Federated National Holding's (FNHC) CEO Michael Braun on Q2 2016 Results - Earnings Call Transcript

| About: Federated National (FNHC)

Federated National Holding Co. (NASDAQ:FNHC)

Q2 2016 Results Earnings Conference Call

August 03, 2016, 09:00 AM ET

Executives

Michael Braun - President & CEO

Erick Fernandez - Interim CFO

Analysts

Christopher Campbell - Keefe, Bruyette & Woods

Ryan Byrnes - Janney Capital Markets

Douglas Ruth - Lenox Financial Services

Ron Bobman - Capital Returns Management

Samir Khare - Capital Returns Management

Operator

Good morning and welcome to Federated National Holding Company's Second Quarter 2016 Financial Results Conference Call. My name is Chelsea and I will be your operator today. Please note that today's call is being recorded. At this time all participants are in a listen-only mode. Later we will conduct the question-and-answer session. [Operator Instructions]

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, 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, or the negatives 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 forecasted 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 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 the date on which they are made and Federated National Holding Company specifically disclaims any obligation to update or revise any forward-looking statement 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 and thank you for joining us today to discuss Federated National Holding Company's second quarter 2016 financial results. I am joined on the call by Erick Fernandez, our interim Chief Financial Officer. Our financial results can be found in our earnings press release. I will go over some brief highlights and then we will open up the lines for questions.

Q2 2016 highlights as measured against the same three-month period last year, except where noted. 29.7% increase in gross written premium to $171.2 million. 24.9% increase in Florida homeowner policies to approximately 266,000. 27.7% increase in total revenue to $75.1 million.

Net income of approximately $1 million. $2.5 million of claims from weather-related events throughout the state of Florida, $11 million in additional reserves for prior-year losses, which brings the total loss reserves to approximately $120 million as of June 30, 2016.

6.1% increase in book value per share, including non-controlling interest, to $19.28 as compared with $18.17 at December 31, 2015. Federated National Insurance Company homeowners Florida rate increase of 5.6% on statewide average became effective August 1, 2016. Monarch National Insurance Company homeowners Florida rate decrease of 11.9% on statewide average became effective April 15, 2016.

Our second-quarter results were impacted by our decision to strengthen our reserves in Florida homeowner’s line of business. The second quarter also included $2.5 million in claims as a result of weather events, including Tropical Storm Colin, which impacted northern Florida in June.

Our partner agents placed $31.9 million in new Florida homeowners premium, $5.1 million in new non-homeowners -- sorry, non-Florida homeowners premium, and $30.4 million in premium in other lines of business, with our renewal business, totals $171.2 million in gross written premiums.

We continue to provide best-in-class service, which is evident in our continued growth in policies and premium. Federated National homeowners rates in Florida increased by an average of 5.6% effective August 1 which - with our 4.2% rate online decrease in catastrophic reinsurance costs effective July 1, should gradually start improving the margins on policies that are both new and renewing. Furthermore, Monarch's rate decrease of 11.9% became effective on April 15, which made the product more competitive in the market and immediately resulted in an increase in premiums written as the quarter progressed. Monarch's gross written premiums are accelerating and should be a source of growth during the second half of 2016 through 2017 and beyond.

With that, we are glad to open up the call to your questions.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Christopher Campbell with Keefe, Bruyette & Woods. Your line is now open.

Christopher Campbell

Hi, good morning.

Michael Braun

Good morning.

Christopher Campbell

Just a few questions. How long is the lack of underwriting analytics going to continue to impact the loss ratio?

Michael Braun

Your question on the analytics, to make sure everyone is up-to-date, so from a period of June last year, 2015, through December when we had no analytics in place, we wrote more policies than we normally would have. Therefore we were using our -- a manual underwriting.

That's really not the main driver here for 2015. Clearly we saw a spike in claims in 2015 during Q3, Q4, but those policies written during that period of time are just a small component of it. The bigger issue is what we experienced primarily in Q3, Q4 was a spike in claims, primarily associated with the assignment of benefits. And that's really impacted Q3, Q4 last year.

Christopher Campbell

Okay. Moving to the assignment of benefits, given that that's been a known concern for some time, what new information did you learn this quarter that drove you to take that reserve development charge?

