in the reinsurance program.

Samir Khare - Capital Returns Management

Okay. And the brokerage revenues from placing Monarch’s program, does FNHC are they eligible for some of that?

Michael Braun

Well, I think currently we do have an in-house brokerage which is Century Risk and then we also use the services of Aon Benfield. So, we would have a Cats hour that would be separate from Federated National Insurance Company’s Cat program. But at some point as it gets bigger, there may be some opportunities where we can create a more economies on that. But really coming out of the gate are two separate legal entities. So they’re going to be a separate catastrophe programs.

Samir Khare - Capital Returns Management

Okay. And then just one more on the Right of First Refusal, I saw there is some language around the potential quota share structure. If this is the avenue you go down is this -- would that be a one, one, or six, one?

Michael Braun

There is no intention to do a quota share as we sit here today. Basically there is sufficient capital to come out of the gate to write business in a voluntary manner. We will always look at all of our options to protect our policyholders and to create value for our shareholders. And being in Florida you can be certain that that would include excessive loss. And quota share is another avenue that can be utilized to protect shareholders and so protect our policyholders as well as shareholders. So, there is no specific plans for that today but we’ll always consider it based on the conditions in the marketplace.

Samir Khare - Capital Returns Management

Okay, thanks I will re-queue I will let someone else have a chance for now.

Michael Braun

Thank you.

Operator

Thank you. Our next question comes from Arash Soleimani with KBW. Your line is open.

Arash Soleimani - KBW

Hi. Just a couple of follow-ups, will the County distribution for this book be similar to your existing book or will it further sort of diversify you guys within Florida?

Michael Braun

Well, I don’t want to say that it would be, there is no intention to make it necessary that different. And to clarify Federated National is in all 67 of the Counties within Florida. Now clearly, we have concentration in Counties where there is a lot of people where they live obviously the Brower, the Palm Beaches, Pinole, Silver and so on. And some of these smaller inland counties specifically up in the Panhandle there is not a lot opportunity to write business. So it’s not that this is a geographic play in the sense that we’re trying to penetrate certain parts of the state that we’re not able to penetrate. Now that’s not the case. So, to your point, I think it will be very similar as it's allocated across the state. But once you get it, it’s different types of risks; whether it is square footage, number of stories, construction type, things like that; that we think there is a lot of quality business in the marketplace that we’re not able to capture right now. And once again to reiterate, the $10 billion plus market, and Federated National has had around 2.5%. So there’s a huge opportunity for Federated National to continue growing and there's a huge opportunity to grow Monarch National into a profitable quality book of business.

Arash Soleimani - KBW

Okay, perfect. And will you need to hire a few more people for claims and what not for the services business or?

Peter Prygelski

Sure, and I can tell you right now, we are up to 209 people, approximately. That’s the last number I have. We continue to grow. We clearly need additional underwriters and adjusters. But the infrastructure is here. The economies of scale should be realized as we continue to grow not only Federated National, but Monarch National such as IT, accounting, audit, human resources, things like that. Even the executive management team are building and so on. So, yes, there will be additional resources, primarily on the side of -- in the capacity of underwriters and adjusters.

Arash Soleimani - KBW

Okay. And I think you guys mentioned that there was a shelf registration out there. So is that planned to replenish the capital that this is using up the kind of fuel further growth within Federated National, FNIC or.

Peter Prygelski

Yes. We’re not going to discuss the shelf out there today. But Federated National Holding Company has committed to put $14 million into Monarch National and that will come out of the holding company as we have that capital today.

Arash Soleimani - KBW

Okay, perfect. And lastly, this is sort of unrelated, but you put an 8-K out with revised accounting on your reinsurance program. Is that -- could it just mean that if you have losses during the year, that your seeded premiums will increase?

