NGHC 2014 2Q 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM 10-Q
 

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2014

OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to 
Commission File Number: 001-36311 
 

NATIONAL GENERAL HOLDINGS CORP.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
27-1046208
(State or Other Jurisdiction of
Incorporation or Organization)
 
(IRS Employer
Identification No.)
59 Maiden Lane, 38th Floor
New York, New York
 
10038
(Address of Principal Executive Offices)
 
(Zip Code)
(212) 380-9500
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o
 
Accelerated Filer o
 
Non-Accelerated Filer x
(Do not check if a smaller
reporting company)
 
Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes o No x
As of August 6, 2014, the number of common shares of the registrant outstanding was 93,344,400.





NATIONAL GENERAL HOLDINGS CORP.

TABLE OF CONTENTS

 
 
Page
PART I
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
PART II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 
 


i



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL GENERAL HOLDINGS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Shares and Par Value per Share)
 
June 30, 2014
 
December 31, 2013
ASSETS
(unaudited)
 
(audited)
Investments:
 
 
  

Fixed maturities, available-for-sale, at fair value (amortized cost $1,395,232 and $757,188)
$
1,443,769

 
$
766,589

Equity securities, available-for-sale, at fair value (cost $20,587 and $6,939)
20,136

 
6,287

Short-term investments
830

 

Equity investment in unconsolidated subsidiaries
142,473

 
133,193

Other investments
3,455

 
2,893

Securities pledged (amortized cost $62,637 and $133,013)
63,153

 
133,922

Total investments
1,673,816

 
1,042,884

Cash and cash equivalents
111,949

 
73,823

Accrued investment income
12,232

 
9,263

Premiums and other receivables, net
658,961

 
449,252

Deferred acquisition costs
114,735

 
60,112

Reinsurance recoverable on unpaid losses (includes $122,209 and $176,241 from related parties at June 30, 2014 and December 31, 2013, respectively)
904,403

 
950,828

Prepaid reinsurance premiums
69,070

 
50,878

Due from affiliate
5,830

 
4,785

Premises and equipment, net
34,045

 
29,535

Intangible assets, net
84,577

 
86,564

Goodwill
96,631

 
70,351

Prepaid and other assets
12,182

 
9,240

Total assets
$
3,778,431

 
$
2,837,515

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
  

Liabilities:
 
 
  

Unpaid loss and loss adjustment expense reserves
$
1,386,111

 
$
1,259,241

Unearned premiums
751,322

 
476,232

Unearned service contract and other revenue
8,988

 
7,319

Reinsurance payable (includes $33,654 and $76,360 to related parties at June 30, 2014 and December 31, 2013, respectively)
43,601

 
93,534

Accounts payable and accrued expenses
239,391

 
91,143

Securities sold under agreements to repurchase, at contract value
60,097

 
109,629

Deferred tax liability
27,509

 
24,476

Income tax payable
19,057

 
1,987

Notes payable
259,113

 
81,142

Other liabilities
29,114

 
49,945

Total liabilities
2,824,303

 
2,194,648

Stockholders’ equity:
 
 
 
Common stock, $0.01 par value - authorized 150,000,000 shares, issued and outstanding 93,344,400 shares - 2014; authorized 150,000,000 shares, issued and outstanding 79,731,800 shares - 2013
933

 
797

Preferred stock, $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,200,000 shares - 2014; authorized 10,000,000 shares, issued and outstanding 0 shares - 2013
55,000

 

Additional paid-in capital
613,839

 
437,006

Accumulated other comprehensive income
31,862

 
7,425

Retained earnings
252,413

 
197,552

Total National General Holdings Corp. Stockholders' Equity
954,047

 
642,780

Non-controlling interest
81

 
87

Total stockholders’ equity
954,128

 
642,867

Total liabilities and stockholders' equity
$
3,778,431

 
$
2,837,515


See accompanying notes to unaudited condensed consolidated financial statements.
1





NATONAL GENERAL HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Shares and Per Share Data)
(Unaudited)
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
  
2014
 
2013
 
2014
 
2013
Revenues:
  

 
  

 
 
 
 
Premium income:
  

 
  

 
 
 
 
Gross premium written
$
468,473

 
$
330,689

 
$
1,114,615

 
$
688,302

Ceded premiums (related parties - three months $12,690; $147,401 and six months $42,967; $291,501)
(49,917
)
 
(183,685
)
 
(128,574
)
 
(368,782
)
Net premium written
418,556

 
147,004

 
986,041

 
319,520

Change in unearned premium
(27,090
)
 
7,546

 
(236,723
)
 
(12,814
)
Net earned premium
391,466

 
154,550

 
749,318

 
306,706

Ceding commission income (primarily related parties)
1,557

 
24,735

 
6,927

 
49,992

Service and fee income
38,486

 
31,406

 
75,192

 
58,668

Net investment income
11,321

 
7,181

 
20,535

 
13,654

Net realized gain (losses) on investments

 
(751
)
 

 
947

Other revenue
100

 

 
107

 
16

Total revenues
442,930

 
217,121

 
852,079

 
429,983

Expenses:
  

 
  

 
  

 
  

