Exhibit 99.1
Tower Group, Inc. Reports Second Quarter 2010 Results; Quarterly Dividend Increased by 78.6% to $0.125 per share
NEW YORK--(BUSINESS WIRE)--August 9, 2010--Tower Group, Inc. (NASDAQ: TWGP) today reported net income of $28.3 million and diluted earnings per share of $0.63 for the second quarter 2010. Operating income(1) and operating earnings per share(1) were $25.3 million and $0.57 for the second quarter of 2010, respectively.
Key Highlights (all percentage increases compare the second quarter 2010 results to the results for the same period in 2009 except as noted otherwise):
- Gross premiums written and produced(2) increased by 26.7% to $331 million.
- For the combined insurance segments, the net combined ratio was 93% for the second quarter of 2010 compared with 84.6% for the same period last year.
- The net loss ratio was 58.6% for the second quarter of 2010 compared with 52.2% for the same period last year.
- The net expense ratio was 34.4% for the second quarter of 2010 compared with 32.4% for the same period last year.
- Net investment income increased by 37.4% to $23.9 million.
- Book value per share of $24.81 at June 30, 2010 represents an increase of 3.9% during the quarter, 6.3% since year end 2009 and 18.5% year over year.
- During the second quarter of 2010, Tower repurchased 1.8 million shares of common stock at a total cost of $39.7 million or an average price per share of $21.51. Since the repurchase program was initiated in March 2010, Tower has repurchased 2.2 million shares and at June 30, 2010, $52.8 million remains available under the repurchase program.
Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., stated, “During the quarter, we were able to continue to profitably grow our business by successfully integrating recent acquisitions while maintaining our underwriting discipline. In addition, as previously announced, Tower completed the acquisition of the Personal Lines Division of OneBeacon Insurance Group on July 1, 2010. With this and other transactions, we have successfully executed our strategy that we began after the CastlePoint acquisition in 2009 to fully deploy CastlePoint’s capital by building a larger and more diversified insurance business. Beginning in the third quarter, with the added business from the OneBeacon transaction, we anticipate that we will be able to achieve greater scale and efficiency as well as generate a significant amount of fee income from managing the reciprocal insurance companies associated with this transaction. Consistent with our focus on capital management, we are pleased to announce that our Board has authorized a 78.6% increase in our quarterly dividends from 7 cents per share to 12.5 cents per share to stockholders of record as of September 10, 2010. In addition to the higher dividend payment, we will maintain focus on enhancing value to our shareholders through the continuation of our share repurchase plan and evaluation of strategic acquisition opportunities to further expand and diversify our business.”
Financial Summary ($ in thousands, except per share data): | |||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||
Gross premiums written | $ | 331,826 | $ | 260,741 | $ | 614,911 | $ | 460,685 | |||||
Premiums produced by managing general agency | (821) | 479 | - | 11,208 | |||||||||
Net premiums written | 292,601 | 235,818 | 539,735 | 422,082 | |||||||||
Total commission and fee income | 9,713 | 7,673 | 21,228 | 26,044 | |||||||||
Net investment income | 23,931 | 17,417 | 47,106 | 31,950 | |||||||||
Net realized investment gains (losses) | 5,166 | 442 | 5,906 | (230) | |||||||||
Total revenues | 311,777 | 254,983 | 615,253 | 455,305 | |||||||||
Gain on investment in acquired unconsolidated affiliate | - | - | - | 7,388 | |||||||||
Other expense | - | - | (466) | - | |||||||||
Net income | 28,256 | 30,627 | 45,729 | 48,604 | |||||||||
Earnings per share—Basic | $ | 0.64 | $ | 0.76 | $ | 1.02 | $ | 1.31 | |||||
Earnings per share—Diluted | $ | 0.63 | $ | 0.75 | $ | 1.02 | $ | 1.30 | |||||
Return on average equity | 11.4% | 15.0% | 9.2% | 18.6% | |||||||||
