![](https://capedge.com/proxy/8-K/0001144204-09-016500/logo.jpg)
FOR IMMEDIATE RELEASE
HALLMARK FINANCIAL SERVICES, INC.
ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2008 EARNINGS RESULTS
FORT WORTH, Texas, (March 26, 2009) - Hallmark Financial Services, Inc. (NASDAQ: HALL) today reported fiscal 2008 net income of $12.9 million compared to $27.9 million reported for fiscal 2007. Hallmark reported a net loss of $2.4 million for the fourth quarter of 2008 compared to net income of $7.3 million reported for the fourth quarter of 2007. On a fully diluted basis, fiscal 2008 net income was $0.62 per share and fourth quarter 2008 was a net loss of $0.12 per share, as compared to net income of $1.34 per share and $0.35 per share for the similar periods of 2007. Total revenues were $268.7 million and $60.2 million for fiscal 2008 and the fourth quarter 2008, representing a 2% and a 14% decrease from the $275.2 million and $69.9 million reported for the similar periods of 2007.
The fourth quarter and fiscal 2008 results were impacted by investment impairments we recognized to reflect market conditions, investment losses realized for tax planning purposes, a valuation allowance on our deferred tax asset and the hurricanes that hit the Texas coast during the third quarter. The following table details these items and their impact on our reported net income and diluted earnings per share ($ in thousands, except per share amounts):
4Q08 | Per Share | FY2008 | Per Share | |||||||||||||
Net income (loss) | $ | (2,407 | ) | $ | (0.12 | ) | $ | 12,899 | $ | 0.62 | ||||||
Investment impairments after tax | (3,634 | ) | $ | (0.17 | ) | �� | (5,749 | ) | $ | (0.28 | ) | |||||
Net realized investment losses after tax | (2,772 | ) | $ | (0.13 | ) | (1,570 | ) | $ | (0.08 | ) | ||||||
Deferred tax valuation allowance | (2,969 | ) | $ | (0.14 | ) | (2,969 | ) | $ | (0.14 | ) | ||||||
Net hurricane loss and LAE after tax | - | $ | - | (3,900 | ) | $ | (0.19 | ) | ||||||||
Impact on net income or loss from significant items | $ | (9,375 | ) | $ | (0.44 | ) | $ | (14,188 | ) | $ | (0.69 | ) |
Book value per share was also impacted by unrealized investment losses due to continued market turmoil, recognized investment impairments, realized investment losses and the hurricanes. The table below details the impact of these and other items during the fourth quarter and fiscal 2008 on our reported book value per share.
4Q08 | FY2008 | |||||||
Beginning book value per share | $ | 9.11 | $ | 8.65 | ||||
Impacted by: | ||||||||
Recognized investment impairment after tax | $ | (0.17 | ) | $ | (0.28 | ) | ||
Realized investment losses after tax | $ | (0.13 | ) | $ | (0.08 | ) | ||
Unrealized investment losses after tax | $ | (0.28 | ) | $ | (0.59 | ) | ||
Deferred tax valuation allowance | $ | (0.18 | ) | $ | (0.22 | ) | ||
Additional minimum pension liability | $ | (0.11 | ) | $ | (0.11 | ) | ||
Net hurricane loss and LAE after tax | $ | - | $ | (0.19 | ) | |||
All other items | $ | 0.37 | $ | 1.43 | ||||
Book value per share as of December 31, 2008 | $ | 8.61 | $ | 8.61 |
Mark J. Morrison, President and Chief Executive Officer, said, ``Not only did the trend of deteriorating economic conditions, decreasing prices and increased competition continue through the fourth quarter of the year, but 2008 produced one of the most costly catastrophe years on record in the United States. Hallmark has not escaped the events of 2008 unscathed. However, our unrelenting focus on underwriting discipline and bottom-line profitability has again resulted in strong underwriting margins in each of our operating units. Despite incurring over $6 million in losses from three hurricanes that made landfall on the Texas and Louisiana coasts, we were able to achieve our underwriting profit target for the year with a combined ratio under 90%. This marks the fifth consecutive year we have exceeded this target.”
Mr. Morrison continued, ``Underwriting discipline in a soft market cycle does not come without a price. As a result of our discipline, premium production declined 3.6% in 2008. If the competitive and economic environments do not improve, production could decline further in the future. Underwriting profits have been and will remain the key component of our strategy. We can only achieve this goal by remaining disciplined in soft market conditions. Thus, our primary focus will continue to be on underwriting profitability, as opposed to premium growth or market share.”
