Exhibit 99.1
Tower Group, Inc. Reports Strong Second Quarter 2009 Operating Results
NEW YORK--(BUSINESS WIRE)--August 5, 2009--Tower Group, Inc. (NASDAQ: TWGP) today reported net income of $30.6 million and diluted earnings per share of $0.75 for the second quarter 2009. Operating income(1) and operating earnings per share(1) were $29.5 million and $0.73 for the second quarter of 2009, respectively.
Key Highlights (all percentage increases compare the second quarter 2009 results to the results for the same period in 2008 except as noted otherwise):
- Gross premiums written and produced(2) increased by 29.7% to $260.9 million.
- Operating return on equity(1) was 14.4% compared to 19.3% in the prior year second quarter.
- Net investment income increased by 108.2% to $17.4 million.
- Brokerage Insurance (formerly Tower managed business):
- Gross premiums written and produced increased by 25.9% to $212.6 million.
- Net combined ratio was 85.5% versus 81.1% in the prior year second quarter.
- Specialty Business (formerly CastlePoint managed business):
- Gross premiums written increased by 49.5% to $48.3 million.
- Net combined ratio was 82.0% versus 85.9% in the prior year second quarter.
- The acquisition of Specialty Underwriters' Alliance, Inc. was announced on June 22, 2009.
- Book value per share increased 7.6% during the quarter to $20.93 at June 30, 2009 as compared to $19.46 at March 31, 2009.
- Pre-tax net unrealized gains of $47 million were attributable to the investment portfolio during the quarter.
Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., stated, “During the quarter, we continued to profitably grow our brokerage business by successfully incorporating our Hermitage business and continuing to expand geographically. Our growth was also driven by expansion into the specialty business that we acquired from CastlePoint. In addition to the strong operating results, we also experienced substantial unrealized gains in our investment portfolio which left us with only $7 million of net unrealized losses for a portfolio of $1.6 billion in investments and cash. Finally, the recently announced acquisition of Specialty Underwriters’ Alliance is proceeding as anticipated and is expected to close sometime during the fourth quarter. We are currently working closely with the SUA management team to provide their producers with access to Tower’s capabilities, which Tower and SUA believe will be mutually beneficial.”
Financial Summary ($ in thousands, except per share data): | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||
Gross premiums written | $260,741 | $165,963 | $460,685 | $301,075 | |||||||||
Premiums produced by managing general agency | 479 | 36,099 | 11,208 | 59,390 | |||||||||
Net premiums written | 235,818 | 82,625 | 422,082 | 150,980 | |||||||||
Total commission and fee income | 7,673 | 36,288 | 26,044 | 67,180 | |||||||||
Net investment income | 17,417 | 8,366 | 31,950 | 18,162 | |||||||||
Net realized (losses) gains on investments | 442 | (7,970) | (230) | (6,596) | |||||||||
Total revenues | 254,983 | 106,798 | 455,305 | 217,290 | |||||||||
Gain on CastlePoint shares | - | - | 7,388 | - | |||||||||
Net income | 30,627 | 10,169 | 48,604 | 25,022 | |||||||||
Earnings per share – Basic | $0.76 | $0.44 | $1.31 | $1.09 | |||||||||
Earnings per share – Diluted | $0.75 | $0.44 | $1.30 | $1.08 | |||||||||
Return on average equity | 15.0% | 12.8% | 18.6% | 15.9% | |||||||||
Combined Brokerage and Specialty Segments | |||||||||||||
Net premiums earned | $229,451 | $70,114 | $397,541 | $138,544 | |||||||||
Net loss ratio | 52.2% | 52.7% | 52.8% | 53.6% | |||||||||
Net expense ratio | 32.4% | 29.0% | 32.7% | 29.7% | |||||||||
Brokerage Insurance Segment | |||||||||||||
Net premiums earned | $173,552 | $62,142 | $300,863 | $128,472 | |||||||||
Net loss ratio | 51.7% | 52.6% | 51.7% | 53.5% | |||||||||
Net expense ratio | 33.8% | 28.5% | 33.5% | 29.6% | |||||||||
Specialty Business Segment | |||||||||||||
Net premiums earned | $55,899 | $7,972 | $96,678 | $10,072 | |||||||||
