10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2019

OR

☐ 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)	(I.R.S. Employer Identification No.)

59 Maiden Lane, 38th Floor

New York, New York

(Address of Principal Executive Offices)

10038

(Zip Code)

(212) 380-9500

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	NGHC	The Nasdaq Stock Market LLC
7.50% Non-Cumulative Preferred Stock, Series A	NGHCP	The Nasdaq Stock Market LLC
Depositary Shares, Representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series B	NGHCO	The Nasdaq Stock Market LLC
Depositary Shares, Representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series C	NGHCN	The Nasdaq Stock Market LLC
7.625% Subordinated Notes due 2055	NGHCZ	The Nasdaq Stock Market LLC

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 28, 2019, the number of common shares of the registrant outstanding was 113,327,683.

NATIONAL GENERAL HOLDINGS CORP.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 2019 and 2018	3
	Condensed Consolidated Statements of Comprehensive Income - Three and Nine Months Ended September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity - Three and Nine Months Ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 2019 and 2018	7
	Notes to Unaudited Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	47
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	78
Item 4.	Controls and Procedures	80
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	81
Item 1A.	Risk Factors	81
Item 6.	Exhibits	81
	Signatures	82

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) (Unaudited)
	September 30,		December 31,
	2019		2018
ASSETS
Investments:
Debt securities, available-for-sale, at fair value (Exchanges - $307,388 and $297,083)	$	4,141,214	$	3,561,032
Equity securities, at fair value	2,760		10,949
Short-term investments (Exchanges - $27,010 and $17,328)	393,663		348,549
Other investments (related parties - $234,617 and $233,723)	301,615		306,276
Total investments	4,839,252		4,226,806
Cash and cash equivalents (Exchanges - $153 and $0)	199,419		193,858
Restricted cash and cash equivalents (Exchanges - $281 and $200)	27,903		39,725
Accrued investment income (related parties - $1,195 and $2,362) (Exchanges - $2,241 and $1,596)	27,946		27,177
Premiums and other receivables, net (Exchanges - $62,540 and $61,327)	1,541,126		1,399,812
Deferred acquisition costs (Exchanges - $23,113 and $20,007)	267,659		251,408
Reinsurance recoverable (related parties - $4,496 and $7,425) (Exchanges - $120,192 and $117,068)	1,504,599		1,611,738
Prepaid reinsurance premiums (Exchanges - $118,042 and $136,433)	643,218		665,674
Premises and equipment, net (Exchanges - $441 and $1,695)	403,857		308,004
Intangible assets, net (Exchanges - $3,270 and $3,405)	392,223		379,937
Goodwill	181,587		180,183
Prepaid and other assets (Exchanges - $11 and $4,581)	45,207		154,958
Total assets	$	10,073,996	$	9,439,280

See accompanying notes to unaudited condensed consolidated financial statements.

1

NATIONAL GENERAL HOLDINGS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Shares and Par Value per Share) (Unaudited)
	September 30,			December 31,
	2019			2018
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves (Exchanges - $193,456 and $178,470)	$	3,039,255		$	2,957,159
Unearned premiums and other revenue (Exchanges - $265,538 and $265,763)	2,450,476			2,280,728
Reinsurance payable (Exchanges - $44,424 and $40,393)	673,724			656,265
Accounts payable and accrued expenses (related parties - $771 and $69,874) (Exchanges - $5,200 and $7,720)	317,675			398,058
Debt	687,978			705,795
Other liabilities (Exchanges - $43,754 and $61,640)	373,269			240,404
Total liabilities	$	7,542,377		$	7,238,409
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, $0.01 par value - authorized 150,000,000 shares, issued and outstanding 113,313,042 shares - 2019; authorized 150,000,000 shares, issued and outstanding 112,940,595 shares - 2018.	$	1,133		$	1,129
Preferred stock, $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - 2019; authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - 2018. Aggregate liquidation preference $450,000 - 2019, $450,000 - 2018.	450,000			450,000
Additional paid-in capital	1,062,859			1,057,783
Accumulated other comprehensive income:
Unrealized foreign currency translation adjustment, net of tax	(20,901		)	(14,461		)
Unrealized gain (loss) on investments, net of tax	101,288			(37,669		)
Total accumulated other comprehensive income (loss)	80,387			(52,130		)
Retained earnings	965,455			764,056
Total National General Holdings Corp. Stockholders’ Equity	2,559,834			2,220,838
Noncontrolling interest	(28,215		)	(19,967		)
Total stockholders’ equity	$	2,531,619		$	2,200,871
Total liabilities and stockholders’ equity	$	10,073,996		$	9,439,280

See accompanying notes to unaudited condensed consolidated financial statements.

2

NATIONAL GENERAL HOLDINGS CORP. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In Thousands, Except Per Share Data) (Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Net earned premium	$	1,053,638		$	939,527		$	3,048,446		$	2,787,971
Ceding commission income	57,587			59,100			187,313			158,976
Service and fee income	161,626			142,690			476,041			415,313
Net investment income	33,740			30,696			102,316			81,702
Net loss on investments	(565		)	(3,170		)	(5,773		)	(22,756		)
Other income	2,146			—			2,146			—
Total revenues	1,308,172			1,168,843			3,810,489			3,421,206
Expenses:
Loss and loss adjustment expense	745,334			657,310			2,112,678			1,961,804
Acquisition costs and other underwriting expenses	209,090			191,470			615,134			542,040
General and administrative expenses	263,864			235,733			759,725			691,167
Interest expense	12,898			12,583			38,822			38,775
Total expenses	1,231,186			1,097,096			3,526,359			3,233,786
Income before provision for income taxes	76,986			71,747			284,130			187,420
Provision for income taxes	16,747			15,518			61,494			38,261
Net income	60,239			56,229			222,636			149,159
Net (income) loss attributable to noncontrolling interest	10,915			12,153			18,152			31,979
Net income attributable to NGHC	71,154			68,382			240,788			181,138
Dividends on preferred stock	(7,875		)	(7,875		)	(24,675		)	(23,625		)
Net income attributable to NGHC common stockholders	$	63,279		$	60,507		$	216,113		$	157,513
Earnings per common share (“EPS”):
Basic EPS	$	0.56		$	0.56		$	1.91		$	1.47
Diluted EPS	$	0.54		$	0.55		$	1.87		$	1.44

See accompanying notes to unaudited condensed consolidated financial statements.

3

NATIONAL GENERAL HOLDINGS CORP. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands) (Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income	$	60,239		$	56,229		$	222,636		$	149,159
Other comprehensive income:
Foreign currency translation adjustment	(4,104		)	926			(8,147		)	(9,278		)
Income tax effect	862			115			1,707			1,948
Total foreign currency translation adjustment, net of tax	(3,242		)	1,041			(6,440		)	(7,330		)
Gross unrealized gain (loss) on investments before reclassifications	33,294			(16,574		)	190,266			(93,695		)
Income tax effect	(6,991		)	3,227			(39,955		)	19,676
Total change in net unrealized gain (loss) on investments, net of tax	26,303			(13,347		)	150,311			(74,019		)
Reclassification adjustments for investments gain/loss to net income:
Net realized (gain) loss on investments	(1,886		)	(1,820		)	(1,835		)	17,737
Income tax effect	396			382			385			(3,725		)
Total (gain) loss on investments reclassifications to net income, net of tax	(1,490		)	(1,438		)	(1,450		)	14,012
Other comprehensive income (loss) before income tax effect	27,304			(17,468		)	180,284			(85,236		)
Income tax effect	(5,733		)	3,724			(37,863		)	17,899
Other comprehensive income (loss), net of tax	21,571			(13,744		)	142,421			(67,337		)
Comprehensive income	81,810			42,485			365,057			81,822
Comprehensive (income) loss attributable to noncontrolling interest	9,821			13,014			8,248			38,811
Comprehensive income attributable to NGHC	$	91,631		$	55,499		$	373,305		$	120,633

See accompanying notes to unaudited condensed consolidated financial statements.

4

NATIONAL GENERAL HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Shares)

(Unaudited)

	Three Months Ended September 30, 2019
	Common Stock				Preferred Stock
	Shares		$		Shares	$		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Retained Earnings			Noncontrolling Interest			Total
Balance, beginning of period	113,215,632		$	1,132	2,565,120	$	450,000	$	1,060,379		$	59,910		$	907,841		$	(18,394	)	$	2,460,868
Net income (loss)	—		—		—	—		—			—			71,154			(10,915		)	60,239
Foreign currency translation adjustment, net of tax	—		—		—	—		—			(3,242		)	—			—			(3,242		)
Change in unrealized gain on investments, net of tax	—		—		—	—		—			23,719			—			1,094			24,813
Common stock dividends declared	—		—		—	—		—			—			(5,665		)	—			(5,665		)
Preferred stock dividends declared	—		—		—	—		—			—			(7,875		)	—			(7,875		)
Common stock issued under employee stock plans and exercises of stock options	117,796		1		—	—		188			—			—			—			189
Shares withheld related to net share settlement	(20,386	)	—		—	—		(493		)	—			—			—			(493		)
Stock-based compensation	—		—		—	—		2,785			—			—			—			2,785
Balance, end of period	113,313,042		$	1,133	2,565,120	$	450,000	$	1,062,859		$	80,387		$	965,455		$	(28,215	)	$	2,531,619

	Three Months Ended September 30, 2018
	Common Stock				Preferred Stock
	Shares		$		Shares	$		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interest			Total
Balance, beginning of period	107,057,771		$	1,071	2,565,000	$	420,000	$	921,744		$	(55,698	)	$	695,099		$	(941	)	$	1,981,275
Net income (loss)	—		—		—	—		—			—			68,382			(12,153		)	56,229
Foreign currency translation adjustment, net of tax	—		—		—	—		—			1,041			—			—			1,041
Change in unrealized loss on investments, net of tax	—		—		—	—		—			(13,924		)	—			(861		)	(14,785		)
Issuance of preferred stock	—		—		120	30,000		(110		)	—			—			—			29,890
Common stock dividends declared	—		—		—	—		—			—			(4,286		)	—			(4,286		)
Preferred stock dividends declared	—		—		—	—		—			—			(7,875		)	—			(7,875		)
Common stock issued under employee stock plans and exercises of stock options	104,951		—		—	—		48			—			—			—			48
Shares withheld related to net share settlement	(30,162	)	—		—	—		(841		)	—			—			—			(841		)
Stock-based compensation	—		—		—	—		2,283			—			—			—			2,283
Balance, end of period	107,132,560		$	1,071	2,565,120	$	450,000	$	923,124		$	(68,581	)	$	751,320		$	(13,955	)	$	2,042,979

See accompanying notes to unaudited condensed consolidated financial statements.

5

NATIONAL GENERAL HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In Thousands, Except Shares)

(Unaudited)

	Nine Months Ended September 30, 2019
	Common Stock				Preferred Stock
	Shares		$		Shares	$		Additional Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Noncontrolling Interest			Total
Balance January 1, 2019	112,940,595		$	1,129	2,565,120	$	450,000	$	1,057,783		$	(52,130	)	$	764,056		$	(19,967	)	$	2,200,871
Net income (loss)	—		—		—	—		—			—			240,788			(18,152		)	222,636
Foreign currency translation adjustment, net of tax	—		—		—	—		—			(6,440		)	—			—			(6,440		)
Change in unrealized gain on investments, net of tax	—		—		—	—		—			138,957			—			9,904			148,861
Common stock dividends declared	—		—		—	—		—			—			(14,714		)	—			(14,714		)
Preferred stock dividends declared	—		—		—	—		—			—			(24,675		)	—			(24,675		)
Common stock issued under employee stock plans and exercises of stock options	518,284		4		—	—		432			—			—			—			436
Shares withheld related to net share settlement	(145,837	)	—		—	—		(3,633		)	—			—			—			(3,633		)
Stock-based compensation	—		—		—	—		8,277			—			—			—			8,277
Balance September 30, 2019	113,313,042		$	1,133	2,565,120	$	450,000	$	1,062,859		$	80,387		$	965,455		$	(28,215	)	$	2,531,619

	Nine Months Ended September 30, 2018
	Common Stock				Preferred Stock
	Shares		$		Shares	$		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interest			Total
Balance January 1, 2018	106,697,648		$	1,067	2,565,000	$	420,000	$	917,751		$	(8,112	)	$	597,863		$	24,856		$	1,953,425
Cumulative-effect adjustment of change in accounting principles	—		—		—	—		—			36			8,794			—			8,830
Net income (loss)	—		—		—	—		—			—			181,138			(31,979		)	149,159
Foreign currency translation adjustment, net of tax	—		—		—	—		—			(7,330		)	—			—			(7,330		)
Change in unrealized loss on investments, net of tax	—		—		—	—		—			(53,175		)	—			(6,832		)	(60,007		)
Issuance of preferred stock	—		—		120	30,000		(110		)	—			—			—			29,890
Common stock dividends declared	—		—		—	—		—			—			(12,850		)	—			(12,850		)
Preferred stock dividends declared	—		—		—	—		—			—			(23,625		)	—			(23,625		)
Common stock issued under employee stock plans and exercises of stock options	557,622		4		—	—		1,645			—			—			—			1,649
Shares withheld related to net share settlement	(122,710	)	—		—	—		(2,955		)	—			—			—			(2,955		)
Stock-based compensation	—		—		—	—		6,793			—			—			—			6,793
Balance September 30, 2018	107,132,560		$	1,071	2,565,120	$	450,000	$	923,124		$	(68,581	)	$	751,320		$	(13,955	)	$	2,042,979

See accompanying notes to unaudited condensed consolidated financial statements.

6

NATIONAL GENERAL HOLDINGS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities:
Net income	$	222,636		$	149,159
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Net loss on investments	5,773			22,756
Bad debt expense	61,334			55,989
Depreciation and amortization	87,055			64,980
Stock-based compensation expense	8,277			6,793
Other, net	(3,159		)	922
Changes in assets and liabilities:
Accrued investment income	(195		)	(1,641		)
Premiums and other receivables	(172,034		)	(208,847		)
Deferred acquisition costs	(17,397		)	(36,647		)
Reinsurance recoverable	118,763			(233,216		)
Prepaid reinsurance premiums	29,372			(163,632		)
Prepaid expenses and other assets	81,324			28,274
Unpaid loss and loss adjustment expense reserves	(14,165		)	199,905
Unearned premiums and other revenue	93,853			316,556
Reinsurance payable	16,361			258,686
Accounts payable and accrued expenses	(578		)	24,874
Other liabilities	(7,766		)	(24,837		)
Net cash provided by operating activities	509,454			460,074
Cash flows from investing activities:
Purchases of:
Debt securities, available-for-sale	(863,050		)	(1,358,877		)
Equity securities	—			(1,297		)
Short-term investments	(2,328,055		)	(2,055,421		)
Other investments	(4,554		)	(27,620		)
Premises and equipment	(84,285		)	(84,779		)
Proceeds from:
Sale and maturity of debt securities, available-for-sale	518,170			1,180,945
Sale of equity securities	1,700			3,448
Sale of short-term investments	2,293,700			1,916,739
Sale and return of other investments	11,639			120,905
Other investing activities, net	16,128			(18,724		)
Net cash used in investing activities	$	(438,607	)	$	(324,681	)

See accompanying notes to unaudited condensed consolidated financial statements.

7

NATIONAL GENERAL HOLDINGS CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
	Nine Months Ended September 30,
	2019			2018
Cash flows from financing activities:
Payments of debt issuance costs	$	(1,726	)	$	—
Repayments of debt and principal payments under capital leases obligations	(29,826		)	(39,000		)
Issuance of preferred stock, net (fees $0 and $110)	—			29,890
Issuance of common stock — employee share options	436			1,649
Taxes paid related to net share settlement of equity awards	(3,633		)	(2,955		)
Dividends paid to common shareholders	(13,573		)	(12,826		)
Dividends paid to preferred shareholders	(25,667		)	(23,625		)
Net cash used in financing activities	(73,989		)	(46,867		)
Effect of exchange rate changes on cash and cash equivalents	(3,119		)	(11,080		)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(6,261		)	77,446
Cash, cash equivalents, and restricted cash at beginning of the period	233,583			357,484
Cash, cash equivalents, and restricted cash at end of the period	$	227,322		$	434,930
Supplemental disclosures of non-cash financing activities:
Accrued common stock dividends	$	5,664		$	4,286
Accrued preferred stock dividends	7,875			7,875

See accompanying notes to unaudited condensed consolidated financial statements.

8

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”) 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 (the “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, 2018 previously filed with the SEC on February 25, 2019. The balance sheet at December 31, 2018, has been derived from the audited consolidated financial statements at that date.

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.

The unaudited condensed consolidated financial statements include the accounts and operations of Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together with their subsidiaries, the “Reciprocal Exchanges” or “Exchanges”). The Company has no ownership interest in the Reciprocal Exchanges but manages their business operations and has the ability to direct their activities through its wholly-owned management companies. The Reciprocal Exchanges are property and casualty insurers.

As of December 31, 2018, the Company reclassified finance lease liabilities in the amount of $30,346 from “Other liabilities” to “Debt” on the Condensed Consolidated Balance Sheets to conform to the current-year presentation.

A detailed description of the Company’s significant accounting policies and management judgments is located in the notes to the audited consolidated financial statements, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC.

2. Recent Accounting Pronouncements

Adopted During 2019

Standard	Description	Date of Adoption	Effect on the Company
ASU 2016-02, Leases (Topic 842) and related amendments.	This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.	January 1, 2019	The Company adopted the standard as of the beginning of the year using the modified retrospective transition approach and did not adjust prior comparative periods. On January 1, 2019, the Company recorded the recognition of the ROU asset and lease liability net of deferred rent, inducement costs and deferred tax impact of $85,000, in both assets and liabilities on its consolidated balance sheets. The adoption of the standard did not have a material effect on the Company’s results of operations and had no impact on cash flows. See Note 10, “Leases” for additional information.

9

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Not Yet Adopted

With the exception of the adopted or not yet adopted accounting pronouncements discussed here, there have been no recent accounting pronouncements, or quantitative or qualitative progress made towards implementation of outstanding accounting pronouncements during the nine months ended September 30, 2019, as compared to those described in Note 2, “Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, that are of significance, or potential significance, to the Company.

Standard	Description	Effective Date	Effect on the Company
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related amendments.	This standard significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. Companies will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326 and impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies that an entity should include recoveries when estimating the allowance for credit losses. The FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value. The standard requires using a modified retrospective approach, recognizing a cumulative-effect adjustment as of the beginning of the first reporting period in which the standard is effective.	January 1, 2020	The Company has identified certain financial assets in scope, including debt securities classified as available for sale, financing receivables and reinsurance recoverables. The impact on the Company’s financial condition, results of operations, cash flows and disclosures at the date of adoption of the updated standard will be determined by the financial instruments held by the Company and the macroeconomic conditions and exposures at that time. The Company’s implementation and evaluation process to date includes, but is not limited to, model development, fulfillment of additional data needs for new disclosures and reporting requirements, and drafting of accounting policies. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the adoption of the standard is not expected to have a material impact on its consolidated financial statements.
ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.	This standard establishes a one-step process for testing the value of the goodwill which an entity carries. ASU 2017-04 requires the goodwill impairment to be measured as the excess of the reporting unit’s carrying amount over its fair value. Early adoption is permitted for interim or annual goodwill impairment tests.	January 1, 2020	The impact of the standard will depend upon the performance of the Company’s reporting units and the market conditions impacting the fair value of each reporting unit going forward. The adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.

10

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 Debt Securities

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

September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	72,188	$	2,300	$	(53	)	$	74,435
Federal agencies	4,379		33		(1		)	4,411
States and political subdivision bonds	188,037		6,017		(30		)	194,024
Foreign government	141,026		5,875		(22		)	146,879
Corporate bonds	1,695,694		71,298		(949		)	1,766,043
Residential mortgage-backed securities	1,019,630		19,513		(1,950		)	1,037,193
Commercial mortgage-backed securities	573,911		35,690		(28		)	609,573
Asset-backed securities	58,555		1,321		(47		)	59,829
Structured securities	252,957		202		(4,332		)	248,827
Total	$	4,006,377	$	142,249	$	(7,412	)	$	4,141,214
NGHC	$	3,705,639	$	135,248	$	(7,061	)	$	3,833,826
Reciprocal Exchanges	300,738		7,001		(351		)	307,388
Total	$	4,006,377	$	142,249	$	(7,412	)	$	4,141,214

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	64,829	$	1,026	$	(262	)	$	65,593
Federal agencies	37,842		22		(389		)	37,475
States and political subdivision bonds	274,367		1,369		(3,539		)	272,197
Foreign government	151,443		993		(70		)	152,366
Corporate bonds	1,283,061		3,094		(25,450		)	1,260,705
Residential mortgage-backed securities	944,365		716		(19,965		)	925,116
Commercial mortgage-backed securities	548,192		3,757		(6,974		)	544,975
Asset-backed securities	60,563		705		(121		)	61,147
Structured securities	249,947		99		(8,588		)	241,458
Total	$	3,614,609	$	11,781	$	(65,358	)	$	3,561,032
NGHC	$	3,311,639	$	11,206	$	(58,896	)	$	3,263,949
Reciprocal Exchanges	302,970		575		(6,462		)	297,083
Total	$	3,614,609	$	11,781	$	(65,358	)	$	3,561,032

As of September 30, 2019 and December 31, 2018, the Company had no other-than-temporary impairments (“OTTI”) in AOCI related to available-for-sale debt securities.

11

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The amortized cost and fair value of available-for-sale debt securities held as of September 30, 2019, 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.

	NGHC				Reciprocal Exchanges				Total
September 30, 2019	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	52,968	$	53,081	$	110	$	110	$	53,078	$	53,191
Due after one year through five years	883,320		911,951		132,418		134,784		1,015,738		1,046,735
Due after five years through ten years	935,527		979,817		73,674		75,405		1,009,201		1,055,222
Due after ten years	261,542		264,537		14,722		14,934		276,264		279,471
Mortgage-backed securities	1,572,282		1,624,440		79,814		82,155		1,652,096		1,706,595
Total	$	3,705,639	$	3,833,826	$	300,738	$	307,388	$	4,006,377	$	4,141,214

(b) Gross Unrealized Losses

The tables below summarize the gross unrealized losses on debt securities classified as available for sale, by length of time the security has continuously been in an unrealized loss position.

	Less Than 12 Months					12 Months or More					Total
September 30, 2019	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	24,598	$	(32	)	$	13,846	$	(21	)	$	38,444	$	(53	)
Federal agencies	259		(1		)	—		—			259		(1		)
States and political subdivision bonds	1,281		(1		)	2,597		(29		)	3,878		(30		)
Foreign government	2,904		(22		)	—		—			2,904		(22		)
Corporate bonds	121,461		(771		)	9,013		(178		)	130,474		(949		)
Residential mortgage-backed securities	206,204		(1,194		)	69,431		(756		)	275,635		(1,950		)
Commercial mortgage-backed securities	4,737		(22		)	750		(6		)	5,487		(28		)
Asset-backed securities	5,548		(26		)	979		(21		)	6,527		(47		)
Structured securities	59,765		(849		)	110,235		(3,483		)	170,000		(4,332		)
Total	$	426,757	$	(2,918	)	$	206,851	$	(4,494	)	$	633,608	$	(7,412	)
NGHC	$	391,883	$	(2,669	)	$	199,953	$	(4,392	)	$	591,836	$	(7,061	)
Reciprocal Exchanges	34,874		(249		)	6,898		(102		)	41,772		(351		)
Total	$	426,757	$	(2,918	)	$	206,851	$	(4,494	)	$	633,608	$	(7,412	)

12

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, 2018	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	474	$	(2	)	$	21,540	$	(260	)	$	22,014	$	(262	)
Federal agencies	23,729		(351		)	1,493		(38		)	25,222		(389		)
States and political subdivision bonds	57,090		(902		)	119,759		(2,637		)	176,849		(3,539		)
Foreign government	45,748		(70		)	—		—			45,748		(70		)
Corporate bonds	586,359		(12,891		)	321,115		(12,559		)	907,474		(25,450		)
Residential mortgage-backed securities	234,396		(1,637		)	551,623		(18,328		)	786,019		(19,965		)
Commercial mortgage-backed securities	13,229		(239		)	148,700		(6,735		)	161,929		(6,974		)
Asset-backed securities	25,978		(78		)	1,494		(43		)	27,472		(121		)
Structured securities	222,154		(8,136		)	6,167		(452		)	228,321		(8,588		)
Total	$	1,209,157	$	(24,306	)	$	1,171,891	$	(41,052	)	$	2,381,048	$	(65,358	)
NGHC	$	1,115,823	$	(22,668	)	$	1,018,975	$	(36,228	)	$	2,134,798	$	(58,896	)
Reciprocal Exchanges	93,334		(1,638		)	152,916		(4,824		)	246,250		(6,462		)
Total	$	1,209,157	$	(24,306	)	$	1,171,891	$	(41,052	)	$	2,381,048	$	(65,358	)

There were 378 and 1,662 individual security lots at September 30, 2019 and December 31, 2018, respectively, that accounted for the gross unrealized loss, none of which are deemed by the Company to be other-than-temporary impairments. As of September 30, 2019 and December 31, 2018, of the $4,494 and $41,052, respectively, of unrealized losses in unrealized loss positions for a period of twelve or more consecutive months, none of those securities were greater than or equal to 25% of its amortized cost.

Factors influencing management’s determination that none of these securities were OTTI included the length of time and/or magnitude of unrealized losses in relation to cost, the nature of the investment, the current financial condition of the issuer and its future prospects, the ability to recover to cost in the near term, 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. The Company regularly monitors its investments that have fair values less than cost or amortized cost for indicators of OTTI, an assessment that requires management judgment regarding the evidence known. Such judgments could change in the future as more information becomes known, which could negatively impact the amounts reported.

The Company’s debt securities portfolio is sensitive to interest rate fluctuations, which impact the fair value of individual securities. Unrealized losses on debt securities reported above were primarily caused by the effects of the interest rate environment. Therefore, the Company does not believe the unrealized losses represent an OTTI as of September 30, 2019 and December 31, 2018.

(c) Equity Securities

The fair values of equity securities were as follows:

	September 30, 2019		December 31, 2018
Common stock	$	2,760	$	10,949
Total	$	2,760	$	10,949
NGHC	$	2,760	$	10,949
Reciprocal Exchanges	—		—
Total	$	2,760	$	10,949

13

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

(d) Investment Income

The components of net investment income consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Cash and short-term investments	$	1,123		$	351		$	3,467		$	680
Debt securities	31,439			27,643			91,631			77,469
Equity securities	1			182			4			541
Other, net (related parties - three months - $(10) and $505; nine months - $2,163 and $550)	2,270			2,924			10,508			6,577
Investment income	34,833			31,100			105,610			85,267
Investment expenses	(1,093		)	(404		)	(3,294		)	(3,565		)
Net investment income	$	33,740		$	30,696		$	102,316		$	81,702
NGHC	$	31,580		$	28,352		$	95,862		$	75,009
Reciprocal Exchanges	2,160			2,344			6,454			6,693
Net investment income	$	33,740		$	30,696		$	102,316		$	81,702

(e) Net Realized Gains (Losses)

The table below indicates realized gains and losses on investments. Other, net includes realized gains and losses from short-term and other investments and foreign exchange. Purchases and sales of investments are recorded on a trade date basis. Realized gains and losses are determined based on the specific identification method.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Debt securities, available-for-sale:
Gross gains	$	3,598		$	2,563		$	3,921		$	4,651
Gross losses	(1,712		)	(743		)	(2,086		)	(22,388		)
Net realized gain (loss) on debt securities, available-for-sale	1,886			1,820			1,835			(17,737		)
Equity securities	(2,208		)	(1,376		)	(6,489		)	(7,203		)
OTTI on investments	—			(3,000		)	—			(3,000		)
Other, net	(243		)	(614		)	(1,119		)	5,184
Net realized loss on investments	$	(565	)	$	(3,170	)	$	(5,773	)	$	(22,756	)
NGHC	$	(428	)	$	(3,003	)	$	(4,936	)	$	(21,490	)
Reciprocal Exchanges	(137		)	(167		)	(837		)	(1,266		)
Net realized loss on investments	$	(565	)	$	(3,170	)	$	(5,773	)	$	(22,756	)

Net gains and losses recognized during the reporting period on equity securities still held at the reporting date were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net losses recognized during the period	$	(2,208	)	$	(1,376	)	$	(6,489	)	$	(7,203	)
Less: Net losses recognized during the period on securities sold during the period	—			—			—			(108		)
Net losses recognized during the reporting period on securities still held at the reporting date	$	(2,208	)	$	(1,376	)	$	(6,489	)	$	(7,095	)

14

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

(f) Credit Quality of Investments

The tables below summarize the credit quality of debt securities, as rated by Standard & Poor’s (“S&P”). If a security is not rated by S&P, an S&P equivalent is determined based on ratings from similar rating agencies. Securities that are not rated are included in the “BB+ and lower” category.

	NGHC						Reciprocal Exchanges
September 30, 2019	Amortized Cost		Fair Value		Percentage		Amortized Cost		Fair Value		Percentage
U.S. Treasury	$	59,290	$	60,998	1.6	%	$	12,898	$	13,437	4.4	%
AAA	622,806		655,803		17.1	%	18,143		18,891		6.1	%
AA, AA+, AA-	1,381,180		1,411,831		36.8	%	109,656		112,043		36.5	%
A, A+, A-	803,831		831,868		21.7	%	111,498		114,601		37.2	%
BBB, BBB+, BBB-	788,908		821,368		21.4	%	48,543		48,416		15.8	%
BB+ and lower	49,624		51,958		1.4	%	—		—		—	%
Total	$	3,705,639	$	3,833,826	100.0	%	$	300,738	$	307,388	100.0	%

	NGHC						Reciprocal Exchanges
December 31, 2018	Amortized Cost		Fair Value		Percentage		Amortized Cost		Fair Value		Percentage
U.S. Treasury	$	52,122	$	52,759	1.6	%	$	12,707	$	12,834	4.3	%
AAA	586,639		589,078		18.0	%	18,335		18,109		6.1	%
AA, AA+, AA-	1,385,709		1,358,528		41.6	%	142,525		140,114		47.2	%
A, A+, A-	591,219		581,106		17.8	%	118,535		115,618		38.9	%
BBB, BBB+, BBB-	653,645		641,554		19.7	%	10,834		10,374		3.5	%
BB+ and lower	42,305		40,924		1.3	%	34		34		—	%
Total	$	3,311,639	$	3,263,949	100.0	%	$	302,970	$	297,083	100.0	%

The tables below summarize the investment quality of the corporate bond holdings and industry concentrations.

September 30, 2019	AAA		AA+, AA, AA-		A+,A,A-		BBB+, BBB, BBB-		BB+ or Lower		Fair Value		% of Corporate Bonds Portfolio
Financial Institutions	—	%	3.6	%	27.2	%	13.6	%	0.4	%	$	791,523	44.8	%
Industrials	0.3	%	3.8	%	18.8	%	29.3	%	0.1	%	923,980		52.3	%
Utilities/Other	—	%	—	%	1.3	%	1.6	%	—	%	50,540		2.9	%
Total	0.3	%	7.4	%	47.3	%	44.5	%	0.5	%	$	1,766,043	100.0	%
NGHC	—	%	5.8	%	40.9	%	41.8	%	0.5	%	$	1,571,375	89.0	%
Reciprocal Exchanges	0.3	%	1.6	%	6.4	%	2.7	%	—	%	194,668		11.0	%
Total	0.3	%	7.4	%	47.3	%	44.5	%	0.5	%	$	1,766,043	100.0	%

15

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

December 31, 2018	AAA		AA+, AA, AA-		A+,A,A-		BBB+, BBB, BBB-		BB+ or Lower		Fair Value		% of Corporate Bonds Portfolio
Financial Institutions	—	%	4.3	%	23.1	%	14.2	%	0.9	%	$	535,373	42.5	%
Industrials	0.4	%	6.1	%	21.5	%	26.7	%	0.6	%	697,324		55.3	%
Utilities/Other	—	%	—	%	1.8	%	0.4	%	—	%	28,008		2.2	%
Total	0.4	%	10.4	%	46.4	%	41.3	%	1.5	%	$	1,260,705	100.0	%
NGHC	—	%	6.3	%	37.3	%	40.6	%	1.4	%	$	1,079,099	85.6	%
Reciprocal Exchanges	0.4	%	4.1	%	9.1	%	0.7	%	0.1	%	181,606		14.4	%
Total	0.4	%	10.4	%	46.4	%	41.3	%	1.5	%	$	1,260,705	100.0	%

(g) Cash and Cash Equivalents, Restricted Cash and Restricted 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 are held primarily in the form of cash or certain high grade securities.

Cash, cash equivalents, and restricted cash are as follows:

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	199,419	$	193,858
Restricted cash and cash equivalents	27,903		39,725
Total cash, cash equivalents and restricted cash	$	227,322	$	233,583

Restricted investments are as follows:

	September 30, 2019		December 31, 2018
Securities on deposit with state regulatory authorities	$	83,567	$	73,119
Restricted investments to trusts in certain reinsurance transactions	54,895		70,470
Total restricted investments	$	138,462	$	143,589

(h) Short-term and Other Investments

Short-term investments include investments with maturities between 91 days and less than one year at the date of acquisition. Short-term investments also consist of commercial paper, U.S. Treasury bills and money market funds that are held within the Company’s longer term investment portfolios.

The table below summarizes the composition of other investments:

	September 30, 2019		December 31, 2018
Equity method investments (related parties - $105,388 and $106,031)	$	140,195	$	142,921
Notes receivable (related parties - $129,229 and $127,692)	129,307		128,893
Long-term Certificates of Deposit (CDs), at cost	20,150		20,252
Investments, at fair value	4,295		6,542
Investments, at cost or amortized cost	7,668		7,668
Total	$	301,615	$	306,276

16

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Equity method investments represent limited liability companies and limited partnership investments in real estate. Investments at fair value, primarily represent the Company’s right to receive the excess servicing spread related to servicing rights, for which the Company has elected the fair value option with changes in fair value recorded in earnings. Investments at cost or amortized cost, represent limited partnerships, loans and trusts. The Company believes its exposure to risk associated with these investments is generally limited to the investment carrying amounts.

The Company’s other investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. For both the three and nine months ended September 30, 2019 and 2018, the Company recorded OTTI on other investments of $0 and $3,000, respectively.

Equity Method Investments - Related Parties

The significant shareholder of the Company has an ownership interest in AmTrust Financial Services, Inc. (“AmTrust”) and ACP Re Ltd. (“ACP Re”).

Limited Liability Companies and Limited Partnerships

The following entities are considered by the Company to be Variable Interest Entities, for which the Company is not the primary beneficiary. The Company accounts for these entities using the equity method of accounting. The Company believes its exposure to risk associated with these investments is generally limited to the investment carrying amounts.

LSC Entity

The Company has a 50% ownership interest in an entity (the “LSC Entity”) initially formed to acquire life settlement contracts, with AmTrust owning the remaining 50%. The LSC Entity used the contributed capital to pay premiums and purchase policies. 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 LSC Entity has a 30% noncontrolling equity interest in a limited partnership managed by a third party. As of September 30, 2019, the LSC Entity directly held one life settlement contract. The life settlement contract is accounted for using the fair value method.

The following table presents the Company’s 50% investment activity in the LSC Entity:

	Nine Months Ended September 30,
	2019			2018
Balance, beginning of the period	$	48,324		$	160,683
Distributions (three months - $(2,500) and $0)	(2,500		)	(116,035		)
Contributions (three months - $258 and $0)	258			2,000
Equity in earnings (losses) (three months - $(481) and $(858))	1,250			651
Change in equity method investments	(992		)	(113,384		)
Balance, end of the period	$	47,332		$	47,299

800 Superior, LLC

The Company holds an investment in 800 Superior, LLC, a limited liability company that owns an office building in Cleveland, Ohio, with AmTrust. AmTrust has been appointed managing member of 800 Superior, LLC. The Company and AmTrust each have a 50% ownership interest in 800 Superior, LLC. Additionally, the Company has an office lease with 800 Superior, LLC. Previously, the Company and AmTrust each also had a 50% ownership interest in East Ninth & Superior, LLC and a 24.5% ownership interest in 800 Superior NMTC Investment Fund II, LLC. During the third quarter of 2019, the net assets of East Ninth & Superior, LLC were combined with 800 Superior, LLC and East Ninth & Superior, LLC and 800 Superior NMTC Investment Fund II, LLC were dissolved.

17

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The Company paid 800 Superior, LLC $742 and $722 in rent for the three months ended September 30, 2019 and 2018, respectively. The Company paid 800 Superior, LLC $2,226 and $2,167 in rent for the nine months ended September 30, 2019 and 2018, respectively.

The Company’s equity interest in 800 Superior, LLC as of September 30, 2019 and December 31, 2018 was $7,325 and $5,125, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 800 Superior, LLC of $(103) and $305, respectively, and made contributions of $2,287 and $0, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 800 Superior, LLC of $(87) and $(922), respectively, and made contributions of $2,287 and $0, respectively.

North Dearborn Building Company, L.P.

The Company holds an investment in North Dearborn Building Company, L.P. (“North Dearborn”), a limited partnership that owns an office building in Chicago, Illinois. AmTrust is also a limited partner in North Dearborn, and the general partner is NA Advisors GP LLC (“NA Advisors”), a related party, owned by Karfunkel family members which is managed by an unrelated third party. The Company and AmTrust each hold a 45% limited partnership interest in North Dearborn, while NA Advisors holds a 10% general partnership interest and a 10% profit interest, which NA Advisors pays to the unrelated third party manager. North Dearborn appointed NA Advisors as the general manager to oversee the day-to-day operations of the office building.

The Company’s equity interest in North Dearborn as of September 30, 2019 and December 31, 2018 was $5,659 and $6,214, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from North Dearborn of $(84) and $(148), respectively, and received distributions of $135 and $0, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from North Dearborn of $(150) and $(313), respectively, and received distributions of $405 and $1,125, respectively.

4455 LBJ Freeway, LLC

The Company holds an investment in 4455 LBJ Freeway, LLC, a limited liability company that owns an office building in Dallas, Texas, with AmTrust. AmTrust has been appointed managing member of 4455 LBJ Freeway, LLC. The Company and AmTrust each have a 50% ownership interest in 4455 LBJ Freeway, LLC. Additionally, the Company entered into a lease agreement with 4455 LBJ Freeway, LLC.

The Company paid 4455 LBJ Freeway, LLC $607 and $551 in rent for the three months ended September 30, 2019 and 2018, respectively. The Company paid 4455 LBJ Freeway, LLC $1,813 and $1,675 in rent for the nine months ended September 30, 2019 and 2018, respectively.

The Company’s equity interest in 4455 LBJ Freeway, LLC as of September 30, 2019 and December 31, 2018 was $984 and $793, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 4455 LBJ Freeway, LLC of $63 and $26, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 4455 LBJ Freeway, LLC of $191 and $15, respectively.

Illinois Center Building, L.P.

The Company holds an investment in Illinois Center Building, L.P. (“Illinois Center”), a limited partnership that owns an office building in Chicago, Illinois. AmTrust and ACP Re are also limited partners in Illinois Center and the general partner is NA Advisors. The Company and AmTrust each hold a 37.5% limited partnership interest in Illinois Center, while ACP Re holds a 15.0% limited partnership interest. NA Advisors holds a 10.0% general partnership interest and a 10.0% profit interest, which NA Advisors pays to the unrelated third party manager. Illinois Center appointed NA Advisors as the general manager to oversee the day-to-day operations of the office building.

18

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The Company’s equity interest in Illinois Center as of September 30, 2019 and December 31, 2018 was $44,088 and $45,575, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from Illinois Center of $(600) and $0, respectively, and made contributions of $0 and $0, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from Illinois Center of $(2,612) and $(2,410), respectively, and made contributions of $1,125 and $2,250, respectively.

4. Fair Value of Financial Instruments

The Company carries certain financial instruments at fair value. Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity.

Level 2 - Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

The following describes the valuation techniques used by the Company to determine the fair value measurements on a recurring basis of financial instruments held as of September 30, 2019 and December 31, 2018. The Company utilizes a pricing service (“pricing service”) to estimate fair value measurements for all its debt and equity securities.

Level 1 measurements:

• U.S. Treasury and federal agencies. The fair values of U.S. government securities are based on quoted market prices in active markets. The Company believes the market for U.S. government securities is an actively traded market given the high level of daily trading volume.

• Common stock. The pricing service utilizes market quotations for equity securities that have quoted market prices in active markets and their respective quoted prices are provided at fair value.

• Short-term investments. Comprised of money market funds that are traded in active markets and fair values are based on quoted market prices.

Level 2 measurements:

• States and political subdivision bonds, and foreign government. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

• Corporate bonds. Comprised of bonds issued by corporations, public and privately placed. The fair values of short-term corporate bonds are priced using the spread above the London Interbank Offering Rate (“LIBOR”) yield curve, and the fair value of long-term corporate bonds 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. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

• Residential and commercial mortgage-backed securities, asset-backed securities and structured securities. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, prepayment speeds, collateral performance and credit spreads.

19

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Level 3 measurements:

• States and political subdivision bonds. The Company holds certain municipal bonds that finance economic development, infrastructure and environmental projects which do not have an active market. These bonds are valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

• Corporate bonds. The Company holds certain structured notes and term loans that do not have an active market. These bonds are valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

• Common stock and preferred stock. From time to time, the Company also holds certain equity securities that are issued by privately-held entities or direct equity investments that do not have an active market. The Company estimates the fair value of these securities primarily based on inputs such as third-party broker quotes, issuers’ book value, market multiples, and other inputs. These bonds are valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

• Other investments, at fair value. Comprised of the Company’s right to receive the Excess Servicing Spread (“ESS”) related to servicing rights. The Company uses a discounted cash flow method to estimate their fair value. The key inputs used in the estimation of ESS include prepayment speed and discount rate. Changes in the fair value of the ESS are recorded in earnings.

Assets measured at fair value on a recurring basis are as follows:

	September 30, 2019
	Level 1		Level 2		Level 3		Total
Available-for-sale debt securities:
U.S. Treasury	$	74,435	$	—	$	—	$	74,435
Federal agencies	4,411		—		—		4,411
States and political subdivision bonds	—		190,924		3,100		194,024
Foreign government	—		146,879		—		146,879
Corporate bonds	—		1,756,263		9,780		1,766,043
Residential mortgage-backed securities	—		1,037,193		—		1,037,193
Commercial mortgage-backed securities	—		609,573		—		609,573
Asset-backed securities	—		59,829		—		59,829
Structured securities	—		248,827		—		248,827
Total available-for-sale debt securities	78,846		4,049,488		12,880		4,141,214
Equity securities:
Common stock	2,474		—		286		2,760
Total equity securities	2,474		—		286		2,760
Short-term investments	381,208		12,455		—		393,663
Other investments	—		—		4,295		4,295
Total	$	462,528	$	4,061,943	$	17,461	$	4,541,932
NGHC	$	421,579	$	3,768,494	$	17,461	$	4,207,534
Reciprocal Exchanges	40,949		293,449		—		334,398
Total	$	462,528	$	4,061,943	$	17,461	$	4,541,932

20

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Available-for-sale debt securities:
U.S. Treasury	$	65,593	$	—	$	—	$	65,593
Federal agencies	37,475		—		—		37,475
States and political subdivision bonds	—		268,601		3,596		272,197
Foreign government	—		152,366		—		152,366
Corporate bonds	—		1,248,938		11,767		1,260,705
Residential mortgage-backed securities	—		925,116		—		925,116
Commercial mortgage-backed securities	—		544,975		—		544,975
Asset-backed securities	—		61,147		—		61,147
Structured securities	—		241,458		—		241,458
Total available-for-sale debt securities	103,068		3,442,601		15,363		3,561,032
Equity securities:
Common stock	9,898		—		1,051		10,949
Total equity securities	9,898		—		1,051		10,949
Short-term investments	348,549		—		—		348,549
Other investments	—		—		6,542		6,542
Total	$	461,515	$	3,442,601	$	22,956	$	3,927,072
NGHC	$	429,502	$	3,160,203	$	22,956	$	3,612,661
Reciprocal Exchanges	32,013		282,398		—		314,411
Total	$	461,515	$	3,442,601	$	22,956	$	3,927,072

The following tables provide a reconciliation of recurring fair value measurements of the Level 3 financial assets:

	States and political subdivision bonds			Corporate bonds			Common stock			Other investments			Total
Balance as of January 1, 2019	$	3,596		$	11,767		$	1,051		$	6,542		$	22,956
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Total gains (losses) for the period:
Included in net income(1)	—			—			(765		)	(2,247		)	(3,012		)
Included in other comprehensive income(2)	(496		)	(1,987		)	—			—			(2,483		)
Purchases	—			—			—			—			—
Sales	—			—			—			—			—
Balance as of September 30, 2019	$	3,100		$	9,780		$	286		$	4,295		$	17,461
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	$	—		$	—		$	(765	)	$	(2,247	)	$	(3,012	)
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	$	(496	)	$	(1,987	)	$	—		$	—		$	(2,483	)

21

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	States and political subdivision bonds			Corporate bonds			Common stock			Preferred stock		Other investments			Total
Balance as of January 1, 2018	$	4,081		$	24,545		$	5,052		$	270	$	10,782		$	44,730
Transfers into Level 3	—			—			—			—		—			—
Transfers out of Level 3	—			—			—			—		—			—
Total gains (losses) for the period:
Included in net income(1)	—			—			(1,303		)	10		802			(491		)
Included in other comprehensive income(2)	(485		)	(11,374		)	—			—		—			(11,859		)
Purchases	—			—			—			—		—			—
Sales	—			—			—			—		(1,741		)	(1,741		)
Balance as of September 30, 2018	$	3,596		$	13,171		$	3,749		$	280	$	9,843		$	30,639
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	$	—		$	—		$	(1,303	)	$	10	$	802		$	(491	)

⁽¹⁾ Gains and losses recognized in net income are reported within net investment income.

⁽²⁾ Gains and losses recognized in other comprehensive income are reported within unrealized gains (losses) on investments, net of tax.

During the nine months ended September 30, 2019 and 2018, there were no transfers between Level 2 and Level 3.

At September 30, 2019 and December 31, 2018, the carrying values of the Company’s cash and cash equivalents, premiums and other receivables, and accounts payable approximate the fair value given their short-term nature and were classified as Level 1.

Fair value information about financial instruments not measured at fair value

Debt - The amount reported in the accompanying Condensed Consolidated Balance Sheets for these financial instruments represents the carrying value of the debt. See Note 9, “Debt” for additional information.

The following table presents the carrying amount and estimated fair value of debt not carried at fair value, excluding finance lease and other liabilities, as well as the input level used to determine the fair value:

		September 30, 2019				December 31, 2018
	Input Level	Carrying amount		Fair value		Carrying amount		Fair value
7.625% Notes	Level 2	$	96,907	$	106,040	$	96,842	$	90,400
6.75% Notes	Level 3	346,926		368,291		346,439		353,756
Subordinated Debentures	Level 3	72,168		72,125		72,168		72,109
2016 Credit Agreement	Level 3	—		—		160,000		163,222
2019 Credit Agreement	Level 3	140,000		147,591		—		—

22

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

5. Deferred Acquisition Costs

The following table reflects the amounts of policy acquisition costs deferred and amortized:

	Nine Months Ended September 30,
	2019									2018
	Property and Casualty			Accident and Health			Total			Property and Casualty			Accident and Health			Total
Balance, beginning of the period	$	226,188		$	25,220		$	251,408		$	198,283		$	18,106		$	216,389
Additions	385,570			41,222			426,792			399,610			16,985			416,595
Amortization	(372,741		)	(37,800		)	(410,541		)	(369,634		)	(13,858		)	(383,492		)
Change in DAC	12,829			3,422			16,251			29,976			3,127			33,103
Balance, end of the period	$	239,017		$	28,642		$	267,659		$	228,259		$	21,233		$	249,492
NGHC	$	215,904		$	28,642		$	244,546		$	208,982		$	21,233		$	230,215
Reciprocal Exchanges	23,113			—			23,113			19,277			—			19,277
Balance, end of the period	$	239,017		$	28,642		$	267,659		$	228,259		$	21,233		$	249,492

6. Goodwill and Intangible Assets, Net

Goodwill

Goodwill is calculated as the excess of purchase price over the net fair value of assets acquired. For the nine months ended September 30, 2019, goodwill increased by $1,404 due to acquisitions.

Intangible Assets

Intangible assets consist of definite and indefinite life assets. Definite-lived intangible assets subject to amortization primarily include agent and customer relationships, value of policies in force, renewal rights and trademarks. Indefinite-lived intangible assets include management contracts and state licenses.

For the three months ended September 30, 2019 and 2018, the Company amortized $6,806 and $8,246, respectively, related to its definite-lived intangible assets, which includes amortization relating to intangible assets owned by the Reciprocal Exchanges of $18 and $(14), respectively. For the nine months ended September 30, 2019 and 2018, the Company amortized $21,134 and $23,330, respectively, related to its definite-lived intangible assets, which includes amortization relating to intangible assets owned by the Reciprocal Exchanges of $41 and $(67), respectively. Total amortization expense includes amortization of loss reserve premium. For the nine months ended September 30, 2019, intangible assets, other than goodwill, increased by $40,544 due to acquisitions.

23

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

7. Unpaid Losses and Loss Adjustment Expense Reserves

The unpaid losses and loss adjustment expense (“LAE”) reserves is an estimate of the Company’s liability from incurred claims at the reporting period. The unpaid losses and loss adjustment expense reserves are the result of ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting its reserves, the Company reviews its loss data to estimate expected loss development. Management believes that its use of standard actuarial methodology applied to its analyses of its historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimate, and future events beyond the control of management, such as changes in law, judicial interpretations of law and inflation, may favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. In addition to inflation, the average severity of claims is affected by a number of factors that may vary by types and features of policies written. Future average severities are projected from historical trends, adjusted for implemented changes in underwriting standards and policy provisions, and general economic trends. These estimated trends are monitored and revised as necessary based on actual development.

The following tables present a reconciliation of beginning and ending reserve balances for unpaid losses and loss adjustment expenses:

	Nine Months Ended September 30, 2019
	Property and Casualty			Accident and Health			NGHC			Reciprocal Exchanges			Total
Gross balance at beginning of the period	$	2,507,409		$	271,280		$	2,778,689		$	178,470		$	2,957,159
Less: Reinsurance recoverable at beginning of the period	(1,182,588		)	(24,575		)	(1,207,163		)	(77,979		)	(1,285,142		)
Net balance at beginning of the period	1,324,821			246,705			1,571,526			100,491			1,672,017
Incurred losses and LAE related to:
Current year	1,726,618			279,460			2,006,078			125,250			2,131,328
Prior year	19,791			(37,775		)	(17,984		)	(666		)	(18,650		)
Total incurred	1,746,409			241,685			1,988,094			124,584			2,112,678
Paid losses and LAE related to:
Current year	(661,742		)	(136,261		)	(798,003		)	(76,704		)	(874,707		)
Prior year	(1,013,023		)	(105,076		)	(1,118,099		)	(39,005		)	(1,157,104		)
Total paid	(1,674,765		)	(241,337		)	(1,916,102		)	(115,709		)	(2,031,811		)
Acquired losses and LAE reserves	92,573			—			92,573			—			92,573
Unrealized foreign exchange gain	—			(8,204		)	(8,204		)	—			(8,204		)
Net balance at end of the period	1,489,038			238,849			1,727,887			109,366			1,837,253
Plus: Reinsurance recoverable at end of the period	1,079,560			38,352			1,117,912			84,090			1,202,002
Gross balance at end of the period	$	2,568,598		$	277,201		$	2,845,799		$	193,456		$	3,039,255

24

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	Nine Months Ended September 30, 2018
	Property and Casualty			Accident and Health			NGHC			Reciprocal Exchanges			Total
Gross balance at beginning of the period	$	2,270,551		$	249,653		$	2,520,204		$	143,353		$	2,663,557
Less: Reinsurance recoverable at beginning of the period	(1,067,495		)	(9,840		)	(1,077,335		)	(52,408		)	(1,129,743		)
Net balance at beginning of the period	1,203,056			239,813			1,442,869			90,945			1,533,814
Incurred losses and LAE related to:
Current year	1,596,337			276,987			1,873,324			124,914			1,998,238
Prior year	(13,318		)	(24,623		)	(37,941		)	1,507			(36,434		)
Total incurred	1,583,019			252,364			1,835,383			126,421			1,961,804
Paid losses and LAE related to:
Current year	(883,969		)	(108,686		)	(992,655		)	(81,526		)	(1,074,181		)
Prior year	(622,468		)	(114,045		)	(736,513		)	(34,079		)	(770,592		)
Total paid	(1,506,437		)	(222,731		)	(1,729,168		)	(115,605		)	(1,844,773		)
Unrealized foreign exchange gain	—			(8,302		)	(8,302		)	—			(8,302		)
Net balance at end of the period	1,279,638			261,144			1,540,782			101,761			1,642,543
Plus: Reinsurance recoverable at end of the period	1,120,630			17,778			1,138,408			74,184			1,212,592
Gross balance at end of the period	$	2,400,268		$	278,922		$	2,679,190		$	175,945		$	2,855,135

Prior year loss development, net of reinsurance

Prior year development is based upon numerous estimates by line of business and accident year. No additional premiums or return premiums have been accrued as a result of the prior year effects.

2019. Loss and LAE for the nine months ended September 30, 2019 included $18,650 of favorable development on prior accident year loss and LAE reserves. The $19,125 of unfavorable development in the property and casualty segment (including $666 of favorable development for the Reciprocal Exchanges) was driven by small business auto, while the $37,775 of favorable development in the accident and health segment was primarily driven by the domestic book of business.

2018. Loss and LAE for the nine months ended September 30, 2018 included $36,434 of favorable development on prior accident year loss and LAE reserves. The $11,811 of favorable development in the property and casualty segment (including $1,507 of unfavorable development for the Reciprocal Exchanges) was primarily driven by favorable development in the Company’s auto physical damage and homeowners products, while $24,623 of favorable development in the accident and health segment was primarily driven by favorable development in the Company’s domestic products.

