EXHIBIT 99.1
MEADOWBROOK INSURANCE GROUP LOGO
MEADOWBROOK INSURANCE GROUP, INC.
(NYSE - MIG)
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CONTACT: ROBERT S. CUBBIN, PRESIDENT & CHIEF EXECUTIVE OFFICER, (248) 204-8031
KAREN M. SPAUN, SVP & CHIEF FINANCIAL OFFICER, (248) 204-8178
JENNIFER BARBER, DIRECTOR OF FINANCIAL ANALYSIS, (248) 204-8159
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MEADOWBROOK INSURANCE GROUP, INC.
REPORTS IMPROVED FULL YEAR 2003
NET OPERATING INCOME OF $9.6 MILLION
- ANNUAL NET OPERATING INCOME OF $0.33 PER SHARE
- FOURTH QUARTER 2003 NET OPERATING INCOME OF $2.2 MILLION OR $0.08 PER SHARE
SOUTHFIELD, MICHIGAN
FEBRUARY 16, 2004
Year-to-Date Results:
Meadowbrook Insurance Group (NYSE: MIG) reported net operating income for the
year ended December 31, 2003 of $9.6 million, or $0.33 per diluted share,
compared to net operating income of $1.1 million, or $0.05 per diluted share in
2002. The increase in net operating income reflects growth of net earned
premium, higher fee-for-service revenue, stable reserves, and overall expense
management. As a result of the equity offering in June 2002, the diluted
weighted average common shares outstanding increased to 29,268,799 in 2003 from
20,543,878 in 2002.
"We are pleased by the consistent earnings pattern we are experiencing,"
commented Meadowbrook President and Chief Executive Officer, Robert S. Cubbin.
"The 2003 net operating income of $0.33 per share met our expectations
established in June 2002, following our equity offering. Our team remains
intensely committed to our plan to leverage fixed costs, maintain underwriting
discipline, and to focus on growing our profitable specialty program and
fee-for-service businesses."
During the year, gross written premium increased $69.7 million, or 37.9%, to
$253.3 million from $183.6 million in 2002. This increase reflects the
anticipated growth from premium rate increases, the conversion of existing
controlled programs to the Company's underwriting subsidiary, the addition of
select new business, and the renewal rights contract announced in November 2002.
Revenues:
Revenues increased $13.0 million, or 6.6%, to $210.8 million for the year ended
December 31, 2003, from $197.8 million in 2002.
26600 Telegraph Rd. - Southfield, MI. 48034 - 248-358-1100 - 800-482-2726
- Fax: 248-358-1614
www.meadowbrook.com
PRESS RELEASE PAGE 2
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Net earned premium increased $5.8 million, or 4.0%, to $151.2 million for the
year ended December 31, 2003, from $145.4 million in 2002. This increase
reflects controlled growth of $22.7 million from new programs that have long and
statistically proven track records, and $19.7 million related to rate increases
and growth in the number of policies in existing programs. These increases were
partially offset by a $36.6 million decrease related to previously discontinued
and terminated programs.
Net commissions and fees increased $7.7 million, or 20.5%, to $45.3 million for
the year ended December 31, 2003, from $37.6 million in 2002. This increase
includes $13.8 million from new fee-for-service contracts. Partially offsetting
this increase is the elimination of $5.6 million in net fees related to a
managed program that has been converted to an insured program within the
Company's underwriting subsidiary. Those fees are now considered inter-company
fees as opposed to managed fees and are eliminated upon financial consolidation.
Net investment income decreased $474,000, or 3.4%, to $13.5 million in 2003,
from $14.0 million in 2002. Average invested assets increased $41.7 million, or
16.0%, to $301.6 million in 2003, from $259.9 million in 2002. The average
investment yield for 2003 was 4.5% compared to 5.4% in 2002. The current pre-tax
book yield is 4.2% and the current pre-tax reinvestment yield is 3.2%. The
decrease in investment yield reflects the accelerated mortgage-backed securities
prepayment and reinvestment of cash flows in municipal bonds and other
securities in an interest rate environment where macro interest rates are still
relatively low.