Loss and loss adjustment expense
255,604

 
98,669

 
480,951

 
201,871

Acquisition costs and other underwriting expenses
74,418

 
32,222

 
148,791

 
62,432

General and administrative expenses
77,059

 
68,412

 
153,258

 
135,221

Interest expense
2,519

 
573

 
3,112

 
916

Total expenses
409,600

 
199,876

 
786,112

 
400,440

Income before provision for income taxes and equity in earnings (losses) of unconsolidated subsidiaries
33,330

 
17,245

 
65,967

 
29,543

Provision for income taxes
424

 
3,782

 
7,760

 
7,553

Income before equity in earnings (losses) of unconsolidated subsidiaries
32,906

 
13,463

 
58,207

 
21,990

Equity in earnings (losses) of unconsolidated subsidiaries
(2,610
)
 
487

 
(1,487
)
 
(324
)
Net income
30,296

 
13,950

 
56,720

 
21,666

Net income (loss) attributable to non-controlling interest
38

 

 
6

 
(44
)
Net income attributable to National General Holdings Corp. ("NGHC")
$
30,334

 
$
13,950

 
$
56,726

 
$
21,622

Dividends on preferred stock

 
(896
)
 

 
(2,158
)
Net income attributable to NGHC common stockholders
$
30,334

 
$
13,054

 
$
56,726

 
$
19,464

Earnings per common share:
  

 
  

 
  

 
  

Basic earnings per share
$
0.32

 
$
0.24

 
$
0.63

 
$
0.39

Diluted earnings per share
$
0.32

 
$
0.22

 
$
0.62

 
$
0.35

Dividends declared per common share
$
0.01

 
$

 
$
0.02

 
$

Weighted average common shares outstanding:
  

 
  

 
  

 
  

Basic
93,344,400

 
54,935,182

 
89,526,029

 
50,270,789

Diluted
94,819,307

 
64,600,233

 
90,898,518

 
61,603,366


See accompanying notes to unaudited condensed consolidated financial statements.
2



NATIONAL GENERAL HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2014
 
2013
 
2014
 
2013
Net income
$
30,296

 
$
13,950

 
$
56,720

 
$
21,666

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax expense - three months $0; $0 and six months $0; $0
156

 

 
(441
)
 

Unrealized holding gain (loss) on securities, net of tax expense - three months $8,673; $(12,460) and six months $13,395; $(13,058)
16,107

 
(23,141
)
 
24,878

 
(24,252
)
Reclassification adjustment for securities sold during the period, net of tax expense - three months $0; $(805) and six months $0; $(115)

 
(1,496
)
 

 
(214
)
Other comprehensive income (loss), net of tax
16,263

 
(24,637
)
 
24,437

 
(24,466
)
Comprehensive income (loss)
46,559

 
(10,687
)
 
81,157

 
(2,800
)
Comprehensive income (loss) attributable to non-controlling interest
38

 

 
6

 
(44
)
Comprehensive income (loss) attributable to NGHC
$
46,597

 
$
(10,687
)
 
$
81,163

 
$
(2,844
)





See accompanying notes to unaudited condensed consolidated financial statements.
3



  
NATIONAL GENERAL HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In Thousands, Except Shares)
(Unaudited)


Six Months Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2014
Common Stock
 
Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
$
 
Shares
 
$
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Non-controlling Interest in Subsidiary
 
Total
Balance January 1, 2014
79,731,800

 
$
797

 

 
$

 
$
437,006

 
$
197,552

 
$
7,425

 
$
87

 
$
642,867

Net income

 

 

 

 

 
56,726

 

 
(6
)
 
56,720

Change in unrealized gains on investments, net of tax

 

 

 

 

 

 
24,878

 

 
24,878

Foreign currency translation, net of tax

 

 

 

 

 

 
(441
)
 

 
(441
)
Common stock dividends

 

 

 

 

 
(1,865
)
 

 

 
(1,865
)
Issuance of common stock
13,612,600

 
136

 

 

 
177,750

 

 

 

 
177,886

Issuance of preferred stock

 

 
2,200,000

 
55,000

 
(1,836
)
 

 

 

 
53,164

Stock-based compensation

 

 

 

 
919

 

 

 

 
919

Balance at June 30, 2014
93,344,400

 
$
933

 
2,200,000

 
$
55,000


$
613,839

 
$
252,413

 
$
31,862

 
$
81

 
$
954,128



Six Months Ended
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2013
Common Stock
 
Preferred Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
$
 
Shares
 
$
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income
 
Non-controlling Interest in Subsidiary
 
Total
Balance January 1, 2013
45,554,570

 
$
455

 
53,054

 
$
53,054

 
$
158,015

 
$
169,039

 
$
32,474

 
$
5

 
$
413,042

Net income

 

 

 

 

 
21,622

 

 
44

 
21,666

Change in unrealized gains (loss) on investments, net of tax

 

 

 

 

 

 
(24,466
)
 

 
(24,466
)
Foreign currency translation, net of tax

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

 

 

 
(12,202
)
 

 

 
(12,202
)
Conversion of preferred stock
12,295,430

 
123

 
(53,054
)
 
(53,054
)
 
52,931

 

 

 

 

Issuance of common stock
21,881,800

 
219

 

 

 
213,058

 

 

 

 
213,277

Capital contributions

 

 

 

 
10,275

 

 

 

 
10,275

Stock-based compensation

 

 

 

 
1,628

 

 

 

 
1,628

Balance at June 30, 2013
79,731,800

 
$
797

 

 
$

 
$
435,907

 
$
178,459

 
$
8,008

 
$
49

 
$
623,220



See accompanying notes to unaudited condensed consolidated financial statements.
4



