BEDFORD, Texas, Oct. 23, 2017 /PRNewswire/ -- State National Companies, Inc. (NASDAQ: SNC), a leading specialty provider of property and casualty insurance services, today reported its financial results for the third quarter ended September 30, 2017.

Commenting on the results, State National's Chairman and Chief Executive Officer, Terry Ledbetter, said, "Our third quarter revenue increase was driven by continued growth in Lender and Program Services with premiums earned and ceding fees both up sequentially and year over year. We believe that the favorable industry trends in both business segments position the company well for future growth and profitability.

As we have previously announced, the definitive agreement under which Markel will acquire all of the outstanding shares of State National remains on track to close in the fourth quarter of 2017."

Total revenues in the third quarter of 2017 were $61.4 million, up 6% from $57.9 million in the third quarter of 2016. Net income was $14.7 million, or $0.34 per diluted share, in the third quarter of 2017, compared to net income of $15.3 million, or $0.37 per diluted share, for the same period in 2016. Realized investment gains were $1.0 million in the third quarter of 2017, down from $2.0 million in the third quarter of 2016. The impact of the decrease in realized net investment gains and losses (net of tax) for the third quarter of 2017 was $0.02 per diluted share. The impact of the additional weighted-average shares outstanding for the current quarter accounts for the additional $0.01 of decrease in the earnings per share compared to the same period last year.

Program Services Segment

The Program Services segment provides fronting to general agents and insurance carriers to leverage State National's "A" (Excellent) A.M. Best rating, expansive licenses and trusted reputation to provide access to the U.S. property and casualty insurance market in exchange for ceding fees. State National issues the policy, and the reinsurer assumes the risk.

In the third quarter of 2017, total revenues from the Program Services segment were $21.7 million, an increase of $2.4 million, or 13%, from the third quarter of 2016. The growth in revenues was driven by increased ceding fees from both new and existing client programs.

Lender Services Segment

In Lender Services, the collateral protection business is fully vertically integrated as State National manages all aspects of these product offerings for its clients, including policy issuance and administration, underwriting and claims, which we believe is a competitive advantage in the marketplace. Additionally, the Company differentiates itself from competitors by establishing long-term relationships with clients and providing high-quality service and advanced technology.

In the third quarter of 2017, net premiums written from the Lender Services segment were $42.5 million, an increase of $5.0 million, or 13%, from the third quarter of 2016. Net premiums earned were $35.5 million in the third quarter of 2017, an increase of $1.8 million, or 5%, from the third quarter of 2016. Contributing to this increase in Lender Services premiums are sales of new accounts and loan portfolio growth from existing accounts driven by continued high levels of automobile sales and rising average automobile loan sizes.

Losses and loss adjustment expenses were $15.7 million in the third quarter of 2017, compared to $13.7 million in the same period last year. The loss ratio increased to 44% in the third quarter from 40% in the third quarter last year, primarily due to increased claim severity. The net expense ratio decreased to approximately 37% in the third quarter 2017 from 38% in the third quarter 2016 due to our ability to effectively leverage fixed costs. The overall result was a net combined ratio for the quarter of 81% compared to 78% in the same period of 2016.

General and Administrative Expenses

General and administrative expenses in the third quarter of 2017 increased to $19.7 million from $17.2 million in the third quarter of 2016, reflecting investment in strategic growth and increased professional fees primarily related to the transaction with Markel.

Balance Sheet

State National's balance sheet reflects low financial leverage with only $43.8 million of debt. This debt has limited covenant requirements and is interest-only until the early to mid-2030s.

State National's investment portfolio has a short duration and consists primarily of fixed income securities, the majority of which have investment grade ratings. The portfolio is laddered to allow for reinvestment of funds as rates change.

Approximately $2.9 billion of State National's assets are comprised of reinsurance recoverables that are primarily related to the Program Services segment. Offsetting these recoverables are unpaid losses, loss adjustment expenses and unearned premium liabilities for the same segment. Recoverables of approximately $1.8 billion are secured by collateral held in trust funds for our benefit or letters of credit. The remainder is ceded to highly rated, well capitalized reinsurers.

Recent Developments

On July 26, 2017, State National and Markel Corporation entered into a definitive agreement under which Markel Corporation will acquire State National. The transaction, which is subject to the approval of a majority of State National shareholders, approvals by relevant state insurance regulators and other customary closing conditions, is expected to close in the fourth quarter of 2017. State National will not be updating its outlook for fiscal 2017 and will not be holding a conference call to discuss its third quarter 2017 results.