8. Reinsurance

The Company utilizes various excess of loss, quota share, state-based industry pools or facilities, and catastrophe reinsurance programs to limit its exposure to a maximum loss on any one risk. Reinsurance agreements transfer portions of the underlying risk of the business the Company writes. Reinsurance does not discharge or diminish the Company’s obligation to pay claims covered by the insurance policies it issues; however, it does permit the Company to recover certain incurred losses from its reinsurers and the Company’s reinsurance recoveries reduce the maximum loss that it may incur as a result of a covered loss event. The Company’s reinsurers generally carry at least an A.M. Best Company, Inc. rating of “A-” (Excellent) or are fully collateralized at the time they enter into the Company’s reinsurance agreements. The total amount, cost and limits relating to the reinsurance coverage the Company purchases may vary from year to year based upon a variety of factors, including the availability of quality reinsurance at an acceptable price and the level of risk that the Company chooses to retain for its own account.

25

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The Company assumes and cedes insurance risks under various reinsurance agreements, on both a pro rata basis and excess of loss basis. The Company purchases reinsurance to mitigate the volatility of direct and assumed business, which may be caused by the aggregate value or the concentration of written exposures in a particular geographic area or business segment and may arise from catastrophes or other events. The Company pays a premium as consideration for ceding the risk.

Reinsurance recoverable is as follows:

	September 30, 2019		December 31, 2018
Reinsurance recoverable on paid losses	$	302,597	$	326,596
Reinsurance recoverable on unpaid losses	1,202,002		1,285,142
Reinsurance recoverable	$	1,504,599	$	1,611,738

The following is the effect of reinsurance on unpaid loss and LAE reserves and unearned premiums:

	September 30, 2019				December 31, 2018
	Assumed		Ceded		Assumed		Ceded
Unpaid Loss and LAE reserves	$	66,422	$	1,202,002	$	84,469	$	1,285,142
Unearned premiums	19,415		643,218		21,015		665,674

The following is the effect of reinsurance on premiums and loss and LAE:

	Three Months Ended September 30,												Nine Months Ended September 30,
	2019						2018						2019						2018
Premium:	Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct	$	1,417,792		$	1,407,731		$	1,330,259		$	1,296,717		$	4,200,571		$	4,080,131		$	4,055,044		$	3,744,321
Assumed	17,365			19,029			25,412			29,078			58,272			59,872			74,206			89,627
Total Gross Premium	1,435,157			1,426,760			1,355,671			1,325,795			4,258,843			4,140,003			4,129,250			3,833,948
Ceded	(400,553		)	(373,122		)	(432,647		)	(386,268		)	(1,064,177		)	(1,091,557		)	(1,209,608		)	(1,045,977		)
Net Premium	$	1,034,604		$	1,053,638		$	923,024		$	939,527		$	3,194,666		$	3,048,446		$	2,919,642		$	2,787,971

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
	Assumed		Ceded		Assumed		Ceded		Assumed		Ceded		Assumed		Ceded
Loss and LAE	$	7,024	$	245,095	$	7,479	$	289,726	$	23,670	$	605,126	$	16,487	$	712,277

State-based Industry Pools and Facilities

The Company’s reinsurance programs include premiums written under state-mandated involuntary plans for automobile, motorcycle and commercial vehicles and premiums ceded to state-provided reinsurance facilities such as Michigan Catastrophic Claims Association (“MCCA”) and North Carolina Reinsurance Facility (“NCRF”), for which the Company retains no loss indemnity risk. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written.

The Company believes that it is unlikely to incur any material loss as a result of non-payment of amounts owed to the Company by MCCA and NCRF because (i) the payment obligations are extended over many years, resulting in relatively small current payment obligations, (ii) both MCCA and NCRF are supported by assessments permitted by statute, and (iii) the Company has not historically incurred losses as a result of non-payment. Because MCCA and NCRF are supported by assessments permitted by statute, and there have been no significant and uncollectible balances from MCCA and NCRF, the Company believes that it has no significant exposure to uncollectible reinsurance balances from these entities.

26

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Quota Share Agreements

In 2017, the Company entered into an Auto Quota Share Agreement (the “Auto Quota Share Agreement”) covering the Company’s auto lines of business. Effective January 1, 2019, the Company ceded 7.0% of net liability under new and renewal auto policies written. On July 1, 2019, the Company renewed its Auto Quota Share Agreement for a two-year term. Effective July 1, 2019, the Company cedes 10.0% of net liability under new and renewal auto policies with the ability to increase the cession to up to 30.0% and decrease the cession down to 5.0% under certain conditions. The Company receives a 31.2% provisional ceding commission on premiums ceded to the reinsurer during the term of the Auto Quota Share Agreement, subject to a sliding scale adjustment to a maximum of 32.8% if the loss ratio for the reinsured business is 64.7% or less and a minimum of 30.0% if the loss ratio is 67.5% or higher.

In 2017, the Company entered into a Homeowners Quota Share Agreement (the “HO Quota Share Agreement”) covering the Company’s homeowners line of business. On July 1, 2019, the Company renewed its HO Quota Share Agreement for a one-year term. Effective July 1, 2019, the Company cedes 40.0% of net liability under homeowners policies and receives a 36.0% ceding commission on new and renewal business and a portion of the in-force business. A portion of the in-force business is being run-off under the prior agreements. The weighted average expected ceding commission for all in-force business and new and renewal homeowners business is 37.5% over the contract term.

Catastrophe Reinsurance

Effective May 1, 2019, the Company’s reinsurance property catastrophe excess of loss program, protecting the Company against catastrophic events and other large losses, provides a total of $650,000 in coverage with one reinstatement with a $70,000 retention for the first event and $50,000 for the second event. As of July 1, 2018, the casualty program provides $35,000 in coverage in excess of a $5,000 retention. Effective October 1, 2019, the Company renewed the casualty program, for which coverage and retention will remain in effect and unchanged. The Company pays a premium as consideration for ceding the risk.

Effective July 1, 2019, the Reciprocal Exchanges renewed their property catastrophe excess of loss program providing a total of $480,000 in coverage with a $20,000 retention, with one reinstatement.

27

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

9. Debt

The following table represents the Company’s debt:

	Interest Rate	Maturity	September 30, 2019			December 31, 2018
Fixed-rate:
6.75% Notes	6.75%	2024	$	350,000		$	350,000
7.625% Notes	7.625%	2055	100,000			100,000
Floating-rate:
Subordinated Debentures I	LIBOR + 3.40%	2035	41,238			41,238
Subordinated Debentures II	LIBOR + 4.25%	2037	30,930			30,930
2016 Credit Agreement(1)	LIBOR + 2.00%	2020	—			160,000
2019 Credit Agreement(2)	LIBOR + 1.75%	2023	140,000			—
Finance lease liabilities	Various	Various	21,002			14,824
Other	3.5%	Various	10,975			15,522
Unamortized debt issuance costs and unamortized discount			(6,167		)	(6,719		)
Total carrying amount of debt			$	687,978		$	705,795

⁽¹⁾ The weighted average interest rate on the amount outstanding as of December 31, 2018 was 4.58%.

⁽²⁾ The weighted average interest rate on the amount outstanding as of September 30, 2019 was 3.84%.

The following table presents the Company’s interest expense:

		Three Months Ended September 30,				Nine Months Ended September 30,
	Interest Payment Frequency	2019		2018		2019		2018
6.75% Notes	Semiannually	$	5,906	$	5,906	$	17,719	$	17,719
7.625% Notes	Quarterly	1,906		1,906		5,719		5,719
Subordinated Debentures	Quarterly	1,118		1,144		3,470		3,227
2016 Credit Agreement	Quarterly	—		1,950		1,211		5,700
2019 Credit Agreement	Quarterly	1,674		—		4,020		—
Finance lease liabilities	Various	302		157		888		477
Other(1)	Various	1,992		1,520		5,795		5,933
Total interest expense		$	12,898	$	12,583	$	38,822	$	38,775

⁽¹⁾ Other includes interest for other liabilities, interest credited on funds held balances and accretion of debt issuance costs.

Notes

The 6.75% Notes are the Company’s general unsecured obligations and rank equally in right of payment with its other existing and future senior unsecured indebtedness and senior in right of payment to any of its indebtedness that is contractually subordinated to the 6.75% Notes. The 6.75% Notes are also effectively subordinated to any of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the existing and future indebtedness of the Company’s subsidiaries (including trade payables). The 6.75% Notes mature on May 15, 2024, unless earlier redeemed or purchased by the Company.

28

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The 7.625% Notes are the Company’s subordinated unsecured obligations and rank (i) senior in right of payment to any future junior subordinated debt, (ii) equal in right of payment with any unsecured, subordinated debt that the Company incurs in the future that ranks equally with the 7.625% Notes, and (iii) subordinate in right of payment to any of the Company’s existing and future senior debt, including amounts outstanding under the Company’s revolving credit facility, the Company’s 6.75% notes and certain of the Company’s other obligations. In addition, the 7.625% Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of the Company’s subsidiaries. The 7.625% Notes mature on September 15, 2055, unless earlier redeemed or purchased by the Company.

Subordinated Debentures

The Company, through a subsidiary, is the issuer of junior subordinated debentures (the “Subordinated Debentures”) relating to an issuance of trust preferred securities. The Subordinated Debentures require interest-only payments to be made on a quarterly basis, with principal due at maturity. The Subordinated Debentures’ principal amounts of $41,238 and $30,930 mature on 2035 and 2037, respectively, and bear interest at an annual rate equal to LIBOR plus 3.40% and LIBOR plus 4.25%, respectively. The Subordinated Debentures are redeemable by the Company at a redemption price equal to 100% of their principal amount.

Credit Agreement

On February 25, 2019, the Company refinanced its existing credit agreement and entered into a new credit agreement (the “2019 Credit Agreement”), with JPMorgan Chase Bank, N.A., as Administrative Agent, KeyBank National Association and Fifth Third Bank, as Co-Syndication Agents, and the various lending institutions party thereto. The 2019 Credit Agreement is currently a $340,000 base revolving credit facility with a letter of credit sublimit of $150,000 and an expansion feature of up to $50,000. Borrowings under the 2019 Credit Agreement bear interest at either the Alternate Base Rate (“ABR”) or the LIBO rate. ABR borrowings under the 2019 Credit Agreement will bear interest at (x) the greatest of (a) the prime rate in effect on such day, (b) the federal funds effective rate on such day plus 0.5 percent or (c) the adjusted LIBO rate for a one-month interest period on such day plus 1 percent. Eurodollar borrowings under the 2019 Credit Agreement will bear interest at the adjusted LIBO rate plus the Eurodollar spread for the interest period in effect. Fees payable by the Company under the 2019 Credit Agreement include a letter of credit participation fee, a letter of credit fronting fee with respect to each letter of credit (0.125%) and a commitment fee on the available commitments of the lenders (a range of 0.175% to 0.25% based on the Company’s consolidated leverage ratio; and as of September 30, 2019, the rate was 0.225%). The 2019 Credit Agreement has a maturity date of February 25, 2023.

Maturities of the Company’s debt for the years subsequent to September 30, 2019 are as follows:

	2019 (remaining three months)		2020		2021		2022		2023		2024		Thereafter		Total
6.75% Notes	$	—	$	—	$	—	$	—	$	—	$	350,000	$	—	$	350,000
7.625% Notes	—		—		—		—		—		—		100,000		100,000
Subordinated Debentures I	—		—		—		—		—		—		41,238		41,238
Subordinated Debentures II	—		—		—		—		—		—		30,930		30,930
2019 Credit Agreement	—		—		—		—		140,000		—		—		140,000
Finance lease liabilities	1,545		6,483		4,958		2,680		1,537		1,242		2,557		21,002
Other	1,633		6,399		2,943		—		—		—		—		10,975
Total principal amount of debt	$	3,178	$	12,882	$	7,901	$	2,680	$	141,537	$	351,242	$	174,725	$	694,145
Unamortized debt issuance costs and unamortized discount															(6,167		)
Carrying amount of debt															$	687,978

29

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Covenants and Compliance

The indenture relating to the 6.75% Notes and 7.625% Notes contains customary covenants, such as reporting of annual and quarterly financial results, and restrictions on certain mergers and consolidations, as well as covenants relating to the incurrence of debt if the Company’s consolidated leverage ratio would exceed 0.35 to 1.00, a limitation on liens, a limitation on the disposition of stock of certain of the Company’s subsidiaries and a limitation on transactions with certain of the Company’s affiliates.

The 2019 Credit Agreement contains certain restrictive covenants customary for facilities of this type (subject to negotiated exceptions and baskets), including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. There are also financial covenants that require the Company to maintain a minimum consolidated net worth, a maximum consolidated leverage ratio, a minimum risk-based capital and a minimum rating. The 2019 Credit Agreement also provides for customary events of default, with grace periods where customary, including failure to pay principal when due, failure to pay interest or fees within three business days after becoming due, failure to comply with covenants, breaches of representations and warranties, default under certain other indebtedness, certain insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, or a change in control of the Company. Upon the occurrence and during the continuation of an event of default, the administrative agent, upon the request of the requisite percentage of the lenders, may terminate the obligations of the lenders to make loans and to issue letters of credit under the 2019 Credit Agreement, declare the Company’s obligations under the 2019 Credit Agreement to become immediately due and payable and/or exercise any and all remedies and other rights under the 2019 Credit Agreement.

As of September 30, 2019, the Company was in compliance with the covenants contained in the Company’s debt agreements.

10. Leases

The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and operating leases liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company uses an incremental borrowing rate at commencement date in determining the present value of future payments. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. The Company elected the package of practical expedients permitted under the transition guidance within the new standard. Application of the package of practical expedients allowed the Company not to reassess a) whether any expired or existing contracts contain leases, b) existing lease classification, c) initial direct cost for existing leases, and d) land easements that exist before the Company's adoption of the new standard.

The Company leases certain retail stores, office space, land, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheets; the Company recognizes lease expense for these leases over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Certain of the Company's lease agreements include rental payments adjusted periodically for inflation. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company rents or subleases certain real estate to third parties.

30

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Supplemental balance sheet information related to leases is as follow:

Leases	Classification	September 30, 2019
Assets:
Finance	Buildings and improvements	$	9,486
Finance	Vehicle	7,616
Finance	Hardware, software and other equipment	4,814
Total finance		21,916
Operating	Operating lease assets	112,540
Total lease assets	Premises and equipment, net(1)	$	134,456
Liabilities:
Finance	Debt	$	21,002
Operating	Other liabilities	117,050
Total lease liabilities		$	138,052

⁽¹⁾ As of September 30, 2019, accumulated depreciation and amortization for Buildings and improvements, Vehicle, Hardware, software and other equipment, and Operating lease assets was $1,840, $5,209, $8,134 and $18,969, respectively.

The components of lease cost are as follows:

Lease Cost	Classification	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Finance lease cost:
Amortization of leased assets	General and administrative expenses	$	2,284	$	5,907
Interest on lease liabilities	Interest expense	302		888
Finance lease cost		$	2,586	$	6,795
Operating lease cost	General and administrative expenses	$	9,794	$	27,538

Maturities of the Company’s lease liabilities for the years subsequent to September 30, 2019 are as follows:

	Operating Leases			Finance Leases			Total
2019 (remaining three months)	$	8,082		$	1,781		$	9,863
2020	27,678			7,258			34,936
2021	23,906			5,473			29,379
2022	19,494			3,037			22,531
2023	16,526			1,794			18,320
2024	13,856			1,428			15,284
Thereafter	28,541			2,847			31,388
Total lease payments	$	138,083		$	23,618		$	161,701
Less: Interest	(21,033		)	(2,616		)
Present value of lease liabilities	$	117,050		$	21,002

31

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Supplemental information related to term and discount rate are as follow:

Leases	Classification	September 30, 2019
Weighted-average remaining lease term:
Finance	Buildings and improvements	7.4 years
Finance	Vehicle	2.9 years
Finance	Hardware, software and other equipment	1.8 years
Operating	Operating lease assets	5.9 years
Weighted-average discount rate:
Finance	Buildings and improvements	5.8	%
Finance	Vehicle	4.2	%
Finance	Hardware, software and other equipment	4.0	%
Operating	Operating lease assets	5.6	%

Supplemental cash flow information related to leases is as follow:

	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	773
Financing cash flows from finance leases	5,281
Operating cash flows from operating leases	17,804
Leased assets obtained in exchange for new finance lease liabilities	10,950
Leased assets obtained in exchange for new operating lease liabilities	21,690

11. Commitments and Contingencies

Litigation

The Company’s insurance subsidiaries are named as defendants in various legal actions arising principally from claims made under insurance policies and contracts. Those actions are considered by the Company in estimating the loss and LAE reserves. The Company’s management believes the resolution of those actions will not have a material adverse effect on the Company’s financial position or results of operations.

32

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

12. Income Taxes

The Company files a consolidated Federal income tax return. The Reciprocal Exchanges are not included in the Company’s consolidated tax return as the Company does not have an ownership interest in the Reciprocal Exchanges, and they are not a part of the consolidated tax sharing agreement among the Company and its subsidiaries.

The Company uses the estimated annual effective tax rate method. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated, are excluded from the estimated annual effective tax rate. In these cases, the actual tax expense or benefit is reported in the same period as the related item. Certain tax effects are also not reflected in the estimated annual effective tax rate, primarily certain changes in the realizability of deferred tax assets and uncertain tax positions.

The Company’s consolidated effective tax rate increased from 21.6% for the three months ended September 30, 2018 to 21.8% for the three months ended September 30, 2019. The Company’s consolidated effective tax rate increased from 20.4% for the nine months ended September 30, 2018 to 21.6% for the nine months ended September 30, 2019. The consolidated effective tax rate was impacted by the implementation of tax law changes under the Tax Cuts and Jobs Act in 2018.

All tax liabilities are payable to the Internal Revenue Service (“IRS”) and various state and local taxing agencies. The Company’s subsidiaries are currently under audit by the IRS for the year ended December 31, 2015, and open to audit years thereafter for federal tax purposes. For state and local tax purposes, the Company is open to audit for tax years ended December 31, 2014 forward, depending on jurisdiction.

13. Stockholders’ Equity

Preferred Stock

The Company has four separate series (Series A through D) of preferred stock outstanding. Two of these series (Series B and C) were issued in offerings using depositary shares. Dividends on the Series A, B and C preferred stock are payable on the liquidation preference amount, on a non-cumulative basis, when, as and if declared by the Company’s Board of Directors, quarterly in arrears on the 15th day of January, April, July and October of each year. Dividends on the Series D preferred stock are payable on the liquidation preference amount, on a non-cumulative basis, when, as and if declared by the Company’s Board of Directors, semi-annually in arrears on the 15th day of January and July of each year, commencing on January 15, 2019. On or after July 15, 2023 (or in the event of a fundamental change of the Company, at any time), the Series D preferred stock may be converted at the holder’s option into shares of the Company’s common stock.

A summary description of the terms of these series of preferred stock is presented in the table below:

Series	Dividend rate per year		Shares of preferred stock issued	Depositary shares issued	Liquidation preference per share		Aggregate liquidation preference
A	7.50	%	2,200,000	—	$	25	$	55,000
B	7.50	%	165,000	6,600,000	$	1,000	$	165,000
C	7.50	%	200,000	8,000,000	$	1,000	$	200,000
D	Fixed/ Floating(1)		120	—	$	250,000	$	30,000

⁽¹⁾ Dividend rate is fixed at 7.00% prior to July 15, 2023 and floating at six-month LIBOR plus 5.4941% thereafter.

33

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Common Stock and Preferred Stock Dividends

Dividends are payable on the Company’s common and preferred stock only when, as and if declared by the Company’s Board of Directors in its discretion, from funds legally available for this purpose. The following tables present the class of stock, declaration date and dividends paid per share:

Class of Stock	Declaration Date	Dividend Per Share		Dividend Per Depositary Share
Common stock	July 29, 2019	$	0.05
Common stock	May 6, 2019	$	0.04
Common stock	February 25, 2019	$	0.04
Preferred stock Series A	July 29, 2019	$	0.46875
Preferred stock Series A	May 6, 2019	$	0.46875
Preferred stock Series A	February 25, 2019	$	0.46875
Preferred stock Series B	July 29, 2019	$	18.75	$	0.46875
Preferred stock Series B	May 6, 2019	$	18.75	$	0.46875
Preferred stock Series B	February 25, 2019	$	18.75	$	0.46875
Preferred stock Series C	July 29, 2019	$	18.75	$	0.46875
Preferred stock Series C	May 6, 2019	$	18.75	$	0.46875
Preferred stock Series C	February 25, 2019	$	18.75	$	0.46875
Preferred stock Series D	May 6, 2019	$	8,750.00

Class of Stock	Declaration Date	Dividend Per Share		Dividend Per Depositary Share
Common stock	August 6, 2018	$	0.04
Common stock	May 7, 2018	$	0.04
Common stock	February 26, 2018	$	0.04
Preferred stock Series A	August 6, 2018	$	0.46875
Preferred stock Series A	May 7, 2018	$	0.46875
Preferred stock Series A	February 26, 2018	$	0.46875
Preferred stock Series B	August 6, 2018	$	18.75	$	0.46875
Preferred stock Series B	May 7, 2018	$	18.75	$	0.46875
Preferred stock Series B	February 26, 2018	$	18.75	$	0.46875
Preferred stock Series C	August 6, 2018	$	18.75	$	0.46875
Preferred stock Series C	May 7, 2018	$	18.75	$	0.46875
Preferred stock Series C	February 26, 2018	$	18.75	$	0.46875

34

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

14. Stock-Based Compensation

Effective May 6, 2019, the Company’s stockholders approved the 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan authorizes up to 2.5 million shares of the Company’s stock for awards of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSU”), performance share units, performance units, cash-based awards or other stock-based awards. The number of shares of common stock for which awards may be issued may not exceed 2.5 million shares, subject to the authority of the Company’s Board of Directors to adjust this amount in the event of a consolidation, reorganization, stock dividend, recapitalization or similar transaction affecting the Company’s common stock. The 2019 Plan serves as a successor of the Company’s prior equity incentive plans. Outstanding awards under the prior plans continue to be outstanding and subject to their terms and conditions. As of September 30, 2019, 2.5 million shares of the Company’s common stock remained available for grants under the 2019 Plan.

Stock Options

A summary of the stock option awards is shown below:

	Shares Subject to Options Outstanding
Nine Months Ended September 30, 2019	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Outstanding at beginning of period	3,184,352		$	9.53
Exercised	(114,848	)	3.80
Outstanding and exercisable at end of period	3,069,504		$	9.74	3.4	$	40,755

⁽¹⁾ The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of the Company’s common stock of $23.02, as reported on the Nasdaq Global Market on September 30, 2019.

No options were granted, forfeited or expired during the nine months ended September 30, 2019. The total intrinsic value of the options exercised for the three months ended September 30, 2019 and 2018 was $1,035 and $322, respectively. The total intrinsic value of the options exercised for the nine months ended September 30, 2019 and 2018 was $2,310 and $3,953, respectively. The total fair value of stock options vested for the three months ended September 30, 2019 and 2018 was $76 and $19, respectively. The total fair value of stock options vested for the nine months ended September 30, 2019 and 2018 was $175 and $652, respectively.

Restricted Stock Units

A summary of the RSUs is shown below:

	RSUs
Nine Months Ended September 30, 2019	Number of RSUs		Weighted-Average Grant Date Fair Value
Non-vested at beginning of period	938,795		$	22.28
Granted	510,241		25.58
Vested	(403,436	)	22.14
Forfeited	(17,104	)	23.19
Non-vested at end of period	1,028,496		$	23.96

The weighted-average grant date fair value of RSUs granted for the nine months ended September 30, 2019 and 2018 was $25.58 and $21.36, respectively. The total fair value of the RSUs vested for the three months ended September 30, 2019 and 2018 was $1,513 and $1,348, respectively. The total fair value of the RSUs vested for the nine months ended September 30, 2019 and 2018 was $8,932 and $6,869, respectively.

35

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

Stock-Based Compensation Expense

Stock-based compensation expense, included in general and administrative expenses, for all stock-based compensation plans was $2,785 and $2,283 for the three months ended September 30, 2019 and 2018, respectively, and $8,277 and $6,793 for the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, the Company had approximately $18,455 of unrecognized stock-based compensation expense, all of which was related to RSUs. This unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately 1.5 years based on vesting under the award service conditions.

15. Earnings Per Share

The following is a summary of the elements used in calculating basic and diluted earnings per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Numerator:
Net income attributable to NGHC	$	71,154		$	68,382		$	240,788		$	181,138
Preferred stock dividends - nonconvertible	(7,875		)	(7,875		)	(23,625		)	(23,625		)
Preferred stock dividends - convertible	—			—			(1,050		)	—
Numerator for basic EPS	63,279			60,507			216,113			157,513
Effect of dilutive securities:
Preferred stock dividends - convertible	—			—			1,050			—
Numerator for diluted EPS - after assumed conversions	$	63,279		$	60,507		$	217,163		$	157,513
Denominator:
Denominator for basic EPS - weighted-average shares outstanding	113,263,367			107,101,837			113,153,121			106,944,461
Effect of dilutive securities:
Employee stock options	1,823,012			2,108,233			1,881,295			2,067,054
RSUs	262,637			353,322			263,635			304,265
Convertible preferred stock	789,473			—			789,473			—
Dilutive potential common shares	2,875,122			2,461,555			2,934,403			2,371,319
Denominator for diluted EPS - weighted-average shares outstanding and assumed conversions	116,138,489			109,563,392			116,087,524			109,315,780
Basic EPS	$	0.56		$	0.56		$	1.91		$	1.47
Diluted EPS	$	0.54		$	0.55		$	1.87		$	1.44

36

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

16. Related Party Transactions

The significant shareholder of the Company has an ownership interest in AmTrust, Maiden Holdings Ltd. (“Maiden”) and ACP Re. The Company provides and receives services to and from these related entities as follows:

Agreements with AmTrust

Asset Purchase and Master Services Agreements

On September 13, 2017, the Company entered into an asset purchase and license agreement (the “Agreement”) with AmTrust, pursuant to which the Company acquired ownership of a policy management system and the related intellectual property, as well as a non-exclusive perpetual license to certain software programs used by the system (the “System”), for a purchase price of $200,000, including license fees which would have been payable for use of the System during the third quarter 2017. The System has been fully transferred to the Company’s operating environment and the purchase price has been fully paid.

The Agreement also terminated the existing master services agreement between the Company and AmTrust. AmTrust continued to provide management of the premium receipts from its lockbox facilities during a transition period pursuant to the Agreement under the same terms as those provided under the master services agreement. The Company recorded expenses related to this agreement of $63 and $729 for the three months ended September 30, 2019 and 2018, respectively, and $511 and $9,819 for the nine months ended September 30, 2019 and 2018, respectively.

NGHC Quota Share Agreement

The Company participated in a quota share reinsurance treaty with ACP Re, Maiden and AmTrust, whereby the Company ceded 50% of the total net earned premiums, net of a ceding commission, and net incurred losses and LAE on business with effective dates after March 1, 2010 (“NGHC Quota Share”). In August 2013, the Company terminated the NGHC Quota Share agreement on a run-off basis. The net reinsurance recoverable is $4,496 and $7,425 at September 30, 2019 and December 31, 2018, respectively. The net recovery under the agreement was $216 and $1,090 for the three months ended September 30, 2019 and 2018, respectively, and $624 and $1,524 for the nine months ended September 30, 2019 and 2018, respectively.

ACP Re and Maiden held assets in trust for the benefit of the Company in the amount of $2,486 and $7,385, respectively, as of September 30, 2019 and $3,796 and $8,644, respectively, as of December 31, 2018.

Equity Method Investments

The Company has an ownership interest in an LSC Entity, limited liability companies and limited partnerships with related parties. See Note 3, “Investments - Equity Method Investments - Related Parties” for additional information.

Agreements with ACP Re

Credit Agreement

The Company is party to a credit agreement (the “ACP Re Credit Agreement”) by and among AmTrust, as administrative agent, ACP Re Holdings, LLC, a Delaware limited liability company owned by a related party trust, the Michael Karfunkel Family 2005 Trust (the “Trust”), as borrower, and AmTrust and the Company, as lenders of $250,000 ($125,000 each lender). The amounts borrowed are secured by equity interests, cash and, other investments held by ACP Re Holdings, LLC in an amount equal to 115% of the outstanding loan balance. The maturity date of the loan is September 20, 2036. The interest rate on the outstanding principal balance is a fixed annual rate of 3.7%, provided that up to 1.2% thereof may be paid in kind. The Trust is required to cause ACP Re Holdings, LLC to maintain assets having a value greater than 115% of the outstanding loan balance, and if there is a shortfall, the Trust will make a contribution to ACP Re Holdings, LLC of assets having a market value of at least the shortfall (the “Maintenance Covenant”). Commencing on September 20, 2026, and for each year thereafter, two percent of the then outstanding principal balance

37

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

of the loan (inclusive of any amounts previously paid in kind) is due and payable. A change of control of greater than 50% and an uncured breach of the Maintenance Covenant are included as events of default.

As of September 30, 2019 and December 31, 2018 the Company had a receivable principal amount related to the ACP Re Credit Agreement of $129,229 and $127,692, respectively. The Company recorded interest income of $1,195 and $1,181 for the three months ended September 30, 2019 and 2018, respectively, and $3,571 and $3,529 for the nine months ended September 30, 2019 and 2018, respectively, under the ACP Re Credit Agreement. Management determined no impairment reserve was needed for the carrying value of the loan at September 30, 2019 and December 31, 2018 based on the collateral levels maintained.

Other Related Party Transactions

Operating Lease Agreements

The Company leases office space at 59 Maiden Lane in New York, New York from 59 Maiden Lane Associates LLC, an entity that is wholly-owned by the Karfunkel family. The lease term is through 2022. The Company paid $207 and $207 in rent for the three months ended September 30, 2019 and 2018, respectively, and $622 and $622 in rent for the nine months ended September 30, 2019 and 2018, respectively.

The Company leases office space at 30 North LaSalle Street, Chicago, Illinois from 30 North LaSalle Street Partners LLC, an entity that is wholly-owned by the Karfunkel family. The lease term is through 2025. The Company paid $78 and $76 in rent for the three months ended September 30, 2019 and 2018, respectively, and $231 and $226 in rent for the nine months ended September 30, 2019 and 2018, respectively.

Use of the Company Aircraft

The Company and Barry Karfunkel, Chief Executive Officer of the Company, are parties to a time sharing agreement for the use of the Company’s plane. Mr. Karfunkel reimbursed the Company $0 and $25 for the three months ended September 30, 2019 and 2018, and reimbursed the Company $15 and $65 for the nine months ended September 30, 2019 and 2018, respectively, for his personal use of the company-owned aircraft.

38

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

17. Segment Information

The Company currently operates two business segments, “Property and Casualty” and “Accident and Health.” The “Corporate and Other” column represents the activities of the holding company, as well as income from the Company’s investment portfolio. The Company evaluates segment profits attributable to the performance of activities within the segment separately from the results of the Company’s investment portfolio. Other operating expenses allocated to the segments are called “General and administrative expenses” which are allocated on an actual basis except corporate salaries and benefits where management’s judgment is applied. In determining total assets by segment, the Company identifies those assets that are attributable to a particular segment such as premiums, deferred acquisition costs, reinsurance recoverable, prepaid reinsurance premiums, intangible assets and goodwill, while the remaining assets are allocated to Corporate and Other.

The Property and Casualty segment, which includes the Reciprocal Exchanges and the management companies, reports the management fees earned by the Company from the Reciprocal Exchanges for underwriting, investment management and other services as service and fee income. The effects of these transactions between the Company and the Reciprocal Exchanges are eliminated in consolidation to derive consolidated net income. However, the management fee income is reported in net income attributable to NGHC and included in the basic and diluted earnings per share.

The following tables summarize the results of operations of the operating segments:

	Three Months Ended September 30, 2019
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	1,272,602		$	162,555		$	—		$	1,435,157
Ceded premiums	(385,347		)	(15,206		)	—			(400,553		)
Net premium written	887,255			147,349			—			1,034,604
Change in unearned premium	(2,520		)	21,554			—			19,034
Net earned premium	884,735			168,903			—			1,053,638
Ceding commission income	55,326			2,261			—			57,587
Service and fee income	97,890			63,736			—			161,626
Total underwriting revenues	1,037,951			234,900			—			1,272,851
Underwriting expenses:
Loss and loss adjustment expense	674,722			70,612			—			745,334
Acquisition costs and other underwriting expenses	161,876			47,214			—			209,090
General and administrative expenses	195,567			68,297			—			263,864
Total underwriting expenses	1,032,165			186,123			—			1,218,288
Underwriting income	5,786			48,777			—			54,563
Net investment income	—			—			33,740			33,740
Net loss on investments	—			—			(565		)	(565		)
Other income	—			—			2,146			2,146
Interest expense	—			—			(12,898		)	(12,898		)
Provision for income taxes	—			—			(16,747		)	(16,747		)
Net (income) loss attributable to noncontrolling interest	—			—			10,915			10,915
Net income attributable to NGHC	$	5,786		$	48,777		$	16,591		$	71,154

39

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	Three Months Ended September 30, 2018
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	1,211,723		$	143,948		$	—		$	1,355,671
Ceded premiums	(412,275		)	(20,372		)	—			(432,647		)
Net premium written	799,448			123,576			—			923,024
Change in unearned premium	(15,267		)	31,770			—			16,503
Net earned premium	784,181			155,346			—			939,527
Ceding commission income	58,831			269			—			59,100
Service and fee income	96,232			46,458			—			142,690
Total underwriting revenues	939,244			202,073			—			1,141,317
Underwriting expenses:
Loss and loss adjustment expense	584,658			72,652			—			657,310
Acquisition costs and other underwriting expenses	146,696			44,774			—			191,470
General and administrative expenses	185,208			50,525			—			235,733
Total underwriting expenses	916,562			167,951			—			1,084,513
Underwriting income	22,682			34,122			—			56,804
Net investment income	—			—			30,696			30,696
Net loss on investments	—			—			(3,170		)	(3,170		)
Interest expense	—			—			(12,583		)	(12,583		)
Provision for income taxes	—			—			(15,518		)	(15,518		)
Net (income) loss attributable to noncontrolling interest	—			—			12,153			12,153
Net income attributable to NGHC	$	22,682		$	34,122		$	11,578		$	68,382

40

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	Nine Months Ended September 30, 2019
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	3,666,072		$	592,771		$	—		$	4,258,843
Ceded premiums	(971,643		)	(92,534		)	—			(1,064,177		)
Net premium written	2,694,429			500,237			—			3,194,666
Change in unearned premium	(142,515		)	(3,705		)	—			(146,220		)
Net earned premium	2,551,914			496,532			—			3,048,446
Ceding commission income	178,533			8,780			—			187,313
Service and fee income	298,356			177,685			—			476,041
Total underwriting revenues	3,028,803			682,997			—			3,711,800
Underwriting expenses:
Loss and loss adjustment expense	1,870,993			241,685			—			2,112,678
Acquisition costs and other underwriting expenses	462,071			153,063			—			615,134
General and administrative expenses	571,498			188,227			—			759,725
Total underwriting expenses	2,904,562			582,975			—			3,487,537
Underwriting income	124,241			100,022			—			224,263
Net investment income	—			—			102,316			102,316
Net loss on investments	—			—			(5,773		)	(5,773		)
Other income	—			—			2,146			2,146
Interest expense	—			—			(38,822		)	(38,822		)
Provision for income taxes	—			—			(61,494		)	(61,494		)
Net (income) loss attributable to noncontrolling interest	—			—			18,152			18,152
Net income attributable to NGHC	$	124,241		$	100,022		$	16,525		$	240,788

41

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	Nine Months Ended September 30, 2018
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	3,594,690		$	534,560		$	—		$	4,129,250
Ceded premiums	(1,161,235		)	(48,373		)	—			(1,209,608		)
Net premium written	2,433,455			486,187			—			2,919,642
Change in unearned premium	(110,875		)	(20,796		)	—			(131,671		)
Net earned premium	2,322,580			465,391			—			2,787,971
Ceding commission income	158,187			789			—			158,976
Service and fee income	280,727			134,586			—			415,313
Total underwriting revenues	2,761,494			600,766			—			3,362,260
Underwriting expenses:
Loss and loss adjustment expense	1,709,440			252,364			—			1,961,804
Acquisition costs and other underwriting expenses	405,541			136,499			—			542,040
General and administrative expenses	542,902			148,265			—			691,167
Total underwriting expenses	2,657,883			537,128			—			3,195,011
Underwriting income	103,611			63,638			—			167,249
Net investment income	—			—			81,702			81,702
Net loss on investments	—			—			(22,756		)	(22,756		)
Interest expense	—			—			(38,775		)	(38,775		)
Provision for income taxes	—			—			(38,261		)	(38,261		)
Net (income) loss attributable to noncontrolling interest	—			—			31,979			31,979
Net income attributable to NGHC	$	103,611		$	63,638		$	13,889		$	181,138

The following tables summarize the financial position of the operating segments:

	September 30, 2019
	Property and Casualty		Accident and Health		Corporate and Other		Total
Premiums and other receivables, net	$	1,365,806	$	165,595	$	9,725	$	1,541,126
Deferred acquisition costs	239,017		28,642		—		267,659
Reinsurance recoverable	1,458,290		46,309		—		1,504,599
Prepaid reinsurance premiums	631,486		11,732		—		643,218
Intangible assets, net and Goodwill	450,437		123,373		—		573,810
Prepaid and other assets	25,417		15,279		4,511		45,207
Corporate and other assets	—		—		5,498,377		5,498,377
Total assets	$	4,170,453	$	390,930	$	5,512,613	$	10,073,996

42

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	December 31, 2018
	Property and Casualty		Accident and Health		Corporate and Other		Total
Premiums and other receivables, net	$	1,245,530	$	153,896	$	386	$	1,399,812
Deferred acquisition costs	226,188		25,220		—		251,408
Reinsurance recoverable	1,585,008		26,730		—		1,611,738
Prepaid reinsurance premiums	665,660		14		—		665,674
Intangible assets, net and Goodwill	443,163		116,957		—		560,120
Prepaid and other assets	20,941		22,472		111,545		154,958
Corporate and other assets	—		—		4,795,570		4,795,570
Total assets	$	4,186,490	$	345,289	$	4,907,501	$	9,439,280

The following tables show an analysis of the premiums by geographical location:

	Three Months Ended September 30,
	2019						2018
	NGHC		Reciprocal Exchanges		Total		NGHC			Reciprocal Exchanges		Total
Gross premium written - North America	$	1,313,309	$	118,267	$	1,431,576	$	1,230,492		$	121,351	$	1,351,843
Gross premium written - Europe	3,581		—		3,581		3,828			—		3,828
Total	$	1,316,890	$	118,267	$	1,435,157	$	1,234,320		$	121,351	$	1,355,671
Net premium written - North America	$	964,536	$	67,285	$	1,031,821	$	921,456		$	14,814	$	936,270
Net premium written - Europe	2,783		—		2,783		(13,246		)	—		(13,246		)
Total	$	967,319	$	67,285	$	1,034,604	$	908,210		$	14,814	$	923,024
Net earned premium - North America	$	972,598	$	57,117	$	1,029,715	$	878,367		$	43,151	$	921,518
Net earned premium - Europe	23,923		—		23,923		18,009			—		18,009
Total	$	996,521	$	57,117	$	1,053,638	$	896,376		$	43,151	$	939,527

	Nine Months Ended September 30,
	2019						2018
	NGHC		Reciprocal Exchanges		Total		NGHC		Reciprocal Exchanges		Total
Gross premium written - North America	$	3,787,030	$	344,982	$	4,132,012	$	3,666,594	$	337,021	$	4,003,615
Gross premium written - Europe	126,831		—		126,831		125,635		—		125,635
Total	$	3,913,861	$	344,982	$	4,258,843	$	3,792,229	$	337,021	$	4,129,250
Net premium written - North America	$	2,945,220	$	172,460	$	3,117,680	$	2,678,841	$	132,240	$	2,811,081
Net premium written - Europe	76,986		—		76,986		108,561		—		108,561
Total	$	3,022,206	$	172,460	$	3,194,666	$	2,787,402	$	132,240	$	2,919,642
Net earned premium - North America	$	2,825,552	$	149,405	$	2,974,957	$	2,559,409	$	141,009	$	2,700,418
Net earned premium - Europe	73,489		—		73,489		87,553		—		87,553
Total	$	2,899,041	$	149,405	$	3,048,446	$	2,646,962	$	141,009	$	2,787,971

43

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The following tables summarize service and fee income by source within each operating segment:

	Three Months Ended September 30,
	2019						2018
	Property and Casualty		Accident and Health		Total		Property and Casualty		Accident and Health		Total
Commission revenue	$	21,333	$	16,353	$	37,686	$	25,404	$	17,874	$	43,278
Finance and processing fees	33,637		800		34,437		29,804		935		30,739
Installment fees	23,464		—		23,464		23,841		—		23,841
Group health administrative fees	—		25,808		25,808		—		18,364		18,364
Late payment fees	9,251		72		9,323		8,164		19		8,183
Other service and fee income	10,205		20,703		30,908		9,019		9,266		18,285
Total	$	97,890	$	63,736	$	161,626	$	96,232	$	46,458	$	142,690
NGHC	$	96,305	$	63,736	$	160,041	$	94,657	$	46,458	$	141,115
Reciprocal Exchanges	1,585		—		1,585		1,575		—		1,575
Total	$	97,890	$	63,736	$	161,626	$	96,232	$	46,458	$	142,690

	Nine Months Ended September 30,
	2019						2018
	Property and Casualty		Accident and Health		Total		Property and Casualty		Accident and Health		Total
Commission revenue	$	68,193	$	57,097	$	125,290	$	68,547	$	51,190	$	119,737
Finance and processing fees	98,218		3,710		101,928		91,676		3,223		94,899
Installment fees	72,782		—		72,782		68,928		—		68,928
Group health administrative fees	—		73,861		73,861		—		57,461		57,461
Late payment fees	26,061		249		26,310		24,360		69		24,429
Other service and fee income	33,102		42,768		75,870		27,216		22,643		49,859
Total	$	298,356	$	177,685	$	476,041	$	280,727	$	134,586	$	415,313
NGHC	$	293,885	$	177,685	$	471,570	$	276,261	$	134,586	$	410,847
Reciprocal Exchanges	4,471		—		4,471		4,466		—		4,466
Total	$	298,356	$	177,685	$	476,041	$	280,727	$	134,586	$	415,313

44

NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

The following tables show an analysis of premiums and fee income by product line:

	Three Months Ended September 30,				Nine Months Ended September 30,
Gross Premium Written	2019		2018		2019		2018
Property and Casualty
Personal Auto	$	705,709	$	661,126	$	2,083,702	$	2,017,996
Homeowners	201,977		192,349		544,056		523,308
RV/Packaged	55,631		54,964		168,796		164,427
Small Business Auto	76,987		75,218		246,694		246,448
Lender-placed Insurance	97,468		94,462		232,265		259,995
Other	16,563		12,253		45,577		45,495
Total Property and Casualty	1,154,335		1,090,372		3,321,090		3,257,669
Accident and Health
Group	73,223		61,743		213,197		177,036
Individual	85,728		78,378		252,719		231,890
International	3,604		3,827		126,855		125,634
Total Accident and Health	162,555		143,948		592,771		534,560
Total NGHC	$	1,316,890	$	1,234,320	$	3,913,861	$	3,792,229
Reciprocal Exchanges
Personal Auto	$	39,166	$	40,240	$	120,012	$	116,602
Homeowners	78,079		80,070		222,019		217,486
Other	1,022		1,041		2,951		2,933
Total Reciprocal Exchanges	$	118,267	$	121,351	$	344,982	$	337,021
Total Gross Premium Written	$	1,435,157	$	1,355,671	$	4,258,843	$	4,129,250

	Three Months Ended September 30,						Nine Months Ended September 30,
Net Premium Written	2019			2018			2019		2018
Property and Casualty
Personal Auto	$	560,032		$	502,964		$	1,730,904	$	1,542,685
Homeowners	82,601			112,390			276,250		255,290
RV/Packaged	52,283			54,627			162,047		162,934
Small Business Auto	56,615			53,155			196,221		181,314
Lender-placed Insurance	61,579			56,529			140,863		134,630
Other	6,860			4,969			15,684		24,362
Total Property and Casualty	819,970			784,634			2,521,969		2,301,215
Accident and Health
Group	59,001			51,296			170,911		145,760
Individual	85,541			78,372			252,316		231,884
International	2,807			(6,092		)	77,010		108,543
Total Accident and Health	147,349			123,576			500,237		486,187
Total NGHC	$	967,319		$	908,210		$	3,022,206	$	2,787,402
Reciprocal Exchanges
Personal Auto	$	67,154		$	12,845		$	101,460	$	40,860
Homeowners	(2,047		)	2,002			68,180		90,826
Other	2,178			(33		)	2,820		554
Total Reciprocal Exchanges	$	67,285		$	14,814		$	172,460	$	132,240
Total Net Premium Written	$	1,034,604		$	923,024		$	3,194,666	$	2,919,642

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NATIONAL GENERAL HOLDINGS CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands, Except Shares and Per Share Data)

	Three Months Ended September 30,				Nine Months Ended September 30,
Net Earned Premium	2019		2018		2019		2018
Property and Casualty
Personal Auto	$	568,346	$	496,139	$	1,621,734	$	1,436,793
Homeowners	86,525		80,308		272,591		242,161
RV/Packaged	51,023		51,229		150,739		145,911
Small Business Auto	62,265		59,636		189,957		178,302
Lender-placed Insurance	56,599		48,466		158,595		162,629
Other	2,860		5,252		8,893		15,775
Total Property and Casualty	827,618		741,030		2,402,509		2,181,571
Accident and Health
Group	59,009		51,310		170,921		145,788
Individual	85,971		78,874		252,122		232,069
International	23,923		25,162		73,489		87,534
Total Accident and Health	168,903		155,346		496,532		465,391
NGHC Total	$	996,521	$	896,376	$	2,899,041	$	2,646,962
Reciprocal Exchanges
Personal Auto	$	33,953	$	13,353	$	65,907	$	38,812
Homeowners	22,759		29,698		82,475		101,578
Other	405		100		1,023		619
Total Reciprocal Exchanges	57,117		43,151		149,405		141,009
Total Net Earned Premium	$	1,053,638	$	939,527	$	3,048,446	$	2,787,971

	Three Months Ended September 30,				Nine Months Ended September 30,
Fee Income	2019		2018		2019		2018
Property and Casualty
Service and Fee Income	$	96,305	$	94,657	$	293,885	$	276,261
Ceding Commission Income	40,260		44,244		128,087		118,664
Total Property and Casualty	136,565		138,901		421,972		394,925
Accident and Health
Service and Fee Income
Group	34,848		25,198		98,084		74,768
Individual	2,128		4,512		5,506		7,973
Third Party Fee	26,760		16,748		74,095		51,845
Total Service and Fee Income	63,736		46,458		177,685		134,586
Ceding Commission Income	2,261		269		8,780		789
Total Accident and Health	65,997		46,727		186,465		135,375
NGHC Total	$	202,562	$	185,628	$	608,437	$	530,300
Reciprocal Exchanges
Service and Fee Income	$	1,585	$	1,575	$	4,471	$	4,466
Ceding Commission Income	15,066		14,587		50,446		39,523
Total Reciprocal Exchanges	$	16,651	$	16,162	$	54,917	$	43,989
Total Fee Income	$	219,213	$	201,790	$	663,354	$	574,289

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q.

Note on Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements that are intended to be covered by the safe harbors created by The Private Securities Litigation Reform Act of 1995. When we use words such as “anticipate,” “intend,” “plan,” “believe,” “estimate,” “expect,” or similar expressions, we do so to identify forward-looking statements. Examples of forward-looking statements include the plans and objectives of management for future operations, including those relating to future growth of our business activities and availability of funds, and are based on current expectations that involve assumptions that are difficult or impossible to predict accurately and many of which are beyond our control. 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, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, estimates of the fair value of our investments, development of claims and the effect on loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, the effect of unpredictable catastrophic losses, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, the effects of tax reform, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with our vendors or other counterparties, breaches in data security or other disruptions with our technology, heightened competition, changes in pricing environments, and changes in asset valuations. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected, is contained in Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2018, and our quarterly reports on Form 10-Q. The projections and statements in this report speak only as of the date of this report and we undertake no obligation to 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.

Overview

We are a specialty personal lines insurance holding company that, through our subsidiaries, provides a variety of insurance products, including personal and small business automobile, homeowners, umbrella, recreational vehicle, motorcycle, lender-placed, supplemental health and other niche insurance products. We sell insurance products with a focus on underwriting profitability through a combination of our customized and predictive analytics and our technology driven low cost infrastructure.

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We manage our business through two segments: P&C and A&H. We transact business primarily through our twenty-two regulated domestic insurance subsidiaries:

Property and Casualty:

Agent Alliance Insurance Company

Century-National Insurance Company

Direct General Insurance Company

Direct General Insurance Company of Mississippi

Direct Insurance Company

Direct National Insurance Company

Imperial Fire and Casualty Insurance Company

Integon Casualty Insurance Company

Integon General Insurance Corporation

Integon Indemnity Corporation

Integon National Insurance Company

Integon Preferred Insurance Company

MIC General Insurance Corporation

National Farmers Union Property and Casualty Company

National General Assurance Company

National General Insurance Company

National General Insurance Online, Inc.

National General Premier Insurance Company

New South Insurance Company

Standard Property and Casualty Insurance Company

Accident and Health:

Direct General Life Insurance Company

National Health Insurance Company

Our insurance subsidiaries have an “A-” (Excellent) group rating by A.M. Best Company, Inc. (“A.M. Best”). On September 5, 2019, A.M. Best affirmed our A- rating including our subsidiary National Farmers Union Property and Casualty Company, which we acquired on August 1, 2019. We currently conduct a limited amount of business outside the United States, primarily in Bermuda and Sweden.

On August 30, 2019, we entered into a share purchase agreement, pursuant to which, subject to the satisfaction or waiver of the conditions set forth therein, we agreed to sell our Euro Accident Health and Care Insurance Sweden operation, to an investor group arranged by Impilo AB, a Swedish investment company focused on Nordic healthcare investments. The estimated sale price for this transaction is $138.0 million. Since this transaction is based on Swedish Krona (SEK) and will reflect certain closing adjustments, the final price will vary accordingly. The transaction is expected to close in late 2019 or early 2020, subject to customary closing conditions and regulatory approvals.

Two of our wholly-owned subsidiaries are management companies that act as attorneys-in-fact for Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together with their subsidiaries, the “Reciprocal Exchanges” or “Exchanges”). We do not own the Reciprocal Exchanges but are paid a fee to manage their business operations through our wholly-owned management companies. The Reciprocal Exchanges are included in our P&C segment.

The operating results of insurance companies are subject to quarterly and yearly fluctuations due to the effect of competition on pricing, the frequency and severity of losses, the effect of weather and natural disasters on losses, general economic conditions, the general regulatory environment in states in which an insurer operates, state regulation of premium rates, changes in fair value of investments, and other factors such as changes in tax laws. The industry has been highly cyclical with periods of high premium rates and shortages of underwriting capacity followed by periods

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of severe price competition and excess capacity. While these cycles can have a large impact on a company’s ability to grow and retain business, we have sought to focus on niche markets and regions where we are able to maintain premium rates at generally consistent levels and maintain underwriting discipline throughout these cycles. We believe that the nature of our insurance products, including their relatively low limits, the relatively short duration of time between when claims are reported and when they are settled, and the broad geographic distribution of our customers, have allowed us to grow and retain our business throughout these cycles. In addition, we have limited our exposure to catastrophe losses through reinsurance. With regard to seasonality, we tend to experience higher claims and claims expense in our P&C segment during periods of severe or inclement weather.

Our products in the P&C segment include personal auto, homeowners, RV/Packaged, small business auto, lender-placed insurance and other products. The personal auto segment includes policies for standard, preferred and nonstandard automobile insurance. The homeowners product includes multiple-peril policies and personal umbrella coverage to the homeowner. The RV/Packaged product offers policies that include RV automatic personal effects coverage, optional replacement cost coverage, RV storage coverage and full-time liability coverage. The small business auto product offers policies that include liability and physical damage coverage for light-to-medium duty commercial vehicles. The lender-placed insurance product offers fire, home and flood products, as well as collateral protection insurance and guaranteed asset protection products for automobiles.

Our products in the A&H segment include group, individual and third party fees. The group product includes revenue from our small group self-funded product. The individual product line includes revenue from our supplemental products including short-term medical, accident/AD&D, hospital indemnity, cancer/critical illness, dental and term life insurance. Third party fees include commission and general agent fees for selling policies issued by third-party insurance companies, fees generated through selling our technology products to third parties and fees from our international health insurance offerings.

We evaluate our operations by monitoring key measures of growth and profitability, including net combined ratio (non-GAAP) and operating leverage. We target a net combined ratio (non-GAAP) in the low-to-mid 90s while seeking to maintain optimal operating leverage in our insurance subsidiaries commensurate with our A.M. Best rating objectives. To achieve our targeted net combined ratio (non-GAAP) we continually seek ways to reduce our operating costs and lower our expense ratio. For the nine months ended September 30, 2019, our annualized operating leverage (the ratio of net earned premium to average total stockholders’ equity) was 1.7x, which was within our planned target operating leverage of between 1.5x and 2.0x.

Investment income is also an important part of our business. Because we often do not settle claims until several months or longer after we receive the original policy premiums, we are able to invest cash from premiums for significant periods of time. We invest our capital and surplus in accordance with state and regulatory guidelines. Our net investment income was $102.3 million and $81.7 million for the nine months ended September 30, 2019 and 2018, respectively. We held 4.5% and 5.2% in cash, cash equivalents and restricted cash of our total invested assets as of September 30, 2019 and December 31, 2018, respectively.

Our most significant balance sheet liability is our unpaid loss and loss adjustment expense (“LAE”) reserves. As of September 30, 2019 and December 31, 2018, our reserves, net of reinsurance recoverable on unpaid losses, were $1.8 billion and $1.7 billion, respectively. We record reserves for estimated losses under insurance policies that we write and for loss adjustment expenses related to the investigation and settlement of policy claims. Our reserves for loss and loss adjustment expenses represent the estimated cost of all reported and unreported loss and loss adjustment expenses incurred and unpaid at any given point in time based on known facts and circumstances. Reserves are based on estimates of the most likely ultimate cost of individual claims. These estimates are inherently uncertain. Judgment is required to determine the relevance of our historical experience and industry information under current facts and circumstances. The interpretation of this historical and industry data can be impacted by external forces, principally frequency and severity of future claims, length of time to achieve ultimate settlement of claims, inflation of medical costs and wages, insurance policy coverage interpretations, jury determinations and legislative changes. Accordingly, our reserves may prove to be inadequate to cover our actual losses. If we change our estimates, such changes would be reflected in our results of operations during the period in which they are made, with increases in our reserves resulting in decreases in our earnings.