Net loss ratio | 53.8% | 53.3% | 56.3% | 54.5% | |||||||||
Net expense ratio | 28.2% | 32.6% | 30.2% | 30.5% | |||||||||
Reconciliation of non-GAAP financial measures: | |||||||||||||
Net income | $30,627 | $10,169 | $48,604 | $25,022 | |||||||||
Net realized (losses) gains on investments, net of tax | 287 | (5,181) | (150) | (4,287) | |||||||||
Acquisition-related transaction costs, net of tax (3) | 868 | - | (9,056) | - | |||||||||
Operating income | 29,472 | 15,350 | 57,810 | 29,309 | |||||||||
Operating EPS and ROE: | |||||||||||||
Earnings per share – Basic | $0.73 | $0.67 | $ 1.56 | $1.27 | |||||||||
Earnings per share – Diluted | $0.73 | $0.66 | $ 1.55 | $1.26 | |||||||||
Return on average equity | 14.4% | 19.3% | 22.2% | 18.6% | |||||||||
Gross premiums written increased to $260.7 million in the second quarter, a 57.1% increase compared to the second quarter of 2008.
Total revenues increased 138.8% to $255 million in the second quarter of 2009 as compared to $106.8 million in the prior year's second quarter. Net premiums earned represented 90% of total revenues for the three months ended June 30, 2009 compared to 65.7% for the same period in 2008.
Total commission and fee income decreased 78.9% to $7.7 million in the second quarter of 2009 compared to $36.3 million in the second quarter of 2008. This was due to the closing of the CastlePoint transaction during the first quarter, after which Tower Risk Management ceased producing business on behalf of CastlePoint Insurance Company. Tower did not cede any brokerage business in 2009, and ceding commission revenue earned from CastlePoint Reinsurance was eliminated during the second quarter.
Net investment income increased by 108.2% to $17.4 million for the three months ended June 30, 2009 compared to $8.4 million for the same period in 2008. On a tax equivalent basis, the yield was 5.7% as of June 30, 2009 compared to 5.4% as of June 30, 2008. The higher yield is due to the acquisition of CastlePoint, whose investment portfolio had a market yield, excluding cash, on the date of acquisition of 7%. CastlePoint’s investment portfolio’s market yield became Tower’s book yield due to business combination accounting rules.
Net realized investment gains were $0.4 million for the three month period ending June 30, 2009 compared to losses of $8 million for the same period last year. Realized capital gains in 2009 were primarily from opportunistic sales of CMBS securities, where yield spreads narrowed, as well as sales of preferred stocks, primarily in the banking sector, to reduce the Company’s overall exposure in this sector. Included in the second quarter net realized investment gains are approximately $4.1 million of other-than-temporarily impaired losses relating to certain structured securities and impairment of CIT Group, Inc. securities.
Operating expenses were $84 million for the three months ended June 30, 2009 as compared to $52.2 million for the same period in 2008.
For the Brokerage Insurance Segment, premiums on renewed business increased 2.8% in personal lines and decreased 0.8% in commercial lines, resulting in an overall increase of 0.4% during the second quarter of 2009. The retention rate on brokerage business was 91% for personal lines and 82% for commercial lines, resulting in a retention rate of 88% for all lines during the second quarter of 2009. Brokerage insurance premiums earned continued to increase, primarily due to the acquisitions of CastlePoint and Hermitage on February 5, 2009 and February 27, 2009, respectively, which added $80.8 million in net premiums earned for the three months ended June 30, 2009.
The Specialty Business Segment consisted of program business written in Tower insurance subsidiaries, program business written in CastlePoint Insurance Company and reinsurance business written in CastlePoint Re. The increase in specialty business premium earned resulted primarily from the acquisition of CastlePoint, which added $41.3 million of net premiums earned for the three months ended June 30, 2009.