Expenses:
Incurred losses decreased $262,000, or 0.3%, to $98.5 million for the year ended
December 31, 2003, from $98.7 million in 2002. The loss and loss adjustment
expense ratio for the year ended December 31, 2003 was 70.1%, compared to 72.1%
for 2002. The improvement in the calendar year loss ratio reflects continued
rate increases, the elimination of the surplus relief treaty in 2002, and the
stabilization of reserves.
Commenting on the calendar year loss ratio, Mr. Cubbin stated, "Our team
continues to focus on the fundamentals of our business. Prior year reserves have
remained stable. The current accident year results reflect year-over-year
improvement and is an indication of a potential trend in our continuing
business."
Salaries and employee benefits for the year ended December 31, 2003 increased
$10.5 million, or 28.1%, to $48.2 million, from $37.7 million in 2002, due
primarily to increases in staff related to new fee-for-service contracts. This
increase was also impacted by merit increases and performance-based variable
compensation.
Policy acquisition and other underwriting expenses decreased $10.0 million, or
29.8%, to $23.6 million for the year ended December 31, 2003, from $33.6 million
in 2002. The GAAP expense ratio was 34.3% for the year ended December 31, 2003,
compared to 36.5% for the year ended December 31, 2002. Reductions in overall
outside commission expense, and the ability to leverage fixed costs had a
favorable impact on the 2003 results.
Other administrative expenses increased $1.5 million, or 6.3%, to $24.5 million
for the year ended December 31, 2003, from $23.0 million in 2002. This increase
is primarily attributable to the new fee-for-service revenue.
Interest expense decreased $2.0 million, or 67.7%, to $977,000 for the year,
from $3.0 million for 2002. This reflects the decrease in the average
outstanding debt from $43.6 million in 2002, to $26.4 million in 2003 and a
decrease in the effective interest rate from 6.9% for 2002, to 3.7% for 2003. At
December 31, 2003, the Company's debt-to-equity ratio was 15.7%, compared to
18.7% at December 31, 2002.
PRESS RELEASE PAGE 3
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Fourth Quarter Results:
Net Operating Income:
Net operating income for the quarter ended December 31, 2003 was $2.2 million,
or $0.08 per diluted share, compared to net operating income of $2.3 million, or
$0.08 per diluted share for the comparable period in 2002.
Gross written premium increased $19.7 million, or 46.1%, during the fourth
quarter of 2003 to $62.4 million, from $42.7 million for the comparable period
in 2002.
Revenues:
Revenues increased $15.6 million, or 34.6%, to $60.6 million in the fourth
quarter of 2003, from $45.0 million for the comparable period in 2002.
Net earned premium increased $16.3 million, or 52.6%, to $47.4 million in the
fourth quarter of 2003, from $31.1 million during the same period of 2002. This
increase reflects controlled growth of $13.3 million in new programs and $5.3
million related to existing programs. These increases were partially offset by a
$2.3 million decrease related to previously discontinued and terminated
programs.
Net commissions and fees decreased $134,000, or 1.3%, to $9.9 million in the
fourth quarter of 2003, from $10.0 million during the same period of 2002. This
decrease includes the elimination of $1.6 million in net fees related to a
managed program that has been converted to an insured program within one of the
Company's insurance subsidiaries. Those fees are now considered inter-company
fees as opposed to managed fees and are eliminated upon financial consolidation.
Partially offsetting this decrease is $1.8 million from new fee-for-service
contracts.
Net investment income decreased $221,000, or 6.2%, to $3.4 million in the fourth
quarter of 2003, from $3.6 million during the same period of 2002.
Expenses:
Incurred losses increased $11.8 million, or 62.2%, to $30.8 million in the
fourth quarter of 2003, from $19.0 million for the comparable period of 2002.
The fourth quarter 2003 loss and loss adjustment expense ratio was 69.5%,
compared to 66.1% for the fourth quarter of 2002. The 2002 calendar quarter loss
ratio was favorably affected by the cumulative effect in the quarter of the
selection of a re-estimated, lower 2002 accident year loss ratio. This change in
ultimate loss ratio selection decreased the calendar quarter loss ratio in 2002
by 2.5 percentage points.
Salaries and employee benefits for the fourth quarter of 2003 increased $2.4
million, or 24.6%, to $12.1 million, from $9.7 million in the fourth quarter of
2002.