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Critical Accounting Policies

Our discussion and analysis of our results of operations, financial condition and liquidity are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities as of the date of the financial statements. As more information becomes known, these estimates and assumptions could change, which would have an impact on actual results that may differ materially from these estimates and judgments under different assumptions. We have not made any changes in estimates or judgments that have had a significant effect on the reported amounts as previously disclosed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.

For more information related to recent accounting pronouncements that we adopted during the nine months ended September 30, 2019, see Note 2, “Recent Accounting Pronouncements” in the notes to our condensed consolidated financial statements.

Principal Revenue and Expense Items

Gross premium written. Gross premium written represents premium from each insurance policy that we write, including as a servicing carrier for assigned risk plans, during a reporting period based on the effective date of the individual policy, prior to ceding reinsurance to third parties.

Net premium written. Net premium written is gross premium written less that portion of premium that we cede to third-party reinsurers under reinsurance agreements. The amount ceded under these reinsurance agreements is based on a contractual formula contained in the individual reinsurance agreement.

Change in unearned premium. Change in unearned premium is the change in the balance of the portion of premium that we have written but have yet to earn during the relevant period because the policy is unexpired.

Net earned premium. Net earned premium is the earned portion of our net premium written. We earn insurance premium on a pro rata basis over the term of the policy. At the end of each reporting period, premium written that is not earned is classified as unearned premium, which is earned in subsequent periods over the remaining term of the policy. Our policies typically have a term of six months or one year. For a six-month policy written on January 1, 2019, we would earn half of the premium in the first quarter of 2019 and the other half in the second quarter of 2019.

Ceding commission income. Ceding commission income is commission we receive based on the earned premium ceded to third-party reinsurers to reimburse us for our acquisition, underwriting and other operating expenses. We earn commissions on reinsurance premium ceded in a manner consistent with the recognition of the earned premium on the underlying insurance policies, on a pro rata basis over the terms of the policies reinsured. The portion of ceding commission revenue which represents reimbursement of successful acquisition costs related to the underlying policies is recorded as an offset to acquisition costs and other underwriting expenses.

Service and fee income. We also generate policy service and fee income from installment fees, late payment fees, and other finance and processing fees related to policy cancellation, policy reinstatement, and insufficient fund check returns. These fees are generally designed to offset expenses incurred in the administration of our insurance business, and are generated as follows. Installment fees are charged to permit a policyholder to pay premiums in installments rather than in a lump sum. Late payment fees are charged when premiums are remitted after the due date and any applicable grace periods. Policy cancellation fees are charged to policyholders when a policy is terminated by the policyholder prior to the expiration of the policy’s term or renewal term, as applicable. Reinstatement fees are charged to reinstate a policy that has lapsed, generally as a result of non-payment of premiums. Insufficient fund fees are charged when the customer’s payment is returned by the financial institution.

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All fee income is recognized as follows. An installment fee is recognized at the time each policy installment bill is due. A late payment fee is recognized when the customer’s payment is not received after the listed due date and any applicable grace period. A policy cancellation fee is recognized at the time the customer’s policy is canceled. A policy reinstatement fee is recognized when the customer’s policy is reinstated. An insufficient fund fee is recognized when the customer’s payment is returned by the financial institution. The amounts charged are primarily intended to compensate us for the administrative costs associated with processing and administering policies that generate insurance premium; however, the amounts of fees charged are not dependent on the amount or period of insurance coverage provided and do not entail any obligation to return any portion of those funds. The costs associated with generating fee income are not separately tracked.

We also collect service fees in the form of commissions and general agent fees by selling policies issued by third-party insurance companies. Commission income and general agent fees are recognized, net of an allowance for estimated policy cancellations, at the time when the policy is sold. The allowance for estimated third-party cancellations is periodically evaluated and adjusted as necessary.

Net investment income. We invest our statutory surplus funds and the funds supporting our insurance liabilities primarily in cash and cash equivalents, debt and equity securities. Our net investment income includes interest and dividends earned on our invested assets and earnings or losses on our equity method investments.

Net gains and losses on investments. Net realized gains occur when we sell our investment securities for more than their costs or amortized costs, as applicable. Net realized losses occur when we sell our investment securities for less than their costs or amortized costs, as applicable, or we write down the investment securities as a result of other-than-temporary impairment loss. We report net unrealized gains (losses) on debt securities classified as available for sale within accumulated other comprehensive income (loss) in our balance sheet. We report all gains (losses) on equity securities within net gains (losses) on investments in our statement of income. Net gains and losses on investments also include foreign exchange gains and losses which are generated by the remeasurement of financial statement balances that are denominated or stated in another currency into the functional currency.

Loss and loss adjustment expenses. Loss and LAE represent our largest expense item and, for any given reporting period, include estimates of future claim payments, changes in those estimates from prior reporting periods and costs associated with investigating, defending and servicing claims. These expenses fluctuate based on the amount and types of risks we insure. We record loss and LAE related to estimates of future claim payments based on case-by-case valuations and statistical analyses. We seek to establish all reserves at the most likely ultimate exposure based on our historical claims experience. It is typical for our more serious bodily injury claims to take several years to settle, and we revise our estimates as we receive additional information about the condition of claimants and the costs of their medical treatment. Our ability to estimate loss and LAE accurately at the time of pricing our insurance policies is a critical factor in our profitability.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses consist of policy acquisition and marketing expenses, salaries and benefits expenses. Policy acquisition expenses comprise commissions attributable to those agents, wholesalers or brokers that produce premiums written on our behalf and promotional fees attributable to our affinity relationships. Acquisition costs also include costs that are related to the successful acquisition of new or renewal insurance contracts including comprehensive loss underwriting exchange reports, motor vehicle reports, credit score checks, and policy issuance costs.

General and administrative expenses. General and administrative expenses are composed of all other operating expenses, including various departmental salaries and benefits expenses for employees that are involved in the maintenance of policies, information systems, and accounting for insurance transactions, and other insurance expenses such as federal excise tax, postage, telephones and internet access charges, as well as legal and auditing fees and board and bureau charges. In addition, general and administrative expenses include those charges that are related to the amortization of tangible and intangible assets and non-insurance activities in which we engage.

Interest expense. Interest expense represents amounts we incur on our outstanding indebtedness and interest credited on funds held balances at the applicable interest rates.

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Income tax expense. We incur federal, state and local income tax expenses as well as income tax expenses in certain foreign jurisdictions in which we operate.

Net operating expense. These expenses consist of the sum of general and administrative expenses and acquisition costs and other underwriting expenses less ceding commission income, service and fee income.

Underwriting income. Underwriting income is a measure of an insurance company’s overall operating profitability before items such as investment income, interest expense and income taxes. Underwriting income is calculated as net earned premium plus ceding commission income and service and fee income less loss and LAE, acquisition costs and other underwriting expenses, and general and administrative expenses.

Insurance Ratios

Net combined ratio (non-GAAP). The net combined ratio (non-GAAP) is a measure of an insurance company’s overall underwriting profit. This is the sum of the net loss ratio and net operating expense ratio (non-GAAP). If the net combined ratio (non-GAAP) is at or above 100 percent, an insurance company cannot be profitable without investment income, and may not be profitable if investment income is insufficient. Our definition of net loss ratio and net operating expense ratio are as follows:

Net loss ratio. The net loss ratio is a measure of the underwriting profitability of an insurance company’s business. Expressed as a percentage, this is the ratio of loss and LAE incurred to net earned premium.

Net operating expense ratio (non-GAAP). The net operating expense ratio (non-GAAP) is one component of an insurance company’s operational efficiency in administering its business. Expressed as a percentage, this is the ratio of net operating expense to net earned premium.

Net combined ratio before amortization and impairment (non-GAAP). The net combined ratio before amortization and impairment (non-GAAP) is a measure of an insurance company’s overall underwriting profit. This is the sum of the net loss ratio and net operating expense ratio before amortization and impairment (non-GAAP). Management believes that this measure of underwriting profitability provides a more useful comparison to the combined ratio of other insurance companies involved in fewer acquisitions. Our definition of net operating expense ratio before amortization and impairment is as follows:

Net operating expense ratio before amortization and impairment (non-GAAP). The net operating expense ratio before amortization and impairment (non-GAAP) is one component of an insurance company’s operational efficiency in administering its business. Expressed as a percentage, this is the ratio of net operating expense before non-cash amortization of intangible assets and non-cash impairment of goodwill to net earned premium.

Net operating expense ratio, net operating expense ratio before amortization and impairment, net combined ratio and net combined ratio before amortization and impairment are considered non-GAAP financial measures under applicable SEC rules because a component of those ratios, net operating expense, is calculated by offsetting acquisition costs and other underwriting expenses and general and administrative expenses by ceding commission income and service and fee income, and is therefore a non-GAAP measure. We use net operating expense ratio (non-GAAP), net operating expense ratio before amortization and impairment (non-GAAP), net combined ratio (non-GAAP) and net combined ratio before amortization and impairment (non-GAAP) to evaluate financial performance against historical results and establish targets on a consolidated basis. We believe this presentation enhances the understanding of our results by eliminating what we believe are volatile and unusual events and presenting the ratios with what we believe are the underlying run rates of the business. Other companies may calculate these measures differently, and, therefore, their measures may not be comparable to those used by us. For a reconciliation showing the total amounts by which acquisition costs and other underwriting expenses and general and administrative expenses were offset by ceding commission income and service and fee income in the calculation of net operating expense, see “Results of Operations - Consolidated Results of Operations” below.

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Results of Operations

Consolidated Results of Operations for the Three Months Ended September 30, 2019 and 2018 (Unaudited)

	Three Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting revenues:	(amounts in thousands)
Gross premium written	$	1,316,890		$	118,267		$	—		$	1,435,157		$	1,234,320		$	121,351		$	—		$	1,355,671
Ceded premiums	(349,571		)	(50,982		)	—			(400,553		)	(326,110		)	(106,537		)	—			(432,647		)
Net premium written	$	967,319		$	67,285		$	—		$	1,034,604		$	908,210		$	14,814		$	—		$	923,024
Change in unearned premium	29,202			(10,168		)	—			19,034			(11,834		)	28,337			—			16,503
Net earned premium	$	996,521		$	57,117		$	—		$	1,053,638		$	896,376		$	43,151		$	—		$	939,527
Ceding commission income	42,521			15,066			—			57,587			44,513			14,587			—			59,100
Service and fee income	179,293			1,585			(19,252		)	161,626			160,425			1,575			(19,310		)	142,690
Total underwriting revenues	$	1,218,335		$	73,768		$	(19,252	)	$	1,272,851		$	1,101,314		$	59,313		$	(19,310	)	$	1,141,317
Underwriting expenses:
Loss and loss adjustment expense	698,064			47,270			—			745,334			617,098			40,212			—			657,310
Acquisition costs and other underwriting expenses	193,521			15,569			—			209,090			180,180			11,290			—			191,470
General and administrative expenses	258,583			24,533			(19,252		)	263,864			234,626			20,417			(19,310		)	235,733
Total underwriting expenses	$	1,150,168		$	87,372		$	(19,252	)	$	1,218,288		$	1,031,904		$	71,919		$	(19,310	)	$	1,084,513
Underwriting income (loss)	$	68,167		$	(13,604	)	$	—		$	54,563		$	69,410		$	(12,606	)	$	—		$	56,804
Net investment income	33,451			2,160			(1,871		)	33,740			30,984			2,344			(2,632		)	30,696
Net loss on investments	(428		)	(137		)	—			(565		)	(3,003		)	(167		)	—			(3,170		)
Other income	2,146			—			—			2,146			—			—			—			—
Interest expense	(12,898		)	(1,871		)	1,871			(12,898		)	(12,583		)	(2,632		)	2,632			(12,583		)
Income (loss) before provision (benefit) for income taxes	$	90,438		$	(13,452	)	$	—		$	76,986		$	84,808		$	(13,061	)	$	—		$	71,747
Provision (benefit) for income taxes	19,284			(2,537		)	—			16,747			16,426			(908		)	—			15,518
Net income (loss)	$	71,154		$	(10,915	)	$	—		$	60,239		$	68,382		$	(12,153	)	$	—		$	56,229
Net (income) loss attributable to noncontrolling interest	—			10,915			—			10,915			—			12,153			—			12,153
Net income attributable to NGHC	$	71,154		$	—		$	—		$	71,154		$	68,382		$	—		$	—		$	68,382
Dividends on preferred stock	(7,875		)	—			—			(7,875		)	(7,875		)	—			—			(7,875		)
Net income attributable to NGHC common stockholders	$	63,279		$	—		$	—		$	63,279		$	60,507		$	—		$	—		$	60,507

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	Three Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting ratios:	(amounts in thousands, except percentages)
Net loss ratio	70.1		%	82.8		%	—		%	70.7		%	68.8		%	93.2		%	—		%	70.0		%
Net operating expense ratio (non-GAAP)	23.1		%	41.1		%	—		%	24.1		%	23.4		%	36.0		%	—		%	24.0		%
Net combined ratio (non-GAAP)	93.2		%	123.9		%	—		%	94.8		%	92.2		%	129.2		%	—		%	94.0		%
Underwriting ratios before amortization and impairment (non-GAAP):
Net loss ratio	70.1		%	82.8		%	—		%	70.7		%	68.8		%	93.2		%	—		%	70.0		%
Net operating expense ratio before amortization and impairment (non-GAAP)	22.4		%	41.0		%	—		%	23.4		%	22.5		%	36.1		%	—		%	23.1		%
Net combined ratio before amortization and impairment (non-GAAP)	92.5		%	123.8		%	—		%	94.1		%	91.3		%	129.3		%	—		%	93.1		%
Reconciliation of net operating expense ratio (non-GAAP):
Total expenses	$	1,163,066		$	89,243		$	(21,123	)	$	1,231,186		$	1,044,487		$	74,551		$	(21,942	)	$	1,097,096
Less: Loss and loss adjustment expense	698,064			47,270			—			745,334			617,098			40,212			—			657,310
Less: Interest expense	12,898			1,871			(1,871		)	12,898			12,583			2,632			(2,632		)	12,583
Less: Ceding commission income	42,521			15,066			—			57,587			44,513			14,587			—			59,100
Less: Service and fee income	179,293			1,585			(19,252		)	161,626			160,425			1,575			(19,310		)	142,690
Net operating expense	$	230,290		$	23,451		$	—		$	253,741		$	209,868		$	15,545		$	—		$	225,413
Net earned premium	$	996,521		$	57,117		$	—		$	1,053,638		$	896,376		$	43,151		$	—		$	939,527
Net operating expense ratio (non-GAAP)	23.1		%	41.1		%	—		%	24.1		%	23.4		%	36.0		%	—		%	24.0		%
Net operating expense	$	230,290		$	23,451		$	—		$	253,741		$	209,868		$	15,545		$	—		$	225,413
Less: Non-cash impairment of goodwill	—			—			—			—			—			—			—			—
Less: Non-cash amortization of intangible assets	6,788			18			—			6,806			8,260			(14		)	—			8,246
Net operating expense before amortization and impairment	$	223,502		$	23,433		$	—		$	246,935		$	201,608		$	15,559		$	—		$	217,167
Net earned premium	$	996,521		$	57,117		$	—		$	1,053,638		$	896,376		$	43,151		$	—		$	939,527
Net operating expense ratio before amortization and impairment (non-GAAP)	22.4		%	41.0		%	—		%	23.4		%	22.5		%	36.1		%	—		%	23.1		%

54

Consolidated Results of Operations for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)

	Nine Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting revenues:	(amounts in thousands)
Gross premium written	$	3,913,861		$	344,982		$	—		$	4,258,843		$	3,793,830		$	337,021		$	(1,601	)	$	4,129,250
Ceded premiums	(891,655		)	(172,522		)	—			(1,064,177		)	(1,006,428		)	(204,781		)	1,601			(1,209,608		)
Net premium written	$	3,022,206		$	172,460		$	—		$	3,194,666		$	2,787,402		$	132,240		$	—		$	2,919,642
Change in unearned premium	(123,165		)	(23,055		)	—			(146,220		)	(140,440		)	8,769			—			(131,671		)
Net earned premium	$	2,899,041		$	149,405		$	—		$	3,048,446		$	2,646,962		$	141,009		$	—		$	2,787,971
Ceding commission income	136,867			50,446			—			187,313			119,453			39,523			—			158,976
Service and fee income	525,730			4,471			(54,160		)	476,041			463,293			4,466			(52,446		)	415,313
Total underwriting revenues	$	3,561,638		$	204,322		$	(54,160	)	$	3,711,800		$	3,229,708		$	184,998		$	(52,446	)	$	3,362,260
Underwriting expenses:
Loss and loss adjustment expense	1,988,094			124,584			—			2,112,678			1,835,383			126,421			—			1,961,804
Acquisition costs and other underwriting expenses	582,805			32,329			—			615,134			509,088			32,952			—			542,040
General and administrative expenses	746,243			67,642			(54,160		)	759,725			681,581			62,032			(52,446		)	691,167
Total underwriting expenses	$	3,317,142		$	224,555		$	(54,160	)	$	3,487,537		$	3,026,052		$	221,405		$	(52,446	)	$	3,195,011
Underwriting income (loss)	$	244,496		$	(20,233	)	$	—		$	224,263		$	203,656		$	(36,407	)	$	—		$	167,249
Net investment income	103,683			6,454			(7,821		)	102,316			82,186			6,693			(7,177		)	81,702
Net loss on investments	(4,936		)	(837		)	—			(5,773		)	(21,490		)	(1,266		)	—			(22,756		)
Other income	2,146			—			—			2,146			—			—			—			—
Interest expense	(38,822		)	(7,821		)	7,821			(38,822		)	(38,775		)	(7,177		)	7,177			(38,775		)
Income (loss) before provision (benefit) for income taxes	$	306,567		$	(22,437	)	$	—		$	284,130		$	225,577		$	(38,157	)	$	—		$	187,420
Provision (benefit) for income taxes	65,779			(4,285		)	—			61,494			44,439			(6,178		)	—			38,261
Net income (loss)	$	240,788		$	(18,152	)	$	—		$	222,636		$	181,138		$	(31,979	)	$	—		$	149,159
Net (income) loss attributable to noncontrolling interest	—			18,152			—			18,152			—			31,979			—			31,979
Net income attributable to NGHC	$	240,788		$	—		$	—		$	240,788		$	181,138		$	—		$	—		$	181,138
Dividends on preferred stock	(24,675		)	—			—			(24,675		)	(23,625		)	—			—			(23,625		)
Net income attributable to NGHC common stockholders	$	216,113		$	—		$	—		$	216,113		$	157,513		$	—		$	—		$	157,513

55

	Nine Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting ratios:	(amounts in thousands, except percentages)
Net loss ratio	68.6		%	83.4		%	—		%	69.3		%	69.3		%	89.7		%	—		%	70.4		%
Net operating expense ratio (non-GAAP)	23.0		%	30.2		%	—		%	23.3		%	23.0		%	36.2		%	—		%	23.6		%
Net combined ratio (non-GAAP)	91.6		%	113.6		%	—		%	92.6		%	92.3		%	125.9		%	—		%	94.0		%
Underwriting ratios before amortization and impairment (non-GAAP):
Net loss ratio	68.6		%	83.4		%	—		%	69.3		%	69.3		%	89.7		%	—		%	70.4		%
Net operating expense ratio before amortization and impairment (non-GAAP)	22.3		%	30.1		%	—		%	22.6		%	22.1		%	36.2		%	—		%	22.8		%
Net combined ratio before amortization and impairment (non-GAAP)	90.9		%	113.5		%	—		%	91.9		%	91.4		%	125.9		%	—		%	93.2		%
Reconciliation of net operating expense ratio (non-GAAP):
Total expenses	$	3,355,964		$	232,376		$	(61,981	)	$	3,526,359		$	3,064,827		$	228,582		$	(59,623	)	$	3,233,786
Less: Loss and loss adjustment expense	1,988,094			124,584			—			2,112,678			1,835,383			126,421			—			1,961,804
Less: Interest expense	38,822			7,821			(7,821		)	38,822			38,775			7,177			(7,177		)	38,775
Less: Ceding commission income	136,867			50,446			—			187,313			119,453			39,523			—			158,976
Less: Service and fee income	525,730			4,471			(54,160		)	476,041			463,293			4,466			(52,446		)	415,313
Net operating expense	$	666,451		$	45,054		$	—		$	711,505		$	607,923		$	50,995		$	—		$	658,918
Net earned premium	$	2,899,041		$	149,405		$	—		$	3,048,446		$	2,646,962		$	141,009		$	—		$	2,787,971
Net operating expense ratio (non-GAAP)	23.0		%	30.2		%	—		%	23.3		%	23.0		%	36.2		%	—		%	23.6		%
Net operating expense	$	666,451		$	45,054		$	—		$	711,505		$	607,923		$	50,995		$	—		$	658,918
Less: Non-cash impairment of goodwill	—			—			—			—			—			—			—			—
Less: Non-cash amortization of intangible assets	21,093			41			—			21,134			23,397			(67		)	—			23,330
Net operating expense before amortization and impairment	$	645,358		$	45,013		$	—		$	690,371		$	584,526		$	51,062		$	—		$	635,588
Net earned premium	$	2,899,041		$	149,405		$	—		$	3,048,446		$	2,646,962		$	141,009		$	—		$	2,787,971
Net operating expense ratio before amortization and impairment (non-GAAP)	22.3		%	30.1		%	—		%	22.6		%	22.1		%	36.2		%	—		%	22.8		%

56

On August 1, 2019, we closed the acquisition of all of the issued and outstanding shares of capital stock of National Farmers Union Property and Casualty Company (“Farmers Union Insurance”) from a subsidiary of QBE Insurance Group. The purchase price for the transaction was $52.8 million, subject to customary post-closing adjustments. The net assets acquired exceeded the amount paid by the Company and, as a result, we recorded a bargain purchase gain of $2.1 million.

Effective July 1, 2019, we renewed our auto and homeowners quota share agreements with third party reinsurers (collectively, the “Quota Shares”). Pursuant to the auto quota share agreement, we cede 10.0% of net liability under new and renewal auto policies with the ability to increase the cession to up to 30.0% and decrease the cession down to 5.0% under certain conditions for a two-year term. Pursuant to our homeowners quota share agreement, we cede 40.0% of net liability under homeowners policies and receive a 36.0% ceding commission on new and renewal business and a portion of the in-force business. The weighted average expected ceding commission for all in-force business and new and renewal homeowners business is 37.5% during the contract term for a one-year term.

As a result of these transactions, comparisons between the three and nine months ended September 30, 2019 and 2018 results will be less meaningful. These transactions impacted our P&C segment only.

Consolidated Results of Operations for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018 (Unaudited)

Gross premium written. Gross premium written increased by $79.5 million, or 5.9%, from $1,355.7 million for the three months ended September 30, 2018 to $1,435.2 million for the three months ended September 30, 2019, due to an increase of $60.9 million from the P&C segment, attributable to our personal auto and homeowners product lines and the acquisition of Farmers Union Insurance, which closed August 1, 2019; and an increase of $18.6 million from the A&H segment primarily due to growth in our domestic business.

Net premium written. Net premium written increased by $111.6 million, or 12.1%, from $923.0 million for the three months ended September 30, 2018 to $1,034.6 million for the three months ended September 30, 2019. Net premium written for the P&C segment increased by $87.8 million for the three months ended September 30, 2019 compared to the same period in 2018, primarily as a result of lower premium ceded to the Auto Quota Share upon commencement of the reduced cession in 2019 and the acquisition of Farmers Union Insurance offset by additional premium ceded to the Homeowners Quota Share. Net premium written for the A&H segment increased by $23.8 million for the three months ended September 30, 2019 compared to the same period in 2018, primarily due to growth in our domestic business.

Net earned premium. Net earned premium increased by $114.1 million, or 12.1%, from $939.5 million for the three months ended September 30, 2018 to $1,053.6 million for the three months ended September 30, 2019. The change by segment was: P&C increased by $100.6 million and A&H increased by $13.6 million. The increase in the P&C segment was primarily attributable to the acquisition of Farmers Union Insurance and our increased auto premium retention in 2019. The increase in the A&H segment was primarily due to growth in our domestic business.

Ceding commission income. Ceding commission income for the three months ended September 30, 2019 and 2018 was $57.6 million and $59.1 million, respectively.

Service and fee income. Service and fee income increased by $18.9 million, or 13.3%, from $142.7 million for the three months ended September 30, 2018 to $161.6 million for the three months ended September 30, 2019. Service and fee income is discussed in more detail in the segment discussions that follow.

57

The components of service and fee income are as follows:

	Three Months Ended September 30,
	2019		2018		Change			% Change
	(amounts in thousands)
Commission revenue	$	37,686	$	43,278	$	(5,592	)	(12.9	)%
Finance and processing fees	34,437		30,739		3,698			12.0	%
Group health administrative fees	25,808		18,364		7,444			40.5	%
Installment fees	23,464		23,841		(377		)	(1.6	)%
Late payment fees	9,323		8,183		1,140			13.9	%
Other service and fee income	30,908		18,285		12,623			69.0	%
Total	$	161,626	$	142,690	$	18,936		13.3	%

Loss and loss adjustment expense; net loss ratio. Loss and LAE increased by $88.0 million, from $657.3 million for the three months ended September 30, 2018 to $745.3 million for the three months ended September 30, 2019, primarily attributable to the acquisition of Farmers Union Insurance and increased retention of auto premium. The changes by segment were: P&C increased by $90.1 million and A&H decreased by $2.0 million.

Loss and LAE for the three months ended September 30, 2019 included $5.9 million of favorable development on prior accident year loss and LAE reserves. This development was composed of $12.9 million of unfavorable development in the P&C segment (including $2.0 million of favorable development for the Reciprocal Exchanges) primarily driven by small business auto, and $18.8 million of favorable development in the A&H segment primarily driven by the domestic book of business. Loss and LAE for the three months ended September 30, 2018 included $2.4 million of favorable development on prior accident year loss and LAE reserves. This development was composed of $10.8 million of unfavorable development in the P&C segment (including $3.6 million of unfavorable development for the Reciprocal Exchanges) primarily driven by unfavorable development in our auto liability product, and $13.2 million of favorable development in the A&H segment.

Our consolidated net loss ratio increased from 70.0% for the three months ended September 30, 2018 to 70.7% for the three months ended September 30, 2019. Net loss ratio is discussed in more detail in the segment discussions that follow.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses increased by $17.6 million, from $191.5 million for the three months ended September 30, 2018 to $209.1 million for the three months ended September 30, 2019, primarily due to an increase of $15.2 million in the P&C segment.

General and administrative expenses. General and administrative expenses increased by $28.1 million, or 11.9%, from $235.7 million for the three months ended September 30, 2018 to $263.9 million for the three months ended September 30, 2019, primarily due to an increase of $17.8 million in the A&H segment as a result of growth in our domestic business.

Net operating expense; net operating expense ratio (non-GAAP). Net operating expense increased by $28.3 million, from $225.4 million for the three months ended September 30, 2018 to $253.7 million for the three months ended September 30, 2019, primarily due to an increase of $27.4 million in the P&C segment.

The consolidated net operating expense ratio increased from 24.0% for the three months ended September 30, 2018 to 24.1% for the three months ended September 30, 2019. Excluding the Reciprocal Exchanges, the net operating expense ratio was 23.1% and 23.4% for the three months ended September 30, 2019 and 2018, respectively. The Reciprocal Exchanges’ net operating expense ratio was 41.1% and 36.0% for the three months ended September 30, 2019 and 2018, respectively. Net operating expense and net operating expense ratio is discussed in more detail in the segment discussions that follow.

58

Net investment income. Net investment income increased by $3.0 million, or 9.9%, from $30.7 million for the three months ended September 30, 2018 to $33.7 million for the three months ended September 30, 2019, primarily due to an increase in portfolio size.

Net gain (loss) on investments. Net loss on investments decreased by $2.6 million, or 82.2%, from a loss of $3.2 million for the three months ended September 30, 2018 to a loss of $0.6 million for the three months ended September 30, 2019, primarily due to a portfolio rebalancing in 2018.

Consolidated Results of Operations for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018 (Unaudited)

Gross premium written. Gross premium written increased by $129.6 million, or 3.1%, from $4,129.3 million for the nine months ended September 30, 2018 to $4,258.8 million for the nine months ended September 30, 2019, due to an increase of $71.4 million from the P&C segment as a result of growth and the acquisition of Farmers Union Insurance; and an increase of $58.2 million from the A&H segment primarily due to growth in our domestic business.

Net premium written. Net premium written increased by $275.0 million, or 9.4%, from $2,919.6 million for the nine months ended September 30, 2018 to $3,194.7 million for the nine months ended September 30, 2019. Net premium written for the P&C segment increased by $261.0 million for the nine months ended September 30, 2019 compared to the same period in 2018, primarily as a result of lower premium ceded to the Auto Quota Share upon commencement of the reduced cession in 2019 and the acquisition of Farmers Union Insurance. Net premium written for the A&H segment increased by $14.1 million for the nine months ended September 30, 2019 compared to the same period in 2018, primarily as a result of growth in our domestic business partially offset by premium ceded to a quota share agreement in our international business.

Net earned premium. Net earned premium increased by $260.5 million, or 9.3%, from $2,788.0 million for the nine months ended September 30, 2018 to $3,048.4 million for the nine months ended September 30, 2019. The change by segment was: P&C increased by $229.3 million and A&H increased by $31.1 million. The increase in the P&C segment was mainly attributable to lower premium ceded to the Auto Quota Share upon commencement of the reduced cession in 2019 and the acquisition of Farmers Union Insurance. The increase in the A&H segment was primarily due to growth in our domestic business partially offset by premium ceded to a quota share agreement in our international business.

Ceding commission income. Ceding commission income increased by $28.3 million, or 17.8%, from $159.0 million for the nine months ended September 30, 2018 to $187.3 million for the nine months ended September 30, 2019, primarily driven by an increase in ceded earned premium to the Quota Shares for both P&C and A&H.

Service and fee income. Service and fee income increased by $60.7 million, or 14.6%, from $415.3 million for the nine months ended September 30, 2018 to $476.0 million for the nine months ended September 30, 2019, due to an increase of $17.6 million in the P&C segment and an increase of $43.1 million in the A&H segment with both increases primarily due to growth. Service and fee income is discussed in more detail in the segment discussions that follow.

59

The components of service and fee income are as follows:

	Nine Months Ended September 30,
	2019		2018		Change		% Change
	(amounts in thousands)
Commission revenue	$	125,290	$	119,737	$	5,553	4.6	%
Finance and processing fees	101,928		94,899		7,029		7.4	%
Group health administrative fees	73,861		57,461		16,400		28.5	%
Installment fees	72,782		68,928		3,854		5.6	%
Late payment fees	26,310		24,429		1,881		7.7	%
Other service and fee income	75,870		49,859		26,011		52.2	%
Total	$	476,041	$	415,313	$	60,728	14.6	%

Loss and loss adjustment expense; net loss ratio. Loss and LAE increased by $150.9 million, from $1,961.8 million for the nine months ended September 30, 2018 to $2,112.7 million for the nine months ended September 30, 2019, primarily reflecting growth ($9.8 million) and the acquisition of Farmers Union Insurance. The changes by segment were: P&C increased by $161.6 million and A&H decreased by $10.7 million.

Loss and LAE for the nine months ended September 30, 2019 included $18.7 million of favorable development on prior accident year loss and LAE reserves. This development was composed of $19.1 million of unfavorable development in the P&C segment (including $0.7 million of favorable development for the Reciprocal Exchanges) primarily driven by small business auto, and $37.8 million of favorable development in the A&H segment primarily driven by the domestic book of business. Loss and LAE for the nine months ended September 30, 2018 included $36.4 million of favorable development on prior accident year loss and LAE reserves. This development was composed of $11.8 million of favorable development in the P&C segment (including $1.5 million of unfavorable development for the Reciprocal Exchanges) primarily driven by favorable development in our auto physical damage and homeowners products, and $24.6 million of favorable development in the A&H segment.

Our consolidated net loss ratio decreased from 70.4% for the nine months ended September 30, 2018 to 69.3% for the nine months ended September 30, 2019. Net loss ratio is discussed in more detail in the segment discussions that follow.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses increased by $73.1 million, or 13.5%, from $542.0 million for the nine months ended September 30, 2018 to $615.1 million for the nine months ended September 30, 2019, due to an increase of $56.5 million in the P&C segment and an increase of $16.6 million in the A&H segment, with both increases primarily due to growth.

General and administrative expenses. General and administrative expenses increased by $68.6 million, from $691.2 million for the nine months ended September 30, 2018 to $759.7 million for the nine months ended September 30, 2019, due to an increase of $28.6 million in the P&C segment and an increase of $40.0 million in the A&H segment, with both increases primarily due to growth.

Net operating expense; net operating expense ratio (non-GAAP). Net operating expense increased by $52.6 million, from $658.9 million for the nine months ended September 30, 2018 to $711.5 million for the nine months ended September 30, 2019, primarily due to an increase of $47.2 million from the P&C segment.

The consolidated net operating expense ratio decreased from 23.6% for the nine months ended September 30, 2018 to 23.3% for the nine months ended September 30, 2019. Excluding the Reciprocal Exchanges, the net operating expense ratio was 23.0% and 23.0% for the nine months ended September 30, 2019 and 2018, respectively. The Reciprocal Exchanges’ net operating expense ratio was 30.2% and 36.2% for the nine months ended September 30, 2019 and 2018, respectively. Net operating expense and net operating expense ratio is discussed in more detail in the segment discussions that follow.

60

Net investment income. Net investment income increased by $20.6 million, or 25.2%, from $81.7 million for the nine months ended September 30, 2018 to $102.3 million for the nine months ended September 30, 2019, primarily due to an increase in portfolio size.

Net gain (loss) on investments. Net loss on investments decreased by $17.0 million, or 74.6%, from a loss of $22.8 million for the nine months ended September 30, 2018 to a loss of $5.8 million for the nine months ended September 30, 2019, primarily due to a portfolio rebalancing in 2018.

P&C Segment - Results of Operations for the Three Months Ended September 30, 2019 and 2018 (Unaudited)

	Three Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting revenues:	(amounts in thousands)
Gross premium written	$	1,154,335		$	118,267		$	—		$	1,272,602		$	1,090,372		$	121,351		$	—		$	1,211,723
Ceded premiums	(334,365		)	(50,982		)	—			(385,347		)	(305,738		)	(106,537		)	—			(412,275		)
Net premium written	$	819,970		$	67,285		$	—		$	887,255		$	784,634		$	14,814		$	—		$	799,448
Change in unearned premium	7,648			(10,168		)	—			(2,520		)	(43,604		)	28,337			—			(15,267		)
Net earned premium	$	827,618		$	57,117		$	—		$	884,735		$	741,030		$	43,151		$	—		$	784,181
Ceding commission income	40,260			15,066			—			55,326			44,244			14,587			—			58,831
Service and fee income	115,557			1,585			(19,252		)	97,890			113,967			1,575			(19,310		)	96,232
Total underwriting revenues	$	983,435		$	73,768		$	(19,252	)	$	1,037,951		$	899,241		$	59,313		$	(19,310	)	$	939,244
Underwriting expenses:
Loss and loss adjustment expense	627,452			47,270			—			674,722			544,446			40,212			—			584,658
Acquisition costs and other underwriting expenses	146,307			15,569			—			161,876			135,406			11,290			—			146,696
General and administrative expenses	190,286			24,533			(19,252		)	195,567			184,101			20,417			(19,310		)	185,208
Total underwriting expenses	$	964,045		$	87,372		$	(19,252	)	$	1,032,165		$	863,953		$	71,919		$	(19,310	)	$	916,562
Underwriting income (loss)	$	19,390		$	(13,604	)	$	—		$	5,786		$	35,288		$	(12,606	)	$	—		$	22,682

61

	Three Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting ratios:	(amounts in thousands, except percentages)
Net loss ratio	75.8		%	82.8		%	—		%	76.3		%	73.5		%	93.2		%	—		%	74.6		%
Net operating expense ratio (non-GAAP)	21.8		%	41.1		%	—		%	23.1		%	21.8		%	36.0		%	—		%	22.6		%
Net combined ratio (non-GAAP)	97.6		%	123.9		%	—		%	99.4		%	95.3		%	129.2		%	—		%	97.2		%
Underwriting ratios before amortization and impairment (non-GAAP):
Net loss ratio	75.8		%	82.8		%	—		%	76.3		%	73.5		%	93.2		%	—		%	74.6		%
Net operating expense ratio before amortization and impairment (non-GAAP)	21.2		%	41.0		%	—		%	22.5		%	20.9		%	36.1		%	—		%	21.7		%
Net combined ratio before amortization and impairment (non-GAAP)	97.0		%	123.8		%	—		%	98.8		%	94.4		%	129.3		%	—		%	96.3		%
Reconciliation of net operating expense ratio (non-GAAP):
Total expenses	$	964,045		$	87,372		$	(19,252	)	$	1,032,165		$	863,953		$	71,919		$	(19,310	)	$	916,562
Less: Loss and loss adjustment expense	627,452			47,270			—			674,722			544,446			40,212			—			584,658
Less: Ceding commission income	40,260			15,066			—			55,326			44,244			14,587			—			58,831
Less: Service and fee income	115,557			1,585			(19,252		)	97,890			113,967			1,575			(19,310		)	96,232
Net operating expense	$	180,776		$	23,451		$	—		$	204,227		$	161,296		$	15,545		$	—		$	176,841
Net earned premium	$	827,618		$	57,117		$	—		$	884,735		$	741,030		$	43,151		$	—		$	784,181
Net operating expense ratio (non-GAAP)	21.8		%	41.1		%	—		%	23.1		%	21.8		%	36.0		%	—		%	22.6		%
Net operating expense	$	180,776		$	23,451		$	—		$	204,227		$	161,296		$	15,545		$	—		$	176,841
Less: Non-cash impairment of goodwill	—			—			—			—			—			—			—			—
Less: Non-cash amortization of intangible assets	5,257			18			—			5,275			6,546			(14		)	—			6,532
Net operating expense before amortization and impairment	$	175,519		$	23,433		$	—		$	198,952		$	154,750		$	15,559		$	—		$	170,309
Net earned premium	$	827,618		$	57,117		$	—		$	884,735		$	741,030		$	43,151		$	—		$	784,181
Net operating expense ratio before amortization and impairment (non-GAAP)	21.2		%	41.0		%	—		%	22.5		%	20.9		%	36.1		%	—		%	21.7		%

62

P&C Segment - Results of Operations for the Nine Months Ended September 30, 2019 and 2018 (Unaudited)

	Nine Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting revenues:	(amounts in thousands)
Gross premium written	$	3,321,090		$	344,982		$	—		$	3,666,072		$	3,259,270		$	337,021		$	(1,601	)	$	3,594,690
Ceded premiums	(799,121		)	(172,522		)	—			(971,643		)	(958,055		)	(204,781		)	1,601			(1,161,235		)
Net premium written	$	2,521,969		$	172,460		$	—		$	2,694,429		$	2,301,215		$	132,240		$	—		$	2,433,455
Change in unearned premium	(119,460		)	(23,055		)	—			(142,515		)	(119,644		)	8,769			—			(110,875		)
Net earned premium	$	2,402,509		$	149,405		$	—		$	2,551,914		$	2,181,571		$	141,009		$	—		$	2,322,580
Ceding commission income	128,087			50,446			—			178,533			118,664			39,523			—			158,187
Service and fee income	348,045			4,471			(54,160		)	298,356			328,707			4,466			(52,446		)	280,727
Total underwriting revenues	$	2,878,641		$	204,322		$	(54,160	)	$	3,028,803		$	2,628,942		$	184,998		$	(52,446	)	$	2,761,494
Underwriting expenses:
Loss and loss adjustment expense	1,746,409			124,584			—			1,870,993			1,583,019			126,421			—			1,709,440
Acquisition costs and other underwriting expenses	429,742			32,329			—			462,071			372,589			32,952			—			405,541
General and administrative expenses	558,016			67,642			(54,160		)	571,498			533,316			62,032			(52,446		)	542,902
Total underwriting expenses	$	2,734,167		$	224,555		$	(54,160	)	$	2,904,562		$	2,488,924		$	221,405		$	(52,446	)	$	2,657,883
Underwriting income (loss)	$	144,474		$	(20,233	)	$	—		$	124,241		$	140,018		$	(36,407	)	$	—		$	103,611

63

	Nine Months Ended September 30,
	2019												2018
	NGHC			Reciprocal Exchanges			Eliminations			Total			NGHC			Reciprocal Exchanges			Eliminations			Total
Underwriting ratios:	(amounts in thousands, except percentages)
Net loss ratio	72.7		%	83.4		%	—		%	73.3		%	72.6		%	89.7		%	—		%	73.6		%
Net operating expense ratio (non-GAAP)	21.3		%	30.2		%	—		%	21.8		%	21.0		%	36.2		%	—		%	21.9		%
Net combined ratio (non-GAAP)	94.0		%	113.6		%	—		%	95.1		%	93.6		%	125.9		%	—		%	95.5		%
Underwriting ratios before amortization and impairment (non-GAAP):
Net loss ratio	72.7		%	83.4		%	—		%	73.3		%	72.6		%	89.7		%	—		%	73.6		%
Net operating expense ratio before amortization and impairment (non-GAAP)	20.6		%	30.1		%	—		%	21.2		%	20.2		%	36.2		%	—		%	21.2		%
Net combined ratio before amortization and impairment (non-GAAP)	93.3		%	113.5		%	—		%	94.5		%	92.8		%	125.9		%	—		%	94.8		%
Reconciliation of net operating expense ratio (non-GAAP):
Total expenses	$	2,734,167		$	224,555		$	(54,160	)	$	2,904,562		$	2,488,924		$	221,405		$	(52,446	)	$	2,657,883
Less: Loss and loss adjustment expense	1,746,409			124,584			—			1,870,993			1,583,019			126,421			—			1,709,440
Less: Ceding commission income	128,087			50,446			—			178,533			118,664			39,523			—			158,187
Less: Service and fee income	348,045			4,471			(54,160		)	298,356			328,707			4,466			(52,446		)	280,727
Net operating expense	$	511,626		$	45,054		$	—		$	556,680		$	458,534		$	50,995		$	—		$	509,529
Net earned premium	$	2,402,509		$	149,405		$	—		$	2,551,914		$	2,181,571		$	141,009		$	—		$	2,322,580
Net operating expense ratio (non-GAAP)	21.3		%	30.2		%	—		%	21.8		%	21.0		%	36.2		%	—		%	21.9		%
Net operating expense	$	511,626		$	45,054		$	—		$	556,680		$	458,534		$	50,995		$	—		$	509,529
Less: Non-cash impairment of goodwill	—			—			—			—			—			—			—			—
Less: Non-cash amortization of intangible assets	16,154			41			—			16,195			18,125			(67		)	—			18,058
Net operating expense before amortization and impairment	$	495,472		$	45,013		$	—		$	540,485		$	440,409		$	51,062		$	—		$	491,471
Net earned premium	$	2,402,509		$	149,405		$	—		$	2,551,914		$	2,181,571		$	141,009		$	—		$	2,322,580
Net operating expense ratio before amortization and impairment (non-GAAP)	20.6		%	30.1		%	—		%	21.2		%	20.2		%	36.2		%	—		%	21.2		%

P&C Segment Results of Operations for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018 (Unaudited)

Gross premium written. Gross premium written increased by $60.9 million, or 5.0%, from $1,211.7 million for the three months ended September 30, 2018 to $1,272.6 million for the three months ended September 30, 2019, primarily attributable to our personal auto and homeowners product lines and the acquisition of Farmers Union Insurance.

Net premium written. Net premium written increased by $87.8 million, or 11.0%, from $799.4 million for the three months ended September 30, 2018 to $887.3 million for the three months ended September 30, 2019, primarily as a result of lower premium ceded to the Auto Quota Share upon commencement of the reduced cession in 2019 and the acquisition of Farmers Union Insurance offset by additional premium ceded to the Homeowners Quota Share.

Net earned premium. Net earned premium increased by $100.6 million, or 12.8%, from $784.2 million for the three months ended September 30, 2018 to $884.7 million for the three months ended September 30, 2019, primarily attributable to the acquisition of Farmers Union Insurance and our increased auto premium retention in 2019.

64

Ceding commission income. Ceding commission income for the three months ended September 30, 2019 and 2018 was $55.3 million and $58.8 million, respectively.

Service and fee income. Service and fee income increased by $1.7 million, from $96.2 million for the three months ended September 30, 2018 to $97.9 million for the three months ended September 30, 2019.

The components of service and fee income are as follows:

	Three Months Ended September 30,
	2019		2018		Change			% Change
	(amounts in thousands)
Finance and processing fees	$	33,637	$	29,804	$	3,833		12.9	%
Installment fees	23,464		23,841		(377		)	(1.6	)%
Commission revenue	21,333		25,404		(4,071		)	(16.0	)%
Late payment fees	9,251		8,164		1,087			13.3	%
Other service and fee income	10,205		9,019		1,186			13.2	%
Total	$	97,890	$	96,232	$	1,658		1.7	%

Loss and loss adjustment expense; net loss ratio. Loss and LAE increased by $90.1 million, from $584.7 million for the three months ended September 30, 2018 to $674.7 million for the three months ended September 30, 2019, primarily reflecting the acquisition of Farmers Union Insurance and increased retention of auto premium.

Our P&C segment net loss ratio, which includes the Reciprocal Exchanges, increased from 74.6% for the three months ended September 30, 2018 to 76.3% for the three months ended September 30, 2019. Excluding the Reciprocal Exchanges, the net loss ratio was 75.8% and 73.5% for the three months ended September 30, 2019 and 2018, respectively. The Reciprocal Exchanges’ net loss ratio was 82.8% and 93.2% for the three months ended September 30, 2019 and 2018, respectively.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses increased by $15.2 million, or 10.3%, from $146.7 million for the three months ended September 30, 2018 to $161.9 million for the three months ended September 30, 2019, primarily due to the acquisition of Farmers Union Insurance.

General and administrative expenses. General and administrative expenses increased by $10.4 million, from $185.2 million for the three months ended September 30, 2018 to $195.6 million for the three months ended September 30, 2019.

Net operating expense; net operating expense ratio (non-GAAP). Net operating expense increased by $27.4 million, from $176.8 million for the three months ended September 30, 2018 to $204.2 million for the three months ended September 30, 2019. Our P&C segment net operating expense ratio increased from 22.6% for the three months ended September 30, 2018 to 23.1% for the three months ended September 30, 2019. The increase in net operating expense and increase in net operating expense ratio were primarily as a result of increased earned premium.

Underwriting income; net combined ratio (non-GAAP). Underwriting income decreased by $16.9 million, from $22.7 million for the three months ended September 30, 2018 to $5.8 million for the three months ended September 30, 2019. Our P&C segment net combined ratio increased from 97.2% for the three months ended September 30, 2018 to 99.4% for the three months ended September 30, 2019. The decrease in underwriting income and the increase in net combined ratio were primarily due to a higher loss ratio.

65

P&C Segment Results of Operations for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018 (Unaudited)

Gross premium written. Gross premium written increased by $71.4 million, or 2.0%, from $3,594.7 million for the nine months ended September 30, 2018 to $3,666.1 million for the nine months ended September 30, 2019.

Net premium written. Net premium written increased by $261.0 million, or 10.7%, from $2,433.5 million for the nine months ended September 30, 2018 to $2,694.4 million for the nine months ended September 30, 2019, primarily as a result of lower premium ceded to the Auto Quota Share upon commencement of the reduced cession in 2019 and the acquisition of Farmers Union Insurance offset by additional premium ceded to Homeowners Quota Share.

Net earned premium. Net earned premium increased by $229.3 million, or 9.9%, from $2,322.6 million for the nine months ended September 30, 2018 to $2,551.9 million for the nine months ended September 30, 2019, primarily attributable to the acquisition of Farmers Union Insurance and our increased auto premium retention in 2019.

Ceding commission income. Ceding commission income increased by $20.3 million, or 12.9%, from $158.2 million for the nine months ended September 30, 2018 to $178.5 million for the nine months ended September 30, 2019, primarily driven by an increase in ceded earned premium to the Quota Shares.

Service and fee income. Service and fee income increased by $17.6 million, from $280.7 million for the nine months ended September 30, 2018 to $298.4 million for the nine months ended September 30, 2019, primarily due to growth.

The components of service and fee income are as follows:

	Nine Months Ended September 30,
	2019		2018		Change			% Change
	(amounts in thousands)
Finance and processing fees	$	98,218	$	91,676	$	6,542		7.1	%
Installment fees	72,782		68,928		3,854			5.6	%
Commission revenue	68,193		68,547		(354		)	(0.5	)%
Late payment fees	26,061		24,360		1,701			7.0	%
Other service and fee income	33,102		27,216		5,886			21.6	%
Total	$	298,356	$	280,727	$	17,629		6.3	%

Loss and loss adjustment expense; net loss ratio. Loss and LAE increased by $161.6 million, from $1,709.4 million for the nine months ended September 30, 2018 to $1,871.0 million for the nine months ended September 30, 2019, primarily reflecting the acquisition of Farmers Union Insurance and increased retention of auto premium.

Our P&C segment net loss ratio, which includes the Reciprocal Exchanges, decreased from 73.6% for the nine months ended September 30, 2018 to 73.3% for the nine months ended September 30, 2019. Excluding the Reciprocal Exchanges, the net loss ratio was 72.7% and 72.6% for the nine months ended September 30, 2019 and 2018, respectively. The Reciprocal Exchanges’ net loss ratio was 83.4% and 89.7% for the nine months ended September 30, 2019 and 2018, respectively.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses increased by $56.5 million, or 13.9%, from $405.5 million for the nine months ended September 30, 2018 to $462.1 million for the nine months ended September 30, 2019, primarily due to the acquisition of Farmers Union Insurance.

General and administrative expenses. General and administrative expenses increased by $28.6 million, from $542.9 million for the nine months ended September 30, 2018 to $571.5 million for the nine months ended September 30, 2019, primarily due to growth ($24.7 million).

66

Net operating expense; net operating expense ratio (non-GAAP). Net operating expense increased by $47.2 million, from $509.5 million for the nine months ended September 30, 2018 to $556.7 million for the nine months ended September 30, 2019. Our P&C segment net operating expense ratio decreased from 21.9% for the nine months ended September 30, 2018 to 21.8% for the nine months ended September 30, 2019. The increase in net operating expense and decrease in net operating expense ratio were primarily as a result of increased earned premium.

Underwriting income; net combined ratio (non-GAAP). Underwriting income increased by $20.6 million, from $103.6 million for the nine months ended September 30, 2018 to $124.2 million for the nine months ended September 30, 2019. Our P&C segment net combined ratio decreased from 95.5% for the nine months ended September 30, 2018 to 95.1% for the nine months ended September 30, 2019. The increase in underwriting income and the decrease in net combined ratio were primarily due to a lower loss ratio.

67

A&H Segment - Results of Operations for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Underwriting revenues:	(amounts in thousands, except percentages)
Gross premium written	$	162,555		$	143,948		$	592,771		$	534,560
Ceded premiums	(15,206		)	(20,372		)	(92,534		)	(48,373		)
Net premium written	$	147,349		$	123,576		$	500,237		$	486,187
Change in unearned premium	21,554			31,770			(3,705		)	(20,796		)
Net earned premium	$	168,903		$	155,346		$	496,532		$	465,391
Ceding commission income	2,261			269			8,780			789
Service and fee income	63,736			46,458			177,685			134,586
Total underwriting revenues	$	234,900		$	202,073		$	682,997		$	600,766
Underwriting expenses:
Loss and loss adjustment expense	70,612			72,652			241,685			252,364
Acquisition costs and other underwriting expenses	47,214			44,774			153,063			136,499
General and administrative expenses	68,297			50,525			188,227			148,265
Total underwriting expenses	$	186,123		$	167,951		$	582,975		$	537,128
Underwriting income	$	48,777		$	34,122		$	100,022		$	63,638
Underwriting ratios:
Net loss ratio	41.8		%	46.8		%	48.7		%	54.2		%
Net operating expense ratio (non-GAAP)	29.3		%	31.3		%	31.2		%	32.1		%
Net combined ratio (non-GAAP)	71.1		%	78.1		%	79.9		%	86.3		%
Underwriting ratios before amortization and impairment (non-GAAP):
Net loss ratio	41.8		%	46.8		%	48.7		%	54.2		%
Net operating expense ratio before amortization and impairment (non-GAAP)	28.4		%	30.2		%	30.2		%	31.0		%
Net combined ratio before amortization and impairment (non-GAAP)	70.2		%	77.0		%	78.9		%	85.2		%
Reconciliation of net operating expense ratio (non-GAAP):
Total expenses	$	186,123		$	167,951		$	582,975		$	537,128
Less: Loss and loss adjustment expense	70,612			72,652			241,685			252,364
Less: Ceding commission income	2,261			269			8,780			789
Less: Service and fee income	63,736			46,458			177,685			134,586
Net operating expense	$	49,514		$	48,572		$	154,825		$	149,389
Net earned premium	$	168,903		$	155,346		$	496,532		$	465,391
Net operating expense ratio (non-GAAP)	29.3		%	31.3		%	31.2		%	32.1		%
Net operating expense	$	49,514		$	48,572		$	154,825		$	149,389
Less: Non-cash impairment of goodwill	—			—			—			—
Less: Non-cash amortization of intangible assets	1,531			1,714			4,939			5,272
Net operating expense before amortization and impairment	$	47,983		$	46,858		$	149,886		$	144,117
Net earned premium	$	168,903		$	155,346		$	496,532		$	465,391
Net operating expense ratio before amortization and impairment (non-GAAP)	28.4		%	30.2		%	30.2		%	31.0		%

68

A&H Segment Results of Operations for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018 (Unaudited)

Gross premium written. Gross premium written increased by $18.6 million, or 12.9%, from $143.9 million for the three months ended September 30, 2018 to $162.6 million for the three months ended September 30, 2019, primarily due to growth in our domestic business.