Dividend Declaration
The Company’s Board of Directors approved a quarterly dividend of $0.07 per share payable September 25, 2009 to stockholders of record as of September 14, 2009.
Acquisition of Specialty Underwriters' Alliance, Inc.
On June 22, 2009, Tower announced the acquisition of Specialty Underwriters' Alliance, Inc. On July 17, 2009, the Federal Trade Commission granted early termination under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. On July 15, 2009, Tower filed a Form A with the Illinois Department of Insurance and the California Department of Insurance. On July 31, 2009, Tower filed a Registration Statement on Form S-4, and SUA filed a preliminary proxy statement with the Securities and Exchange Commission.
Additional Highlights and Disclosures:
2009 and 2010 Guidance
Tower expects third quarter 2009 operating earnings per share to be in a range of $0.71 to $0.76 per diluted share. For the full year 2009, Tower projects operating earnings per share to be in a range between $3.15 and $3.25 per diluted share. For 2010, Tower projects its diluted earnings per share to be in a range between $3.50 and $3.70 per diluted share. Both 2009 and 2010 ranges include the effects of the SUA transaction.
Notes on Non-GAAP Financial Measures
(1) Operating income is a common performance measurement for insurance companies and excludes realized investment gains or losses and expenses related to the adoption of FAS No. 141R, Business Combinations. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. The Federal statutory tax rate of 35% was used to calculate the tax applicable to net realized gains or losses on investments and tax deductible acquisition related transaction costs. Operating earnings per share is operating income divided by diluted weighted average shares outstanding. Operating return on equity is annualized operating income divided by average common stockholders’ equity.
(2) Gross premiums written through our insurance subsidiaries and produced as managing general agent on behalf of other insurance companies.
(3) During the first quarter, $7.3 million of the acquisition related transaction costs were not deemed deductible for tax purposes. The tax rate used to calculate the acquisition related transaction costs that were tax deductible was 35%. During the second quarter, $868 thousand of tax benefit related to acquisition related transaction costs were realized and excluded from operating income.
About Tower Group, Inc.
Tower Group, Inc. offers property and casualty insurance products and services through its operating subsidiaries. Its insurance company subsidiaries in the U.S. offer insurance products to individuals and small to medium-sized businesses through its network of retail and wholesale agents and specialty business through program underwriting agents. Tower also offers reinsurance solutions to small insurance companies through its Bermuda based reinsurer and U.S. insurance companies. Tower's insurance services subsidiaries provide underwriting, claims and reinsurance brokerage services to other insurance companies.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release and any other written or oral statements made by or on behalf of Tower may include forward-looking statements that reflect Tower's current views with respect to future events and financial performance. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "will," "plan," "expect," "project," "intend," "estimate," "anticipate," "believe" and "continue" or their negative or variations or similar terminology. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. With respect to the acquisition of Specialty Underwriters’ Alliance, Inc., the following factors, among others, could cause or contribute to such material differences: the ability to obtain necessary governmental approvals or rulings on or regarding the acquisition on the proposed terms and schedule, the failure of the shareholders of Specialty Underwriters’ Alliance, Inc. to approve the acquisition, the failure to satisfy the closing conditions to the acquisition, the risk that the business of Specialty Underwriters’ Alliance, Inc. will not be integrated successfully or that such integration may be more difficult, time-consuming or costly than expected, the risk that the revenue opportunities, cost savings and other anticipated synergies from the acquisition may not be fully realized or may take longer to realize than expected, disruption from the acquisition making it difficult to maintain relationships with customers, employees, brokers and managing general agents, the risk that the U.S. tax authorities may view the tax treatment of the acquisition differently from Tower’s tax advisors, and costs relating to the acquisition. Please refer to Tower’s filings with the SEC, including Tower’s Annual Report on Form 10-K for the year ended December 31, 2008, for a description of other important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. Forward-looking statements speak only as of the date on which they are made, and the assumptions underlying our pro forma projections and/or earnings guidance could prove incorrect, and Tower undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
For more information visit Tower's website at http://www.twrgrp.com/.
