MEADOWBROOK INSURANCE GROUP, INC.
(NYSE - MIG)
================================================================================
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 2005
NET INCOME UP 62.4% TO $4.6 MILLION
- EARNINGS PER DILUTED SHARE OF $0.16 FOR THE SECOND QUARTER
- COMBINED RATIO OF 97.1%
- REVENUES INCREASED 16.1%
- BOOK VALUE PER SHARE OF $6.00
- 2005 YEAR TO DATE NET INCOME UP 37.5% TO $8.3 MILLION
SOUTHFIELD, MICHIGAN
AUGUST 2, 2005
Second Quarter Results:
Meadowbrook Insurance Group (NYSE: MIG) reported net income for the quarter
ended June 30, 2005 of $4.6 million, or $0.16 per diluted share, up 62.4%
compared to net income of $2.8 million, or $0.10 per diluted share, in 2004. Net
operating income(1) for the quarter ended June 30, 2005 was $4.5 million, or
$0.15 per diluted share, up 58.8% compared to net operating income of $2.8
million, or $0.10 per diluted share, in 2004. This improvement reflects growth
of earned premium from profitable programs, a continued favorable rate
environment, and overall expense management.
Commenting on the results, Meadowbrook President and Chief Executive Officer,
Robert S. Cubbin stated: "The net income for the second quarter shows strong
evidence of our commitment to disciplined underwriting, growth of our profitable
specialty programs, and continued success in leveraging our fixed costs."
During the quarter, gross written premium increased $5.1 million, or 7.2%, to
$76.0 million, from $70.9 million for the comparable period in 2004. This
increase reflects the growth from modest premium rate increases and new programs
implemented in 2004.
- ----------
(1) 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).
PRESS RELEASE PAGE 2
Revenues:
Revenues increased $10.6 million, or 16.1%, to $76.0 million for the quarter
ended June 30, 2005, from $65.4 million for the comparable period in 2004.
Net earned premium increased $10.3 million, or 19.4%, to $63.4 million for the
quarter ended June 30, 2005, from $53.1 million for the comparable period in
2004. This increase reflects the growth in earned premium from programs written
in the second half of 2004 and the first quarter of 2005, which included new
programs implemented in 2004. In addition, this growth includes the impact of
overall rate increases of 8.4% and 1.6% achieved in 2004 and 2005, respectively.
This growth also includes the impact of the increase in the net retention on the
Company's core workers' compensation reinsurance treaty.
Net commissions and fees decreased $810,000, or 9.2%, to $8.0 million for the
quarter. This decrease is primarily related to the anticipated impact from the
expected run-off of two limited duration contracts with the State of Missouri.
As announced in the third quarter of 2004, the Company accelerated the
recognition of $3.5 million in revenue from those contracts and therefore, fees
that would otherwise have been earned this year were earned in 2004. However,
intercompany fees, which are eliminated upon consolidation, have continued to
increase. Therefore, gross commissions and fees, before consolidation, remained
consistent at $20.9 million.
Net investment income increased $930,000, or 26.2%, to $4.5 million for the
quarter ended June 30, 2005, from $3.5 million for the comparable period in
2004. Average invested assets increased $66.9 million, or 19.5%, to $409.8
million in 2005, from $343.0 million for the comparable period in 2004. The
increase in average invested assets reflects cash flows from underwriting
activities, growth in gross written premium during 2004 and 2005, and $24.3
million in net proceeds received in conjunction with the senior debentures
issued during the second quarter of 2004. This increase was also the result of a
rise in the average investment yield to 4.4%, compared to 4.1% for the
comparable period in 2004. The current pre-tax book yield is 4.1%. The duration
of the investment portfolio is 3.8 years.
Expenses:
Incurred losses increased $4.9 million, or 14.9%, to $37.7 million for the
quarter ended June 30, 2005, from $32.8 million for the comparable period in
2004. The loss and loss adjustment expense ratio for the quarter ended June 30,
2005 was 64.4%, compared to 66.5% for the comparable period in 2004. This
overall improvement in the loss and loss adjustment expense ratio reflects
continued rate increases, the growth of earned premiums in the current accident
year from profitable programs, stable reserves on prior accident years, and the
expected shift in the balance of net earned premiums between the workers'
compensation and general liability lines of business. Historically, the general
liability line of business has a lower loss ratio and a higher commission rate.