Combined Brokerage and Specialty Segments | |||||||||||||
Net premiums earned | 272,967 | 229,451 | 541,013 | 397,541 | |||||||||
Net loss ratio | 58.6% | 52.2% | 60.8% | 52.8% | |||||||||
Net expense ratio | 34.4% | 32.4% | 34.0% | 32.7% | |||||||||
Brokerage Insurance Segment | |||||||||||||
Net premiums earned | 183,434 | 195,970 | 372,860 | 341,666 | |||||||||
Net loss ratio | 53.5% | 52.2% | 58.2% | 52.2% | |||||||||
Net expense ratio | 35.0% | 33.3% | 35.2% | 33.1% | |||||||||
Specialty Business Segment | |||||||||||||
Net premiums earned | 89,533 | 33,481 | 168,153 | 55,875 | |||||||||
Net loss ratio | 69.0% | 52.5% | 66.7% | 56.8% | |||||||||
Net expense ratio | 33.1% | 27.5% | 31.4% | 30.0% | |||||||||
Reconciliation of non-GAAP financial measures: | |||||||||||||
Net income | $ | 28,256 | $ | 30,627 | $ | 45,729 | $ | 48,604 | |||||
Net realized gains (losses) on investments, net of tax | 3,358 | 287 | 3,839 | (150) | |||||||||
Acquisition-related transaction costs, net of tax (3) | (364) | 868 | (1,158) | (9,055) | |||||||||
Operating income | $ | 25,262 | $ | 29,472 | $ | 43,048 | $ | 57,809 | |||||
Operating earnings per share—Basic | $ | 0.57 | $ | 0.73 | $ | 0.96 | $ | 1.56 | |||||
Operating earnings per share—Diluted | $ | 0.57 | $ | 0.73 | $ | 0.96 | $ | 1.55 | |||||
Operating return on average equity | 10.2% | 14.4% | 8.7% | 22.2% |
Second Quarter 2010 Highlights
Gross premiums written increased to $331.8 million in the second quarter of 2010, which was 27.3% higher than in the second quarter of 2009. Excluding SUA, policies in-force for our Brokerage Insurance business increased by 11.2% as of June 30, 2010 compared to June 30, 2009. For the three months ended June 30, 2010, premiums on renewed Brokerage Insurance business increased 3.4% and 0.1%, respectively in personal and commercial lines, resulting in an overall premium increase on renewal business of 1.3%. During the same time period, Brokerage Insurance renewal retention was 91% in personal lines and 81% in commercial lines resulting in overall retention of 86%.
Total revenues increased 22.3% to $311.8 million in the second quarter of 2010 as compared to $255 million in the prior year's second quarter. The growth was primarily due to increased net premiums earned and net investment income resulting from the acquisition of SUA in the fourth quarter of 2009. Net premiums earned represented 87.6% of total revenues for the three months ended June 30, 2010 compared to 90% for the same period in 2009.
Net investment income increased 37.4% to $23.9 million for the three months ended June 30, 2010 compared to $17.4 million for the same period in 2009. The tax equivalent investment yield at amortized cost was 5.2% at June 30, 2010 compared to 5.7% at June 30, 2009. Net realized investment gains were $5.2 million for the three months ended June 30, 2010 compared to a gain of $0.4 million in the same period last year. The second quarter gains include other-than-temporarily impaired credit losses of $0.3 million as compared to $4.1 million of such losses in the second quarter of 2009.
Total commission and fee income increased 26.6% to $9.7 million in the second quarter of 2010 compared to $7.7 million in the second quarter of 2009.
For the combined segments, the gross loss ratio for the three months ended June 30, 2010 was 59.4% compared to 50.5% in the same period in 2009. The net loss ratio was 58.6% for the three months ended June 30, 2010 compared to 52.2% during the same period in 2009.
For the combined segments, our gross expense ratio was 31.9% for the three months ended June 30, 2010 as compared to 30.5% in the same period in 2009. Our net expense ratio was 34.4% for the three months ended June 30, 2010 as compared to 32.4% during the same period in 2009.
Interest expense increased by $0.6 million and $1.7 million, respectively, for the three and six months ended June 30, 2010 compared to the same periods in 2009. Interest expense increased for the six month period mainly due to subordinated debentures assumed as a result of the merger with CastlePoint.
