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 LA, DIRECTOR OF FINANCIAL ANALYSIS, (248) 204-8159
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MEADOWBROOK INSURANCE GROUP, INC.
REPORTS SECOND QUARTER 2004
NET INCOME OF $2.8 MILLION
o REVENUES INCREASED 27.2%
o YEAR TO DATE NET INCOME OF $6.1 MILLION
o EARNINGS PER DILUTED SHARE OF $0.10 FOR THE SECOND QUARTER
o EARNINGS PER DILUTED SHARE OF $0.21 FOR THE YEAR TO DATE
SOUTHFIELD, MICHIGAN
AUGUST 5, 2004
Second Quarter Results:
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Meadowbrook Insurance Group (NYSE: MIG) reported net income for the quarter
ended June 30, 2004 of $2.8 million, or $0.10 per diluted share, compared to net
income of $2.7 million, or $0.09 per diluted share, in 2003. The net income for
the quarter reflects the growth of earned premium in profitable programs written
in the second half of 2003 and the first quarter of 2004, continued rate
increases, growth in agency commissions, and overall expense management.
"We continue to experience a consistent and improving earnings pattern,"
commented Robert S. Cubbin, President and Chief Executive Officer of
Meadowbrook. "The net operating income for the second quarter met our
expectations and keeps us on track to meet full year estimates. Our management
team remains committed to underwriting discipline and is focused on growing our
profitable specialty program and fee-for-service businesses."
During the quarter, gross written premium increased $14.7 million, or 26.1%, to
$70.9 million, from $56.2 million for the comparable period in 2003. This
increase reflects the anticipated growth from premium rate increases, the
conversion of existing controlled programs to the Company's underwriting
subsidiaries, the growth of existing programs, and the implementation of new
programs with proven track records of profitability.
PRESS RELEASE PAGE 2
Revenues:
Revenues increased $13.9 million, or 27.2%, to $65.4 million for the quarter
ended June 30, 2004, from $51.5 million for the comparable period in 2003.
Net earned premium increased $16.9 million, or 46.5%, to $53.1 million for the
quarter ended June 30, 2004, from $36.2 million for the comparable period in
2003. This increase reflects the growth in earned premium from programs written
in the second half of 2003 and the first quarter of 2004, which include the
impact of overall rate increases of 13.6% and 5.7% achieved in 2003 and 2004,
respectively.
As anticipated, net commissions and fees decreased $2.4 million, or 21.5%, to
$8.8 million for the quarter. This decrease is primarily related to the planned
run-off of two limited duration contracts with the State of Missouri. However,
intercompany fees, which are eliminated upon consolidation, have increased.
Gross commissions and fees, before consolidation, increased $1.2 million, or
6.1%, to $20.9 million for the quarter.
Net investment income decreased $30,000, or 0.8%, to $3.5 million for the
quarter ended June 30, 2004, from $3.6 million for the comparable period in
2003. Average invested assets increased $42.6 million, or 14.2%, to $343.0
million in 2004, from $300.4 million for the comparable period in 2003. The
increase in average invested assets reflects cash flows from underwriting
activities, growth in gross written premium during 2003 and 2004, and $24.3
million in net proceeds received in conjunction with the senior debentures
issued during the second quarter of 2004. This increase was partially offset by
a decrease in the average investment yield to 4.1%, compared to 4.8% for the
comparable period in 2003. The current pre-tax book yield is 4.0%. The decrease
in investment yield reflects accelerated prepayments on mortgage-backed
securities and reinvestment of cash flows in municipal bonds and other
securities in an interest rate environment where macro interest rates were still
relatively low.
Expenses:
Incurred losses increased $8.7 million, or 36.2%, to $32.8 million for the
quarter ended June 30, 2004, from $24.1 million for the comparable period in
2003. The loss and loss adjustment expense ratio for the quarter ended June 30,
2004 was 66.5%, compared to 71.1% for the comparable period in 2003. The current
quarter loss ratio reflects an increase in net ultimate loss estimates on prior
accident years of $648,000, compared to a $1.9 million increase in the second
quarter of 2003. This increase in net ultimate loss estimates on prior accident
years equals 0.3% of the Company's net loss and loss adjustment expense reserves
of $192.0 million as of December 31, 2003. The remaining improvement in the loss
and loss adjustment ratio reflects continued rate increases and the growth of
earned premium from profitable programs.
