SNC State National Companies, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): March 19, 2015

STATE NATIONAL COMPANIES, INC.

(Exact name of registrant as specified in its charter)

1900 L. Don Dodson Dr.
Bedford, Texas 76021

(Address of principal executive offices) (zip code)

(817) 265-2000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02                                           Results of Operations and Financial Condition.

On March 19, 2015, State National Companies, Inc. (the “Company”) issued a press release reporting the Company’s financial results for the fourth quarter and the year ended December 31, 2014.  A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this “Report”) and will be posted on the Investor Relations section of the Company’s website at http://ir.statenational.com. In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 2.02 and in the attached Exhibit 99.1 shall be deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Item 7.01                                           Regulation FD Disclosure.

On March 19, 2015, the Company published a data sheet providing certain financial information of the Company for the fourth quarter and the year ended December 31, 2014, which will be available on the Investor Relations section of the Company’s website at http://ir.statenational.com. A copy of the data sheet is also furnished as Exhibit 99.2 to this Report.  In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 7.01 and in the attached Exhibit 99.2 shall be deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

Use of our Website to Distribute Material Company Information

Our company website address is www.statenational.com. We use our website as a channel of distribution for important company information. Important information, including press releases, investor presentations and financial information regarding our company, is routinely posted on and accessible on the Investor Relations subpage of our website, which is accessible by clicking on the tab labeled “Investor Relations” on our website home page. We also use our website to expedite public access to time-critical information regarding our company in advance of or in lieu of distributing a press release or a filing with the Securities and Exchange Commission (the “SEC”) disclosing the same information. Therefore, investors should look to the Investor Relations subpage of our website for important and time-critical information. Visitors to our website can also register to receive automatic e-mail notifications alerting them when new information is made available on the Investor Relations subpage of our website. In addition, we make available on the Investor Relations subpage of our website (under the link “Financial Information” and then “SEC Filings”), free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable after we electronically file such reports with the SEC. Further, copies of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, our Code of Business Conduct and Ethics and the charters for the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Directors are also available through the Investor Relations subpage of our website (under the link “Corporate Governance”).

Additionally, the public may read and copy any of the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. Our electronically filed reports can also be obtained on the SEC’s internet site at http://www.sec.gov.

Item 9.01                                           Financial Statements And Exhibits.

(d)                                 Exhibits.

In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached exhibits shall be deemed to be furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.

99.1                        Press Release dated March 19, 2015.

99.2                        Data Sheet.

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SIGNATURE

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 hereunto duly authorized.

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INDEX TO EXHIBITS

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Exhibit 99.1

State National Companies Reports

Fourth Quarter and Full Year 2014 Earnings

BEDFORD, TX — March 19, 2015 — State National Companies, Inc. (NASDAQ: SNC) today reported its financial results for the fourth quarter and full year ended December 31, 2014.

Total revenues in the fourth quarter of 2014 were $43.0 million, up 15.3 percent from $37.3 million in the fourth quarter of 2013. Adjusted net income, a non-GAAP measure, was $7.9 million, or $0.18 per diluted share, in the fourth quarter of 2014, compared to adjusted net income of $8.3 million, or $0.24 per diluted share, for the same period in 2013.  Reported net income was $6.8 million, or $0.15 per diluted share, in the fourth quarter of 2014. See below for a reconciliation of non-GAAP financial measures.

Total revenues for 2014 were $154.5 million, up 20.2 percent from $128.5 million in 2013, primarily due to increases in premiums earned and ceding fees.  Adjusted net income was $28.7 million, or $0.73 per diluted share in 2014, compared to adjusted net income of $22.1 million or $0.65 per diluted share in 2013.  Reported net income was $11.0 million in 2014, compared to $22.7 million in 2013.

Commenting on the year, State National’s Chairman, President and Chief Executive Officer Terry Ledbetter, stated, “We are pleased with our 2014 results, which reflect significant operational and corporate accomplishments.  State National achieved gross written premiums of over $1.0 billion for the first time in our Company’s 40-year history and reached record totals for premiums earned, ceding fees and adjusted net income.  Adjusted net income increased 29.9% over 2013 with a 14.9% adjusted return on equity, which was very positive considering the 65.7% increase in equity over the prior year. We continue to grow by distinguishing ourselves as a trusted provider of customized insurance solutions, and by delivering superior service to our clients through quality programs in both our Program and Lender Services segments.