Mark E. Schwarz, Executive Chairman of Hallmark, stated, “The significant decline in general economic conditions, the massive disruptions in financial markets and the magnitude of catastrophe losses that occurred over the past year created challenges for most companies in our industry. Although there are signs of easing in the soft market conditions for certain lines of business, most would agree that the competitive landscape and general economic climate will continue to create headwinds for our industry in the coming year. Despite these challenges, we expect our competitive strengths and growth strategies will allow Hallmark to continue to produce superior results.”
Mr. Schwarz continued, “Hallmark’s growth in book value per share was flat for the year due to approximately $8.8 million in recognized impairment losses that reflect current market prices for certain securities. With few exceptions, it is our expectation we will hold these securities until they recover in value. Despite the negative contribution to book value growth, Hallmark’s investment portfolio performed comparatively well in the face of extremely volatile market conditions. Net investment income increased 30% over the same quarter of last year and for the year has grown by 22%. We continue to maintain a diversified portfolio, with fixed income investments representing 91% of invested assets and 89% of the fixed income securities being rated investment grade. Our fixed income investment holdings are comprised of 76% tax-exempt securities and 22% short-term investments. As of the end of the year, our portfolio had a modified duration of 3.3 years and a tax-equivalent yield over 8.3%. Hallmark remains financially strong and has ample liquidity, with $59 million of cash and cash equivalents, excess capital held at the holding company and cash flow from operations of over $46 million for the year.''
2
Three Months Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
($ in thousands) | ||||||||||||
Gross premiums written | $ | 57,492 | $ | 55,933 | 3 | % | ||||||
Net premiums written | 55,073 | 53,881 | 2 | % | ||||||||
Net premiums earned | 58,384 | 59,250 | -1 | % | ||||||||
Commission and fee income | 6,000 | 4,710 | 27 | % | ||||||||
Investment income, net of expenses | 4,367 | 3,369 | 30 | % | ||||||||
Gain (loss) on investments | (9,856 | ) | 1,287 | -866 | % | |||||||
Total revenues | 60,196 | 69,916 | -14 | % | ||||||||
Net income (loss) | (2,407 | ) | 7,276 | -133 | % | |||||||
Common EPS - basic | $ | (0.12 | ) | $ | 0.35 | -134 | % | |||||
Common EPS - diluted | $ | (0.12 | ) | $ | 0.35 | -134 | % | |||||
Annualized return on average equity | -5.2 | % | 16.5 | % | -132 | % | ||||||
Book value per share | $ | 8.61 | $ | 8.65 | 0 | % | ||||||
Cash flow from operations | $ | 9,138 | $ | 17,796 | -49 | % |
Fiscal Year Ended | ||||||||||||
December 31, | ||||||||||||
2008 | 2007 | % Change | ||||||||||
($ in thousands) | ||||||||||||
Gross premiums written | $ | 243,849 | $ | 249,472 | -2 | % | ||||||
Net premiums written | 234,927 | 238,811 | -2 | % | ||||||||
Net premiums earned | 236,320 | 225,971 | 5 | % | ||||||||
Commission and fee income | 22,280 | 28,054 | -21 | % | ||||||||
Investment income, net of expenses | 16,049 | 13,180 | 22 | % | ||||||||
Gain (loss) on investments | (11,261 | ) | 2,586 | -535 | % | |||||||
Total revenues | 268,690 | 275,166 | -2 | % | ||||||||
Net income | 12,899 | 27,863 | -54 | % | ||||||||
Common EPS - basic | $ | 0.62 | $ | 1.34 | -54 | % | ||||||
Common EPS - diluted | $ | 0.62 | $ | 1.34 | -54 | % | ||||||
Annualized return on average equity | 7.2 | % | 16.9 | % | -57 | % | ||||||
Book value per share | $ | 8.61 | $ | 8.65 | 0 | % | ||||||
Cash flow from operations | $ | 46,296 | $ | 79,563 | -42 | % |
The decrease in total revenue for the three months ended December 31, 2008 was primarily due to recognized impairment losses on our investment portfolio and lower earned premium. The decrease in total revenues for the year ended December 31, 2008 was primarily due to recognized impairment losses on our investment portfolio and lower commission and fee income partially offset by increased earned premium and investment income.