Commenting on the calendar year loss ratio, Mr. Cubbin stated: "We remain
focused on the fundamentals of our business and continue to achieve modest rate
increases. Prior year reserves have remained relatively stable. The current
accident year results reflect year-over-year improvement and are consistent with
our expectations."
Salaries and employee benefits for the quarter ended June 30, 2004 increased
$457,000, or 3.9%, to $12.3 million, from $11.9 million for the comparable
period in 2003, due primarily to merit increases and performance-based variable
compensation. These increases were partially offset by a slight decrease in
staffing levels.
Policy acquisition and other underwriting expenses increased $2.9 million, or
48.4%, to $8.9 million for the quarter ended June 30, 2004, from $6.0 million
for the comparable period in 2003. The GAAP expense ratio was 34.8% for the
quarter ended June 30, 2004, compared to 35.3% for the quarter ended June 30,
2003. The improvement in the expense ratio reflects a decrease in insurance
related assessments. This
PRESS RELEASE PAGE 3
decrease was partially offset by an increase in ceded excess reinsurance
expenses primarily related to the previously discussed public entity
excess-liability program.
Other administrative expenses increased $1.4 million, or 26.4%, to $6.7 million
for the quarter ended June 30, 2004, from $5.3 million for the comparable period
in 2003. This increase is primarily attributable to an increase in accrued
policyholder dividends in 2004, compared to a reduction in accrued policyholder
dividends in 2003.
Interest expense increased $316,000, or 149.1%, to $528,000 for the quarter,
from $212,000 for the comparable period in 2003. Interest expense increased
$318,000 related to the senior and junior subordinated debentures. Excluding the
interest related to the debentures, interest expense remained consistent with
2003 results. This reflects a lower average outstanding balance of $16.9 million
during the quarter ended June 30, 2004, from $20.9 million for the comparable
period in 2003, offset by an increase in the effective interest rate from 4.1%
for the second quarter of 2003 to 5.0% for the comparable period of 2004. The
increase in the effective interest rate is a result of the increase in the
underlying Eurocurrency based rate. At June 30, 2004, the Company's
debt-to-equity ratio was 29.8%, compared to 15.7% at December 31, 2003.
Year to Date Results:
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Net Income:
Net income for the six months ended June 30, 2004 was $6.1 million, or $0.21 per
diluted share, compared to net income of $5.4 million, or $0.18 per diluted
share, for the comparable period in 2003.
Gross written premium increased $26.9 million, or 21.5%, to $151.9 million for
the six months ended June 30, 2004, from $125.0 million for the comparable
period in 2003.
Revenues:
Revenues increased $34.2 million, or 35.7%, to $129.9 million for the six months
ended June 30, 2004, from $95.7 million for the comparable period in 2003.
Net earned premium increased $39.2 million, or 61.6%, to $102.8 million for the
six months ended June 30, 2004, from $63.6 million during the same period of
2003.
Net commissions and fees decreased $4.5 million, or 18.3%, to $20.1 million for
the six months ended June 30, 2004, from $24.6 million during the same period of
2003.
Expenses:
Incurred losses increased $24.0 million, or 58.2%, to $65.3 million for the six
months ended June 30, 2004, from $41.3 million in the comparable period of 2003.
The loss and loss adjustment expense ratio for the six months ended June 30,
2004 was 68.3%, compared to 70.2% for the comparable period in 2003.
Other expenses increased $9.4 million, or 20.2%, to $55.8 million for the six
months ended June 30, 2004, from $46.4 million in the comparable period of 2003.
The GAAP expense ratio was 33.4% for the six months ended June 30, 2004,
compared to 35.8% for the comparable period in 2003.
PRESS RELEASE PAGE 4
Other Matters:
Shareholders' equity increased to $157.0 million, or $5.41 per common share, at
June 30, 2004, compared to $155.1 million, or $5.34 per common share, at
December 31, 2003. The increase in shareholders' equity reflects year-to-date
net income, which is partially offset by a decrease of $4.6 million in the net
unrealized gain in the Company's investment portfolio. The net unrealized gain
was $2.8 million at June 30, 2004, down from $7.4 million at December 31, 2003.