Policy acquisition and other underwriting expenses increased $1.1 million, or
16.5%, to $7.9 million in the fourth quarter of 2003, from $6.8 million for the
comparable period in 2002. The GAAP expense ratio was 33.6% for the fourth
quarter of 2003, compared to 36.1% for the fourth quarter of 2002. Reductions in
overall outside commission expense, and the ability to leverage fixed costs had
a favorable impact on the fourth quarter 2003 results. The fourth quarter of
2003 was also favorably impacted by a decrease in loss-based and other insurance
related assessments.
Other administrative expenses increased $703,000, or 12.7%, to $6.3 million in
the fourth quarter of 2003, from $5.5 million for the comparable period in 2002.
PRESS RELEASE PAGE 4
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Interest expense increased $6,000, or 1.9%, to $321,000 in the fourth quarter of
2003, from $315,000 for the comparable period in 2002. This reflects an increase
in the effective interest rate from 3.8% in the fourth quarter of 2002, to 4.5%
in the fourth quarter of 2003. This increase was partially offset by a decrease
in the fourth quarter average outstanding debt from $33.5 million in 2002, to
$28.7 million in 2003.
Other Matters:
Shareholders' equity increased to $155.1 million, or $5.34 per common share, at
December 31, 2003, compared to $147.4 million, or $4.98 per common share, at
December 31, 2002. The increase in shareholders' equity reflects year-to-date
net income, share repurchases, and unrealized depreciation of $1.0 million in
the Company's investment portfolio. During 2003, the Company repurchased and
retired 569,100 shares for a total cost of approximately $1.6 million.
On September 30, 2003, a non-consolidated subsidiary trust of the Company issued
$10.0 million of mandatory redeemable trust preferred securities to a trust
formed by an institutional investor. The Company issued $10.3 million of junior
subordinated debentures to the Company's trust. The Company received a total of
$9.7 million in net proceeds, after the deduction of approximately $300,000 of
issuance costs associated with the debentures. The debentures have a floating
rate equal to the three-month LIBOR plus 4.05% and mature in 30 years. The
Company contributed $6.3 million of the proceeds to the surplus of its insurance
company subsidiaries and the balance is being used for general corporate
purposes.
Statutory surplus increased in the quarter to $99.9 million at December 31, 2003
from $98.2 million at September 30, 2003, and in the year from $93.8 million at
December 31, 2002.
Cash flow provided by operations was $47.5 million for the year ended December
31, 2003, compared to $1.8 million in 2002. For the quarter ended December 31,
2003, cash flow provided by operations was $16.0 million, compared to $904,000
for the comparable period of 2002. This increase in positive cash flow primarily
reflects an increase in earnings, growth in written premiums, and collections of
reinsurance recoverables.
ABOUT MEADOWBROOK INSURANCE GROUP
A leader in the alternative risk market, Meadowbrook is a program-based risk
management company, specializing in alternative risk management solutions for
agents, brokers, and insureds of all sizes. Meadowbrook Insurance Group, Inc.
common shares are listed on the New York Stock Exchange under the symbol "MIG".
For further information, please visit Meadowbrook's corporate web site at
www.meadowbrook.com.
Certain statements made by Meadowbrook Insurance Group, Inc. in this release may
constitute forward-looking statements including, but not limited to, those
statements that include the words "believes", "expects", "anticipates",
"estimates", or similar expressions. Please refer to the Company's most recent
10-K, 10-Q, and other Securities and Exchange Commission filings for more
information on risk factors. Actual results could differ materially. These
forward-looking statements involve risks and uncertainties including, but not
limited to the following: the frequency and severity of claims; uncertainties
inherent in reserve estimates; catastrophic events; a change in the demand for,
pricing of, availability or collectibility of reinsurance; increased rate
pressure on premiums; obtainment of certain rate increases in current market
conditions; investment rate of return; changes in and adherence to insurance
regulation; actions taken by regulators, rating agencies or lenders; obtainment
of certain processing efficiencies; changing rates of inflation; and general
economic conditions. Meadowbrook is not under any obligation to (and expressly
disclaims any such obligation to) update or alter its forward-looking statements
whether as a result of new information, future events or otherwise.