Michael Braun

Sure. What we do is we do a reserve analysis periodically with our business. So we took a full review during the second quarter, both with our internal actuary and our independent actuary, and what we found was basically the payments going towards assignment of benefits. We are paying it out quicker, which is a -- indicative of how we handle our claims, which is to process them and serve them and pay them out as quick as possible.

But what we also found during the quarter was we are finding that we've controlled our litigation associated with the assignment of benefits, so we are finding that a lot of these vendors that we are working with are becoming more receptive to closing out these cases quicker rather than later.

So we're getting some conflicting information. The actuaries are clearly looking at the trends, which brought on additional results, both in severity of assignment of benefits, so, in other words, claims with assignment of benefits are more expensive than those that are - do not.

However, I think the assignment of benefits issue that we've experienced a big spike in, in Q3 and Q4, in my opinion has plateaued if not has actually decreased, because the percentage of claims that we are getting with an assignment of benefits is down in Q1, Q2 versus last year Q3, Q4.

So there's a lot of moving information. But we thought it was prudent to do a full actuarial review with our independent actuary, and that resulted in a large increase in our reserves.

Christopher Campbell

Okay. And since you typically - I think for the assignment of benefits, you've been booking your current accident year loss picks at about 400 bps. Would you take this up further given the new information, or do you feel comfortable at your current loss picks?

Michael Braun

Well, in the past 2014, just off the top of my head, I believe we are around 29.5% attritional loss ratio. Which in 2015 we moved up to about 32.5%. And unfortunately now, as we look at 2015, it's about 35.5% as well as 2016, approximately. So, the question becomes - and the concern is that people ask is, does that continue to climb. I don't believe that to be the case. I can't say that with certainty.

But once again, based on the volume of claims that are coming in, we are not seeing a continued spike based on the severity of the claims. Yes, the AOB are more expensive than non-AOB, but the percentage of claims that are coming in with AOB is decreasing and we are finding that those vendors are more reasonable.

So as these - in the past, these vendors have been quick to litigate. I think they've come to find out that with litigation they are not necessarily getting more money, but that's really a benefit to the attorneys in that process. So in my opinion, I think you're getting these guys that are more reasonable.

And once again, that's why I believe the assignment of benefits with the data that we have appears to have plateaued and really is showing signs that it's actually decreasing as a percentage of total claims.

Christopher Campbell

Okay. And if I can just get one more question. Have you adopted the Citizens policy language related to AOB?

Michael Braun

Yes, we have. And for everyone's benefit, citizens had new language that came out over the summer and ours was effective approximately September 15 on new and renewal policies. What that does is it limits the amount of work that can be done on the first 72 hours of the claim. So that definitely will help. That's not a cure-all but that will definitely help.

Really, AOB, I hate to tell you, but it is a cost and ultimately it does get baked into the rate, which unfortunately impacts the consumer. In addition to that, we also have our rate increase that was driven in part by the AOB, the assignment of benefits.

Christopher Campbell

Okay, great. Thanks for all the answers and best of luck in the third quarter.

Michael Braun

Thank you.

Operator

Thank you. And our next question comes from the line of Bianca Rodriguez with Raymond James. Your line is now open.

Bianca Rodriguez

I am Bianca Rodriguez, in for Greg Peters this morning.

Michael Braun

Good morning.

Bianca Rodriguez

Good morning. I just wanted to circle back and get some more color regarding this frequency and severity of claims that are coming in. We understand that AOB does lend itself to an increase cost, but just wanted to get some more color around that.

Michael Braun

Sure. Well, the assignment of benefits typically what we were finding is in our homeowner book approximately 3% of the policies were having claims. That has spiked somewhat in primarily, like I say, the latter half of 2015.

So the frequency has increased slightly, but really it's those claims that were coming in with assignment of benefits that was approximately 20%. So 20% of those claims that were coming in with the assignment of benefits were significantly more expensive to settle.

So, once again, that impacted Q3 and Q4. In my opinion, the data that we are looking at now does not show that continuing to increase. It has plateaued and appears to have decreased. So, the assignment of benefits during the first two quarters was low teens.

That data is premature, but once again, we decided to do a full actuarial review and we thought it was prudent to go ahead and take a big bump on reserves. I am hopeful that those reserves prove redundant. Way early to say that, but I think it's appropriate to do that. And that's what we did with the second quarter.