About State National Companies, Inc.

State National Companies, Inc. (NASDAQ: SNC) is a leading specialty provider of property and casualty insurance services operating in two niche markets across the United States. In its Lender Services segment, the Company specializes in providing portfolio protection solutions which insures personal automobiles and other vehicles held as collateral for loans made by credit unions, banks and specialty finance companies. In its Program Services segment, the Company leverages its "A" (Excellent) A.M. Best rating, expansive licenses and trusted reputation to provide access to the U.S. property and casualty insurance market in exchange for ceding fees. To learn more, please visit www.statenational.com. State National routinely posts important Company information on its website.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements contained in this press release are forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally, but not always, accompanied by words such as "estimate," "believe," "expect," "will," "plan," "target," "could" or other words that convey the uncertainty of future events or outcomes.

There can be no assurance that actual developments will be those anticipated by us. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, our ability to recover from our capacity providers, the cost and availability of reinsurance coverage, challenges to our use of issuing carrier or fronting arrangements by regulators or changes in state or federal insurance or other statutes or regulations, our dependence on a limited number of business partners, potential regulatory scrutiny of collateral protection insurance, level of new car sales, availability of credit for vehicle purchases and other factors affecting automobile financing, our ability to compete effectively, a downgrade in the financial strength ratings of our insurance subsidiaries, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, changes in interest rates or other changes in the financial markets, the effects of emerging claim and coverage issues, changes in the demand for our products, the effect of general economic conditions, breaches in data security or other disruptions with our technology, and changes in pricing or other competitive environments.

Forward-looking statements involve inherent risks and uncertainties that are difficult to predict, many of which are beyond our control. Additional information about these risks and uncertainties is contained in our filings with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date of this release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.



                                                STATE NATIONAL COMPANIES, INC.

                                                  CONSOLIDATED BALANCE SHEETS

                                  ($ in thousands, except for share and per share information)


                                      September 30,                                  December 31,

                                               2017                                           2016
                                               ----                                           ----



                                       (Unaudited)

    Assets:

    Investments:

    Fixed-maturity securities -
     available-for-sale, at
     fair value (amortized cost -
     $400,885, $329,994,
     respectively)                                                        $406,677                   $332,107

    Equity securities -
     available-for-sale, at
     fair value (cost - $2,039,
     $3,271, respectively)                                                   2,116                      3,224
                                                                             -----                      -----

    Total investments                                                      408,793                    335,331


    Cash and cash equivalents                                               64,003                     91,698

    Restricted cash and
     investments                                                            25,192                      2,958

    Accounts receivable from
     agents, net                                                           145,867                     35,964

    Reinsurance recoverable on
     paid losses                                                             1,740                      1,430

    Deferred acquisition costs                                               1,348                      1,194

    Reinsurance recoverables                                             2,871,500                  2,342,864

    Property and equipment, net
     (includes land held for sale
     - $1,034, $1,034,
     respectively)                                                          16,999                     16,163

    Interest receivable                                                      2,319                      2,112

    Income taxes receivable                                                      -                       329

    Deferred income taxes, net                                              30,900                     28,858

    Goodwill and intangible
     assets, net                                                            14,364                     12,588

    Other assets                                                             7,680                      5,248
                                                                             -----                      -----

    Total assets                                                        $3,590,705                 $2,876,737
                                                                        ==========                 ==========


    Liabilities:

    Unpaid losses and loss
     adjustment expenses                                                $2,087,941                 $1,703,706

    Unearned premiums                                                      828,583                    680,691

    Allowance for policy
     cancellations                                                          68,568                     66,418

    Deferred ceding fees                                                    39,639                     32,226

    Accounts payable to agents                                               2,467                      2,639

    Accounts payable to insurance
     companies                                                             118,791                     14,871

    Debt, net                                                               43,815                     43,783

    Income taxes payable                                                     3,649                          -

    Other liabilities                                                       63,454                     36,023
                                                                            ------                     ------

    Total liabilities                                                    3,256,907                  2,580,357


    Shareholders' equity:

    Common stock, $.001 par value
     (150,000,000 shares
     authorized; 42,173,561 and
     41,924,440 shares issued at
     September 30, 2017 and
     December 31, 2016,
     respectively)                                                              42                         42

    Preferred stock, $.001 par
     value (10,000,000 shares
     authorized; no shares issued
     and outstanding at September
     30, 2017 and December 31,
     2016)                                                                       -                         -

    Additional paid-in capital                                             232,710                    229,297

    Retained earnings                                                       98,073                     66,230

    Accumulated other
     comprehensive income                                                    2,973                        811
                                                                             -----                        ---

    Total shareholders' equity                                             333,798                    296,380
                                                                           -------                    -------

    Total liabilities and
     shareholders' equity                                               $3,590,705                 $2,876,737
                                                                        ==========                 ==========



                                                                     STATE NATIONAL COMPANIES, INC.