Tower has changed the presentation of its business results, beginning January 1, 2009, by allocating its previously reported insurance segment into brokerage insurance and specialty business, based on the way management organizes the segments for making operating decisions and assessing profitability. This will result in the reporting of three operating segments. The prior period segment disclosures have been restated to conform to the current presentation.
The Brokerage Insurance Segment offers a broad range of commercial lines and personal lines property and casualty insurance products to small to mid-sized businesses and individuals distributed through a network of retail and wholesale agents on both an admitted and non-admitted basis;
The Specialty Business Segment provides specialty classes of business through program underwriting agents. This segment also includes reinsurance solutions provided primarily to small insurance companies; and
The Insurance Services Segment provides underwriting, claims and reinsurance brokerage services to insurance companies.
Brokerage Insurance & Specialty Business Combined ($ in thousands) (Unaudited) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
| 2008 | Change(%) | 2009 | 2008 | Change(%) | |||||||
Revenues | ||||||||||||
Premiums earned | ||||||||||||
Gross premiums earned | $267,641 | $138,634 | 93.1% | $483,699 | $273,771 | 76.7% | ||||||
Less: ceded premiums earned | (38,190) | (68,520) | -44.3% | (86,158) | (135,227) | -36.3% | ||||||
Net premiums earned | 229,451 | 70,114 | 227.3% | 397,541 | 138,544 | 186.9% | ||||||
Ceding commission revenue | 7,167 | 21,491 | -66.6% | 20,742 | 42,145 | -50.8% | ||||||
Policy billing fees | 709 | 459 | 54.4% | 1,241 | 961 | 29.1% | ||||||
Total | 237,324 | 92,064 | 157.8% | 419,524 | 181,650 | 131.0% | ||||||
Expenses | ||||||||||||
Loss and loss adjustment expenses | ||||||||||||
Gross loss and loss adjustment expenses | 135,042 | 69,952 | 93.0% | 264,481 | 137,082 | 92.9% | ||||||
Less:ceded loss and loss adjustment expenses | (15,216) | (33,029) | -53.9% | (54,398) | (62,862) | -13.5% | ||||||
Net loss and loss adjustment expenses | 119,826 | 36,923 | 224.5% | 210,083 | 74,220 | 183.1% | ||||||
Underwriting expenses | ||||||||||||
Direct commission expense | 53,353 | 24,872 | 114.5% | 98,335 | 48,106 | 104.4% | ||||||
Other underwriting expenses | 28,974 | 17,393 | 66.6% | 53,606 | 36,140 | 48.3% | ||||||
Total underwriting expenses | 82,327 | 42,265 | 94.8% | 151,941 | 84,246 | 80.4% | ||||||
Underwriting profit | $35,171 | $12,876 | 173.2% | $57,500 | $23,184 | 148.0% | ||||||
Key Measures | ||||||||||||
Premiums written | ||||||||||||
Gross premiums written | $260,741 | $165,963 | 57.1% | $460,685 | $301,076 | 53.0% | ||||||
Less: ceded premiums written | (24,923) | (83,338) | -70.1% | (38,603) | (150,095) | -74.3% | ||||||
Net premiums written | $235,818 | $82,625 | 185.4% | $422,082 | $150,981 | 179.6% | ||||||
Loss Ratios | ||||||||||||
Gross | 50.5% | 50.6% | 54.7% | 50.1% | ||||||||
Net | 52.2% | 52.6% | 52.8% | 53.6% | ||||||||