Bianca Rodriguez

Okay, great. And then just one more question pertaining to the Monarch price decrease. In light of the actuary report, do you believe that the price decrease was still the right call?

Michael Braun

Absolutely. So to give you more on there, Monarch is a brand-new company that was launched in 2015, April of 2015, and we dipped our toe in the water with that, and the rates turned to be very high. We adjusted those rates. We did not bring them to where the market was at that point.

We have brought them to where we believe the market is going. Let me say that differently. So April of 2016, those rates came down approximately 12% and it is competitive in some parts of the state, in some parts of the business that we are writing. But I believe that competitiveness will increase.

In other words, as we at Federated National and others in the market take rate, Monarch will be more competitive. Assignment of benefits is not really impacting Monarch at this point, but obviously we monitor that.

And if assignment of benefits continues - if it grows to be a bigger problem in the industry, obviously that is going to impact that rate in Monarch as well. But, long answer short is we are comfortable with Monarch's rates where they are today.

Bianca Rodriguez

Okay. Thank you so much for your responses.

Michael Braun

Thank you.

Operator

Thank you. And our next question comes from the line of Ryan Byrnes with Janney Capital Markets. Your line is now open.

Ryan Byrnes

Great, thanks. Good morning, guys. So obviously last year you guys made an auditor change, and I just wanted to see if along that process were there changes in the actuarial systems at Federated?

Michael Braun

No. We've been - so there is two things there. Well, let me back up even more. Everything we do, we try to be best in class. We believe Florida is a great opportunity. It's a market that is dominated by what is known as Florida domestic carriers, which is about 70% of the market.

And we try to differentiate ourselves as best in class and everything we do, from the service that we provide to how we handle claims and including - we have some big, national carriers that we work with. And with that, we brought our game to the next level by having our auditors and our reserves done by big four accounting firms.

Our auditor is E&Y and they - this has nothing, E&Y has nothing to do with what occurred with us taking these reserves. Obviously they are aware of it. They understand what we are doing and they've seen the reports that we've had during Q2, but that's not driving it, and our reserves that we use, our opining actuary is KPMG. And once again, we have an in-house actuary in KPMG, and we look at the data and we make the best decision available at this time.

Clearly, we could have waited until year-end to use our opining actuary, but we've been extremely sensitive to the assignment of benefits, and we've been watching our data and understanding business as it's coming in and the claims. We were very quick to react in that part and hence the big change in Q2.

Ryan Byrnes

Okay. And then quickly, just to break out the Monarch piece, just trying to - what were the premiums written there? I am just trying to figure out where the growth is coming from?

Michael Braun

So, Federated National is -- has been doing about $3 million a week. I think that is going to slow down to about $2.5 million a week in Q3. Monarch, which was doing approximately $75,000 a week in premium, is now up to $375,000 to $400,000 per week in premium. It is gaining better traction in the market, and I think as people understand the quality product that it is and the quality service that we provide with it, I think you're going to see continued growth with Monarch.

And, once again, I believe the competitors that we are seeing take rate will also make Monarch more attractive. So, that's where the premium is coming from. And then we also do write some GNS for a Lloyd's syndicate, which is approximately $100,000 per week.

Ryan Byrnes

Okay. And then sorry, my last one and I will get back in queue. The other income line was very strong again this quarter, and the Q is not out yet, but I'm assuming a lot of that growth is coming from the auto program.

Any color on how - again, that's becoming a more meaningful part of your earnings stream. Just want to get some maybe, again, it's a program for - you're partnered with other people. But what are the underlying results for the business? I just want to see how to expect that going forward.

Michael Braun

Ryan, Erick will give you a little more detail, but I'm going to give you the overview. Which is the auto program is impacting the income statement by showing a lot of fees, but they are also elevating some of the expenses.

So there is some movement of numbers in a geographic way because of the auto program. And we are going to try to explain that better, not only in this Q, as we file, but any subsequent -- in each quarter hereafter. But Erick may be able to provide a little more color.

Erick Fernandez

Ryan, its Erick. So in addition, you mentioned other income, but really there's two pieces that's grown that balance. One is policy fees, and that is directly related to ultimately gross written premium.