This improvement also includes a modest decrease in unallocated loss adjustment
expense as a result of efficiencies realized in claims management.
Policy acquisition and other underwriting expenses increased $2.1 million, or
23.7%, to $11.0 million for the quarter ended June 30, 2005, from $8.9 million
for the comparable period in 2004. The GAAP expense ratio was 32.7% for the
quarter ended June 30, 2005, compared to 34.7% for the quarter ended June 30,
2004. The decrease in the expense ratio is primarily due to the continued
leveraging of fixed costs and a reduction in insurance related assessments. Also
impacting the expense ratio was a reduction in net ceded excess reinsurance
expense which included a reduction in the net cost related to two of the
Company's reinsurance treaties as a result of an increase in the net retention
level. These decreases to the expense ratio were partially offset by the
anticipated increase in outside commission expense resulting from the previously
mentioned shift in the balance of premiums between the workers' compensation and
general liability lines of business.
PRESS RELEASE PAGE 3
The GAAP combined ratio was 97.1% for the second quarter of 2005, compared to
101.2% for the comparable period in 2004.
Commenting on the 2005 GAAP combined ratio, Mr. Cubbin stated: "We are very
pleased with the strong improvement in the GAAP combined ratio from 2004 to
2005. We will continue to focus our efforts on leveraging fixed costs and
maintaining or improving our loss and expense ratios."
Salaries and employee benefits for the quarter ended June 30, 2005 increased
$1.3 million, or 10.7%, to $13.6 million, from $12.3 million for the comparable
period in 2004, due primarily to merit increases and performance-based variable
compensation. These increases were partially offset by a slight decrease in
staffing levels.
Other administrative expenses decreased $423,000, or 6.5%, to $6.0 million for
the quarter ended June 30, 2005, from $6.4 million for the comparable period in
2004. This decrease is primarily attributable to a decrease in expenses related
to outside third party claims administrators, legal expenses, and overall
expense management initiatives. These decreases were partially offset by a small
increase in information technology expenses.
Interest expense increased $278,000, or 52.7%, to $806,000 for the quarter, from
$528,000 for the comparable period in 2004. Interest expense increased $320,000
related to the senior and junior subordinated debentures. Excluding the interest
related to the debentures, interest related to the Company's lines of credit
decreased $42,000. This decrease reflects a lower average outstanding balance of
$9.9 million during the quarter ended June 30, 2005, from $16.9 million for the
comparable period in 2004, partially offset by an increase in the effective
interest rate from 4.2% for the second quarter of 2004 to 5.4% for the
comparable period of 2005. The increase in the effective interest rate is a
result of the increase in the underlying Eurocurrency based rate.
Year to Date Results:
Net Income:
Net income for the six months ended June 30, 2005 was up $2.3 million, or 37.5%
to $8.3 million, or $0.28 per diluted share, from net income of $6.0 million, or
$0.21 per diluted share, for the comparable period in 2004.
Gross written premium increased $15.0 million, or 9.9%, to $166.9 million for
the six months ended June 30, 2005, from $151.9 million for the comparable
period in 2004.
Revenues:
Revenues increased $20.9 million, or 16.1%, to $150.8 million for the six months
ended June 30, 2005, from $129.9 million for the comparable period in 2004.
Net earned premium increased $21.4 million, or 20.8%, to $124.2 million for the
six months ended June 30, 2005, from $102.8 million during the same period of
2004.
Net commissions and fees decreased $2.0 million, or 9.9%, to $18.1 million for
the six months ended June 30, 2005, from $20.1 million during the same period of
2004.
PRESS RELEASE PAGE 4
Expenses:
Incurred losses were $74.8 million for the six months ended June 30, 2005, up
from $65.3 million in the comparable period of 2004. However, the loss and loss
adjustment expense ratio for the six months ended June 30, 2005 was 65.0%,
compared to 68.3% for the comparable period in 2004.
Other expenses were $63.5 million for the six months ended June 30, 2005, up
from $55.0 million in the comparable period of 2004. However, the GAAP expense
ratio was down slightly to 33.2% for the six months ended June 30, 2005,
compared to 33.3% for the comparable period in 2004.
