Exhibit 99.1
Harleysville Group Reports First Quarter 2004 Results
HARLEYSVILLE, Pa., April 30 /PRNewswire-FirstCall/ -- Harleysville Group
Inc. (Nasdaq: HGIC) today reported diluted net income of $0.55 per share in
the first quarter of 2004. The company had a diluted net loss of $0.11 per
share in the first quarter of 2003. Realized investment gains amounted to
$0.27 per share in the first quarter of 2004, compared to a $0.01 per share
realized loss in the first quarter of 2003. There was no material reserve
development in the first quarter of 2004. In 2003, the company's first quarter
earnings were reduced by $0.43 per share after tax due to a workers
compensation reserve adjustment.
The company reported diluted operating income of $0.28 per share for the
first quarter of 2004, compared to a diluted operating loss of $0.10 per share
in the same period of 2003. Operating income is a non-GAAP financial measure
defined by the company as net income excluding after-tax realized gains and
losses on investments.
"We have improved our financial performance, but we're just getting
started," commented Michael L. Browne, Harleysville Group's chief executive
officer. "We are significantly sharpening our focus on four areas -
underwriting, claims, service to agents and policyholders, and productivity -
the cornerstones of our business that have the greatest impact on our near-
term performance and position us well for sustainable growth and profitability
in the future."
Harleysville Group's overall statutory combined ratio* was 107.2 percent
in the first quarter of 2004, compared to 115.4 percent in the first quarter
of 2003. In 2003, the workers compensation reserve adjustment added 10.0
points to the combined ratio.
First quarter net written premiums were $206.0 million in the first
quarter of 2004, compared to $215.3 million in 2003.
First quarter pretax investment income increased 1 percent to $21.6
million, while after-tax investment income rose 2 percent to $16.8 million.
Operating cash flow for the first quarter was $11.2 million.
Commercial lines Net written premiums in commercial lines declined 1
percent in the first quarter of 2004 to $168.2 million. The commercial lines
statutory combined ratio was 104.7 percent in the first quarter of 2004,
versus 114.1 percent in the first quarter of 2003. In 2003, the workers
compensation reserve adjustment added 13.4 points to the quarter's commercial
lines statutory combined ratio.
Personal lines Harleysville Group's personal lines statutory combined
ratio was 116.2 percent in the first quarter of 2004, versus 119.3 percent
during the first quarter of 2003. In 2003, higher catastrophe losses
contributed to the higher statutory combined ratio. Net written premiums were
down 15 percent to $37.8 million in the first quarter of 2004.
Outlook "I am very encouraged by our core strengths - a strong balance
sheet, a great franchise, a solid and loyal network of independent agents, and
employees who every day are engaged in active dialogue with me on ways to
improve the fundamentals of our business," said Browne. "We are looking at our
business and executing our strategy in a new and much more disciplined way. I
am confident we will restore our company to its past high levels of financial
performance."
Webcast The company will host a live Webcast today, Friday, April 30,
2004, at 9:00 a.m. (ET) to discuss its first quarter results. The Webcast will
be available from the Investors section of the company's Web site
(www.harleysvillegroup.com) and will be archived on the Web site until April
30, 2005.
GAAP and non-GAAP financial measures The company uses a non-GAAP
financial measure called "operating income" that management believes is useful
to investors because it illustrates the performance of normal, ongoing
operations, which is important in understanding and evaluating the company's
financial condition and results of operations. While this measure is utilized
by investors to evaluate performance, it is not a substitute for the U.S. GAAP
financial measure of net income. Therefore, a reconciliation of this non-GAAP
financial measure to the U.S. GAAP financial measure of net income is provided
following the Consolidated Statements of Income contained in this release.
Management also uses operating income for goal setting, determining employee
and senior management compensation, and evaluating performance.
Corporate profile Harleysville Insurance is a premier provider of
insurance products and services for small businesses and individuals, and
ranks among the top 60 U.S. property/casualty insurance groups based on net
written premiums. Harleysville Mutual Insurance Company owns 57 percent of
Harleysville Group Inc. (Nasdaq: HGIC), a publicly traded holding company for
nine regional property/casualty insurance companies collectively rated A-
(Excellent) by A.M. Best Company. Harleysville Insurance, which distributes
its products exclusively through independent insurance agencies, currently
operates in 32 eastern and Midwestern states. Further information can be found
on the company's Web site at www.harleysvillegroup.com.