As that has continue to grow, that line should continue to grow. And then the other piece, as you mentioned, the auto growth that we've seen from last year, Q2 to this year Q2, and that significant growth. And that's all in commission income.

And just to give you the numbers, again, we will have it in the 10-Q, but just so you have them now: policy fees came in at $4.9 million for the quarter; commission income at $5.7 million; brokerage revenue, $1.6 million; and then finance, $551,000.

Michael Braun

So Ryan, there's a lot of math there. But what we are trying to explain is it's a heavy ceded program with some partner GAs that we are working with. So once again, there's a lot of fees that are - when you look at just the fees, looks very attractive, and then if you just look at the expenses, that looks very unattractive.

So, we believe we are making money net of all the fees and all the expenses, but yet it's still a young program. I don't think it - that's just becoming more meaningful in terms of gross written premium. I don't think it's going to be a meaningful contributor or a material contributor to earnings, so I would temper expectations on that.

Ryan Byrnes

Sure. I guess the only thing I would mention is maybe break out those expenses so we can - because again, it seems like it's generating a lot of earnings, but if you break out the expense between the segments, it would be helpful for us.

Michael Braun

Understood.

Operator

Thank you. [Operator Instructions] And our next question comes from the line of Douglas Ruth with Lenox Financial Services. Your line is now open.

Douglas Ruth

Good morning.

Michael Braun

Morning, Doug.

Douglas Ruth

Mike, could you comment? Is there any update as far as what's happening with the Geico relationship?

Michael Braun

Yes, the Geico relationship is -- they are a great partner. The premium is approximately $200,000 a week for Federated National. We are trying to go ahead and get Monarch in there, but that's not there yet. But we are at about $200,000 a week of premium, roughly, and we are hopeful that that's going to continue to grow.

Douglas Ruth

Was there any indication that it was getting - increasing throughout the quarter?

Michael Braun

Well, clearly after the April 15 rate -- I'm sorry. That's Monarch [with] April 15. But with Federated National with Geico, we just launched that in Q2, so it's fairly new. You see the advertising with Geico quite a bit, not only for their auto, but for their homeowner products.

But yes, I would say it has been plateaued for the last month or so at approximately $200,000 a week at this time. They sell primarily through their call center and the website, but they also have about 15 retail branches in the state, and it's available there as well. I anticipate a climbing, but that we've plateaued for the last month there.

Douglas Ruth

Okay. How is the relationship with Allstate at this point?

Michael Braun

Allstate is a great partner. We have a significant amount of our business has been generated from our partner agents at Allstate and the (technical difficulty) vantage team over there. So I think it's a very healthy relationship and I think it continues to go well. They are a big part of our company.

Douglas Ruth

Now, will Allstate be selling the Monarch product at some point?

Michael Braun

That is our intention. That is our desire, absolutely. It has not yet been approved for Allstate distribution, but I think there is a lot of quality product, quality rates. What we've tried to do is design Monarch to accompany Federated National.

So we are certain things work in certain areas, certain types of risk. It's a good product to sell alongside of it, but we have not yet been authorized to sell Monarch through Allstate. Hopeful that happens soon, but I don't have any update on that.

Douglas Ruth

Okay. And what is the company's market share and how much insurance do you have in place in Florida?

Michael Braun

We are at approximately, a little over -- about 5% of the market, the Florida property market. So we are at about $550 million of in-force premiums in Florida. We are continuing to grow. Once again, I would say that we are a - we're destinations for the agents.

And let me say what that means; is the insured looks at homeowners insurance as a commodity. No one in the state of Florida has brand recognition like you would see the national auto writers, or even national homeowner writers. So from the homeowner perspective, it's really a commodity.

But the agents, they are looking to place that business. This is their business. This is their livelihood. This is what they do to support themselves, their families. They are very critical in terms of where they want to place that policy. They want to place it somewhere where they can get quality service and where claims are handled quickly and fairly.

And I am very proud to say that we excel at that, and therefore I think our numbers represent as well, both that voluntary independent agents place business with us, as -- also, in addition to that, we are with two nationally recognized carriers that are very selective on who they choose. So I think our service speaks volumes.