Additional Highlights and Disclosures:
Acquisition of OneBeacon’s Personal Lines Division
On July 1, 2010, Tower completed the acquisition of the Personal Lines Division of OneBeacon Insurance Group. Tower acquired Massachusetts Homeland Insurance Company, York Insurance Company of Maine and two management companies. The management companies are the attorneys-in-fact for Adirondack Insurance Exchange, a New York reciprocal insurer, and New Jersey Skylands Insurance Association, a New Jersey reciprocal insurer, and its New Jersey domiciled stock insurance subsidiary, New Jersey Skylands Insurance Company. The total consideration for this acquisition was $167 million, subject to post-closing adjustments.
Dividend Declaration
Tower’s Board of Directors approved a quarterly dividend on August 6, 2010 of $0.125 per share payable on September 24, 2010 to stockholders of record as of September 10, 2010.
2010 Guidance
Tower expects third quarter 2010 operating earnings per share to be in a range of $0.75 to $0.80. For the full year 2010, Tower projects its operating earnings per share to be in a range between $2.55 and $2.65.
Notes on Non-GAAP Financial Measures
(1) Operating income excludes realized gains and losses and acquisition-related transaction costs, net of tax. This is a common measurement for property and casualty insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Additionally, these measures are a key internal management performance standard. 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) For the three and six month periods ended June 30, 2010, $0.3 million and $1.0 million, respectively, of acquisition-related transaction costs were not deemed deductible for tax purposes. A tax rate of 35% was used for those acquisition-related transaction costs that were tax deductible.
Conference Call
Tower will host a conference call and webcast to discuss these results today at 10:00 a.m. ET. This conference call will be broadcast live over the Internet. To access a listen-only webcast over the Internet, please visit the Investor Information section of Tower Group, Inc.’s website, www.twrgrp.com, or use this link: http://investor.twrgrp.com/events.cfm.
Please access the website at least 15 minutes prior to the call to register and to download any necessary audio software. If you are unable to participate during the live conference call, a webcast will be archived in the Investor Information section of Tower Group, Inc.'s website at www.twrgrp.com.
About Tower Group, Inc.
Tower Group, Inc. offers diversified property and casualty insurance products and services through its operating subsidiaries. Its insurance company subsidiaries 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'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. Please refer to Tower’s filings with the SEC, including among others Tower’s Annual Report on Form 10-K for the year ended December 31, 2009 and subsequent filings on Form 10-Q, for a description of the 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 Tower undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Brokerage Insurance & Specialty Business Combined | |||||||||||||||||||
($ in thousands) | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
2010 | 2009 | Change(%) | 2010 | 2009 | Change(%) | ||||||||||||||
Revenues | |||||||||||||||||||
Premiums earned | |||||||||||||||||||
Gross premiums earned | $ | 320,937 | $ | 267,641 | 19.9% | $ | 642,755 | $ | 483,699 | 32.9% | |||||||||