Other Matters:
Shareholders' equity increased to $175.0 million, or $6.00 per common share, at
June 30, 2005, compared to $167.5 million, or $5.76 per common share, at
December 31, 2004. The increase in shareholders' equity reflects year-to-date
net income and the exercise of stock options and warrants. During the first six
months of 2005, 21,850 stock options and 285,000 warrants were exercised for
total proceeds of approximately $1.0 million. These increases were partially
offset by a decrease of $1.1 million in the net unrealized gain in the Company's
investment portfolio and share repurchases. The net unrealized gain was $3.7
million at June 30, 2005, down from $4.8 million at December 31, 2004, as a
result of the expected increase in interest rates. The net unrealized gain
increased during the quarter from $442,000 at March 31, 2005. As of June 30,
2005, the Company had repurchased 208,790 shares this year for a total cost of
approximately $1.1 million.
At June 30, 2005, the Company's debt-to-equity ratio was 24.2%, compared to
26.5% at December 31, 2004. Excluding the interest only, 30-year debentures, the
debt-to-equity ratio would be 4.0% at June 30, 2005, compared to 5.4% at
December 31, 2004.
Statutory surplus increased in the quarter to $126.2 million at June 30, 2005,
from $122.4 million at March 31, 2005, and increased in the six months from
$120.7 million at December 31, 2004. The increase in statutory surplus was
primarily due to statutory net income which was partially offset by a slight
increase in non-admitted assets.
Cash flow provided by operations was $8.9 million for the quarter ended June 30,
2005, compared to $10.1 million in 2004. For the six months ended June 30, 2005,
cash flow provided by operations was $23.0 million, compared to $26.3 million
for the comparable period of 2004. The decrease in the cash flow provided by
operations reflects the tax benefit realized in 2004 from the utilization of the
net operating loss carryforward. As of December 31, 2004, the entire net
operating loss carryforward has been fully utilized.
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) 2005 2004
- ------------------------------------------------------ ------------ ------------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $ 407,405 $ 402,156
Premium & agents balances 100,180 84,094
Reinsurance recoverable 188,805 169,069
Deferred policy acquisition costs 26,168 25,167
Prepaid reinsurance premiums 25,350 26,075
Goodwill 28,997 28,997
Other assets 63,117 66,138
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TOTAL ASSETS $ 840,022 $ 801,696
============ ============
LIABILITIES
Loss and loss adjustment expense reserves $ 418,069 $ 378,157
Unearned premium reserves 139,704 134,302
Debt 9,918 12,144
Debentures 35,310 35,310
Other liabilities 62,026 74,273
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TOTAL LIABILITIES 665,027 634,186
STOCKHOLDERS' EQUITY
Common stockholders' equity 174,995 167,510
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 840,022 $ 801,696
============ ============
BOOK VALUE PER COMMON SHARE $ 6.00 $ 5.76
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE
SECURITIES, NET OF DEFERRED TAXES $ 5.87 $ 5.60
EARNINGS RELEASE PAGE 6
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
(IN THOUSANDS, EXCEPT ---------------------------- -----------------------------
SHARE & PER SHARE DATA) 2005 2004 2005 2004
- ---------------------------------------------------------- ------------ ------------ ------------ ------------
SUMMARY DATA
Gross written premiums $ 75,960 $ 70,871 $ 166,952 $ 151,925
Net written premiums 61,288 53,025 130,278 115,976
REVENUES
Net earned premiums $ 63,364 $ 53,083 $ 124,151 $ 102,796
Commissions and fees (net) 8,034 8,844 18,133 20,125
Net investment income 4,477 3,547 8,568 7,144