On April 29, 2004, the Company issued $13.0 million of senior debentures to an
institutional investor in a pooled transaction. The Company received a total of
$12.6 million in net proceeds, after the deduction of approximately $390,000 of
issuance costs associated with the debentures. The debentures have a floating
rate equal to the three-month LIBOR plus 4.0%, and mature in 30 years.
On May 26, 2004, the Company issued $12.0 million of senior debentures to an
institutional investor in a pooled transaction. The Company received a total of
$11.6 million in net proceeds, after the deduction of approximately $360,000 of
issuance costs associated with the debentures. The debentures have a floating
rate equal to the three-month LIBOR plus 4.2%, and mature in 30 years.
The proceeds from these two issuances will be used to support future premium
growth through contributions to the surplus of its insurance company
subsidiaries and for other general corporate purposes.
Statutory surplus increased in the quarter to $99.3 million at June 30, 2004,
from $98.4 million at March 31, 2004, and decreased in the six months from $99.9
million at December 31, 2003.
Cash flow provided by operations was $10.1 million for the quarter ended June
30, 2004, compared to $17.4 million in 2003. For the six months ended June 30,
2004, cash flow provided by operations was $26.3 million, compared to $30.2
million for the comparable period of 2003.
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
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED BALANCE SHEET INFORMATION
JUNE 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2004 2003
- ------------------------------------- ------------------------ -----------------------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $ 358,921 $ 324,234
Premium & agents balances 95,113 77,554
Reinsurance recoverable 167,742 165,012
Deferred policy acquisition costs 22,352 19,564
Prepaid reinsurance premiums 23,564 20,492
Goodwill 28,997 28,997
Other assets 58,798 56,413
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TOTAL ASSETS $ 755,487 $ 692,266
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LIABILITIES
Loss and loss adjustment expense reserves $ 360,138 $ 339,465
Unearned premium reserves 125,502 109,677
Debt 16,204 17,506
Debentures 35,310 10,310
Other liabilities 61,310 60,195
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TOTAL LIABILITIES 598,464 537,153
STOCKHOLDERS' EQUITY
Common stockholders' equity 157,023 155,113
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 755,487 $ 692,266
======================== =======================
BOOK VALUE PER COMMON SHARE $5.41 $5.34
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE
SECURITIES, NET OF DEFERRED TAXES $5.31 $5.09
EARNINGS RELEASE PAGE 6
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(IN THOUSANDS, EXCEPT FOR THE QUARTER FOR THE SIX MONTHS
SHARE & PER SHARE DATA) ENDED JUNE 30, ENDED JUNE 30,
- ------------------------- -------------- --------------
SUMMARY DATA 2004 2003 2004 2003
------------ ------------ ------------ ------------
Gross premiums written $ 70,871 $ 56,220 $ 151,925 $ 125,009
Net premiums written 53,025 40,177 115,976 91,979
REVENUES
Net premiums earned $ 53,083 $ 36,230 $ 102,796 $ 63,614
Commissions and fees (net) 8,844 11,271 20,125 24,627
Net investment income 3,547 3,577 7,144 6,930
Net capital (losses) gains (32) 374 (152) 579
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TOTAL REVENUES 65,442 51,452 129,913 95,750
EXPENSES
Net losses & loss adjustment expenses (1) 32,826 24,109 65,335 41,295
Salaries & employee benefits 12,325 11,868 25,133 23,800
Interest on notes payable 528 212 843 449
Policy acquisition and other underwriting expenses (1) 8,896 5,993 16,458 9,749
Other administrative expenses 6,705 5,306 13,333 12,390