Net premium written. Net premium written increased by $23.8 million, or 19.2%, from $123.6 million for the three months ended September 30, 2018 to $147.3 million for the three months ended September 30, 2019. The increase was primarily due to growth in our domestic business offset by premium ceded to a quota share agreement in our international business.

Net earned premium. Net earned premium increased by $13.6 million, or 8.7%, from $155.3 million for the three months ended September 30, 2018 to $168.9 million for the three months ended September 30, 2019, primarily due to growth in our domestic business offset by premium ceded to a quota share agreement in our international business.

Service and fee income. Service and fee income increased by $17.3 million, or 37.2%, from $46.5 million for the three months ended September 30, 2018 to $63.7 million for the three months ended September 30, 2019, primarily due to growth in our domestic business and a $5.8 million sale of a software license to a third party.

The components of service and fee income are as follows:

	Three Months Ended September 30,
	2019		2018		Change			% Change
	(amounts in thousands)
Group health administrative fees	$	25,808	$	18,364	$	7,444		40.5	%
Commission revenue	16,353		17,874		(1,521		)	(8.5	)%
Finance and processing fees	800		935		(135		)	(14.4	)%
Other service and fee income	20,775		9,285		11,490			123.7	%
Total	$	63,736	$	46,458	$	17,278		37.2	%

Loss and loss adjustment expense; net loss ratio. Loss and LAE decreased by $2.0 million, from $72.7 million for the three months ended September 30, 2018 to $70.6 million for the three months ended September 30, 2019. Our A&H net loss ratio decreased from 46.8% for the three months ended September 30, 2018 to 41.8% for the three months ended September 30, 2019. The loss ratio decrease was primarily as a result of favorable development on prior year loss.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses for the three months ended September 30, 2019 and 2018 were $47.2 million and $44.8 million, respectively.

General and administrative expenses. General and administrative expenses increased by $17.8 million, or 35.2%, from $50.5 million for the three months ended September 30, 2018 to $68.3 million for the three months ended September 30, 2019, primarily due to growth in our domestic business ($11.7 million).

Net operating expense; net operating expense ratio (non-GAAP). Net operating expense for the three months ended September 30, 2019 and 2018 was $49.5 million and $48.6 million, respectively. Our A&H net operating expense ratio decreased from 31.3% for the three months ended September 30, 2018 to 29.3% for the three months ended September 30, 2019.

Underwriting income; net combined ratio (non-GAAP). Underwriting income increased by $14.7 million, from $34.1 million for the three months ended September 30, 2018 to $48.8 million for the three months ended September 30, 2019. Our A&H net combined ratio decreased from 78.1% for the three months ended September 30, 2018 to 71.1%

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for the three months ended September 30, 2019. The net combined ratio decrease was a result of a lower net loss ratio and net operating expense ratio.

A&H Segment Results of Operations for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018 (Unaudited)

Gross premium written. Gross premium written increased by $58.2 million, or 10.9%, from $534.6 million for the nine months ended September 30, 2018 to $592.8 million for the nine months ended September 30, 2019, primarily due to growth in our domestic business.

Net premium written. Net premium written increased by $14.1 million, or 2.9%, from $486.2 million for the nine months ended September 30, 2018 to $500.2 million for the nine months ended September 30, 2019. The increase was primarily as a result of growth in our domestic business partially offset by premium ceded to a quota share agreement in our international business.

Net earned premium. Net earned premium increased by $31.1 million, or 6.7%, from $465.4 million for the nine months ended September 30, 2018 to $496.5 million for the nine months ended September 30, 2019, as a result of growth in our domestic business partially offset by premium ceded to a quota share agreement in our international business.

Service and fee income. Service and fee income increased by $43.1 million, or 32.0%, from $134.6 million for the nine months ended September 30, 2018 to $177.7 million for the nine months ended September 30, 2019, primarily due to growth in our domestic business and a $5.8 million sale of a software license to a third party.

The components of service and fee income are as follows:

	Nine Months Ended September 30,
	2019		2018		Change		% Change
	(amounts in thousands)
Group health administrative fees	$	73,861	$	57,461	$	16,400	28.5	%
Commission revenue	57,097		51,190		5,907		11.5	%
Finance and processing fees	3,710		3,223		487		15.1	%
Other service and fee income	43,017		22,712		20,305		89.4	%
Total	$	177,685	$	134,586	$	43,099	32.0	%

Loss and loss adjustment expense; net loss ratio. Loss and LAE decreased by $10.7 million, from $252.4 million for the nine months ended September 30, 2018 to $241.7 million for the nine months ended September 30, 2019. Our A&H net loss ratio decreased from 54.2% for the nine months ended September 30, 2018 to 48.7% for the nine months ended September 30, 2019. The loss ratio decrease was primarily as a result of favorable development on prior year loss.

Acquisition costs and other underwriting expenses. Acquisition costs and other underwriting expenses increased by $16.6 million, or 12.1%, from $136.5 million for the nine months ended September 30, 2018 to $153.1 million for the nine months ended September 30, 2019, primarily from domestic growth ($17.9 million).

General and administrative expenses. General and administrative expenses increased by $40.0 million, or 27.0%, from $148.3 million for the nine months ended September 30, 2018 to $188.2 million for the nine months ended September 30, 2019, primarily from domestic growth ($30.6 million).

Net operating expense; net operating expense ratio (non-GAAP). Net operating expense increased by $5.4 million, from $149.4 million for the nine months ended September 30, 2018 to $154.8 million for the nine months ended September 30, 2019. Our A&H net operating expense ratio decreased from 32.1% for the nine months ended September 30, 2018 to 31.2% for the nine months ended September 30, 2019.

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Underwriting income; net combined ratio (non-GAAP). Underwriting income increased by $36.4 million, from $63.6 million for the nine months ended September 30, 2018 to $100.0 million for the nine months ended September 30, 2019. Our A&H net combined ratio decreased from 86.3% for the nine months ended September 30, 2018 to 79.9% for the nine months ended September 30, 2019. The net combined ratio decrease was a result of a lower net loss ratio and net operating expense ratio.

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Balance Sheets

	September 30, 2019
	NGHC		Reciprocal Exchanges			Eliminations			Total
ASSETS	(amounts in thousands)
Investments:
Debt securities, available-for-sale, at fair value	$	3,833,826	$	307,388		$	—		$	4,141,214
Equity securities, at fair value	2,760		—			—			2,760
Short-term investments	366,653		27,010			—			393,663
Other investments	409,033		—			(107,418		)	301,615
Total investments	4,612,272		334,398			(107,418		)	4,839,252
Cash and cash equivalents	199,266		153			—			199,419
Restricted cash and cash equivalents	27,622		281			—			27,903
Accrued investment income	58,812		2,241			(33,107		)	27,946
Premiums and other receivables, net	1,478,586		62,540			—			1,541,126
Deferred acquisition costs	244,546		23,113			—			267,659
Reinsurance recoverable	1,384,407		120,192			—			1,504,599
Prepaid reinsurance premiums	525,176		118,042			—			643,218
Premises and equipment, net	403,416		441			—			403,857
Intangible assets, net	388,953		3,270			—			392,223
Goodwill	181,587		—			—			181,587
Prepaid and other assets	45,196		11			—			45,207
Total assets	$	9,549,839	$	664,682		$	(140,525	)	$	10,073,996
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves	$	2,845,799	$	193,456		$	—		$	3,039,255
Unearned premiums and other revenue	2,184,938		265,538			—			2,450,476
Reinsurance payable	629,300		44,424			—			673,724
Accounts payable and accrued expenses	312,475		38,307			(33,107		)	317,675
Debt	687,978		107,418			(107,418		)	687,978
Other liabilities	329,515		43,754			—			373,269
Total liabilities	$	6,990,005	$	692,897		$	(140,525	)	$	7,542,377
Stockholders’ equity:
Common stock	$	1,133	$	—		$	—		$	1,133
Preferred stock	450,000		—			—			450,000
Additional paid-in capital	1,062,859		—			—			1,062,859
Accumulated other comprehensive income	80,387		—			—			80,387
Retained earnings	965,455		—			—			965,455
Total National General Holdings Corp. Stockholders’ Equity	2,559,834		—			—			2,559,834
Noncontrolling interest	—		(28,215		)	—			(28,215		)
Total stockholders’ equity	$	2,559,834	$	(28,215	)	$	—		$	2,531,619
Total liabilities and stockholders’ equity	$	9,549,839	$	664,682		$	(140,525	)	$	10,073,996

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	December 31, 2018
	NGHC			Reciprocal Exchanges			Eliminations			Total
ASSETS	(amounts in thousands)
Investments:
Debt securities, available-for-sale, at fair value	$	3,263,949		$	297,083		$	—		$	3,561,032
Equity securities, at fair value	10,949			—			—			10,949
Short-term investments	331,221			17,328			—			348,549
Other investments	407,580			—			(101,304		)	306,276
Total investments	4,013,699			314,411			(101,304		)	4,226,806
Cash and cash equivalents	193,858			—			—			193,858
Restricted cash and cash equivalents	39,525			200			—			39,725
Accrued investment income	50,981			1,596			(25,400		)	27,177
Premiums and other receivables, net	1,338,485			61,327			—			1,399,812
Deferred acquisition costs	231,401			20,007			—			251,408
Reinsurance recoverable	1,494,670			117,068			—			1,611,738
Prepaid reinsurance premiums	529,241			136,433			—			665,674
Premises and equipment, net	306,309			1,695			—			308,004
Intangible assets, net	376,532			3,405			—			379,937
Goodwill	180,183			—			—			180,183
Prepaid and other assets	150,377			4,581			—			154,958
Total assets	$	8,905,261		$	660,723		$	(126,704	)	$	9,439,280
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Unpaid loss and loss adjustment expense reserves	$	2,778,689		$	178,470		$	—		$	2,957,159
Unearned premiums and other revenue	2,014,965			265,763			—			2,280,728
Reinsurance payable	615,872			40,393			—			656,265
Accounts payable and accrued expenses	390,338			33,120			(25,400		)	398,058
Debt	705,795			101,304			(101,304		)	705,795
Other liabilities	178,764			61,640			—			240,404
Total liabilities	$	6,684,423		$	680,690		$	(126,704	)	$	7,238,409
Stockholders’ equity:
Common stock	$	1,129		$	—		$	—		$	1,129
Preferred stock	450,000			—			—			450,000
Additional paid-in capital	1,057,783			—			—			1,057,783
Accumulated other comprehensive loss	(52,130		)	—			—			(52,130		)
Retained earnings	764,056			—			—			764,056
Total National General Holdings Corp. Stockholders’ Equity	2,220,838			—			—			2,220,838
Noncontrolling interest	—			(19,967		)	—			(19,967		)
Total stockholders’ equity	$	2,220,838		$	(19,967	)	$	—		$	2,200,871
Total liabilities and stockholders’ equity	$	8,905,261		$	660,723		$	(126,704	)	$	9,439,280

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Other Material Changes in Financial Position

	September 30, 2019		December 31, 2018		Change		% Change
	(amounts in thousands)
Selected Assets:
Premiums and other receivables, net	$	1,541,126	$	1,399,812	$	141,314	10.1	%

Changes in Financial Position During the Nine Months Ended September 30, 2019 Compared to December 31, 2018

Premiums and other receivables increased by $141.3 million, primarily driven by growth in our P&C segment ($120.3 million), including additional receivables from Farmers Union Insurance, which we acquired on August 1, 2019.

Investment Portfolio

Our investment strategy emphasizes, first, the preservation of capital and, second, maximization of an appropriate risk-adjusted return. We seek to maximize investment returns using investment guidelines that stress prudent allocation among cash and cash equivalents, debt securities and, to a lesser extent, other investments. Cash and cash equivalents include cash on deposit, commercial paper, pooled short-term money market funds and certificates of deposit with an original maturity of 90 days or less. Our debt securities include obligations of the U.S. Treasury or U.S. government agencies, obligations of local and foreign governments, obligations of U.S. and Canadian corporations, mortgages guaranteed by the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, Federal Farm Credit entities, commercial mortgage obligations, and structured securities primarily consisting of collateralized loan and debt obligations.

The average yield on our investment portfolio was 3.1% and 3.1% for the nine months ended September 30, 2019 and 2018, respectively, and the average duration of the portfolio was 4.0 and 4.2 years as of September 30, 2019 and 2018, respectively.

For more information related to our investments, see Note 3, “Investments” in the notes to our Condensed Consolidated Financial Statements.

Liquidity and Capital Resources

We are organized as a holding company with twenty-two domestic insurance company subsidiaries and various foreign insurance and reinsurance subsidiaries, as well as various other non-insurance subsidiaries. Our principal sources of operating funds are premiums, service and fee income, investment income and proceeds from sales and maturities of investments. Our primary uses of operating funds include payments of claims and operating expenses. Currently, we pay claims using cash flow from operations and invest our excess cash primarily in debt securities and, to a lesser extent, other investments. Except as set forth below, we expect that projected cash flows from operations, as well as the net proceeds from our debt and equity issuances, will provide us with sufficient liquidity to fund our anticipated growth by providing capital to increase the surplus of our insurance subsidiaries, as well as to pay claims and operating expenses, and to pay interest and principal on debt and debt facilities and other holding company expenses for the foreseeable future. However, if our growth attributable to potential acquisitions, internally generated growth, or a combination of these factors, exceeds our expectations, we may have to raise additional capital. If we cannot obtain adequate capital on favorable terms or at all, we may be unable to support future growth or operating requirements and, as a result, our business, financial condition and results of operations could be adversely affected. To support our current and future policy writings, we have raised capital using a combination of debt and equity, and entered into third party quota share reinsurance agreements. We may raise additional capital over the next twelve months or obtain additional capital support in the form of third party quota share reinsurance.

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We may generate liquidity through the issuance of debt or equity securities or financing through borrowings under credit facilities, or a combination thereof. We also have a $340.0 million credit agreement, under which there was $140.0 million outstanding as of September 30, 2019. The proceeds of borrowings under the credit agreement may be used for working capital, acquisitions and general corporate purposes.

Our insurance subsidiaries are subject to statutory and regulatory restrictions imposed on insurance companies by their place of domicile which limit the amount of cash dividends or distributions that they may pay to us unless special permission is received from the insurance regulator of the relevant domicile. The aggregate limit imposed by the various domiciliary regulatory authorities of our insurance subsidiaries was approximately $352.4 million and $287.9 million as of September 30, 2019 and December 31, 2018, respectively, taking into account dividends paid in the prior twelve month periods. During the nine months ended September 30, 2019 and 2018, there were $0.0 million and $90.8 million, respectively, of dividends or return of capital paid by our insurance subsidiaries.

We forecast claim payments based on our historical experience. We seek to manage the funding of claim payments by actively managing available cash and forecasting cash flows on both a short-term and long-term basis. Cash payments for claims were $2,031.8 million and $1,844.8 million in the nine months ended September 30, 2019 and 2018, respectively. Historically, we have funded claim payments from cash flow from operations (principally premiums), net of amounts ceded to our third-party reinsurers. We presently expect to maintain sufficient cash flow from operations to meet our anticipated claim obligations and operating and capital expenditure needs. Our cash and cash equivalents (including restricted cash) and total investments were $5.1 billion at September 30, 2019 and $4.5 billion at December 31, 2018. We do not anticipate selling securities in our investment portfolio to pay claims or to fund operating expenses. Should circumstances arise that would require us to do so, we may incur losses on such sales, which would adversely affect our results of operations and financial condition and could reduce investment income in future periods.

Pursuant to a tax allocation agreement by and among us and certain of our subsidiaries, we compute and pay federal income taxes on a consolidated basis. Each subsidiary party to this agreement computes and pays to us its respective share of the federal income tax liability primarily based on separate return calculations.

The following table is a summary of our statement of cash flows:

	Nine Months Ended September 30,
	2019			2018			Change			% Change
	(amounts in thousands)
Net cash provided by operating activities	$	509,454		$	460,074		$	49,380		10.7	%
Net cash used in investing activities	(438,607		)	(324,681		)	(113,926		)	35.1	%
Net cash used in financing activities	(73,989		)	(46,867		)	(27,122		)	57.9	%
Effect of exchange rate changes on cash and cash equivalents	(3,119		)	(11,080		)	7,961			(71.9	)%
Net (decrease) increase in cash, cash equivalents, and restricted cash	$	(6,261	)	$	77,446		$	(83,707	)	(108.1	)%

Comparison of the Nine Months Ended September 30, 2019 and 2018

Net cash provided by operating activities increased by $49.4 million, primarily due to higher net income and a decrease in our reinsurance recoverables, partially offset by a decrease in unpaid loss and loss adjustment expense reserves during the nine months ended September 30, 2019.

Net cash used in investing activities increased by $113.9 million, primarily due to lower proceeds from sales and maturities of debt securities and other investments net of purchases during the nine months ended September 30, 2019.

Net cash used in financing activities increased by $27.1 million, primarily due to proceeds received from preferred stock in 2018.

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Off-Balance Sheet Arrangements

As of September 30, 2019 we did not have any off-balance sheet arrangements that have or are likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.

Reinsurance

We utilize various excess of loss, quota share, state-based industry pools or facilities, and catastrophe reinsurance programs to limit our exposure to a maximum loss on any one risk. Reinsurance agreements transfer portions of the underlying risk of the business we write. Reinsurance does not discharge or diminish our obligation to pay claims covered by the insurance policies we issue; however, it does permit us to recover certain incurred losses from our reinsurers and our reinsurance recoveries reduce the maximum loss that we may incur as a result of a covered loss event. We believe it is important to ensure that our reinsurance partners are financially strong and they generally carry at least an A.M. Best rating of “A-” (Excellent) or are fully collateralized at the time we enter into our reinsurance agreements. We also enter into reinsurance relationships with third-party captives formed by agents as a mechanism for sharing risk and profit. The total amount, cost and limits relating to the reinsurance coverage we purchase may vary from year to year based upon a variety of factors, including the availability of quality reinsurance at an acceptable price and the level of risk that we choose to retain for our own account.

We assume and cede insurance risks under various reinsurance agreements, on both a pro rata basis and an excess of loss basis. We purchase reinsurance to mitigate the volatility of direct and assumed business, which may be caused by the aggregate value or the concentration of written exposures in a particular geographic area or business segment and may arise from catastrophes or other large loss events.

For more information about our reinsurance agreements, refer to Note 10, “Reinsurance” of our Annual Report on Form 10-K for the year ended December 31, 2018, and Note 8, “Reinsurance” in the notes to our condensed consolidated financial statements.

Debt

Revolving Credit Agreement

On February 25, 2019, we refinanced our existing credit agreement and entered into a new credit agreement (the “2019 Credit Agreement”), with JPMorgan Chase Bank, N.A., as Administrative Agent, KeyBank National Association and Fifth Third Bank, as Co-Syndication Agents, and the various lending institutions party thereto. The 2019 Credit Agreement is currently a $340.0 million base revolving credit facility with a letter of credit sublimit of $150.0 million and an expansion feature of up to $50.0 million. Borrowings under the 2019 Credit Agreement bear interest at either the Alternate Base Rate (“ABR”) or the LIBO rate. ABR borrowings under the 2019 Credit Agreement will bear interest at (x) the greatest of (a) the prime rate in effect on such day, (b) the federal funds effective rate on such day plus 0.5 percent or (c) the adjusted LIBO rate for a one-month interest period on such day plus 1 percent. Eurodollar borrowings under the 2019 Credit Agreement will bear interest at the adjusted LIBO rate plus the Eurodollar spread for the interest period in effect. Fees payable by us under the 2019 Credit Agreement include a letter of credit participation fee, a letter of credit fronting fee with respect to each letter of credit (0.125%) and a commitment fee on the available commitments of the lenders (a range of 0.175% to 0.25% based on our consolidated leverage ratio, and which rate was 0.225% as of September 30, 2019). The 2019 Credit Agreement has a maturity date of February 25, 2023. As of September 30, 2019, there was $140.0 million outstanding under the 2019 Credit Agreement.

For more information about our debt, including other outstanding debt, ranking and restrictive covenants, refer to Note 12, “Debt” of our Annual Report on Form 10-K for the year ended December 31, 2018, and Note 9, “Debt” in the notes to our condensed consolidated financial statements.

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Preferred Stock

For more information about our preferred stock, refer to Note 15, “Stockholders’ Equity” of our Annual Report on Form 10-K for the year ended December 31, 2018, and Note 13, “Stockholders’ Equity” in the notes to our condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Liquidity Risk. Liquidity risk represents our potential inability to meet all payment obligations when they become due. We maintain sufficient cash and marketable securities to fund claim payments and operations. We purchase reinsurance coverage to mitigate the risk of an unexpected rise in claims severity or frequency from catastrophic events or a single large loss. The availability, amount and cost of reinsurance depend on market conditions and may vary significantly.

Credit Risk. Credit risk is the potential loss arising principally from adverse changes in the financial condition of the issuers of our debt securities and the financial condition of our reinsurers.

We address the credit risk related to the issuers of our debt securities by investing primarily in debt securities that are rated “BBB-” or higher by Standard & Poor’s. We also independently monitor the financial condition of all issuers of our debt securities. To limit our risk exposure, we employ diversification policies that limit the credit exposure to any single issuer or business sector.

We are subject to credit risk with respect to our reinsurers. Although our reinsurers are obligated to reimburse us to the extent we cede risk to them, we are ultimately liable to our policyholders on all risks we have ceded. As a result, reinsurance contracts do not limit our ultimate obligations to pay claims covered under the insurance policies we issue and we might not collect amounts recoverable from our reinsurers. We address this credit risk by selecting reinsurers that generally carry at least an A.M. Best rating of “A-” (Excellent) or are fully collateralized at the time we enter into the agreement and by performing, along with our reinsurance broker, periodic credit reviews of our reinsurers. If one of our reinsurers suffers a credit downgrade, we may consider various options to lessen the risk of asset impairment, including commutation, novation and letters of credit. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reinsurance.”

Market Risk. Market risk is the risk of potential economic loss principally arising from adverse changes in the fair value of financial instruments. The major components of market risk affecting us are interest rate risk and equity price risk.

Interest Rate Risk. We had debt securities with a fair value of $4.1 billion as of September 30, 2019 that are subject to interest rate risk. Interest rate risk is the risk that we may incur losses due to adverse changes in interest rates. Fluctuations in interest rates have a direct impact on the market valuation of our debt securities. We manage our exposure to interest rate risk through a disciplined asset and liability matching and capital management process. In the management of this risk, the characteristics of duration, credit and variability of cash flows are critical elements. These risks are assessed regularly and balanced within the context of our liability and capital position.

The table below summarizes the interest rate risk by illustrating the sensitivity of the fair value and carrying value of our debt securities as of September 30, 2019 to selected hypothetical changes in interest rates, and the associated impact on our stockholders’ equity. We anticipate that we will continue to meet our obligations out of income. We classify our debt securities primarily as available for sale. Temporary changes in the fair value of our debt securities impact the carrying value of these securities and are reported in our stockholders’ equity as a component of accumulated other comprehensive income, net of taxes.

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The selected scenarios with our debt securities in the table below are not predictions of future events, but rather are intended to illustrate the effect such events may have on the fair value and carrying value of our debt securities and on our stockholders’ equity, each as of September 30, 2019.

Hypothetical Change in Interest Rates	Fair Value		Estimated Change in Fair Value			Hypothetical Percentage Increase (Decrease) in Stockholders’ Equity
	(amounts in thousands)
200 basis point increase	$	3,810,207	$	(331,007	)	(10.3	)%
100 basis point increase	3,975,731		(165,483		)	(5.2	)
No change	4,141,214		—			—
100 basis point decrease	4,299,201		157,987			4.9
200 basis point decrease	4,454,414		313,200			9.8

Changes in interest rates would affect the fair market value of our fixed-rate debt instruments but would not have an impact on our earnings or cash flow. As of September 30, 2019, we had $662.2 million principal amount of debt instruments (excluding finance lease and other liabilities), of which $450.0 million are fixed-rate debt instruments. A fluctuation of 100 basis points in interest on our variable-rate debt instruments, which are tied to LIBOR, would affect our earnings and cash flows by $2.1 million before income tax, on an annual basis, but would not affect the fair market value of the variable-rate debt.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in ensuring that information required to be disclosed by us in the reports we file or submit under the Exchange Act is timely recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are routinely involved in legal proceedings arising in the ordinary course of business, in particular in connection with claims adjudication with respect to our policies. We believe we have recorded adequate reserves for these liabilities and that there is no individual case pending that is likely to have a material adverse effect on our financial condition or results of operations.

On July 25, 2019, the City of North Miami Beach Police Officers’ and Firefighters’ Retirement Plan filed a complaint in the U.S. District Court for the Central District of California against the Company and certain of its officers. The plaintiff purports to represent a class of individuals and entities who purchased or otherwise acquired shares of the Company’s common stock between August 5, 2015 and August 9, 2017. The complaint asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder based on allegedly false and misleading statements made by the Company in its SEC filings in relationship to the Company’s involvement in the historical and no longer existing Wells Fargo collateral protection insurance program. The complaint seeks damages in an amount to be proven at trial. We believe that the claims set forth in the complaint are unfounded and without merit and intend to vigorously contest them. We note, however, that in light of the inherent uncertainty in legal proceedings, we can give no assurance as to the ultimate resolution of the matter, and an estimate of the possible loss or range of loss, if any, cannot be made at this time.

Item 1A. Risk Factors

There have been no material changes to the Risk Factors described in Part I “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 as filed with the SEC.

Item 6. Exhibits

INDEX TO EXHIBITS

The following documents are filed as exhibits to this report:

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.1	Certification of Chief Executive Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
32.2	Certification of Chief Financial Officer pursuant to 18 U.SC. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document (filed herewith)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (filed herewith)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith)
104	The Cover Page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL contained in Exhibit 101.

81

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NATIONAL GENERAL HOLDINGS CORP.
October 30, 2019
	By:	/s/ Barry Karfunkel
		Name: Barry Karfunkel Title: Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Michael Weiner
		Name: Michael Weiner Title: Chief Financial Officer (Principal Financial Officer)

82

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Barry Karfunkel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of National General Holdings Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 30, 2019	By:	/s/ Barry Karfunkel
		Barry Karfunkel Chief Executive Officer (Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Weiner, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of National General Holdings Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

October 30, 2019	By:	/s/ Michael Weiner
		Michael Weiner Chief Financial Officer (Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Barry Karfunkel, Chief Executive Officer (Principal Executive Officer) of National General Holdings Corp. (the “Company”), hereby certify, that, to my knowledge:

1. The Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 30, 2019	By:	/s/ Barry Karfunkel
		Barry Karfunkel Chief Executive Officer (Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Michael Weiner, Chief Financial Officer (Principal Financial Officer) of National General Holdings Corp. (the “Company”), hereby certify, that, to my knowledge:

1. The Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2019 (the “Report”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October 30, 2019	By:	/s/ Michael Weiner
		Michael Weiner Chief Financial Officer (Principal Financial Officer)

XML

Basis of Reporting

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Reporting

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”) 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 (the “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, 2018 previously filed with the SEC on February 25, 2019. The balance sheet at December 31, 2018, has been derived from the audited consolidated financial statements at that date.

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.

The unaudited condensed consolidated financial statements include the accounts and operations of Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer (together with their subsidiaries, the “Reciprocal Exchanges” or “Exchanges”). The Company has no ownership interest in the Reciprocal Exchanges but manages their business operations and has the ability to direct their activities through its wholly-owned management companies. The Reciprocal Exchanges are property and casualty insurers.

As of December 31, 2018, the Company reclassified finance lease liabilities in the amount of $30,346 from “Other liabilities” to “Debt” on the Condensed Consolidated Balance Sheets to conform to the current-year presentation.

A detailed description of the Company’s significant accounting policies and management judgments is located in the notes to the audited consolidated financial statements, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC.

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 60,239	$ 56,229	$ 222,636	$ 149,159
Other comprehensive income:
Foreign currency translation adjustment	(4,104)	926	(8,147)	(9,278)
Income tax effect	862	115	1,707	1,948
Total foreign currency translation adjustment, net of tax	(3,242)	1,041	(6,440)	(7,330)
Gross unrealized gain (loss) on investments before reclassifications	33,294	(16,574)	190,266	(93,695)
Income tax effect	(6,991)	3,227	(39,955)	19,676
Total change in net unrealized gain (loss) on investments, net of tax	26,303	(13,347)	150,311	(74,019)
Reclassification adjustments for investments gain/loss to net income:
Net realized (gain) loss on investments	(1,886)	(1,820)	(1,835)	17,737
Income tax effect	396	382	385	(3,725)
Total (gain) loss on investments reclassifications to net income, net of tax	(1,490)	(1,438)	(1,450)	14,012
Other comprehensive income (loss) before income tax effect	27,304	(17,468)	180,284	(85,236)
Income tax effect	(5,733)	3,724	(37,863)	17,899
Other comprehensive income (loss), net of tax	21,571	(13,744)	142,421	(67,337)
Comprehensive income	81,810	42,485	365,057	81,822
Comprehensive (income) loss attributable to noncontrolling interest	9,821	13,014	8,248	38,811
Comprehensive income attributable to NGHC	$ 91,631	$ 55,499	$ 373,305	$ 120,633

XML

Document and Entity Information Statement - $ / shares	9 Months Ended
	Sep. 30, 2019	Oct. 29, 2019
Document Information
Document Type	10-Q
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Entity Central Index Key	0001578735
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2019
Document Transition Report	false
Entity File Number	001-36311
Entity Registrant Name	NATIONAL GENERAL HOLDINGS CORP.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-1046208
Entity Address, Address Line One	59 Maiden Lane
Entity Address, Address Line Two	38th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10038
City Area Code	212
Local Phone Number	380-9500
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Listing, Par Value Per Share	$ 0.01
Entity Common Stock, Shares Outstanding		113,327,683
Common Stock, par value $0.01 per share
Document Information
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	NGHC
Security Exchange Name	NASDAQ
7.50% Non-Cumulative Preferred Stock, Series A
Document Information
Title of 12(b) Security	7.50% Non-Cumulative Preferred Stock, Series A
Trading Symbol	NGHCP
Security Exchange Name	NASDAQ
Depositary Shares, Representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series B
Document Information
Title of 12(b) Security	Depositary Shares, Representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series B
Trading Symbol	NGHCO
Security Exchange Name	NASDAQ
Depositary Shares, Representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series C
Document Information
Title of 12(b) Security	Depositary Shares, Representing 1/40th of a Share of 7.50% Non-Cumulative Preferred Stock, Series C
Trading Symbol	NGHCN
Security Exchange Name	NASDAQ
7.625% Subordinated Notes due 2055
Document Information
Title of 12(b) Security	7.625% Subordinated Notes due 2055
Trading Symbol	NGHCZ
Security Exchange Name	NASDAQ

XML

Stockholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock

The Company has four separate series (Series A through D) of preferred stock outstanding. Two of these series (Series B and C) were issued in offerings using depositary shares. Dividends on the Series A, B and C preferred stock are payable on the liquidation preference amount, on a non-cumulative basis, when, as and if declared by the Company’s Board of Directors, quarterly in arrears on the 15th day of January, April, July and October of each year. Dividends on the Series D preferred stock are payable on the liquidation preference amount, on a non-cumulative basis, when, as and if declared by the Company’s Board of Directors, semi-annually in arrears on the 15th day of January and July of each year, commencing on January 15, 2019. On or after July 15, 2023 (or in the event of a fundamental change of the Company, at any time), the Series D preferred stock may be converted at the holder’s option into shares of the Company’s common stock.

A summary description of the terms of these series of preferred stock is presented in the table below:

Series	Dividend rate per year		Shares of preferred stock issued	Depositary shares issued	Liquidation preference per share		Aggregate liquidation preference
A	7.50	%	2,200,000	—	$	25	$	55,000
B	7.50	%	165,000	6,600,000	$	1,000	$	165,000
C	7.50	%	200,000	8,000,000	$	1,000	$	200,000
D	Fixed/ Floating(1)		120	—	$	250,000	$	30,000

⁽¹⁾ Dividend rate is fixed at 7.00% prior to July 15, 2023 and floating at six-month LIBOR plus 5.4941% thereafter.

Common Stock and Preferred Stock Dividends

Dividends are payable on the Company’s common and preferred stock only when, as and if declared by the Company’s Board of Directors in its discretion, from funds legally available for this purpose. The following tables present the class of stock, declaration date and dividends paid per share:

Class of Stock	Declaration Date	Dividend Per Share		Dividend Per Depositary Share
Common stock	July 29, 2019	$	0.05
Common stock	May 6, 2019	$	0.04
Common stock	February 25, 2019	$	0.04
Preferred stock Series A	July 29, 2019	$	0.46875
Preferred stock Series A	May 6, 2019	$	0.46875
Preferred stock Series A	February 25, 2019	$	0.46875
Preferred stock Series B	July 29, 2019	$	18.75	$	0.46875
Preferred stock Series B	May 6, 2019	$	18.75	$	0.46875
Preferred stock Series B	February 25, 2019	$	18.75	$	0.46875
Preferred stock Series C	July 29, 2019	$	18.75	$	0.46875
Preferred stock Series C	May 6, 2019	$	18.75	$	0.46875
Preferred stock Series C	February 25, 2019	$	18.75	$	0.46875
Preferred stock Series D	May 6, 2019	$	8,750.00

Class of Stock	Declaration Date	Dividend Per Share		Dividend Per Depositary Share
Common stock	August 6, 2018	$	0.04
Common stock	May 7, 2018	$	0.04
Common stock	February 26, 2018	$	0.04
Preferred stock Series A	August 6, 2018	$	0.46875
Preferred stock Series A	May 7, 2018	$	0.46875
Preferred stock Series A	February 26, 2018	$	0.46875
Preferred stock Series B	August 6, 2018	$	18.75	$	0.46875
Preferred stock Series B	May 7, 2018	$	18.75	$	0.46875
Preferred stock Series B	February 26, 2018	$	18.75	$	0.46875
Preferred stock Series C	August 6, 2018	$	18.75	$	0.46875
Preferred stock Series C	May 7, 2018	$	18.75	$	0.46875
Preferred stock Series C	February 26, 2018	$	18.75	$	0.46875

XML

Segment Information

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Segment Information

Segment Information

The Company currently operates two business segments, “Property and Casualty” and “Accident and Health.” The “Corporate and Other” column represents the activities of the holding company, as well as income from the Company’s investment portfolio. The Company evaluates segment profits attributable to the performance of activities within the segment separately from the results of the Company’s investment portfolio. Other operating expenses allocated to the segments are called “General and administrative expenses” which are allocated on an actual basis except corporate salaries and benefits where management’s judgment is applied. In determining total assets by segment, the Company identifies those assets that are attributable to a particular segment such as premiums, deferred acquisition costs, reinsurance recoverable, prepaid reinsurance premiums, intangible assets and goodwill, while the remaining assets are allocated to Corporate and Other.

The Property and Casualty segment, which includes the Reciprocal Exchanges and the management companies, reports the management fees earned by the Company from the Reciprocal Exchanges for underwriting, investment management and other services as service and fee income. The effects of these transactions between the Company and the Reciprocal Exchanges are eliminated in consolidation to derive consolidated net income. However, the management fee income is reported in net income attributable to NGHC and included in the basic and diluted earnings per share.

The following tables summarize the results of operations of the operating segments:

	Three Months Ended September 30, 2019
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	1,272,602		$	162,555		$	—		$	1,435,157
Ceded premiums	(385,347		)	(15,206		)	—			(400,553		)
Net premium written	887,255			147,349			—			1,034,604
Change in unearned premium	(2,520		)	21,554			—			19,034
Net earned premium	884,735			168,903			—			1,053,638
Ceding commission income	55,326			2,261			—			57,587
Service and fee income	97,890			63,736			—			161,626
Total underwriting revenues	1,037,951			234,900			—			1,272,851
Underwriting expenses:
Loss and loss adjustment expense	674,722			70,612			—			745,334
Acquisition costs and other underwriting expenses	161,876			47,214			—			209,090
General and administrative expenses	195,567			68,297			—			263,864
Total underwriting expenses	1,032,165			186,123			—			1,218,288
Underwriting income	5,786			48,777			—			54,563
Net investment income	—			—			33,740			33,740
Net loss on investments	—			—			(565		)	(565		)
Other income	—			—			2,146			2,146
Interest expense	—			—			(12,898		)	(12,898		)
Provision for income taxes	—			—			(16,747		)	(16,747		)
Net (income) loss attributable to noncontrolling interest	—			—			10,915			10,915
Net income attributable to NGHC	$	5,786		$	48,777		$	16,591		$	71,154

	Three Months Ended September 30, 2018
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	1,211,723		$	143,948		$	—		$	1,355,671
Ceded premiums	(412,275		)	(20,372		)	—			(432,647		)
Net premium written	799,448			123,576			—			923,024
Change in unearned premium	(15,267		)	31,770			—			16,503
Net earned premium	784,181			155,346			—			939,527
Ceding commission income	58,831			269			—			59,100
Service and fee income	96,232			46,458			—			142,690
Total underwriting revenues	939,244			202,073			—			1,141,317
Underwriting expenses:
Loss and loss adjustment expense	584,658			72,652			—			657,310
Acquisition costs and other underwriting expenses	146,696			44,774			—			191,470
General and administrative expenses	185,208			50,525			—			235,733
Total underwriting expenses	916,562			167,951			—			1,084,513
Underwriting income	22,682			34,122			—			56,804
Net investment income	—			—			30,696			30,696
Net loss on investments	—			—			(3,170		)	(3,170		)
Interest expense	—			—			(12,583		)	(12,583		)
Provision for income taxes	—			—			(15,518		)	(15,518		)
Net (income) loss attributable to noncontrolling interest	—			—			12,153			12,153
Net income attributable to NGHC	$	22,682		$	34,122		$	11,578		$	68,382

	Nine Months Ended September 30, 2019
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	3,666,072		$	592,771		$	—		$	4,258,843
Ceded premiums	(971,643		)	(92,534		)	—			(1,064,177		)
Net premium written	2,694,429			500,237			—			3,194,666
Change in unearned premium	(142,515		)	(3,705		)	—			(146,220		)
Net earned premium	2,551,914			496,532			—			3,048,446
Ceding commission income	178,533			8,780			—			187,313
Service and fee income	298,356			177,685			—			476,041
Total underwriting revenues	3,028,803			682,997			—			3,711,800
Underwriting expenses:
Loss and loss adjustment expense	1,870,993			241,685			—			2,112,678
Acquisition costs and other underwriting expenses	462,071			153,063			—			615,134
General and administrative expenses	571,498			188,227			—			759,725
Total underwriting expenses	2,904,562			582,975			—			3,487,537
Underwriting income	124,241			100,022			—			224,263
Net investment income	—			—			102,316			102,316
Net loss on investments	—			—			(5,773		)	(5,773		)
Other income	—			—			2,146			2,146
Interest expense	—			—			(38,822		)	(38,822		)
Provision for income taxes	—			—			(61,494		)	(61,494		)
Net (income) loss attributable to noncontrolling interest	—			—			18,152			18,152
Net income attributable to NGHC	$	124,241		$	100,022		$	16,525		$	240,788

	Nine Months Ended September 30, 2018
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	3,594,690		$	534,560		$	—		$	4,129,250
Ceded premiums	(1,161,235		)	(48,373		)	—			(1,209,608		)
Net premium written	2,433,455			486,187			—			2,919,642
Change in unearned premium	(110,875		)	(20,796		)	—			(131,671		)
Net earned premium	2,322,580			465,391			—			2,787,971
Ceding commission income	158,187			789			—			158,976
Service and fee income	280,727			134,586			—			415,313
Total underwriting revenues	2,761,494			600,766			—			3,362,260
Underwriting expenses:
Loss and loss adjustment expense	1,709,440			252,364			—			1,961,804
Acquisition costs and other underwriting expenses	405,541			136,499			—			542,040
General and administrative expenses	542,902			148,265			—			691,167
Total underwriting expenses	2,657,883			537,128			—			3,195,011
Underwriting income	103,611			63,638			—			167,249
Net investment income	—			—			81,702			81,702
Net loss on investments	—			—			(22,756		)	(22,756		)
Interest expense	—			—			(38,775		)	(38,775		)
Provision for income taxes	—			—			(38,261		)	(38,261		)
Net (income) loss attributable to noncontrolling interest	—			—			31,979			31,979
Net income attributable to NGHC	$	103,611		$	63,638		$	13,889		$	181,138

The following tables summarize the financial position of the operating segments:

	September 30, 2019
	Property and Casualty		Accident and Health		Corporate and Other		Total
Premiums and other receivables, net	$	1,365,806	$	165,595	$	9,725	$	1,541,126
Deferred acquisition costs	239,017		28,642		—		267,659
Reinsurance recoverable	1,458,290		46,309		—		1,504,599
Prepaid reinsurance premiums	631,486		11,732		—		643,218
Intangible assets, net and Goodwill	450,437		123,373		—		573,810
Prepaid and other assets	25,417		15,279		4,511		45,207
Corporate and other assets	—		—		5,498,377		5,498,377
Total assets	$	4,170,453	$	390,930	$	5,512,613	$	10,073,996

	December 31, 2018
	Property and Casualty		Accident and Health		Corporate and Other		Total
Premiums and other receivables, net	$	1,245,530	$	153,896	$	386	$	1,399,812
Deferred acquisition costs	226,188		25,220		—		251,408
Reinsurance recoverable	1,585,008		26,730		—		1,611,738
Prepaid reinsurance premiums	665,660		14		—		665,674
Intangible assets, net and Goodwill	443,163		116,957		—		560,120
Prepaid and other assets	20,941		22,472		111,545		154,958
Corporate and other assets	—		—		4,795,570		4,795,570
Total assets	$	4,186,490	$	345,289	$	4,907,501	$	9,439,280

The following tables show an analysis of the premiums by geographical location:

	Three Months Ended September 30,
	2019						2018
	NGHC		Reciprocal Exchanges		Total		NGHC			Reciprocal Exchanges		Total
Gross premium written - North America	$	1,313,309	$	118,267	$	1,431,576	$	1,230,492		$	121,351	$	1,351,843
Gross premium written - Europe	3,581		—		3,581		3,828			—		3,828
Total	$	1,316,890	$	118,267	$	1,435,157	$	1,234,320		$	121,351	$	1,355,671
Net premium written - North America	$	964,536	$	67,285	$	1,031,821	$	921,456		$	14,814	$	936,270
Net premium written - Europe	2,783		—		2,783		(13,246		)	—		(13,246		)
Total	$	967,319	$	67,285	$	1,034,604	$	908,210		$	14,814	$	923,024
Net earned premium - North America	$	972,598	$	57,117	$	1,029,715	$	878,367		$	43,151	$	921,518
Net earned premium - Europe	23,923		—		23,923		18,009			—		18,009
Total	$	996,521	$	57,117	$	1,053,638	$	896,376		$	43,151	$	939,527

	Nine Months Ended September 30,
	2019						2018
	NGHC		Reciprocal Exchanges		Total		NGHC		Reciprocal Exchanges		Total
Gross premium written - North America	$	3,787,030	$	344,982	$	4,132,012	$	3,666,594	$	337,021	$	4,003,615
Gross premium written - Europe	126,831		—		126,831		125,635		—		125,635
Total	$	3,913,861	$	344,982	$	4,258,843	$	3,792,229	$	337,021	$	4,129,250
Net premium written - North America	$	2,945,220	$	172,460	$	3,117,680	$	2,678,841	$	132,240	$	2,811,081
Net premium written - Europe	76,986		—		76,986		108,561		—		108,561
Total	$	3,022,206	$	172,460	$	3,194,666	$	2,787,402	$	132,240	$	2,919,642
Net earned premium - North America	$	2,825,552	$	149,405	$	2,974,957	$	2,559,409	$	141,009	$	2,700,418
Net earned premium - Europe	73,489		—		73,489		87,553		—		87,553
Total	$	2,899,041	$	149,405	$	3,048,446	$	2,646,962	$	141,009	$	2,787,971

The following tables summarize service and fee income by source within each operating segment:

	Three Months Ended September 30,
	2019						2018
	Property and Casualty		Accident and Health		Total		Property and Casualty		Accident and Health		Total
Commission revenue	$	21,333	$	16,353	$	37,686	$	25,404	$	17,874	$	43,278
Finance and processing fees	33,637		800		34,437		29,804		935		30,739
Installment fees	23,464		—		23,464		23,841		—		23,841
Group health administrative fees	—		25,808		25,808		—		18,364		18,364
Late payment fees	9,251		72		9,323		8,164		19		8,183
Other service and fee income	10,205		20,703		30,908		9,019		9,266		18,285
Total	$	97,890	$	63,736	$	161,626	$	96,232	$	46,458	$	142,690
NGHC	$	96,305	$	63,736	$	160,041	$	94,657	$	46,458	$	141,115
Reciprocal Exchanges	1,585		—		1,585		1,575		—		1,575
Total	$	97,890	$	63,736	$	161,626	$	96,232	$	46,458	$	142,690

	Nine Months Ended September 30,
	2019						2018
	Property and Casualty		Accident and Health		Total		Property and Casualty		Accident and Health		Total
Commission revenue	$	68,193	$	57,097	$	125,290	$	68,547	$	51,190	$	119,737
Finance and processing fees	98,218		3,710		101,928		91,676		3,223		94,899
Installment fees	72,782		—		72,782		68,928		—		68,928
Group health administrative fees	—		73,861		73,861		—		57,461		57,461
Late payment fees	26,061		249		26,310		24,360		69		24,429
Other service and fee income	33,102		42,768		75,870		27,216		22,643		49,859
Total	$	298,356	$	177,685	$	476,041	$	280,727	$	134,586	$	415,313
NGHC	$	293,885	$	177,685	$	471,570	$	276,261	$	134,586	$	410,847
Reciprocal Exchanges	4,471		—		4,471		4,466		—		4,466
Total	$	298,356	$	177,685	$	476,041	$	280,727	$	134,586	$	415,313

The following tables show an analysis of premiums and fee income by product line:

	Three Months Ended September 30,				Nine Months Ended September 30,
Gross Premium Written	2019		2018		2019		2018
Property and Casualty
Personal Auto	$	705,709	$	661,126	$	2,083,702	$	2,017,996
Homeowners	201,977		192,349		544,056		523,308
RV/Packaged	55,631		54,964		168,796		164,427
Small Business Auto	76,987		75,218		246,694		246,448
Lender-placed Insurance	97,468		94,462		232,265		259,995
Other	16,563		12,253		45,577		45,495
Total Property and Casualty	1,154,335		1,090,372		3,321,090		3,257,669
Accident and Health
Group	73,223		61,743		213,197		177,036
Individual	85,728		78,378		252,719		231,890
International	3,604		3,827		126,855		125,634
Total Accident and Health	162,555		143,948		592,771		534,560
Total NGHC	$	1,316,890	$	1,234,320	$	3,913,861	$	3,792,229
Reciprocal Exchanges
Personal Auto	$	39,166	$	40,240	$	120,012	$	116,602
Homeowners	78,079		80,070		222,019		217,486
Other	1,022		1,041		2,951		2,933
Total Reciprocal Exchanges	$	118,267	$	121,351	$	344,982	$	337,021
Total Gross Premium Written	$	1,435,157	$	1,355,671	$	4,258,843	$	4,129,250

	Three Months Ended September 30,						Nine Months Ended September 30,
Net Premium Written	2019			2018			2019		2018
Property and Casualty
Personal Auto	$	560,032		$	502,964		$	1,730,904	$	1,542,685
Homeowners	82,601			112,390			276,250		255,290
RV/Packaged	52,283			54,627			162,047		162,934
Small Business Auto	56,615			53,155			196,221		181,314
Lender-placed Insurance	61,579			56,529			140,863		134,630
Other	6,860			4,969			15,684		24,362
Total Property and Casualty	819,970			784,634			2,521,969		2,301,215
Accident and Health
Group	59,001			51,296			170,911		145,760
Individual	85,541			78,372			252,316		231,884
International	2,807			(6,092		)	77,010		108,543
Total Accident and Health	147,349			123,576			500,237		486,187
Total NGHC	$	967,319		$	908,210		$	3,022,206	$	2,787,402
Reciprocal Exchanges
Personal Auto	$	67,154		$	12,845		$	101,460	$	40,860
Homeowners	(2,047		)	2,002			68,180		90,826
Other	2,178			(33		)	2,820		554
Total Reciprocal Exchanges	$	67,285		$	14,814		$	172,460	$	132,240
Total Net Premium Written	$	1,034,604		$	923,024		$	3,194,666	$	2,919,642

	Three Months Ended September 30,				Nine Months Ended September 30,
Net Earned Premium	2019		2018		2019		2018
Property and Casualty
Personal Auto	$	568,346	$	496,139	$	1,621,734	$	1,436,793
Homeowners	86,525		80,308		272,591		242,161
RV/Packaged	51,023		51,229		150,739		145,911
Small Business Auto	62,265		59,636		189,957		178,302
Lender-placed Insurance	56,599		48,466		158,595		162,629
Other	2,860		5,252		8,893		15,775
Total Property and Casualty	827,618		741,030		2,402,509		2,181,571
Accident and Health
Group	59,009		51,310		170,921		145,788
Individual	85,971		78,874		252,122		232,069
International	23,923		25,162		73,489		87,534
Total Accident and Health	168,903		155,346		496,532		465,391
NGHC Total	$	996,521	$	896,376	$	2,899,041	$	2,646,962
Reciprocal Exchanges
Personal Auto	$	33,953	$	13,353	$	65,907	$	38,812
Homeowners	22,759		29,698		82,475		101,578
Other	405		100		1,023		619
Total Reciprocal Exchanges	57,117		43,151		149,405		141,009
Total Net Earned Premium	$	1,053,638	$	939,527	$	3,048,446	$	2,787,971

	Three Months Ended September 30,				Nine Months Ended September 30,
Fee Income	2019		2018		2019		2018
Property and Casualty
Service and Fee Income	$	96,305	$	94,657	$	293,885	$	276,261
Ceding Commission Income	40,260		44,244		128,087		118,664
Total Property and Casualty	136,565		138,901		421,972		394,925
Accident and Health
Service and Fee Income
Group	34,848		25,198		98,084		74,768
Individual	2,128		4,512		5,506		7,973
Third Party Fee	26,760		16,748		74,095		51,845
Total Service and Fee Income	63,736		46,458		177,685		134,586
Ceding Commission Income	2,261		269		8,780		789
Total Accident and Health	65,997		46,727		186,465		135,375
NGHC Total	$	202,562	$	185,628	$	608,437	$	530,300
Reciprocal Exchanges
Service and Fee Income	$	1,585	$	1,575	$	4,471	$	4,466
Ceding Commission Income	15,066		14,587		50,446		39,523
Total Reciprocal Exchanges	$	16,651	$	16,162	$	54,917	$	43,989
Total Fee Income	$	219,213	$	201,790	$	663,354	$	574,289

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Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping

Assets measured at fair value on a recurring basis are as follows:

	September 30, 2019
	Level 1		Level 2		Level 3		Total
Available-for-sale debt securities:
U.S. Treasury	$	74,435	$	—	$	—	$	74,435
Federal agencies	4,411		—		—		4,411
States and political subdivision bonds	—		190,924		3,100		194,024
Foreign government	—		146,879		—		146,879
Corporate bonds	—		1,756,263		9,780		1,766,043
Residential mortgage-backed securities	—		1,037,193		—		1,037,193
Commercial mortgage-backed securities	—		609,573		—		609,573
Asset-backed securities	—		59,829		—		59,829
Structured securities	—		248,827		—		248,827
Total available-for-sale debt securities	78,846		4,049,488		12,880		4,141,214
Equity securities:
Common stock	2,474		—		286		2,760
Total equity securities	2,474		—		286		2,760
Short-term investments	381,208		12,455		—		393,663
Other investments	—		—		4,295		4,295
Total	$	462,528	$	4,061,943	$	17,461	$	4,541,932
NGHC	$	421,579	$	3,768,494	$	17,461	$	4,207,534
Reciprocal Exchanges	40,949		293,449		—		334,398
Total	$	462,528	$	4,061,943	$	17,461	$	4,541,932

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Available-for-sale debt securities:
U.S. Treasury	$	65,593	$	—	$	—	$	65,593
Federal agencies	37,475		—		—		37,475
States and political subdivision bonds	—		268,601		3,596		272,197
Foreign government	—		152,366		—		152,366
Corporate bonds	—		1,248,938		11,767		1,260,705
Residential mortgage-backed securities	—		925,116		—		925,116
Commercial mortgage-backed securities	—		544,975		—		544,975
Asset-backed securities	—		61,147		—		61,147
Structured securities	—		241,458		—		241,458
Total available-for-sale debt securities	103,068		3,442,601		15,363		3,561,032
Equity securities:
Common stock	9,898		—		1,051		10,949
Total equity securities	9,898		—		1,051		10,949
Short-term investments	348,549		—		—		348,549
Other investments	—		—		6,542		6,542
Total	$	461,515	$	3,442,601	$	22,956	$	3,927,072
NGHC	$	429,502	$	3,160,203	$	22,956	$	3,612,661
Reciprocal Exchanges	32,013		282,398		—		314,411
Total	$	461,515	$	3,442,601	$	22,956	$	3,927,072

Fair Value Assets Measured On Recurring Basis Unobservable Input Reconciliation

The following tables provide a reconciliation of recurring fair value measurements of the Level 3 financial assets:

	States and political subdivision bonds			Corporate bonds			Common stock			Other investments			Total
Balance as of January 1, 2019	$	3,596		$	11,767		$	1,051		$	6,542		$	22,956
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Total gains (losses) for the period:
Included in net income(1)	—			—			(765		)	(2,247		)	(3,012		)
Included in other comprehensive income(2)	(496		)	(1,987		)	—			—			(2,483		)
Purchases	—			—			—			—			—
Sales	—			—			—			—			—
Balance as of September 30, 2019	$	3,100		$	9,780		$	286		$	4,295		$	17,461
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	$	—		$	—		$	(765	)	$	(2,247	)	$	(3,012	)
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	$	(496	)	$	(1,987	)	$	—		$	—		$	(2,483	)

	States and political subdivision bonds			Corporate bonds			Common stock			Preferred stock		Other investments			Total
Balance as of January 1, 2018	$	4,081		$	24,545		$	5,052		$	270	$	10,782		$	44,730
Transfers into Level 3	—			—			—			—		—			—
Transfers out of Level 3	—			—			—			—		—			—
Total gains (losses) for the period:
Included in net income(1)	—			—			(1,303		)	10		802			(491		)
Included in other comprehensive income(2)	(485		)	(11,374		)	—			—		—			(11,859		)
Purchases	—			—			—			—		—			—
Sales	—			—			—			—		(1,741		)	(1,741		)
Balance as of September 30, 2018	$	3,596		$	13,171		$	3,749		$	280	$	9,843		$	30,639
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	$	—		$	—		$	(1,303	)	$	10	$	802		$	(491	)

⁽¹⁾ Gains and losses recognized in net income are reported within net investment income.

