Exhibit 99.1
FOR IMMEDIATE RELEASE
Company Contact:
Kevin Kaastra
Controller
Fremont Michigan InsuraCorp, Inc.
(231) 924-0300
Fremont Michigan InsuraCorp, Inc. Announces 1st Quarter Earnings
Fremont, Michigan, May 13, 2005 – Fremont Michigan InsuraCorp., Inc. (OTCBB: FMMH) today reported its results of operations for the quarter ended March 31, 2005.
For the quarter ended March 31, 2005, the Company reported net income of $472,000, or $.55 per diluted share, as compared to a net loss of $362,000 for the quarter ended March 31, 2004. First quarter direct written premiums were $8.8 million compared to $7.9 million in the first quarter of 2004. The Company’s combined ratio for the first quarter was 96.8%, compared to 108.9% for the first quarter of 2004.
Revenue for the first quarter was $9.6 million compared to 2004 first quarter revenue of $5.3 million. Net premiums earned for the first quarter were $9.1 million compared to $5.1 million in 2004. Net premiums earned increased $516,000 during the quarter due to normal volume growth while the remaining increase of $3.5 million is due to the decline in earned premium ceded under the quota share reinsurance agreement which was placed into runoff on January 1, 2004.
Net investment income increased 121% to $374,000 as compared to $169,000 in the comparable period in 2004. The increase in investment income is due to increased invested assets attributable to the investment of the proceeds received from the issuance of shares in connection with the demutualization and stock offering completed on October 15, 2004 coupled with an increase in pretax yields and a decline in investment expenses.
The Company’s loss ratio for the first quarter in 2005 was 63.8% compared to 77.0% in 2004. The decline is attributable to the increase in net earned premiums retained by the Company as a result of no longer ceding earned premiums to the quota share reinsurer.
“The Company is pleased with our first quarter results which continue to reflect the positive impact of exiting the quota share reinsurance agreement as reflected in the increase in net premiums earned and the improvement in our loss ratio,” commented Richard E. Dunning, President and CEO. “We continue to focus on our target market and are pleased with the growth in direct written premiums given the increasing competitiveness in the market. As pricing pressure continues in the market we are dedicated to maintaining our underwriting discipline while continuing to seek out new profitable business. We were also pleased with the recent court ruling in Michigan which will allow insurers to continue to use insurance scoring as a pricing tool.”
Fremont Michigan InsuraCorp, Inc. is a holding company owning all of the common stock of Fremont Insurance Company. Headquartered in Fremont, Michigan, Fremont Insurance Company is a property and casualty insurer writing personal and commercial lines insurance on risks exclusively located in Michigan through 170 independent agencies. Its products include homeowners, automobile, mobile home, dwelling, farm, commercial, workers compensation and marine.
Certain of the statements contained herein (other than statements of historical facts) are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include estimates and assumptions related to economic, competitive and legislative developments. These forward- looking statements are subject to change and uncertainty that are, in many instances, beyond the company’s control and have been made based upon management’s expectations and beliefs concerning future developments and their potential effect on Fremont Michigan InsuraCorp, Inc. There can be no assurance that
future developments will be in accordance with management’s expectations so that the effect of future developments on Fremont Michigan InsuraCorp, Inc. will be those anticipated by management. Actual financial results including premium growth and underwriting results could differ materially from those anticipated by Fremont Michigan InsuraCorp, Inc. depending on the outcome of certain factors, which may include changes in property and casualty loss trends and reserves; catastrophe losses; the insurance product pricing environment; changes in applicable law; government regulation and changes therein that may impede the ability to charge adequate rates; changes in accounting principles; performance of the financial markets; fluctuations in interest rates; availability and price of reinsurance; and the status of the labor markets in which the company operates.