Less: ceded premiums earned | (47,970) | (38,190) | 25.6% | (101,742) | (86,158) | 18.1% | |||||||||||||
Net premiums earned | 272,967 | 229,451 | 19.0% | 541,013 | 397,541 | 36.1% | |||||||||||||
Ceding commission revenue | 8,453 | 7,164 | 18.0% | 18,641 | 20,741 | -10.1% | |||||||||||||
Policy billing fees | 1,009 | 709 | 42.3% | 1,780 | 1,241 | 43.4% | |||||||||||||
Total | 282,429 | 237,324 | 19.0% | 561,434 | 419,523 | 33.8% | |||||||||||||
Expenses | |||||||||||||||||||
Loss and loss adjustment expenses | |||||||||||||||||||
Gross loss and loss adjustment expenses | 190,536 | 135,042 | 41.1% | 387,230 | 264,481 | 46.4% | |||||||||||||
Less: ceded loss and loss adjustment | |||||||||||||||||||
expenses | (30,667) | (15,216) | 101.5% | (58,025) | (54,398) | 6.7% | |||||||||||||
Net loss and loss adjustment expenses | 159,869 | 119,826 | 33.4% | 329,205 | 210,083 | 56.7% | |||||||||||||
Underwriting expenses | |||||||||||||||||||
Direct commission expense | 58,536 | 53,352 | 9.7% | 116,475 | 98,334 | 18.4% | |||||||||||||
Other underwriting expenses | 44,783 | 28,975 | 54.6% | 87,968 | 53,606 | 64.1% | |||||||||||||
Total underwriting expenses | 103,319 | 82,327 | 25.5% | 204,443 | 151,940 | 34.6% | |||||||||||||
Underwriting profit | $ | 19,241 | $ | 35,171 | -45.3% | $ | 27,786 | $ | 57,500 | -51.7% | |||||||||
Key Measures | |||||||||||||||||||
Premiums written | |||||||||||||||||||
Gross premiums written | $ | 331,826 | $ | 260,741 | 27.3% | $ | 614,911 | $ | 460,685 | 33.5% | |||||||||
Less: ceded premiums written | (39,225) | (24,923) | 57.4% | (75,176) | (38,603) | 94.7% | |||||||||||||
Net premiums written | $ | 292,601 | $ | 235,818 | 24.1% | $ | 539,735 | $ | 422,082 | 27.9% | |||||||||
Loss Ratios | |||||||||||||||||||
Gross | 59.4% | 50.5% | 60.2% | 54.7% | |||||||||||||||
Net | 58.6% | 52.2% | 60.8% | 52.8% | |||||||||||||||
Accident Year Loss Ratios | |||||||||||||||||||
Gross | 56.3% | 53.4% | 58.5% | 54.4% | |||||||||||||||
Net | 57.8% | 52.0% | 60.5% | 54.4% | |||||||||||||||
Underwriting Expense Ratios | |||||||||||||||||||
Gross | 31.9% | 30.5% | 31.5% | 31.2% | |||||||||||||||
Net | 34.4% | 32.4% | 34.0% | 32.7% | |||||||||||||||
Combined Ratios | |||||||||||||||||||
Gross | 91.3% | 81.0% | 91.7% | 85.9% | |||||||||||||||
Net | 93.0% | 84.6% | 94.8% | 85.5% | |||||||||||||||
Brokerage Insurance Segment Information | ||||||||||||||
($ in thousands) | ||||||||||||||
(Unaudited) | ||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||
June 30, | June 30, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||
Revenues | ||||||||||||||
Premiums earned | ||||||||||||||
Gross premiums earned | $ | 223,705 | $ | 227,560 | $ | 460,927 | $ | 417,474 | ||||||
Less: ceded premiums earned | (40,271) | (31,590) | (88,067) | (75,808) | ||||||||||
Net premiums earned | 183,434 | 195,970 | 372,860 | 341,666 | ||||||||||
Ceding commission revenue | 7,342 | 5,966 | 15,752 | 19,077 | ||||||||||
Policy billing fees | 1,009 | 709 | 1,780 | 1,241 | ||||||||||
Total | 191,785 | 202,645 | 390,392 | 361,984 | ||||||||||
Expenses | ||||||||||||||
Loss and loss adjustment expenses | ||||||||||||||
Gross loss and loss adjustment expenses | 130,646 | 111,504 | 271,576 | 225,051 | ||||||||||
Less: ceded loss and loss adjustment | ||||||||||||||
expenses | (32,591) | (9,264) | (54,565) | (46,694) | ||||||||||
Net loss and loss adjustment expenses | 98,055 | 102,240 | 217,011 | 178,357 | ||||||||||
Underwriting expenses | ||||||||||||||
Direct commission expenses | 36,722 | 45,864 | 77,391 | 84,048 | ||||||||||