Our staff latest count is 347 people. I think we have a unique culture in Florida. And once again, if you look at the growth and we've achieved over the last five years, it has been incredible, and that's only been through organic business. Yet we've been careful. So yet again, we talk about analytics and trying to ensure that we are writing quality, sustainable business. The business plan remains the same even though it's a disappointing quarter.

The business plan remains the same and I think the higher costs that were incurred, primarily - this was an increase in reserve, so those unfortunately do get passed into the policyholder. And I think our policy, our product is extremely competitive in the marketplace. So I see good things coming our way.

Douglas Ruth

Okay. Shifting gears a little bit, could you talk a little bit about some of the other states and where the growth is coming?

Michael Braun

Yes. So, we are -- our non-Florida homeowner states include Louisiana, Alabama, South Carolina, and most of that business is coming from Louisiana, and then second is South Carolina. And Alabama has - is a bit small because it's really South, towards Mobile.

We have an application pending in Texas and New York and anticipate coming online hopefully in Q4 with Texas, but let's just say Q1, and hopefully with New York, Long Island Q1 as well. That is the plan.

We have a great partner, a general agent that distributes our product outside of Florida. So they already have a distribution. They've got a pipeline of significant business that they need additional capacity for. So they are anxiously waiting on us, as we are anxiously waiting on approval from the regulators, that we can get those products out there.

Douglas Ruth

Okay. I've got two more questions. Any changes to the investment portfolio?

Erick Fernandez

Doug, its Erick. No real changes; from a Federated National investment portfolio, we are at $451 million as of June 30. We continue to push munis, and that's up about 31%. I think if you remember a couple quarters ago, we are at 25%, 26% of the overall balance. So no real changes. Again, heavy fixed income and we are starting to dial down equity, given market conditions.

Douglas Ruth

What's the equity component of - what percent of the portfolio?

Erick Fernandez

It's about 9%. Again, including cash.

Douglas Ruth

I want to give you folks credit. The assignment of benefits thing, I understand it. It was pretty ugly, and I gave you credit for being candid to the investment community and getting your arms wrapped around it.

And I think that what you've done is the right thing. It was surprising, but I feel that what you are telling us is the truth, and the way it really is. So, thank you for answering my questions and we are looking forward to the next report.

Michael Braun

Thank you, Doug. Have a good day.

Douglas Ruth

Appreciate it.

Operator

Thank you. And our next question comes from the line of Ron Bobman with Capital Returns Management. Your line is now open.

Ron Bobman

Hi. Thanks. I had a question about the rate increase for the FedNat. And I guess it's going to incept here soon, or just incepted. I think you said August 1.

Michael Braun

Yes, correct; August 1.

Ron Bobman

And you mentioned the percentage -- the size of the rate increase. But I was just trying to understand it or sort of size it in a dollar perspective. If policy renewal retention holds steady at the range that it currently runs at?

How many dollars would that rate increase produce over the 12 months prospectively that the rate increase gets billed and invoiced to policies as they renew, could you roughly size that, I am not looking for a precise number.

Michael Braun

Well, there is obviously the 5.5%, 5.6% as an average, so it varies by policy and it can impact our competitiveness in the marketplace. So there's a lot of moving pieces. But I believe how we've done it will not really impact us in the marketplace. I think we are still extremely competitive.

That being said, let's just use some easy math. If it's a $500 million book and there's a 5% rate increase, you are talking about $25 million of additional premiums that would come in. And let's just say there is an acquisition of 20%, so real quick, you are going to - you could take off, let's call it $5 million.

So you have, after acquisition, which is the payment to the retail agent, taxes to the state as well as to our GA, let's just call it -- just easy number, 20%. So you really have $20 million to help with the other two items, which is reinsurance expense and the attritional loss ratio.

That doesn't all happen, as you know, August 1. I am kind of giving you a macro answer on that. But it's a significant amount of money that we'll start to earn on the books gradually, effective August 1.

Ron Bobman

Okay, thanks. That answered my question. I just want to make sure I understand it. Because you mentioned the reinsurance costs. Are you referring to the marginal reinsurance cost associated with the additional premium collected? Because…

Michael Braun

To your question on reinsurance, as we put out there, our rate online -- our reinsurance rate online decreased 4.2%. So obviously, as we've moved from a $150 million spent on our cap program to $180 million, clearly the spend went up.