NATIONAL GENERAL HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
 
Six Months Ended June 30,
 
2014
 
2013
Cash flows from operating activities:
 
 
  

Net income
$
56,720

 
$
21,666

Reconciliation of net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation, amortization and goodwill impairment
13,338

 
9,494

Net amortization of premium on fixed maturities
1,594

 
2,050

Stock compensation expense
919

 
1,628

Equity in losses of unconsolidated subsidiaries
1,487

 
324

Net realized gain on investments

 
(947
)
Realized loss on premise and equipment disposals

 
86

Bad debt expense
14,519

 
8,427

Foreign currency translation, net of tax
(441
)
 

Changes in assets and liabilities:
 
 
 
Accrued investment income
(2,485
)
 
(140
)
Premiums and other receivables
(184,691
)
 
(29,862
)
Deferred acquisition costs, net
(54,623
)
 
(1,384
)
Reinsurance recoverable on unpaid losses
58,603

 
1,099

Prepaid reinsurance premiums
18,011

 
1,983

Prepaid expenses and other assets
(1,988
)
 
(3,003
)
Unpaid loss and loss adjustment expense reserves
77,948

 
(5,122
)
Unearned premiums
217,286

 
10,831

Unearned service contract and other revenue
1,669

 
3,230

Reinsurance payable
(81,435
)
 
2,818

Accounts payable
131,185

 
30,055

Income tax payable
17,070

 
(3,101
)
Deferred tax liability
(29,630
)
 
(5,476
)
Other liabilities
(20,830
)
 
(4,739
)
Net cash provided by operating activities
234,226

 
39,917

Cash flows from investing activities:
 
 
 
Investment in unconsolidated subsidiaries
(10,901
)
 
(17,214
)
Purchases of other investments
(557
)
 
(2,437
)
Acquisition of consolidated subsidiaries, net of cash obtained
(15,778
)
 
(22,766
)
Purchases of short term investments
(124,000
)
 
(38,795
)
Proceeds from sale of short-term investments
124,000

 
96,169

Purchases of premises and equipment
(5,550
)
 
(3,538
)
Disposals of premises and equipment

 
49

Purchases of fixed maturities
(591,550
)
 
(331,893
)
Proceeds from sale and maturity of fixed maturities
79,529

 
227,369

Net cash used in investing activities
(544,807
)
 
(93,056
)
 
 
 
 

See accompanying notes to unaudited condensed consolidated financial statements.
5



NATIONAL GENERAL HOLDINGS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

Cash flows from financing activities:
 
 
 

Securities sold under agreements to repurchase, net
(49,532
)
 
(53,419
)
Securities sold but not yet purchased, net

 
(56,700
)
Notes payable repayments
(80,946
)
 
(58,084
)
Proceeds from notes payable
250,000

 
68,700

Issuance of common stock
177,886

 
213,277

Issuance of preferred stock, net of fees
53,164

 

Dividends paid
(1,865
)
 
(12,202
)
Net cash provided by financing activities
348,707

 
101,572

Net increase in cash and cash equivalents
38,126

 
48,433

Cash and cash equivalents, beginning of the period
73,823

 
39,937

Cash and cash equivalents, end of the period
$
111,949

 
$
88,370

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for income taxes
$
14,200

 
$
15,500

Cash paid for interest
3,089

 
966

Noncash capital contribution

 
10,275


See accompanying notes to unaudited condensed consolidated financial statements.
6

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)


1. Basis of Reporting

The accompanying unaudited interim condensed consolidated financial statements include the accounts of National General Holdings Corp. and its subsidiaries (the “Company” or “NGHC”) and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP” or “U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These interim condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2013, previously filed with the SEC on March 28, 2014. The balance sheet at December 31, 2013 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

These interim condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

A detailed description of the Company’s significant accounting policies and management judgments is located in the audited consolidated financial statements, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC.

All significant inter-company transactions and accounts have been eliminated in the condensed consolidated financial statements.

To facilitate period-to-period comparisons, certain reclassifications have been made to prior period consolidated financial statement amounts to conform to current period presentation.

2. Recent Accounting Pronouncements

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2014, as compared to those described in our Annual Report on Form 10-K for the year ended December 31, 2013, that are of significance, or potential significance, to the Company.
In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity", to reduce diversity in practice for reporting discontinued operations. Under the previous guidance, any component of an entity that was a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group was eligible for discontinued operations presentation. The revised guidance only allows disposals of components of an entity that represent a strategic shift (e.g., disposal of a major geographical area, a major line of business, a major equity method investment, or other major parts of an entity) and that have a major effect on a reporting entity’s operations and financial results to be reported as discontinued operations. The revised guidance also requires expanded disclosure in the financial statements for discontinued operations as well as for disposals of significant components of an entity that do not qualify for discontinued operations presentation. The updated guidance is effective prospectively for fiscal years beginning after December 15, 2014, and interim periods within those years. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.

