EXHIBIT 99.1
News Release
Contact: | Stewart Yee | |
Investor Relations | ||
Affirmative Insurance Holdings, Inc. | ||
(972) 728-2117 |
AFFIRMATIVE INSURANCE HOLDINGS, INC. ANNOUNCES FIRST QUARTER 2005 RESULTS
ADDISON, Texas (May 12, 2005)– Affirmative Insurance Holdings, Inc. (Nasdaq: AFFM), a producer and provider of personal non-standard automobile insurance, today announced financial results for the quarter ended March 31, 2005.
Highlights for the Company’s first quarter included:
• | Net income for the first quarter of 2005 was $8.0 million, an increase of 9.8% compared to net income of $7.3 million for the first quarter of 2004; | |||
• | Earnings per share for the first quarter of 2005 were $0.47 per diluted share with an annualized return on equity of 15.3%; and | |||
• | Total revenues for the first quarter of 2005 were $87.1 million, an increase of $14.9 million or 20.7% as compared to total revenue of $72.2 million for the same period of 2004. |
“Affirmative produced another quarter of solid profitability as we worked to fully employ the capital raised during 2004,” said Thomas E. Mangold, chief executive officer of Affirmative Insurance Holdings, Inc. “We continue to remain focused on developing and deploying our multiple distribution channel strategy, both through organic and acquisition expansion. We saw competitive pressures accelerate during this quarter, particularly in the independent agency distribution channel. From an underwriting and pricing perspective, we continue to exercise strong discipline and have been unwilling to sacrifice underwriting margins for the sake of top line growth. In the quarter we have continued to see favorable loss experience from prior periods. ”
First Quarter Financial Results
First quarter consolidated net income was $8.0 million or $0.47 per diluted share, up 9.8% from net income of $7.3 million or $0.62 per diluted share for the same period in 2004. Increases in consolidated net income were primarily due to increased retention of gross premium written in our insurance companies at favorable margins. Weighted average diluted shares for the first quarter increased to 17.1 million compared to 11.7 million for the same quarter of the prior year, as a result of the Company’s initial public offering in July of 2004.
Consolidated revenues for the three months ended March 31, 2005 were $87.1 million, an increase of $14.9 million, or 20.7%, compared to revenues of $72.2 million for the three months ended March 31, 2004. The increase in consolidated revenues was primarily due to increased retention of gross premiums written and increased invested assets in our insurance companies.
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Total controlled premium decreased $5.6 million, or 4.7%, to $113.2 million in the first quarter of 2005 compared to total controlled premium of $118.8 million in the first quarter of 2004. In the Company’s Retail distribution channel, total controlled premium increased $3.4 million, or 9.1%, to $41.0 million in the first quarter of 2005, principally due to increases in Texas. Total controlled premium from the Company’s Independent Agency distribution channel decreased $6.9 million, or 12.7%, to $47.1 million primarily due to decreases in Florida, partially offset by increases in South Carolina and New Mexico. Total controlled premium from unaffiliated underwriting agencies decreased by $2.2 million, or 8.0%, to $25.1 million in the first quarter of 2005, primarily due to the continued run-off of a cancelled program in California partially offset by increases in two other programs in California.
Revenues from agency operations increased 12.1% to $47.7 million with a pre-tax margin of 17.2%, compared to revenues of $42.6 million with a pre-tax margin of 19.0% for the first quarter of 2004. Net income from agency operations increased 3.0% to $5.3 million from $5.1 million in the same quarter of the prior year.
Revenues from insurance company operations for the first quarter of 2005 were $76.1 million, an increase of 39.6% as compared to first quarter 2004 revenues of $54.5 million. The combined ratio for the first quarter of 2005 was 94.7% as compared to 93.2% for the first quarter of 2004. Net income from insurance company operations increased 34.3% to $3.3 million from $2.5 million in the same quarter of the prior year.
Guidance and Supplemental Information
Based on its current expectations of market conditions, Affirmative is adjusting its guidance for 2005 and estimates full year earnings to be in the range of $1.75 to $1.85 per diluted share from its earlier guidance of $1.90 to $2.10 per diluted share. This guidance is based on 17.1 million diluted shares and does not include the impact from any acquisitions that may occur in the future.
To provide a more complete understanding of Affirmative’s financial results, the Company has posted supplemental financial data on the investor relations portion of the Company’s website, www.affirmativeholdings.com. The data pertains to first quarter financial results for 2004 and 2005.