Accident Year Loss Ratios | ||||||||||||
Gross | 53.6% | 51.5% | 54.4% | 51.0% | ||||||||
Net | 53.7% | 54.5% | 54.4% | 54.5% | ||||||||
Underwriting Expense Ratios | ||||||||||||
Gross | 30.5% | 30.2% | 31.2% | 30.4% | ||||||||
Net | 32.4% | 29.0% | 32.7% | 29.7% | ||||||||
Combined Ratios | ||||||||||||
Gross | 81.0% | 80.8% | 85.9% | 80.5% | ||||||||
Net | 84.6% | 81.6% | 85.5% | 83.3% |
Brokerage Insurance Segment Results of Operations ($ in thousands) (Unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2009 | 2008 | Change(%) | 2009 | 2008 | Change(%) | ||||||||
Revenues | |||||||||||||
Premiums earned | |||||||||||||
Gross premiums earned | $201,619 | $117,934 | 71.0% | $364,106 | $244,183 | 49.1% | |||||||
Less: ceded premiums earned | (28,066) | (55,792) | -49.7% | (63,242) | (115,711) | -45.3% | |||||||
Net premiums earned | 173,552 | 62,142 | 179.3% | 300,863 | 128,472 | 134.2% | |||||||
Ceding commission revenue | 5,885 | 17,380 | -66.1% | 16,553 | 35,788 | -53.7% | |||||||
Policy billing fees | 709 | 459 | 54.4% | 1,241 | 961 | 29.1% | |||||||
Total | 180,145 | 79,981 | 125.2% | 318,656 | 165,221 | 92.9% | |||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | |||||||||||||
Gross loss and loss adjustment expenses | 97,003 | 58,505 | 65.8% | 195,188 | 120,431 | 62.1% | |||||||
Less:ceded loss and loss adjustment expenses | (7,254) | (25,832) | -71.9% | (39,531) | (51,696) | -23.5% | |||||||
Net loss and loss adjustment expenses | 89,749 | 32,673 | 174.7% | 155,657 | 68,735 | 126.5% | |||||||
Underwriting expenses | |||||||||||||
Direct commission expense | 41,272 | 19,785 | 108.6% | 72,470 | 40,666 | 78.2% | |||||||
Other underwriting expenses | 24,007 | 15,764 | 52.3% | 46,099 | 34,152 | 35.0% | |||||||
Total underwriting expenses | 65,279 | 35,549 | 83.6% | 118,569 | 74,818 | 58.5% | |||||||
Underwriting profit | $25,117 | $11,759 | 113.6% | $44,430 | $21,668 | 105.1% | |||||||
Key Measures | |||||||||||||
Premiums written | |||||||||||||
Gross premiums written | $212,454 | $133,662 | 58.9% | $365,660 | $248,532 | 47.1% | |||||||
Less: ceded premiums written | (12,957) | (60,703) | -78.7% | (24,236) | (112,387) | -78.4% | |||||||
Net premiums written | $199,497 | $72,959 | 173.4% | $341,424 | $136,145 | 150.8% | |||||||
Loss Ratios | |||||||||||||
Gross | 48.1% | 49.6% | 53.6% | 49.3% | |||||||||
Net | 51.7% | 52.6% | 51.7% | 53.5% | |||||||||
Accident Year Loss Ratios | |||||||||||||
Gross | 51.9% | 50.8% | 53.0% | 50.5% | |||||||||
Net | 53.0% | 54.7% | 53.5% | 54.5% | |||||||||
Underwriting Expense Ratios | |||||||||||||
Gross | 32.0% | 29.8% | 32.2% | 30.2% | |||||||||
Net | 33.8% | 28.5% | 33.5% | 29.6% | |||||||||
Combined Ratios | |||||||||||||
Gross | 80.1% | 79.4% | 85.8% | 79.5% | |||||||||
Net | 85.5% | 81.1% | 85.2% | 83.1% |
Specialty Business Segment Results of Operations ($ in thousands) (Unaudited) | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2009 | 2008 | Change(%) | 2009 | 2008 | Change(%) | ||||||||
Revenues | |||||||||||||