“State National simplifies insurance so that our clients can protect more assets, businesses and people.  By making insurance products easily accessible to our customers, we ensure processes are efficient and barriers are minimized,” added Ledbetter. “In October 2014 we completed the resale registration with the SEC of our common stock sold in the private placement and in November 2014, our shares began trading on the NASDAQ Global Select Market. Overall, State National’s operating segments, competitive position and foundation for profitable growth are all stronger today than ever before.”

Financial Highlights

2014 Fourth Quarter

·                  Gross written premiums were $250.9 million, down 4.7 percent from $263.4  million in the fourth quarter 2013

·                  Premiums earned were $27.1 million, up 13.4 percent from $23.9 million in the fourth quarter 2013

·      Ceding fees were $12.7 million, up 22.1 percent from $10.4 million in the fourth quarter 2013

·                  Adjusted net income was $7.9 million, down 4.8 percent from $8.3 million in fourth quarter 2013

·                  Adjusted diluted EPS of $0.18 compared to $0.24 in fourth quarter 2013

2014 Full Year

·                  Gross written premiums were just over $1.0 billion, up 27.7 percent from $810.0 million in 2013

·                  Premiums earned were $96.7 million, up 14.6 percent from $84.4 million in 2013

·                  Ceding fees were $45.7 million, up 38.9 percent from $32.9 million in 2013

·                  Adjusted net income was $28.7 million, up 29.9 percent from $22.1 million in 2013

·                  Adjusted diluted EPS of $0.73 compared to $0.65 in 2013

·                  Adjusted return on equity was 14.9 percent

·                  Shareholders’ equity was $240.9 million as of December 31, 2014, compared to $145.4 million as of December 31, 2013

Program Services Segment

Total revenues from the Program Services segment in the fourth quarter of 2014 were $12.7 million, an increase of $2.3 million, or 22.1 percent, from the fourth quarter of 2013.  The increase in revenues was driven by a 22.1 percent increase in ceding fees to $12.7 million in the fourth quarter of 2014 from $10.4 million in the fourth quarter of 2013.  The higher ceding fees were primarily the result of an increase in gross earned premiums related to the year over year increases from two significant programs.

Total revenues from the Program Services segment for the full year 2014 were $45.7 million, an increase of $13.3 million, or 41.0 percent, from 2013.  This increase was primarily driven by a 38.9 percent increase in ceding fees to $45.7 million in 2014 from $32.9 million in 2013.  The growth in ceding fees for two significant programs that contributed to the fourth quarter performance also drove the annual revenue increase. One of these programs experienced growth in gross written premium in 2014 while the other was added in mid-2013 and generated a full year of earned premiums in 2014.

Lender Services Segment

Total revenues from the Lender Services segment in the fourth quarter of 2014 were $27.7 million, an increase of $3.0 million, or 12.1 percent, from the fourth quarter of 2013.  Premiums earned increased by $3.2 million, or 13.4 percent, to $27.1 million in the fourth quarter of 2014 from $23.9 million in the fourth quarter of 2013. Increases in Lender Services premiums were primarily driven by rising automobile sales, higher average automobile loan balances and increasing credit availability.  In addition, the amendment to the CUNA Mutual alliance agreement resulted in additional net premiums earned due to the increase in our retention of this business.

Total revenues from the Lender Services segment for the full year 2014 were $99.5 million, an increase of $11.5 million, or 13.1 percent, from 2013, and premiums earned increased by $11.8 million, or 13.9 percent, to $96.7 million in 2014 from $84.9 million in 2013, primarily due to the same factors affecting the fourth quarter.