⁽²⁾ Gains and losses recognized in other comprehensive income are reported within unrealized gains (losses) on investments, net of tax.

Schedule of Carrying Values and Estimated Fair Values of Debt Instruments

The following table presents the carrying amount and estimated fair value of debt not carried at fair value, excluding finance lease and other liabilities, as well as the input level used to determine the fair value:

		September 30, 2019				December 31, 2018
	Input Level	Carrying amount		Fair value		Carrying amount		Fair value
7.625% Notes	Level 2	$	96,907	$	106,040	$	96,842	$	90,400
6.75% Notes	Level 3	346,926		368,291		346,439		353,756
Subordinated Debentures	Level 3	72,168		72,125		72,168		72,109
2016 Credit Agreement	Level 3	—		—		160,000		163,222
2019 Credit Agreement	Level 3	140,000		147,591		—		—

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Investments - Investment Quality of Corporate Bonds (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities
Fair Value	$ 4,141,214	$ 3,561,032
Reciprocal Exchanges
Schedule of Available-for-sale Securities
Fair Value	307,388	297,083
NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Fair Value	3,833,826	3,263,949
Corporate Debt Securities
Schedule of Available-for-sale Securities
Fair Value	$ 1,766,043	$ 1,260,705
% of Corporate Bonds Portfolio	100.00%	100.00%
Corporate Debt Securities | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Fair Value	$ 194,668	$ 181,606
% of Corporate Bonds Portfolio	11.00%	14.40%
Corporate Debt Securities | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Fair Value	$ 1,571,375	$ 1,079,099
% of Corporate Bonds Portfolio	89.00%	85.60%
Corporate Debt Securities | Standard & Poor's, AAA Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.30%	0.40%
Corporate Debt Securities | Standard & Poor's, AAA Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.30%	0.40%
Corporate Debt Securities | Standard & Poor's, AAA Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.00%	0.00%
Corporate Debt Securities | Standard & Poor's, AA, AA Plus, and AA Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	7.40%	10.40%
Corporate Debt Securities | Standard & Poor's, AA, AA Plus, and AA Minus Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	1.60%	4.10%
Corporate Debt Securities | Standard & Poor's, AA, AA Plus, and AA Minus Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	5.80%	6.30%
Corporate Debt Securities | Standard & Poor's, A, A Plus, and A Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	47.30%	46.40%
Corporate Debt Securities | Standard & Poor's, A, A Plus, and A Minus Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	6.40%	9.10%
Corporate Debt Securities | Standard & Poor's, A, A Plus, and A Minus Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	40.90%	37.30%
Corporate Debt Securities | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	44.50%	41.30%
Corporate Debt Securities | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	2.70%	0.70%
Corporate Debt Securities | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	41.80%	40.60%
Corporate Debt Securities | Standard & Poor's, BB Plus and Lower Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.50%	1.50%
Corporate Debt Securities | Standard & Poor's, BB Plus and Lower Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.00%	0.10%
Corporate Debt Securities | Standard & Poor's, BB Plus and Lower Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.50%	1.40%
Corporate Debt Securities | Financial Institutions
Schedule of Available-for-sale Securities
Fair Value	$ 791,523	$ 535,373
% of Corporate Bonds Portfolio	44.80%	42.50%
Corporate Debt Securities | Financial Institutions | Standard & Poor's, AAA Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.00%	0.00%
Corporate Debt Securities | Financial Institutions | Standard & Poor's, AA, AA Plus, and AA Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	3.60%	4.30%
Corporate Debt Securities | Financial Institutions | Standard & Poor's, A, A Plus, and A Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	27.20%	23.10%
Corporate Debt Securities | Financial Institutions | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	13.60%	14.20%
Corporate Debt Securities | Financial Institutions | Standard & Poor's, BB Plus and Lower Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.40%	0.90%
Corporate Debt Securities | Industrials
Schedule of Available-for-sale Securities
Fair Value	$ 923,980	$ 697,324
% of Corporate Bonds Portfolio	52.30%	55.30%
Corporate Debt Securities | Industrials | Standard & Poor's, AAA Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.30%	0.40%
Corporate Debt Securities | Industrials | Standard & Poor's, AA, AA Plus, and AA Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	3.80%	6.10%
Corporate Debt Securities | Industrials | Standard & Poor's, A, A Plus, and A Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	18.80%	21.50%
Corporate Debt Securities | Industrials | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	29.30%	26.70%
Corporate Debt Securities | Industrials | Standard & Poor's, BB Plus and Lower Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.10%	0.60%
Corporate Debt Securities | Utilities And Other
Schedule of Available-for-sale Securities
Fair Value	$ 50,540	$ 28,008
% of Corporate Bonds Portfolio	2.90%	2.20%
Corporate Debt Securities | Utilities And Other | Standard & Poor's, AAA Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.00%	0.00%
Corporate Debt Securities | Utilities And Other | Standard & Poor's, AA, AA Plus, and AA Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.00%	0.00%
Corporate Debt Securities | Utilities And Other | Standard & Poor's, A, A Plus, and A Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	1.30%	1.80%
Corporate Debt Securities | Utilities And Other | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	1.60%	0.40%
Corporate Debt Securities | Utilities And Other | Standard & Poor's, BB Plus and Lower Rating
Schedule of Available-for-sale Securities
Investment quality - corporate bond holdings and industry concentrations	0.00%	0.00%

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Investments - Equity Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule of Equity Securities
Equity securities	$ 2,760	$ 10,949
Reciprocal Exchanges
Schedule of Equity Securities
Equity securities	0	0
NGHC, excluding Reciprocal Exchanges
Schedule of Equity Securities
Equity securities	2,760	10,949
Common stock
Schedule of Equity Securities
Equity securities	$ 2,760	$ 10,949

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Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Jan. 01, 2019
Adoption of Leases Topic 842
Lease, Right-of-Use Asset	$ 134,456
Lease Liability	$ 138,052
Accounting Standards Update 2016-02
Adoption of Leases Topic 842
Lease, Right-of-Use Asset		$ 85,000
Lease Liability		$ 85,000

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Segment Information - Net Premium Written (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information
Net premium written	$ 1,034,604	$ 923,024	$ 3,194,666	$ 2,919,642
Reciprocal Exchanges
Segment Reporting Information
Net premium written	67,285	14,814	172,460	132,240
NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	967,319	908,210	3,022,206	2,787,402
Property and Casualty
Segment Reporting Information
Net premium written	887,255	799,448	2,694,429	2,433,455
Property and Casualty | Reciprocal Exchanges
Segment Reporting Information
Net premium written	67,285	14,814	172,460	132,240
Property and Casualty | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	819,970	784,634	2,521,969	2,301,215
Property and Casualty | Personal Auto | Reciprocal Exchanges
Segment Reporting Information
Net premium written	67,154	12,845	101,460	40,860
Property and Casualty | Personal Auto | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	560,032	502,964	1,730,904	1,542,685
Property and Casualty | Homeowners | Reciprocal Exchanges
Segment Reporting Information
Net premium written	(2,047)	2,002	68,180	90,826
Property and Casualty | Homeowners | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	82,601	112,390	276,250	255,290
Property and Casualty | RV/Packaged | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	52,283	54,627	162,047	162,934
Property and Casualty | Small Business Auto | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	56,615	53,155	196,221	181,314
Property and Casualty | Lender-placed insurance | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	61,579	56,529	140,863	134,630
Property and Casualty | Other | Reciprocal Exchanges
Segment Reporting Information
Net premium written	2,178	(33)	2,820	554
Property and Casualty | Other | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	6,860	4,969	15,684	24,362
Accident and Health
Segment Reporting Information
Net premium written	147,349	123,576	500,237	486,187
Accident and Health | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	147,349	123,576	500,237	486,187
Accident and Health | Group | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	59,001	51,296	170,911	145,760
Accident and Health | Individual | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	85,541	78,372	252,316	231,884
Accident and Health | International | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net premium written	$ 2,807	$ (6,092)	$ 77,010	$ 108,543

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Reinsurance - Narrative (Details) - USD ($) $ in Thousands					12 Months Ended
	Jul. 01, 2019	May 01, 2019	Jan. 01, 2019	Jul. 01, 2018	Dec. 31, 2019
Personal Auto
Reinsurance Retention Policy
Reinsurance - Percentage of Business Ceded	10.00%		7.00%
Reinsurance percentage of ceding commission	31.20%
Homeowners
Reinsurance Retention Policy
Reinsurance - Percentage of Business Ceded	40.00%
Reinsurance percentage of ceding commission	36.00%
Property Catastrophe Program
Reinsurance Retention Policy
Amount of coverage in excess of retention		$ 650,000
Casualty Program
Reinsurance Retention Policy
Amount of coverage in excess of retention				$ 35,000
Retention amount				$ 5,000
Minimum | Personal Auto
Reinsurance Retention Policy
Reinsurance percentage of ceding commission	30.00%
Loss Ratio	64.70%
Maximum | Personal Auto
Reinsurance Retention Policy
Reinsurance percentage of ceding commission	32.80%
Loss Ratio	67.50%
Weighted Average | Homeowners
Reinsurance Retention Policy
Reinsurance percentage of ceding commission	37.50%
Reciprocal Exchanges | Property Catastrophe Program
Reinsurance Retention Policy
Amount of coverage in excess of retention	$ 480,000
Retention amount	$ 20,000
Subsequent Event | Minimum | Personal Auto
Reinsurance Retention Policy
Reinsurance percentage of ceding commission					5.00%
Subsequent Event | Maximum | Personal Auto
Reinsurance Retention Policy
Reinsurance percentage of ceding commission					30.00%
First Event | Property Catastrophe Program
Reinsurance Retention Policy
Retention amount		70,000
Second Event | Property Catastrophe Program
Reinsurance Retention Policy
Retention amount		$ 50,000

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Debt - Subordinated Debentures (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument
Notes Payable	$ 687,978	$ 705,795
Surplus Notes | Subordinated Debentures I
Debt Instrument
Notes Payable	$ 41,238	41,238
Basis Spread on Variable Rate	3.40%
Surplus Notes | Subordinated Debentures II
Debt Instrument
Notes Payable	$ 30,930	$ 30,930
Basis Spread on Variable Rate	4.25%
Surplus Notes | Subordinated Debentures
Debt Instrument
Debt Instrument, Redemption Price, Percentage	100.00%
LIBOR | Surplus Notes | Subordinated Debentures I
Debt Instrument
LIBOR	LIBOR
LIBOR | Surplus Notes | Subordinated Debentures II
Debt Instrument
LIBOR	LIBOR

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Investments - Related Parties - LSC Entity (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($) contract	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) contract	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
LSC Entities | AmTrust Financial Services, Inc.
Schedule of Equity Method Investments
Ownership percentage	50.00%		50.00%
LSC Entities | VIE, Not primary beneficiary | Related Parties
Schedule of Equity Method Investments
Ownership percentage	50.00%		50.00%
Life Settlement Contracts, Investment Method, Number of Contracts | contract	1		1
Equity investment in unconsolidated subsidiaries	$ 47,332	$ 47,299	$ 47,332	$ 47,299	$ 48,324	$ 160,683
Distributions (three months - $(2,500) and $0)	(2,500)	0	(2,500)	(116,035)
Contributions (three months - $258 and $0)	258	0	258	2,000
Equity in earnings (losses) (three months - $(481) and $(858))	$ (481)	$ (858)	1,250	651
Change in equity method investments			$ (992)	$ (113,384)
LSC Entities investment in LP
Schedule of Equity Method Investments
Ownership percentage	30.00%		30.00%

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Investments - Related Parties - Illinois Center Building, L.P. (Details) - Illinois Center Building, L.P. - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
ACP Re Group, Inc.
Schedule of Equity Method Investments
Limited Partnership, Percentage Participation	37.50%		37.50%
ACP Re
Schedule of Equity Method Investments
Limited Partnership, Percentage Participation	15.00%		15.00%
NA Advisors GP LLC
Schedule of Equity Method Investments
Limited Partnership, Percentage Participation	10.00%		10.00%
Limited Partnership, Percentage of Profit Interest	10.00%		10.00%
VIE, Not primary beneficiary | Related Parties
Schedule of Equity Method Investments
Ownership percentage	37.50%		37.50%
Equity investment in unconsolidated subsidiaries	$ 44,088		$ 44,088		$ 45,575
Equity in earnings (losses)	(600)	$ 0	(2,612)	$ (2,410)
Contributions	$ 0	$ 0	$ 1,125	$ 2,250

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Deferred Acquisition Costs (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Movement Analysis of Deferred Policy Acquisition Costs
Balance, beginning of the period	$ 251,408	$ 216,389
Additions	426,792	416,595
Amortization	(410,541)	(383,492)
Change in DAC	16,251	33,103
Balance, end of the period	267,659	249,492
Reciprocal Exchanges
Movement Analysis of Deferred Policy Acquisition Costs
Balance, end of the period	23,113	19,277
NGHC, excluding Reciprocal Exchanges
Movement Analysis of Deferred Policy Acquisition Costs
Balance, end of the period	244,546	230,215
Property and Casualty
Movement Analysis of Deferred Policy Acquisition Costs
Balance, beginning of the period	226,188	198,283
Additions	385,570	399,610
Amortization	(372,741)	(369,634)
Change in DAC	12,829	29,976
Balance, end of the period	239,017	228,259
Property and Casualty | Reciprocal Exchanges
Movement Analysis of Deferred Policy Acquisition Costs
Balance, end of the period	23,113	19,277
Property and Casualty | NGHC, excluding Reciprocal Exchanges
Movement Analysis of Deferred Policy Acquisition Costs
Balance, end of the period	215,904	208,982
Accident and Health
Movement Analysis of Deferred Policy Acquisition Costs
Balance, beginning of the period	25,220	18,106
Additions	41,222	16,985
Amortization	(37,800)	(13,858)
Change in DAC	3,422	3,127
Balance, end of the period	28,642	21,233
Accident and Health | Reciprocal Exchanges
Movement Analysis of Deferred Policy Acquisition Costs
Balance, end of the period	0	0
Accident and Health | NGHC, excluding Reciprocal Exchanges
Movement Analysis of Deferred Policy Acquisition Costs
Balance, end of the period	$ 28,642	$ 21,233

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Related Party Transactions - Credit Agreement with ACP Re (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Party Transaction
Other investments	$ 301,615		$ 301,615		$ 306,276
ACP Re
Related Party Transaction
Notes Receivable, Related Parties	125,000		125,000
Related Parties
Related Party Transaction
Other investments	234,617		234,617		233,723
Related Parties | ACP Re
Related Party Transaction
Notes Receivable, Related Parties	250,000		$ 250,000
Maintenance Covenant, minimum collateral interest as percent of value of outstanding loan balance			115.00%
Minimum percent of change in control included as events of default			50.00%
Related Parties | Loans
Related Party Transaction
Notes Receivable, Related Parties	$ 125,000		$ 125,000
Related Parties | Loans | ACP Re
Related Party Transaction
Interest rate on debt	3.70%		3.70%
Maximum percent of interest that may be paid in kind	1.20%		1.20%
Other investments	$ 129,229		$ 129,229		$ 127,692
Interest Income, Related Party	$ 1,195	$ 1,181	$ 3,571	$ 3,529

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Leases - Narrative (Details)	Sep. 30, 2019
Minimum
Lessee, Lease, Description
Finance Lease, Renewal Term	1 year
Operating Lease, Renewal Term	1 year
Maximum
Lessee, Lease, Description
Finance Lease, Renewal Term	5 years
Operating Lease, Renewal Term	5 years

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Leases - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Lease, Cost [Abstract]
Amortization of leased assets	$ 2,284	$ 5,907
Interest on lease liabilities	302	888
Finance lease cost	2,586	6,795
Operating lease cost	$ 9,794	$ 27,538

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Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award
Stock-compensation expense	$ 2,785	$ 2,283	$ 8,277	$ 6,793
Unrecognized compensation cost	$ 18,455		$ 18,455
Future period share-based compensation expense period of recognition (in years)			1 year 6 months
Common stock
Share-based Compensation Arrangement by Share-based Payment Award
Number of shares authorized	2,500,000		2,500,000
Number of shares available for grant	2,500,000		2,500,000

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Deferred Acquisition Costs

9 Months Ended

Sep. 30, 2019

Deferred Acquisition Costs [Abstract]

Deferred Policy Acquisition Costs

Deferred Acquisition Costs

The following table reflects the amounts of policy acquisition costs deferred and amortized:

	Nine Months Ended September 30,
	2019									2018
	Property and Casualty			Accident and Health			Total			Property and Casualty			Accident and Health			Total
Balance, beginning of the period	$	226,188		$	25,220		$	251,408		$	198,283		$	18,106		$	216,389
Additions	385,570			41,222			426,792			399,610			16,985			416,595
Amortization	(372,741		)	(37,800		)	(410,541		)	(369,634		)	(13,858		)	(383,492		)
Change in DAC	12,829			3,422			16,251			29,976			3,127			33,103
Balance, end of the period	$	239,017		$	28,642		$	267,659		$	228,259		$	21,233		$	249,492
NGHC	$	215,904		$	28,642		$	244,546		$	208,982		$	21,233		$	230,215
Reciprocal Exchanges	23,113			—			23,113			19,277			—			19,277
Balance, end of the period	$	239,017		$	28,642		$	267,659		$	228,259		$	21,233		$	249,492

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Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt

Debt

The following table represents the Company’s debt:

	Interest Rate	Maturity	September 30, 2019			December 31, 2018
Fixed-rate:
6.75% Notes	6.75%	2024	$	350,000		$	350,000
7.625% Notes	7.625%	2055	100,000			100,000
Floating-rate:
Subordinated Debentures I	LIBOR + 3.40%	2035	41,238			41,238
Subordinated Debentures II	LIBOR + 4.25%	2037	30,930			30,930
2016 Credit Agreement(1)	LIBOR + 2.00%	2020	—			160,000
2019 Credit Agreement(2)	LIBOR + 1.75%	2023	140,000			—
Finance lease liabilities	Various	Various	21,002			14,824
Other	3.5%	Various	10,975			15,522
Unamortized debt issuance costs and unamortized discount			(6,167		)	(6,719		)
Total carrying amount of debt			$	687,978		$	705,795

⁽¹⁾ The weighted average interest rate on the amount outstanding as of December 31, 2018 was 4.58%.

⁽²⁾ The weighted average interest rate on the amount outstanding as of September 30, 2019 was 3.84%.

The following table presents the Company’s interest expense:

		Three Months Ended September 30,				Nine Months Ended September 30,
	Interest Payment Frequency	2019		2018		2019		2018
6.75% Notes	Semiannually	$	5,906	$	5,906	$	17,719	$	17,719
7.625% Notes	Quarterly	1,906		1,906		5,719		5,719
Subordinated Debentures	Quarterly	1,118		1,144		3,470		3,227
2016 Credit Agreement	Quarterly	—		1,950		1,211		5,700
2019 Credit Agreement	Quarterly	1,674		—		4,020		—
Finance lease liabilities	Various	302		157		888		477
Other(1)	Various	1,992		1,520		5,795		5,933
Total interest expense		$	12,898	$	12,583	$	38,822	$	38,775

⁽¹⁾ Other includes interest for other liabilities, interest credited on funds held balances and accretion of debt issuance costs.

Notes

The 6.75% Notes are the Company’s general unsecured obligations and rank equally in right of payment with its other existing and future senior unsecured indebtedness and senior in right of payment to any of its indebtedness that is contractually subordinated to the 6.75% Notes. The 6.75% Notes are also effectively subordinated to any of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness and are structurally subordinated to the existing and future indebtedness of the Company’s subsidiaries (including trade payables). The 6.75% Notes mature on May 15, 2024, unless earlier redeemed or purchased by the Company.

The 7.625% Notes are the Company’s subordinated unsecured obligations and rank (i) senior in right of payment to any future junior subordinated debt, (ii) equal in right of payment with any unsecured, subordinated debt that the Company incurs in the future that ranks equally with the 7.625% Notes, and (iii) subordinate in right of payment to any of the Company’s existing and future senior debt, including amounts outstanding under the Company’s revolving credit facility, the Company’s 6.75% notes and certain of the Company’s other obligations. In addition, the 7.625% Notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of the Company’s subsidiaries. The 7.625% Notes mature on September 15, 2055, unless earlier redeemed or purchased by the Company.

Subordinated Debentures

The Company, through a subsidiary, is the issuer of junior subordinated debentures (the “Subordinated Debentures”) relating to an issuance of trust preferred securities. The Subordinated Debentures require interest-only payments to be made on a quarterly basis, with principal due at maturity. The Subordinated Debentures’ principal amounts of $41,238 and $30,930 mature on 2035 and 2037, respectively, and bear interest at an annual rate equal to LIBOR plus 3.40% and LIBOR plus 4.25%, respectively. The Subordinated Debentures are redeemable by the Company at a redemption price equal to 100% of their principal amount.

Credit Agreement

On February 25, 2019, the Company refinanced its existing credit agreement and entered into a new credit agreement (the “2019 Credit Agreement”), with JPMorgan Chase Bank, N.A., as Administrative Agent, KeyBank National Association and Fifth Third Bank, as Co-Syndication Agents, and the various lending institutions party thereto. The 2019 Credit Agreement is currently a $340,000 base revolving credit facility with a letter of credit sublimit of $150,000 and an expansion feature of up to $50,000. Borrowings under the 2019 Credit Agreement bear interest at either the Alternate Base Rate (“ABR”) or the LIBO rate. ABR borrowings under the 2019 Credit Agreement will bear interest at (x) the greatest of (a) the prime rate in effect on such day, (b) the federal funds effective rate on such day plus 0.5 percent or (c) the adjusted LIBO rate for a one-month interest period on such day plus 1 percent. Eurodollar borrowings under the 2019 Credit Agreement will bear interest at the adjusted LIBO rate plus the Eurodollar spread for the interest period in effect. Fees payable by the Company under the 2019 Credit Agreement include a letter of credit participation fee, a letter of credit fronting fee with respect to each letter of credit (0.125%) and a commitment fee on the available commitments of the lenders (a range of 0.175% to 0.25% based on the Company’s consolidated leverage ratio; and as of September 30, 2019, the rate was 0.225%). The 2019 Credit Agreement has a maturity date of February 25, 2023.

Maturities of the Company’s debt for the years subsequent to September 30, 2019 are as follows:

	2019 (remaining three months)		2020		2021		2022		2023		2024		Thereafter		Total
6.75% Notes	$	—	$	—	$	—	$	—	$	—	$	350,000	$	—	$	350,000
7.625% Notes	—		—		—		—		—		—		100,000		100,000
Subordinated Debentures I	—		—		—		—		—		—		41,238		41,238
Subordinated Debentures II	—		—		—		—		—		—		30,930		30,930
2019 Credit Agreement	—		—		—		—		140,000		—		—		140,000
Finance lease liabilities	1,545		6,483		4,958		2,680		1,537		1,242		2,557		21,002
Other	1,633		6,399		2,943		—		—		—		—		10,975
Total principal amount of debt	$	3,178	$	12,882	$	7,901	$	2,680	$	141,537	$	351,242	$	174,725	$	694,145
Unamortized debt issuance costs and unamortized discount															(6,167		)
Carrying amount of debt															$	687,978

Covenants and Compliance

The indenture relating to the 6.75% Notes and 7.625% Notes contains customary covenants, such as reporting of annual and quarterly financial results, and restrictions on certain mergers and consolidations, as well as covenants relating to the incurrence of debt if the Company’s consolidated leverage ratio would exceed 0.35 to 1.00, a limitation on liens, a limitation on the disposition of stock of certain of the Company’s subsidiaries and a limitation on transactions with certain of the Company’s affiliates.

The 2019 Credit Agreement contains certain restrictive covenants customary for facilities of this type (subject to negotiated exceptions and baskets), including restrictions on indebtedness, liens, acquisitions and investments, restricted payments and dispositions. There are also financial covenants that require the Company to maintain a minimum consolidated net worth, a maximum consolidated leverage ratio, a minimum risk-based capital and a minimum rating. The 2019 Credit Agreement also provides for customary events of default, with grace periods where customary, including failure to pay principal when due, failure to pay interest or fees within three business days after becoming due, failure to comply with covenants, breaches of representations and warranties, default under certain other indebtedness, certain insolvency or receivership events affecting the Company and its subsidiaries, the occurrence of certain material judgments, or a change in control of the Company. Upon the occurrence and during the continuation of an event of default, the administrative agent, upon the request of the requisite percentage of the lenders, may terminate the obligations of the lenders to make loans and to issue letters of credit under the 2019 Credit Agreement, declare the Company’s obligations under the 2019 Credit Agreement to become immediately due and payable and/or exercise any and all remedies and other rights under the 2019 Credit Agreement.

As of September 30, 2019, the Company was in compliance with the covenants contained in the Company’s debt agreements.

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2019

Segment Reporting [Abstract]

Schedule of Segment Reporting Information by Segment

The following tables summarize the results of operations of the operating segments:

	Three Months Ended September 30, 2019
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	1,272,602		$	162,555		$	—		$	1,435,157
Ceded premiums	(385,347		)	(15,206		)	—			(400,553		)
Net premium written	887,255			147,349			—			1,034,604
Change in unearned premium	(2,520		)	21,554			—			19,034
Net earned premium	884,735			168,903			—			1,053,638
Ceding commission income	55,326			2,261			—			57,587
Service and fee income	97,890			63,736			—			161,626
Total underwriting revenues	1,037,951			234,900			—			1,272,851
Underwriting expenses:
Loss and loss adjustment expense	674,722			70,612			—			745,334
Acquisition costs and other underwriting expenses	161,876			47,214			—			209,090
General and administrative expenses	195,567			68,297			—			263,864
Total underwriting expenses	1,032,165			186,123			—			1,218,288
Underwriting income	5,786			48,777			—			54,563
Net investment income	—			—			33,740			33,740
Net loss on investments	—			—			(565		)	(565		)
Other income	—			—			2,146			2,146
Interest expense	—			—			(12,898		)	(12,898		)
Provision for income taxes	—			—			(16,747		)	(16,747		)
Net (income) loss attributable to noncontrolling interest	—			—			10,915			10,915
Net income attributable to NGHC	$	5,786		$	48,777		$	16,591		$	71,154

	Three Months Ended September 30, 2018
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	1,211,723		$	143,948		$	—		$	1,355,671
Ceded premiums	(412,275		)	(20,372		)	—			(432,647		)
Net premium written	799,448			123,576			—			923,024
Change in unearned premium	(15,267		)	31,770			—			16,503
Net earned premium	784,181			155,346			—			939,527
Ceding commission income	58,831			269			—			59,100
Service and fee income	96,232			46,458			—			142,690
Total underwriting revenues	939,244			202,073			—			1,141,317
Underwriting expenses:
Loss and loss adjustment expense	584,658			72,652			—			657,310
Acquisition costs and other underwriting expenses	146,696			44,774			—			191,470
General and administrative expenses	185,208			50,525			—			235,733
Total underwriting expenses	916,562			167,951			—			1,084,513
Underwriting income	22,682			34,122			—			56,804
Net investment income	—			—			30,696			30,696
Net loss on investments	—			—			(3,170		)	(3,170		)
Interest expense	—			—			(12,583		)	(12,583		)
Provision for income taxes	—			—			(15,518		)	(15,518		)
Net (income) loss attributable to noncontrolling interest	—			—			12,153			12,153
Net income attributable to NGHC	$	22,682		$	34,122		$	11,578		$	68,382

	Nine Months Ended September 30, 2019
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	3,666,072		$	592,771		$	—		$	4,258,843
Ceded premiums	(971,643		)	(92,534		)	—			(1,064,177		)
Net premium written	2,694,429			500,237			—			3,194,666
Change in unearned premium	(142,515		)	(3,705		)	—			(146,220		)
Net earned premium	2,551,914			496,532			—			3,048,446
Ceding commission income	178,533			8,780			—			187,313
Service and fee income	298,356			177,685			—			476,041
Total underwriting revenues	3,028,803			682,997			—			3,711,800
Underwriting expenses:
Loss and loss adjustment expense	1,870,993			241,685			—			2,112,678
Acquisition costs and other underwriting expenses	462,071			153,063			—			615,134
General and administrative expenses	571,498			188,227			—			759,725
Total underwriting expenses	2,904,562			582,975			—			3,487,537
Underwriting income	124,241			100,022			—			224,263
Net investment income	—			—			102,316			102,316
Net loss on investments	—			—			(5,773		)	(5,773		)
Other income	—			—			2,146			2,146
Interest expense	—			—			(38,822		)	(38,822		)
Provision for income taxes	—			—			(61,494		)	(61,494		)
Net (income) loss attributable to noncontrolling interest	—			—			18,152			18,152
Net income attributable to NGHC	$	124,241		$	100,022		$	16,525		$	240,788

	Nine Months Ended September 30, 2018
	Property and Casualty			Accident and Health			Corporate and Other			Total
Underwriting revenues:
Gross premium written	$	3,594,690		$	534,560		$	—		$	4,129,250
Ceded premiums	(1,161,235		)	(48,373		)	—			(1,209,608		)
Net premium written	2,433,455			486,187			—			2,919,642
Change in unearned premium	(110,875		)	(20,796		)	—			(131,671		)
Net earned premium	2,322,580			465,391			—			2,787,971
Ceding commission income	158,187			789			—			158,976
Service and fee income	280,727			134,586			—			415,313
Total underwriting revenues	2,761,494			600,766			—			3,362,260
Underwriting expenses:
Loss and loss adjustment expense	1,709,440			252,364			—			1,961,804
Acquisition costs and other underwriting expenses	405,541			136,499			—			542,040
General and administrative expenses	542,902			148,265			—			691,167
Total underwriting expenses	2,657,883			537,128			—			3,195,011
Underwriting income	103,611			63,638			—			167,249
Net investment income	—			—			81,702			81,702
Net loss on investments	—			—			(22,756		)	(22,756		)
Interest expense	—			—			(38,775		)	(38,775		)
Provision for income taxes	—			—			(38,261		)	(38,261		)
Net (income) loss attributable to noncontrolling interest	—			—			31,979			31,979
Net income attributable to NGHC	$	103,611		$	63,638		$	13,889		$	181,138

The following tables summarize the financial position of the operating segments:

	September 30, 2019
	Property and Casualty		Accident and Health		Corporate and Other		Total
Premiums and other receivables, net	$	1,365,806	$	165,595	$	9,725	$	1,541,126
Deferred acquisition costs	239,017		28,642		—		267,659
Reinsurance recoverable	1,458,290		46,309		—		1,504,599
Prepaid reinsurance premiums	631,486		11,732		—		643,218
Intangible assets, net and Goodwill	450,437		123,373		—		573,810
Prepaid and other assets	25,417		15,279		4,511		45,207
Corporate and other assets	—		—		5,498,377		5,498,377
Total assets	$	4,170,453	$	390,930	$	5,512,613	$	10,073,996

	December 31, 2018
	Property and Casualty		Accident and Health		Corporate and Other		Total
Premiums and other receivables, net	$	1,245,530	$	153,896	$	386	$	1,399,812
Deferred acquisition costs	226,188		25,220		—		251,408
Reinsurance recoverable	1,585,008		26,730		—		1,611,738
Prepaid reinsurance premiums	665,660		14		—		665,674
Intangible assets, net and Goodwill	443,163		116,957		—		560,120
Prepaid and other assets	20,941		22,472		111,545		154,958
Corporate and other assets	—		—		4,795,570		4,795,570
Total assets	$	4,186,490	$	345,289	$	4,907,501	$	9,439,280

Revenue from External Customers by Geographic Areas

The following tables show an analysis of the premiums by geographical location:

	Three Months Ended September 30,
	2019						2018
	NGHC		Reciprocal Exchanges		Total		NGHC			Reciprocal Exchanges		Total
Gross premium written - North America	$	1,313,309	$	118,267	$	1,431,576	$	1,230,492		$	121,351	$	1,351,843
Gross premium written - Europe	3,581		—		3,581		3,828			—		3,828
Total	$	1,316,890	$	118,267	$	1,435,157	$	1,234,320		$	121,351	$	1,355,671
Net premium written - North America	$	964,536	$	67,285	$	1,031,821	$	921,456		$	14,814	$	936,270
Net premium written - Europe	2,783		—		2,783		(13,246		)	—		(13,246		)
Total	$	967,319	$	67,285	$	1,034,604	$	908,210		$	14,814	$	923,024
Net earned premium - North America	$	972,598	$	57,117	$	1,029,715	$	878,367		$	43,151	$	921,518
Net earned premium - Europe	23,923		—		23,923		18,009			—		18,009
Total	$	996,521	$	57,117	$	1,053,638	$	896,376		$	43,151	$	939,527

	Nine Months Ended September 30,
	2019						2018
	NGHC		Reciprocal Exchanges		Total		NGHC		Reciprocal Exchanges		Total
Gross premium written - North America	$	3,787,030	$	344,982	$	4,132,012	$	3,666,594	$	337,021	$	4,003,615
Gross premium written - Europe	126,831		—		126,831		125,635		—		125,635
Total	$	3,913,861	$	344,982	$	4,258,843	$	3,792,229	$	337,021	$	4,129,250
Net premium written - North America	$	2,945,220	$	172,460	$	3,117,680	$	2,678,841	$	132,240	$	2,811,081
Net premium written - Europe	76,986		—		76,986		108,561		—		108,561
Total	$	3,022,206	$	172,460	$	3,194,666	$	2,787,402	$	132,240	$	2,919,642
Net earned premium - North America	$	2,825,552	$	149,405	$	2,974,957	$	2,559,409	$	141,009	$	2,700,418
Net earned premium - Europe	73,489		—		73,489		87,553		—		87,553
Total	$	2,899,041	$	149,405	$	3,048,446	$	2,646,962	$	141,009	$	2,787,971

Revenue from External Customers by Product Type

The following tables summarize service and fee income by source within each operating segment:

	Three Months Ended September 30,
	2019						2018
	Property and Casualty		Accident and Health		Total		Property and Casualty		Accident and Health		Total
Commission revenue	$	21,333	$	16,353	$	37,686	$	25,404	$	17,874	$	43,278
Finance and processing fees	33,637		800		34,437		29,804		935		30,739
Installment fees	23,464		—		23,464		23,841		—		23,841
Group health administrative fees	—		25,808		25,808		—		18,364		18,364
Late payment fees	9,251		72		9,323		8,164		19		8,183
Other service and fee income	10,205		20,703		30,908		9,019		9,266		18,285
Total	$	97,890	$	63,736	$	161,626	$	96,232	$	46,458	$	142,690
NGHC	$	96,305	$	63,736	$	160,041	$	94,657	$	46,458	$	141,115
Reciprocal Exchanges	1,585		—		1,585		1,575		—		1,575
Total	$	97,890	$	63,736	$	161,626	$	96,232	$	46,458	$	142,690

	Nine Months Ended September 30,
	2019						2018
	Property and Casualty		Accident and Health		Total		Property and Casualty		Accident and Health		Total
Commission revenue	$	68,193	$	57,097	$	125,290	$	68,547	$	51,190	$	119,737
Finance and processing fees	98,218		3,710		101,928		91,676		3,223		94,899
Installment fees	72,782		—		72,782		68,928		—		68,928
Group health administrative fees	—		73,861		73,861		—		57,461		57,461
Late payment fees	26,061		249		26,310		24,360		69		24,429
Other service and fee income	33,102		42,768		75,870		27,216		22,643		49,859
Total	$	298,356	$	177,685	$	476,041	$	280,727	$	134,586	$	415,313
NGHC	$	293,885	$	177,685	$	471,570	$	276,261	$	134,586	$	410,847
Reciprocal Exchanges	4,471		—		4,471		4,466		—		4,466
Total	$	298,356	$	177,685	$	476,041	$	280,727	$	134,586	$	415,313

The following tables show an analysis of premiums and fee income by product line:

	Three Months Ended September 30,				Nine Months Ended September 30,
Gross Premium Written	2019		2018		2019		2018
Property and Casualty
Personal Auto	$	705,709	$	661,126	$	2,083,702	$	2,017,996
Homeowners	201,977		192,349		544,056		523,308
RV/Packaged	55,631		54,964		168,796		164,427
Small Business Auto	76,987		75,218		246,694		246,448
Lender-placed Insurance	97,468		94,462		232,265		259,995
Other	16,563		12,253		45,577		45,495
Total Property and Casualty	1,154,335		1,090,372		3,321,090		3,257,669
Accident and Health
Group	73,223		61,743		213,197		177,036
Individual	85,728		78,378		252,719		231,890
International	3,604		3,827		126,855		125,634
Total Accident and Health	162,555		143,948		592,771		534,560
Total NGHC	$	1,316,890	$	1,234,320	$	3,913,861	$	3,792,229
Reciprocal Exchanges
Personal Auto	$	39,166	$	40,240	$	120,012	$	116,602
Homeowners	78,079		80,070		222,019		217,486
Other	1,022		1,041		2,951		2,933
Total Reciprocal Exchanges	$	118,267	$	121,351	$	344,982	$	337,021
Total Gross Premium Written	$	1,435,157	$	1,355,671	$	4,258,843	$	4,129,250

	Three Months Ended September 30,						Nine Months Ended September 30,
Net Premium Written	2019			2018			2019		2018
Property and Casualty
Personal Auto	$	560,032		$	502,964		$	1,730,904	$	1,542,685
Homeowners	82,601			112,390			276,250		255,290
RV/Packaged	52,283			54,627			162,047		162,934
Small Business Auto	56,615			53,155			196,221		181,314
Lender-placed Insurance	61,579			56,529			140,863		134,630
Other	6,860			4,969			15,684		24,362
Total Property and Casualty	819,970			784,634			2,521,969		2,301,215
Accident and Health
Group	59,001			51,296			170,911		145,760
Individual	85,541			78,372			252,316		231,884
International	2,807			(6,092		)	77,010		108,543
Total Accident and Health	147,349			123,576			500,237		486,187
Total NGHC	$	967,319		$	908,210		$	3,022,206	$	2,787,402
Reciprocal Exchanges
Personal Auto	$	67,154		$	12,845		$	101,460	$	40,860
Homeowners	(2,047		)	2,002			68,180		90,826
Other	2,178			(33		)	2,820		554
Total Reciprocal Exchanges	$	67,285		$	14,814		$	172,460	$	132,240
Total Net Premium Written	$	1,034,604		$	923,024		$	3,194,666	$	2,919,642

	Three Months Ended September 30,				Nine Months Ended September 30,
Net Earned Premium	2019		2018		2019		2018
Property and Casualty
Personal Auto	$	568,346	$	496,139	$	1,621,734	$	1,436,793
Homeowners	86,525		80,308		272,591		242,161
RV/Packaged	51,023		51,229		150,739		145,911
Small Business Auto	62,265		59,636		189,957		178,302
Lender-placed Insurance	56,599		48,466		158,595		162,629
Other	2,860		5,252		8,893		15,775
Total Property and Casualty	827,618		741,030		2,402,509		2,181,571
Accident and Health
Group	59,009		51,310		170,921		145,788
Individual	85,971		78,874		252,122		232,069
International	23,923		25,162		73,489		87,534
Total Accident and Health	168,903		155,346		496,532		465,391
NGHC Total	$	996,521	$	896,376	$	2,899,041	$	2,646,962
Reciprocal Exchanges
Personal Auto	$	33,953	$	13,353	$	65,907	$	38,812
Homeowners	22,759		29,698		82,475		101,578
Other	405		100		1,023		619
Total Reciprocal Exchanges	57,117		43,151		149,405		141,009
Total Net Earned Premium	$	1,053,638	$	939,527	$	3,048,446	$	2,787,971

	Three Months Ended September 30,				Nine Months Ended September 30,
Fee Income	2019		2018		2019		2018
Property and Casualty
Service and Fee Income	$	96,305	$	94,657	$	293,885	$	276,261
Ceding Commission Income	40,260		44,244		128,087		118,664
Total Property and Casualty	136,565		138,901		421,972		394,925
Accident and Health
Service and Fee Income
Group	34,848		25,198		98,084		74,768
Individual	2,128		4,512		5,506		7,973
Third Party Fee	26,760		16,748		74,095		51,845
Total Service and Fee Income	63,736		46,458		177,685		134,586
Ceding Commission Income	2,261		269		8,780		789
Total Accident and Health	65,997		46,727		186,465		135,375
NGHC Total	$	202,562	$	185,628	$	608,437	$	530,300
Reciprocal Exchanges
Service and Fee Income	$	1,585	$	1,575	$	4,471	$	4,466
Ceding Commission Income	15,066		14,587		50,446		39,523
Total Reciprocal Exchanges	$	16,651	$	16,162	$	54,917	$	43,989
Total Fee Income	$	219,213	$	201,790	$	663,354	$	574,289

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Leases (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Supplemental Balance Sheet Information Related to Leases

Supplemental balance sheet information related to leases is as follow:

Leases	Classification	September 30, 2019
Assets:
Finance	Buildings and improvements	$	9,486
Finance	Vehicle	7,616
Finance	Hardware, software and other equipment	4,814
Total finance		21,916
Operating	Operating lease assets	112,540
Total lease assets	Premises and equipment, net(1)	$	134,456
Liabilities:
Finance	Debt	$	21,002
Operating	Other liabilities	117,050
Total lease liabilities		$	138,052

⁽¹⁾ As of September 30, 2019, accumulated depreciation and amortization for Buildings and improvements, Vehicle, Hardware, software and other equipment, and Operating lease assets was $1,840, $5,209, $8,134 and $18,969, respectively.

Schedule of Lease Cost

The components of lease cost are as follows:

Lease Cost	Classification	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Finance lease cost:
Amortization of leased assets	General and administrative expenses	$	2,284	$	5,907
Interest on lease liabilities	Interest expense	302		888
Finance lease cost		$	2,586	$	6,795
Operating lease cost	General and administrative expenses	$	9,794	$	27,538

Schedule of Maturity of Financing Lease Liabilities

Maturities of the Company’s lease liabilities for the years subsequent to September 30, 2019 are as follows:

	Operating Leases			Finance Leases			Total
2019 (remaining three months)	$	8,082		$	1,781		$	9,863
2020	27,678			7,258			34,936
2021	23,906			5,473			29,379
2022	19,494			3,037			22,531
2023	16,526			1,794			18,320
2024	13,856			1,428			15,284
Thereafter	28,541			2,847			31,388
Total lease payments	$	138,083		$	23,618		$	161,701
Less: Interest	(21,033		)	(2,616		)
Present value of lease liabilities	$	117,050		$	21,002

Schedule of Maturity of Operating Lease Liabilities

Maturities of the Company’s lease liabilities for the years subsequent to September 30, 2019 are as follows:

	Operating Leases			Finance Leases			Total
2019 (remaining three months)	$	8,082		$	1,781		$	9,863
2020	27,678			7,258			34,936
2021	23,906			5,473			29,379
2022	19,494			3,037			22,531
2023	16,526			1,794			18,320
2024	13,856			1,428			15,284
Thereafter	28,541			2,847			31,388
Total lease payments	$	138,083		$	23,618		$	161,701
Less: Interest	(21,033		)	(2,616		)
Present value of lease liabilities	$	117,050		$	21,002

Schedule of Lease Term and Discount Rate

Supplemental information related to term and discount rate are as follow:

Leases	Classification	September 30, 2019
Weighted-average remaining lease term:
Finance	Buildings and improvements	7.4 years
Finance	Vehicle	2.9 years
Finance	Hardware, software and other equipment	1.8 years
Operating	Operating lease assets	5.9 years
Weighted-average discount rate:
Finance	Buildings and improvements	5.8	%
Finance	Vehicle	4.2	%
Finance	Hardware, software and other equipment	4.0	%
Operating	Operating lease assets	5.6	%

Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases is as follow:

	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	773
Financing cash flows from finance leases	5,281
Operating cash flows from operating leases	17,804
Leased assets obtained in exchange for new finance lease liabilities	10,950
Leased assets obtained in exchange for new operating lease liabilities	21,690

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Deferred Acquisition Costs (Tables)

9 Months Ended

Sep. 30, 2019

Deferred Acquisition Costs [Abstract]

Deferred Policy Acquisition Costs

The following table reflects the amounts of policy acquisition costs deferred and amortized:

	Nine Months Ended September 30,
	2019									2018
	Property and Casualty			Accident and Health			Total			Property and Casualty			Accident and Health			Total
Balance, beginning of the period	$	226,188		$	25,220		$	251,408		$	198,283		$	18,106		$	216,389
Additions	385,570			41,222			426,792			399,610			16,985			416,595
Amortization	(372,741		)	(37,800		)	(410,541		)	(369,634		)	(13,858		)	(383,492		)
Change in DAC	12,829			3,422			16,251			29,976			3,127			33,103
Balance, end of the period	$	239,017		$	28,642		$	267,659		$	228,259		$	21,233		$	249,492
NGHC	$	215,904		$	28,642		$	244,546		$	208,982		$	21,233		$	230,215
Reciprocal Exchanges	23,113			—			23,113			19,277			—			19,277
Balance, end of the period	$	239,017		$	28,642		$	267,659		$	228,259		$	21,233		$	249,492

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Fair Value of Financial Instruments - Debt (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt	$ 687,978	$ 705,795
Senior Notes | 7.625% Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt	96,907	96,842
Senior Notes | 7.625% Notes | Level 2
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Fair value estimates of debt	106,040	90,400
Senior Notes | 6.75% Notes
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt	346,926	346,439
Senior Notes | 6.75% Notes | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Fair value estimates of debt	368,291	353,756
Surplus Notes | Subordinated Debentures
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt	72,168	72,168
Surplus Notes | Subordinated Debentures | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Fair value estimates of debt	72,125	72,109
Line of Credit | 2016 Credit Agreement
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt	0	160,000
Line of Credit | 2016 Credit Agreement | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Fair value estimates of debt	0	163,222
Line of Credit | 2019 Credit Agreement
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Debt	140,000	0
Line of Credit | 2019 Credit Agreement | Level 3
Fair Value, Balance Sheet Grouping, Financial Statement Captions
Fair value estimates of debt	$ 147,591	$ 0

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Investments - Short-term and Other Investments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Investment
Other investments	$ 301,615		$ 301,615		$ 306,276
OTTI on investments	0	$ 3,000	0	$ 3,000
Related Parties
Investment
Other investments	234,617		234,617		233,723
Other Investments
Investment
OTTI on investments	0	$ 3,000	0	$ 3,000
Equity method investments
Investment
Other investments	140,195		140,195		142,921
Equity method investments | Related Parties
Investment
Other investments	105,388		105,388		106,031
Notes receivable
Investment
Other investments	129,307		129,307		128,893
Notes receivable | Related Parties
Investment
Other investments	129,229		129,229		127,692
Long-term Certificates of Deposit (CDs), at cost
Investment
Other investments	20,150		20,150		20,252
Investments, at fair value
Investment
Other investments	4,295		4,295		6,542
Investments, at cost or amortized cost
Investment
Other investments	$ 7,668		$ 7,668		$ 7,668

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Investments - Related Parties - 4455 LBJ Freeway, LLC (Details) - 4455 LBJ Freeway, LLC - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
AmTrust Financial Services, Inc.
Schedule of Equity Method Investments
Limited Partnership, Percentage Participation	50.00%		50.00%
Related Parties
Schedule of Equity Method Investments
Equity investment in unconsolidated subsidiaries	$ 984		$ 984		$ 793
Related Parties | 4455 LBJ Freeway, LLC
Schedule of Equity Method Investments
Rent expense	$ 607	$ 551	$ 1,813	$ 1,675
VIE, Not primary beneficiary | Related Parties
Schedule of Equity Method Investments
Ownership percentage	50.00%		50.00%
Equity in earnings (losses)	$ 63	$ 26	$ 191	$ 15

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Related Party Transactions - Other Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Related Parties | Lease Agreement 59 Maiden Lane
Related Party Transaction
Expenses from transactions with related party	$ 207	$ 207	$ 622	$ 622
Related Parties | Lease Agreement 30 North LaSalle
Related Party Transaction
Expenses from transactions with related party	78	76	231	226
Chief Executive Officer
Related Party Transaction
Aircraft Rental and Landing Fees	$ 0	$ 25	$ 15	$ 65

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Income Taxes (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Tax Disclosure [Abstract]
Effective Income Tax Rate, Percent	21.80%	21.60%	21.60%	20.40%

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Leases - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Operating Lease Liabilities, Payments Due
2019 (remaining three months)	$ 8,082
2020	27,678
2021	23,906
2022	19,494
2023	16,526
2024	13,856
Thereafter	28,541
Total lease payments	138,083
Less: Interest	(21,033)
Present value of lease liabilities	117,050
Finance Lease Liabilities, Payments Due
2019 (remaining three months)	1,781
2020	7,258
2021	5,473
2022	3,037
2023	1,794
2024	1,428
Thereafter	2,847
Total lease payments	23,618
Less: Interest	(2,616)
Present value of lease liabilities	21,002	$ 14,824
Lease Liabilities, Payments Due
2019 (remaining three months)	9,863
2020	34,936
2021	29,379
2022	22,531
2023	18,320
2024	15,284
Thereafter	31,388
Total lease payments	$ 161,701

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Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Earnings Per Share, Diluted
Net income attributable to NGHC	$ 71,154	$ 68,382	$ 240,788	$ 181,138
Dividends on preferred stock	(7,875)	(7,875)	(24,675)	(23,625)
Numerator for basic EPS	63,279	60,507	216,113	157,513
Preferred stock dividends - convertible	0	0	1,050	0
Numerator for diluted EPS - after assumed conversions	$ 63,279	$ 60,507	$ 217,163	$ 157,513
Denominator for basic EPS - weighted-average shares outstanding	113,263,367	107,101,837	113,153,121	106,944,461
Convertible preferred stock	789,473	0	789,473	0
Dilutive potential common shares	2,875,122	2,461,555	2,934,403	2,371,319
Denominator for diluted EPS - weighted-average shares outstanding and assumed conversions	116,138,489	109,563,392	116,087,524	109,315,780
Earnings Per Share, Basic
Basic EPS	$ 0.56	$ 0.56	$ 1.91	$ 1.47
Earnings Per Share, Diluted
Diluted EPS	$ 0.54	$ 0.55	$ 1.87	$ 1.44
Employee stock options
Earnings Per Share, Diluted
Effect of dilutive securities	1,823,012	2,108,233	1,881,295	2,067,054
RSUs
Earnings Per Share, Diluted
Effect of dilutive securities	262,637	353,322	263,635	304,265
Preferred stock dividends - nonconvertible
Earnings Per Share, Diluted
Dividends on preferred stock	$ (7,875)	$ (7,875)	$ (23,625)	$ (23,625)
Preferred stock dividends - convertible
Earnings Per Share, Diluted
Dividends on preferred stock	$ 0	$ 0	$ (1,050)	$ 0

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company carries certain financial instruments at fair value. Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:

Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date. Additionally, the entity must have the ability to access the active market and the quoted prices cannot be adjusted by the entity.

Level 2 - Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices in active markets for similar assets or liabilities; quoted prices in inactive markets for identical or similar assets or liabilities; or inputs that are observable or can be corroborated by observable market data by correlation or other means for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs are supported by little or no market activity. The unobservable inputs represent management’s best assumptions of how market participants would price the assets or liabilities. Generally, Level 3 assets and liabilities are valued using pricing models, discounted cash flow methodologies, or similar techniques that require significant judgment or estimation.

The following describes the valuation techniques used by the Company to determine the fair value measurements on a recurring basis of financial instruments held as of September 30, 2019 and December 31, 2018. The Company utilizes a pricing service (“pricing service”) to estimate fair value measurements for all its debt and equity securities.

Level 1 measurements:

• U.S. Treasury and federal agencies. The fair values of U.S. government securities are based on quoted market prices in active markets. The Company believes the market for U.S. government securities is an actively traded market given the high level of daily trading volume.

• Common stock. The pricing service utilizes market quotations for equity securities that have quoted market prices in active markets and their respective quoted prices are provided at fair value.

• Short-term investments. Comprised of money market funds that are traded in active markets and fair values are based on quoted market prices.

Level 2 measurements:

• States and political subdivision bonds, and foreign government. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

• Corporate bonds. Comprised of bonds issued by corporations, public and privately placed. The fair values of short-term corporate bonds are priced using the spread above the London Interbank Offering Rate (“LIBOR”) yield curve, and the fair value of long-term corporate bonds 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. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active.

• Residential and commercial mortgage-backed securities, asset-backed securities and structured securities. The primary inputs to the valuation include quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, prepayment speeds, collateral performance and credit spreads.

Level 3 measurements:

• States and political subdivision bonds. The Company holds certain municipal bonds that finance economic development, infrastructure and environmental projects which do not have an active market. These bonds are valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

• Corporate bonds. The Company holds certain structured notes and term loans that do not have an active market. These bonds are valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

• Common stock and preferred stock. From time to time, the Company also holds certain equity securities that are issued by privately-held entities or direct equity investments that do not have an active market. The Company estimates the fair value of these securities primarily based on inputs such as third-party broker quotes, issuers’ book value, market multiples, and other inputs. These bonds are valued based on non-binding broker quotes where the inputs have not been corroborated to be market observable.

• Other investments, at fair value. Comprised of the Company’s right to receive the Excess Servicing Spread (“ESS”) related to servicing rights. The Company uses a discounted cash flow method to estimate their fair value. The key inputs used in the estimation of ESS include prepayment speed and discount rate. Changes in the fair value of the ESS are recorded in earnings.