3
Standard Commercial Segment revenues decreased $1.6 million and $2.4 million, or 7% and 3%, during the three months and year ended December 31, 2008 as compared to the same periods during 2007, due primarily to lower earned premium as a result of increased competition, rate pressure and deterioration of the economic environment in the U.S. Specialty Commercial Segment revenues increased $0.7 million and $1.3 million, or 2% and 1%, during the three months and year ended December 31, 2008 as compared to the same periods of 2007, due to the acquisition of our Heath XS Operating Unit in the third quarter and increased retention of business. Revenues from the Personal Segment increased $1.6 million and $6.2 million, or 11% and 11%, during the three months and year ended December 31, 2008 as compared to the same periods during 2007, due largely to geographic expansion into new states. Corporate revenue decreased $10.4 million and $11.6 million for the three months and year ended December 31, 2008 primarily due to losses recognized on our investment portfolio of $9.9 million and $11.3 million during the three months and year ended December 31, 2008 as compared to recognized gains on our investment portfolio of $1.3 million and $2.6 million during the same period in the prior year, partially offset by increased investment income of $0.7 million and $2.3 million for the same periods primarily due to changes in capital allocation.
On a diluted basis per share, net income (loss) was ($0.12) and $0.62 per share for the three months and year ended December 31, 2008 as compared to $0.35 and $1.34 per share for the same periods in 2007. The decrease in net income for the three months and year ended December 31, 2008 was primarily attributable to decreased revenue and recognized losses on investments discussed above and higher loss and loss adjustment expenses due to hurricane related losses in 2008.
Hallmark's net loss ratio was 57.8% for the fourth quarter of 2008 as compared to 56.2% for the fourth quarter of 2007. For fiscal 2008, Hallmark’s net loss ratio was 61.0% as compared to 58.8% for fiscal 2007. Hallmark's net expense ratio was 28.8% for the fourth quarter of 2008 as compared to 27.7% for the fourth quarter of 2007. For fiscal 2008, Hallmark’s net expense ratio was 28.9% as compared to 27.8% for fiscal 2007. Hallmark maintained a profitable net combined ratio of 86.6% for the fourth quarter of 2008 and 89.9% for fiscal 2008 as compared to 83.9% and 86.6% for the same periods in the prior year.
Hallmark Financial Services, Inc. is an insurance holding company which, through its subsidiaries, engages in the sale of property/casualty insurance products to businesses and individuals. Hallmark’s business involves marketing, distributing, underwriting and servicing commercial insurance, personal insurance and general aviation insurance, as well as providing other insurance related services. The Company is headquartered in Fort Worth, Texas and its common stock is listed on NASDAQ under the symbol "HALL."
Forward-looking statements in this Release are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Act of 1995. Investors are cautioned that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, continued acceptance of the Company’s products and services in the marketplace, competitive factors, interest rate trends, general economic conditions, the availability of financing, underwriting loss experience and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission.
For further information, please contact:
Mark J. Morrison, President and Chief Executive Officer at 817.348.1600
www.hallmarkgrp.com
4
HALLMARK FINANCIAL SERVICES, INC. AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
December 31, 2008 and 2007 | |||||||
(In thousands) |