Losses and loss adjustment expenses (LAE) were $11.7 million in the fourth quarter of 2014 compared to $8.6 million in the same period last year, primarily a result of an increased loss ratio, increased retention for the business subject to the CUNA Mutual alliance and higher earned premium. The net loss ratio rose to 43.3

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percent in the fourth quarter of 2014 from 35.9 percent in the fourth quarter of 2013, due to an increase in claim volume and severity.

Losses and LAE were $40.6 million for 2014 compared to $31.6 million for 2013, again related to an increased loss ratio and higher earned premiums.  A strengthening economy, an aging automobile fleet, and easier access to credit have contributed to an increase in vehicle sales, resulting in higher loan balances upon which the Company pays claims.  The net loss ratio increased to 42.0 percent for 2014 from 37.3 percent for 2013, which was also driven by an increase in claim volume and severity that impacted the fourth quarter performance.

General and Administrative Expenses

General and administrative expenses in the fourth quarter of 2014 increased by $3.3 million, or 24.8 percent, to $16.6 million from $13.3 million in the fourth quarter of 2013, primarily due to an increase in direct personnel costs, including stock-based compensation expense incurred in 2014.  The Company did not have stock-based compensation expense in 2013.

General and administrative expenses for 2014 increased by $5.5 million, or 10.3 percent, to $58.9 million from $53.4 million in 2013, primarily due to the same factors affecting the fourth quarter.

Non-GAAP Reconciliation

This press release includes certain financial measures that have been adjusted for items impacting comparability.  The accompanying information provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, earnings per share, return on equity or any other GAAP measure of liquidity or financial performance.

Adjusted net income is considered a non-GAAP financial measure because it reflects the following adjustments to net income, which is the most directly comparable measure calculated in accordance with GAAP: the pro forma provision for income taxes as if the Company had been treated as a C Corporation for each period presented, and the exclusion (net of tax benefit) of the increase in the Company’s deferred tax asset as a result of the conversion to C Corporation status, the amount of founder special compensation and the non-recurring offering-related expenses and contract modification expense related to the amendment to our alliance agreement with CUNA Mutual.  Management believes this measure is helpful to investors because it provides comparability in evaluating core financial performance between periods.

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STATE NATIONAL COMPANIES, INC.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except per share data)

Adjusted Net Income

Adjusted Earnings Per Share

Adjusted Return on Equity

(1)         During the periods presented, we made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company.  We refer to these as “founder special compensation.”  Following the completion of the private placement, we ceased paying founder special compensation.

(2)         Offering-related expenses are non-recurring expenses related to the Company’s private placement of common stock.

(3)         In connection with the 2014 amendment to the alliance agreement with CUNA Mutual, we paid CUNA Mutual $17.8 million.  As a result, we recorded non-recurring contract modification expense of $17.8 million.

(4)         Upon the completion of the private placement, our parent company’s status as a Subchapter S corporation terminated and our consolidated income became fully subject to U.S. federal income taxes.  This adjustment represents estimated income taxes as if the Company had been treated as a C Corporation for each period presented. The estimated tax was calculated assuming the Company’s blended statutory federal and state income tax rates of 37.5% for the year ended December 31, 2014 and 38.1% for the year ended December 31, 2013, respectively.

(5)         As a result of the Company’s conversion to a C Corporation, the deferred tax asset increased by approximately $14.3 million primarily due to the effects of eliminating deferred tax balances on the insurance subsidiaries related to intercompany transactions. This excludes the tax effect related to contract modification expense of $6.7 million.

(6)         Founder special compensation, offering-related expenses, and contract modification expense are shown net of the estimated tax benefit for each period presented.  The estimated tax was calculated assuming the Company’s blended statutory federal and state income tax rates of 37.5% and 38.1% for the periods ended December 31, 2014 and 2013, respectively.

Balance Sheet

State National’s balance sheet reflects low financial leverage with $44.5 million of subordinated debentures.  The subordinated debentures have limited covenant requirements and are interest-only until the mid-2030s. The Company had only $6.7 million of goodwill or other intangibles at December 31, 2014.

State National’s investment portfolio is primarily comprised of fixed income securities, the majority of which have investment grade ratings with short duration of approximately four years and are laddered to allow for new funds to reinvest annually as rates change.  Most of the Company’s reserves are ceded to reinsurers.