Assets measured at fair value on a recurring basis are as follows:

	September 30, 2019
	Level 1		Level 2		Level 3		Total
Available-for-sale debt securities:
U.S. Treasury	$	74,435	$	—	$	—	$	74,435
Federal agencies	4,411		—		—		4,411
States and political subdivision bonds	—		190,924		3,100		194,024
Foreign government	—		146,879		—		146,879
Corporate bonds	—		1,756,263		9,780		1,766,043
Residential mortgage-backed securities	—		1,037,193		—		1,037,193
Commercial mortgage-backed securities	—		609,573		—		609,573
Asset-backed securities	—		59,829		—		59,829
Structured securities	—		248,827		—		248,827
Total available-for-sale debt securities	78,846		4,049,488		12,880		4,141,214
Equity securities:
Common stock	2,474		—		286		2,760
Total equity securities	2,474		—		286		2,760
Short-term investments	381,208		12,455		—		393,663
Other investments	—		—		4,295		4,295
Total	$	462,528	$	4,061,943	$	17,461	$	4,541,932
NGHC	$	421,579	$	3,768,494	$	17,461	$	4,207,534
Reciprocal Exchanges	40,949		293,449		—		334,398
Total	$	462,528	$	4,061,943	$	17,461	$	4,541,932

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Available-for-sale debt securities:
U.S. Treasury	$	65,593	$	—	$	—	$	65,593
Federal agencies	37,475		—		—		37,475
States and political subdivision bonds	—		268,601		3,596		272,197
Foreign government	—		152,366		—		152,366
Corporate bonds	—		1,248,938		11,767		1,260,705
Residential mortgage-backed securities	—		925,116		—		925,116
Commercial mortgage-backed securities	—		544,975		—		544,975
Asset-backed securities	—		61,147		—		61,147
Structured securities	—		241,458		—		241,458
Total available-for-sale debt securities	103,068		3,442,601		15,363		3,561,032
Equity securities:
Common stock	9,898		—		1,051		10,949
Total equity securities	9,898		—		1,051		10,949
Short-term investments	348,549		—		—		348,549
Other investments	—		—		6,542		6,542
Total	$	461,515	$	3,442,601	$	22,956	$	3,927,072
NGHC	$	429,502	$	3,160,203	$	22,956	$	3,612,661
Reciprocal Exchanges	32,013		282,398		—		314,411
Total	$	461,515	$	3,442,601	$	22,956	$	3,927,072

The following tables provide a reconciliation of recurring fair value measurements of the Level 3 financial assets:

	States and political subdivision bonds			Corporate bonds			Common stock			Other investments			Total
Balance as of January 1, 2019	$	3,596		$	11,767		$	1,051		$	6,542		$	22,956
Transfers into Level 3	—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—
Total gains (losses) for the period:
Included in net income(1)	—			—			(765		)	(2,247		)	(3,012		)
Included in other comprehensive income(2)	(496		)	(1,987		)	—			—			(2,483		)
Purchases	—			—			—			—			—
Sales	—			—			—			—			—
Balance as of September 30, 2019	$	3,100		$	9,780		$	286		$	4,295		$	17,461
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	$	—		$	—		$	(765	)	$	(2,247	)	$	(3,012	)
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	$	(496	)	$	(1,987	)	$	—		$	—		$	(2,483	)

	States and political subdivision bonds			Corporate bonds			Common stock			Preferred stock		Other investments			Total
Balance as of January 1, 2018	$	4,081		$	24,545		$	5,052		$	270	$	10,782		$	44,730
Transfers into Level 3	—			—			—			—		—			—
Transfers out of Level 3	—			—			—			—		—			—
Total gains (losses) for the period:
Included in net income(1)	—			—			(1,303		)	10		802			(491		)
Included in other comprehensive income(2)	(485		)	(11,374		)	—			—		—			(11,859		)
Purchases	—			—			—			—		—			—
Sales	—			—			—			—		(1,741		)	(1,741		)
Balance as of September 30, 2018	$	3,596		$	13,171		$	3,749		$	280	$	9,843		$	30,639
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	$	—		$	—		$	(1,303	)	$	10	$	802		$	(491	)

⁽¹⁾ Gains and losses recognized in net income are reported within net investment income.

⁽²⁾ Gains and losses recognized in other comprehensive income are reported within unrealized gains (losses) on investments, net of tax.

During the nine months ended September 30, 2019 and 2018, there were no transfers between Level 2 and Level 3.

At September 30, 2019 and December 31, 2018, the carrying values of the Company’s cash and cash equivalents, premiums and other receivables, and accounts payable approximate the fair value given their short-term nature and were classified as Level 1.

Fair value information about financial instruments not measured at fair value

Debt - The amount reported in the accompanying Condensed Consolidated Balance Sheets for these financial instruments represents the carrying value of the debt. See Note 9, “Debt” for additional information.

The following table presents the carrying amount and estimated fair value of debt not carried at fair value, excluding finance lease and other liabilities, as well as the input level used to determine the fair value:

		September 30, 2019				December 31, 2018
	Input Level	Carrying amount		Fair value		Carrying amount		Fair value
7.625% Notes	Level 2	$	96,907	$	106,040	$	96,842	$	90,400
6.75% Notes	Level 3	346,926		368,291		346,439		353,756
Subordinated Debentures	Level 3	72,168		72,125		72,168		72,109
2016 Credit Agreement	Level 3	—		—		160,000		163,222
2019 Credit Agreement	Level 3	140,000		147,591		—		—

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Reinsurance

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Reinsurance

Reinsurance

The Company utilizes various excess of loss, quota share, state-based industry pools or facilities, and catastrophe reinsurance programs to limit its exposure to a maximum loss on any one risk. Reinsurance agreements transfer portions of the underlying risk of the business the Company writes. Reinsurance does not discharge or diminish the Company’s obligation to pay claims covered by the insurance policies it issues; however, it does permit the Company to recover certain incurred losses from its reinsurers and the Company’s reinsurance recoveries reduce the maximum loss that it may incur as a result of a covered loss event. The Company’s reinsurers generally carry at least an A.M. Best Company, Inc. rating of “A-” (Excellent) or are fully collateralized at the time they enter into the Company’s reinsurance agreements. The total amount, cost and limits relating to the reinsurance coverage the Company purchases may vary from year to year based upon a variety of factors, including the availability of quality reinsurance at an acceptable price and the level of risk that the Company chooses to retain for its own account.

The Company assumes and cedes insurance risks under various reinsurance agreements, on both a pro rata basis and excess of loss basis. The Company purchases reinsurance to mitigate the volatility of direct and assumed business, which may be caused by the aggregate value or the concentration of written exposures in a particular geographic area or business segment and may arise from catastrophes or other events. The Company pays a premium as consideration for ceding the risk.

Reinsurance recoverable is as follows:

	September 30, 2019		December 31, 2018
Reinsurance recoverable on paid losses	$	302,597	$	326,596
Reinsurance recoverable on unpaid losses	1,202,002		1,285,142
Reinsurance recoverable	$	1,504,599	$	1,611,738

The following is the effect of reinsurance on unpaid loss and LAE reserves and unearned premiums:

	September 30, 2019				December 31, 2018
	Assumed		Ceded		Assumed		Ceded
Unpaid Loss and LAE reserves	$	66,422	$	1,202,002	$	84,469	$	1,285,142
Unearned premiums	19,415		643,218		21,015		665,674

The following is the effect of reinsurance on premiums and loss and LAE:

	Three Months Ended September 30,												Nine Months Ended September 30,
	2019						2018						2019						2018
Premium:	Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct	$	1,417,792		$	1,407,731		$	1,330,259		$	1,296,717		$	4,200,571		$	4,080,131		$	4,055,044		$	3,744,321
Assumed	17,365			19,029			25,412			29,078			58,272			59,872			74,206			89,627
Total Gross Premium	1,435,157			1,426,760			1,355,671			1,325,795			4,258,843			4,140,003			4,129,250			3,833,948
Ceded	(400,553		)	(373,122		)	(432,647		)	(386,268		)	(1,064,177		)	(1,091,557		)	(1,209,608		)	(1,045,977		)
Net Premium	$	1,034,604		$	1,053,638		$	923,024		$	939,527		$	3,194,666		$	3,048,446		$	2,919,642		$	2,787,971

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
	Assumed		Ceded		Assumed		Ceded		Assumed		Ceded		Assumed		Ceded
Loss and LAE	$	7,024	$	245,095	$	7,479	$	289,726	$	23,670	$	605,126	$	16,487	$	712,277

State-based Industry Pools and Facilities

The Company’s reinsurance programs include premiums written under state-mandated involuntary plans for automobile, motorcycle and commercial vehicles and premiums ceded to state-provided reinsurance facilities such as Michigan Catastrophic Claims Association (“MCCA”) and North Carolina Reinsurance Facility (“NCRF”), for which the Company retains no loss indemnity risk. Prepaid reinsurance premiums are earned on a pro rata basis over the period of risk, based on a daily earnings convention, which is consistent with premiums written.

The Company believes that it is unlikely to incur any material loss as a result of non-payment of amounts owed to the Company by MCCA and NCRF because (i) the payment obligations are extended over many years, resulting in relatively small current payment obligations, (ii) both MCCA and NCRF are supported by assessments permitted by statute, and (iii) the Company has not historically incurred losses as a result of non-payment. Because MCCA and NCRF are supported by assessments permitted by statute, and there have been no significant and uncollectible balances from MCCA and NCRF, the Company believes that it has no significant exposure to uncollectible reinsurance balances from these entities.

Quota Share Agreements

In 2017, the Company entered into an Auto Quota Share Agreement (the “Auto Quota Share Agreement”) covering the Company’s auto lines of business. Effective January 1, 2019, the Company ceded 7.0% of net liability under new and renewal auto policies written. On July 1, 2019, the Company renewed its Auto Quota Share Agreement for a two-year term. Effective July 1, 2019, the Company cedes 10.0% of net liability under new and renewal auto policies with the ability to increase the cession to up to 30.0% and decrease the cession down to 5.0% under certain conditions. The Company receives a 31.2% provisional ceding commission on premiums ceded to the reinsurer during the term of the Auto Quota Share Agreement, subject to a sliding scale adjustment to a maximum of 32.8% if the loss ratio for the reinsured business is 64.7% or less and a minimum of 30.0% if the loss ratio is 67.5% or higher.

In 2017, the Company entered into a Homeowners Quota Share Agreement (the “HO Quota Share Agreement”) covering the Company’s homeowners line of business. On July 1, 2019, the Company renewed its HO Quota Share Agreement for a one-year term. Effective July 1, 2019, the Company cedes 40.0% of net liability under homeowners policies and receives a 36.0% ceding commission on new and renewal business and a portion of the in-force business. A portion of the in-force business is being run-off under the prior agreements. The weighted average expected ceding commission for all in-force business and new and renewal homeowners business is 37.5% over the contract term.

Catastrophe Reinsurance

Effective May 1, 2019, the Company’s reinsurance property catastrophe excess of loss program, protecting the Company against catastrophic events and other large losses, provides a total of $650,000 in coverage with one reinstatement with a $70,000 retention for the first event and $50,000 for the second event. As of July 1, 2018, the casualty program provides $35,000 in coverage in excess of a $5,000 retention. Effective October 1, 2019, the Company renewed the casualty program, for which coverage and retention will remain in effect and unchanged. The Company pays a premium as consideration for ceding the risk.

Effective July 1, 2019, the Reciprocal Exchanges renewed their property catastrophe excess of loss program providing a total of $480,000 in coverage with a $20,000 retention, with one reinstatement.

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Schedule of Preferred Stock

A summary description of the terms of these series of preferred stock is presented in the table below:

Series	Dividend rate per year		Shares of preferred stock issued	Depositary shares issued	Liquidation preference per share		Aggregate liquidation preference
A	7.50	%	2,200,000	—	$	25	$	55,000
B	7.50	%	165,000	6,600,000	$	1,000	$	165,000
C	7.50	%	200,000	8,000,000	$	1,000	$	200,000
D	Fixed/ Floating(1)		120	—	$	250,000	$	30,000

⁽¹⁾ Dividend rate is fixed at 7.00% prior to July 15, 2023 and floating at six-month LIBOR plus 5.4941% thereafter.

Schedule of Dividends Declared

The following tables present the class of stock, declaration date and dividends paid per share:

Class of Stock	Declaration Date	Dividend Per Share		Dividend Per Depositary Share
Common stock	July 29, 2019	$	0.05
Common stock	May 6, 2019	$	0.04
Common stock	February 25, 2019	$	0.04
Preferred stock Series A	July 29, 2019	$	0.46875
Preferred stock Series A	May 6, 2019	$	0.46875
Preferred stock Series A	February 25, 2019	$	0.46875
Preferred stock Series B	July 29, 2019	$	18.75	$	0.46875
Preferred stock Series B	May 6, 2019	$	18.75	$	0.46875
Preferred stock Series B	February 25, 2019	$	18.75	$	0.46875
Preferred stock Series C	July 29, 2019	$	18.75	$	0.46875
Preferred stock Series C	May 6, 2019	$	18.75	$	0.46875
Preferred stock Series C	February 25, 2019	$	18.75	$	0.46875
Preferred stock Series D	May 6, 2019	$	8,750.00

Class of Stock	Declaration Date	Dividend Per Share		Dividend Per Depositary Share
Common stock	August 6, 2018	$	0.04
Common stock	May 7, 2018	$	0.04
Common stock	February 26, 2018	$	0.04
Preferred stock Series A	August 6, 2018	$	0.46875
Preferred stock Series A	May 7, 2018	$	0.46875
Preferred stock Series A	February 26, 2018	$	0.46875
Preferred stock Series B	August 6, 2018	$	18.75	$	0.46875
Preferred stock Series B	May 7, 2018	$	18.75	$	0.46875
Preferred stock Series B	February 26, 2018	$	18.75	$	0.46875
Preferred stock Series C	August 6, 2018	$	18.75	$	0.46875
Preferred stock Series C	May 7, 2018	$	18.75	$	0.46875
Preferred stock Series C	February 26, 2018	$	18.75	$	0.46875

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Unpaid Losses and Loss Adjustment Expense Reserves (Tables)

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense

The following tables present a reconciliation of beginning and ending reserve balances for unpaid losses and loss adjustment expenses:

	Nine Months Ended September 30, 2019
	Property and Casualty			Accident and Health			NGHC			Reciprocal Exchanges			Total
Gross balance at beginning of the period	$	2,507,409		$	271,280		$	2,778,689		$	178,470		$	2,957,159
Less: Reinsurance recoverable at beginning of the period	(1,182,588		)	(24,575		)	(1,207,163		)	(77,979		)	(1,285,142		)
Net balance at beginning of the period	1,324,821			246,705			1,571,526			100,491			1,672,017
Incurred losses and LAE related to:
Current year	1,726,618			279,460			2,006,078			125,250			2,131,328
Prior year	19,791			(37,775		)	(17,984		)	(666		)	(18,650		)
Total incurred	1,746,409			241,685			1,988,094			124,584			2,112,678
Paid losses and LAE related to:
Current year	(661,742		)	(136,261		)	(798,003		)	(76,704		)	(874,707		)
Prior year	(1,013,023		)	(105,076		)	(1,118,099		)	(39,005		)	(1,157,104		)
Total paid	(1,674,765		)	(241,337		)	(1,916,102		)	(115,709		)	(2,031,811		)
Acquired losses and LAE reserves	92,573			—			92,573			—			92,573
Unrealized foreign exchange gain	—			(8,204		)	(8,204		)	—			(8,204		)
Net balance at end of the period	1,489,038			238,849			1,727,887			109,366			1,837,253
Plus: Reinsurance recoverable at end of the period	1,079,560			38,352			1,117,912			84,090			1,202,002
Gross balance at end of the period	$	2,568,598		$	277,201		$	2,845,799		$	193,456		$	3,039,255

	Nine Months Ended September 30, 2018
	Property and Casualty			Accident and Health			NGHC			Reciprocal Exchanges			Total
Gross balance at beginning of the period	$	2,270,551		$	249,653		$	2,520,204		$	143,353		$	2,663,557
Less: Reinsurance recoverable at beginning of the period	(1,067,495		)	(9,840		)	(1,077,335		)	(52,408		)	(1,129,743		)
Net balance at beginning of the period	1,203,056			239,813			1,442,869			90,945			1,533,814
Incurred losses and LAE related to:
Current year	1,596,337			276,987			1,873,324			124,914			1,998,238
Prior year	(13,318		)	(24,623		)	(37,941		)	1,507			(36,434		)
Total incurred	1,583,019			252,364			1,835,383			126,421			1,961,804
Paid losses and LAE related to:
Current year	(883,969		)	(108,686		)	(992,655		)	(81,526		)	(1,074,181		)
Prior year	(622,468		)	(114,045		)	(736,513		)	(34,079		)	(770,592		)
Total paid	(1,506,437		)	(222,731		)	(1,729,168		)	(115,605		)	(1,844,773		)
Unrealized foreign exchange gain	—			(8,302		)	(8,302		)	—			(8,302		)
Net balance at end of the period	1,279,638			261,144			1,540,782			101,761			1,642,543
Plus: Reinsurance recoverable at end of the period	1,120,630			17,778			1,138,408			74,184			1,212,592
Gross balance at end of the period	$	2,400,268		$	278,922		$	2,679,190		$	175,945		$	2,855,135

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Basis of Reporting (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Adoption of Leases Topic 842
Other liabilities	$ 373,269	$ 240,404
Debt | Accounting Standards Update 2016-02
Adoption of Leases Topic 842
Other liabilities		$ 30,346

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Condensed Consolidated Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues:
Net earned premium	$ 1,053,638	$ 939,527	$ 3,048,446	$ 2,787,971
Ceding commission income	57,587	59,100	187,313	158,976
Service and fee income	161,626	142,690	476,041	415,313
Net investment income	33,740	30,696	102,316	81,702
Net loss on investments	(565)	(3,170)	(5,773)	(22,756)
Other income	2,146	0	2,146	0
Total revenues	1,308,172	1,168,843	3,810,489	3,421,206
Expenses:
Loss and loss adjustment expense	745,334	657,310	2,112,678	1,961,804
Acquisition costs and other underwriting expenses	209,090	191,470	615,134	542,040
General and administrative expenses	263,864	235,733	759,725	691,167
Interest expense	12,898	12,583	38,822	38,775
Total expenses	1,231,186	1,097,096	3,526,359	3,233,786
Income before provision for income taxes	76,986	71,747	284,130	187,420
Provision for income taxes	16,747	15,518	61,494	38,261
Net income	60,239	56,229	222,636	149,159
Net (income) loss attributable to noncontrolling interest	10,915	12,153	18,152	31,979
Net income attributable to NGHC	71,154	68,382	240,788	181,138
Dividends on preferred stock	(7,875)	(7,875)	(24,675)	(23,625)
Net income attributable to NGHC common stockholders	$ 63,279	$ 60,507	$ 216,113	$ 157,513
Earnings per common share (“EPS”):
Basic EPS	$ 0.56	$ 0.56	$ 1.91	$ 1.47
Diluted EPS	$ 0.54	$ 0.55	$ 1.87	$ 1.44

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Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Preferred stock
Stock issuance costs	$ 0	$ 110

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Investments (Tables)

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Available-for-Sale Debt Securities

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

September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	72,188	$	2,300	$	(53	)	$	74,435
Federal agencies	4,379		33		(1		)	4,411
States and political subdivision bonds	188,037		6,017		(30		)	194,024
Foreign government	141,026		5,875		(22		)	146,879
Corporate bonds	1,695,694		71,298		(949		)	1,766,043
Residential mortgage-backed securities	1,019,630		19,513		(1,950		)	1,037,193
Commercial mortgage-backed securities	573,911		35,690		(28		)	609,573
Asset-backed securities	58,555		1,321		(47		)	59,829
Structured securities	252,957		202		(4,332		)	248,827
Total	$	4,006,377	$	142,249	$	(7,412	)	$	4,141,214
NGHC	$	3,705,639	$	135,248	$	(7,061	)	$	3,833,826
Reciprocal Exchanges	300,738		7,001		(351		)	307,388
Total	$	4,006,377	$	142,249	$	(7,412	)	$	4,141,214

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	64,829	$	1,026	$	(262	)	$	65,593
Federal agencies	37,842		22		(389		)	37,475
States and political subdivision bonds	274,367		1,369		(3,539		)	272,197
Foreign government	151,443		993		(70		)	152,366
Corporate bonds	1,283,061		3,094		(25,450		)	1,260,705
Residential mortgage-backed securities	944,365		716		(19,965		)	925,116
Commercial mortgage-backed securities	548,192		3,757		(6,974		)	544,975
Asset-backed securities	60,563		705		(121		)	61,147
Structured securities	249,947		99		(8,588		)	241,458
Total	$	3,614,609	$	11,781	$	(65,358	)	$	3,561,032
NGHC	$	3,311,639	$	11,206	$	(58,896	)	$	3,263,949
Reciprocal Exchanges	302,970		575		(6,462		)	297,083
Total	$	3,614,609	$	11,781	$	(65,358	)	$	3,561,032

Available-for-Sale Debt Securities by Contractual Maturity

The amortized cost and fair value of available-for-sale debt securities held as of September 30, 2019, 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.

	NGHC				Reciprocal Exchanges				Total
September 30, 2019	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	52,968	$	53,081	$	110	$	110	$	53,078	$	53,191
Due after one year through five years	883,320		911,951		132,418		134,784		1,015,738		1,046,735
Due after five years through ten years	935,527		979,817		73,674		75,405		1,009,201		1,055,222
Due after ten years	261,542		264,537		14,722		14,934		276,264		279,471
Mortgage-backed securities	1,572,282		1,624,440		79,814		82,155		1,652,096		1,706,595
Total	$	3,705,639	$	3,833,826	$	300,738	$	307,388	$	4,006,377	$	4,141,214

Gross Unrealized Losses

The tables below summarize the gross unrealized losses on debt securities classified as available for sale, by length of time the security has continuously been in an unrealized loss position.

	Less Than 12 Months					12 Months or More					Total
September 30, 2019	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	24,598	$	(32	)	$	13,846	$	(21	)	$	38,444	$	(53	)
Federal agencies	259		(1		)	—		—			259		(1		)
States and political subdivision bonds	1,281		(1		)	2,597		(29		)	3,878		(30		)
Foreign government	2,904		(22		)	—		—			2,904		(22		)
Corporate bonds	121,461		(771		)	9,013		(178		)	130,474		(949		)
Residential mortgage-backed securities	206,204		(1,194		)	69,431		(756		)	275,635		(1,950		)
Commercial mortgage-backed securities	4,737		(22		)	750		(6		)	5,487		(28		)
Asset-backed securities	5,548		(26		)	979		(21		)	6,527		(47		)
Structured securities	59,765		(849		)	110,235		(3,483		)	170,000		(4,332		)
Total	$	426,757	$	(2,918	)	$	206,851	$	(4,494	)	$	633,608	$	(7,412	)
NGHC	$	391,883	$	(2,669	)	$	199,953	$	(4,392	)	$	591,836	$	(7,061	)
Reciprocal Exchanges	34,874		(249		)	6,898		(102		)	41,772		(351		)
Total	$	426,757	$	(2,918	)	$	206,851	$	(4,494	)	$	633,608	$	(7,412	)

	Less Than 12 Months					12 Months or More					Total
December 31, 2018	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	474	$	(2	)	$	21,540	$	(260	)	$	22,014	$	(262	)
Federal agencies	23,729		(351		)	1,493		(38		)	25,222		(389		)
States and political subdivision bonds	57,090		(902		)	119,759		(2,637		)	176,849		(3,539		)
Foreign government	45,748		(70		)	—		—			45,748		(70		)
Corporate bonds	586,359		(12,891		)	321,115		(12,559		)	907,474		(25,450		)
Residential mortgage-backed securities	234,396		(1,637		)	551,623		(18,328		)	786,019		(19,965		)
Commercial mortgage-backed securities	13,229		(239		)	148,700		(6,735		)	161,929		(6,974		)
Asset-backed securities	25,978		(78		)	1,494		(43		)	27,472		(121		)
Structured securities	222,154		(8,136		)	6,167		(452		)	228,321		(8,588		)
Total	$	1,209,157	$	(24,306	)	$	1,171,891	$	(41,052	)	$	2,381,048	$	(65,358	)
NGHC	$	1,115,823	$	(22,668	)	$	1,018,975	$	(36,228	)	$	2,134,798	$	(58,896	)
Reciprocal Exchanges	93,334		(1,638		)	152,916		(4,824		)	246,250		(6,462		)
Total	$	1,209,157	$	(24,306	)	$	1,171,891	$	(41,052	)	$	2,381,048	$	(65,358	)

Equity Securities

The fair values of equity securities were as follows:

	September 30, 2019		December 31, 2018
Common stock	$	2,760	$	10,949
Total	$	2,760	$	10,949
NGHC	$	2,760	$	10,949
Reciprocal Exchanges	—		—
Total	$	2,760	$	10,949

Investment Income

The components of net investment income consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Cash and short-term investments	$	1,123		$	351		$	3,467		$	680
Debt securities	31,439			27,643			91,631			77,469
Equity securities	1			182			4			541
Other, net (related parties - three months - $(10) and $505; nine months - $2,163 and $550)	2,270			2,924			10,508			6,577
Investment income	34,833			31,100			105,610			85,267
Investment expenses	(1,093		)	(404		)	(3,294		)	(3,565		)
Net investment income	$	33,740		$	30,696		$	102,316		$	81,702
NGHC	$	31,580		$	28,352		$	95,862		$	75,009
Reciprocal Exchanges	2,160			2,344			6,454			6,693
Net investment income	$	33,740		$	30,696		$	102,316		$	81,702

Net Realized Gains (Losses)

The table below indicates realized gains and losses on investments. Other, net includes realized gains and losses from short-term and other investments and foreign exchange. Purchases and sales of investments are recorded on a trade date basis. Realized gains and losses are determined based on the specific identification method.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Debt securities, available-for-sale:
Gross gains	$	3,598		$	2,563		$	3,921		$	4,651
Gross losses	(1,712		)	(743		)	(2,086		)	(22,388		)
Net realized gain (loss) on debt securities, available-for-sale	1,886			1,820			1,835			(17,737		)
Equity securities	(2,208		)	(1,376		)	(6,489		)	(7,203		)
OTTI on investments	—			(3,000		)	—			(3,000		)
Other, net	(243		)	(614		)	(1,119		)	5,184
Net realized loss on investments	$	(565	)	$	(3,170	)	$	(5,773	)	$	(22,756	)
NGHC	$	(428	)	$	(3,003	)	$	(4,936	)	$	(21,490	)
Reciprocal Exchanges	(137		)	(167		)	(837		)	(1,266		)
Net realized loss on investments	$	(565	)	$	(3,170	)	$	(5,773	)	$	(22,756	)

Net gains and losses recognized during the reporting period on equity securities still held at the reporting date were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net losses recognized during the period	$	(2,208	)	$	(1,376	)	$	(6,489	)	$	(7,203	)
Less: Net losses recognized during the period on securities sold during the period	—			—			—			(108		)
Net losses recognized during the reporting period on securities still held at the reporting date	$	(2,208	)	$	(1,376	)	$	(6,489	)	$	(7,095	)

Credit Quality of Investments

The tables below summarize the credit quality of debt securities, as rated by Standard & Poor’s (“S&P”). If a security is not rated by S&P, an S&P equivalent is determined based on ratings from similar rating agencies. Securities that are not rated are included in the “BB+ and lower” category.

	NGHC						Reciprocal Exchanges
September 30, 2019	Amortized Cost		Fair Value		Percentage		Amortized Cost		Fair Value		Percentage
U.S. Treasury	$	59,290	$	60,998	1.6	%	$	12,898	$	13,437	4.4	%
AAA	622,806		655,803		17.1	%	18,143		18,891		6.1	%
AA, AA+, AA-	1,381,180		1,411,831		36.8	%	109,656		112,043		36.5	%
A, A+, A-	803,831		831,868		21.7	%	111,498		114,601		37.2	%
BBB, BBB+, BBB-	788,908		821,368		21.4	%	48,543		48,416		15.8	%
BB+ and lower	49,624		51,958		1.4	%	—		—		—	%
Total	$	3,705,639	$	3,833,826	100.0	%	$	300,738	$	307,388	100.0	%

	NGHC						Reciprocal Exchanges
December 31, 2018	Amortized Cost		Fair Value		Percentage		Amortized Cost		Fair Value		Percentage
U.S. Treasury	$	52,122	$	52,759	1.6	%	$	12,707	$	12,834	4.3	%
AAA	586,639		589,078		18.0	%	18,335		18,109		6.1	%
AA, AA+, AA-	1,385,709		1,358,528		41.6	%	142,525		140,114		47.2	%
A, A+, A-	591,219		581,106		17.8	%	118,535		115,618		38.9	%
BBB, BBB+, BBB-	653,645		641,554		19.7	%	10,834		10,374		3.5	%
BB+ and lower	42,305		40,924		1.3	%	34		34		—	%
Total	$	3,311,639	$	3,263,949	100.0	%	$	302,970	$	297,083	100.0	%

The tables below summarize the investment quality of the corporate bond holdings and industry concentrations.

September 30, 2019	AAA		AA+, AA, AA-		A+,A,A-		BBB+, BBB, BBB-		BB+ or Lower		Fair Value		% of Corporate Bonds Portfolio
Financial Institutions	—	%	3.6	%	27.2	%	13.6	%	0.4	%	$	791,523	44.8	%
Industrials	0.3	%	3.8	%	18.8	%	29.3	%	0.1	%	923,980		52.3	%
Utilities/Other	—	%	—	%	1.3	%	1.6	%	—	%	50,540		2.9	%
Total	0.3	%	7.4	%	47.3	%	44.5	%	0.5	%	$	1,766,043	100.0	%
NGHC	—	%	5.8	%	40.9	%	41.8	%	0.5	%	$	1,571,375	89.0	%
Reciprocal Exchanges	0.3	%	1.6	%	6.4	%	2.7	%	—	%	194,668		11.0	%
Total	0.3	%	7.4	%	47.3	%	44.5	%	0.5	%	$	1,766,043	100.0	%

December 31, 2018	AAA		AA+, AA, AA-		A+,A,A-		BBB+, BBB, BBB-		BB+ or Lower		Fair Value		% of Corporate Bonds Portfolio
Financial Institutions	—	%	4.3	%	23.1	%	14.2	%	0.9	%	$	535,373	42.5	%
Industrials	0.4	%	6.1	%	21.5	%	26.7	%	0.6	%	697,324		55.3	%
Utilities/Other	—	%	—	%	1.8	%	0.4	%	—	%	28,008		2.2	%
Total	0.4	%	10.4	%	46.4	%	41.3	%	1.5	%	$	1,260,705	100.0	%
NGHC	—	%	6.3	%	37.3	%	40.6	%	1.4	%	$	1,079,099	85.6	%
Reciprocal Exchanges	0.4	%	4.1	%	9.1	%	0.7	%	0.1	%	181,606		14.4	%
Total	0.4	%	10.4	%	46.4	%	41.3	%	1.5	%	$	1,260,705	100.0	%

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents, and restricted cash are as follows:

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	199,419	$	193,858
Restricted cash and cash equivalents	27,903		39,725
Total cash, cash equivalents and restricted cash	$	227,322	$	233,583

Restricted Investments

Restricted investments are as follows:

	September 30, 2019		December 31, 2018
Securities on deposit with state regulatory authorities	$	83,567	$	73,119
Restricted investments to trusts in certain reinsurance transactions	54,895		70,470
Total restricted investments	$	138,462	$	143,589

Other Investments

The table below summarizes the composition of other investments:

	September 30, 2019		December 31, 2018
Equity method investments (related parties - $105,388 and $106,031)	$	140,195	$	142,921
Notes receivable (related parties - $129,229 and $127,692)	129,307		128,893
Long-term Certificates of Deposit (CDs), at cost	20,150		20,252
Investments, at fair value	4,295		6,542
Investments, at cost or amortized cost	7,668		7,668
Total	$	301,615	$	306,276

LSC Entity

The following table presents the Company’s 50% investment activity in the LSC Entity:

	Nine Months Ended September 30,
	2019			2018
Balance, beginning of the period	$	48,324		$	160,683
Distributions (three months - $(2,500) and $0)	(2,500		)	(116,035		)
Contributions (three months - $258 and $0)	258			2,000
Equity in earnings (losses) (three months - $(481) and $(858))	1,250			651
Change in equity method investments	(992		)	(113,384		)
Balance, end of the period	$	47,332		$	47,299

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company files a consolidated Federal income tax return. The Reciprocal Exchanges are not included in the Company’s consolidated tax return as the Company does not have an ownership interest in the Reciprocal Exchanges, and they are not a part of the consolidated tax sharing agreement among the Company and its subsidiaries.

The Company uses the estimated annual effective tax rate method. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated, are excluded from the estimated annual effective tax rate. In these cases, the actual tax expense or benefit is reported in the same period as the related item. Certain tax effects are also not reflected in the estimated annual effective tax rate, primarily certain changes in the realizability of deferred tax assets and uncertain tax positions.

The Company’s consolidated effective tax rate increased from 21.6% for the three months ended September 30, 2018 to 21.8% for the three months ended September 30, 2019. The Company’s consolidated effective tax rate increased from 20.4% for the nine months ended September 30, 2018 to 21.6% for the nine months ended September 30, 2019. The consolidated effective tax rate was impacted by the implementation of tax law changes under the Tax Cuts and Jobs Act in 2018.

All tax liabilities are payable to the Internal Revenue Service (“IRS”) and various state and local taxing agencies. The Company’s subsidiaries are currently under audit by the IRS for the year ended December 31, 2015, and open to audit years thereafter for federal tax purposes. For state and local tax purposes, the Company is open to audit for tax years ended December 31, 2014 forward, depending on jurisdiction.

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Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The significant shareholder of the Company has an ownership interest in AmTrust, Maiden Holdings Ltd. (“Maiden”) and ACP Re. The Company provides and receives services to and from these related entities as follows:

Agreements with AmTrust

Asset Purchase and Master Services Agreements

On September 13, 2017, the Company entered into an asset purchase and license agreement (the “Agreement”) with AmTrust, pursuant to which the Company acquired ownership of a policy management system and the related intellectual property, as well as a non-exclusive perpetual license to certain software programs used by the system (the “System”), for a purchase price of $200,000, including license fees which would have been payable for use of the System during the third quarter 2017. The System has been fully transferred to the Company’s operating environment and the purchase price has been fully paid.

The Agreement also terminated the existing master services agreement between the Company and AmTrust. AmTrust continued to provide management of the premium receipts from its lockbox facilities during a transition period pursuant to the Agreement under the same terms as those provided under the master services agreement. The Company recorded expenses related to this agreement of $63 and $729 for the three months ended September 30, 2019 and 2018, respectively, and $511 and $9,819 for the nine months ended September 30, 2019 and 2018, respectively.

NGHC Quota Share Agreement

The Company participated in a quota share reinsurance treaty with ACP Re, Maiden and AmTrust, whereby the Company ceded 50% of the total net earned premiums, net of a ceding commission, and net incurred losses and LAE on business with effective dates after March 1, 2010 (“NGHC Quota Share”). In August 2013, the Company terminated the NGHC Quota Share agreement on a run-off basis. The net reinsurance recoverable is $4,496 and $7,425 at September 30, 2019 and December 31, 2018, respectively. The net recovery under the agreement was $216 and $1,090 for the three months ended September 30, 2019 and 2018, respectively, and $624 and $1,524 for the nine months ended September 30, 2019 and 2018, respectively.

ACP Re and Maiden held assets in trust for the benefit of the Company in the amount of $2,486 and $7,385, respectively, as of September 30, 2019 and $3,796 and $8,644, respectively, as of December 31, 2018.

Equity Method Investments

The Company has an ownership interest in an LSC Entity, limited liability companies and limited partnerships with related parties. See Note 3, “Investments - Equity Method Investments - Related Parties” for additional information.

Agreements with ACP Re

Credit Agreement

The Company is party to a credit agreement (the “ACP Re Credit Agreement”) by and among AmTrust, as administrative agent, ACP Re Holdings, LLC, a Delaware limited liability company owned by a related party trust, the Michael Karfunkel Family 2005 Trust (the “Trust”), as borrower, and AmTrust and the Company, as lenders of $250,000 ($125,000 each lender). The amounts borrowed are secured by equity interests, cash and, other investments held by ACP Re Holdings, LLC in an amount equal to 115% of the outstanding loan balance. The maturity date of the loan is September 20, 2036. The interest rate on the outstanding principal balance is a fixed annual rate of 3.7%, provided that up to 1.2% thereof may be paid in kind. The Trust is required to cause ACP Re Holdings, LLC to maintain assets having a value greater than 115% of the outstanding loan balance, and if there is a shortfall, the Trust will make a contribution to ACP Re Holdings, LLC of assets having a market value of at least the shortfall (the “Maintenance Covenant”). Commencing on September 20, 2026, and for each year thereafter, two percent of the then outstanding principal balance

of the loan (inclusive of any amounts previously paid in kind) is due and payable. A change of control of greater than 50% and an uncured breach of the Maintenance Covenant are included as events of default.

As of September 30, 2019 and December 31, 2018 the Company had a receivable principal amount related to the ACP Re Credit Agreement of $129,229 and $127,692, respectively. The Company recorded interest income of $1,195 and $1,181 for the three months ended September 30, 2019 and 2018, respectively, and $3,571 and $3,529 for the nine months ended September 30, 2019 and 2018, respectively, under the ACP Re Credit Agreement. Management determined no impairment reserve was needed for the carrying value of the loan at September 30, 2019 and December 31, 2018 based on the collateral levels maintained.

Other Related Party Transactions

Operating Lease Agreements

The Company leases office space at 59 Maiden Lane in New York, New York from 59 Maiden Lane Associates LLC, an entity that is wholly-owned by the Karfunkel family. The lease term is through 2022. The Company paid $207 and $207 in rent for the three months ended September 30, 2019 and 2018, respectively, and $622 and $622 in rent for the nine months ended September 30, 2019 and 2018, respectively.

The Company leases office space at 30 North LaSalle Street, Chicago, Illinois from 30 North LaSalle Street Partners LLC, an entity that is wholly-owned by the Karfunkel family. The lease term is through 2025. The Company paid $78 and $76 in rent for the three months ended September 30, 2019 and 2018, respectively, and $231 and $226 in rent for the nine months ended September 30, 2019 and 2018, respectively.

Use of the Company Aircraft

The Company and Barry Karfunkel, Chief Executive Officer of the Company, are parties to a time sharing agreement for the use of the Company’s plane. Mr. Karfunkel reimbursed the Company $0 and $25 for the three months ended September 30, 2019 and 2018, and reimbursed the Company $15 and $65 for the nine months ended September 30, 2019 and 2018, respectively, for his personal use of the company-owned aircraft.

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Investments - Investment Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net Investment Income
Investment Income	$ 34,833	$ 31,100	$ 105,610	$ 85,267
Investment expenses	(1,093)	(404)	(3,294)	(3,565)
Net investment income	33,740	30,696	102,316	81,702
Reciprocal Exchanges
Net Investment Income
Net investment income	2,160	2,344	6,454	6,693
NGHC, excluding Reciprocal Exchanges
Net Investment Income
Net investment income	31,580	28,352	95,862	75,009
Cash and short-term investments
Net Investment Income
Investment Income	1,123	351	3,467	680
Debt securities
Net Investment Income
Investment Income	31,439	27,643	91,631	77,469
Equity securities
Net Investment Income
Investment Income	1	182	4	541
Other, net
Net Investment Income
Other, net (related parties - three months - $(10) and $505; nine months - $2,163 and $550)	2,270	2,924	10,508	6,577
Other, net | Related Parties
Net Investment Income
Other, net (related parties - three months - $(10) and $505; nine months - $2,163 and $550)	$ (10)	$ 505	$ 2,163	$ 550

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Investments - Available-for-Sale Debt Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities
Total	$ 4,006,377	$ 3,614,609
Gross Unrealized Gains
Total	142,249	11,781
Total	(7,412)	(65,358)
Fair Value
Debt securities, available-for-sale	4,141,214	3,561,032
Fair Value	4,141,214	3,561,032
Other-than-temporary impairments recognized in AOCI	0	0
Reciprocal Exchanges
Schedule of Available-for-sale Securities
Total	300,738	302,970
Gross Unrealized Gains
Total	7,001	575
Total	(351)	(6,462)
Fair Value
Debt securities, available-for-sale	307,388	297,083
Fair Value	307,388	297,083
NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Total	3,705,639	3,311,639
Gross Unrealized Gains
Total	135,248	11,206
Total	(7,061)	(58,896)
Fair Value
Fair Value	3,833,826	3,263,949
U.S. Treasury
Schedule of Available-for-sale Securities
Debt Securities	72,188	64,829
Gross Unrealized Gains
Debt Securities	2,300	1,026
Debt Securities	(53)	(262)
Fair Value
Debt securities, available-for-sale	74,435	65,593
U.S. Treasury | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Total	12,898	12,707
Fair Value
Fair Value	13,437	12,834
U.S. Treasury | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Total	59,290	52,122
Fair Value
Fair Value	60,998	52,759
Federal agencies
Schedule of Available-for-sale Securities
Debt Securities	4,379	37,842
Gross Unrealized Gains
Debt Securities	33	22
Debt Securities	(1)	(389)
Fair Value
Debt securities, available-for-sale	4,411	37,475
States and political subdivision bonds
Schedule of Available-for-sale Securities
Debt Securities	188,037	274,367
Gross Unrealized Gains
Debt Securities	6,017	1,369
Debt Securities	(30)	(3,539)
Fair Value
Debt securities, available-for-sale	194,024	272,197
Foreign government
Schedule of Available-for-sale Securities
Debt Securities	141,026	151,443
Gross Unrealized Gains
Debt Securities	5,875	993
Debt Securities	(22)	(70)
Fair Value
Debt securities, available-for-sale	146,879	152,366
Corporate bonds
Schedule of Available-for-sale Securities
Debt Securities	1,695,694	1,283,061
Gross Unrealized Gains
Debt Securities	71,298	3,094
Debt Securities	(949)	(25,450)
Fair Value
Debt securities, available-for-sale	1,766,043	1,260,705
Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Debt Securities	1,019,630	944,365
Gross Unrealized Gains
Debt Securities	19,513	716
Debt Securities	(1,950)	(19,965)
Fair Value
Debt securities, available-for-sale	1,037,193	925,116
Commercial mortgage-backed securities
Schedule of Available-for-sale Securities
Debt Securities	573,911	548,192
Gross Unrealized Gains
Debt Securities	35,690	3,757
Debt Securities	(28)	(6,974)
Fair Value
Debt securities, available-for-sale	609,573	544,975
Asset-backed securities
Schedule of Available-for-sale Securities
Debt Securities	58,555	60,563
Gross Unrealized Gains
Debt Securities	1,321	705
Debt Securities	(47)	(121)
Fair Value
Debt securities, available-for-sale	59,829	61,147
Structured securities
Schedule of Available-for-sale Securities
Debt Securities	252,957	249,947
Gross Unrealized Gains
Debt Securities	202	99
Debt Securities	(4,332)	(8,588)
Fair Value
Debt securities, available-for-sale	$ 248,827	$ 241,458

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Investments - Cash and Cash Equivalents, Restricted Cash and Restricted Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Cash and cash equivalents	$ 199,419	$ 193,858
Restricted cash and cash equivalents	27,903	39,725
Total cash, cash equivalents and restricted cash	227,322	233,583	$ 434,930	$ 357,484
Securities on deposit with state regulatory authorities	83,567	73,119
Restricted investments to trusts in certain reinsurance transactions	54,895	70,470
Total restricted investments	$ 138,462	$ 143,589

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Segment Information - Gross Premium Written (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information
Gross premium written	$ 1,435,157	$ 1,355,671	$ 4,258,843	$ 4,129,250
Reciprocal Exchanges
Segment Reporting Information
Gross premium written	118,267	121,351	344,982	337,021
NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	1,316,890	1,234,320	3,913,861	3,792,229
Property and Casualty
Segment Reporting Information
Gross premium written	1,272,602	1,211,723	3,666,072	3,594,690
Property and Casualty | Reciprocal Exchanges
Segment Reporting Information
Gross premium written	118,267	121,351	344,982	337,021
Property and Casualty | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	1,154,335	1,090,372	3,321,090	3,257,669
Property and Casualty | Personal Auto | Reciprocal Exchanges
Segment Reporting Information
Gross premium written	39,166	40,240	120,012	116,602
Property and Casualty | Personal Auto | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	705,709	661,126	2,083,702	2,017,996
Property and Casualty | Homeowners | Reciprocal Exchanges
Segment Reporting Information
Gross premium written	78,079	80,070	222,019	217,486
Property and Casualty | Homeowners | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	201,977	192,349	544,056	523,308
Property and Casualty | RV/Packaged | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	55,631	54,964	168,796	164,427
Property and Casualty | Small Business Auto | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	76,987	75,218	246,694	246,448
Property and Casualty | Lender-placed insurance | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	97,468	94,462	232,265	259,995
Property and Casualty | Other | Reciprocal Exchanges
Segment Reporting Information
Gross premium written	1,022	1,041	2,951	2,933
Property and Casualty | Other | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	16,563	12,253	45,577	45,495
Accident and Health
Segment Reporting Information
Gross premium written	162,555	143,948	592,771	534,560
Accident and Health | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	162,555	143,948	592,771	534,560
Accident and Health | Group | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	73,223	61,743	213,197	177,036
Accident and Health | Individual | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	85,728	78,378	252,719	231,890
Accident and Health | International | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	$ 3,604	$ 3,827	$ 126,855	$ 125,634

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Reinsurance - Effects of Reinsurance (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Reinsurance Recoverables
Reinsurance recoverable on paid losses	$ 302,597		$ 302,597		$ 326,596
Reinsurance recoverable on unpaid losses	1,202,002		1,202,002		1,285,142
Reinsurance recoverable	1,504,599		1,504,599		1,611,738
Reinsurance Liabilities
Unpaid Loss and LAE reserves, assumed	66,422		66,422		84,469
Unearned premiums, assumed	19,415		19,415		21,015
Prepaid reinsurance premiums	643,218		643,218		$ 665,674
Premiums:
Direct, Written	1,417,792	$ 1,330,259	4,200,571	$ 4,055,044
Assumed, Written	17,365	25,412	58,272	74,206
Gross premium written	1,435,157	1,355,671	4,258,843	4,129,250
Ceded premiums	(400,553)	(432,647)	(1,064,177)	(1,209,608)
Net premium written	1,034,604	923,024	3,194,666	2,919,642
Direct, Earned	1,407,731	1,296,717	4,080,131	3,744,321
Assumed, Earned	19,029	29,078	59,872	89,627
Premiums Earned, Gross	1,426,760	1,325,795	4,140,003	3,833,948
Ceded, Earned	(373,122)	(386,268)	(1,091,557)	(1,045,977)
Net earned premium	1,053,638	939,527	3,048,446	2,787,971
Loss and LAE expense:
Assumed Loss and LAE	7,024	7,479	23,670	16,487
Ceded Loss and LAE	$ 245,095	$ 289,726	$ 605,126	$ 712,277

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Debt - Senior Notes (Details) - Senior Notes	Sep. 30, 2019
6.75% Notes
Debt Instrument
Interest rate on debt	6.75%
7.625% Notes
Debt Instrument
Interest rate on debt	7.625%

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Stockholders' Equity - Dividends Declared (Details) - $ / shares	3 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018
Common stock
Class of Stock
Declaration Date	Jul. 29, 2019	May 06, 2019	Feb. 25, 2019	Aug. 06, 2018	May 07, 2018	Feb. 26, 2018
Common Stock, Dividend Per Share	$ 0.05	$ 0.04	$ 0.04	$ 0.04	$ 0.04	$ 0.04
Preferred Stock Series A
Class of Stock
Declaration Date	Jul. 29, 2019	May 06, 2019	Feb. 25, 2019	Aug. 06, 2018	May 07, 2018	Feb. 26, 2018
Preferred Stock, Dividend Per Share	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875
Preferred Stock Series B
Class of Stock
Declaration Date	Jul. 29, 2019	May 06, 2019	Feb. 25, 2019	Aug. 06, 2018	May 07, 2018	Feb. 26, 2018
Preferred Stock, Dividend Per Share	$ 18.75	$ 18.75	$ 18.75	$ 18.75	$ 18.75	$ 18.75
Preferred Stock, Dividend Per Depositary Share	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875
Preferred Stock Series C
Class of Stock
Declaration Date	Jul. 29, 2019	May 06, 2019	Feb. 25, 2019	Aug. 06, 2018	May 07, 2018	Feb. 26, 2018
Preferred Stock, Dividend Per Share	$ 18.75	$ 18.75	$ 18.75	$ 18.75	$ 18.75	$ 18.75
Preferred Stock, Dividend Per Depositary Share	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875	$ 0.46875
Preferred Stock Series D
Class of Stock
Declaration Date		May 06, 2019
Preferred Stock, Dividend Per Share		$ 8,750.00

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Segment Information - Long Lived Assets and Total Assets of Business Segments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Segment Reporting Information
Premiums and other receivables, net	$ 1,541,126	$ 1,399,812
Deferred acquisition costs	267,659	251,408
Reinsurance recoverable	1,504,599	1,611,738
Prepaid reinsurance premiums	643,218	665,674
Intangible assets, net and Goodwill	573,810	560,120
Prepaid and other assets	45,207	154,958
Corporate and other assets	5,498,377	4,795,570
Total assets	10,073,996	9,439,280
Property and Casualty
Segment Reporting Information
Premiums and other receivables, net	1,365,806	1,245,530
Deferred acquisition costs	239,017	226,188
Reinsurance recoverable	1,458,290	1,585,008
Prepaid reinsurance premiums	631,486	665,660
Intangible assets, net and Goodwill	450,437	443,163
Prepaid and other assets	25,417	20,941
Corporate and other assets	0	0
Total assets	4,170,453	4,186,490
Accident and Health
Segment Reporting Information
Premiums and other receivables, net	165,595	153,896
Deferred acquisition costs	28,642	25,220
Reinsurance recoverable	46,309	26,730
Prepaid reinsurance premiums	11,732	14
Intangible assets, net and Goodwill	123,373	116,957
Prepaid and other assets	15,279	22,472
Corporate and other assets	0	0
Total assets	390,930	345,289
Corporate and Other
Segment Reporting Information
Premiums and other receivables, net	9,725	386
Deferred acquisition costs	0	0
Reinsurance recoverable	0	0
Prepaid reinsurance premiums	0	0
Intangible assets, net and Goodwill	0	0
Prepaid and other assets	4,511	111,545
Corporate and other assets	5,498,377	4,795,570
Total assets	$ 5,512,613	$ 4,907,501

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Related Party Transactions - NGHC Quota Share Agreement (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Party Transaction
Restricted investments to trusts in certain reinsurance transactions	$ 54,895		$ 54,895		$ 70,470
Related Parties | ACP Re
Related Party Transaction
Restricted investments to trusts in certain reinsurance transactions	2,486		2,486		3,796
Related Parties | Maiden
Related Party Transaction
Restricted investments to trusts in certain reinsurance transactions	7,385		$ 7,385		8,644
Related Parties | Reinsurance | ACP Re, Maiden and AmTrust
Related Party Transaction
Percentage of business ceded			50.00%
Related Parties | Reinsurance Recoverable on Unpaid Losses | ACP Re, Maiden and AmTrust
Related Party Transaction
Due from (to) reinsurance treaties	4,496		$ 4,496		$ 7,425
Amounts of transaction	$ 216	$ 1,090	$ 624	$ 1,524

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Leases - Cash Flow Lease Information (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Lease, Cost [Abstract]
Operating cash flows from finance leases	$ 773
Financing cash flows from finance leases	5,281
Operating cash flows from operating leases	17,804
Leased assets obtained in exchange for new finance lease liabilities	10,950
Leased assets obtained in exchange for new operating lease liabilities	$ 21,690

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Leases - Lease Assets and Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Lessee, Lease, Description
Finance lease asset	$ 21,916
Operating	112,540
Total lease assets	134,456
Finance lease liabilities	21,002	$ 14,824
Operating	117,050
Total lease liabilities	138,052
Buildings and improvements
Lessee, Lease, Description
Finance lease asset	9,486
Accumulated amortization	1,840
Vehicles
Lessee, Lease, Description
Finance lease asset	7,616
Accumulated amortization	5,209
Hardware, software and other equipment
Lessee, Lease, Description
Finance lease asset	4,814
Accumulated amortization	8,134
Operating lease assets
Lessee, Lease, Description
Accumulated amortization	$ 18,969

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Stock-Based Compensation - RSU Activity (Details) - RSUs - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
RSUs
Non-vested at beginning of period			938,795
Granted			510,241
Vested			(403,436)
Forfeited			(17,104)
Non-vested at end of period	1,028,496		1,028,496
Weighted Average Grant Date Fair Value (in usd per share)
Non-vested at beginning of period			$ 22.28
Granted			25.58	$ 21.36
Vested			22.14
Forfeited			23.19
Non-vested at end of period	$ 23.96		$ 23.96
RSUs Additional Disclosures
Fair value of RSU's vested	$ 1,513	$ 1,348	$ 8,932	$ 6,869

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Investments - Related Parties - 800 Superior, LLC (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Related Parties | 800 Superior, LLC
Schedule of Equity Method Investments
Rent expense	$ 742	$ 722	$ 2,226	$ 2,167
East Ninth & Superior, LLC | VIE, Not primary beneficiary | Related Parties
Schedule of Equity Method Investments
Ownership percentage	50.00%		50.00%
Eight Hundred Superior NMTC investment Fund II | AmTrust Financial Services, Inc.
Schedule of Equity Method Investments
Ownership percentage	24.50%		24.50%
Eight Hundred Superior NMTC investment Fund II | Related Parties
Schedule of Equity Method Investments
Ownership percentage	24.50%		24.50%
800 Superior, LLC | AmTrust Financial Services, Inc.
Schedule of Equity Method Investments
Ownership percentage	50.00%		50.00%
800 Superior, LLC | VIE, Not primary beneficiary | Related Parties
Schedule of Equity Method Investments
Ownership percentage	50.00%		50.00%
Equity investment in unconsolidated subsidiaries	$ 7,325		$ 7,325		$ 5,125
Equity in earnings (losses)	(103)	305	(87)	(922)
Contributions	$ 2,287	$ 0	$ 2,287	$ 0

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Fair Value of Financial Instruments - Assets Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	$ 4,141,214	$ 3,561,032
Equity securities, at fair value	2,760	10,949
Short-term investments	393,663	348,549
Other investments	301,615	306,276
Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	307,388	297,083
Equity securities, at fair value	0	0
Short-term investments	27,010	17,328
NGHC, excluding Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Equity securities, at fair value	2,760	10,949
Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	4,141,214	3,561,032
Equity securities, at fair value	2,760	10,949
Total	4,541,932	3,927,072
Recurring | Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	334,398	314,411
Recurring | NGHC, excluding Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	4,207,534	3,612,661
Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	78,846	103,068
Equity securities, at fair value	2,474	9,898
Total	462,528	461,515
Level 1 | Recurring | Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	40,949	32,013
Level 1 | Recurring | NGHC, excluding Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	421,579	429,502
Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	4,049,488	3,442,601
Equity securities, at fair value	0	0
Total	4,061,943	3,442,601
Level 2 | Recurring | Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	293,449	282,398
Level 2 | Recurring | NGHC, excluding Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	3,768,494	3,160,203
Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	12,880	15,363
Equity securities, at fair value	286	1,051
Total	17,461	22,956
Level 3 | Recurring | Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	0	0
Level 3 | Recurring | NGHC, excluding Reciprocal Exchanges
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Total	17,461	22,956
U.S. Treasury
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	74,435	65,593
U.S. Treasury | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	74,435	65,593
U.S. Treasury | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	74,435	65,593
U.S. Treasury | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
U.S. Treasury | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Federal agencies
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	4,411	37,475
Federal agencies | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	4,411	37,475
Federal agencies | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	4,411	37,475
Federal agencies | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Federal agencies | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
States and political subdivision bonds
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	194,024	272,197
States and political subdivision bonds | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	194,024	272,197
States and political subdivision bonds | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
States and political subdivision bonds | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	190,924	268,601
States and political subdivision bonds | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	3,100	3,596
Foreign government
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	146,879	152,366
Foreign government | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	146,879	152,366
Foreign government | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Foreign government | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	146,879	152,366
Foreign government | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Corporate bonds
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	1,766,043	1,260,705
Corporate bonds | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	1,766,043	1,260,705
Corporate bonds | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Corporate bonds | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	1,756,263	1,248,938
Corporate bonds | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	9,780	11,767
Residential mortgage-backed securities
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	1,037,193	925,116
Residential mortgage-backed securities | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	1,037,193	925,116
Residential mortgage-backed securities | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Residential mortgage-backed securities | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	1,037,193	925,116
Residential mortgage-backed securities | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Commercial mortgage-backed securities
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	609,573	544,975
Commercial mortgage-backed securities | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	609,573	544,975
Commercial mortgage-backed securities | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Commercial mortgage-backed securities | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	609,573	544,975
Commercial mortgage-backed securities | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Asset-backed securities
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	59,829	61,147
Asset-backed securities | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	59,829	61,147
Asset-backed securities | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Asset-backed securities | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	59,829	61,147
Asset-backed securities | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Structured securities
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	248,827	241,458
Structured securities | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	248,827	241,458
Structured securities | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Structured securities | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	248,827	241,458
Structured securities | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Debt securities, available-for-sale	0	0
Common stock
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Equity securities, at fair value	2,760	10,949
Common stock | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Equity securities, at fair value	2,760	10,949
Common stock | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Equity securities, at fair value	2,474	9,898
Common stock | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Equity securities, at fair value	0	0
Common stock | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Equity securities, at fair value	286	1,051
Short-term investments | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Short-term investments	393,663	348,549
Short-term investments | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Short-term investments	381,208	348,549
Short-term investments | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Short-term investments	12,455	0
Short-term investments | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Short-term investments	0	0
Other investments | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Other investments	4,295	6,542
Other investments | Level 1 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Other investments	0	0
Other investments | Level 2 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Other investments	0	0
Other investments | Level 3 | Recurring
Fair Value Assets Measured on Recurring and Nonrecurring Basis
Other investments	$ 4,295	$ 6,542

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The following is a summary of the elements used in calculating basic and diluted earnings per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Numerator:
Net income attributable to NGHC	$	71,154		$	68,382		$	240,788		$	181,138
Preferred stock dividends - nonconvertible	(7,875		)	(7,875		)	(23,625		)	(23,625		)
Preferred stock dividends - convertible	—			—			(1,050		)	—
Numerator for basic EPS	63,279			60,507			216,113			157,513
Effect of dilutive securities:
Preferred stock dividends - convertible	—			—			1,050			—
Numerator for diluted EPS - after assumed conversions	$	63,279		$	60,507		$	217,163		$	157,513
Denominator:
Denominator for basic EPS - weighted-average shares outstanding	113,263,367			107,101,837			113,153,121			106,944,461
Effect of dilutive securities:
Employee stock options	1,823,012			2,108,233			1,881,295			2,067,054
RSUs	262,637			353,322			263,635			304,265
Convertible preferred stock	789,473			—			789,473			—
Dilutive potential common shares	2,875,122			2,461,555			2,934,403			2,371,319
Denominator for diluted EPS - weighted-average shares outstanding and assumed conversions	116,138,489			109,563,392			116,087,524			109,315,780
Basic EPS	$	0.56		$	0.56		$	1.91		$	1.47
Diluted EPS	$	0.54		$	0.55		$	1.87		$	1.44

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Debt (Tables)

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Schedule of Debt Instruments

The following table represents the Company’s debt:

	Interest Rate	Maturity	September 30, 2019			December 31, 2018
Fixed-rate:
6.75% Notes	6.75%	2024	$	350,000		$	350,000
7.625% Notes	7.625%	2055	100,000			100,000
Floating-rate:
Subordinated Debentures I	LIBOR + 3.40%	2035	41,238			41,238
Subordinated Debentures II	LIBOR + 4.25%	2037	30,930			30,930
2016 Credit Agreement(1)	LIBOR + 2.00%	2020	—			160,000
2019 Credit Agreement(2)	LIBOR + 1.75%	2023	140,000			—
Finance lease liabilities	Various	Various	21,002			14,824
Other	3.5%	Various	10,975			15,522
Unamortized debt issuance costs and unamortized discount			(6,167		)	(6,719		)
Total carrying amount of debt			$	687,978		$	705,795

⁽¹⁾ The weighted average interest rate on the amount outstanding as of December 31, 2018 was 4.58%.