Consolidated Statements of Operations
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| | | Quarter Ended March 31,
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| | | 2005
| | | 2004
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| | | (unaudited) | | | (unaudited) | |
Revenues: | | | | | | | | |
Net premiums earned | | $ | 9,110,678 | | | $ | 5,087,148 | |
Net investment income | | | 374,467 | | | | 169,129 | |
Net realized gains (losses) on investments | | | 20,309 | | | | (8,367 | ) |
Other income, net | | | 95,255 | | | | 92,151 | |
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Total revenues | | | 9,600,709 | | | | 5,340,061 | |
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Expenses: | | | | | | | | |
Losses and loss adjustment expenses, net | | | 5,808,993 | | | | 3,917,277 | |
Policy acquisition and other underwriting expenses | | | 3,005,163 | | | | 1,625,343 | |
Interest expense | | | 77,606 | | | | 140,519 | |
Demutualization expenses | | | — | | | | 18,625 | |
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Total expenses | | | 8,891,762 | | | | 5,701,764 | |
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Income (loss) before federal income tax expense | | | 708,947 | | | | (361,703 | ) |
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Federal income tax expense | | | 236,550 | | | | — | |
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Net income (loss) | | $ | 472,397 | | | $ | (361,703 | ) |
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Net income per common share: | | | | | | | | |
Basic | | $ | 0.55 | | | $ | — | |
Diluted | | $ | 0.55 | | | $ | — | |
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Supplementary financial data: | | | | | | | | |
Combined ratio | | | 96.8 | % | | | 108.9 | % |
Consolidated Balance Sheet
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| | | March 31, | | | December 31, |
| | | 2005
| | | 2004
|
| | | (unaudited) | | | |
| Assets | | | | | | | |
Investments: | | | | | | | |
Fixed maturities available for sale, at fair value | | $ | 37,019,861 | | | $ | 37,205,694 |
Equity securities available for sale, at fair value | | | 6,862,977 | | | | 5,071,758 |
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Total investments | | | 43,882,838 | | | | 42,277,452 |
Cash and cash equivalents | | | 1,225,381 | | | | 3,672,254 |
Receivable from sale of investments | | | — | | | | 739,150 |
Premiums due from policyholders, net | | | 6,273,587 | | | | 6,846,286 |
Amounts due from reinsurers | | | 9,997,143 | | | | 10,879,642 |
Accrued investment income | | | 370,857 | | | | 398,208 |
Property and equipment, net of accumulated depreciation | | | 828,683 | | | | 848,103 |
Deferred policy acquisition costs | | | 2,543,360 | | | | 2,860,621 |
Note receivable from related party | | | 135,292 | | | | 136,262 |
Other assets | | | 2,120 | | | | 3,136 |
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| | | $ | 65,259,261 | | | $ | 68,661,114 |
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| Liabilities and Stockholders’ Equity | | | | | | | |
Liabilities: | | | | | | | |
Losses and loss adjustment expenses | | $ | 19,352,386 | | | $ | 18,972,587 |
Unearned premiums | | | 17,710,766 | | | | 19,675,548 |
Reinsurance funds withheld and premiums ceded payable | | | 2,561,166 | | | | 3,018,710 |
Accrued expenses and other liabilities | | | 5,823,172 | | | | 6,798,772 |
Surplus notes | | | 2,890,288 | | | | 2,890,288 |
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Total liabilities | | | 48,337,778 | | | | 51,355,905 |
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Commitments and contingencies | | | | | | | |
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Stockholders’ Equity | | | | | | | |
Preferred stock, no par value, authorized 4,500,000 shares, no shares issued and outstanding | | | — | | | | — |
Class A common stock, no par value, authorized 5,000,000 shares, 862,128 shares issued and outstanding | | | — | | | | — |
Class B common stock, no par value, authorized 500,000 shares, no shares issued and outstanding | | | — | | | | — |
Additional paid-in capital | | | 7,522,413 | | | | 7,512,913 |
Retained earnings | | | 9,686,208 | | | | 9,213,811 |
Accumulated other comprehensive income: | | | | | | | |
Net unrealized (losses ) gains on investments | | | (287,138 | ) | | | 578,485 |
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Total stockholders’ equity | | | 16,921,483 | | | | 17,305,209 |
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Total liabilities and stockholders’ equity | | $ | 65,259,261 | | | $ | 68,661,114 |
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