Peter Prygelski

Well, basically Arash, we usually, only buy excess of loss to cover our catastrophic exposure. However, reinsurance is abundant and we not only utilize excess of loss, we saw an opportunity where we could capture some savings by adding a quota share. Now with quota share, that really starts a lot of accounting treatment. So as an abundance of caution we want to make sure that we put everything out there. But clearly as the book performs better, there will be more profit to be retained by Federated National Insurance Company and ultimately Federated National Holding Company. So it’s just an additional source of capital that we deployed in our program via quota share to protect our shareholders and policy holders.

Operator

Our next question comes from Tom Harman with BestWeek Insurance. Your line is open.

Tom Harman - BestWeek Insurance

Just from sort of a macro point of view, I wondered if you might be able to elaborate on whether or not there were certain market conditions that allowed you to do this now as opposed to, say, two or three years ago or four years ago, within the Florida marketplace. Are there conditions that are aiding this decision right now that you can point to?

Peter Prygelski

While, obviously the market changes from year-to-year and really quarter-to-quarter within Florida and as well as within the economy. But I would say that the Florida marketplace for the P&C industry, the home owner writers is pretty competitive right now. And I believe there is about 50 carriers that have a Demotech rating that are licensed to write business in Florida. We’re only 2.5% of the market. We think that we’re doing a very good job executing our business plan and working with our agents and buying reinsurance. So we think there’s a great opportunity as we continue to service our insurance to do it on a bigger scale and we’ve got two great partners that are interested in the same objectives, and really it’s a match made that’s really going to create value for everyone, including our soon to be policy holders within Monarch.

Tom Harman - BestWeek Insurance

Would you attribute it to improved cost of reinsurance, certain take outs? There is more room in there, right?

Peter Prygelski

Well, I would agree with you that reinsurance has come down in pricing over the last few years, in part, because of an abundance of cash based on policies at the Fed. And I would also say that that clearly comes into it. Citizens was on a glide path for approximately, I'm going to say six or seven years now where they were raising rates up to 10%. They were a competitor with prices lower than ours five years ago. And that’s really not the case right now. So the marketplace is very favorable for good competition right now and we think that we could do a very good job in this competitive environment.

Tom Harman - BestWeek Insurance

And did I hear you correctly that -- maybe I got the numbers wrong, but did I hear you correctly talk about perhaps writing $300 million to $350 million more in 2015, right?

Peter Prygelski

No, no, I am not saying more. I'm saying that currently in the first quarter we had announced our results and we had grown by around $47 million; and that being said, if we continue on that trend, Federated National in 2014, could write $300 million, maybe $350 million. There’s a lot of business that we're currently writing and that trajectory can take us out past 2014. Our investment with Monarch is we believe that there's a great opportunity for the years to come. Clearly this is not going to impact us in 2014. This is for us, for the future, for our partners for the future, and we believe we can create a lot of value for future policy holders. But we don’t anticipate writing until January 1.

Tom Harman - BestWeek Insurance

And just for my own education here, when you talk about the market that you are currently in, can you differentiate between the two as it currently stands; the one that you getting into is Monarch and the one that you are currently in?

Peter Prygelski

Well, basically what we find is that this is Florida, which is obviously impacted by wind. And one of the things the state has done is incur its mitigation features that can really impact or reduce the damage to homes in the event of a storm. So new homes have a lot of features that really mitigate future damage, and also things that we think have worked very well. Now Florida has a lot of homes that are older, that don’t have these features and so on and there is a different rating structure for that. So it’s a combination of things. I’m not going to say specifically that newer homes would work in one, but not the other, but it’s a combination of characteristics that we have identified not only in what models for the reinsurance that we purchase but also characteristics that we noticed in our ALP, historical losses. And we've paid out over $700 million in losses over the last 10 years. So we think we've got a pretty good dataset to build a new program from.

Tom Harman - BestWeek Insurance

Was is something statutorily that was preventing you from doing what you want to do now?