Net realized gains (losses) 104 (32) (10) (152)
------------ ------------ ------------ ------------
TOTAL REVENUES 75,979 65,442 150,842 129,913
EXPENSES
Net losses & loss adjustment expenses (1) 37,728 32,826 74,862 65,335
Salaries & employee benefits 13,648 12,325 26,253 25,133
Interest expense 806 528 1,579 843
Policy acquisition and other underwriting expenses (1) 10,971 8,870 21,793 16,416
Other administrative expenses 6,046 6,469 13,831 12,565
------------ ------------ ------------ ------------
TOTAL EXPENSES 69,199 61,018 138,318 120,292
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 6,780 4,424 12,524 9,621
Income tax expense 2,250 1,546 4,202 3,534
Equity earnings of affiliates 50 (58) 1 (35)
------------ ------------ ------------ ------------
NET INCOME $ 4,580 $ 2,820 $ 8,323 $ 6,052
============ ============ ============ ============
NET OPERATING INCOME (2) $ 4,512 $ 2,841 $ 8,330 $ 6,152
============ ============ ============ ============
DILUTED EARNINGS PER COMMON SHARE
Net income $ 0.16 $ 0.10 $ 0.28 $ 0.21
Net operating income $ 0.15 $ 0.10 $ 0.28 $ 0.21
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,443,933 29,459,390 29,419,606 29,427,512
GAAP RATIOS:
Loss & LAE ratio 64.4% 66.5% 65.0% 68.3%
Other underwriting expense ratio 32.7% 34.7% 33.2% 33.3%
------------ ------------ ------------ ------------
GAAP combined ratio 97.1% 101.2% 98.2% 101.6%
============ ============ ============ ============
(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
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
SUPPLEMENTAL INFORMATION
FOR THE QUARTER FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ ------------------------
(IN THOUSANDS) 2005 2004 2005 2004
- ---------------------------------------------------------------------- ---------- ---------- ---------- ----------
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $ 63,364 $ 53,083 $ 124,151 $ 102,796
Consolidated net loss and LAE (1) $ 37,728 $ 32,826 $ 74,862 $ 65,335
Intercompany claim fees 3,077 2,463 5,793 4,865
---------- ---------- ---------- ----------
Unconsolidated net loss and LAE $ 40,805 $ 35,289 $ 80,655 $ 70,200
========== ========== ========== ==========
GAAP loss and LAE ratio 64.4% 66.5% 65.0% 68.3%
Consolidated policy acquisition and other underwriting expenses (1) $ 10,971 $ 8,870 $ 21,793 $ 16,416
Intercompany administrative and other underwriting fees 9,772 9,575 19,428 17,845
---------- ---------- ---------- ----------
Unconsolidated policy acquisition and other underwriting expenses $ 20,743 $ 18,445 $ 41,221 $ 34,261
========== ========== ========== ==========
GAAP other underwriting expense ratio 32.7% 34.7% 33.2% 33.3%
GAAP combined ratio 97.1% 101.2% 98.2% 101.6%
2005 2004 2005 2004
---------- ---------- ---------- ----------
UNCONSOLIDATED GAAP DATA - GROSS COMMISSIONS AND FEES:
Managed programs:
Management fees $ 4,100 $ 3,898 $ 8,296 $ 8,609
Claims fees 1,766 2,728 3,518 5,429
Loss control fees 555 532 1,128 1,077
Reinsurance brokerage 94 (30) 439 117
---------- ---------- ---------- ----------
Total managed programs 6,515 7,128 13,381 15,232
Agency commissions 1,982 1,770 5,942 4,989
Intersegment revenue (463) (54) (1,190) (96)
---------- ---------- ---------- ----------
Net commissions and fees 8,034 8,844 18,133 20,125
Intercompany commissions and fees 12,849 12,038 25,221 22,710
---------- ---------- ---------- ----------
Gross commissions and fees $ 20,883 $ 20,882 $ 43,354 $ 42,835
========== ========== ========== ==========
(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)
2002A 2003A Q104A Q204A Q304A
----------- ----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 183,637 $ 253,280 $ 81,054 $ 70,871 $ 79,234
Net written premiums 139,795 189,827 62,951 53,025 56,303
INCOME STATEMENT
REVENUES