In May 2014, the FASB issued guidance on recognizing revenue in contracts with customers. The objective of the new guidance as issued by the FASB in ASU 2014-09, “Revenue from Contracts with Customers”, is to remove inconsistencies and weaknesses in revenue requirements, provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices, and provide for improved disclosure requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods and services. To achieve that core principle, an entity applies the following five steps: (1) identifies the contract(s) with a customer; (2) identifies the performance obligations in the contract; (3) determines the transaction price; (4) allocates the transaction price to the performance obligations in the contract;

7

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

and (5) recognizes revenue when (or as) the entity satisfies the performance obligations. The new guidance also includes a comprehensive set of qualitative and quantitative disclosure requirements including information about: (i) contracts with customers-including revenue and impairments recognized, disaggregation of revenue, and information about contract balances and performance obligations; (ii) significant judgments in determining the satisfaction of performance obligations, determining the transaction price, and amounts allocated to performance obligations; and (iii) assets recognized from the costs to obtain or fulfill a contract. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. While the guidance specifically excludes revenues from insurance contracts, investments and financial instruments from the scope of the new guidance, the guidance will be applicable to the Company’s other forms of revenue not specifically exempted from the guidance. The Company is currently evaluating the impact this guidance will have on its consolidated financial condition, results of operations, cash flows and disclosures and is currently unable to estimate the impact of adopting this guidance.

In June 2014, the FASB issued ASU No. 2014-11, "Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures." The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. ASU No. 2014-11 requires new disclosures for certain transactions comprised of (1) a transfer of a financial asset accounted for as a sale and (2) an agreement with the same transferee entered into in contemplation of the initial transfer that results in the transferor retaining substantially all of the exposure to the economic return on the transferred financial asset throughout the term of the transaction. Such disclosures include: (1) the carrying amount of assets derecognized (sold) as of the date of derecognition; (2) the amount of gross proceeds received by the transferor at the time of derecognition for the assets derecognized; (3) the information about the transferor’s ongoing exposure to the economic return on the transferred financial assets; and (4) the amounts that are reported in the statement of financial position arising from the transaction, such as those represented by derivative contracts. ASU No. 2014-11 also requires expanded disclosures about the nature of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. Such disclosures include: (1) a disaggregation of the gross obligation by the class of collateral pledged; (2) the remaining contractual time to maturity of the agreements; and (3) a discussion of the potential risks associated with the agreements and the related collateral pledged including obligations arising from a decline in the fair value of the collateral pledged and how those risks are managed. For public entities, the disclosure for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for all annual periods beginning after December 15, 2014, and for interim periods beginning after March 15, 2015. All other amendments in this Update are effective for public entities for the first interim or annual period beginning after December 15, 2014. The disclosure requirements are not required to be presented for comparative periods before the effective date. The adoption of this guidance is not expected to have a material effect on the Company’s results of operations, financial position or liquidity.



8

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

3. Investments

(a) Available-for-Sale Securities

The cost, fair value, and gross unrealized gains and losses on available-for-sale securities were as follows:

June 30, 2014
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Equity securities:
 
 
 
 
 
 
 
 
   Common stock
 
$
15,542

 
$
628

 
$
(907
)
 
$
15,263

   Preferred stock
 
5,045

 
3

 
(175
)
 
4,873

Fixed maturities:
 
 
 
 
 
 
 
 
   U.S. Treasury and Federal agencies
 
190,920

 
1,160

 
(169
)
 
191,911

   States and political subdivisions bonds
 
152,667

 
3,039

 
(908
)
 
154,798

   Residential mortgage-backed securities
 
386,005

 
8,474

 
(1,907
)
 
392,572

   Corporate bonds
 
699,501

 
39,742

 
(1,198
)
 
738,045

   Asset-backed other securities
 
999

 

 

 
999

   Foreign government
 
6,233

 

 
(14
)
 
6,219

   Commercial mortgage-backed securities
 
21,544

 
834

 

 
22,378

Subtotal
 
$
1,478,456

 
$
53,880

 
$
(5,278
)
 
$
1,527,058

Less: Securities pledged
 
62,637

 
555

 
(39
)
 
63,153

Total
 
$
1,415,819

 
$
53,325

 
$
(5,239
)
 
$
1,463,905

December 31, 2013
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Equity securities:
 
 
 
 
 
 
 
 
   Common stock
 
$
1,939

 
$

 
$

 
$
1,939

   Preferred stock
 
5,000

 

 
(652
)
 
4,348

Fixed maturities:
 
 
 
 
 
 
 
 
   U.S. Treasury and Federal agencies
 
30,655

 
920

 

 
31,575

   States and political subdivisions bonds
 
101,105

 
1,681

 
(3,202
)
 
99,584

   Residential mortgage-backed securities
 
272,820

 
4,136

 
(7,527
)
 
269,429

   Corporate bonds
 
477,442

 
21,397

 
(7,044
)
 
491,795

   Commercial mortgage-backed securities
 
8,179

 

 
(51
)
 
8,128

Subtotal
 
$
897,140

 
$
28,134

 
$
(18,476
)
 
$
906,798

Less: Securities pledged
 
133,013

 
3,884

 
(2,975
)
 
133,922

Total
 
$
764,127

 
$
24,250

 
$
(15,501
)
 
$
772,876


The amortized cost and fair value of available-for-sale debt securities held as of June 30, 2014, by contractual maturity, are shown in the table below. Actual maturities may differ from contractual maturities because some borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

9

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

June 30, 2014
 
Cost or Amortized
Cost
 
Fair
Value
Due in one year or less
 
$
11,840

 
$
11,950

Due after one year through five years
 
298,690

 
306,268

Due after five years through ten years
 
644,233

 
676,029

Due after ten years
 
95,557

 
97,725

Mortgage-backed securities
 
407,549

 
414,950

Total
 
$
1,457,869

 
$
1,506,922


(b) Investment Income

The components of net investment income consisted of the following:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2014
 