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TOTAL EXPENSES 61,280 47,488 121,102 87,683
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 4,162 3,964 8,811 8,067
Federal income tax expense 1,284 1,285 2,724 2,632
Equity earnings of affiliates (58) -- (35) --
------------ ------------ ------------ ------------
NET INCOME $ 2,820 $ 2,679 $ 6,052 $ 5,435
============ ============ ============ ============
NET OPERATING INCOME (2) $ 2,841 $ 2,432 $ 6,152 $ 5,053
============ ============ ============ ============
DILUTED EARNINGS PER COMMON SHARE
Net income $ 0.10 $ 0.09 $ 0.21 $ 0.18
Net operating income $ 0.10 $ 0.08 $ 0.21 $ 0.17
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,459,390 29,261,119 29,427,512 29,389,101
GAAP RATIOS:
Loss & LAE ratio 66.5% 71.1% 68.3% 70.2%
Other underwriting expense ratio 34.8% 35.3% 33.4% 35.8%
------------ ------------ ------------ ------------
GAAP combined ratio 101.3% 106.4% 101.7% 106.0%
============ ============ ============ ============
(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
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
SUPPLEMENTAL INFORMATION
(IN THOUSANDS) FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
2004 2003 2004 2003
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Unconsolidated GAAP data - Ratio Calculation Table:
Net earned premium $ 53,083 $ 36,230 $ 102,796 $ 63,614
Consolidated net loss and LAE (1) $ 32,826 $ 24,109 $ 65,335 $ 41,295
Intercompany claim fees 2,463 1,635 4,865 3,355
--------- --------- --------- ---------
Unconsolidated net loss and LAE $ 35,289 $ 25,744 $ 70,200 $ 44,650
========= ========= ========= =========
GAAP loss and LAE ratio 66.5% 71.1% 68.3% 70.2%
Consolidated policy acquisition and other underwriting expenses (1) $ 8,896 $ 5,993 $ 16,458 $ 9,749
Intercompany administrative and other underwriting fees 9,575 6,784 17,845 13,019
--------- --------- --------- ---------
Unconsolidated policy acquisition and other underwriting expenses $ 18,471 $ 12,777 $ 34,303 $ 22,768
========= ========= ========= =========
GAAP other underwriting expense ratio 34.8% 35.3% 33.4% 35.8%
GAAP combined ratio 101.3% 106.4% 101.7% 106.0%
2004 2003 2004 2003
--------- --------- --------- ---------
Unconsolidated GAAP data - Gross Commissions and Fees:
Managed programs:
Management fees $ 3,898 $ 4,840 $ 8,609 $ 10,188
Claims fees 2,728 3,755 5,429 8,137
Loss control fees 532 549 1,077 1,126
Reinsurance brokerage (30) 106 117 161
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Total managed programs 7,128 9,250 15,232 19,612
Agency commissions 3,993 3,675 8,772 7,822
Intersegment revenue (2,277) (1,654) (3,879) (2,807)
--------- --------- --------- ---------
Net commissions and fees 8,844 11,271 20,125 24,627
Intercompany commissions and fees 12,038 8,419 22,710 16,374
--------- --------- --------- ---------
Gross commissions and fees $ 20,882 $ 19,690 $ 42,835 $ 41,001
========= ========= ========= =========
(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
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(IN THOUSANDS, EXCEPT
SHARE & PER SHARE DATA)
2001A 2002A Q103A Q203A Q303A
------------ ------------ ------------ ------------ ------------
SUMMARY DATA
Gross premiums written $ 299,104 $ 183,637 $ 68,789 $ 56,220 $ 65,839
Net premiums written 186,083 139,795 51,802 40,177 50,568
INCOME STATEMENT
REVENUES
Net premiums earned $ 163,665 $ 145,383 $ 27,384 $ 36,230 $ 40,187
Commissions and fees (net) 40,675 37,581 13,356 11,271 10,803
Net Investment income 14,228 13,958 3,353 3,577 3,197
Net capital gains (losses) 735 666 205 374 299
(Loss) gain on sale of subsidiary (1,097) 199 -- -- --
------------ ------------ ------------ ------------ ------------
TOTAL REVENUES 218,206 197,787 44,298 51,452 54,486
EXPENSES