Other underwriting expenses | 35,842 | 26,058 | 71,283 | 49,449 | ||||||||||
Total underwriting expenses | 72,564 | 71,922 | 148,674 | 133,497 | ||||||||||
Underwriting profit | $ | 21,166 | $ | 28,483 | $ | 24,707 | $ | 50,130 | ||||||
Key Measures | ||||||||||||||
Premiums written | ||||||||||||||
Gross premiums written | $ | 251,133 | $ | 229,427 | $ | 463,870 | $ | 400,293 | ||||||
Less: ceded premiums written | (33,137) | (15,433) | (63,773) | (28,089) | ||||||||||
Net premiums written | $ | 217,996 | $ | 213,994 | $ | 400,097 | $ | 372,204 | ||||||
Loss Ratios | ||||||||||||||
Gross | 58.4% | 49.0% | 58.9% | 53.9% | ||||||||||
Net | 53.5% | 52.2% | 58.2% | 52.2% | ||||||||||
Accident Year Loss Ratios | ||||||||||||||
Gross | 55.5% | 52.1% | 57.2% | 53.3% | ||||||||||
Net | 53.6% | 51.3% | 58.3% | 53.7% | ||||||||||
Underwriting Expense Ratios | ||||||||||||||
Gross | 32.0% | 31.3% | 31.9% | 31.7% | ||||||||||
Net | 35.0% | 33.3% | 35.2% | 33.1% | ||||||||||
Combined Ratios | ||||||||||||||
Gross | 90.4% | 80.3% | 90.8% | 85.6% | ||||||||||
Net | 88.5% | 85.5% | 93.4% | 85.3% | ||||||||||
Specialty Business Segment Information | |||||||||||||||
($ in thousands) | |||||||||||||||
(Unaudited) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenues | |||||||||||||||
Premiums earned | |||||||||||||||
Gross premiums earned | $ | 97,232 | $ | 40,081 | $ | 181,828 | $ | 66,225 | |||||||
Less: ceded premiums earned | (7,699) | (6,600) | (13,675) | (10,350) | |||||||||||
Net premiums earned | 89,533 | 33,481 | 168,153 | 55,875 | |||||||||||
Ceding commission revenue | 1,111 | 1,198 | 2,889 | 1,664 | |||||||||||
Total | 90,644 | 34,679 | 171,042 | 57,539 | |||||||||||
Expenses | |||||||||||||||
Loss and loss adjustment expenses | |||||||||||||||
Gross loss and loss adjustment expenses | 59,890 | 23,538 | 115,654 | 39,430 | |||||||||||
Less: ceded loss and loss adjustment | |||||||||||||||
expenses | 1,924 | (5,952) | (3,460) | (7,704) | |||||||||||
Net loss and loss adjustment expenses | 61,814 | 17,586 | 112,194 | 31,726 | |||||||||||
Underwriting expenses | |||||||||||||||
Direct commission expense | 21,814 | 7,488 | 39,084 | 14,286 | |||||||||||
Other underwriting expenses | 8,941 | 2,917 | 16,685 | 4,157 | |||||||||||
Total underwriting expenses | 30,755 | 10,405 | 55,769 | 18,443 | |||||||||||
Underwriting profit | $ | (1,925) | $ | 6,688 | $ | 3,079 | $ | 7,370 | |||||||
Key Measures | |||||||||||||||
Premiums written | |||||||||||||||
Gross premiums written | $ | 80,693 | $ | 31,314 | $ | 151,041 | $ | 60,392 | |||||||
Less: ceded premiums written | (6,088) | (9,490) | (11,403) | (10,514) | |||||||||||
Net premiums written | $ | 74,605 | $ | 21,824 | $ | 139,638 | $ | 49,878 | |||||||
Loss Ratios | |||||||||||||||
Gross | 61.6% | 58.7% | 63.6% | 59.5% | |||||||||||
Net | 69.0% | 52.5% | 66.7% | 56.8% | |||||||||||
Accident Year Loss Ratios | |||||||||||||||
Gross | 58.2% | 61.0% | 61.8% | 60.9% | |||||||||||
Net | 66.3% | 55.8% | 65.3% | 58.7% | |||||||||||
Underwriting Expense Ratios | |||||||||||||||
Gross | 31.6% | 26.0% | 30.7% | 27.8% | |||||||||||
Net | 33.1% | 27.5% | 31.4% | 30.0% | |||||||||||
Combined Ratios | |||||||||||||||
Gross | 93.2% | 84.7% | 94.3% | 87.3% | |||||||||||
Net | 102.1% | 80.0% | 98.1% | 86.8% | |||||||||||
Insurance Services Segment Results of Operations | |||||||||||||
($ in thousands) | |||||||||||||
(Unaudited) | |||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||
June 30, |
| June 30, | |||||||||||