ASSETS | 2008 | 2007 | ||||||
Investments: | ||||||||
Debt securities, available-for-sale, at fair value | $ | 268,513 | $ | 250,359 | ||||
Equity securities, available-for-sale, at fair value | 25,003 | 15,166 | ||||||
Total investments | 293,516 | 265,525 | ||||||
Cash and cash equivalents | 59,134 | 146,219 | ||||||
Restricted cash and cash equivalents | 8,033 | 16,043 | ||||||
Prepaid reinsurance premiums | 1,349 | 942 | ||||||
Premiums receivable | 44,032 | 46,026 | ||||||
Accounts receivable | 4,531 | 5,219 | ||||||
Receivable for securities | 1,031 | 27,395 | ||||||
Reinsurance recoverable | 8,218 | 4,952 | ||||||
Deferred policy acquisition costs | 19,524 | 19,757 | ||||||
Excess of cost over fair value of net assets acquired | 41,080 | 30,025 | ||||||
Intangible assets | 28,969 | 23,781 | ||||||
Current federal income tax recoverable | 696 | - | ||||||
Deferred federal income taxes | 6,696 | 275 | ||||||
Prepaid expenses | 1,007 | 1,240 | ||||||
Other assets | 20,582 | 19,583 | ||||||
$ | 538,398 | $ | 606,982 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Notes payable | $ | 60,919 | $ | 60,814 | ||||
Structured settlements | - | 10,000 | ||||||
Reserves for unpaid losses and loss adjustment expenses | 156,363 | 125,338 | ||||||
Unearned premiums | 102,192 | 102,998 | ||||||
Unearned revenue | 2,037 | 2,949 | ||||||
Accrued agent profit sharing | 2,151 | 2,844 | ||||||
Accrued ceding commission payable | 8,605 | 12,099 | ||||||
Pension liability | 4,309 | 1,669 | ||||||
Payable for securities | 3,606 | 91,401 | ||||||
Current federal income tax payable | - | 864 | ||||||
Accounts payable and other accrued expenses | 18,067 | 16,385 | ||||||
358,249 | 427,361 | |||||||
Commitments and contingencies | ||||||||
Redeemable minority interest | 737 | - | ||||||
Stockholders’ equity: | ||||||||
Common stock, $.18 par value, authorized 33,333,333 shares in 2008 and 2007; issued 20,841,782 shares in 2008 and 20,776,080 shares in 2007 | 3,751 | 3,740 | ||||||
Capital in excess of par value | 119,928 | 118,459 | ||||||
Retained earnings | 72,242 | 59,343 | ||||||
Accumulated other comprehensive loss | (16,432 | ) | (1,844 | ) | ||||
Treasury stock, 7,828 shares in 2008 and 2007, at cost | (77 | ) | (77 | ) | ||||
Total stockholders’ equity | 179,412 | 179,621 | ||||||
$ | 538,398 | $ | 606,982 |
5
Hallmark Financial Services, Inc. and Subsidiaries | |||||||
Consolidated Statements of Operations | |||||||
($ in thousands, except per share amounts) |
Three Months Ended | Fiscal Year Ended | |||||||||||||||
December 31 | December 31 | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
Gross premiums written | $ | 57,492 | $ | 55,933 | $ | 243,849 | $ | 249,472 | ||||||||
Ceded premiums written | (2,419 | ) | (2,052 | ) | (8,922 | ) | (10,661 | ) | ||||||||
Net premiums written | 55,073 | 53,881 | 234,927 | 238,811 | ||||||||||||
Change in unearned premiums | 3,311 | 5,369 | 1,393 | (12,840 | ) | |||||||||||
Net premiums earned | 58,384 | 59,250 | 236,320 | 225,971 | ||||||||||||
Investment income, net of expenses | 4,367 | 3,369 | 16,049 | 13,180 | ||||||||||||
Gain (loss) on investments | (9,856 | ) | 1,287 | (11,261 | ) | 2,586 | ||||||||||
Finance charges | 1,280 | 1,225 | 5,174 | 4,702 | ||||||||||||
Commission and fees | 6,000 | 4,710 | 22,280 | 28,054 | ||||||||||||
Processing and service fees | 16 | 71 | 114 | 657 | ||||||||||||
Other income | 5 | 4 | 14 | 16 | ||||||||||||
Total revenues | 60,196 | 69,916 | 268,690 | 275,166 | ||||||||||||
Losses and loss adjustment expenses | 33,730 | 33,298 | 144,244 | 132,918 | ||||||||||||
Other operating expenses | 24,982 | 23,761 | 96,096 | 94,272 | ||||||||||||
Interest expense | 1,188 | 1,306 | 4,745 | 3,914 | ||||||||||||
Amortization of intangible assets | 715 | 574 | 2,481 | 2,293 | ||||||||||||