                                                                   CONSOLIDATED STATEMENTS OF INCOME

                                                                              (Unaudited)

                                                           ($ in thousands, except for per share information)


                                                  Three Months Ended                                     Nine Months Ended
                                                  ------------------                                     -----------------

                                      September 30,                   September 30,                September 30,           September 30,

                                               2017                             2016                          2017                     2016
                                               ----                             ----                          ----                     ----


    Revenues:

    Premiums earned                                         $35,499                                       $33,700                               $105,941      $94,293

    Commission income                                         328                                           389                                    926        1,015

    Ceding fees                                            21,697                                        19,263                                 60,340       52,424

    Net investment income                                   2,314                                         2,001                                  6,753        6,141

    Realized net investment gains
     (losses)                                               1,010                                         2,063                                  3,409        1,707

    Other income                                              597                                           501                                  1,658        1,416
                                                              ---                                           ---                                  -----        -----

    Total revenues                                         61,445                                        57,917                                179,027      156,996


    Expenses:

    Losses and loss adjustment
     expenses                                              15,883                                        13,755                                 50,849       42,587

    Commissions                                             1,064                                         1,408                                  4,341        4,235

    Taxes, licenses, and fees                               1,096                                           960                                  2,962        2,466

    General and administrative                             19,666                                        17,235                                 57,412       51,377

    Interest expense                                          631                                           565                                  1,831        1,655
                                                              ---                                           ---                                  -----        -----

    Total expenses                                         38,340                                        33,923                                117,395      102,320
                                                           ------                                        ------                                -------      -------


    Income (loss) before income taxes                      23,105                                        23,994                                 61,632       54,676


    Income taxes:

    Current tax expense (benefit)                          11,160                                        10,801                                 25,420       21,292

    Deferred tax expense (benefit)                        (2,749)                                      (2,130)                               (3,207)     (1,597)
                                                           ------                                        ------                                 ------       ------

                                                            8,411                                         8,671                                 22,213       19,695
                                                            -----                                         -----                                 ------       ------

    Net income (loss)                                       $14,694                                       $15,323                                $39,419      $34,981
                                                            =======                                       =======                                =======      =======


    Net income (loss) per share
     attributable to common
     shareholders:

    Basic earnings per
     share                                                    $0.35                                         $0.37                                  $0.95        $0.83

    Diluted earnings per share                               0.34                                          0.37                                   0.92         0.83


    Dividends, per share                                      $0.06                                         $0.06                                  $0.18        $0.18


    Weighted-average common shares
     outstanding - basic                               41,683,695                                    41,937,467                             41,655,636   42,196,075

    Weighted-average common shares
     outstanding - diluted                             43,412,902                                    41,940,918                             42,967,302   42,215,846



    Program Services Segment - Results of Operations

    Unaudited


                                                     Three Months Ended          Nine Months Ended

                                                        September 30,              September 30,
                                                        -------------              -------------

    ($ in thousands)                                               2017            2016                 2017 2016
    ---------------                                                ----            ----                 ---- ----


    Revenues:

    Premiums earned                                                   $        -                        $3    $           -      $3

    Ceding fees                                                           21,697                     19,263           60,340   52,424
                                                                          ------                     ------           ------   ------

    Total revenues                                                        21,697                     19,266           60,340   52,427


    Expenses:

    Losses and loss
     adjustment expenses                                                     187                         96               17    1,001

    Commissions                                                                4                          2                8        5

    Taxes, licenses, and
     fees                                                                     17                          2               62       13

    General and
     administrative                                                        3,794                      3,681           12,290   10,800
                                                                           -----                      -----           ------   ------

    Total expenses                                                         4,002                      3,781           12,377   11,819


    Income (loss) before
     income taxes                                                        $17,695                    $15,485          $47,963  $40,608
                                                                         =======                    =======          =======  =======


    Gross premiums written                                              $426,098                   $350,541       $1,253,939 $957,962

    Gross premiums earned                                               $393,303                   $311,463       $1,110,189 $872,090



    Lender Services Segment - Results of Operations

    Unaudited


                                                    Three Months Ended             Nine Months Ended

                                                       September 30,                 September 30,
                                                       -------------                 -------------