⁽²⁾ The weighted average interest rate on the amount outstanding as of September 30, 2019 was 3.84%.

Schedule of Interest Expense

The following table presents the Company’s interest expense:

		Three Months Ended September 30,				Nine Months Ended September 30,
	Interest Payment Frequency	2019		2018		2019		2018
6.75% Notes	Semiannually	$	5,906	$	5,906	$	17,719	$	17,719
7.625% Notes	Quarterly	1,906		1,906		5,719		5,719
Subordinated Debentures	Quarterly	1,118		1,144		3,470		3,227
2016 Credit Agreement	Quarterly	—		1,950		1,211		5,700
2019 Credit Agreement	Quarterly	1,674		—		4,020		—
Finance lease liabilities	Various	302		157		888		477
Other(1)	Various	1,992		1,520		5,795		5,933
Total interest expense		$	12,898	$	12,583	$	38,822	$	38,775

⁽¹⁾ Other includes interest for other liabilities, interest credited on funds held balances and accretion of debt issuance costs.

Schedule of Maturities of Long-term Debt

Maturities of the Company’s debt for the years subsequent to September 30, 2019 are as follows:

	2019 (remaining three months)		2020		2021		2022		2023		2024		Thereafter		Total
6.75% Notes	$	—	$	—	$	—	$	—	$	—	$	350,000	$	—	$	350,000
7.625% Notes	—		—		—		—		—		—		100,000		100,000
Subordinated Debentures I	—		—		—		—		—		—		41,238		41,238
Subordinated Debentures II	—		—		—		—		—		—		30,930		30,930
2019 Credit Agreement	—		—		—		—		140,000		—		—		140,000
Finance lease liabilities	1,545		6,483		4,958		2,680		1,537		1,242		2,557		21,002
Other	1,633		6,399		2,943		—		—		—		—		10,975
Total principal amount of debt	$	3,178	$	12,882	$	7,901	$	2,680	$	141,537	$	351,242	$	174,725	$	694,145
Unamortized debt issuance costs and unamortized discount															(6,167		)
Carrying amount of debt															$	687,978

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Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Adopted During 2019

Standard	Description	Date of Adoption	Effect on the Company
ASU 2016-02, Leases (Topic 842) and related amendments.	This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.	January 1, 2019	The Company adopted the standard as of the beginning of the year using the modified retrospective transition approach and did not adjust prior comparative periods. On January 1, 2019, the Company recorded the recognition of the ROU asset and lease liability net of deferred rent, inducement costs and deferred tax impact of $85,000, in both assets and liabilities on its consolidated balance sheets. The adoption of the standard did not have a material effect on the Company’s results of operations and had no impact on cash flows. See Note 10, “Leases” for additional information.

Not Yet Adopted

With the exception of the adopted or not yet adopted accounting pronouncements discussed here, there have been no recent accounting pronouncements, or quantitative or qualitative progress made towards implementation of outstanding accounting pronouncements during the nine months ended September 30, 2019, as compared to those described in Note 2, “Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, that are of significance, or potential significance, to the Company.

Standard	Description	Effective Date	Effect on the Company
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related amendments.	This standard significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. Companies will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326 and impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies that an entity should include recoveries when estimating the allowance for credit losses. The FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value. The standard requires using a modified retrospective approach, recognizing a cumulative-effect adjustment as of the beginning of the first reporting period in which the standard is effective.	January 1, 2020	The Company has identified certain financial assets in scope, including debt securities classified as available for sale, financing receivables and reinsurance recoverables. The impact on the Company’s financial condition, results of operations, cash flows and disclosures at the date of adoption of the updated standard will be determined by the financial instruments held by the Company and the macroeconomic conditions and exposures at that time. The Company’s implementation and evaluation process to date includes, but is not limited to, model development, fulfillment of additional data needs for new disclosures and reporting requirements, and drafting of accounting policies. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the adoption of the standard is not expected to have a material impact on its consolidated financial statements.
ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.	This standard establishes a one-step process for testing the value of the goodwill which an entity carries. ASU 2017-04 requires the goodwill impairment to be measured as the excess of the reporting unit’s carrying amount over its fair value. Early adoption is permitted for interim or annual goodwill impairment tests.	January 1, 2020	The impact of the standard will depend upon the performance of the Company’s reporting units and the market conditions impacting the fair value of each reporting unit going forward. The adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.

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Goodwill and Intangible Assets, Net

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets, Net

Goodwill and Intangible Assets, Net

Goodwill

Goodwill is calculated as the excess of purchase price over the net fair value of assets acquired. For the nine months ended September 30, 2019, goodwill increased by $1,404 due to acquisitions.

Intangible Assets

Intangible assets consist of definite and indefinite life assets. Definite-lived intangible assets subject to amortization primarily include agent and customer relationships, value of policies in force, renewal rights and trademarks. Indefinite-lived intangible assets include management contracts and state licenses.

For the three months ended September 30, 2019 and 2018, the Company amortized $6,806 and $8,246, respectively, related to its definite-lived intangible assets, which includes amortization relating to intangible assets owned by the Reciprocal Exchanges of $18 and $(14), respectively. For the nine months ended September 30, 2019 and 2018, the Company amortized $21,134 and $23,330, respectively, related to its definite-lived intangible assets, which includes amortization relating to intangible assets owned by the Reciprocal Exchanges of $41 and $(67), respectively. Total amortization expense includes amortization of loss reserve premium. For the nine months ended September 30, 2019, intangible assets, other than goodwill, increased by $40,544 due to acquisitions.

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Leases

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Leases

Leases

The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and operating leases liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The Company uses an incremental borrowing rate at commencement date in determining the present value of future payments. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. The Company elected the package of practical expedients permitted under the transition guidance within the new standard. Application of the package of practical expedients allowed the Company not to reassess a) whether any expired or existing contracts contain leases, b) existing lease classification, c) initial direct cost for existing leases, and d) land easements that exist before the Company's adoption of the new standard.

The Company leases certain retail stores, office space, land, and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheets; the Company recognizes lease expense for these leases over the lease term.

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of lease renewal options is at the Company’s sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.

Certain of the Company's lease agreements include rental payments adjusted periodically for inflation. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company rents or subleases certain real estate to third parties.

Supplemental balance sheet information related to leases is as follow:

Leases	Classification	September 30, 2019
Assets:
Finance	Buildings and improvements	$	9,486
Finance	Vehicle	7,616
Finance	Hardware, software and other equipment	4,814
Total finance		21,916
Operating	Operating lease assets	112,540
Total lease assets	Premises and equipment, net(1)	$	134,456
Liabilities:
Finance	Debt	$	21,002
Operating	Other liabilities	117,050
Total lease liabilities		$	138,052

⁽¹⁾ As of September 30, 2019, accumulated depreciation and amortization for Buildings and improvements, Vehicle, Hardware, software and other equipment, and Operating lease assets was $1,840, $5,209, $8,134 and $18,969, respectively.

The components of lease cost are as follows:

Lease Cost	Classification	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Finance lease cost:
Amortization of leased assets	General and administrative expenses	$	2,284	$	5,907
Interest on lease liabilities	Interest expense	302		888
Finance lease cost		$	2,586	$	6,795
Operating lease cost	General and administrative expenses	$	9,794	$	27,538

Maturities of the Company’s lease liabilities for the years subsequent to September 30, 2019 are as follows:

	Operating Leases			Finance Leases			Total
2019 (remaining three months)	$	8,082		$	1,781		$	9,863
2020	27,678			7,258			34,936
2021	23,906			5,473			29,379
2022	19,494			3,037			22,531
2023	16,526			1,794			18,320
2024	13,856			1,428			15,284
Thereafter	28,541			2,847			31,388
Total lease payments	$	138,083		$	23,618		$	161,701
Less: Interest	(21,033		)	(2,616		)
Present value of lease liabilities	$	117,050		$	21,002

Supplemental information related to term and discount rate are as follow:

Leases	Classification	September 30, 2019
Weighted-average remaining lease term:
Finance	Buildings and improvements	7.4 years
Finance	Vehicle	2.9 years
Finance	Hardware, software and other equipment	1.8 years
Operating	Operating lease assets	5.9 years
Weighted-average discount rate:
Finance	Buildings and improvements	5.8	%
Finance	Vehicle	4.2	%
Finance	Hardware, software and other equipment	4.0	%
Operating	Operating lease assets	5.6	%

Supplemental cash flow information related to leases is as follow:

	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	773
Financing cash flows from finance leases	5,281
Operating cash flows from operating leases	17,804
Leased assets obtained in exchange for new finance lease liabilities	10,950
Leased assets obtained in exchange for new operating lease liabilities	21,690

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-Based Compensation

Effective May 6, 2019, the Company’s stockholders approved the 2019 Omnibus Incentive Plan (the “2019 Plan”). The 2019 Plan authorizes up to 2.5 million shares of the Company’s stock for awards of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSU”), performance share units, performance units, cash-based awards or other stock-based awards. The number of shares of common stock for which awards may be issued may not exceed 2.5 million shares, subject to the authority of the Company’s Board of Directors to adjust this amount in the event of a consolidation, reorganization, stock dividend, recapitalization or similar transaction affecting the Company’s common stock. The 2019 Plan serves as a successor of the Company’s prior equity incentive plans. Outstanding awards under the prior plans continue to be outstanding and subject to their terms and conditions. As of September 30, 2019, 2.5 million shares of the Company’s common stock remained available for grants under the 2019 Plan.

Stock Options

A summary of the stock option awards is shown below:

	Shares Subject to Options Outstanding
Nine Months Ended September 30, 2019	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Outstanding at beginning of period	3,184,352		$	9.53
Exercised	(114,848	)	3.80
Outstanding and exercisable at end of period	3,069,504		$	9.74	3.4	$	40,755

⁽¹⁾ The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of the Company’s common stock of $23.02, as reported on the Nasdaq Global Market on September 30, 2019.

No options were granted, forfeited or expired during the nine months ended September 30, 2019. The total intrinsic value of the options exercised for the three months ended September 30, 2019 and 2018 was $1,035 and $322, respectively. The total intrinsic value of the options exercised for the nine months ended September 30, 2019 and 2018 was $2,310 and $3,953, respectively. The total fair value of stock options vested for the three months ended September 30, 2019 and 2018 was $76 and $19, respectively. The total fair value of stock options vested for the nine months ended September 30, 2019 and 2018 was $175 and $652, respectively.

Restricted Stock Units

A summary of the RSUs is shown below:

	RSUs
Nine Months Ended September 30, 2019	Number of RSUs		Weighted-Average Grant Date Fair Value
Non-vested at beginning of period	938,795		$	22.28
Granted	510,241		25.58
Vested	(403,436	)	22.14
Forfeited	(17,104	)	23.19
Non-vested at end of period	1,028,496		$	23.96

The weighted-average grant date fair value of RSUs granted for the nine months ended September 30, 2019 and 2018 was $25.58 and $21.36, respectively. The total fair value of the RSUs vested for the three months ended September 30, 2019 and 2018 was $1,513 and $1,348, respectively. The total fair value of the RSUs vested for the nine months ended September 30, 2019 and 2018 was $8,932 and $6,869, respectively.

Stock-Based Compensation Expense

Stock-based compensation expense, included in general and administrative expenses, for all stock-based compensation plans was $2,785 and $2,283 for the three months ended September 30, 2019 and 2018, respectively, and $8,277 and $6,793 for the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, the Company had approximately $18,455 of unrecognized stock-based compensation expense, all of which was related to RSUs. This unrecognized stock-based compensation expense is expected to be recognized over a weighted-average period of approximately 1.5 years based on vesting under the award service conditions.

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Basis of Reporting Basis of Reporting (Policies)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Accounting, Policy

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”) 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 (the “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, 2018 previously filed with the SEC on February 25, 2019. The balance sheet at December 31, 2018, has been derived from the audited consolidated financial statements at that date.

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.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Adopted During 2019

Standard	Description	Date of Adoption	Effect on the Company
ASU 2016-02, Leases (Topic 842) and related amendments.	This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.	January 1, 2019	The Company adopted the standard as of the beginning of the year using the modified retrospective transition approach and did not adjust prior comparative periods. On January 1, 2019, the Company recorded the recognition of the ROU asset and lease liability net of deferred rent, inducement costs and deferred tax impact of $85,000, in both assets and liabilities on its consolidated balance sheets. The adoption of the standard did not have a material effect on the Company’s results of operations and had no impact on cash flows. See Note 10, “Leases” for additional information.

Not Yet Adopted

With the exception of the adopted or not yet adopted accounting pronouncements discussed here, there have been no recent accounting pronouncements, or quantitative or qualitative progress made towards implementation of outstanding accounting pronouncements during the nine months ended September 30, 2019, as compared to those described in Note 2, “Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, that are of significance, or potential significance, to the Company.

Standard	Description	Effective Date	Effect on the Company
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related amendments.	This standard significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. Companies will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326 and impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies that an entity should include recoveries when estimating the allowance for credit losses. The FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value. The standard requires using a modified retrospective approach, recognizing a cumulative-effect adjustment as of the beginning of the first reporting period in which the standard is effective.	January 1, 2020	The Company has identified certain financial assets in scope, including debt securities classified as available for sale, financing receivables and reinsurance recoverables. The impact on the Company’s financial condition, results of operations, cash flows and disclosures at the date of adoption of the updated standard will be determined by the financial instruments held by the Company and the macroeconomic conditions and exposures at that time. The Company’s implementation and evaluation process to date includes, but is not limited to, model development, fulfillment of additional data needs for new disclosures and reporting requirements, and drafting of accounting policies. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the adoption of the standard is not expected to have a material impact on its consolidated financial statements.
ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.	This standard establishes a one-step process for testing the value of the goodwill which an entity carries. ASU 2017-04 requires the goodwill impairment to be measured as the excess of the reporting unit’s carrying amount over its fair value. Early adoption is permitted for interim or annual goodwill impairment tests.	January 1, 2020	The impact of the standard will depend upon the performance of the Company’s reporting units and the market conditions impacting the fair value of each reporting unit going forward. The adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.

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Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common stock	Preferred stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Non-controlling Interest
Common stock, shares outstanding, beginning balance at Dec. 31, 2017		106,697,648
Common stock, amount, beginning balance at Dec. 31, 2017		$ 1,067
Preferred stock, shares outstanding, beginning balance at Dec. 31, 2017			2,565,000
Preferred stock, amount, beginning balance at Dec. 31, 2017			$ 420,000
Total stockholders' equity, amount, beginning balance at Dec. 31, 2017	$ 1,953,425			$ 917,751	$ (8,112)	$ 597,863	$ 24,856
Increase (Decrease) in Stockholders' Equity
Net income (loss)	149,159					181,138	(31,979)
Foreign currency translation adjustment, net of tax	(7,330)				(7,330)
Change in unrealized gain (loss) on investments, net of tax	(60,007)				(53,175)		(6,832)
Issuance of preferred stock, shares			120
Issuance of preferred stock, value	29,890		$ 30,000
Issuance of preferred stock, Adjustments to Additional Paid in Capital				(110)
Common stock dividends declared	(12,850)					(12,850)
Preferred stock dividends declared	(23,625)					(23,625)
Common stock issued under employee stock plans and exercises of stock options, shares		557,622
Common stock issued under employee stock plans and exercises of stock options, value	1,649	$ 4		1,645
Shares withheld related to net share settlement, shares		(122,710)
Shares withheld related to net share settlement, value	(2,955)			(2,955)
Stock-based compensation	6,793			6,793
Common stock, shares outstanding, ending balance at Sep. 30, 2018		107,132,560
Common stock, amount, ending balance at Sep. 30, 2018		$ 1,071
Preferred stock, shares outstanding, ending balance at Sep. 30, 2018			2,565,120
Preferred stock, amount, ending balance at Sep. 30, 2018			$ 450,000
Total stockholders' equity, amount, ending balance at Sep. 30, 2018	2,042,979			923,124	(68,581)	751,320	(13,955)
Common stock, shares outstanding, beginning balance at Jun. 30, 2018		107,057,771
Common stock, amount, beginning balance at Jun. 30, 2018		$ 1,071
Preferred stock, shares outstanding, beginning balance at Jun. 30, 2018			2,565,000
Preferred stock, amount, beginning balance at Jun. 30, 2018			$ 420,000
Total stockholders' equity, amount, beginning balance at Jun. 30, 2018	1,981,275			921,744	(55,698)	695,099	(941)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	56,229					68,382	(12,153)
Foreign currency translation adjustment, net of tax	1,041				1,041
Change in unrealized gain (loss) on investments, net of tax	(14,785)				(13,924)		(861)
Issuance of preferred stock, shares			120
Issuance of preferred stock, value	29,890		$ 30,000
Issuance of preferred stock, Adjustments to Additional Paid in Capital				(110)
Common stock dividends declared	(4,286)					(4,286)
Preferred stock dividends declared	(7,875)					(7,875)
Common stock issued under employee stock plans and exercises of stock options, shares		104,951
Common stock issued under employee stock plans and exercises of stock options, value	48			48
Shares withheld related to net share settlement, shares		(30,162)
Shares withheld related to net share settlement, value	(841)			(841)
Stock-based compensation	2,283			2,283
Common stock, shares outstanding, ending balance at Sep. 30, 2018		107,132,560
Common stock, amount, ending balance at Sep. 30, 2018		$ 1,071
Preferred stock, shares outstanding, ending balance at Sep. 30, 2018			2,565,120
Preferred stock, amount, ending balance at Sep. 30, 2018			$ 450,000
Total stockholders' equity, amount, ending balance at Sep. 30, 2018	2,042,979			923,124	(68,581)	751,320	(13,955)
Increase (Decrease) in Stockholders' Equity
Cumulative-effect adjustment of change in accounting principles	$ 8,830				36	8,794
Common stock, shares outstanding, beginning balance at Dec. 31, 2018	112,940,595	112,940,595
Common stock, amount, beginning balance at Dec. 31, 2018		$ 1,129
Preferred stock, shares outstanding, beginning balance at Dec. 31, 2018	2,565,120		2,565,120
Preferred stock, amount, beginning balance at Dec. 31, 2018			$ 450,000
Total stockholders' equity, amount, beginning balance at Dec. 31, 2018	$ 2,200,871			1,057,783	(52,130)	764,056	(19,967)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	222,636					240,788	(18,152)
Foreign currency translation adjustment, net of tax	(6,440)				(6,440)
Change in unrealized gain (loss) on investments, net of tax	148,861				138,957		9,904
Common stock dividends declared	(14,714)					(14,714)
Preferred stock dividends declared	(24,675)					(24,675)
Common stock issued under employee stock plans and exercises of stock options, shares		518,284
Common stock issued under employee stock plans and exercises of stock options, value	436	$ 4		432
Shares withheld related to net share settlement, shares		(145,837)
Shares withheld related to net share settlement, value	(3,633)			(3,633)
Stock-based compensation	$ 8,277			8,277
Common stock, shares outstanding, ending balance at Sep. 30, 2019	113,313,042	113,313,042
Common stock, amount, ending balance at Sep. 30, 2019		$ 1,133
Preferred stock, shares outstanding, ending balance at Sep. 30, 2019	2,565,120		2,565,120
Preferred stock, amount, ending balance at Sep. 30, 2019			$ 450,000
Total stockholders' equity, amount, ending balance at Sep. 30, 2019	$ 2,531,619			1,062,859	80,387	965,455	(28,215)
Common stock, shares outstanding, beginning balance at Jun. 30, 2019		113,215,632
Common stock, amount, beginning balance at Jun. 30, 2019		$ 1,132
Preferred stock, shares outstanding, beginning balance at Jun. 30, 2019			2,565,120
Preferred stock, amount, beginning balance at Jun. 30, 2019			$ 450,000
Total stockholders' equity, amount, beginning balance at Jun. 30, 2019	2,460,868			1,060,379	59,910	907,841	(18,394)
Increase (Decrease) in Stockholders' Equity
Net income (loss)	60,239					71,154	(10,915)
Foreign currency translation adjustment, net of tax	(3,242)				(3,242)
Change in unrealized gain (loss) on investments, net of tax	24,813				23,719		1,094
Common stock dividends declared	(5,665)					(5,665)
Preferred stock dividends declared	(7,875)					(7,875)
Common stock issued under employee stock plans and exercises of stock options, shares		117,796
Common stock issued under employee stock plans and exercises of stock options, value	189	$ 1		188
Shares withheld related to net share settlement, shares		(20,386)
Shares withheld related to net share settlement, value	(493)			(493)
Stock-based compensation	$ 2,785			2,785
Common stock, shares outstanding, ending balance at Sep. 30, 2019	113,313,042	113,313,042
Common stock, amount, ending balance at Sep. 30, 2019		$ 1,133
Preferred stock, shares outstanding, ending balance at Sep. 30, 2019	2,565,120		2,565,120
Preferred stock, amount, ending balance at Sep. 30, 2019			$ 450,000
Total stockholders' equity, amount, ending balance at Sep. 30, 2019	$ 2,531,619			$ 1,062,859	$ 80,387	$ 965,455	$ (28,215)

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Investments:
Debt securities, available-for-sale, at fair value (Exchanges - $307,388 and $297,083)	$ 4,141,214	$ 3,561,032
Equity securities, at fair value	2,760	10,949
Short-term investments (Exchanges - $27,010 and $17,328)	393,663	348,549
Other investments (related parties - $234,617 and $233,723)	301,615	306,276
Total investments	4,839,252	4,226,806
Cash and cash equivalents (Exchanges - $153 and $0)	199,419	193,858
Restricted cash and cash equivalents (Exchanges - $281 and $200)	27,903	39,725
Accrued investment income (related parties - $1,195 and $2,362) (Exchanges - $2,241 and $1,596)	27,946	27,177
Premiums and other receivables, net (Exchanges - $62,540 and $61,327)	1,541,126	1,399,812
Deferred acquisition costs (Exchanges - $23,113 and $20,007)	267,659	251,408
Reinsurance recoverable (related parties - $4,496 and $7,425) (Exchanges - $120,192 and $117,068)	1,504,599	1,611,738
Prepaid reinsurance premiums (Exchanges - $118,042 and $136,433)	643,218	665,674
Premises and equipment, net (Exchanges - $441 and $1,695)	403,857	308,004
Intangible assets, net (Exchanges - $3,270 and $3,405)	392,223	379,937
Goodwill	181,587	180,183
Prepaid and other assets (Exchanges - $11 and $4,581)	45,207	154,958
Total assets	10,073,996	9,439,280
Liabilities:
Unpaid loss and loss adjustment expense reserves (Exchanges - $193,456 and $178,470)	3,039,255	2,957,159
Unearned premiums and other revenue (Exchanges - $265,538 and $265,763)	2,450,476	2,280,728
Reinsurance payable (Exchanges - $44,424 and $40,393)	673,724	656,265
Accounts payable and accrued expenses (related parties - $771 and $69,874) (Exchanges - $5,200 and $7,720)	317,675	398,058
Debt	687,978	705,795
Other liabilities (Exchanges - $43,754 and $61,640)	373,269	240,404
Total liabilities	7,542,377	7,238,409
Stockholders’ equity:
Common stock, $0.01 par value - authorized 150,000,000 shares, issued and outstanding 113,313,042 shares - 2019; authorized 150,000,000 shares, issued and outstanding 112,940,595 shares - 2018.	1,133	1,129
Preferred stock, $0.01 par value - authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - 2019; authorized 10,000,000 shares, issued and outstanding 2,565,120 shares - 2018. Aggregate liquidation preference $450,000 - 2019, $450,000 - 2018.	450,000	450,000
Additional paid-in capital	1,062,859	1,057,783
Accumulated other comprehensive income:
Unrealized foreign currency translation adjustment, net of tax	(20,901)	(14,461)
Unrealized gain (loss) on investments, net of tax	101,288	(37,669)
Total accumulated other comprehensive income (loss)	80,387	(52,130)
Retained earnings	965,455	764,056
Total National General Holdings Corp. Stockholders’ Equity	2,559,834	2,220,838
Noncontrolling interest	(28,215)	(19,967)
Total stockholders’ equity	2,531,619	2,200,871
Total liabilities and stockholders’ equity	$ 10,073,996	$ 9,439,280

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Segment Information - Schedule of Revenue by Geographical Location (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information
Gross premium written	$ 1,435,157	$ 1,355,671	$ 4,258,843	$ 4,129,250
Net premium written	1,034,604	923,024	3,194,666	2,919,642
Net earned premium	1,053,638	939,527	3,048,446	2,787,971
Reciprocal Exchanges
Segment Reporting Information
Gross premium written	118,267	121,351	344,982	337,021
Net premium written	67,285	14,814	172,460	132,240
Net earned premium	57,117	43,151	149,405	141,009
NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	1,316,890	1,234,320	3,913,861	3,792,229
Net premium written	967,319	908,210	3,022,206	2,787,402
Net earned premium	996,521	896,376	2,899,041	2,646,962
North America
Segment Reporting Information
Gross premium written	1,431,576	1,351,843	4,132,012	4,003,615
Net premium written	1,031,821	936,270	3,117,680	2,811,081
Net earned premium	1,029,715	921,518	2,974,957	2,700,418
North America | Reciprocal Exchanges
Segment Reporting Information
Gross premium written	118,267	121,351	344,982	337,021
Net premium written	67,285	14,814	172,460	132,240
Net earned premium	57,117	43,151	149,405	141,009
North America | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	1,313,309	1,230,492	3,787,030	3,666,594
Net premium written	964,536	921,456	2,945,220	2,678,841
Net earned premium	972,598	878,367	2,825,552	2,559,409
Europe
Segment Reporting Information
Gross premium written	3,581	3,828	126,831	125,635
Net premium written	2,783	(13,246)	76,986	108,561
Net earned premium	23,923	18,009	73,489	87,553
Europe | Reciprocal Exchanges
Segment Reporting Information
Gross premium written	0	0	0	0
Net premium written	0	0	0	0
Net earned premium	0	0	0	0
Europe | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Gross premium written	3,581	3,828	126,831	125,635
Net premium written	2,783	(13,246)	76,986	108,561
Net earned premium	$ 23,923	$ 18,009	$ 73,489	$ 87,553

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Goodwill and Intangible Assets, Net - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Entity Information
Goodwill, Period Increase (Decrease)			$ 1,404
Amortization of Intangible Assets	$ 6,806	$ 8,246	21,134	$ 23,330
Intangible Assets, Other Than Goodwill, Period Increase (Decrease)	40,544		40,544
Reciprocal Exchanges
Entity Information
Amortization of Intangible Assets	$ 18	$ (14)	$ 41	$ (67)

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Debt - Debt Instruments (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Debt Instrument
Notes Payable	$ 687,978		$ 705,795
Finance lease liabilities	21,002		14,824
Unamortized debt issuance costs and unamortized discount	$ (6,167)		(6,719)
Senior Notes | 6.75% Notes
Debt Instrument
Interest rate on debt	6.75%
Notes Payable	$ 350,000		350,000
Senior Notes | 7.625% Notes
Debt Instrument
Interest rate on debt	7.625%
Notes Payable	$ 100,000		100,000
Surplus Notes | Subordinated Debentures I
Debt Instrument
Basis Spread on Variable Rate	3.40%
Notes Payable	$ 41,238		41,238
Surplus Notes | Subordinated Debentures I | LIBOR
Debt Instrument
LIBOR	LIBOR
Surplus Notes | Subordinated Debentures II
Debt Instrument
Basis Spread on Variable Rate	4.25%
Notes Payable	$ 30,930		30,930
Surplus Notes | Subordinated Debentures II | LIBOR
Debt Instrument
LIBOR	LIBOR
Other | Other
Debt Instrument
Interest rate on debt	3.50%
Notes Payable	$ 10,975		15,522
2016 Credit Agreement
Debt Instrument
Notes Payable	0		160,000
2019 Credit Agreement
Debt Instrument
Notes Payable	$ 140,000		$ 0
JPMorgan Chase, N.A. | 2016 Credit Agreement
Debt Instrument
Basis Spread on Variable Rate		2.00%
Interest rate on Credit Agreement			4.58%
JPMorgan Chase, N.A. | 2016 Credit Agreement | LIBOR
Debt Instrument
LIBOR		LIBOR
JPMorgan Chase, N.A. | 2019 Credit Agreement
Debt Instrument
Basis Spread on Variable Rate	1.75%
Interest rate on Credit Agreement	3.84%
JPMorgan Chase, N.A. | 2019 Credit Agreement | LIBOR
Debt Instrument
LIBOR	LIBO
Basis Spread on Variable Rate	1.00%

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Segment Information - Net Earned Premium (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information
Net earned premium	$ 1,053,638	$ 939,527	$ 3,048,446	$ 2,787,971
Reciprocal Exchanges
Segment Reporting Information
Net earned premium	57,117	43,151	149,405	141,009
NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	996,521	896,376	2,899,041	2,646,962
Property and Casualty
Segment Reporting Information
Net earned premium	884,735	784,181	2,551,914	2,322,580
Property and Casualty | Reciprocal Exchanges
Segment Reporting Information
Net earned premium	57,117	43,151	149,405	141,009
Property and Casualty | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	827,618	741,030	2,402,509	2,181,571
Property and Casualty | Personal Auto | Reciprocal Exchanges
Segment Reporting Information
Net earned premium	33,953	13,353	65,907	38,812
Property and Casualty | Personal Auto | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	568,346	496,139	1,621,734	1,436,793
Property and Casualty | Homeowners | Reciprocal Exchanges
Segment Reporting Information
Net earned premium	22,759	29,698	82,475	101,578
Property and Casualty | Homeowners | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	86,525	80,308	272,591	242,161
Property and Casualty | RV/Packaged | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	51,023	51,229	150,739	145,911
Property and Casualty | Small Business Auto | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	62,265	59,636	189,957	178,302
Property and Casualty | Lender-placed insurance | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	56,599	48,466	158,595	162,629
Property and Casualty | Other | Reciprocal Exchanges
Segment Reporting Information
Net earned premium	405	100	1,023	619
Property and Casualty | Other | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	2,860	5,252	8,893	15,775
Accident and Health
Segment Reporting Information
Net earned premium	168,903	155,346	496,532	465,391
Accident and Health | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	168,903	155,346	496,532	465,391
Accident and Health | Group | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	59,009	51,310	170,921	145,788
Accident and Health | Individual | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	85,971	78,874	252,122	232,069
Accident and Health | International | NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Net earned premium	$ 23,923	$ 25,162	$ 73,489	$ 87,534

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Debt - Credit Agreement (Details) - 2019 Credit Agreement - JPMorgan Chase, N.A. $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($)
Debt Instrument
Line of Credit Facility, Maximum Amount Outstanding During Period	$ 340,000
Basis Spread on Variable Rate	1.75%
Letter Of Credit Fronting Fee	0.125%
Line of Credit Facility, Leverage Ratio	0.225%
LIBOR
Debt Instrument
federal funds	LIBO
Basis Spread on Variable Rate	1.00%
Federal Funds Purchased
Debt Instrument
federal funds	federal funds
Alternate Base Rate Or LIBOR
Debt Instrument
Basis Spread on Variable Rate	0.50%
Minimum
Debt Instrument
Line of Credit Facility, Current Borrowing Capacity	$ 150,000
Line of Credit Facility, Commitment Fee Percentage	0.175%
Maximum
Debt Instrument
Line of Credit Facility, Current Borrowing Capacity	$ 50,000
Line of Credit Facility, Commitment Fee Percentage	0.25%

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Investments - Credit Quality of Investments (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Schedule of Available-for-sale Securities
Amortized Cost	$ 4,006,377	$ 3,614,609
Fair Value	4,141,214	3,561,032
NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	3,705,639	3,311,639
Fair Value	3,833,826	3,263,949
Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	300,738	302,970
Fair Value	307,388	297,083
Debt securities | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	3,705,639	3,311,639
Fair Value	$ 3,833,826	$ 3,263,949
Percentage	100.00%	100.00%
Debt securities | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 300,738	$ 302,970
Fair Value	$ 307,388	$ 297,083
Percentage	100.00%	100.00%
U.S. Treasury | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 59,290	$ 52,122
Fair Value	$ 60,998	$ 52,759
Percentage	1.60%	1.60%
U.S. Treasury | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 12,898	$ 12,707
Fair Value	$ 13,437	$ 12,834
Percentage	4.40%	4.30%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, AAA Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 622,806	$ 586,639
Fair Value	$ 655,803	$ 589,078
Percentage	17.10%	18.00%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, AAA Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 18,143	$ 18,335
Fair Value	$ 18,891	$ 18,109
Percentage	6.10%	6.10%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, AA, AA Plus, and AA Minus Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 1,381,180	$ 1,385,709
Fair Value	$ 1,411,831	$ 1,358,528
Percentage	36.80%	41.60%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, AA, AA Plus, and AA Minus Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 109,656	$ 142,525
Fair Value	$ 112,043	$ 140,114
Percentage	36.50%	47.20%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, A, A Plus, and A Minus Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 803,831	$ 591,219
Fair Value	$ 831,868	$ 581,106
Percentage	21.70%	17.80%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, A, A Plus, and A Minus Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 111,498	$ 118,535
Fair Value	$ 114,601	$ 115,618
Percentage	37.20%	38.90%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 788,908	$ 653,645
Fair Value	$ 821,368	$ 641,554
Percentage	21.40%	19.70%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, BBB, BBB Plus, and BBB Minus Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 48,543	$ 10,834
Fair Value	$ 48,416	$ 10,374
Percentage	15.80%	3.50%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, BB Plus and Lower Rating | NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 49,624	$ 42,305
Fair Value	$ 51,958	$ 40,924
Percentage	1.40%	1.30%
Debt Securities, Excluding US Treasury Securities | Standard & Poor's, BB Plus and Lower Rating | Reciprocal Exchanges
Schedule of Available-for-sale Securities
Amortized Cost	$ 0	$ 34
Fair Value	$ 0	$ 34
Percentage	0.00%	0.00%

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Investments - Gross Unrealized Losses (Details) $ in Thousands	Sep. 30, 2019 USD ($) security	Dec. 31, 2018 USD ($) security
Schedule of Available-for-sale Securities
Less Than 12 Months	$ 426,757	$ 1,209,157
12 Months or More	206,851	1,171,891
Total	633,608	2,381,048
Less Than 12 Months	(2,918)	(24,306)
12 Months or More	(4,494)	(41,052)
Total	$ (7,412)	$ (65,358)
Number of securities with gross unrealized loss | security	378	1,662
25% of amortized cost or cost	25.00%	25.00%
Reciprocal Exchanges
Schedule of Available-for-sale Securities
Less Than 12 Months	$ 34,874	$ 93,334
12 Months or More	6,898	152,916
Total	41,772	246,250
Less Than 12 Months	(249)	(1,638)
12 Months or More	(102)	(4,824)
Total	(351)	(6,462)
NGHC, excluding Reciprocal Exchanges
Schedule of Available-for-sale Securities
Less Than 12 Months	391,883	1,115,823
12 Months or More	199,953	1,018,975
Total	591,836	2,134,798
Less Than 12 Months	(2,669)	(22,668)
12 Months or More	(4,392)	(36,228)
Total	(7,061)	(58,896)
U.S. Treasury
Schedule of Available-for-sale Securities
Less Than 12 Months	24,598	474
12 Months or More	13,846	21,540
Total	38,444	22,014
Less Than 12 Months	(32)	(2)
12 Months or More	(21)	(260)
Total	(53)	(262)
Federal agencies
Schedule of Available-for-sale Securities
Less Than 12 Months	259	23,729
12 Months or More	0	1,493
Total	259	25,222
Less Than 12 Months	(1)	(351)
12 Months or More	0	(38)
Total	(1)	(389)
States and political subdivision bonds
Schedule of Available-for-sale Securities
Less Than 12 Months	1,281	57,090
12 Months or More	2,597	119,759
Total	3,878	176,849
Less Than 12 Months	(1)	(902)
12 Months or More	(29)	(2,637)
Total	(30)	(3,539)
Foreign government
Schedule of Available-for-sale Securities
Less Than 12 Months	2,904	45,748
12 Months or More	0	0
Total	2,904	45,748
Less Than 12 Months	(22)	(70)
12 Months or More	0	0
Total	(22)	(70)
Corporate bonds
Schedule of Available-for-sale Securities
Less Than 12 Months	121,461	586,359
12 Months or More	9,013	321,115
Total	130,474	907,474
Less Than 12 Months	(771)	(12,891)
12 Months or More	(178)	(12,559)
Total	(949)	(25,450)
Residential mortgage-backed securities
Schedule of Available-for-sale Securities
Less Than 12 Months	206,204	234,396
12 Months or More	69,431	551,623
Total	275,635	786,019
Less Than 12 Months	(1,194)	(1,637)
12 Months or More	(756)	(18,328)
Total	(1,950)	(19,965)
Commercial mortgage-backed securities
Schedule of Available-for-sale Securities
Less Than 12 Months	4,737	13,229
12 Months or More	750	148,700
Total	5,487	161,929
Less Than 12 Months	(22)	(239)
12 Months or More	(6)	(6,735)
Total	(28)	(6,974)
Asset-backed securities
Schedule of Available-for-sale Securities
Less Than 12 Months	5,548	25,978
12 Months or More	979	1,494
Total	6,527	27,472
Less Than 12 Months	(26)	(78)
12 Months or More	(21)	(43)
Total	(47)	(121)
Structured securities
Schedule of Available-for-sale Securities
Less Than 12 Months	59,765	222,154
12 Months or More	110,235	6,167
Total	170,000	228,321
Less Than 12 Months	(849)	(8,136)
12 Months or More	(3,483)	(452)
Total	$ (4,332)	$ (8,588)

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Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following is a summary of the elements used in calculating basic and diluted earnings per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Numerator:
Net income attributable to NGHC	$	71,154		$	68,382		$	240,788		$	181,138
Preferred stock dividends - nonconvertible	(7,875		)	(7,875		)	(23,625		)	(23,625		)
Preferred stock dividends - convertible	—			—			(1,050		)	—
Numerator for basic EPS	63,279			60,507			216,113			157,513
Effect of dilutive securities:
Preferred stock dividends - convertible	—			—			1,050			—
Numerator for diluted EPS - after assumed conversions	$	63,279		$	60,507		$	217,163		$	157,513
Denominator:
Denominator for basic EPS - weighted-average shares outstanding	113,263,367			107,101,837			113,153,121			106,944,461
Effect of dilutive securities:
Employee stock options	1,823,012			2,108,233			1,881,295			2,067,054
RSUs	262,637			353,322			263,635			304,265
Convertible preferred stock	789,473			—			789,473			—
Dilutive potential common shares	2,875,122			2,461,555			2,934,403			2,371,319
Denominator for diluted EPS - weighted-average shares outstanding and assumed conversions	116,138,489			109,563,392			116,087,524			109,315,780
Basic EPS	$	0.56		$	0.56		$	1.91		$	1.47
Diluted EPS	$	0.54		$	0.55		$	1.87		$	1.44

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Recent Accounting Pronouncements (Tables)

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

Adopted During 2019

Standard	Description	Date of Adoption	Effect on the Company
ASU 2016-02, Leases (Topic 842) and related amendments.	This standard was issued to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.	January 1, 2019	The Company adopted the standard as of the beginning of the year using the modified retrospective transition approach and did not adjust prior comparative periods. On January 1, 2019, the Company recorded the recognition of the ROU asset and lease liability net of deferred rent, inducement costs and deferred tax impact of $85,000, in both assets and liabilities on its consolidated balance sheets. The adoption of the standard did not have a material effect on the Company’s results of operations and had no impact on cash flows. See Note 10, “Leases” for additional information.

Not Yet Adopted

With the exception of the adopted or not yet adopted accounting pronouncements discussed here, there have been no recent accounting pronouncements, or quantitative or qualitative progress made towards implementation of outstanding accounting pronouncements during the nine months ended September 30, 2019, as compared to those described in Note 2, “Significant Accounting Policies” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, that are of significance, or potential significance, to the Company.

Standard	Description	Effective Date	Effect on the Company
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related amendments.	This standard significantly changes the impairment model for most financial assets and certain other instruments. ASU 2016-13 will require immediate recognition of estimated credit losses expected to occur over the remaining life of many financial assets, which will generally result in earlier recognition of allowances for credit losses on loans and other financial instruments. Companies will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Companies will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. The FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarifies that receivables arising from operating leases are not within the scope of Topic 326 and impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. The FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies that an entity should include recoveries when estimating the allowance for credit losses. The FASB issued ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which eases transition to the credit losses standard by providing the option to measure certain types of assets at fair value. The standard requires using a modified retrospective approach, recognizing a cumulative-effect adjustment as of the beginning of the first reporting period in which the standard is effective.	January 1, 2020	The Company has identified certain financial assets in scope, including debt securities classified as available for sale, financing receivables and reinsurance recoverables. The impact on the Company’s financial condition, results of operations, cash flows and disclosures at the date of adoption of the updated standard will be determined by the financial instruments held by the Company and the macroeconomic conditions and exposures at that time. The Company’s implementation and evaluation process to date includes, but is not limited to, model development, fulfillment of additional data needs for new disclosures and reporting requirements, and drafting of accounting policies. Based on the composition of the Company’s investment portfolio, current market conditions, and historical credit loss activity, the adoption of the standard is not expected to have a material impact on its consolidated financial statements.
ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.	This standard establishes a one-step process for testing the value of the goodwill which an entity carries. ASU 2017-04 requires the goodwill impairment to be measured as the excess of the reporting unit’s carrying amount over its fair value. Early adoption is permitted for interim or annual goodwill impairment tests.	January 1, 2020	The impact of the standard will depend upon the performance of the Company’s reporting units and the market conditions impacting the fair value of each reporting unit going forward. The adoption of the standard is not expected to have a material impact on the Company’s consolidated financial statements.

