Fremont Michigan InsuraCorp, Inc. Investor Presentation June 2008 Exhibit 99.1 |
Richard E. Dunning President and CEO |
3 Company Overview Fremont Michigan Insuracorp – holding company of Fremont Insurance Company Property & casualty insurance carrier Formed as mutual in 1876 Demutualized and converted to stock company in October 2004 via IPO Headquartered in Fremont, Michigan Multi-line product offering: o Personal o Commercial o Farm o Marine Focused on individuals and small to medium sized businesses exclusively in Michigan |
4 Company Overview 61,150 policies in force at March 31, 2008 180 independent insurance agencies marketing Fremont policies throughout Michigan Assets of $85.4 million at March 31, 2008 Direct premiums written of $54 million for the year ended December 31, 2007 Stock Symbol: FMMH traded on OTC Bulletin Board “B++” (Good) rated by A.M. Best – upgraded in 2006 |
5 Investment Catalysts Experienced management team Focus during soft market o Maintain underwriting discipline o Continued revenue growth in soft market o Generation of fee income Investment in technology Focused agency network Financial performance |
6 Experienced Management Team 2003 8 VP – Finance Kevin Kaastra, CPA 2007 27 VP – Commercial Lines Kent Shantz, CIC 2003 28 VP – Personal Lines & Product Pricing Skip Massucci, CPCU, API 2005 3 VP – Information Technology Dave Mangin 1972 36 VP – Agency Relations, Farm & Marine Lines William Hall 1982 26 Sr. VP – Admin. & Treasurer Marv Deur 1998 17 VP - Marketing Kurt Dettmer 1996 12 President & CEO Richard Dunning Year Joined Fremont Years of Industry Experience Title Name |
7 Ownership of Mgt., Board & Employees 13.2% 1.6% 4.9% 6.8% % of Total Shares 228,574 Total 27,655 Company 401(k) Plan 83,872 Board of Directors 117,047 Management Team Common Stock Group |
8 Underwriting Discipline Soft market drives carriers to relax their underwriting standards and reduce rates Key to success is ensuring that exposure is appropriately priced for the amount of risk assumed Consistent standards to evaluate risk Specialized underwriting by line of business Handling initial application screening, report running, and policy issuance Due diligence process Financial stability and responsibility of the insured Insurance score Inspections Engineering reports Rating software Motor Vehicle Reports Exchange of claims information |
9 Technology – Fremont Complete Proprietary web-based rating platform Quote, bind and issue policy Real-time interface with policy processing system Eliminated paper submissions and allowed real-time rating to agents Submissions must meet underwriting standards otherwise referred to underwriter Product lines: homeowners, personal & commercial auto, mobilowners, businessowners, marine and workers compensation Invested over $2.5 million since 2005 Received (10/07) national award by Applied Users Group |
10 Technology – Real Time Functionality Invoice and Policy Inquiry Claim Status Make Payment On-line Policy Pricing First Notice of Loss Agency Download Website Log-in |
11 Fremont Complete |
12 Direct Premium Written Per Employee $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 1997 1999 2001 2003 2005 2007 DPW Projected 2008 |
13 Agency Distribution Network Exclusive product marketing in Michigan 180 independent agencies Disciplined rate development process Goal: To be ranked as a top-four insurer within each independent agency Agencies: Focus on partners with strong track records of success Compensation linked to performance Management: Aggressive monitoring of agency activity Strong home office support staff for all agencies |
14 Top Line Growth Potential Michigan Market Others 99.6% Fremont 0.4% Fremont Others Total DPW in Michigan market is $13.4 billion Fremont writes $54 million representing 0.4% of the total market Significant growth potential in Michigan for Fremont |
Kevin G. Kaastra, CPA Vice President of Finance |
16 1 st Quarter Financial Results (In thousands, except per share data) 2008 2007 $ % Direct premiums written 12,064 $ 10,963 $ 1,101 $ 10.0% Net premiums earned 11,217 $ 10,265 $ 952 $ 9.3% Net investment income 516 491 25 5.1% Net realized gains 159 28 131 467.9% Other income, net 138 104 34 32.7% Total revenues 12,030 10,888 1,142 10.5% Losses and LAE, net 6,337 5,831 506 8.7% Underwriting expenses 4,063 3,848 215 5.6% Interest expense - 50 (50) -100.0% Total expenses 10,400 9,729 671 6.9% Income before tax 1,630 1,159 471 40.6% Federal income tax 526 356 170 47.8% Net income 1,104 $ 803 $ 301 $ 37.5% Diluted EPS .61 $ .45 $ 0.17 $ 37.0% Loss & LAE ratio 56.5% 56.8% Expense ratio 36.2% 37.5% Combined ratio 92.7% 94.3% Quarter Ended March 31, Change |
17 14 Quarters of Profitable Results - 1,000 2,000 3,000 4,000 5,000 6,000 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Pretax income Combined Ratio |