    ($ in thousands)                                              2017                2016                 2017 2016
    ---------------                                               ----                ----                 ---- ----


    Revenues:

    Premiums earned                                                      $35,499                       $33,697          $105,941      $94,290

    Commission income                                                        328                           389               926        1,015

    Other income                                                             554                           491             1,627        1,410
                                                                             ---                           ---             -----        -----

    Total revenues                                                        36,381                        34,577           108,494       96,715


    Expenses:

    Losses and loss adjustment
     expenses                                                             15,696                        13,659            50,832       41,586

    Commissions                                                            1,060                         1,406             4,333        4,230

    Taxes, licenses, and fees                                              1,079                           958             2,900        2,453

    General and administrative                                            10,878                        10,262            33,577       31,397
                                                                          ------                        ------            ------       ------

    Total expenses                                                        28,713                        26,285            91,642       79,666


    Income (loss) before income
     taxes                                                                $7,668                        $8,292           $16,852      $17,049
                                                                          ======                        ======           =======      =======


    Net loss ratio                                                         44.2%                        40.5%            48.0%       44.1%

    Net expense ratio                                                      36.7%                        37.5%            38.5%       40.4%
                                                                            ----                          ----              ----         ----

    Net combined ratio                                                     80.9%                        78.0%            86.5%       84.5%


    Gross premiums written                                               $52,947                       $45,746          $134,766     $114,688

    Net premiums written                                                 $42,469                       $37,517          $109,093      $94,433




    Corporate Segment - Results of Operations

    Unaudited


                                                    Three Months Ended           Nine Months Ended

                                                       September 30,               September 30,
                                                       -------------               -------------

    ($ in thousands)                                              2017                2016                 2017 2016
    ---------------                                               ----                ----                 ---- ----


    Revenues:

    Net investment income                                                 $2,314                        $2,001            $6,753       $6,141

    Realized net investment gains
     (losses)                                                              1,010                         2,063             3,409        1,707

    Other income                                                              43                            10                31            6
                                                                             ---                           ---               ---          ---

    Total revenues                                                         3,367                         4,074            10,193        7,854


    Expenses:

    General and administrative                                             4,994                         3,292            11,545        9,180

    Interest expense                                                         631                           565             1,831        1,655
                                                                             ---                           ---             -----        -----

    Total expenses                                                         5,625                         3,857            13,376       10,835


    Income (loss) before income
     taxes                                                               (2,258)                          217           (3,183)     (2,981)


    Income tax expense (benefit)                                           8,411                         8,671            22,213       19,695
                                                                           -----                         -----            ------       ------


    Net income (loss)                                                  $(10,669)                     $(8,454)        $(25,396)   $(22,676)
                                                                        ========                       =======          ========     ========

Non-GAAP Reconciliation
The accompanying information provides a reconciliation of this non-GAAP financial measure to its most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). This non-GAAP financial measure should not be considered as an alternative to GAAP measures such as net income, earnings per share, return on equity or any other GAAP measure of liquidity or financial performance.

Earnings before interest, taxes, depreciation and amortization or EBITDA, is considered a non-GAAP financial measure because it reflects adjustments to net income for interest expense, income tax expense, and depreciation and amortization. Management believes this measure is helpful to investors because it provides a supplemental measure of evaluating core financial performance between periods.



    State National Companies, Inc.

    Reconciliation of Non-GAAP Financial Measures

    (unaudited)

    ($ in thousands)


                                                  Three Months Ended         Nine Months Ended

                                                     September 30,           September 30,
                                                     -------------           -------------

                                                                2017           2016                2017 2016
                                                                ----           ----                ---- ----


    EBITDA                                                           $24,727                   $25,633       $66,285 $59,430

    Reconciliation of EBITDA:

    Net income                                                       $14,694                   $15,323       $39,419 $34,981

    Plus: Interest expense                                               631                       565         1,831   1,655

    Plus: Income tax expense                                           8,411                     8,671        22,213  19,695

    Plus: Depreciation and
     amortization                                                        991                     1,074         2,822   3,099
                                                                         ---                     -----         -----   -----

    EBITDA                                                           $24,727                   $25,633       $66,285 $59,430
                                                                     =======                   =======       ======= =======



    CONTACTS:                           State National Companies, Inc.

                                        David Hale, COO & CFO

                                        817-265-2000


                                        Dennard ? Lascar Associates

                                        Rick Black

                                        713-529-6600

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SOURCE State National Companies, Inc.