Premiums earned | |||||||||||||
Gross premiums earned | $66,022 | $20,700 | 218.9% | $119,593 | $29,588 | 304.2% | |||||||
Less: ceded premiums earned | (10,124) | (12,728) | -20.5% | (22,916) | (19,516) | 17.4% | |||||||
Net premiums earned | 55,899 | 7,972 | 601.2% | 96,678 | 10,072 | 859.9% | |||||||
Ceding commission revenue | 1,280 | 4,111 | -68.9% | 4,190 | 6,357 | -34.1% | |||||||
Total | 57,178 | 12,083 | 373.2% | 100,867 | 16,429 | 514.0% | |||||||
Expenses | |||||||||||||
Loss and loss adjustment expenses | |||||||||||||
Gross loss and loss adjustment expenses | 38,038 | 11,447 | 232.3% | 69,292 | 16,651 | 316.1% | |||||||
Less:ceded loss and loss adjustment expenses | (7,962) | (7,197) | 10.6% | (14,867) | (11,166) | 33.1% | |||||||
Net loss and loss adjustment expenses | 30,077 | 4,250 | 607.7% | 54,426 | 5,485 | 892.3% | |||||||
Underwriting expenses | |||||||||||||
Direct commission expense | 12,083 | 5,082 | 137.8% | 25,865 | 7,440 | 247.6% | |||||||
Other underwriting expenses | 4,967 | 1,629 | 204.9% | 7,507 | 1,988 | 277.6% | |||||||
Total underwriting expenses | 17,050 | 6,711 | 154.1% | 33,372 | 9,428 | 254.0% | |||||||
Underwriting profit | $10,052 | $1,122 | 795.9% | $13,070 | $1,516 | 762.1% | |||||||
Key Measures | |||||||||||||
Premiums written | |||||||||||||
Gross premiums written | $48,287 | $32,301 | 49.5% | $95,025 | $52,544 | 80.8% | |||||||
Less: ceded premiums written | (11,966) | (22,635) | -47.1% | (14,367) | (37,708) | -61.9% | |||||||
Net premiums written | $36,321 | $9,666 | 275.8% | $80,658 | $14,836 | 443.7% | |||||||
Loss Ratios | |||||||||||||
Gross | 57.6% | 55.3% | 57.9% | 56.3% | |||||||||
Net | 53.8% | 53.3% | 56.3% | 54.5% | |||||||||
Accident Year Loss Ratios | |||||||||||||
Gross | 59.1% | 55.3% | 58.7% | 56.3% | |||||||||
Net | 55.8% | 53.3% | 57.4% | 54.5% | |||||||||
Underwriting Expense Ratios | |||||||||||||
Gross | 25.8% | 32.4% | 27.9% | 31.9% | |||||||||
Net | 28.2% | 32.6% | 30.2% | 30.5% | |||||||||
Combined Ratios | |||||||||||||
Gross | 83.4% | 87.7% | 85.8% | 88.2% | |||||||||
Net | 82.0% | 85.9% | 86.5% | 85.0% |
Insurance Services Segment Results of Operations ($ in thousands) (Unaudited) | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2009 | 2008 | Change(%) | 2009 | 2008 | Change(%) | |||||||
Revenue | ||||||||||||
Direct commission revenue from | ($824) | $11,903 | -106.9% | $2,283 | $20,067 | -88.6% | ||||||
Claims administration revenue | 136 | 1,013 | -86.6% | 982 | 1,970 | -50.2% | ||||||
Other administration revenue | 221 | 1,209 | -81.7% | 416 | 1,580 | -73.7% | ||||||
Reinsurance intermediary fees | 207 | 117 | 77.0% | 301 | 285 | 5.6% | ||||||
Policy billing fees | 60 | 96 | -37.1% | 79 | 172 | -53.8% | ||||||
Total | (200) | 14,338 | -101.4% | 4,061 | 24,074 | -83.1% | ||||||
Expenses | ||||||||||||
Direct commission expense paid to producers | 125 | 5,154 | -97.6% | 1,616 | 8,525 | -81.0% | ||||||
Other insurance services expenses | 181 | 3,171 | -94.3% | 1,040 | 4,745 | -78.1% | ||||||
Claims expense reimbursement to TICNY | 136 | 1,013 | -86.6% | 982 | 1,970 | -50.2% | ||||||