EARNINGS RELEASE PAGE 5
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MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED BALANCE SHEET INFORMATION
DECEMBER 31, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2003 2002
- ------------------------------------- ------------------------ -----------------------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $ 324,234 $ 286,050
Premium & agents balances 77,554 71,420
Reinsurance recoverable 165,012 202,213
Deferred policy acquisition costs 19,564 12,140
Prepaid reinsurance premiums 20,492 18,115
Goodwill 28,997 28,997
Other assets 56,413 55,904
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TOTAL ASSETS $ 692,266 $ 674,839
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LIABILITIES
Loss and loss adjustment expense reserves $ 339,465 $ 374,933
Unearned premium reserves 109,677 68,678
Debt 17,506 32,497
Junior subordinated debentures 10,310 -
Other liabilities 60,195 51,336
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TOTAL LIABILITIES 537,153 527,444
STOCKHOLDERS' EQUITY
Common stockholders' equity 155,113 147,395
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 692,266 $ 674,839
======================== =======================
BOOK VALUE PER COMMON SHARE $5.34 $4.98
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE
SECURITIES, NET OF DEFERRED TAXES $5.09 $4.69
EARNINGS RELEASE PAGE 6
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MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(IN THOUSANDS, EXCEPT FOR THE QUARTER FOR THE YEAR
SHARE & PER SHARE DATA) ENDED DECEMBER 31, ENDED DECEMBER 31,
- ------------------------- ------------------- ------------------
SUMMARY DATA 2003 2002 2003 2002
- ------------ -------------- ---------- -------- ------------
Gross premiums written $ 62,432 $ 42,724 $ 253,280 $ 183,637
Net premiums written 47,280 31,331 189,827 139,795
REVENUES
Net premiums earned $ 47,404 $ 31,073 $ 151,205 $ 145,383
Commissions and fees (net) 9,861 9,995 45,291 37,581
Net investment income 3,357 3,578 13,484 13,958
Net capital (losses) gains (55) 341 823 666
Gain on sale of subsidiary - - - 199
-------------- ---------- ----------- -----------
TOTAL REVENUES 60,567 44,987 210,803 197,787
EXPENSES
Net losses & loss adjustment
expenses (1) 30,820 18,999 98,472 98,734
Salaries & employee benefits 12,066 9,681 48,238 37,659
Interest on notes payable 321 315 977 3,021
Gain on debt reduction - - - (359)
Policy acquisition and other
underwriting expenses (1) 7,873 6,756 23,618 33,635
Other administrative expenses 6,251 5,548 24,457 23,016
-------------- ---------- ----------- -----------
TOTAL EXPENSES 57,331 41,299 195,762 195,706
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 3,236 3,688 15,041 2,081
Federal income tax expense 1,075 1,179 4,945 431
Equity earnings of affiliates 3 - 3 -
-------------- ---------- ----------- -----------
NET INCOME $ 2,164 $ 2,509 $ 10,099 $ 1,650
============== ========== =========== ===========
NET OPERATING INCOME (2) $ 2,200 $ 2,284 $ 9,556 $ 1,079
============== ========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE
Net income $ 0.07 $ 0.08 $ 0.35 $ 0.08
Net operating income $ 0.08 $ 0.08 $ 0.33 $ 0.05
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,301,782 29,644,402 29,268,799 20,543,878
GAAP RATIOS:
Loss & LAE ratio 69.5% 66.1% 70.1% 72.1%
Other underwriting expense ratio 33.6% 36.1% 34.3% 36.5%
-------------- ---------- ---------- --------
GAAP combined ratio 103.1% 102.2% 104.4% 108.6%
============== ========== ========== ========
(1) Both the loss and loss adjustment and expense ratios are calculated based
upon the unconsolidated insurance company operations. The supplemental
information contained on page 7 sets forth the intercompany fees, which are
eliminated in consolidation.
(2) While net operating income is a non-GAAP disclosure, management believes
this information is beneficial to reviewing the financial statements. Net
operating income is net income less realized gains (losses) net of taxes
associated with such gains (losses).