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Cash flows from operating activities:
Net income	$ 222,636	$ 149,159
Adjustments to reconcile net income to cash provided by (used in) operating activities:
Net loss on investments	5,773	22,756
Bad debt expense	61,334	55,989
Depreciation and amortization	87,055	64,980
Stock-based compensation expense	8,277	6,793
Other, net	(3,159)	922
Changes in assets and liabilities:
Accrued investment income	(195)	(1,641)
Premiums and other receivables	(172,034)	(208,847)
Deferred acquisition costs	(17,397)	(36,647)
Reinsurance recoverable	118,763	(233,216)
Prepaid reinsurance premiums	29,372	(163,632)
Prepaid expenses and other assets	81,324	28,274
Unpaid loss and loss adjustment expense reserves	(14,165)	199,905
Unearned premiums and other revenue	93,853	316,556
Reinsurance payable	16,361	258,686
Accounts payable and accrued expenses	(578)	24,874
Other liabilities	(7,766)	(24,837)
Net cash provided by operating activities	509,454	460,074
Cash flows from investing activities:
Purchases of Debt securities, available-for-sale	(863,050)	(1,358,877)
Purchases of Equity securities	0	(1,297)
Purchases of Short-term investments	(2,328,055)	(2,055,421)
Purchases of Other investments	(4,554)	(27,620)
Purchases of Premises and equipment	(84,285)	(84,779)
Proceeds from Sale and maturity of debt securities, available-for-sale	518,170	1,180,945
Proceeds from Sale of equity securities	1,700	3,448
Proceeds from Sale of short-term investments	2,293,700	1,916,739
Proceeds from Sale and return of other investments	11,639	120,905
Other investing activities	16,128	(18,724)
Net cash used in investing activities	(438,607)	(324,681)
Cash flows from financing activities:
Payments of debt issuance costs	(1,726)	0
Repayments of debt and principal payments under capital leases obligations	(29,826)	(39,000)
Issuance of preferred stock, net (fees $0 and $110)	0	29,890
Issuance of common stock — employee share options	436	1,649
Taxes paid related to net share settlement of equity awards	(3,633)	(2,955)
Dividends paid to common shareholders	(13,573)	(12,826)
Dividends paid to preferred shareholders	(25,667)	(23,625)
Net cash used in financing activities	(73,989)	(46,867)
Effect of exchange rate changes on cash and cash equivalents	(3,119)	(11,080)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(6,261)	77,446
Cash, cash equivalents, and restricted cash at beginning of the period	233,583	357,484
Cash, cash equivalents, and restricted cash at end of the period	227,322	434,930
Common stock
Dividends Payable
Dividends Payable	5,664	4,286
Preferred stock
Dividends Payable
Dividends Payable	$ 7,875	$ 7,875

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt securities, available-for-sale	$ 4,141,214	$ 3,561,032
Short-term investments	393,663	348,549
Cash and cash equivalents	199,419	193,858
Other investments	301,615	306,276
Restricted cash and cash equivalents	27,903	39,725
Accrued investment income	27,946	27,177
Premiums and other receivables, net	1,541,126	1,399,812
Deferred acquisition costs	267,659	251,408
Reinsurance recoverable	1,504,599	1,611,738
Prepaid reinsurance premiums	643,218	665,674
Premises and equipment, net	403,857	308,004
Intangible assets, net	392,223	379,937
Prepaid and other assets	45,207	154,958
Unpaid loss and loss adjustment expense reserves	3,039,255	2,957,159
Unearned premiums and other revenue	2,450,476	2,280,728
Reinsurance payable	673,724	656,265
Accounts payable and accrued expenses	317,675	398,058
Other liabilities	$ 373,269	$ 240,404
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	113,313,042	112,940,595
Common stock, shares outstanding	113,313,042	112,940,595
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Shares of preferred stock issued	2,565,120	2,565,120
Preferred stock, shares outstanding	2,565,120	2,565,120
Aggregate liquidation preference	$ 450,000	$ 450,000
Related Parties
Other investments	234,617	233,723
Accrued investment income	1,195	2,362
Reinsurance recoverable	4,496	7,425
Accounts payable and accrued expenses	771	69,874
Reciprocal Exchanges
Debt securities, available-for-sale	307,388	297,083
Short-term investments	27,010	17,328
Cash and cash equivalents	153	0
Restricted cash and cash equivalents	281	200
Accrued investment income	2,241	1,596
Premiums and other receivables, net	62,540	61,327
Deferred acquisition costs	23,113	20,007
Reinsurance recoverable	120,192	117,068
Prepaid reinsurance premiums	118,042	136,433
Premises and equipment, net	441	1,695
Intangible assets, net	3,270	3,405
Prepaid and other assets	11	4,581
Unpaid loss and loss adjustment expense reserves	193,456	178,470
Unearned premiums and other revenue	265,538	265,763
Reinsurance payable	44,424	40,393
Accounts payable and accrued expenses	5,200	7,720
Other liabilities	$ 43,754	$ 61,640

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Debt - Debt Maturities (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Debt Instrument
2019 (remaining three months)	$ 3,178
2020	12,882
2021	7,901
2022	2,680
2023	141,537
2024	351,242
Thereafter	174,725
Total principal amount of debt	694,145
Unamortized debt issuance costs and unamortized discount	(6,167)	$ (6,719)
Carrying amount of debt	687,978	705,795
Senior Notes | 6.75% Notes
Debt Instrument
2019 (remaining three months)	0
2020	0
2021	0
2022	0
2023	0
2024	350,000
Thereafter	0
Total principal amount of debt	350,000
Carrying amount of debt	346,926	346,439
Senior Notes | 7.625% Notes
Debt Instrument
2019 (remaining three months)	0
2020	0
2021	0
2022	0
2023	0
2024	0
Thereafter	100,000
Total principal amount of debt	100,000
Carrying amount of debt	96,907	$ 96,842
Surplus Notes | Subordinated Debentures I
Debt Instrument
2019 (remaining three months)	0
2020	0
2021	0
2022	0
2023	0
2024	0
Thereafter	41,238
Total principal amount of debt	41,238
Surplus Notes | Subordinated Debentures II
Debt Instrument
2019 (remaining three months)	0
2020	0
2021	0
2022	0
2023	0
2024	0
Thereafter	30,930
Total principal amount of debt	30,930
Finance lease liabilities | Finance lease liabilities
Debt Instrument
2019 (remaining three months)	1,545
2020	6,483
2021	4,958
2022	2,680
2023	1,537
2024	1,242
Thereafter	2,557
Total principal amount of debt	21,002
Other | Other
Debt Instrument
2019 (remaining three months)	1,633
2020	6,399
2021	2,943
2022	0
2023	0
2024	0
Thereafter	0
Total principal amount of debt	10,975
JPMorgan Chase, N.A. | 2019 Credit Agreement
Debt Instrument
2019 (remaining three months)	0
2020	0
2021	0
2022	0
2023	140,000
2024	0
Thereafter	0
Total principal amount of debt	$ 140,000

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Segment Information - Service and Fee Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenue from External Customer
Service and fee income	$ 161,626	$ 142,690	$ 476,041	$ 415,313
Reciprocal Exchanges
Revenue from External Customer
Service and fee income	1,585	1,575	4,471	4,466
NGHC, excluding Reciprocal Exchanges
Revenue from External Customer
Service and fee income	160,041	141,115	471,570	410,847
Property and Casualty
Revenue from External Customer
Service and fee income	97,890	96,232	298,356	280,727
Property and Casualty | Reciprocal Exchanges
Revenue from External Customer
Service and fee income	1,585	1,575	4,471	4,466
Property and Casualty | NGHC, excluding Reciprocal Exchanges
Revenue from External Customer
Service and fee income	96,305	94,657	293,885	276,261
Accident and Health
Revenue from External Customer
Service and fee income	63,736	46,458	177,685	134,586
Accident and Health | Reciprocal Exchanges
Revenue from External Customer
Service and fee income	0	0	0	0
Accident and Health | NGHC, excluding Reciprocal Exchanges
Revenue from External Customer
Service and fee income	63,736	46,458	177,685	134,586
Commission revenue
Revenue from External Customer
Service and fee income	37,686	43,278	125,290	119,737
Commission revenue | Property and Casualty
Revenue from External Customer
Service and fee income	21,333	25,404	68,193	68,547
Commission revenue | Accident and Health
Revenue from External Customer
Service and fee income	16,353	17,874	57,097	51,190
Finance and processing fees
Revenue from External Customer
Service and fee income	34,437	30,739	101,928	94,899
Finance and processing fees | Property and Casualty
Revenue from External Customer
Service and fee income	33,637	29,804	98,218	91,676
Finance and processing fees | Accident and Health
Revenue from External Customer
Service and fee income	800	935	3,710	3,223
Installment fees
Revenue from External Customer
Service and fee income	23,464	23,841	72,782	68,928
Installment fees | Property and Casualty
Revenue from External Customer
Service and fee income	23,464	23,841	72,782	68,928
Installment fees | Accident and Health
Revenue from External Customer
Service and fee income	0	0	0	0
Group health administrative fees
Revenue from External Customer
Service and fee income	25,808	18,364	73,861	57,461
Group health administrative fees | Property and Casualty
Revenue from External Customer
Service and fee income	0	0	0	0
Group health administrative fees | Accident and Health
Revenue from External Customer
Service and fee income	25,808	18,364	73,861	57,461
Late payment fees
Revenue from External Customer
Service and fee income	9,323	8,183	26,310	24,429
Late payment fees | Property and Casualty
Revenue from External Customer
Service and fee income	9,251	8,164	26,061	24,360
Late payment fees | Accident and Health
Revenue from External Customer
Service and fee income	72	19	249	69
Other service and fee income
Revenue from External Customer
Service and fee income	30,908	18,285	75,870	49,859
Other service and fee income | Property and Casualty
Revenue from External Customer
Service and fee income	10,205	9,019	33,102	27,216
Other service and fee income | Accident and Health
Revenue from External Customer
Service and fee income	$ 20,703	$ 9,266	$ 42,768	$ 22,643

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Unpaid Losses and Loss Adjustment Expense Reserves (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Liability for Claims and Claims Adjustment Expense
Gross balance at beginning of the period	$ 2,957,159	$ 2,663,557
Less: Reinsurance recoverable at beginning of the period	1,285,142	1,129,743
Net balance at beginning of the period	1,672,017	1,533,814
Current year	2,131,328	1,998,238
Prior year	(18,650)	(36,434)
Total incurred	2,112,678	1,961,804
Current year	(874,707)	(1,074,181)
Prior year	(1,157,104)	(770,592)
Total paid	(2,031,811)	(1,844,773)
Acquired losses and LAE reserves	92,573
Unrealized foreign exchange gain	(8,204)	(8,302)
Net balance at end of the period	1,837,253	1,642,543
Plus: Reinsurance recoverable at end of the period	1,202,002	1,212,592
Gross balance at end of the period	3,039,255	2,855,135
NGHC, excluding Reciprocal Exchanges
Liability for Claims and Claims Adjustment Expense
Gross balance at beginning of the period	2,778,689	2,520,204
Less: Reinsurance recoverable at beginning of the period	1,207,163	1,077,335
Net balance at beginning of the period	1,571,526	1,442,869
Current year	2,006,078	1,873,324
Prior year	(17,984)	(37,941)
Total incurred	1,988,094	1,835,383
Current year	(798,003)	(992,655)
Prior year	(1,118,099)	(736,513)
Total paid	(1,916,102)	(1,729,168)
Acquired losses and LAE reserves	92,573
Unrealized foreign exchange gain	(8,204)	(8,302)
Net balance at end of the period	1,727,887	1,540,782
Plus: Reinsurance recoverable at end of the period	1,117,912	1,138,408
Gross balance at end of the period	2,845,799	2,679,190
Reciprocal Exchanges
Liability for Claims and Claims Adjustment Expense
Gross balance at beginning of the period	178,470
Gross balance at end of the period	193,456
Property and Casualty
Liability for Claims and Claims Adjustment Expense
Prior year	19,125	(11,811)
Property and Casualty | NGHC, excluding Reciprocal Exchanges
Liability for Claims and Claims Adjustment Expense
Gross balance at beginning of the period	2,507,409	2,270,551
Less: Reinsurance recoverable at beginning of the period	1,182,588	1,067,495
Net balance at beginning of the period	1,324,821	1,203,056
Current year	1,726,618	1,596,337
Prior year	19,791	(13,318)
Total incurred	1,746,409	1,583,019
Current year	(661,742)	(883,969)
Prior year	(1,013,023)	(622,468)
Total paid	(1,674,765)	(1,506,437)
Acquired losses and LAE reserves	92,573
Unrealized foreign exchange gain	0	0
Net balance at end of the period	1,489,038	1,279,638
Plus: Reinsurance recoverable at end of the period	1,079,560	1,120,630
Gross balance at end of the period	2,568,598	2,400,268
Property and Casualty | Reciprocal Exchanges
Liability for Claims and Claims Adjustment Expense
Gross balance at beginning of the period	178,470	143,353
Less: Reinsurance recoverable at beginning of the period	77,979	52,408
Net balance at beginning of the period	100,491	90,945
Current year	125,250	124,914
Prior year	(666)	1,507
Total incurred	124,584	126,421
Current year	(76,704)	(81,526)
Prior year	(39,005)	(34,079)
Total paid	(115,709)	(115,605)
Acquired losses and LAE reserves	0
Unrealized foreign exchange gain	0	0
Net balance at end of the period	109,366	101,761
Plus: Reinsurance recoverable at end of the period	84,090	74,184
Gross balance at end of the period	193,456	175,945
Accident and Health | NGHC, excluding Reciprocal Exchanges
Liability for Claims and Claims Adjustment Expense
Gross balance at beginning of the period	271,280	249,653
Less: Reinsurance recoverable at beginning of the period	24,575	9,840
Net balance at beginning of the period	246,705	239,813
Current year	279,460	276,987
Prior year	(37,775)	(24,623)
Total incurred	241,685	252,364
Current year	(136,261)	(108,686)
Prior year	(105,076)	(114,045)
Total paid	(241,337)	(222,731)
Acquired losses and LAE reserves	0
Unrealized foreign exchange gain	(8,204)	(8,302)
Net balance at end of the period	238,849	261,144
Plus: Reinsurance recoverable at end of the period	38,352	17,778
Gross balance at end of the period	$ 277,201	$ 278,922

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Debt - Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Debt Instrument
Interest Expense, Debt	$ 12,898	$ 12,583	$ 38,822	$ 38,775
Finance lease liabilities
Debt Instrument
Interest Expense, Debt	302	157	888	477
Other
Debt Instrument
Interest Expense, Debt	1,992	1,520	5,795	5,933
Senior Notes | 6.75% Notes
Debt Instrument
Interest Expense, Debt	5,906	5,906	17,719	17,719
Senior Notes | 7.625% Notes
Debt Instrument
Interest Expense, Debt	1,906	1,906	5,719	5,719
Surplus Notes | Subordinated Debentures
Debt Instrument
Interest Expense, Debt	1,118	1,144	3,470	3,227
2016 Credit Agreement | JPMorgan Chase, N.A.
Debt Instrument
Interest Expense, Debt	0	1,950	1,211	5,700
2019 Credit Agreement | JPMorgan Chase, N.A.
Debt Instrument
Interest Expense, Debt	$ 1,674	$ 0	$ 4,020	$ 0

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Segment Information - Fee Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Segment Reporting Information
Service and fee income	$ 161,626	$ 142,690	$ 476,041	$ 415,313
Ceding commission income	57,587	59,100	187,313	158,976
Fee Income	219,213	201,790	663,354	574,289
Property and Casualty
Segment Reporting Information
Service and fee income	97,890	96,232	298,356	280,727
Ceding commission income	55,326	58,831	178,533	158,187
Accident and Health
Segment Reporting Information
Service and fee income	63,736	46,458	177,685	134,586
Ceding commission income	2,261	269	8,780	789
Reciprocal Exchanges | Property and Casualty
Segment Reporting Information
Service and fee income	1,585	1,575	4,471	4,466
Ceding commission income	15,066	14,587	50,446	39,523
Fee Income	16,651	16,162	54,917	43,989
NGHC, excluding Reciprocal Exchanges
Segment Reporting Information
Fee Income	202,562	185,628	608,437	530,300
NGHC, excluding Reciprocal Exchanges | Property and Casualty
Segment Reporting Information
Service and fee income	96,305	94,657	293,885	276,261
Ceding commission income	40,260	44,244	128,087	118,664
Fee Income	136,565	138,901	421,972	394,925
NGHC, excluding Reciprocal Exchanges | Accident and Health
Segment Reporting Information
Service and fee income	63,736	46,458	177,685	134,586
Ceding commission income	2,261	269	8,780	789
Fee Income	65,997	46,727	186,465	135,375
Group | NGHC, excluding Reciprocal Exchanges | Accident and Health
Segment Reporting Information
Service and fee income	34,848	25,198	98,084	74,768
Individual | NGHC, excluding Reciprocal Exchanges | Accident and Health
Segment Reporting Information
Service and fee income	2,128	4,512	5,506	7,973
Third Party Fee | NGHC, excluding Reciprocal Exchanges | Accident and Health
Segment Reporting Information
Service and fee income	$ 26,760	$ 16,748	$ 74,095	$ 51,845

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Investments - Net Realized Gains (Losses) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Gain (Loss) on Investments
OTTI on investments	$ 0	$ (3,000)	$ 0	$ (3,000)
Other, net	(243)	(614)	(1,119)	5,184
Net loss on investments	(565)	(3,170)	(5,773)	(22,756)
Reciprocal Exchanges
Gain (Loss) on Investments
Net loss on investments	(137)	(167)	(837)	(1,266)
NGHC, excluding Reciprocal Exchanges
Gain (Loss) on Investments
Net loss on investments	(428)	(3,003)	(4,936)	(21,490)
Debt securities
Gain (Loss) on Investments
Debt securities, available-for-sale, gross gains	3,598	2,563	3,921	4,651
Debt securities, available-for-sale, gross losses	(1,712)	(743)	(2,086)	(22,388)
Net realized gain (loss) on debt securities, available-for-sale	1,886	1,820	1,835	(17,737)
Equity securities
Gain (Loss) on Investments
Equity securities	(2,208)	(1,376)	(6,489)	(7,203)
Less: Net losses recognized during the period on securities sold during the period	0	0	0	(108)
Net losses recognized during the reporting period on securities still held at the reporting date	$ (2,208)	$ (1,376)	$ (6,489)	$ (7,095)

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Investments - Available-for-Sale Debt Securities by Contractual Maturity (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Amortized Cost
Due in one year or less	$ 53,078
Due after one year through five years	1,015,738
Due after five years through ten years	1,009,201
Due after ten years	276,264
Mortgage-backed securities	1,652,096
Debt Securities	4,006,377
Fair Value
Due in one year or less	53,191
Due after one year through five years	1,046,735
Due after five years through ten years	1,055,222
Due after ten years	279,471
Mortgage-backed securities	1,706,595
Debt Securities	4,141,214
Reciprocal Exchanges
Amortized Cost
Due in one year or less	110
Due after one year through five years	132,418
Due after five years through ten years	73,674
Due after ten years	14,722
Mortgage-backed securities	79,814
Debt Securities	300,738
Fair Value
Due in one year or less	110
Due after one year through five years	134,784
Due after five years through ten years	75,405
Due after ten years	14,934
Mortgage-backed securities	82,155
Debt Securities	307,388
NGHC, excluding Reciprocal Exchanges
Amortized Cost
Due in one year or less	52,968
Due after one year through five years	883,320
Due after five years through ten years	935,527
Due after ten years	261,542
Mortgage-backed securities	1,572,282
Debt Securities	3,705,639
Fair Value
Due in one year or less	53,081
Due after one year through five years	911,951
Due after five years through ten years	979,817
Due after ten years	264,537
Mortgage-backed securities	1,624,440
Debt Securities	$ 3,833,826

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Related Party Transactions - Asset Purchase and Master Services Agreements (Details) - Related Parties - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Sep. 13, 2017	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Purchase Commitment
Related Party Transaction
Payments for Software	$ 200,000
Master Service Agreement
Related Party Transaction
Expenses from transactions with related party		$ 63	$ 729	$ 511	$ 9,819

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Leases - Lease Term and Discount Rate (Details)	Sep. 30, 2019
Lessee, Lease, Description
Operating Lease, Weighted Average Remaining Lease Term	5 years 10 months 24 days
Operating Lease, Weighted Average Discount Rate, Percent	5.60%
Buildings and improvements
Lessee, Lease, Description
Finance Lease, Weighted Average Remaining Lease Term	7 years 4 months 24 days
Finance Lease, Weighted Average Discount Rate, Percent	5.80%
Vehicle
Lessee, Lease, Description
Finance Lease, Weighted Average Remaining Lease Term	2 years 10 months 24 days
Finance Lease, Weighted Average Discount Rate, Percent	4.20%
Hardware, software and other equipment
Lessee, Lease, Description
Finance Lease, Weighted Average Remaining Lease Term	1 year 9 months 18 days
Finance Lease, Weighted Average Discount Rate, Percent	4.00%

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Debt - Covenants and Compliance (Details) - Senior Notes	Sep. 30, 2019
Indenture Excess Leverage Ratio | Minimum
Debt Instrument
Ratio of Indebtedness to Net Capital	0.35
Indenture Excess Leverage Ratio | Maximum
Debt Instrument
Ratio of Indebtedness to Net Capital	1.00
6.75% Notes
Debt Instrument
Interest rate on debt	6.75%
7.625% Notes
Debt Instrument
Interest rate on debt	7.625%

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Stock-Based Compensation - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures
Share Price	$ 23.02		$ 23.02
Employee stock options
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding
Outstanding at beginning of period			3,184,352
Exercised			(114,848)
Outstanding at end of period	3,069,504		3,069,504
Exercisable at end of period	3,069,504		3,069,504
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price
Outstanding at beginning of period			$ 9.53
Exercised			3.80
Outstanding at end of period	$ 9.74		9.74
Exercisable at end of period	$ 9.74		$ 9.74
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures
Weighted average remaining contractual term for option awards outstanding			3 years 4 months 24 days
Intrinsic value of the underlying stock exceeds the exercise price of options outstanding	$ 40,755		$ 40,755
Weighted average remaining contractual term for vested portions of options outstanding and currently exercisable			3 years 5 months
Intrinsic value of the underlying shares reserved for issuance and exercise price of vested portions of options outstanding and currently exercisable	40,755		$ 40,755
Granted in period			0
Forfeitures in period			0
Expirations in period			0
Intrinsic value of stock options exercised	1,035	$ 322	$ 2,310	$ 3,953
Fair value of stock options vested	$ 76	$ 19	$ 175	$ 652

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Stockholders' Equity - Preferred Stock (Details) - USD ($) $ / shares in Units, $ in Thousands		9 Months Ended	60 Months Ended
	Jul. 16, 2023	Sep. 30, 2019	Jul. 15, 2023	Dec. 31, 2018
Class of Stock
Shares of preferred stock issued		2,565,120		2,565,120
Aggregate liquidation preference		$ 450,000		$ 450,000
Preferred stock | Preferred Stock Series A
Class of Stock
Dividend rate per year		7.50%
Shares of preferred stock issued		2,200,000
Depositary shares issued		0
Liquidation preference per share		$ 25
Aggregate liquidation preference		$ 55,000
Preferred stock | Preferred Stock Series B
Class of Stock
Dividend rate per year		7.50%
Shares of preferred stock issued		165,000
Depositary shares issued		6,600,000
Liquidation preference per share		$ 1,000
Aggregate liquidation preference		$ 165,000
Preferred stock | Preferred Stock Series C
Class of Stock
Dividend rate per year		7.50%
Shares of preferred stock issued		200,000
Depositary shares issued		8,000,000
Liquidation preference per share		$ 1,000
Aggregate liquidation preference		$ 200,000
Preferred stock | Preferred Stock Series D
Class of Stock
Shares of preferred stock issued		120
Depositary shares issued		0
Liquidation preference per share		$ 250,000
Aggregate liquidation preference		$ 30,000
Preferred stock | Subsequent Event | Preferred Stock Series D
Class of Stock
Dividend rate per year	5.4941%		7.00%
Dividend rate per year	six-month LIBOR

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Segment Information - Results of Operations of the Business Segments (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) segment	Sep. 30, 2018 USD ($)
Segment Reporting [Abstract]
Number of business segments | segment			2
Segment Reporting Information
Gross premium written	$ 1,435,157	$ 1,355,671	$ 4,258,843	$ 4,129,250
Ceded premiums	(400,553)	(432,647)	(1,064,177)	(1,209,608)
Net premium written	1,034,604	923,024	3,194,666	2,919,642
Change in unearned premium	19,034	16,503	(146,220)	(131,671)
Net earned premium	1,053,638	939,527	3,048,446	2,787,971
Ceding commission income	57,587	59,100	187,313	158,976
Service and fee income	161,626	142,690	476,041	415,313
Total underwriting revenues	1,272,851	1,141,317	3,711,800	3,362,260
Loss and loss adjustment expense	745,334	657,310	2,112,678	1,961,804
Acquisition costs and other underwriting expenses	209,090	191,470	615,134	542,040
General and administrative expenses	263,864	235,733	759,725	691,167
Total underwriting expenses	1,218,288	1,084,513	3,487,537	3,195,011
Underwriting income	54,563	56,804	224,263	167,249
Net investment income	33,740	30,696	102,316	81,702
Net loss on investments	(565)	(3,170)	(5,773)	(22,756)
Other income	2,146	0	2,146	0
Interest expense	(12,898)	(12,583)	(38,822)	(38,775)
Provision for income taxes	(16,747)	(15,518)	(61,494)	(38,261)
Net (income) loss attributable to noncontrolling interest	10,915	12,153	18,152	31,979
Net income attributable to NGHC	71,154	68,382	240,788	181,138
Property and Casualty
Segment Reporting Information
Gross premium written	1,272,602	1,211,723	3,666,072	3,594,690
Ceded premiums	(385,347)	(412,275)	(971,643)	(1,161,235)
Net premium written	887,255	799,448	2,694,429	2,433,455
Change in unearned premium	(2,520)	(15,267)	(142,515)	(110,875)
Net earned premium	884,735	784,181	2,551,914	2,322,580
Ceding commission income	55,326	58,831	178,533	158,187
Service and fee income	97,890	96,232	298,356	280,727
Total underwriting revenues	1,037,951	939,244	3,028,803	2,761,494
Loss and loss adjustment expense	674,722	584,658	1,870,993	1,709,440
Acquisition costs and other underwriting expenses	161,876	146,696	462,071	405,541
General and administrative expenses	195,567	185,208	571,498	542,902
Total underwriting expenses	1,032,165	916,562	2,904,562	2,657,883
Underwriting income	5,786	22,682	124,241	103,611
Net investment income	0	0	0	0
Net loss on investments	0	0	0	0
Other income	0		0
Interest expense	0	0	0	0
Provision for income taxes	0	0	0	0
Net (income) loss attributable to noncontrolling interest	0	0	0	0
Net income attributable to NGHC	5,786	22,682	124,241	103,611
Accident and Health
Segment Reporting Information
Gross premium written	162,555	143,948	592,771	534,560
Ceded premiums	(15,206)	(20,372)	(92,534)	(48,373)
Net premium written	147,349	123,576	500,237	486,187
Change in unearned premium	21,554	31,770	(3,705)	(20,796)
Net earned premium	168,903	155,346	496,532	465,391
Ceding commission income	2,261	269	8,780	789
Service and fee income	63,736	46,458	177,685	134,586
Total underwriting revenues	234,900	202,073	682,997	600,766
Loss and loss adjustment expense	70,612	72,652	241,685	252,364
Acquisition costs and other underwriting expenses	47,214	44,774	153,063	136,499
General and administrative expenses	68,297	50,525	188,227	148,265
Total underwriting expenses	186,123	167,951	582,975	537,128
Underwriting income	48,777	34,122	100,022	63,638
Net investment income	0	0	0	0
Net loss on investments	0	0	0	0
Other income	0		0
Interest expense	0	0	0	0
Provision for income taxes	0	0	0	0
Net (income) loss attributable to noncontrolling interest	0	0	0	0
Net income attributable to NGHC	48,777	34,122	100,022	63,638
Corporate and Other
Segment Reporting Information
Gross premium written	0	0	0	0
Ceded premiums	0	0	0	0
Net premium written	0	0	0	0
Change in unearned premium	0	0	0	0
Net earned premium	0	0	0	0
Ceding commission income	0	0	0	0
Service and fee income	0	0	0	0
Total underwriting revenues	0	0	0	0
Loss and loss adjustment expense	0	0	0	0
Acquisition costs and other underwriting expenses	0	0	0	0
General and administrative expenses	0	0	0	0
Total underwriting expenses	0	0	0	0
Underwriting income	0	0	0	0
Net investment income	33,740	30,696	102,316	81,702
Net loss on investments	(565)	(3,170)	(5,773)	(22,756)
Other income	2,146		2,146
Interest expense	(12,898)	(12,583)	(38,822)	(38,775)
Provision for income taxes	(16,747)	(15,518)	(61,494)	(38,261)
Net (income) loss attributable to noncontrolling interest	10,915	12,153	18,152	31,979
Net income attributable to NGHC	$ 16,591	$ 11,578	$ 16,525	$ 13,889

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Investments - Related Parties - North Dearborn (Details) - North Dearborn Building Company, L.P. - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
AmTrust Financial Services, Inc.
Schedule of Equity Method Investments
Limited Partnership, Percentage Participation	45.00%		45.00%
NA Advisors GP LLC
Schedule of Equity Method Investments
Limited Partnership, Percentage Participation	10.00%		10.00%
Limited Partnership, Percentage of Profit Interest	10.00%		10.00%
VIE, Not primary beneficiary | Related Parties
Schedule of Equity Method Investments
Ownership percentage	45.00%		45.00%
Equity investment in unconsolidated subsidiaries	$ 5,659		$ 5,659		$ 6,214
Equity in earnings (losses)	(84)	$ (148)	(150)	$ (313)
Distributions	$ 135	$ 0	$ 405	$ 1,125

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Fair Value of Financial Instruments - Changes in Fair Value of Level 3 Financial Assets (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance as of	$ 22,956	$ 44,730
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Total gains (losses) included in net income	(3,012)	(491)
Total gains (losses) included in other comprehensive income	(2,483)	(11,859)
Purchases	0	0
Sales	0	(1,741)
Balance as of	17,461	30,639
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	(3,012)	(491)
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	(2,483)
States and political subdivision bonds
Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance as of	3,596	4,081
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Total gains (losses) included in net income	0	0
Total gains (losses) included in other comprehensive income	(496)	(485)
Purchases	0	0
Sales	0	0
Balance as of	3,100	3,596
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	0	0
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	(496)
Corporate bonds
Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance as of	11,767	24,545
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Total gains (losses) included in net income	0	0
Total gains (losses) included in other comprehensive income	(1,987)	(11,374)
Purchases	0	0
Sales	0	0
Balance as of	9,780	13,171
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	0	0
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	(1,987)
Common stock
Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance as of	1,051	5,052
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Total gains (losses) included in net income	(765)	(1,303)
Total gains (losses) included in other comprehensive income	0	0
Purchases	0	0
Sales	0	0
Balance as of	286	3,749
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	(765)	(1,303)
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	0
Preferred stock
Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance as of		270
Transfers into Level 3		0
Transfers out of Level 3		0
Total gains (losses) included in net income		10
Total gains (losses) included in other comprehensive income		0
Purchases		0
Sales		0
Balance as of		280
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period		10
Other investments
Fair Value Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance as of	6,542	10,782
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Total gains (losses) included in net income	(2,247)	802
Total gains (losses) included in other comprehensive income	0	0
Purchases	0	0
Sales	0	(1,741)
Balance as of	4,295	9,843
Change in unrealized gains (losses) for the period included in net income for assets held at the end of the reporting period	(2,247)	$ 802
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at the end of the reporting period	$ 0

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation, Stock Options, Activity

A summary of the stock option awards is shown below:

	Shares Subject to Options Outstanding
Nine Months Ended September 30, 2019	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Outstanding at beginning of period	3,184,352		$	9.53
Exercised	(114,848	)	3.80
Outstanding and exercisable at end of period	3,069,504		$	9.74	3.4	$	40,755

⁽¹⁾ The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing price of the Company’s common stock of $23.02, as reported on the Nasdaq Global Market on September 30, 2019.

Schedule of Stock-based Compensation, Restricted Stock Units Award Activity

A summary of the RSUs is shown below:

	RSUs
Nine Months Ended September 30, 2019	Number of RSUs		Weighted-Average Grant Date Fair Value
Non-vested at beginning of period	938,795		$	22.28
Granted	510,241		25.58
Vested	(403,436	)	22.14
Forfeited	(17,104	)	23.19
Non-vested at end of period	1,028,496		$	23.96

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Reinsurance (Tables)

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Schedule of Reinsurance Recoverable

Reinsurance recoverable is as follows:

	September 30, 2019		December 31, 2018
Reinsurance recoverable on paid losses	$	302,597	$	326,596
Reinsurance recoverable on unpaid losses	1,202,002		1,285,142
Reinsurance recoverable	$	1,504,599	$	1,611,738

Schedule of Effect of Reinsurance on Unpaid Loss and LAE Reserves and Unearned Premiums

The following is the effect of reinsurance on unpaid loss and LAE reserves and unearned premiums:

	September 30, 2019				December 31, 2018
	Assumed		Ceded		Assumed		Ceded
Unpaid Loss and LAE reserves	$	66,422	$	1,202,002	$	84,469	$	1,285,142
Unearned premiums	19,415		643,218		21,015		665,674

Schedule of Effect of Reinsurance on Premiums

The following is the effect of reinsurance on premiums and loss and LAE:

	Three Months Ended September 30,												Nine Months Ended September 30,
	2019						2018						2019						2018
Premium:	Written			Earned			Written			Earned			Written			Earned			Written			Earned
Direct	$	1,417,792		$	1,407,731		$	1,330,259		$	1,296,717		$	4,200,571		$	4,080,131		$	4,055,044		$	3,744,321
Assumed	17,365			19,029			25,412			29,078			58,272			59,872			74,206			89,627
Total Gross Premium	1,435,157			1,426,760			1,355,671			1,325,795			4,258,843			4,140,003			4,129,250			3,833,948
Ceded	(400,553		)	(373,122		)	(432,647		)	(386,268		)	(1,064,177		)	(1,091,557		)	(1,209,608		)	(1,045,977		)
Net Premium	$	1,034,604		$	1,053,638		$	923,024		$	939,527		$	3,194,666		$	3,048,446		$	2,919,642		$	2,787,971

Schedule of Effect of Reinsurance on Losses

	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
	Assumed		Ceded		Assumed		Ceded		Assumed		Ceded		Assumed		Ceded
Loss and LAE	$	7,024	$	245,095	$	7,479	$	289,726	$	23,670	$	605,126	$	16,487	$	712,277

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Litigation

The Company’s insurance subsidiaries are named as defendants in various legal actions arising principally from claims made under insurance policies and contracts. Those actions are considered by the Company in estimating the loss and LAE reserves. The Company’s management believes the resolution of those actions will not have a material adverse effect on the Company’s financial position or results of operations.

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Investments

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

(a) Available-For-Sale Debt Securities

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

September 30, 2019	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	72,188	$	2,300	$	(53	)	$	74,435
Federal agencies	4,379		33		(1		)	4,411
States and political subdivision bonds	188,037		6,017		(30		)	194,024
Foreign government	141,026		5,875		(22		)	146,879
Corporate bonds	1,695,694		71,298		(949		)	1,766,043
Residential mortgage-backed securities	1,019,630		19,513		(1,950		)	1,037,193
Commercial mortgage-backed securities	573,911		35,690		(28		)	609,573
Asset-backed securities	58,555		1,321		(47		)	59,829
Structured securities	252,957		202		(4,332		)	248,827
Total	$	4,006,377	$	142,249	$	(7,412	)	$	4,141,214
NGHC	$	3,705,639	$	135,248	$	(7,061	)	$	3,833,826
Reciprocal Exchanges	300,738		7,001		(351		)	307,388
Total	$	4,006,377	$	142,249	$	(7,412	)	$	4,141,214

December 31, 2018	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Treasury	$	64,829	$	1,026	$	(262	)	$	65,593
Federal agencies	37,842		22		(389		)	37,475
States and political subdivision bonds	274,367		1,369		(3,539		)	272,197
Foreign government	151,443		993		(70		)	152,366
Corporate bonds	1,283,061		3,094		(25,450		)	1,260,705
Residential mortgage-backed securities	944,365		716		(19,965		)	925,116
Commercial mortgage-backed securities	548,192		3,757		(6,974		)	544,975
Asset-backed securities	60,563		705		(121		)	61,147
Structured securities	249,947		99		(8,588		)	241,458
Total	$	3,614,609	$	11,781	$	(65,358	)	$	3,561,032
NGHC	$	3,311,639	$	11,206	$	(58,896	)	$	3,263,949
Reciprocal Exchanges	302,970		575		(6,462		)	297,083
Total	$	3,614,609	$	11,781	$	(65,358	)	$	3,561,032

As of September 30, 2019 and December 31, 2018, the Company had no other-than-temporary impairments (“OTTI”) in AOCI related to available-for-sale debt securities.

The amortized cost and fair value of available-for-sale debt securities held as of September 30, 2019, 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.

	NGHC				Reciprocal Exchanges				Total
September 30, 2019	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	52,968	$	53,081	$	110	$	110	$	53,078	$	53,191
Due after one year through five years	883,320		911,951		132,418		134,784		1,015,738		1,046,735
Due after five years through ten years	935,527		979,817		73,674		75,405		1,009,201		1,055,222
Due after ten years	261,542		264,537		14,722		14,934		276,264		279,471
Mortgage-backed securities	1,572,282		1,624,440		79,814		82,155		1,652,096		1,706,595
Total	$	3,705,639	$	3,833,826	$	300,738	$	307,388	$	4,006,377	$	4,141,214

(b) Gross Unrealized Losses

The tables below summarize the gross unrealized losses on debt securities classified as available for sale, by length of time the security has continuously been in an unrealized loss position.

	Less Than 12 Months					12 Months or More					Total
September 30, 2019	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	24,598	$	(32	)	$	13,846	$	(21	)	$	38,444	$	(53	)
Federal agencies	259		(1		)	—		—			259		(1		)
States and political subdivision bonds	1,281		(1		)	2,597		(29		)	3,878		(30		)
Foreign government	2,904		(22		)	—		—			2,904		(22		)
Corporate bonds	121,461		(771		)	9,013		(178		)	130,474		(949		)
Residential mortgage-backed securities	206,204		(1,194		)	69,431		(756		)	275,635		(1,950		)
Commercial mortgage-backed securities	4,737		(22		)	750		(6		)	5,487		(28		)
Asset-backed securities	5,548		(26		)	979		(21		)	6,527		(47		)
Structured securities	59,765		(849		)	110,235		(3,483		)	170,000		(4,332		)
Total	$	426,757	$	(2,918	)	$	206,851	$	(4,494	)	$	633,608	$	(7,412	)
NGHC	$	391,883	$	(2,669	)	$	199,953	$	(4,392	)	$	591,836	$	(7,061	)
Reciprocal Exchanges	34,874		(249		)	6,898		(102		)	41,772		(351		)
Total	$	426,757	$	(2,918	)	$	206,851	$	(4,494	)	$	633,608	$	(7,412	)

	Less Than 12 Months					12 Months or More					Total
December 31, 2018	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury	$	474	$	(2	)	$	21,540	$	(260	)	$	22,014	$	(262	)
Federal agencies	23,729		(351		)	1,493		(38		)	25,222		(389		)
States and political subdivision bonds	57,090		(902		)	119,759		(2,637		)	176,849		(3,539		)
Foreign government	45,748		(70		)	—		—			45,748		(70		)
Corporate bonds	586,359		(12,891		)	321,115		(12,559		)	907,474		(25,450		)
Residential mortgage-backed securities	234,396		(1,637		)	551,623		(18,328		)	786,019		(19,965		)
Commercial mortgage-backed securities	13,229		(239		)	148,700		(6,735		)	161,929		(6,974		)
Asset-backed securities	25,978		(78		)	1,494		(43		)	27,472		(121		)
Structured securities	222,154		(8,136		)	6,167		(452		)	228,321		(8,588		)
Total	$	1,209,157	$	(24,306	)	$	1,171,891	$	(41,052	)	$	2,381,048	$	(65,358	)
NGHC	$	1,115,823	$	(22,668	)	$	1,018,975	$	(36,228	)	$	2,134,798	$	(58,896	)
Reciprocal Exchanges	93,334		(1,638		)	152,916		(4,824		)	246,250		(6,462		)
Total	$	1,209,157	$	(24,306	)	$	1,171,891	$	(41,052	)	$	2,381,048	$	(65,358	)

There were 378 and 1,662 individual security lots at September 30, 2019 and December 31, 2018, respectively, that accounted for the gross unrealized loss, none of which are deemed by the Company to be other-than-temporary impairments. As of September 30, 2019 and December 31, 2018, of the $4,494 and $41,052, respectively, of unrealized losses in unrealized loss positions for a period of twelve or more consecutive months, none of those securities were greater than or equal to 25% of its amortized cost.

Factors influencing management’s determination that none of these securities were OTTI included the length of time and/or magnitude of unrealized losses in relation to cost, the nature of the investment, the current financial condition of the issuer and its future prospects, the ability to recover to cost in the near term, 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. The Company regularly monitors its investments that have fair values less than cost or amortized cost for indicators of OTTI, an assessment that requires management judgment regarding the evidence known. Such judgments could change in the future as more information becomes known, which could negatively impact the amounts reported.

The Company’s debt securities portfolio is sensitive to interest rate fluctuations, which impact the fair value of individual securities. Unrealized losses on debt securities reported above were primarily caused by the effects of the interest rate environment. Therefore, the Company does not believe the unrealized losses represent an OTTI as of September 30, 2019 and December 31, 2018.

(c) Equity Securities

The fair values of equity securities were as follows:

	September 30, 2019		December 31, 2018
Common stock	$	2,760	$	10,949
Total	$	2,760	$	10,949
NGHC	$	2,760	$	10,949
Reciprocal Exchanges	—		—
Total	$	2,760	$	10,949

(d) Investment Income

The components of net investment income consisted of the following:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Cash and short-term investments	$	1,123		$	351		$	3,467		$	680
Debt securities	31,439			27,643			91,631			77,469
Equity securities	1			182			4			541
Other, net (related parties - three months - $(10) and $505; nine months - $2,163 and $550)	2,270			2,924			10,508			6,577
Investment income	34,833			31,100			105,610			85,267
Investment expenses	(1,093		)	(404		)	(3,294		)	(3,565		)
Net investment income	$	33,740		$	30,696		$	102,316		$	81,702
NGHC	$	31,580		$	28,352		$	95,862		$	75,009
Reciprocal Exchanges	2,160			2,344			6,454			6,693
Net investment income	$	33,740		$	30,696		$	102,316		$	81,702

(e) Net Realized Gains (Losses)

The table below indicates realized gains and losses on investments. Other, net includes realized gains and losses from short-term and other investments and foreign exchange. Purchases and sales of investments are recorded on a trade date basis. Realized gains and losses are determined based on the specific identification method.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Debt securities, available-for-sale:
Gross gains	$	3,598		$	2,563		$	3,921		$	4,651
Gross losses	(1,712		)	(743		)	(2,086		)	(22,388		)
Net realized gain (loss) on debt securities, available-for-sale	1,886			1,820			1,835			(17,737		)
Equity securities	(2,208		)	(1,376		)	(6,489		)	(7,203		)
OTTI on investments	—			(3,000		)	—			(3,000		)
Other, net	(243		)	(614		)	(1,119		)	5,184
Net realized loss on investments	$	(565	)	$	(3,170	)	$	(5,773	)	$	(22,756	)
NGHC	$	(428	)	$	(3,003	)	$	(4,936	)	$	(21,490	)
Reciprocal Exchanges	(137		)	(167		)	(837		)	(1,266		)
Net realized loss on investments	$	(565	)	$	(3,170	)	$	(5,773	)	$	(22,756	)

Net gains and losses recognized during the reporting period on equity securities still held at the reporting date were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net losses recognized during the period	$	(2,208	)	$	(1,376	)	$	(6,489	)	$	(7,203	)
Less: Net losses recognized during the period on securities sold during the period	—			—			—			(108		)
Net losses recognized during the reporting period on securities still held at the reporting date	$	(2,208	)	$	(1,376	)	$	(6,489	)	$	(7,095	)

(f) Credit Quality of Investments

The tables below summarize the credit quality of debt securities, as rated by Standard & Poor’s (“S&P”). If a security is not rated by S&P, an S&P equivalent is determined based on ratings from similar rating agencies. Securities that are not rated are included in the “BB+ and lower” category.

	NGHC						Reciprocal Exchanges
September 30, 2019	Amortized Cost		Fair Value		Percentage		Amortized Cost		Fair Value		Percentage
U.S. Treasury	$	59,290	$	60,998	1.6	%	$	12,898	$	13,437	4.4	%
AAA	622,806		655,803		17.1	%	18,143		18,891		6.1	%
AA, AA+, AA-	1,381,180		1,411,831		36.8	%	109,656		112,043		36.5	%
A, A+, A-	803,831		831,868		21.7	%	111,498		114,601		37.2	%
BBB, BBB+, BBB-	788,908		821,368		21.4	%	48,543		48,416		15.8	%
BB+ and lower	49,624		51,958		1.4	%	—		—		—	%
Total	$	3,705,639	$	3,833,826	100.0	%	$	300,738	$	307,388	100.0	%

	NGHC						Reciprocal Exchanges
December 31, 2018	Amortized Cost		Fair Value		Percentage		Amortized Cost		Fair Value		Percentage
U.S. Treasury	$	52,122	$	52,759	1.6	%	$	12,707	$	12,834	4.3	%
AAA	586,639		589,078		18.0	%	18,335		18,109		6.1	%
AA, AA+, AA-	1,385,709		1,358,528		41.6	%	142,525		140,114		47.2	%
A, A+, A-	591,219		581,106		17.8	%	118,535		115,618		38.9	%
BBB, BBB+, BBB-	653,645		641,554		19.7	%	10,834		10,374		3.5	%
BB+ and lower	42,305		40,924		1.3	%	34		34		—	%
Total	$	3,311,639	$	3,263,949	100.0	%	$	302,970	$	297,083	100.0	%

The tables below summarize the investment quality of the corporate bond holdings and industry concentrations.

September 30, 2019	AAA		AA+, AA, AA-		A+,A,A-		BBB+, BBB, BBB-		BB+ or Lower		Fair Value		% of Corporate Bonds Portfolio
Financial Institutions	—	%	3.6	%	27.2	%	13.6	%	0.4	%	$	791,523	44.8	%
Industrials	0.3	%	3.8	%	18.8	%	29.3	%	0.1	%	923,980		52.3	%
Utilities/Other	—	%	—	%	1.3	%	1.6	%	—	%	50,540		2.9	%
Total	0.3	%	7.4	%	47.3	%	44.5	%	0.5	%	$	1,766,043	100.0	%
NGHC	—	%	5.8	%	40.9	%	41.8	%	0.5	%	$	1,571,375	89.0	%
Reciprocal Exchanges	0.3	%	1.6	%	6.4	%	2.7	%	—	%	194,668		11.0	%
Total	0.3	%	7.4	%	47.3	%	44.5	%	0.5	%	$	1,766,043	100.0	%

December 31, 2018	AAA		AA+, AA, AA-		A+,A,A-		BBB+, BBB, BBB-		BB+ or Lower		Fair Value		% of Corporate Bonds Portfolio
Financial Institutions	—	%	4.3	%	23.1	%	14.2	%	0.9	%	$	535,373	42.5	%
Industrials	0.4	%	6.1	%	21.5	%	26.7	%	0.6	%	697,324		55.3	%
Utilities/Other	—	%	—	%	1.8	%	0.4	%	—	%	28,008		2.2	%
Total	0.4	%	10.4	%	46.4	%	41.3	%	1.5	%	$	1,260,705	100.0	%
NGHC	—	%	6.3	%	37.3	%	40.6	%	1.4	%	$	1,079,099	85.6	%
Reciprocal Exchanges	0.4	%	4.1	%	9.1	%	0.7	%	0.1	%	181,606		14.4	%
Total	0.4	%	10.4	%	46.4	%	41.3	%	1.5	%	$	1,260,705	100.0	%

(g) Cash and Cash Equivalents, Restricted Cash and Restricted 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 are held primarily in the form of cash or certain high grade securities.

Cash, cash equivalents, and restricted cash are as follows:

	September 30, 2019		December 31, 2018
Cash and cash equivalents	$	199,419	$	193,858
Restricted cash and cash equivalents	27,903		39,725
Total cash, cash equivalents and restricted cash	$	227,322	$	233,583

Restricted investments are as follows:

	September 30, 2019		December 31, 2018
Securities on deposit with state regulatory authorities	$	83,567	$	73,119
Restricted investments to trusts in certain reinsurance transactions	54,895		70,470
Total restricted investments	$	138,462	$	143,589

(h) Short-term and Other Investments

Short-term investments include investments with maturities between 91 days and less than one year at the date of acquisition. Short-term investments also consist of commercial paper, U.S. Treasury bills and money market funds that are held within the Company’s longer term investment portfolios.

The table below summarizes the composition of other investments:

	September 30, 2019		December 31, 2018
Equity method investments (related parties - $105,388 and $106,031)	$	140,195	$	142,921
Notes receivable (related parties - $129,229 and $127,692)	129,307		128,893
Long-term Certificates of Deposit (CDs), at cost	20,150		20,252
Investments, at fair value	4,295		6,542
Investments, at cost or amortized cost	7,668		7,668
Total	$	301,615	$	306,276

Equity method investments represent limited liability companies and limited partnership investments in real estate. Investments at fair value, primarily represent the Company’s right to receive the excess servicing spread related to servicing rights, for which the Company has elected the fair value option with changes in fair value recorded in earnings. Investments at cost or amortized cost, represent limited partnerships, loans and trusts. The Company believes its exposure to risk associated with these investments is generally limited to the investment carrying amounts.

The Company’s other investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. For both the three and nine months ended September 30, 2019 and 2018, the Company recorded OTTI on other investments of $0 and $3,000, respectively.

Equity Method Investments - Related Parties

The significant shareholder of the Company has an ownership interest in AmTrust Financial Services, Inc. (“AmTrust”) and ACP Re Ltd. (“ACP Re”).

Limited Liability Companies and Limited Partnerships

The following entities are considered by the Company to be Variable Interest Entities, for which the Company is not the primary beneficiary. The Company accounts for these entities using the equity method of accounting. The Company believes its exposure to risk associated with these investments is generally limited to the investment carrying amounts.

LSC Entity

The Company has a 50% ownership interest in an entity (the “LSC Entity”) initially formed to acquire life settlement contracts, with AmTrust owning the remaining 50%. The LSC Entity used the contributed capital to pay premiums and purchase policies. 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 LSC Entity has a 30% noncontrolling equity interest in a limited partnership managed by a third party. As of September 30, 2019, the LSC Entity directly held one life settlement contract. The life settlement contract is accounted for using the fair value method.

The following table presents the Company’s 50% investment activity in the LSC Entity:

	Nine Months Ended September 30,
	2019			2018
Balance, beginning of the period	$	48,324		$	160,683
Distributions (three months - $(2,500) and $0)	(2,500		)	(116,035		)
Contributions (three months - $258 and $0)	258			2,000
Equity in earnings (losses) (three months - $(481) and $(858))	1,250			651
Change in equity method investments	(992		)	(113,384		)
Balance, end of the period	$	47,332		$	47,299

800 Superior, LLC

The Company holds an investment in 800 Superior, LLC, a limited liability company that owns an office building in Cleveland, Ohio, with AmTrust. AmTrust has been appointed managing member of 800 Superior, LLC. The Company and AmTrust each have a 50% ownership interest in 800 Superior, LLC. Additionally, the Company has an office lease with 800 Superior, LLC. Previously, the Company and AmTrust each also had a 50% ownership interest in East Ninth & Superior, LLC and a 24.5% ownership interest in 800 Superior NMTC Investment Fund II, LLC. During the third quarter of 2019, the net assets of East Ninth & Superior, LLC were combined with 800 Superior, LLC and East Ninth & Superior, LLC and 800 Superior NMTC Investment Fund II, LLC were dissolved.

The Company paid 800 Superior, LLC $742 and $722 in rent for the three months ended September 30, 2019 and 2018, respectively. The Company paid 800 Superior, LLC $2,226 and $2,167 in rent for the nine months ended September 30, 2019 and 2018, respectively.

The Company’s equity interest in 800 Superior, LLC as of September 30, 2019 and December 31, 2018 was $7,325 and $5,125, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 800 Superior, LLC of $(103) and $305, respectively, and made contributions of $2,287 and $0, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 800 Superior, LLC of $(87) and $(922), respectively, and made contributions of $2,287 and $0, respectively.

North Dearborn Building Company, L.P.

The Company holds an investment in North Dearborn Building Company, L.P. (“North Dearborn”), a limited partnership that owns an office building in Chicago, Illinois. AmTrust is also a limited partner in North Dearborn, and the general partner is NA Advisors GP LLC (“NA Advisors”), a related party, owned by Karfunkel family members which is managed by an unrelated third party. The Company and AmTrust each hold a 45% limited partnership interest in North Dearborn, while NA Advisors holds a 10% general partnership interest and a 10% profit interest, which NA Advisors pays to the unrelated third party manager. North Dearborn appointed NA Advisors as the general manager to oversee the day-to-day operations of the office building.

The Company’s equity interest in North Dearborn as of September 30, 2019 and December 31, 2018 was $5,659 and $6,214, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from North Dearborn of $(84) and $(148), respectively, and received distributions of $135 and $0, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from North Dearborn of $(150) and $(313), respectively, and received distributions of $405 and $1,125, respectively.

4455 LBJ Freeway, LLC

The Company holds an investment in 4455 LBJ Freeway, LLC, a limited liability company that owns an office building in Dallas, Texas, with AmTrust. AmTrust has been appointed managing member of 4455 LBJ Freeway, LLC. The Company and AmTrust each have a 50% ownership interest in 4455 LBJ Freeway, LLC. Additionally, the Company entered into a lease agreement with 4455 LBJ Freeway, LLC.

The Company paid 4455 LBJ Freeway, LLC $607 and $551 in rent for the three months ended September 30, 2019 and 2018, respectively. The Company paid 4455 LBJ Freeway, LLC $1,813 and $1,675 in rent for the nine months ended September 30, 2019 and 2018, respectively.

The Company’s equity interest in 4455 LBJ Freeway, LLC as of September 30, 2019 and December 31, 2018 was $984 and $793, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 4455 LBJ Freeway, LLC of $63 and $26, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from 4455 LBJ Freeway, LLC of $191 and $15, respectively.

Illinois Center Building, L.P.

The Company holds an investment in Illinois Center Building, L.P. (“Illinois Center”), a limited partnership that owns an office building in Chicago, Illinois. AmTrust and ACP Re are also limited partners in Illinois Center and the general partner is NA Advisors. The Company and AmTrust each hold a 37.5% limited partnership interest in Illinois Center, while ACP Re holds a 15.0% limited partnership interest. NA Advisors holds a 10.0% general partnership interest and a 10.0% profit interest, which NA Advisors pays to the unrelated third party manager. Illinois Center appointed NA Advisors as the general manager to oversee the day-to-day operations of the office building.

The Company’s equity interest in Illinois Center as of September 30, 2019 and December 31, 2018 was $44,088 and $45,575, respectively. For the three months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from Illinois Center of $(600) and $0, respectively, and made contributions of $0 and $0, respectively. For the nine months ended September 30, 2019 and 2018, the Company recorded equity in earnings (losses) from Illinois Center of $(2,612) and $(2,410), respectively, and made contributions of $1,125 and $2,250, respectively.

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Unpaid Losses and Loss Adjustment Expense Reserves

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Unpaid Losses and Loss Adjustment Expenses

Unpaid Losses and Loss Adjustment Expense Reserves

The unpaid losses and loss adjustment expense (“LAE”) reserves is an estimate of the Company’s liability from incurred claims at the reporting period. The unpaid losses and loss adjustment expense reserves are the result of ongoing analysis of recent loss development trends and emerging historical experience. Original estimates are increased or decreased as additional information becomes known regarding individual claims. In setting its reserves, the Company reviews its loss data to estimate expected loss development. Management believes that its use of standard actuarial methodology applied to its analyses of its historical experience provides a reasonable estimate of future losses. However, actual future losses may differ from the Company’s estimate, and future events beyond the control of management, such as changes in law, judicial interpretations of law and inflation, may favorably or unfavorably impact the ultimate settlement of the Company’s losses and LAE.

The anticipated effect of inflation is implicitly considered when estimating liabilities for losses and LAE. In addition to inflation, the average severity of claims is affected by a number of factors that may vary by types and features of policies written. Future average severities are projected from historical trends, adjusted for implemented changes in underwriting standards and policy provisions, and general economic trends. These estimated trends are monitored and revised as necessary based on actual development.

The following tables present a reconciliation of beginning and ending reserve balances for unpaid losses and loss adjustment expenses:

	Nine Months Ended September 30, 2019
	Property and Casualty			Accident and Health			NGHC			Reciprocal Exchanges			Total
Gross balance at beginning of the period	$	2,507,409		$	271,280		$	2,778,689		$	178,470		$	2,957,159
Less: Reinsurance recoverable at beginning of the period	(1,182,588		)	(24,575		)	(1,207,163		)	(77,979		)	(1,285,142		)
Net balance at beginning of the period	1,324,821			246,705			1,571,526			100,491			1,672,017
Incurred losses and LAE related to:
Current year	1,726,618			279,460			2,006,078			125,250			2,131,328
Prior year	19,791			(37,775		)	(17,984		)	(666		)	(18,650		)
Total incurred	1,746,409			241,685			1,988,094			124,584			2,112,678
Paid losses and LAE related to:
Current year	(661,742		)	(136,261		)	(798,003		)	(76,704		)	(874,707		)
Prior year	(1,013,023		)	(105,076		)	(1,118,099		)	(39,005		)	(1,157,104		)
Total paid	(1,674,765		)	(241,337		)	(1,916,102		)	(115,709		)	(2,031,811		)
Acquired losses and LAE reserves	92,573			—			92,573			—			92,573
Unrealized foreign exchange gain	—			(8,204		)	(8,204		)	—			(8,204		)
Net balance at end of the period	1,489,038			238,849			1,727,887			109,366			1,837,253
Plus: Reinsurance recoverable at end of the period	1,079,560			38,352			1,117,912			84,090			1,202,002
Gross balance at end of the period	$	2,568,598		$	277,201		$	2,845,799		$	193,456		$	3,039,255

	Nine Months Ended September 30, 2018
	Property and Casualty			Accident and Health			NGHC			Reciprocal Exchanges			Total
Gross balance at beginning of the period	$	2,270,551		$	249,653		$	2,520,204		$	143,353		$	2,663,557
Less: Reinsurance recoverable at beginning of the period	(1,067,495		)	(9,840		)	(1,077,335		)	(52,408		)	(1,129,743		)
Net balance at beginning of the period	1,203,056			239,813			1,442,869			90,945			1,533,814
Incurred losses and LAE related to:
Current year	1,596,337			276,987			1,873,324			124,914			1,998,238
Prior year	(13,318		)	(24,623		)	(37,941		)	1,507			(36,434		)
Total incurred	1,583,019			252,364			1,835,383			126,421			1,961,804
Paid losses and LAE related to:
Current year	(883,969		)	(108,686		)	(992,655		)	(81,526		)	(1,074,181		)
Prior year	(622,468		)	(114,045		)	(736,513		)	(34,079		)	(770,592		)
Total paid	(1,506,437		)	(222,731		)	(1,729,168		)	(115,605		)	(1,844,773		)
Unrealized foreign exchange gain	—			(8,302		)	(8,302		)	—			(8,302		)
Net balance at end of the period	1,279,638			261,144			1,540,782			101,761			1,642,543
Plus: Reinsurance recoverable at end of the period	1,120,630			17,778			1,138,408			74,184			1,212,592
Gross balance at end of the period	$	2,400,268		$	278,922		$	2,679,190		$	175,945		$	2,855,135

Prior year loss development, net of reinsurance

Prior year development is based upon numerous estimates by line of business and accident year. No additional premiums or return premiums have been accrued as a result of the prior year effects.

2019. Loss and LAE for the nine months ended September 30, 2019 included $18,650 of favorable development on prior accident year loss and LAE reserves. The $19,125 of unfavorable development in the property and casualty segment (including $666 of favorable development for the Reciprocal Exchanges) was driven by small business auto, while the $37,775 of favorable development in the accident and health segment was primarily driven by the domestic book of business.

2018. Loss and LAE for the nine months ended September 30, 2018 included $36,434 of favorable development on prior accident year loss and LAE reserves. The $11,811 of favorable development in the property and casualty segment (including $1,507 of unfavorable development for the Reciprocal Exchanges) was primarily driven by favorable development in the Company’s auto physical damage and homeowners products, while $24,623 of favorable development in the accident and health segment was primarily driven by favorable development in the Company’s domestic products.