Conference call
Affirmative will hold a conference today, Thursday, May 12th, at 11:00 a.m. Eastern Time, 10:00 a.m. Central Time. Following a brief presentation, participants will have the opportunity to ask questions. To participate in the call, dial1-800-299-9086 (international dial 1-617-786-2903),ten minutes before the conference call begins and dialpasscode 95900620.
There will also be a real-time audio webcast of the conference call by CCBN. To listen to the live call, select the webcast icon from the investor relations section of Affirmative’s websitehttp://www.affirmativeholdings.com at least 15 minutes before the start of the call to register, download, and install any necessary audio software. Individuals accessing the audio webcast will be “listen only” and will not have the ability to take part in the Q&A session.
A digital replay will be available one hour after the conclusion of the call. Interested individuals can access the webcast replay athttp://www.affirmativeholdings.com, by clicking on the webcast link. The webcast replay will be available for 30 days after the call. Phone replay will be available through May 19th and may be accessed by dialing1-888-286-8010 (international dial 1-617-801-6888), then enter passcode 27793299.
About Affirmative Insurance Holdings, Inc.
Headquartered in Addison, Texas, Affirmative Insurance Holdings, Inc., is a producer and provider of personal 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.
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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; the market price of our common stock; changes in business strategy; severe weather conditions; 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; claims experience; availability of qualified personnel; and the loss of one or more members of the Company’s management team.
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Affirmative Insurance Holdings, Inc.
Consolidated Statements of Operations — Unaudited
(dollars in thousands, except per share data)
Three months ended March 31, | ||||||||
2005 | 2004 | |||||||
Revenues | ||||||||
Net premiums earned | $ | 67,936 | $ | 47,210 | ||||
Commissions and fees | 17,902 | 24,761 | ||||||
Net investment income | 1,257 | 227 | ||||||
Realized gains (losses) | 3 | (17 | ) | |||||
Total revenues | 87,098 | 72,181 | ||||||
Expenses | ||||||||
Losses and loss adjustment expenses | 44,567 | 31,708 | ||||||
Policy acquisition and operating expenses | 29,517 | 28,499 | ||||||
Interest expense | 579 | 217 | ||||||
Total expenses | 74,663 | 60,424 | ||||||
Net income before income taxes, minority interest and equity interest in unconsolidated subsidiaries | 12,435 | 11,757 | ||||||
Income tax expense | 4,406 | 4,207 | ||||||
Minority interest, net of income taxes | 33 | 95 | ||||||
Equity interest in unconsolidated subsidiaries, net of income taxes | — | 173 | ||||||
Net income | $ | 7,996 | $ | 7,282 | ||||
Net income per common share — Basic | $ | 0.47 | $ | 0.63 | ||||
Net income per common share — Diluted | $ | 0.47 | $ | 0.62 | ||||
Weighted average shares — Basic | 16,845,934 | 11,582,422 | ||||||
Weighted average shares — Diluted | 17,119,853 | 11,700,663 |
Affirmative Insurance Holdings, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
March 31, | December 31, | |||||||
2005 | 2004 | |||||||
Assets | ||||||||
Fixed maturities — available for sale | $ | 158,866 | $ | 157,666 | ||||
Short-term investments | — | 1,995 | ||||||
158,866 | 159,661 | |||||||
Cash and cash equivalents | 30,268 | 24,096 | ||||||
Fiduciary and restricted cash | 27,230 | 16,267 | ||||||
Premiums and fees receivable | 131,350 | 107,411 | ||||||
Commissions receivable | 8,678 | 11,890 | ||||||
Receivable from reinsurers | 55,294 | 75,403 | ||||||
Deferred acquisition costs | 28,980 | 19,118 | ||||||
Other assets | 111,559 | 107,074 | ||||||
Total assets | $ | 552,225 | $ | 520,920 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Liabilities | ||||||||
Reserves for losses and loss adjustment expenses | 103,808 | 93,030 | ||||||
Unearned premium | 119,567 | 90,695 | ||||||
Amounts due reinsurers | 28,673 | 43,167 | ||||||
Deferred revenue | 28,076 | 24,478 | ||||||
Other liabilities | 60,537 | 64,244 | ||||||
Total liabilities | 340,661 | 315,614 | ||||||
Stockholders’ equity | ||||||||
Common stock | 169 | 168 | ||||||
Additional paid-in capital | 151,976 | 151,752 | ||||||
Accumulated other comprehensive income (loss) | (1,375 | ) | 251 | |||||
Retained earnings | 60,794 | 53,135 | ||||||
Total stockholders’ equity | 211,564 | 205,306 | ||||||
Total liabilities and stockholders’ equity | $ | 552,225 | $ | 520,920 | ||||