EARNINGS RELEASE PAGE 7
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MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
SUPPLEMENTAL INFORMATION
(IN THOUSANDS)
- -------------- FOR THE QUARTER FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------- ------------------
2003 2002 2003 2002
-------------- ------------ ------------ -------------
Unconsolidated GAAP data - Ratio
Calculation Table:
Net earned premium $ 47,404 $ 31,073 $ 151,205 $ 145,383
Consolidated net loss and LAE (1) $ 30,820 $ 18,999 $ 98,472 $ 98,734
Intercompany claim fees 2,137 1,550 7,514 6,154
-------------- ------------ ------------ -------------
Unconsolidated net loss and LAE $ 32,957 $ 20,549 $ 105,986 $ 104,888
============== ============ ============ =============
GAAP loss and LAE ratio 69.5% 66.1% 70.1% 72.1%
Consolidated policy acquisition and other
underwriting expenses (1) $ 7,873 $ 6,756 $ 23,618 $ 33,635
Intercompany administrative and other
underwriting fees 8,071 4,466 28,296 19,445
-------------- ------------ ------------ -------------
Unconsolidated policy acquisition and
other underwriting expenses $ 15,944 $ 11,222 $ 51,914 $ 53,080
============== ============ ============ =============
GAAP other underwriting expense ratio 33.6% 36.1% 34.3% 36.5%
GAAP combined ratio 103.1% 102.2% 104.4% 108.6%
2003 2002 2003 2002
-------------- ------------ ------------ -------------
Unconsolidated GAAP data - Gross
Commissions and Fees:
Managed programs:
Management fees $ 4,041 $ 3,171 $ 18,751 $ 12,761
Claims fees 3,156 2,660 14,756 8,076
Loss control fees 574 618 2,303 2,590
Reinsurance brokerage 90 49 308 309
-------------- ------------ ------------ -------------
Total managed programs 7,861 6,498 36,118 23,736
Agency commissions 3,605 3,603 14,954 14,330
Intersegment revenue (1,605) (106) (5,781) (485)
-------------- ------------ ------------ -------------
Net commissions and fees 9,861 9,995 45,291 37,581
Intercompany commissions and fees 10,208 6,016 35,810 25,599
-------------- ------------ ------------ -------------
Gross commissions and fees $ 20,069 $ 16,011 $ 81,101 $ 63,180
============== ============ ============ =============
- --------------------
(1) Both the loss and loss adjustment and expense ratios are calculated based
upon the unconsolidated insurance company operations. The above table sets forth
the intercompany fees, which are eliminated in consolidation. The GAAP combined
ratio is the sum of the GAAP loss and loss adjustment expense ratio and the GAAP
expense ratio. The GAAP loss and loss adjustment expense ratio is the
unconsolidated net loss and loss adjustment expense in relation to net earned
premium. The GAAP expense ratio is the unconsolidated policy acquisition and
other underwriting expenses in relation to net earned premium.
EARNINGS RELEASE PAGE 8
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MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(IN THOUSANDS, EXCEPT
SHARE & PER SHARE DATA)
2001A Q102A Q202A Q302A Q402A
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SUMMARY DATA
Gross premiums written $ 299,104 $ 57,506 $ 42,816 $ 40,591 $ 42,724
Net premiums written 186,083 37,904 40,722 29,838 31,331
INCOME STATEMENT
REVENUES
Net premiums earned $ 163,665 $ 38,657 $ 44,313 $ 31,340 $ 31,073
Commissions and fees (net) 40,675 8,964 9,968 8,654 9,995
Net Investment income 14,228 3,124 3,505 3,751 3,578
Net capital gains (losses) 735 9 (310) 626 341
(Loss) gain on sale of subsidiary (1,097) 199 -- -- --
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TOTAL REVENUES 218,206 50,953 57,476 44,371 44,987
EXPENSES
Net losses & loss adjustment expenses 125,183 24,458 30,638 24,639 18,999
Policy acquisition and other underwriting
expenses 31,662 8,986 10,948 6,945 6,756
Other administrative expenses 22,778 5,418 6,073 5,977 5,548
Salaries & employee benefits 44,179 9,613 9,235 9,130 9,681
Gain on debt reduction -- -- (359) -- --