18 Historical Financial Results (000's, except per share data) 2007 2006 2005 2004 2003 Direct premiums written 53,956 $ 48,869 $ 45,516 $ 41,971 $ 38,323 $ Net premiums earned 42,774 $ 39,249 $ 38,756 $ 27,196 $ 18,099 $ Net investment income 2,165 1,888 1,689 1,176 815 Net realized gains 1,978 520 609 276 (32) Other income, net 471 417 397 386 388 Total revenues 47,388 42,074 41,451 29,034 19,270 Losses and LAE, net 24,424 17,565 20,704 17,039 11,370 Underwriting expenses 15,897 13,600 12,508 9,615 6,887 Interest expense 146 228 309 487 577 Demutualization expenses - - - 302 175 Total expenses 40,467 31,393 33,521 27,443 19,009 Income before tax 6,921 10,681 7,930 1,591 261 Federal income tax 2,037 3,466 (1,152) 78 35 Net income 4,884 $ 7,215 $ 9,082 $ 1,513 $ 226 $ Diluted EPS 2.69 $ 3.98 $ 5.09 $ .50 $ NA Loss & LAE ratio 57.1% 44.8% 53.4% 62.7% 62.8% Expense ratio 37.2% 34.6% 32.3% 35.4% 38.1% Combined ratio 94.3% 79.4% 85.7% 98.1% 100.9% |
19 Profitable Top Line Growth - 10,000 20,000 30,000 40,000 50,000 60,000 2003 2004 2005 2006 2007 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0% Personal Commercial Farm Marine Combined ratio |
20 Combined Ratio Source: Insurance Information Institute, AM Best, ISO 98.3 92.4 95.6 100.7 100.1 98.1 85.7 79.4 94.3 100.9 75 85 95 105 2003 2004 2005 2006 2007 Industry Fremont Despite Katrina, ’05 benefited from heavy use of reinsurance which lowered net losses ’06 produced the best industry underwriting result since 87.6 combined ratio in 1949 Record setting combined ratio for Fremont Target Combined Ratio: 94% |
21 Investment Income (100) 400 900 1,400 1,900 2,400 Net Investment Income 815 1,176 1,689 1,888 2,165 Realized Gains (32) 276 609 520 1,978 2003 2004 2005 2006 2007 |
22 Return on Equity (a) 2005 ROE includes impact of $3.8 million tax benefit from release of deferred tax valuation allowance. ROE excluding this item was 24.2%. *Source: ISO - 10.0% 20.0% 30.0% 40.0% Fremont 2.9% 11.8% 42.1% 23.9% 13.2% Industry* 8.9% 9.4% 9.6% 12.2% 13.0% 2003 2004 2005 (a) 2006 2007 Target ROE: 12% - 14% |
23 Reinsurance Primary Coverage Multi-line excess of loss coverage o $150,000 retention – max exposure to Company on any one loss o Casualty Coverage: $4,850,000 above retention o Property Coverage: $9,850,000 above retention Catastrophe excess of loss coverage o $1,250,000 retention for any one event o Coverage: $24,750,000 above retention Reinsurance Partners AON Re – Broker QBE Reinsurance Company Toa Reinsurance Company GMAC Re Lloyds Others |
24 Investment Portfolio (in '000s) 3/31/2008 % 12/31/2007 % U.S. Govt 541 $ 1% 3,198 $ 5% • No subprime holdings Tax Exempt Muni 26,458 46% 25,761 44% Taxable Muni 3,522 6% - 0% • 98% of MBS are agency Corporates 5,002 9% 6,834 12% backed Mortgage Backed 14,301 25% 14,736 25% Total Bonds 49,824 87% 50,529 86% • All insured tax-exempt securities have underlying Equities 7,356 13% 8,305 14% rating of A- or higher Total 57,180 $ 100% 58,834 $ 100% • Equities consist of mutual funds Bond TE Yield 5.3% 5.3% in large, mid and small-cap Bond Duration 5.3 5.1 and international/specialty Bond Rating Allocation AAA 65% AA 17% A 18% Average AA+ Highlights |
25 Book Value Growth $- $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 Stock Price $4.85 $5.85 $10.68 $24.76 $18.64 $19.50 Book Value $9.18 $9.74 $14.55 $19.37 $22.16 $22.31 10/15/04 12/31/04 12/31/05 12/31/06 12/31/07 6/9/08 Represents 3/31/08 Book Value |
26 Strategic Operating Metrics Peer Performance in Top Quartile Maximum Premium to Surplus Ratio of 1.5 Target ROE: 12% - 14% Expense Ratio – Top Quartile of Peers Processing & Product Fee Income |
27 Why Invest In Fremont? Experienced management team with ownership stake Established business model producing profitable growth Award winning technology platform – Fremont Complete Focused agency network Book value growth and transparent balance sheet Top and bottom line growth potential |
Questions |
29 Fremont Michigan Insuracorp, Inc. (the “Company”) may from time to time make written or oral “forward-looking statements,” including statements contained in the Company’s filings with the Securities and Exchange Commission, in its reports to shareholders and in other communications by the Company, which are made in good faith by the Company pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements with respect to the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Company’s control).The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. A partial list of important factors that may affect our financial condition and results of operations is set forth in our filings with the Securities and Exchange Commission. The Company cautions that the list of important factors is not exclusive. Readers are also cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the current date.The Company does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Company. |
Fremont Michigan InsuraCorp, Inc. Investor Presentation June 2008 |