2010 | 2009 | 2010 | 2009 | ||||||||||
Revenue | |||||||||||||
Direct commission revenue from managing general agent | $ | (387) | $ | (824) | $ | (439) | $ | 2,283 | |||||
Claims administration revenue | 117 | 136 | 291 | 982 | |||||||||
Other administration revenue | 70 | 221 | 172 | 416 | |||||||||
Reinsurance intermediary fees | 450 | 207 | 782 | 302 | |||||||||
Policy billing fees | 1 | 60 | 1 | 79 | |||||||||
Total revenue | 251 | (200) | 807 | 4,062 | |||||||||
Expenses | |||||||||||||
Direct commission expenses paid to producers | 139 | 125 | 260 | 1,616 | |||||||||
Other insurance services expenses | 277 | 181 | 524 | 1,040 | |||||||||
Claims expense reimbursement to TICNY | 4 | 136 | 8 | 982 | |||||||||
Total | 420 | 442 | 792 | 3,638 | |||||||||
Insurance services pre-tax income | $ | (169) | $ | (642) | $ | 15 | $ | 424 | |||||
Premiums produced by TRM on behalf of issuing companies | $ | (821) | $ | 479 | $ | - | $ | 11,208 | |||||
Tower Group, Inc. | ||||||||
Consolidated Balance Sheets | ||||||||
(Unaudited) | ||||||||
June 30, | December 31, | |||||||
($ in thousands, except par value and share amounts) | 2010 | 2009 | ||||||
Assets | ||||||||
Available-for-sale investments, at fair value | ||||||||
Fixed-maturity securities (amortized cost of $1,594,918 and $1,729,117) | $ | 1,685,727 | $ | 1,783,596 | ||||
Equity securities (cost of $37,105 and $78,051) | 36,825 | 76,733 | ||||||
Short-term investments (cost of $0 and $36,500) | - | 36,500 | ||||||
Total available-for-sale investments, at fair value | 1,722,552 | 1,896,829 | ||||||
Cash and cash equivalents | 348,451 | 164,882 | ||||||
Investment income receivable | 19,414 | 20,240 | ||||||
Premiums receivable | 308,766 | 308,075 | ||||||
Reinsurance recoverable on paid losses | 14,715 | 14,819 | ||||||
Reinsurance recoverable on unpaid losses | 237,963 | 199,687 | ||||||
Prepaid reinsurance premiums | 67,889 | 94,818 | ||||||
Deferred acquisition costs, net of deferred ceding commission revenue | 183,725 | 170,652 | ||||||
Deferred income taxes | 25,038 | 41,757 | ||||||
Intangible assets | 50,686 | 53,350 | ||||||
Goodwill | 243,748 | 244,690 | ||||||
Fixed assets, net of accumulated depreciation | 79,423 | 66,429 | ||||||
Other assets | 77,704 | 36,724 | ||||||
Total assets | $ | 3,380,074 | $ | 3,312,952 | ||||
Liabilities | ||||||||
Loss and loss adjustment expenses | $ | 1,188,375 | $ | 1,131,989 | ||||
Unearned premium | 631,094 | 658,940 | ||||||
Reinsurance balances payable | 48,661 | 89,080 | ||||||
Funds held under reinsurance agreements | 69,269 | 13,737 | ||||||
Other liabilities | 81,714 | 133,647 | ||||||
Debt | 291,058 | 235,058 | ||||||
Total liabilities | 2,310,171 | 2,262,451 | ||||||
Stockholders' equity | ||||||||
Common stock ($0.01 par value; 100,000,000 shares authorized, 45,497,009 and | ||||||||
45,092,321 shares issued, and 43,129,415 and 44,984,953 shares outstanding) | 455 | 451 | ||||||
Treasury stock (2,367,594 and 107,368 shares) | (50,603) | (1,995) | ||||||
Paid-in-capital | 755,992 | 751,878 | ||||||
Accumulated other comprehensive income | 58,843 | 34,554 | ||||||
Retained earnings | 305,216 | 265,613 | ||||||
Total stockholders' equity | 1,069,903 | 1,050,501 | ||||||
Total liabilities and stockholders' equity | $ | 3,380,074 | $ | 3,312,952 | ||||
Tower Group, Inc. | ||||||||||||||||||
Consolidated Statements of Income and Comprehensive Income | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
(in thousands, except per share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||||