Net earned premiums $ 145,383 $ 151,205 $ 49,713 $ 53,083 $ 52,963
Commissions and fees (net) 37,581 45,291 11,281 8,844 12,669
Net Investment income 13,958 13,484 3,597 3,547 3,757
Net realized gains (losses) 666 823 (120) (32) 79
Gain on sale of subsidiary 199 - - - -
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES 197,787 210,803 64,471 65,442 69,468
EXPENSES
Net losses & loss adjustment expenses 98,734 98,472 32,509 32,826 31,829
Policy acquisition and other underwriting expenses 33,573 23,606 7,546 8,870 8,169
Other administrative expenses 22,612 23,232 6,096 6,469 6,802
Salaries & employee benefits 37,659 48,238 12,808 12,325 14,284
Gain on debt reduction (359) - - - -
Interest expense 3,021 977 315 528 686
----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES 195,240 194,525 59,274 61,018 61,770
INCOME BEFORE TAXES AND EQUITY EARNINGS 2,547 16,278 5,197 4,424 7,698
Income tax expense 897 6,182 1,988 1,546 2,509
Equity earnings of affiliates - 3 23 (58) 63
----------- ----------- ----------- ----------- -----------
NET INCOME $ 1,650 $ 10,099 $ 3,232 $ 2,820 $ 5,252
Net realized capital gain (loss), net of tax 571 543 (79) (21) 52
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $ 1,079 $ 9,556 $ 3,311 $ 2,841 $ 5,200
=========== =========== =========== =========== ===========
Weighted average common shares outstanding 20,543,878 29,268,799 29,395,208 29,459,390 29,425,674
Shares O/S at end of the period 29,591,494 29,022,435 29,034,433 29,040,733 29,067,883
PER SHARE DATA (DILUTED)
Net income $ 0.08 $ 0.35 $ 0.11 $ 0.10 $ 0.18
Net realized gain (loss), net of tax $ 0.03 $ 0.02 $ - $ - $ -
Operating income $ 0.05 $ 0.33 $ 0.11 $ 0.10 $ 0.18
----------- ----------- ----------- ----------- -----------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 72.1% 70.1% 70.2% 66.5% 64.8%
GAAP Expense ratio 36.5% 34.3% 31.8% 34.7% 34.7%
----------- ----------- ----------- ----------- -----------
GAAP COMBINED RATIO 108.6% 104.4% 102.0% 101.2% 99.5%
=========== =========== =========== =========== ===========
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $ 145,383 $ 151,205 $ 49,713 $ 53,083 $ 52,963
Consolidated net loss and LAE $ 98,734 $ 98,472 $ 32,509 $ 32,826 $ 31,829
Intercompany claim fees 6,154 7,514 2,402 2,463 2,511
----------- ----------- ----------- ----------- -----------
Unconsolidated net loss and LAE $ 104,888 $ 105,986 $ 34,911 $ 35,289 $ 34,340
=========== =========== =========== =========== ===========
GAAP NET LOSS AND LAE RATIO 72.1% 70.1% 70.2% 66.5% 64.8%
Consolidated Policy acquisition and other underwriting expenses $ 33,573 $ 23,606 $ 7,546 $ 8,870 $ 8,169
Intercompany administrative and other underwriting fees 19,445 28,296 8,270 9,575 10,187
----------- ----------- ----------- ----------- -----------
Unconsolidated policy acquisition and other underwriting expenses $ 53,018 $ 51,902 $ 15,816 $ 18,445 $ 18,356
=========== =========== =========== =========== ===========
GAAP EXPENSE RATIO 36.5% 34.3% 31.8% 34.7% 34.7%
GAAP COMBINED RATIO 108.6% 104.4% 102.0% 101.2% 99.5%
----------- ----------- ----------- ----------- -----------
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 12,761 $ 18,751 $ 4,711 $ 3,898 $ 3,948
Claims fees 8,076 14,756 2,701 2,728 5,998
Loss control fees 2,590 2,303 545 532 552
Reinsurance brokerage 309 308 147 (30) 184
----------- ----------- ----------- ----------- -----------
Total managed programs 23,736 36,118 8,104 7,128 10,682
Agency commissions 14,330 9,378 3,219 1,770 2,657
Intersegment commissions and fees (485) (205) (42) (54) (670)
----------- ----------- ----------- ----------- -----------
Net Commissions and fees 37,581 45,291 11,281 8,844 12,669
Intercompany commissions and fees 25,599 35,810 10,672 12,038 12,698
----------- ----------- ----------- ----------- -----------
