Exhibit 99.1
Affirmative Insurance Announces 2007 First Quarter Results and Quarterly Cash Dividend of Two Cents Per Share
ADDISON, Texas, May 11, 2007 (PRIME NEWSWIRE) -- Affirmative Insurance Holdings, Inc. (Nasdaq:AFFM), a distributor and producer of non-standard personal automobile insurance, today announced financial results for the quarter ended March 31, 2007.
Key Financial Results for the Quarter Ended March 31, 2007
Three months ended March 31, -------------------------------------------- 2007 2006 % Change ------- ------- ------- (dollars in millions, except per share data) Gross premiums written $ 143.2 $ 88.7 61.3% Net premiums written $ 102.1 $ 87.1 17.3% Net premiums earned $ 82.8 $ 73.0 13.3% Total revenues $ 109.9 $ 92.2 19.2% Net income $ 2.2 $ 6.2 -64.0% Net income per common share - diluted $ 0.15 $ 0.40 -62.5%
First Quarter Financial Results
In the first quarter of 2007, Affirmative's net income was $2.2 million or $0.15 per diluted share, as compared to the net income of $6.2 million or $0.40 income per diluted share for the same period in 2006. Weighted average diluted shares outstanding remained unchanged at 15.5 million shares.
On January 31, 2007, Affirmative completed the acquisition of USAgencies L.L.C. in a fully financed all cash transaction valued at approximately $199.2 million. USAgencies is a non-standard personal automobile insurance distributor and provider with retail sales locations in Louisiana, Illinois and Alabama. For accounting purposes, the transaction was effective as of January 1, 2007, so the company's reported results for the first quarter of 2007 include USAgencies' first quarter 2007 operating results as adjusted to reflect purchase accounting treatment.
Net premiums earned for the three months ended March 31, 2007 were $82.8 million, an increase of $9.8 million or 13.3% as compared to net premiums earned of $73.0 million for the three months ended March 31, 2006. The increase was primarily due to the inclusion of the operating results of USAgencies in the first quarter 2007 financial statements. In the first quarter of 2007, Affirmative's gross premiums written increased to $143.2 million or 61.3% as compared to the first quarter of 2006 and net premiums written increased 17.3% to $102.1 million.
The revenue from commission income and fees included in Affirmative's consolidated financial statements increased 33.6% to $23.4 million in the first quarter of 2007 from $17.5 million in the comparable period in 2006.
For the quarter ended March 31, 2007, Affirmative's loss and loss adjustment expense ratio was 70.0% as compared to 65.2% for the first quarter of 2006. The increase in the loss and loss adjustment expense ratio is primarily a result of the addition of USAgencies' book of business, which operates at a higher loss and loss adjustment expense ratio than Affirmative's other operations have experienced. Moreover, in the first quarter of 2007, Affirmative's insurance companies experienced a modest increase in the 2007 loss and loss adjustment expense ratio due to slightly negative premium trends resulting from selected rate and product changes during 2006.
For the quarter ended March 31, 2007, the company's expense ratio was 22.4% as compared to 22.1% in the prior year and the combined ratio (the sum of the loss and loss adjustment expense ratio and the expense ratio) for the first quarter of 2007 was 92.4% as compared to 87.4% for the comparable quarter in 2006.