Peter Prygelski

Yes, basically, an insurance company and a holding company really can’t have multiple programs unless there are different. Meaning, so let’s say you have one that just writes mobile homes let’s say, or another that just writes single family homes or so on. So really this is a combination. This is a different capital base that affords us the opportunity to go ahead and write similar type of business, but in a different carrier.

Operator

Our next question comes from Samir Khare with Capital Returns Management. Your line is open.

Samir Khare - Capital Returns Management

Just a quick question. When do you think this will be capitalized by, or is it already capitalized?

Peter Prygelski

Clearly we’re intending to go live, January 1. So we’ll have to be capitalized before January 1. It depends on a number of variables, including the approval process as we go through the state, the application and so on.

Samir Khare - Capital Returns Management

Okay, and do you guys have the cash on hand to capitalize it right now if you wanted to? And so how much would you guys have after capitalizing it at logical [ph] level?

Peter Prygelski

We’re not going to talk about specifically the capital that we have on hand other than to say that we have the $14 million to go ahead and start Monarch National, whether it would be tomorrow or within six months. Whatever that may be, we’ve got the capital on hand.

Samir Khare - Capital Returns Management

Okay. And just kind of thinking ahead a little bit; does this make sense potentially in the future to open up even more stubs and have other parties use you as a -- use your infrastructure in a similar fashion?

Peter Prygelski

Samir, I think we do a really good job in what we do. We're operators here that are very -- that know the Florida marketplace well, and we’re always looking to create value for our shareholders. We like to give our agents business and we’re receptive to whatever we can do to make that happen. So this is our current plan, which is Federated National and deploying Monarch National which is great. But as other opportunities present themselves in the future, we’ll be glad to look at it.

Samir Khare - Capital Returns Management

Okay. And actually one last question, just wanted to circle back to a question asked earlier about the potential for reinsurance brokerage revenues? You mentioned that you guys do have an internal broker but I just wanted to make sure, so that does entitle you to reinsurance brokerage?

Peter Prygelski

I can say that we do have brokerage in-house, but our intension with Monarch is to utilize an independent broker to help us get rates at market terms, to clearly identify market terms.

Operator

Our next question comes from Luke Bodine [ph] with Raymond James. Your line is open.

Unidentified Analyst

I would like to get rather a little bit better of a sense of the composition of the two different books between Monarch and Federated National. Maybe you could talk a little bit more about, maybe just the segmentation between those two books of business?

Peter Prygelski

Basically, I can say that our rates are very competitive in Federated National and we’re not able to take as much business, bind this much business as we would like to. So in other words the rates rose in forms work for our current book and we’re looking to expand that. So I don’t want to tell you that we’re trying to go and start doing de-pops. That’s not what we are looking to do. It’s other quality homes that to the untrained eye may look rather similar, but based on our modelling of those risks and really the two main drivers, as reinsurance cost as it relates to construction and other characteristics of a house, as well as those same characteristics, how they drive ALP losses. Our ALP [indiscernible]. Those are your typical insurance losses on homes. So it’s more a complementary book.

Unidentified Analyst

And then just in terms of policy limits, those can be roughly about the same as your current book or…

Peter Prygelski

Basically I can tell you that at Federated National we've got some high limits on our policies. I believe we go as high as $4 million on some of these policies. Now we have treaties above 500,000 to minimize the losses that we could have, non-related to wind. And obviously our wind program is very robust as well. So it would be similar but probably in a narrow order band for some period of time, whether it’s the first year or two. As we have more comfort and experience in the book, we'll be able to do more things with it.

Operator

Showing no further questions at this time. I'd like to turn the call back to Michael Braun for further remarks.

Michael Braun

Well, Pete and I really appreciate everyone's time by either asking a questions or listening in. We're always available. Our contact information is out there. And we are very excited about the opportunity, not only with Federated National but with our new partners on Monarch National. So enjoy your afternoon and if anyone has any questions, give us a call.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone have a great day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Federated National Holding's (FNHC) CEO Michael Braun on Joint Venture Conference Call (Transcript)
This Transcript
All Transcripts