* "Statutory combined ratio" is a non-GAAP measure of underwriting
profitability and is based on numbers determined under statutory accounting
practices as filed with state insurance regulators. It is the sum of the ratio
of losses to premiums earned plus the ratio of underwriting expenses to
premiums written. A ratio of less than 100 percent indicates underwriting
profitability.
Certain of the statements contained herein (other than statements of
historical facts) are forward-looking statements. Such forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and include estimates and assumptions
related to economic, competitive and legislative developments. These forward-
looking statements are subject to change and uncertainty that are, in many
instances, beyond the company's control and have been made based upon
management's expectations and beliefs concerning future developments and their
potential effect on Harleysville Group Inc. There can be no assurance that
future developments will be in accordance with management's expectations so
that the effect of future developments on Harleysville Group will be those
anticipated by management. Actual financial results including premium growth
and underwriting results could differ materially from those anticipated by
Harleysville Group depending on the outcome of certain factors, which may
include changes in property and casualty loss trends and reserves; catastrophe
losses; the insurance product pricing environment; changes in applicable law;
government regulation and changes therein that may impede the ability to
charge adequate rates; changes in accounting principles; performance of the
financial markets; fluctuations in interest rates; availability and price of
reinsurance; and the status of the labor markets in which the company
operates.
Harleysville Group Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS Quarter ended March 31
(in thousands, except per share data) 2004 2003
OPERATING RESULTS
Diluted earnings (loss) per common
share:
Operating income (loss)* $0.28 ($0.10)
Realized gains (losses), net
of tax 0.27 (0.01)
Net income (loss) $0.55 ($0.11)
Cash dividend per common share $0.17 $0.165
FINANCIAL CONDITION March 31, 2004 December 31, 2003
Assets $2,681,227 $2,680,389
Shareholders' equity $590,059 $572,747
Per common share $19.69 $19.16
CONSOLIDATED STATEMENTS OF INCOME Quarter ended March 31
(LOSS)
(in thousands, except per share data) 2004 2003
REVENUES:
Premiums earned $206,948 $198,829
Investment income, net of investment
expense 21,642 21,447
Realized investment gains (losses) 12,488 (433)
Other income 4,564 4,520
Total revenues 245,642 224,363
LOSSES AND EXPENSES:
Losses and loss settlement expenses 151,110 163,759
Amortization of deferred policy
acquisition costs 50,688 48,317
Other underwriting expenses 19,638 18,557
Interest expense 1,577 1,394
Other expenses 1,419 1,211
Total expenses 224,432 233,238
Income (loss) before income taxes 21,210 (8,875)
Income taxes (benefit) 4,717 (5,635)
Net income (loss) $16,493 ($3,240)
Weighted average number of shares
outstanding:
Basic 29,960,760 29,987,316
Diluted 30,048,135 29,987,316
Per common share:
Basic earnings (loss) $0.55 ($0.11)
Diluted earnings (loss) $0.55 ($0.11)
RECONCILIATION TO OPERATING INCOME
(LOSS) :
Net income (loss) $16,493 ($3,240)
Less realized investment gains
(losses), net of taxes 8,117 (282)
Operating income (loss) $8,376 ($2,958)
These financial figures are unaudited.
* Operating income is a non-GAAP financial measure defined by the
company as net income excluding after-tax realized gains and losses on
investments.
Harleysville Group Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) March 31, 2004* December 31, 2003
ASSETS
Investments:
Fixed maturities:
Held to maturity, at
amortized cost (fair
value $490,469 $460,615 $439,613
and $467,485)
Available for sale, at
fair value (amortized
cost $1,160,672 1,233,870 1,246,019
and $1,183,158)
Equity securities, at fair
value (cost $108,599 and
$97,189) 142,705 137,590
Short-term investments, at
cost, which approximates
fair value 68,691 31,411
Total investments 1,905,881 1,854,633
Cash 1,782 13,430
Premiums in course of collection 138,258 140,674
Reinsurance receivable 178,020 164,841
Accrued investment income 21,220 23,086
Deferred policy acquisition costs 98,884 99,033
Prepaid reinsurance premiums 29,781 30,899
Property and equipment, net 23,095 23,824
Deferred income taxes 40,801 43,020
Securities lending collateral 186,570 221,454
Other assets 56,935 65,495
Total assets $2,681,227 $2,680,389
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss
settlement expenses $1,251,877 $1,219,977
Unearned premiums 435,842 437,883
Accounts payable and accrued
expenses 93,407 91,999
Securities lending
obligation 186,570 221,454
Debt 120,145 120,145
Due to affiliate 3,327 16,184
Total liabilities 2,091,168 2,107,642
Shareholders' equity:
Preferred stock, $1 par
value; authorized 1,000,000
shares;
none issued
Common stock, $1 par value,
authorized 80,000,000
shares;
issued 31,368,464 and
31,298,532 shares;
outstanding 29,970,555
and 29,900,623 shares 31,368 31,299
Additional paid-in capital 158,062 156,997
Accumulated other comprehensive
income 63,078 60,450
Retained earnings 362,238 350,844
Deferred compensation (200) (2,356)
Treasury stock, at cost, 1,397,909
and 1,000,000 shares (24,487) (24,487)
Total shareholders'
equity 590,059 572,747
Total liabilities and shareholders'
equity $2,681,227 $2,680,389
* These financial figures are unaudited.