2013
 
2014
 
2013
Interest
 
 
 
 
 
 
 
 
Cash and short term investments
 
$
7

 
$
3

 
$
17

 
$
5

Fixed maturities
 
11,926

 
9,442

 
21,679

 
18,182

Investment Income
 
11,933

 
9,445

 
21,696

 
18,187

Investment expense
 
(560
)
 
(2,169
)
 
(1,029
)
 
(4,334
)
Repurchase Agreements interest expense
 
(52
)
 
(95
)
 
(132
)
 
(199
)
Net Investment Income
 
$
11,321

 
$
7,181

 
$
20,535

 
$
13,654


(c) Realized Gains and Losses

Proceeds from sales of fixed maturity securities during the six months ended June 30, 2014 and 2013 were $0 and $174,327, respectively.

The tables below indicate the gross realized gains and losses for the three and six months ended June 30, 2014 and 2013.

Three Months Ended June 30, 2014
 
Gross Gains
 
Gross Losses
 
Net Gains (Losses)
Fixed maturity securities
 
$

 
$

 
$


Three Months Ended June 30, 2013
 
Gross Gains
 
Gross Losses
 
Net Gains (Losses)
Fixed maturity securities
 
$
4,662

 
$
(5,413
)
 
$
(751
)

Six Months Ended June 30, 2014
 
Gross Gains
 
Gross Losses
 
Net Gains (Losses)
Fixed maturity securities
 
$

 
$

 
$


Six Months Ended June 30, 2013
 
Gross Gains
 
Gross Losses
 
Net Gains (Losses)
Fixed maturity securities
 
$
6,386

 
$
(5,439
)
 
$
947



10

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)


(d) Unrealized Gains and Losses

Unrealized gains (losses) on fixed maturity securities, equity securities and securities sold but not yet purchased consisted of the following:

June 30, 2014
 
 
Net unrealized loss on common stock
 
$
(279
)
Net unrealized loss on preferred stock
 
(172
)
Net unrealized gains on fixed maturity securities
 
49,053

Deferred income tax expense
 
(16,664
)
Net unrealized gains, net of deferred income tax expense
 
$
31,938

 
 
 
Change in net unrealized gains, net of deferred income tax expense
 
$
24,878


December 31, 2013
 
 
Net unrealized loss on preferred stock
 
$
(652
)
Net unrealized gains on fixed maturity securities
 
10,310

Deferred income tax expense
 
(2,598
)
Net unrealized gains, net of deferred income tax expense
 
$
7,060


(e) Gross Unrealized Losses

The tables below summarize the gross unrealized losses of fixed maturity and equity securities by length of time the security has continuously been in an unrealized loss position as of June 30, 2014 and December 31, 2013:
 
 
Less Than 12 Months
 
12 Months or More
 
Total
June 30, 2014
 
Fair
Market
Value
 
Unrealized
Losses
 
No. of
Positions
Held
 
Fair
Market
Value
 
Unrealized
Losses
 
No. of
Positions
Held
 
Fair
Market
Value
 
Unrealized
Losses
Common stock
 
$
1,033

 
$
(907
)
 
1

 
$

 
$

 

 
$
1,033

 
$
(907
)
Preferred stock
 

 

 

 
4,828

 
(175
)
 
1

 
4,828

 
(175
)
U.S. Government
 
166,971

 
(169
)
 
2

 

 

 

 
166,971

 
(169
)
States and political subdivisions
 
18,807

 
(215
)
 
7

 
11,470

 
(693
)
 
11

 
30,277

 
(908
)
Residential Mortgage-backed
 
126,116

 
(1,877
)
 
11

 
2,063

 
(30
)
 
3

 
128,179

 
(1,907
)
Foreign government
 
6,221

 
(14
)
 
1

 

 

 

 
6,221

 
(14
)
Corporate bonds
 
25,773

 
(125
)
 
12

 
36,593

 
(1,073
)
 
17

 
62,366

 
(1,198
)
Total
 
$
344,921

 
$
(3,307
)
 
34

 
$
54,954

 
$
(1,971
)
 
32

 
$
399,875

 
$
(5,278
)

11

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

 
 
Less Than 12 Months
 
12 Months or More
 
Total
December 31, 2013
 
Fair
Market
Value
 
Unrealized
Losses
 
No. of
Positions
Held
 
Fair
Market
Value
 
Unrealized
Losses
 
No. of
Positions
Held
 
Fair
Market
Value
 
Unrealized
Losses
Preferred stock
 
$
4,348

 
$
(652
)
 
1

 
$

 
$

 

 
$
4,348

 
$
(652
)
States and political subdivisions
 
32,770

 
(2,622
)
 
18

 
2,600

 
(580
)
 
2

 
35,370

 
(3,202
)
Residential Mortgage-backed
 
176,491

 
(7,527
)
 
6

 

 

 

 
176,491

 
(7,527
)
Commercial Mortgage-backed
 
8,128

 
(51
)
 
2

 

 

 

 
8,128

 
(51
)
Corporate bonds
 
128,362

 
(4,051
)
 
39

 
41,673

 
(2,993
)
 
9

 
170,035

 
(7,044
)
Total
 
$
350,099

 
$
(14,903
)
 
66

 
$
44,273

 
$
(3,573
)
 
11

 
$
394,372

 
$
(18,476
)

There were 66 and 77 securities at June 30, 2014 and December 31, 2013, respectively, that account for the gross unrealized loss, none of which are deemed by the Company to be an other-than-temporary impairment (“OTTI”). Significant factors influencing the Company’s determination that none of the securities are OTTI included the magnitude of unrealized losses in relation to cost, the nature of the investment and management’s intent not to sell these securities and it being more likely than not that the Company will not be required to sell these investments before anticipated recovery of fair value to the Company’s cost basis.