Interest on notes payable 4,516 1,250 874 582 315
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TOTAL EXPENSES 228,318 49,725 57,409 47,273 41,299
(LOSS) INCOME BEFORE TAXES AND EQUITY EARNINGS (10,112) 1,228 67 (2,902) 3,688
Federal income tax (benefit) expense (3,602) 318 (55) (1,011) 1,179
Equity earnings of affiliates -- -- -- -- --
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NET (LOSS) INCOME $ (6,510) $ 910 $ 122 $ (1,891) $ 2,509
Net realized capital (loss) gain, net of tax (239) 138 (205) 413 225
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OPERATING (LOSS) INCOME $ (6,271) $ 772 $ 327 $ (2,304) $ 2,284
Weighted average common shares outstanding 8,512,186 8,517,861 13,902,073 29,785,580 29,644,402
Shares O/S at end of the period 8,512,194 8,512,194 29,787,194 29,744,894 29,591,494
PER SHARE DATA (DILUTED)
Net (loss) income $ (0.76) $ 0.11 $ 0.01 $ (0.06) $ 0.08
Net realized capital (loss) gain, net of tax $ (0.03) $ 0.02 $ (0.01) $ 0.01 $ --
Operating (loss) income $ (0.73) $ 0.09 $ 0.02 $ (0.07) $ 0.08
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OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 81.1% 67.4% 72.6% 83.3% 66.1%
GAAP Expense ratio 36.0% 37.8% 35.8% 36.2% 36.1%
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GAAP COMBINED RATIO 117.1% 105.2% 108.4% 119.5% 102.2%
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UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premium $ 163,665 $ 38,657 $ 44,313 $ 31,340 $ 31,073
Consolidated net loss and LAE $ 125,183 $ 24,458 $ 30,638 $ 24,639 $ 18,999
Intercompany claim fees 7,520 1,609 1,521 1,474 1,550
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Unconsolidated net loss and LAE $ 132,703 $ 26,067 $ 32,159 $ 26,113 $ 20,549
==========================================================================
GAAP NET LOSS AND LAE RATIO 81.1% 67.4% 72.6% 83.3% 66.1%
Consolidated Policy acquisition and other
underwriting expenses $ 31,662 $ 8,986 $ 10,948 $ 6,945 $ 6,756
Intercompany administrative and other
underwriting fees 27,309 5,632 4,938 4,409 4,466
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Unconsolidated policy acquisition and other
underwriting expenses $ 58,971 $ 14,618 $ 15,886 $ 11,354 $ 11,222
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GAAP EXPENSE RATIO 36.0% 37.8% 35.8% 36.2% 36.1%
GAAP COMBINED RATIO 117.1% 105.2% 108.4% 119.5% 102.2%
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 13,318 $ 3,161 $ 3,421 $ 3,008 $ 3,171
Claims fees 8,594 1,734 1,805 1,877 2,660
Loss control fees 2,326 596 739 637 618
Reinsurance brokerage 1,233 72 123 65 49
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Total managed programs 25,471 5,563 6,088 5,587 6,498
Agency commissions 15,706 3,638 3,976 3,113 3,603
Intersegment commissions and fees (502) (237) (96) (46) (106)
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Net Commissions and fees 40,675 8,964 9,968 8,654 9,995
Intercompany commissions and fees 34,829 7,241 6,459 5,883 6,016
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Gross commissions and fees $ 75,504 $ 16,205 $ 16,427 $ 14,537 $ 16,011
==========================================================================
2002A Q103A Q203A Q303A Q403A 2003A
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SUMMARY DATA
Gross premiums written $ 183,637 $ 68,789 $ 56,220 $ 65,839 $ 62,432 $ 253,280
Net premiums written 139,795 51,802 40,177 50,568 47,280 189,827
INCOME STATEMENT
REVENUES
Net premiums earned $ 145,383 $ 27,384 $ 36,230 $ 40,187 $ 47,404 $ 151,205
Commissions and fees (net) 37,581 13,356 11,271 10,803 9,861 45,291
Net Investment income 13,958 3,353 3,577 3,197 3,357 13,484
Net capital gains (losses) 666 205 374 299 (55) 823
(Loss) gain on sale of subsidiary 199 -- -- -- -- --
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TOTAL REVENUES 197,787 44,298 51,452 54,486 60,567 210,803