Total expenses | 60,615 | 58,939 | 247,566 | 233,397 | ||||||||||||
Income (loss) before tax and minority interest | (419 | ) | 10,977 | 21,124 | 41,769 | |||||||||||
Income tax expense | 1,953 | 3,701 | 8,175 | 13,906 | ||||||||||||
Income (loss) before minority interest | (2,372 | ) | 7,276 | 12,949 | 27,863 | |||||||||||
Minority interest | 35 | - | 50 | - | ||||||||||||
Net income (loss) | $ | (2,407 | ) | $ | 7,276 | $ | 12,899 | $ | 27,863 | |||||||
Common stockholders net income (loss) per share: | ||||||||||||||||
Basic | $ | (0.12 | ) | $ | 0.35 | $ | 0.62 | $ | 1.34 | |||||||
Diluted | $ | (0.12 | ) | $ | 0.35 | $ | 0.62 | $ | 1.34 |
6
Hallmark Financial Services, Inc. |
Consolidated Segment Data |
Three Months Ended December 31, 2008 | ||||||||||||||||||||
Standard | Specialty | |||||||||||||||||||
Commercial | Commercial | Personal | ||||||||||||||||||
Segment | Segment | Segment | Corporate | Consolidated | ||||||||||||||||
Produced premium (1) | $ | 17,863 | $ | 41,752 | $ | 14,191 | $ | - | $ | 73,806 | ||||||||||
Gross premiums written | 17,863 | 25,438 | 14,191 | - | 57,492 | |||||||||||||||
Ceded premiums written | (1,162 | ) | (1,257 | ) | - | - | (2,419 | ) | ||||||||||||
Net premiums written | 16,701 | 24,181 | 14,191 | - | 55,073 | |||||||||||||||
Change in unearned premiums | 2,210 | 674 | 427 | - | 3,311 | |||||||||||||||
Net premiums earned | 18,911 | 24,855 | 14,618 | - | 58,384 | |||||||||||||||
Total revenues | 19,458 | 33,265 | 16,198 | (8,725 | ) | 60,196 | ||||||||||||||
Losses and loss adjustment expenses | 13,052 | 10,667 | 10,012 | (1 | ) | 33,730 | ||||||||||||||
Pre-tax income (loss), net of | ||||||||||||||||||||
minority interest | 579 | 8,727 | 1,942 | (11,702 | ) | (454 | ) | |||||||||||||
Net loss ratio (2) | 69.0 | % | 42.9 | % | 68.5 | % | 57.8 | % | ||||||||||||
Net expense ratio (2) | 27.0 | % | 30.5 | % | 22.0 | % | 28.8 | % | ||||||||||||
Net combined ratio (2) | 96.0 | % | 73.4 | % | 90.5 | % | 86.6 | % |
Three Months Ended December 31, 2007 | ||||||||||||||||||||
Standard | Specialty | |||||||||||||||||||
Commercial | Commercial | Personal | ||||||||||||||||||
Segment | Segment | Segment | Corporate | Consolidated | ||||||||||||||||
Produced premium (1) | $ | 20,739 | $ | 32,771 | $ | 12,688 | $ | - | $ | 66,198 | ||||||||||
Gross premiums written | 20,729 | 22,516 | 12,688 | - | 55,933 | |||||||||||||||
Ceded premiums written | (1,220 | ) | (832 | ) | - | - | (2,052 | ) | ||||||||||||
Net premiums written | 19,509 | 21,684 | 12,688 | - | 53,881 | |||||||||||||||
Change in unearned premiums | 2,126 | 2,511 | 732 | - | 5,369 | |||||||||||||||
Net premiums earned | 21,635 | 24,195 | 13,420 | - | 59,250 | |||||||||||||||
Total revenues | 21,024 | 32,564 | 14,614 | 1,714 | 69,916 | |||||||||||||||
Losses and loss adjustment expenses | 10,859 | 13,086 | 9,357 | (4 | ) | 33,298 | ||||||||||||||
Pre-tax income (loss) | 3,290 | 7,711 | 1,375 | (1,399 | ) | 10,977 | ||||||||||||||
Net loss ratio (2) | 50.2 | % | 54.1 | % | 69.7 | % | 56.2 | % | ||||||||||||
Net expense ratio (2) | 27.1 | % | 30.5 | % | 23.6 | % | 27.7 | % | ||||||||||||
Net combined ratio (2) | 77.3 | % | 84.6 | % | 93.3 | % | 83.9 | % |
1 | Produced premium is a non-GAAP measurement that management uses to track total controlled premium produced by our operations. We believe this is a useful tool for users of our financial statements to measure our premium production whether retained by our insurance company subsidiaries or retained by third party insurance carriers. |
2 | The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as underwriting expenses of our insurance company subsidiaries (which include provisional ceding commissions, direct agent commissions, premium taxes and assessments, professional fees, other general underwriting expenses and allocated overhead expenses) and offset by agency fee income, divided by net premiums earned, each determined in accordance with GAAP. Net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. |