Net losses & loss adjustment expenses 125,183 98,734 17,186 24,109 26,357
Policy acquisition and other underwriting
expenses 31,662 33,635 3,756 5,993 5,996
Other administrative expenses 22,778 23,016 7,084 5,306 5,816
Salaries & employee benefits 44,179 37,659 11,932 11,868 12,372
Gain on debt reduction -- (359) -- -- --
Interest on notes payable 4,516 3,021 237 212 207
------------ ------------ ------------ ------------ ------------
TOTAL EXPENSES 228,318 195,706 40,195 47,488 50,748
(LOSS) INCOME BEFORE TAXES AND EQUITY EARNINGS (10,112) 2,081 4,103 3,964 3,738
Federal income tax (benefit) expense (3,602) 431 1,347 1,285 1,238
Equity earnings of affiliates -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (6,510) $ 1,650 $ 2,756 $ 2,679 $ 2,500
Net realized capital (loss) gain, net of tax (239) 571 135 247 197
------------ ------------ ------------ ------------ ------------
OPERATING (LOSS) INCOME $ (6,271) $ 1,079 $ 2,621 $ 2,432 $ 2,303
============ ============ ============ ============ ============
Weighted average common shares outstanding 8,512,186 20,543,878 29,510,681 29,261,119 29,169,826
Shares O/S at end of the period 8,512,194 29,591,494 29,363,694 29,022,394 29,022,435
PER SHARE DATA (DILUTED)
Net (loss) income $ (0.76) $ 0.08 $ 0.09 $ 0.09 $ 0.09
Net realized capital (loss) gain, net of tax $ (0.03) $ 0.03 $ -- $ 0.01 $ 0.01
Operating (loss) income $ (0.73) $ 0.05 $ 0.09 $ 0.08 $ 0.08
------------ ------------ ------------ ------------ ------------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 81.1% 72.1% 69.0% 71.1% 70.6%
GAAP Expense ratio 36.0% 36.5% 36.5% 35.3% 32.9%
------------ ------------ ------------ ------------ ------------
GAAP COMBINED RATIO 117.1% 108.6% 105.5% 106.4% 103.5%
============ ============ ============ ============ ============
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premium $ 163,665 $ 145,383 $ 27,384 $ 36,230 $ 40,187
Consolidated net loss and LAE $ 125,183 $ 98,734 $ 17,186 $ 24,109 $ 26,357
Intercompany claim fees 7,520 6,154 1,720 1,635 2,022
------------ ------------ ------------ ------------ ------------
Unconsolidated net loss and LAE $ 132,703 $ 104,888 $ 18,906 $ 25,744 $ 28,379
============ ============ ============ ============ ============
GAAP NET LOSS AND LAE RATIO 81.1% 72.1% 69.0% 71.1% 70.6%
Consolidated Policy acquisition and other
underwriting expenses $ 31,662 $ 33,635 $ 3,756 $ 5,993 $ 5,996
Intercompany administrative and other
underwriting fees 27,309 19,445 6,235 6,784 7,206
------------ ------------ ------------ ------------ ------------
Unconsolidated policy acquisition and other
underwriting expenses $ 58,971 $ 53,080 $ 9,991 $ 12,777 $ 13,202
============ ============ ============ ============ ============
GAAP EXPENSE RATIO 36.0% 36.5% 36.5% 35.3% 32.9%
GAAP COMBINED RATIO 117.1% 108.6% 105.5% 106.4% 103.5%
------------ ------------ ------------ ------------ ------------
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 13,318 $ 12,761 $ 5,348 $ 4,840 $ 4,522
Claims fees 8,594 8,076 4,382 3,755 3,463
Loss control fees 2,326 2,590 577 549 603
Reinsurance brokerage 1,233 309 55 106 57
------------ ------------ ------------ ------------ ------------
Total managed programs 25,471 23,736 10,362 9,250 8,645
Agency commissions 15,706 14,330 4,147 3,675 3,527
Intersegment commissions and fees (502) (485) (1,153) (1,654) (1,369)
------------ ------------ ------------ ------------ ------------
Net Commissions and fees 40,675 37,581 13,356 11,271 10,803
Intercompany commissions and fees 34,829 25,599 7,955 8,419 9,228
------------ ------------ ------------ ------------ ------------
Gross commissions and fees $ 75,504 $ 63,180 $ 21,311 $ 19,690 $ 20,031
============ ============ ============ ============ ============
Q403A 2003A Q104A Q204A
------------ ----------- ------------ ------------