Total | 441 | 9,338 | -95.3% | 3,637 | 15,240 | -76.1% | ||||||
Insurance services pre-tax income (loss) | ($641) | $5,000 | -112.8% | $424 | $8,834 | -95.2% | ||||||
Premiums produced by TRM on behalf | $479 | $36,099 | -98.7% | $11,208 | $59,390 | -81.1% |
Tower Group, Inc. Consolidated Balance Sheets | |||||||||||
(Unaudited) | |||||||||||
June 30, | December 31, | ||||||||||
($ in thousands, except par value and share amounts) | 2009 | 2008 | |||||||||
Assets | |||||||||||
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of | $ | 1,421,612 | $ | 530,159 | |||||||
Equity securities, available-for-sale, at fair value (cost of $8,785 and $12,726) | 7,169 | 10,814 | |||||||||
Total investments | 1,428,781 | 540,973 | |||||||||
Cash and cash equivalents | 152,795 | 136,253 | |||||||||
Investment income receivable | 14,982 | 6,972 | |||||||||
Premiums receivable | 213,901 | 188,643 | |||||||||
Reinsurance recoverable on unpaid losses | 114,935 | 222,229 | |||||||||
Reinsurance recoverable on paid losses | 21,825 | 50,377 | |||||||||
Prepaid reinsurance premiums | 64,438 | 153,650 | |||||||||
Deferred acquisition costs, net of deferred ceding commission revenue | 146,008 | 53,080 | |||||||||
Deferred income taxes | 58,550 | 36,207 | |||||||||
Intangible assets | 38,963 | 20,464 | |||||||||
Goodwill | 236,407 | 18,962 | |||||||||
Fixed assets, net of accumulated depreciation | 46,590 | 39,038 | |||||||||
Investment in unconsolidated affiliate | - | 29,293 | |||||||||
Other assets | 38,079 | 42,240 | |||||||||
Total assets | $ | 2,576,254 | $ | 1,538,381 | |||||||
Liabilities | |||||||||||
Loss and loss adjustment expenses | $ | 833,175 | $ | 534,991 | |||||||
Unearned premium | 523,113 | 328,847 | |||||||||
Reinsurance balances payable | 51,419 | 134,598 | |||||||||
Payable to issuing carriers | 47 | 47,301 | |||||||||
Funds held under reinsurance agreements | 15,558 | 20,474 | |||||||||
Accounts payable, accrued liabilities and other liabilities | 70,585 | 35,930 | |||||||||
Subordinated debentures | 235,058 | 101,036 | |||||||||
Total liabilities | 1,728,955 | 1,203,177 | |||||||||
Stockholders' Equity | |||||||||||
Common stock ($0.01 par value; 100,000,000 shares authorized, 40,565,221 and | 405 | 234 | |||||||||
Treasury stock (75,374 and 68,675 shares) | (1,330 | ) | (1,026 | ) | |||||||
Paid-in-capital | 642,047 | 208,094 | |||||||||
Accumulated other comprehensive net loss | (4,655 | ) | (37,498 | ) | |||||||
Retained earnings | 210,832 | 165,400 | |||||||||
Total stockholders' equity | 847,299 | 335,204 | |||||||||
Total liabilities and stockholders' equity | $ | 2,576,254 | $ | 1,538,381 |
Tower Group, Inc. Consolidated Statements of Income and Comprehensive Net Income (Unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
($ in thousands, except | June 30, | June 30, | ||||||||||||||
per share and share amounts) | 2009 | 2008 | 2009 | 2008 | ||||||||||||
Revenues | ||||||||||||||||
Net premiums earned | $ | 229,451 | $ | 70,114 | $ | 397,541 | $ | 138,544 | ||||||||