EXPENSES
Net losses & loss adjustment expenses 98,734 17,186 24,109 26,357 30,820 98,472
Policy acquisition and other underwriting
expenses 33,635 3,756 5,993 5,996 7,873 23,618
Other administrative expenses 23,016 7,084 5,306 5,816 6,251 24,457
Salaries & employee benefits 37,659 11,932 11,868 12,372 12,066 48,238
Gain on debt reduction (359) -- -- -- -- --
Interest on notes payable 3,021 237 212 207 321 977
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TOTAL EXPENSES 195,706 40,195 47,488 50,748 57,331 195,762
(LOSS) INCOME BEFORE TAXES AND EQUITY EARNINGS 2,081 4,103 3,964 3,738 3,236 15,041
Federal income tax (benefit) expense 431 1,347 1,285 1,238 1,075 4,945
Equity earnings of affiliates -- -- -- -- 3 3
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NET (LOSS) INCOME $ 1,650 $ 2,756 $ 2,679 $ 2,500 $ 2,164 $ 10,099
Net realized capital (loss) gain, net of tax 571 135 247 197 (36) 543
------------------------------------------------------------------------------
OPERATING (LOSS) INCOME $ 1,079 $ 2,621 $ 2,432 $ 2,303 $ 2,200 $ 9,556
==============================================================================
Weighted average common shares outstanding 20,543,878 29,510,681 29,261,119 29,169,826 29,301,782 29,268,799
Shares O/S at end of the period 29,591,494 29,363,694 29,022,394 29,022,435 29,022,435 29,022,435
PER SHARE DATA (DILUTED)
Net (loss) income $ 0.08 $ 0.09 $ 0.09 $ 0.09 $ 0.07 $ 0.35
Net realized capital (loss) gain, net of tax $ 0.03 $ -- $ 0.01 $ 0.01 $ (0.01) $ 0.02
Operating (loss) income $ 0.05 $ 0.09 $ 0.08 $ 0.08 $ 0.08 $ 0.33
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OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 72.1% 69.0% 71.1% 70.6% 69.5% 70.1%
GAAP Expense ratio 36.5% 36.5% 35.3% 32.9% 33.6% 34.3%
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GAAP COMBINED RATIO 108.6% 105.5% 106.4% 103.5% 103.1% 104.4%
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premium $ 145,383 $ 27,384 $ 36,230 $ 40,187 $ 47,404 $ 151,205
Consolidated net loss and LAE $ 98,734 $ 17,186 $ 24,109 $ 26,357 $ 30,820 $ 98,472
Intercompany claim fees 6,154 1,720 1,635 2,022 2,137 7,514
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Unconsolidated net loss and LAE $ 104,888 $ 18,906 $ 25,744 $ 28,379 $ 32,97 $ 105,986
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GAAP NET LOSS AND LAE RATIO 72.1% 69.0% 71.1% 70.6% 69.5% 70.1%
Consolidated Policy acquisition and other
underwriting expenses $ 33,635 $ 3,756 $ 5,993 $ 5,996 $ 7,873 $ 23,618
Intercompany administrative and other
underwriting fees 19,445 6,235 6,784 7,206 8,071 28,296
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Unconsolidated policy acquisition and other
underwriting expenses $ 53,080 $ 9,991 $ 12,777 $ 13,202 $ 15,944 $ 51,914
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GAAP EXPENSE RATIO 36.5% 36.5% 35.3% 32.9% 33.6% 34.3%
GAAP COMBINED RATIO 108.6% 105.5% 106.4% 103.5% 103.1% 104.4%
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UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 12,761 $ 5,348 $ 4,840 $ 4,522 $ 4,041 $ 18,751
Claims fees 8,076 4,382 3,755 3,463 3,156 14,756
Loss control fees 2,590 577 549 603 57 2,303
Reinsurance brokerage 309 55 106 57 90 308
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Total managed programs 23,736 10,362 9,250 8,645 7,861 36,118
Agency commissions 14,330 4,147 3,675 3,527 3,605 14,954
Intersegment commissions and fees (485) (1,153) (1,654) (1,369) (1,605) (5,781)
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Net Commissions and fees 37,581 13,356 11,271 10,803 9,861 45,291
Intercompany commissions and fees 25,599 7,955 8,419 9,228 10,208 35,810
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Gross commissions and fees $ 63,180 $ 21,311 $ 19,690 $ 20,031 $ 20,069 $ 81,101
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