Revenues | ||||||||||||||||||
Net premiums earned | $ | 272,967 | $ | 229,451 | $ | 541,013 | $ | 397,541 | ||||||||||
Ceding commission revenue | 8,453 | 7,167 | 18,641 | 20,741 | ||||||||||||||
Insurance services revenue | 250 | (293 | ) | 806 | 3,983 | |||||||||||||
Policy billing fees | 1,010 | 799 | 1,781 | 1,320 | ||||||||||||||
Net investment income | 23,931 | 17,417 | 47,106 | 31,950 | ||||||||||||||
Net realized investment gains (losses) | ||||||||||||||||||
Other-than-temporary impairments | (2,836 | ) | (6,139 | ) | (8,982 | ) | (14,871 | ) | ||||||||||
Portion of loss recognized in other comprehensive income | 2,505 | 2,011 | 5,720 | 7,517 | ||||||||||||||
Other net realized investment gains | 5,497 | 4,570 | 9,168 | 7,124 | ||||||||||||||
Total net realized investment gains (losses) | 5,166 | 442 | 5,906 | (230 | ) | |||||||||||||
Total revenues | 311,777 | 254,983 | 615,253 | 455,305 | ||||||||||||||
Expenses | ||||||||||||||||||
Loss and loss adjustment expenses | 159,868 | 119,828 | 329,205 | 210,083 | ||||||||||||||
Direct and ceding commission expense | 58,619 | 52,541 | 116,664 | 99,949 | ||||||||||||||
Other operating expenses | 45,719 | 31,419 | 89,927 | 58,163 | ||||||||||||||
Acquisition-related transaction costs | 393 | - | 1,250 | 11,348 | ||||||||||||||
Interest expense | 5,214 | 4,659 | 10,095 | 8,442 | ||||||||||||||
Total expenses | 269,813 | 208,447 | 547,141 | 387,985 | ||||||||||||||
Other income (expense) | ||||||||||||||||||
Equity in loss of unconsolidated affiliate | - | - | - | (777 | ) | |||||||||||||
Gain on investment in acquired unconsolidated affiliate | - | - | - | 7,388 | ||||||||||||||
Other expense | - | - | (466 | ) | - | |||||||||||||
Income before income taxes | 41,964 | 46,536 | 67,646 | 73,931 | ||||||||||||||
Income tax expense | 13,708 | 15,909 | 21,917 | 25,327 | ||||||||||||||
Net income | $ | 28,256 | $ | 30,627 | $ | 45,729 | $ | 48,604 | ||||||||||
Gross unrealized investment holding gains arising during periods | ||||||||||||||||||
Gross unrealized investment holding gains arising during periods | 19,463 | 43,493 | 43,274 | 48,559 | ||||||||||||||
Cumulative effect of adjustment resulting from adoption of | ||||||||||||||||||
new accounting guidance | - | - | - | (2,497 | ) | |||||||||||||
Equity in net unrealized gains on investment in | ||||||||||||||||||
unconsolidated affiliate's investment portfolio | - | - | - | 3,124 | ||||||||||||||
Less: reclassification adjustment for (gains) losses included in net | ||||||||||||||||||
income | (5,166 | ) | (442 | ) | (5,906 | ) | 230 | |||||||||||
Income tax (expense) related to items of other comprehensive | ||||||||||||||||||
income | (5,485 | ) | (14,345 | ) | (13,079 | ) | (16,573 | ) | ||||||||||
Comprehensive net income | $ | 37,068 | $ | 59,333 | $ | 70,018 | $ | 81,447 | ||||||||||
Basic and diluted earnings per share | ||||||||||||||||||
Basic-Common stock: | ||||||||||||||||||
Basic | $ | 0.64 | $ | 0.76 | $ | 1.02 | $ | 1.31 | ||||||||||
Diluted | $ | 0.63 | $ | 0.75 | $ | 1.02 | $ | 1.30 | ||||||||||
Weighted average common shares outstanding | ||||||||||||||||||
Basic | 44,330 | 40,467 | 44,706 | 37,110 | ||||||||||||||
Diluted | 44,515 | 40,606 | 44,900 | 37,256 | ||||||||||||||
Dividends declared and paid per common share | $ | 0.07 | $ | 0.07 | $ | 0.14 | $ | 0.12 |
CONTACT:
Tower Group, Inc.
Thomas Song, 212-655-4789
Managing Vice President
tsong@twrgrp.com
For more information visit Tower's website at
http://www.twrgrp.com/