News Release
Contact: | Tim Bienek Chief Financial Officer 972-728-6300 ext. 6331 tim.bienek@affirmativeholdings.com | Michael Russell Investor Relations 972-728-6300 ext. 2092 mike.russell@affirmativeholdings.com |
Affirmative Insurance Holdings Announces 2004 Second Quarter Results
Solid financial performance comes on the heels of non-standard auto insurer’s IPO in July
ADDISON, Texas (Aug. 9, 2004) —Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM), a provider of personal non-standard automobile insurance, today announced financial results for the three and six month periods ended June 30, 2004.
Highlights for the Company’s 2004 second quarter included:
• | Net income increased 52.6 percent over the same period in 2003. | |||
• | Revenues from agency operations increased 20.1 percent and pre-tax margins improved 5.7 percentage points from year-ago levels. | |||
• | The Company’s GAAP combined ratio of its insurance segment was 94.7 percent. |
“As a new public company, we are pleased to report to our shareholders that the second quarter produced strong financial results and continued top-line growth,” said Thomas E. Mangold, president and chief executive officer of Affirmative Insurance Holdings, Inc. “We are encouraged that the pricing and competitive conditions remain favorable in the markets where we operate.”
Affirmative’s second quarter financial report is its first public earnings announcement since the Company’s July 9, 2004 initial public offering of 8,170,000 shares of common stock priced at $14.00 per share. Of the total shares sold in the offering, 4,420,000 were sold by Affirmative and 3,750,000 were sold by a selling shareholder, Vesta Insurance Group. On July 26, 2004, Affirmative announced that the underwriters exercised in full their over-allotment option to purchase an additional 1,225,500 shares, also at $14.00 per share. The underwriters purchased 663,000 additional shares from Affirmative and 562,500 additional shares from Vesta. Including the shares sold in the IPO and over-allotment option, Affirmative’s net proceeds from the offering totaled approximately $65.3 million, after deducting estimated offering expenses.
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Affirmative Insurance Holdings, Inc. 2004 Second Quarter Results | Page 2 |
Following Affirmative’s initial public stock offering, A.M. Best Co. upgraded the financial strength ratings of Affirmative’s insurance subsidiaries, Affirmative Insurance Company and Insura Property and Casualty Insurance Company, Inc., to B+ (Very Good) from B (Fair). The ratings of the insurance companies were removed from review and assigned a stable outlook.
FINANCIAL RESULTS
Second quarter 2004 net income was $5.5 million or $0.47 per diluted share, a year-over-year increase of $1.9 million or 52.6 percent, compared to $3.6 million or $0.36 per diluted share for the same period in 2003.
Total revenues for the three months ended June 30, 2004 were $67.2 million, an increase of $43.8 million, compared to $23.4 million for the same period in 2003. The increase in revenues was principally due to Affirmative’s retention of gross premiums written by its insurance companies following the restructuring of the reinsurance agreements with Vesta, which allowed Affirmative on January 1, 2004 to start retaining premiums and losses that were previously ceded to Vesta Fire.
For the six months ended June 30, 2004, the Company reported net income of $12.8 million or $1.09 per diluted share, compared to net income of $9.1 million or $0.90 per diluted share in the same period of 2003. Total revenues for the first six months of 2004 totaled $139.4 million versus $51.1 million during the first half of 2003.
CREDIT FACILITY
Affirmative also announced this it has entered into a $15 million two-year credit facility with The Frost National Bank. This senior secured credit facility will be used for general working capital for agency operations, capital surplus for affiliated insurance companies and to finance acquisition activities.
GUIDANCE AND SUPPLEMENTAL INFORMATION
Affirmative maintains a positive outlook for the remainder of 2004 and believes earnings for the full year will be in the range of $1.60 to $1.80 per diluted share. For 2005, the Company projects earnings to be in the range of $1.85 to $2.05 per diluted share.
To provide a more complete understanding of Affirmative’s financial results, Company officials have posted supplemental financial data on the investor relations Web site, which can be found by visiting www.affirmativeholdings.com. The data pertains to quarterly financial results for all four quarters of 2003 and the first and second quarters of 2004.
CONFERENCE CALL The Company will hold a conference call to discuss its second quarter results at 11:30 a.m. (EST), Monday, July 9, 2004. The conference call will be accessible on Affirmative’s investor relations Web page, which can be found by visiting www.affirmativeholdings.com and clicking ‘investor relations’, or by telephone at 800-901-5241 (Passcode: 17375433). Recorded replays of the earnings conference call will be available one hour after the call’s completion on the investor relations Web page or by telephone at 888-286-8010 (Passcode: 98538111).
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Affirmative Insurance Holdings, Inc. 2004 Second Quarter Results | Page 3 |
ABOUT AFFIRMATIVE INSURANCE HOLDINGS
Headquartered in Addison, Texas, Affirmative Insurance Holdings, Inc., is a producer and provider of non-standard automobile insurance policies to individual consumers in highly targeted geographic markets. Affirmative currently offers products and services in 11 states, including Texas, Illinois, California and Florida.