Affirmative Insurance Holdings, Inc. Consolidated Statements of Operations - Unaudited (dollars in thousands, except per share data) Three months ended March 31, -------------------------------- 2007 2006 % Change --------- ---------- -------- Revenues Net premiums earned $ 82,770 $ 73,038 13.3% Commission income and fees 23,383 17,499 33.6% Net investment income 3,961 2,060 92.3% Realized losses (169) (367) -54.0% --------- ---------- Total revenues 109,945 92,230 19.2% --------- ---------- Expenses Losses and loss adjustment expenses 57,952 47,652 21.6% Selling, general and administrative expenses 38,625 32,601 18.5% Depreciation and amortization 3,288 1,060 210.2% Interest expense 6,632 1,085 511.2% --------- ---------- Total expenses 106,497 82,398 29.2% --------- ---------- Income before income taxes, minority interest and equity interest in unconsolidated subsidiaries 3,448 9,832 -64.9% Income tax expense 1,202 3,520 -65.9% Minority interest, net of income taxes -- 81 NM --------- ---------- Net income (loss) $ 2,246 $ 6,231 -64.0% ========== ========== Net income (loss) per common share - Basic $ 0.15 $ 0.40 -62.5% ========== ========== Net income (loss) per common share - Diluted $ 0.15 $ 0.40 -62.5% ========== ========== Weighted average shares outstanding - Basic 15,358,050 15,432,557 Weighted average shares outstanding - Diluted 15,467,045 15,463,132 Operational Information Gross premiums written $ 143,153 $ 88,749 61.3% Net premiums written $ 102,112 $ 87,058 17.3% Percentage retained 71.3% 98.1% Loss Ratio 70.0% 65.2% Expense Ratio 22.4% 22.1% ---------- ---------- Combined Ratio 92.4% 87.4% ========== ========== Affirmative Insurance Holdings, Inc. Condensed Consolidated Balance Sheets (dollars in thousands, except share and per share data) March 31, December 31, 2007 2006 ---------- ---------- (Unaudited) Assets Fixed maturities - available for sale $ 324,192 $ 219,960 Short-term investments 18,512 1,810 ---------- ---------- Total invested assets 342,704 221,770 Cash and cash equivalents 55,933 52,484 Fiduciary and restricted cash 25,214 35,582 Premiums and fees receivable 92,832 78,307 Premium finance receivable 44,237 -- Commissions receivable 2,373 909 Receivable from reinsurers 113,311 24,795 Deferred acquisition costs 30,039 23,865 Deferred tax asset, net 10,319 8,880 Goodwill and other intangible assets, net 190,730 83,443 Other assets 47,622 27,232 ---------- ---------- Total assets $ 955,314 $ 557,267 ========== ========== Liabilities and Stockholders' Equity Liabilities Reserves for losses and loss adjustment expenses 239,579 162,569 Unearned premium 164,347 92,124 Amounts due reinsurers 4,899 5,089 Deferred revenue 17,495 7,877 Senior secured credit facility 199,500 -- Notes payable 76,946 56,702 Other liabilities 43,849 26,513 ---------- ---------- Total liabilities 746,615 350,874 ---------- ---------- Stockholders' equity Common stock 177 177 Additional paid-in capital 161,101 160,862 Treasury stock, at cost (32,880) (32,880) Accumulated other comprehensive income (loss) (320) (448) Retained earnings 80,621 78,682 ---------- ---------- Total stockholders' equity 208,699 206,393 ---------- ---------- Total liabilities and stockholders' equity $ 955,314 $ 557,267 ========== ========== Debt as % of capitalization 57.0% 21.6% Actual shares outstanding 15,361,848 15,354,575 Book value per share $ 13.59 $ 13.44
Declaration of Dividend
Affirmative's board of directors declared a quarterly cash dividend on its common stock of two cents ($0.02) per share, payable on June 29, 2007, to shareholders of record at the close of business on June 15, 2007.
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 future results of Affirmative'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 that, among others, could cause Affirmative's actual results and experience to differ materially from the anticipated results or other expectations expressed in the 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 Affirmative's common stock; changes in the company's busines s 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; and availability of qualified personnel.
About Affirmative Insurance Holdings, Inc.
Affirmative Insurance Holdings, Inc. is a distributor and producer of non-standard personal automobile insurance policies for individual consumers in targeted geographic markets. The company currently offers products and services in 13 states, including Louisiana, Texas, Illinois, California and Florida.
The Affirmative Insurance Holdings, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3443
CONTACT: Affirmative Insurance Holdings, Inc. Mark Pape, Chief Financial Officer (972) 728-6481