Ceding commission revenue | 7,167 | 21,491 | 20,741 | 42,145 | ||||||||||||
Insurance services revenue | (293 | ) | 14,242 | 3,983 | 23,902 | |||||||||||
Policy billing fees | 799 | 555 | 1,320 | 1,133 | ||||||||||||
Net investment income | 17,417 | 8,366 | 31,950 | 18,162 | ||||||||||||
Net realized gains (losses) on investments | 4,570 | 323 | 7,124 | 4,133 | ||||||||||||
Other-than-temporary impairment losses | (6,139 | ) | (8,293 | ) | (14,871 | ) | (10,729 | ) | ||||||||
Portion of loss recognized in other accumulated | 2,011 | - | 7,517 | - | ||||||||||||
Net impairment losses recognized in earnings | (4,128 | ) | (8,293 | ) | (7,354 | ) | (10,729 | ) | ||||||||
Total revenues | 254,983 | 106,798 | 455,305 | 217,290 | ||||||||||||
Expenses | ||||||||||||||||
Loss and loss adjustment expenses | 119,828 | 36,923 | 210,083 | 74,219 | ||||||||||||
Direct and ceding commission expense | 52,541 | 30,026 | 99,949 | 56,634 | ||||||||||||
Other operating expenses | 31,419 | 22,193 | 58,163 | 43,858 | ||||||||||||
Interest expense | 4,659 | 2,161 | 8,442 | 4,484 | ||||||||||||
Total expenses | 208,447 | 91,303 | 376,637 | 179,195 | ||||||||||||
Other Income (expense) | ||||||||||||||||
Equity income (loss) in unconsolidated affiliate | - | 762 | (777 | ) | 1,522 | |||||||||||
Acquisition-related transaction costs | - | - | (11,348 | ) | - | |||||||||||
Gain on investment in acquired unconsolidated affiliate | - | - | 7,388 | - | ||||||||||||
Income before income taxes | 46,536 | 16,257 | 73,931 | 39,617 | ||||||||||||
Income tax expense | 15,909 | 6,088 | 25,327 | 14,595 | ||||||||||||
Net income | $ | 30,627 | $ | 10,169 | $ | 48,604 | $ | 25,022 | ||||||||
Gross unrealized investment holding gains/ | 43,384 | (9,550 | ) | 48,330 | (22,074 | ) | ||||||||||
Cumulative effect of adjustment resulting from | - | - | (2,497 | ) | - | |||||||||||
Equity in net unrealized gains (losses) on investment in | - | (324 | ) | 3,245 | (1,107 | ) | ||||||||||
Less: reclassification adjustment for (gains) losses | (442 | ) | 7,970 | 230 | 6,596 | |||||||||||
Income tax (benefit) expense related to items of other | (14,389 | ) | 666 | (16,617 | ) | 5,805 | ||||||||||
Comprehensive net income | $ | 59,180 | $ | 8,931 | $ | 81,295 | $ | 14,242 | ||||||||
Basic and diluted earnings per share | ||||||||||||||||
Basic | ||||||||||||||||
Common stock: | ||||||||||||||||
Distributed | $ | 0.07 | $ | 0.05 | $ | 0.12 | $ | 0.10 | ||||||||
Undistributed | 0.69 | 0.39 | 1.19 | 0.98 | ||||||||||||
Total | $ | 0.76 | $ | 0.44 | $ | 1.31 | $ | 1.08 | ||||||||
Diluted | $ | 0.75 | $ | 0.44 | $ | 1.30 | $ | 1.07 | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic | 40,467,037 | 23,321,911 | 37,109,965 | 23,268,226 | ||||||||||||
Diluted | 40,606,326 | 23,527,262 | 37,255,790 | 23,461,117 | ||||||||||||
Dividends declared and paid per common share | ||||||||||||||||
Common stock | $ | 0.07 | $ | 0.05 | $ | 0.12 | $ | 0.10 |
CONTACT:
Tower Group, Inc.
Thomas Song, 212-655-4789
Managing Vice President
tsong@twrgrp.com