7
Hallmark Financial Services, Inc. |
Consolidated Segment Data |
Fiscal Year Ended December 31, 2008 | ||||||||||||||||||||
Standard | Specialty | |||||||||||||||||||
Commercial | Commercial | Personal | ||||||||||||||||||
Segment | Segment | Segment | Corporate | Consolidated | ||||||||||||||||
Produced premium (1) | $ | 80,193 | $ | 146,054 | $ | 60,834 | $ | - | $ | 287,081 | ||||||||||
Gross premiums written | 80,190 | 102,825 | 60,834 | - | 243,849 | |||||||||||||||
Ceded premiums written | (4,829 | ) | (4,093 | ) | - | - | (8,922 | ) | ||||||||||||
Net premiums written | 75,361 | 98,732 | 60,834 | - | 234,927 | |||||||||||||||
Change in unearned premiums | 4,434 | (1,226 | ) | (1,815 | ) | - | 1,393 | |||||||||||||
Net premiums earned | 79,795 | 97,506 | 59,019 | - | 236,320 | |||||||||||||||
Total revenues | 84,075 | 127,882 | 64,475 | (7,742 | ) | 268,690 | ||||||||||||||
Losses and loss adjustment expenses | 49,270 | 55,933 | 39,042 | (1 | ) | 144,244 | ||||||||||||||
Pre-tax income (loss), net of | ||||||||||||||||||||
minority interest | 9,683 | 21,328 | 8,989 | (18,926 | ) | 21,074 | ||||||||||||||
Net loss ratio (2) | 61.7 | % | 57.4 | % | 66.2 | % | 61.0 | % | ||||||||||||
Net expense ratio (2) | 27.1 | % | 30.7 | % | 22.2 | % | 28.9 | % | ||||||||||||
Net combined ratio (2) | 88.8 | % | 88.1 | % | 88.4 | % | 89.9 | % |
Fiscal Year Ended December 31, 2007 | ||||||||||||||||||||
Standard | Specialty | |||||||||||||||||||
Commercial | Commercial | Personal | ||||||||||||||||||
Segment | Segment | Segment | Corporate | Consolidated | ||||||||||||||||
Produced premium (1) | $ | 90,985 | $ | 151,003 | $ | 55,916 | $ | - | $ | 297,904 | ||||||||||
Gross premiums written | 90,868 | 102,688 | 55,916 | - | 249,472 | |||||||||||||||
Ceded premiums written | (6,273 | ) | (4,388 | ) | - | - | (10,661 | ) | ||||||||||||
Net premiums written | 84,595 | 98,300 | 55,916 | - | 238,811 | |||||||||||||||
Change in unearned premiums | (840 | ) | (9,589 | ) | (2,411 | ) | - | (12,840 | ) | |||||||||||
Net premiums earned | 83,755 | 88,711 | 53,505 | - | 225,971 | |||||||||||||||
Total revenues | 86,512 | 126,550 | 58,268 | 3,836 | 275,166 | |||||||||||||||
Losses and loss adjustment expenses | 48,480 | 48,484 | 35,969 | (15 | ) | 132,918 | ||||||||||||||
Pre-tax income (loss) | 12,415 | 28,338 | 7,523 | (6,507 | ) | 41,769 | ||||||||||||||
Net loss ratio (2) | 57.9 | % | 54.7 | % | 67.2 | % | 58.8 | % | ||||||||||||
Net expense ratio (2) | 27.3 | % | 31.1 | % | 23.2 | % | 27.8 | % | ||||||||||||
Net combined ratio (2) | 85.2 | % | 85.8 | % | 90.4 | % | 86.6 | % |
1 | Produced premium is a non-GAAP measurement that management uses to track total controlled premium produced by our operations. We believe this is a useful tool for users of our financial statements to measure our premium production whether retained by our insurance company subsidiaries or retained by third party insurance carriers. |
2 | The net loss ratio is calculated as incurred losses and loss adjustment expenses divided by net premiums earned, each determined in accordance with GAAP. The net expense ratio is calculated as underwriting expenses of our insurance company subsidiaries (which include provisional ceding commissions, direct agent commissions, premium taxes and assessments, professional fees, other general underwriting expenses and allocated overhead expenses) and offset by agency fee income, divided by net premiums earned, each determined in accordance with GAAP. Net combined ratio is calculated as the sum of the net loss ratio and the net expense ratio. |
8