FORWARD-LOOKING STATEMENTS DISCLOSURE
Certain information in this news release and other statements or materials are not historical facts but are forward-looking statements relating to such matters as assumed future results of the Company’s business, financial condition, liquidity, results of operations, plans and objectives. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, the Company provides the following cautionary remarks regarding important factors which, among others, could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, results of the Company’s business, and the other matters referred to above include, but are not limited to: general volatility of the non-standard personal automobile and reinsurance markets; claims experience; severe weather conditions; changes in business strategy; availability, terms and deployment of capital; the degree and nature of competitor product and pricing activity; changes in the non-standard personal automobile insurance industry, interest rates or the general economy; identification and integration of potential acquisitions; and the loss of one or more member of the Company’s management team.
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(financial tables follow)
Affirmative Insurance Holdings, Inc. 2004 Second Quarter Results | Page 4 |
Affirmative Insurance Holdings, Inc.
Consolidated Statements of Operations — Unaudited
(dollars in thousands, except per share data)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2004 | 2003 | 2004 | 2003 | |||||||||||||
Revenues | ||||||||||||||||
Net premiums earned | $ | 43,738 | $ | — | $ | 90,948 | $ | — | ||||||||
Commission income | 8,276 | 11,165 | 19,200 | 24,929 | ||||||||||||
Fee income | 13,826 | 9,610 | 27,317 | 20,281 | ||||||||||||
Claims processing fees | 1,009 | 2,582 | 1,355 | 5,384 | ||||||||||||
Net investment income | 363 | 52 | 590 | 102 | ||||||||||||
Realized gains (losses) | (3 | ) | (9 | ) | (20 | ) | 434 | |||||||||
Total revenues | 67,209 | 23,400 | 139,390 | 51,130 | ||||||||||||
Expenses | ||||||||||||||||
Losses and loss adjustment expenses | 28,149 | — | 59,857 | — | ||||||||||||
Policy acquisition expenses | 13,620 | 3,653 | 26,273 | 8,253 | ||||||||||||
Employee compensation and benefits | 10,230 | 8,960 | 20,909 | 18,277 | ||||||||||||
Depreciation and amortization | 961 | 911 | 1,845 | 1,682 | ||||||||||||
Operating expenses | 4,821 | 4,010 | 9,104 | 8,051 | ||||||||||||
Interest expense | 174 | 260 | 391 | 370 | ||||||||||||
Total expenses | 57,955 | 17,794 | 118,379 | 36,633 | ||||||||||||
Net income before income taxes, minority interest and equity interest in unconsolidated subsidiaries | 9,254 | 5,606 | 21,011 | 14,497 | ||||||||||||
Income tax expense | 3,311 | 2,004 | 7,518 | 5,183 | ||||||||||||
Minority interest, net of income taxes | 212 | 10 | 307 | 256 | ||||||||||||
Equity interest in unconsolidated subsidiaries, net of income taxes | 250 | — | 423 | — | ||||||||||||
Net income | $ | 5,481 | $ | 3,592 | $ | 12,763 | $ | 9,058 | ||||||||
Net income per common share — Basic | $ | 0.47 | $ | 0.36 | $ | 1.10 | $ | 0.90 | ||||||||
Net income per common share — Diluted | $ | 0.47 | $ | 0.36 | $ | 1.09 | $ | 0.90 | ||||||||
Weighted average shares — Basic | 11,671,883 | 10,085,230 | 11,627,149 | 10,072,197 | ||||||||||||
Weighted average shares — Diluted | 11,770,892 | 10,105,117 | 11,735,771 | 10,092,084 |
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Affirmative Insurance Holdings, Inc. 2004 Second Quarter Results | Page 5 |
Affirmative Insurance Holdings, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
June 30, | December 31, | |||||||
2004 | 2003 | |||||||
(Unaudited) | ||||||||
Assets | ||||||||
Fixed maturities — available for sale | $ | 53,346 | $ | 6,610 | ||||
Other invested assets | — | 928 | ||||||
53,346 | 7,538 | |||||||
Cash and cash equivalents | 39,446 | 15,358 | ||||||
Fiduciary and restricted cash | 12,438 | 9,467 | ||||||
Premiums and fees receivable | 108,382 | 75,596 | ||||||
Commissions receivable | 6,914 | 7,043 | ||||||
Receivable from reinsurers | 96,005 | 94,526 | ||||||
Deferred acquisition costs | 12,560 | 14,371 | ||||||
Other assets | 92,849 | 90,680 | ||||||
Total assets | $ | 421,940 | $ | 314,579 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Reserves for losses and loss adjustment expenses | 87,414 | 58,507 | ||||||
Unearned premium | 85,885 | 71,226 | ||||||
Amounts due reinsurers | 50,252 | 19,633 | ||||||
Deferred revenue | 20,976 | 15,451 | ||||||
Other liabilities | 50,948 | 36,385 | ||||||
Total liabilities | 295,475 | 201,202 | ||||||
Stockholders’ equity | ||||||||
Common stock | 117 | 116 | ||||||
Warrants | — | 157 | ||||||
Additional paid-in capital | 85,230 | 84,074 | ||||||
Accumulated other comprehensive loss | (684 | ) | (9 | ) | ||||
Retained earnings | 41,802 | 29,039 | ||||||
Total stockholders’ equity | 126,465 | 113,377 | ||||||
Total liabilities and stockholders’ equity | $ | 421,940 | $ | 314,579 | ||||
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