(f) Restricted Cash and Investments

The Company, in order to conduct business in certain states, is required to maintain letters of credit or assets on deposit to support state mandated regulatory requirements and certain third party agreements. The Company also utilizes trust accounts to collateralize business with its reinsurance counterparties. These assets held are primarily in the form of cash or certain high grade securities. The fair values of our restricted assets as of June 30, 2014 and December 31, 2013 are as follows:
 
 
June 30, 2014
 
December 31, 2013
Restricted cash
 
$
13,034

 
$
1,155

Restricted investments - fixed maturities at fair value
 
44,079

 
42,092

Total restricted cash and investments
 
$
57,113

 
$
43,247


(g) Other

The Company enters into reverse repurchase and repurchase agreements, which are accounted for as either collateralized lending or borrowing transactions and are recorded at contract amounts which approximate fair value. For the collateralized borrowing transactions (i.e., repurchase agreements), the Company receives cash or securities that it invests or holds in short-term or fixed income securities. As of June 30, 2014, the Company had collateralized borrowing transaction principal outstanding of $60,097 at interest rates between 0.14% and 0.45%. As of December 31, 2013, the Company had collateralized borrowing transaction principal outstanding of $109,629 at interest rates between 0.37% and 0.44%. Interest expense associated with the repurchase borrowing agreements for the three and six months ended June 30, 2014 was $52 and $132, respectively. Interest expense associated with the repurchase borrowing agreements for the three and six months ended June 30, 2013 was $95 and $199, respectively. The Company has approximately $63,153 and $133,922 of collateral pledged in support for these agreements as of June 30, 2014 and December 31, 2013, respectively.

4. Fair Value of Financial Instruments

ASC 820, “Fair Value Measurements and Disclosures”, provides a definition of fair value, establishes a framework for measuring fair value, and requires expanded disclosures about fair value measurements. The standard applies when GAAP requires or allows assets or liabilities to be measured at fair value; therefore, it does not expand the use of fair value in any new circumstance.
The Company utilized a pricing service to estimate fair value measurements for approximately 100.0% of its fixed maturities. For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these prices in the amounts disclosed in Level 1 of the fair value hierarchy. The Company receives the quoted market prices from nationally recognized third-party pricing services (“pricing services”). When quoted market prices are unavailable,

12

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

the Company utilizes a pricing service to determine an estimate of fair value. This pricing method is used, primarily, for fixed maturities. The fair value estimates provided by the pricing service are included in Level 2 of the fair value hierarchy. If the Company determines that the fair value estimate provided by the pricing service does not represent fair value or if quoted market prices and an estimate from pricing services are unavailable, the Company produces an estimate of fair value based on dealer quotations of the bid price for recent activity in positions with the same or similar characteristics to that being valued or through consensus pricing of a pricing service. Depending on the level of observable inputs, the Company will then determine if the estimate is in Level 2 or Level 3 of the fair value hierarchy.
The following describes the valuation techniques used by the Company to determine the fair value of financial instruments held as of June 30, 2014.
Equity Securities ‑ For public common and preferred stocks, the Company receives prices from a nationally recognized pricing service that are based on observable market transactions and includes these estimates in the amount disclosed in Level 1. When current market quotes in active markets are unavailable for certain non-redeemable preferred stocks held by the Company, the Company receives an estimate of fair value from the pricing service that provides fair value estimates for the Company’s fixed maturities. The service utilizes some of the same methodologies to price the non-redeemable preferred stocks as it does for the fixed maturities. The Company includes the estimate in the amount disclosed in Level 2.
U.S. Treasury and Federal Agencies ‑ Comprised of primarily bonds issued by the U.S. Treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association and the Federal National Mortgage Association. The fair values of U.S. government securities are based on quoted market prices in active markets, and are included in the Level 1 fair value hierarchy. The Company believes the market for U.S. Treasury securities is an actively traded market given the high level of daily trading volume. The fair values of U.S. government agency securities are priced using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. government agency securities are included in the Level 2 fair value hierarchy.
State and Political Subdivision Bonds ‑ Comprised of bonds and auction rate securities issued by U.S. state and municipality entities or agencies. The fair values of municipal bonds are generally priced by pricing services. The pricing services typically use spreads obtained from broker-dealers, trade prices and the new issue market. As the significant inputs used to price the municipal bonds are observable market inputs, these are classified within Level 2. Municipal auction rate securities are reported in the consolidated balance sheets at cost which approximates their fair value.
Corporate Bonds ‑ Comprised of bonds issued by corporations and are generally priced by pricing services. The fair values of corporate bonds that are short term are priced, by the pricing services, using the spread above the London Interbank Offering Rate ("LIBOR") yield curve and the fair value of corporate bonds that are long term are priced using the spread above the risk-free yield curve. The spreads are sourced from broker/dealers, trade prices and the new issue market. Where pricing is unavailable from pricing services, the Company obtains non-binding quotes from broker dealers. As the significant inputs used to price corporate bonds are observable market inputs, the fair values of corporate bonds are included in the Level 2 fair value hierarchy.
Mortgage-backed Securities ‑ Comprised of commercial and residential mortgage-backed securities. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price are observable market inputs, the fair value of these securities are included in the Level 2 fair value hierarchy.
Premiums and other receivables - The carrying values reported in the accompanying balance sheets for these financial instruments approximate their fair values due to the short term nature of these assets.
Notes Payable - The amount reported in the accompanying balance sheets for this financial instrument represents the carrying value of the debt. As of June 30, 2014, the current fair value of the Company's 6.75% Notes, Imperial-related Notes and Surplus Notes, which are not publicly traded, were $271,470, $3,497 and $4,982, respectively. The fair value of the Company’s 6.75% Notes was determined using market-based metrics and the magnitude and timing of contractual interest and principal payments.  The Imperial-related Notes and the Surplus Notes were both valued using the Black Derman-Toy interest rate lattice model.
In accordance with ASC 820, assets and liabilities measured at fair value on a recurring basis are as follows:


13

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

 
 
 
 
 
 
 
 
 
June 30, 2014
 
Recurring Fair Value Measures
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
Common stock
 
$
15,263

 
$

 
$

 
$
15,263

Preferred stock
 

 
4,873

 

 
4,873

Fixed maturities:
 
 
 
 
 
 
 

U.S. Treasury and Federal agencies
 
191,911

 

 

 
191,911

State and political subdivision bonds
 

 
154,798

 

 
154,798

Residential mortgage-backed securities
 

 
392,572

 

 
392,572

Corporate bonds
 

 
738,045

 

 
738,045

Commercial mortgage-backed securities
 

 
22,378

 

 
22,378

Asset-backed other securities
 

 
999

 

 
999

Foreign government
 

 
6,219

 

 
6,219

Other investments
 

 

 
4,285

 
4,285

Total assets
 
$
207,174

 
$
1,319,884

 
$
4,285

 
$
1,531,343

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
 
$

 
$
60,097

 
$

 
$
60,097

Total liabilities
 
$

 
$
60,097

 
$

 
$
60,097



 
 
 
 
 
 
 
 
 
December 31, 2013
 
Recurring Fair Value Measures
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
Equity securities:
 
 
 
 
 
 
 
 
Common stock
 
$
1,939

 
$

 
$

 
$
1,939

Preferred stock
 

 
4,348

 

 
4,348

Fixed maturities:
 
 
 
 
 
 
 

U.S. Treasury and Federal agencies
 
31,575

 

 

 
31,575

State and political subdivision bonds
 

 
99,584

 

 
99,584

Residential mortgage-backed securities
 

 
269,429

 

 
269,429

Corporate bonds
 

 
491,795

 

 
491,795

Commercial mortgage-backed securities
 

 
8,128

 

 
8,128

Other investments
 

 

 
2,893

 
2,893

Total assets
 
$
33,514

 
$
873,284

 
$
2,893

 
$
909,691

 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
 
$

 
$
109,629

 
$

 
$
109,629

Total liabilities
 
$

 
$
109,629

 
$

 
$
109,629


There have not been any transfers between Level 1 and Level 2, or Level 2 and Level 3, respectively, during the periods represented by these condensed consolidated financial statements.


14

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

The Company does not measure any assets or liabilities at fair value on a nonrecurring basis at June 30, 2014. The carrying value of the Company’s cash and cash equivalents, premiums and other receivables, accrued interest, accounts payable and accrued expenses approximates fair value given the short-term nature of such items.


5. Equity Investments in Unconsolidated Subsidiaries

In July 2010, the Company and AmTrust Financial Services, Inc. (“AmTrust”) formed Tiger Capital LLC (“Tiger”) for the purposes of acquiring certain life settlement contracts whereby each company initially contributed approximately $11,000 for the respective fifty percent ownership interests in Tiger. In 2011, the Company, through its wholly-owned subsidiary, American Capital Acquisition Investments, S.A. (“ACAI”), formed AMT Capital Alpha, LLC (“AMT Alpha”) with AmTrust for the purposes of acquiring additional life settlement contracts.

On March 28, 2013, the Company entered into a Stock Purchase Agreement with ACP Re Ltd. ("ACP Re") to acquire 50% of the issued and outstanding shares of AMT Capital Holdings S.A. (“AMTCH”), a Luxembourg Societe Anonyme, for cash consideration in the amount of $12,136. ACP Re Ltd. and the Company are majority owned and controlled by a common parent and the transaction is accounted for as between entities under common control. AMTCH’s primary purpose is to acquire certain life settlement contracts. AmTrust owns the remaining 50% of AMTCH. The Company accounts for AMTCH using the equity method of accounting. The Company’s 50% equity interest in AMTCH at the acquisition date was approximately $22,411. The difference between the equity interest and consideration paid was recorded as additional paid-in capital of $10,275.

In December 2013, ACAI and AmTrust formed AMT Capital Holdings II S.A (“AMTCH II”). The company is equally owned by both parties and was established for the purpose of acquiring additional life settlement contracts.

