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National General watching lender-placed biz following 120% combined ratio in Q2

National General Holdings Corp. posted a combined ratio of 120% in its lender-placed business in the second quarter, and executives are monitoring it closely for the potential of a sale or shutdown.

President and CEO Barry Karfunkel said on the company's second-quarter earnings call that the business' top line is "dropping at a greater-than-expected pace" as some of its large clients are selling its nonperforming loan service rights.

Karfunkel said the company is attempting to return the line to profitability by winning new clients and taking costs out of the business.

"We're in the process of achieving operational efficiencies, which will bring our fixed expenses more in line with premium levels that we expect to run in future periods," Karfunkel said. "With these initiatives, we expect to be marginally profitable over the next couple of quarters."

Several analysts questioned executives about the company's relationship with Wells Fargo & Co., which has been embroiled in a scandal involving selling lender-placed auto insurance to customers without their knowledge. National General's management declined to speak about the issue or describe its relationship with the bank during the call.

When asked by an analyst if a sale or shutdown of the business was on the horizon, Karfunkel said the company is monitoring its progress on a monthly and quarterly basis. And, if the company does not achieve its profitability targets in any of its business segments, it will make "appropriate decisions."

Shares of National General dropped 6.48% on higher-than-average volume to $19.21 as of 12:48 p.m. ET on Aug. 8.