SUPPLEMENTARY FINANCIAL ANALYSTS' DATA
Quarter ended March 31
(dollars in thousands) 2004 2003
Net premiums written* $206,026 $215,283
Statutory surplus * $488,264 $493,404
Pretax investment income $21,642 $21,447
Related federal income taxes 4,864 4,973
After-tax investment income $16,778 $16,474
SEGMENT INFORMATION
Quarter ended March 31
(dollars in thousands) 2004 2003
Revenues:
Premiums earned:
Commercial lines $162,320 $148,749
Personal lines 44,628 50,080
Total premiums earned 206,948 198,829
Net investment income 21,642 21,447
Realized investment gains
(losses) 12,488 (433)
Other 4,564 4,520
Total revenues $245,642 $224,363
Income (loss) before income taxes :
Underwriting loss:
Commercial lines ($9,648) ($28,006)
Personal lines (4,860) (7,894)
SAP underwriting loss (14,508) (35,900)
GAAP adjustments 20 4,096
GAAP underwriting loss (14,488) (31,804)
Net investment income 21,642 21,447
Realized investment gains
(losses) 12,488 (433)
Other 1,568 1,915
Income (loss) before income
taxes $21,210 ($8,875)
Income taxes on net investment income $4,864 $4,973
Income tax on remaining loss (147) (10,608)
Total income taxes (benefit) $4,717 ($5,635)
Effective tax rate on:
Net investment income 22.5% 23.2%
Net income 22.2% 63.5%
These financial figures are unaudited.
* Statutory data is prepared in accordance with statutory accounting
rules as defined by the National Association of Insurance Commissioners'
Accounting Practices and Procedures Manual and therefore is not reconciled
to GAAP.
Harleysville Group Inc. and Subsidiaries
STATUTORY DATA BY LINE OF BUSINESS*
Quarter ended March 31
(dollars in thousands) 2004 2003
Net premiums written:
Commercial:
Automobile $56,761 $55,243
Workers' compensation 26,740 32,773
Commercial multi-peril 68,198 64,812
Other commercial 16,481 17,709
Total commercial $168,180 $170,537
Personal:
Automobile $23,201 $29,597
Homeowners 12,968 13,472
Other personal 1,677 1,677
Total personal $37,846 $44,746
Total personal and commercial $206,026 $215,283
Combined ratios:
Commercial:
Automobile 103.1% 96.0%
Workers' compensation 122.9% 192.2%
Commercial multi-peril 105.1% 98.8%
Other commercial 81.7% 83.8%
Total commercial 104.7% 114.1%
Personal:
Automobile 118.3% 117.5%
Homeowners 109.3% 124.0%
Other personal 147.6% 114.8%
Total personal 116.2% 119.3%
Total personal and commercial 107.2% 115.4%
Losses paid $134,060 $128,637
Net catastrophe losses incurred $2,625 $3,649
These financial figures are unaudited.
* Statutory data is prepared in accordance with statutory accounting
rules as defined by the National Association of Insurance Commissioners'
Accounting Practices and Procedures Manual and therefore is not
reconciled to GAAP.
SOURCE Harleysville Group Inc.
-0- 04/30/2004
/CONTACT: Mark Cummins (Investors), +1-215-256-5025,
mcummins@harleysvillegroup.com; or Randy Buckwalter (Media), +1-215-256-5288,
rbuckwalter@harleysvillegroup.com, both of Harleysville Group/
/Web site: http://www.harleysvillegroup.com /
(HGIC)
CO: Harleysville Group Inc.
ST: Pennsylvania
IN: INS
SU: MAV CCA ERN