However, when you look at year-over-year with the exposure, it's down about 4.2%. So, we continue to buy the blend of the two models, the air and the RMS, 1 in 100 long-term. So that puts us higher than if we were to buy at the low end of the model.

And then we buy all the RPPs, the reinstatements, that is, for subsequent events, and the program cascades. So to the point, I believe you will see some relief on our reinsurance then. That pricing will have decreased based on year-over-year rate online of the 4.2%.

Ron Bobman

Okay. Thanks for the help.

Michael Braun

Thanks, Ron.

Operator

Thank you. And our next question comes from the line of Samir Khare with Capital Returns Management. Your line is now open.

Samir Khare

Hi. Good morning, guys. This is the West Coast office of Capital Returns.

Michael Braun

Good morning.

Samir Khare

Morning. Just another couple questions on the adverse development, or on the AOB problem. What initiatives are you guys putting in place in case this lull and trend reverses back to 2015 levels to combat AOB?

Michael Braun

I didn't hear you correctly, completely. So you said what are we doing if -- what, now? If AOB goes to 2015?

Samir Khare

Yes. If the AOB goes to the 2015 levels, what initiatives did you guys put in place to combat the issue?

Michael Braun

Well, once again, what we are finding is the early guys in the AOB were pretty aggressive and had big demands and were quick to go to -- to sue. But since they made a tremendous amount of money and brought a lot of people in, and you really can't drive anywhere in Florida without seeing these vans everywhere of these contractors, these vendors. The ultimate answer to question is containing AOB and the potential abuses really falls on the steps of the legislators up in Tallahassee.

Do I believe it's going to be fixed? At this point, I don't know that they are going to change or fix anything next spring. I can't say that for sure. So ultimately what happens is the consumer pays for it.

So I think the 5.6% rate increase goes a long way, but I think our claims team is very well run and understands these vendors. And I would say we actually have a working relationship with these vendors because we see them over and over again. And you learn to work with what their expectations are and so on.

So we are seeing more reasonableness of AOB, and we are seeing less frequency of AOB as it resolves to the total number of claims on our book. So, ultimately the answer, Samir, is it rests with the legislators.

The new language in our contracts sure does help. Us being as proactive as possible on claims helps. But at the end of the day, if an insured calls us, we can get out, we can resolve the issue pretty quick and for a reasonable dollar. But when you get a lot of vendors in there, it can get expensive quick.

Samir Khare

Okay. And it sounds like with the $11 million of adverse development from 2015, it sounds like you have tried to be sufficiently conservative to put it behind you, with chance of being redundant. I am paraphrasing what you were saying before. Just the $11 million, how much is going to actual pace of reserves versus IBNR for 2015? Do you have that?

Michael Braun

Well, to answer that, we have $120 million. I don't know that anyone in Florida has $120 million in reserves. When I say that, meaning a Florida property writer, especially when you look at the size of our book at 250,000 policies.

So I feel very comfortable with the reserves that we have. I feel comfortable that the decision, very painful decision, was the appropriate decision to make and I don't anticipate more problems.

Primarily it's 2015. We get a little bit of movement in 2014 and older years, but really 2015, that second half of the year really impacted us. I believe we've got sufficient reserves on 2015 year and older, and I believe that 2016 -- we are doing everything that we need to do to manage the business correctly.

And I hope we are redundant. I am not an actuary. I think what we've done is very reasonable, and in my opinion, it's obviously very big. I'm hopeful some of this comes back. I wouldn't say that it's going to be coming back Q3, Q4, but I am hopeful that this is redundant. Time will tell.

Samir Khare

Okay. But do you guys have a separation of how you guys allocated that $11 million case versus IBNR…

Michael Braun

You are looking at by accident year? You are…

Samir Khare

Just for 2015, the additional $11 million that you guys…

Michael Braun

Samir, yes, it went all to IBNR.

Samir Khare

It went all to IBNR? Okay, that's helpful. And in terms of the homeowners business that comes from Monarch versus FedNat, is there a different loss pick that you guys have for each of those?

Michael Braun

They're similar, just because it's an immature look at this point. You're looking at Monarch, is about $8 million, so the data will become much more credible as we move forward and we will adjust as we go forward. But the earned premium is pretty low at this point, very, very anxious to grow the book. We don't want to be foolish with the book, but we are very anxious to grow the book.