A life settlement contract is a contract between the owner of a life insurance policy and a third party who obtains the ownership and beneficiary rights of the underlying life insurance policy. The Company, along with AmTrust, is obligated to pay premiums on these life insurance policies as they come due. A third party serves as the administrator for two of the life settlement contract portfolios, for which it receives an administrative fee. The third-party administrator is eligible to receive a percentage of profits after certain time and performance thresholds have been met.

Tiger, AMT Alpha, AMTCH and AMTCH II are considered to be variable interest entities (“VIE”), for which the Company is not a primary beneficiary. In determining whether it is the primary beneficiary of a VIE, the Company considered qualitative and quantitative factors, including, but not limited to, activities that most significantly impact the VIE's economic performance and which party controls such activities. The Company does not have the ability to direct the activities of Tiger, AMT Alpha, AMTCH and AMTCH II that most significantly impact its economic performance. The Company’s maximum exposure to a loss as a result of its involvement with the unconsolidated VIE is limited to its recorded investment plus additional capital commitments. The Company uses the equity method of accounting to account for its investments in Tiger, AMT Alpha, AMTCH and AMTCH II (collectively, “LSC Entities”).

The Company currently has a fifty percent ownership interest in the LSC Entities. AmTrust owns the remaining fifty percent interest in the LSC Entities.

The following tables present the investment activity in the LSC Entities.
Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Tiger
 
AMT Alpha
 
AMTCH
 
AMTCH II
 
Total
Balance at beginning of period
 
$
73,186

 
$
6,537

 
$
32,966

 
$
13,497

 
$
126,186

Contributions
 
6,878

 
475

 
3,428

 
106

 
10,887

Equity in earnings (losses) of unconsolidated subsidiaries
 
(4,654
)
 
(77
)
 
(3,244
)
 
6,840

 
(1,135
)
Change in equity method investments
 
2,224

 
398

 
184

 
6,946

 
9,752

Balance at end of period
 
$
75,410

 
$
6,935

 
$
33,150

 
$
20,443

 
$
135,938



15

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

Six Months Ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
Tiger
 
AMT Alpha
 
AMTCH
 
Total
Balance at beginning of period
 
$
58,273

 
$
8,211

 
$

 
$
66,484

Contributions
 
5,890

 
300

 

 
6,190

Acquisition of interest
 

 

 
22,411

 
22,411

Equity in earnings (losses) of unconsolidated subsidiaries
 
1,999

 
(1,943
)
 
(845
)
 
(789
)
Change in equity method investments
 
7,889

 
(1,643
)
 
21,566

 
27,812

Balance at end of period
 
$
66,162

 
$
6,568

 
$
21,566

 
$
94,296


The following tables summarize total assets and total liabilities as of June 30, 2014 and December 31, 2013 for the Company’s unconsolidated equity method investment in the LSC Entities.
June 30, 2014
 
 
 
 
 
 
 
 
 
 
Condensed balance sheet data
 
Tiger
 
AMT Alpha
 
AMTCH
 
AMTCH II
 
Total
Investments in life settlement contracts at fair value
 
$
155,897

 
$
14,787

 
$
64,210

 
$
41,305

 
$
276,199

Total assets
 
166,507

 
15,224

 
66,716

 
42,853

 
291,300

Total liabilities
 
15,687

 
1,353

 
416

 
1,968

 
19,424

Members' equity
 
150,820

 
13,871

 
66,300

 
40,885

 
271,876

NGHC's 50% ownership interest
 
$
75,410

 
$
6,935

 
$
33,150

 
$
20,443

 
$
135,938


December 31, 2013
 
 
 
 
 
 
 
 
 
 
Condensed balance sheet data
 
Tiger
 
AMT Alpha
 
AMTCH
 
AMTCH II
 
Total
Investments in life settlement contracts at fair value
 
$
153,684

 
$
14,366

 
$
64,974

 
$

 
$
233,024

Total assets
 
163,169

 
14,416

 
66,168

 
27,005

 
270,758

Total liabilities
 
16,797

 
1,342

 
236

 
12

 
18,387

Members' equity
 
146,372

 
13,074

 
65,932

 
26,993

 
252,371

NGHC's 50% ownership interest
 
$
73,186

 
$
6,537

 
$
32,966

 
$
13,497

 
$
126,186



The following tables summarize the results of operations for the Company's unconsolidated equity method investment in the LSC Entities for the three and six months ended June 30, 2014 and 2013.

Three Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
Condensed results of operations
 
Tiger
 
AMT Alpha
 
AMTCH
 
AMTCH II
 
Total
Revenue, net of commission
 
$
(2,933
)
 
$
(202
)
 
$
(2,106
)
 
$
777

 
$
(4,464
)
Total expenses
 
284

 
7

 
256

 
59

 
606

Net income (loss)
 
$
(3,217
)
 
$
(209
)
 
$
(2,362
)
 
$
718

 
$
(5,070
)
NGHC's ownership interest
 
$
(1,609
)
 
$
(104
)
 
$
(1,181
)
 
$
359

 
$
(2,535
)


16

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousands, Except Shares and Per Share Data)

Three Months Ended June 30, 2013
 
 
 
 
 
 
 
 
Condensed results of operations
 
Tiger
 
AMT Alpha
 
AMTCH
 
Total
Revenue, net of commission
 
$
2,123

 
$
236

 
$
358

 
$
2,717

Total expenses
 
666

 
10

 
464