2015 Outlook

In 2014, our Lender Services segment had the highest level of new sales in our Company’s history.  We expect that momentum to carry into 2015 because of our strong sales and marketing efforts coupled with the ongoing success of our relationship with CUNA Mutual. The trend of rising automobile sales, higher average automobile loan balances and increasing credit availability should also contribute to growth in 2015. Based on these factors we expect net earned premiums in 2015 to be in the range of $120 to $130 million, up from $96.7 million in 2014, with an expected combined ratio of 85 to 90 percent.

In Program Services, increased capital in the property and casualty insurance market, including the increased role of alternative capital markets in reinsurance, and the growth of offshore reinsurance markets generally should drive demand for our services, as many of these firms do not have direct access to the U.S. market. We also anticipate downgrades of certain insurance companies to create increased demand for our issuing carrier capacities. We have a robust pipeline that is partially a result of new dedicated staff that was added in the summer of 2014, calling directly on general agents. In 2015, we expect fees for Program Services to be in the range of $55 to $60 million. Included in this projection is our expectation of approximately $21 to $25 million in fees from Meadowbrook and Nephila, each of which individually contribute $10 to $13 million in fees.

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Conference Call

State National will host a conference tomorrow morning, March 20, 2015 at 9:00 a.m. Central Time to discuss further its fourth quarter and full year 2014 results. To access the call live, dial (716) 247-5810 and use the passcode 82008889# at least 10 minutes prior to the start time. Alternatively, investors can listen live over the Internet by visiting the Company’s website at http://ir.statenational.com/. For those who cannot listen to the live call, a telephonic replay will be available through March 27, 2015 and may be accessed by calling (404) 537-3406 and using pass code 82008889 #. Also, an archive of the webcast will be available after the call for a period of 90 days on the “Investors” section of the Company’s website at http://www.statenational.com/.

About State National Companies, Inc.

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

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally, but not always, accompanied by words such as “estimate,” “believe,” “expect,” “anticipate,” “would,” “will,” “may,” “plan,” “goal,” “target,” “could,” “continue,” “intend” or other words that convey the uncertainty of future events or outcomes. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control.

Examples of forward-looking statements include the plans and objectives of management for future operations, including those relating to future growth of our business, 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, our ability to recover from our capacity providers, the cost and availability of reinsurance coverage, challenges to our use of issuing carrier or fronting arrangements by regulators or changes in state or federal insurance or other statutes or regulations, our dependence on a limited number of business partners, potential regulatory scrutiny of lender-placed automobile insurance, level of new car sales, availability of credit for vehicle purchases and other factors affecting automobile financing, our ability to compete effectively, a downgrade in the financial strength ratings of our insurance subsidiaries, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, changes in interest rates or other changes in the financial markets, the effects of emerging claim and coverage issues, changes in the demand for our products, the effect of general economic conditions, breaches in data security or other disruptions with our technology, and changes in pricing  or other competitive environments.

Forward-looking statements involve inherent risks and uncertainties and State National Companies cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward- looking statements made from time-to-time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of State National Companies. These factors and other risks and uncertainties are described in detail in our filings with the Securities and Exchange Commission.   The forward-

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looking statements in this press release speak only as of the date of this release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

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STATE NATIONAL COMPANIES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

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STATE NATIONAL COMPANIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

($ in thousands, except for per share information)

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Program Services Segment — Results of Operations

Unaudited

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Lender Services Segment — Results of Operations

Unaudited

(1)         In connection with the amendment to the alliance agreements with CUNA Mutual, we paid CUNA Mutual $17.8 million.  As a result, we recorded non-recurring contract modification expense of $17.8 million.

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Corporate Segment — Results of Operations

Unaudited

(1)         During the periods presented, we made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company.  We refer to these payments as “Founder special compensation.”  Following the completion of the private placement, we ceased paying Founder special compensation.

(2)         Offering-related expenses are non-recurring expenses related to the Company’s private placement of common stock.

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Exhibit 99.2