Gross commissions and fees $ 63,180 $ 81,101 $ 21,953 $ 20,882 $ 25,367
=========== =========== =========== =========== ===========
Q404A 2004A Q105A Q205A
----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 82,334 $ 313,493 $ 90,992 $ 75,960
Net written premiums 61,682 233,961 68,990 61,288
INCOME STATEMENT
REVENUES
Net earned premiums $ 58,734 $ 214,493 $ 60,787 $ 63,364
Commissions and fees (net) 7,741 40,535 10,099 8,034
Net Investment income 4,010 14,911 4,091 4,477
Net realized gains (losses) 412 339 (114) 104
Gain on sale of subsidiary - - - -
----------- ----------- ----------- -----------
TOTAL REVENUES 70,897 270,278 74,863 75,979
EXPENSES
Net losses & loss adjustment expenses 38,774 135,938 37,134 37,728
Policy acquisition and other underwriting expenses 8,839 33,424 10,822 10,971
Other administrative expenses 6,597 25,964 7,785 6,046
Salaries & employee benefits 12,880 52,297 12,605 13,648
Gain on debt reduction - - - -
Interest expense 752 2,281 773 806
----------- ----------- ----------- -----------
TOTAL EXPENSES 67,842 249,904 69,119 69,199
INCOME BEFORE TAXES AND EQUITY EARNINGS 3,055 20,374 5,744 6,780
Income tax expense 309 6,352 1,952 2,250
Equity earnings of affiliates 11 39 (49) 50
----------- ----------- ----------- -----------
NET INCOME $ 2,757 $ 14,061 $ 3,743 $ 4,580
Net realized capital gain (loss), net of tax 272 224 (75) 68
----------- ----------- ----------- -----------
OPERATING INCOME $ 2,485 $ 13,837 $ 3,818 $ 4,512
=========== =========== =========== ===========
Weighted average common shares outstanding 29,439,194 29,420,508 29,481,870 29,443,933
Shares O/S at end of the period 29,074,832 29,074,832 29,017,682 29,172,892
PER SHARE DATA (DILUTED)
Net income $ 0.09 $ 0.48 $ 0.13 $ 0.16
Net realized gain (loss), net of tax $ 0.01 $ 0.01 $ - $ 0.01
Operating income $ 0.08 $ 0.47 $ 0.13 $ 0.15
----------- ----------- ----------- -----------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 70.0% 67.9% 65.6% 64.4%
GAAP Expense ratio 32.6% 33.5% 33.7% 32.7%
----------- ----------- ----------- -----------
GAAP COMBINED RATIO 102.6% 101.4% 99.3% 97.1%
=========== =========== =========== ===========
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $ 58,734 $ 214,493 $ 60,787 $ 63,364
Consolidated net loss and LAE $ 38,774 $ 135,938 $ 37,134 $ 37,728
Intercompany claim fees 2,315 9,691 2,716 3,077
----------- ----------- ----------- -----------
Unconsolidated net loss and LAE $ 41,089 $ 145,629 $ 39,850 $ 40,805
=========== =========== =========== ===========
GAAP NET LOSS AND LAE RATIO 70.0% 67.9% 65.6% 64.4%
Consolidated Policy acquisition and other underwriting expenses $ 8,839 $ 33,424 $ 10,822 $ 10,971
Intercompany administrative and other underwriting fees 10,327 38,359 9,656 9,772
----------- ----------- ----------- -----------
Unconsolidated policy acquisition and other underwriting expenses $ 19,166 $ 71,783 $ 20,478 $ 20,743
=========== =========== =========== ===========
GAAP EXPENSE RATIO 32.6% 33.5% 33.7% 32.7%
GAAP COMBINED RATIO 102.6% 101.4% 99.3% 97.1%
----------- ----------- ----------- -----------
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 3,696 $ 16,253 $ 4,196 $ 4,100
Claims fees 1,780 13,207 1,752 1,766
Loss control fees 545 2,174 573 555
Reinsurance brokerage 119 420 345 94
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Total managed programs 6,140 32,054 6,866 6,515
Agency commissions 2,159 9,805 3,960 1,982
Intersegment commissions and fees (558) (1,324) (727) (463)
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Net Commissions and fees 7,741 40,535 10,099 8,034
Intercompany commissions and fees 12,642 48,050 12,372 12,849
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Gross commissions and fees $ 20,383 $ 88,585 $ 22,471 $ 20,883
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