SUMMARY DATA
Gross premiums written $ 62,432 $ 253,280 $ 81,054 $ 70,871
Net premiums written 47,280 189,827 62,951 53,025
INCOME STATEMENT
REVENUES
Net premiums earned $ 47,404 $ 151,205 $ 49,713 $ 53,083
Commissions and fees (net) 9,861 45,291 11,281 8,844
Net Investment income 3,357 13,484 3,597 3,547
Net capital gains (losses) (55) 823 (120) (32)
(Loss) gain on sale of subsidiary -- -- -- --
------------ ------------ ------------ ------------
TOTAL REVENUES 60,567 210,803 64,471 65,442
EXPENSES
Net losses & loss adjustment expenses 30,820 98,472 32,509 32,826
Policy acquisition and other underwriting
expenses 7,873 23,618 7,562 8,896
Other administrative expenses 6,251 24,457 6,628 6,705
Salaries & employee benefits 12,066 48,238 12,808 12,325
Gain on debt reduction -- -- -- --
Interest on notes payable 321 977 315 528
------------ ------------ ------------ ------------
TOTAL EXPENSES 57,331 195,762 59,822 61,280
(LOSS) INCOME BEFORE TAXES AND EQUITY EARNINGS 3,236 15,041 4,649 4,162
Federal income tax (benefit) expense 1,075 4,945 1,440 1,284
Equity earnings of affiliates 3 3 23 (58)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ 2,164 $ 10,099 $ 3,232 $ 2,820
Net realized capital (loss) gain, net of tax (36) 543 (79) (21)
------------ ------------ ------------ ------------
OPERATING (LOSS) INCOME $ 2,200 $ 9,556 $ 3,311 $ 2,841
============ ============ ============ ============
Weighted average common shares outstanding 29,301,782 29,268,799 29,395,208 29,459,390
Shares O/S at end of the period 29,022,435 29,022,435 29,034,433 29,040,733
PER SHARE DATA (DILUTED)
Net (loss) income $ 0.07 $ 0.35 $ 0.11 $ 0.10
Net realized capital (loss) gain, net of tax $ (0.01) $ 0.02 $ -- $ --
Operating (loss) income $ 0.08 $ 0.33 $ 0.11 $ 0.10
------------ ------------ ------------ ------------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 69.5% 70.1% 70.2% 66.5%
GAAP Expense ratio 33.6% 34.3% 31.8% 34.8%
------------ ------------ ------------ ------------
GAAP COMBINED RATIO 103.1% 104.4% 102.0% 101.3%
============ ============ ============ ============
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premium $ 47,404 $ 151,205 $ 49,713 $ 53,083
Consolidated net loss and LAE $ 30,820 $ 98,472 $ 32,509 $ 32,826
Intercompany claim fees 2,137 7,514 2,402 2,463
------------ ------------ ------------ ------------
Unconsolidated net loss and LAE $ 32,957 $ 105,986 $ 34,911 $ 35,289
============ ============ ============ ============
GAAP NET LOSS AND LAE RATIO 69.5% 70.1% 70.2% 66.5%
Consolidated Policy acquisition and other
underwriting expenses $ 7,873 $ 23,618 $ 7,562 $ 8,896
Intercompany administrative and other
underwriting fees 8,071 28,296 8,270 9,575
------------ ------------ ------------ ------------
Unconsolidated policy acquisition and other
underwriting expenses $ 15,944 $ 51,914 $ 15,832 $ 18,471
============ ============ ============ ============
GAAP EXPENSE RATIO 33.6% 34.3% 31.8% 34.8%
GAAP COMBINED RATIO 103.1% 104.4% 102.0% 101.3%
------------ ------------ ------------ ------------
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 4,041 $ 18,751 $ 4,711 $ 3,898
Claims fees 3,156 14,756 2,701 2,728
Loss control fees 574 2,303 545 532
Reinsurance brokerage 90 308 147 (30)
------------ ------------ ------------ ------------
Total managed programs 7,861 36,118 8,104 7,128
Agency commissions 3,605 14,954 4,779 3,993
Intersegment commissions and fees (1,605) (5,781) (1,602) (2,277)
------------ ------------ ------------ ------------
Net Commissions and fees 9,861 45,291 11,281 8,844
Intercompany commissions and fees 10,208 35,810 10,672 12,038
------------ ------------ ------------ ------------
Gross commissions and fees $ 20,069 $ 81,101 $ 21,953 $ 20,882
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