I think the market is receptive, but I got to tell you, even with this AOB, I think this AOB could harden the market up a bit. But what we are seeing is a very soft market, and we are not trying to buy the market with Monarch. We're trying to win that business at the correct rate.

Samir Khare

Okay. And then I know it's a small book, but in terms of what you've seen with claims activity in Monarch versus FedNat, is there a difference in claiming behavior or AOB behavior, or any of anything of the sort that you guys can see with…

Michael Braun

It's just way too early. Yes, it's just way too early. We are seeing similar type claims. You get your fires, you get your water losses. There is - the data is just very - it's early in the game, Samir. But clearly loss data as it develops, as it matures, will give us a lot more information. And we will adjust the reserves and the rates on Monarch as that information becomes available.

Samir Khare

Sure, okay. And then anyway you can help us think about the trajectory of auto premiums? I know you gave a round number last time, but is there an update to that number?

Michael Braun

I would say that -- I believe I said $50 million, and I don't think we will surpass that in 2016. We're trying to be very selective in what we do. We've got some really good GAs that we are working with. Believe it or not, we've ended some of our GA relationships. And that's the benefit of us controlling the claims, is we want to know if there's a problem.

We want to know it quick. And we can turn and - either correct or turn things off very quickly. So we also have some new GAs coming on that were - quality agents that we are hopeful for. But just a rough number that I think I put out there last time of $50 million, I would say that that's a reasonable number for gross written in 2016.

But once again, it's a bit confusing and we need to illustrate that better for everybody. Because if you look at just the expenses, it doesn't look good, and if you're looking at just the revenue, it doesn't look good.

But all in, it's not going to be a material impact on earnings, but we are building out a business there and I think it's going to be profitable for us obviously on a go forward.

Samir Khare

All right, great. Thank you very much.

Michael Braun

All right. Thanks, Sam.

Operator

Thank you. And we have a follow up question from the line of Ryan Byrnes with Janney Capital Markets. Your line is now open.

Ryan Byrnes

Great. Thanks for taking the follow up. I just want to get your thoughts on the remaining buyback that you have dipped your toe in the water, the first couple of quarters. But now the stock again looks like it's trading right around book value. Wanted to get your thoughts on how active you guys could be in the back half of the year, if the trading multiple persists.

Michael Braun

Yes, there is obviously of the buyback, we still have a big chunk of it that's available. And then we still have a lot of capital in the holding company beyond that. So I believe we've got about $7.5 million of that $10 million that remains, that we can do. The question is, what's the best thing to do with that capital, and we look at our stock at book.

Sure, it's more attractive to us than it would have been at a higher dollar amount. But I can also tell you there is opportunities in the Florida market as well, and I think that more opportunities with some of these other carriers will become available.

I think the assignment of benefits, it's not a Federated National, it's not a Monarch National only issue. This is something that is hitting the industry, and so we want to be wise with that capital.

But I think to answer your question, the buyback will continue. I can't tell you if we will exhaust that $10 million in a rapid manner not, but we will absolutely - we have a committee on the board that evaluates the market and decides -- executes the trades as appropriate.

Ryan Byrnes

Okay, great. And then just my last one, any update on the CFO permanent search?

Michael Braun

I've gotten a lot of unsolicited resumes. Erick and I are working together well and we'll be maybe conducting the search after Q2 or after Q3. But Erick and I are working well, and the team works well. So, no update other than we are just working through the close of the quarter and evaluating what we have.

Ryan Byrnes

And are you guys using an outside search firm or just doing it internally?

Michael Braun

We have two or three different firms that are ready to go, but we have not started the search with them. Once again, we have just been working to close out Q2 so far.

Ryan Byrnes

Okay, great. Thanks.

Michael Braun

Thank you, Ryan.

Operator

Thank you. And I am not showing any further questions at this time. I would now like to turn the call back to Mr. Michael Braun, President and Chief Executive Officer for any closing remarks.

Michael Braun

Well, I just want to thank everyone for their participation, whether they are dialed in or they are reading this transcript at a later point. Anyone that has follow-up questions, I'm always available. Erick is available as well. And both of our contact information’s on the website and on the press release. So thank you for the interest in our company.

Operator

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

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