Exhibit 99.1
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
HOLLY MOLTANE, DIRECTOR OF EXTERNAL FINANCIAL REPORTING, (248) 204-8590
MEADOWBROOK INSURANCE GROUP, INC.
REPORTS RECORD NET INCOME FOR 2005 OF $17.9 MILLION, UP 27.4%
- FOURTH QUARTER NET INCOME UP 78.6%, TO $0.17 PER DILUTED SHARE
SOUTHFIELD, MICHIGAN
FEBRUARY 14, 2006
YEAR-TO-DATE OVERVIEW:
Meadowbrook Insurance Group, Inc. (NYSE: MIG) reported $17.9 million in net
income, or $0.60 per diluted share, for the year ended December 31, 2005. This
is an increase of $3.8 million, or 27.4%, from net income of $14.1 million, or
$0.48 per diluted share, in 2004. Overall underwriting results continued to
improve during 2005, as a result of the controlled growth of premiums, growth of
new fee-based revenue, and overall expense control initiatives.
FOURTH QUARTER OVERVIEW:
Net income for the quarter ended December 31, 2005 was $4.9 million, or $0.17
per diluted share, up 78.6%, compared to net income of $2.8 million, or $0.09
per diluted share, for the comparable period in 2004.
FULL YEAR 2005 HIGHLIGHTS INCLUDED:
- Year-to-date earnings per diluted share increased to $0.60, compared
to $0.48 in 2004.
- Year-to-date revenues increased 12.5%.
- Return on beginning equity was 10.7%.
- Book value per share increased to $6.19.
- GAAP combined ratio improved to 98.7%.
- Annual cash flow from operations was $81.9 million.
Commenting on the results, Meadowbrook President and Chief Executive Officer,
Robert S. Cubbin stated: "We are pleased with the successful execution of our
business plan thus far, but we remain committed to growing our margins and
return on equity, as well as all aspects of our balanced revenue sources: agency
commissions, fee-for-service revenue, and insurance premiums. We remain focused
on underwriting discipline, the leveraging of fixed costs, strong internal
controls, and overall process improvements. With
PRESS RELEASE PAGE 2
the strength of our balance sheet and our concerted efforts aimed toward
improving productivity, we are optimistic that results should continue to
improve."
YEAR TO DATE RESULTS:
As noted above, net income for the year was $17.9 million, or $0.60 per diluted
share. This was an increase of 27.4% over 2004 net income of $14.1 million, or
$0.48 per diluted share.
Revenues:
Revenues increased $33.7 million, or 12.5%, to $304.0 million for the year ended
December 31, 2005, compared to $270.3 million in 2004.
Gross written premium increased $18.7 million, or 6.0%, to $332.2 million for
the year ended December 31, 2005, compared to $313.5 million in 2004. This
increase reflects modest premium rate increases in a slightly more competitive
pricing environment, new programs implemented in 2004 and 2005, and growth in
existing programs.
Net earned premium increased $35.5 million, or 16.5%, to $250.0 million for the
year ended December 31, 2005, from $214.5 million in 2004. This increase
reflects growth in earned premium from new and existing programs and the impact
of overall rate increases of 8.4% and 2.9% achieved in 2004 and 2005,
respectively. In addition, the increase in earned premium reflects the favorable
impact from an increase in the net retention levels on certain reinsurance
treaties.
Net commissions and fees decreased $4.6 million, or 11.4%, to $35.9 million for
the year ended December 31, 2005, from $40.5 million in 2004. Gross commissions
and fees, before consolidation, were $86.7 million for the year ended December
31, 2005, compared to $88.6 million in 2004. This decrease is the result of the
anticipated impact from the expected run-off of two limited duration contracts.
As announced in the third quarter of 2004, we accelerated the recognition of an
additional $3.5 million in revenue from those contracts; and therefore, fees
that would otherwise have been earned in 2005 were earned in 2004. The impact of
this 2004 revenue acceleration was partially offset by growth in agency
commissions and fees related to new managed programs.
Net investment income increased $3.1 million, or 20.6%, to $18.0 million for the
year ended December 31, 2005, from $14.9 million in 2004. Average invested
assets increased $65.6 million, or 18.3%, to $424.3 million in 2005, from $358.7
million in 2004. The increase in average invested assets reflects cash flows
from underwriting activities and growth in gross written premium. In addition,
the increase in average invested assets reflects $19.4 million and $24.3 million
in net proceeds received in conjunction with the debentures issued in the third
quarter of 2005 and the second quarter of 2004, respectively. In addition, this
increase was partially the result of a slight rise in the average investment
yield to 4.24%, compared to 4.16% in 2004. The current pre-tax book yield was
4.17% and the after tax book yield was 3.06%. The duration of the investment
portfolio was 3.4 years.
Expenses:
Incurred losses were $151.5 million for the year ended December 31, 2005, up
from $135.9 million in 2004. The loss and loss adjustment expense (LAE) ratio
for the year ended December 31, 2005 improved 2.7 percentage points to 65.2%,
from 67.9% in 2004.
Policy acquisition and other underwriting expenses increased $11.0 million to
$44.4 million for the year ended December 31, 2005, from $33.4 million in 2004.
The GAAP expense ratio remained consistent at 33.5% for the year ended December
31, 2005 and 2004, despite an increase in the percentage of higher commission
expense programs in non-workers' compensation lines of business.
PRESS RELEASE PAGE 3
The GAAP combined ratio improved 2.7 percentage points to 98.7% for the year
ended December 31, 2005, from 101.4% in 2004.
Salaries and employee benefits for the year ended December 31, 2005 decreased
$966,000, or 1.9%, to $51.3 million, from $52.3 million in 2004, due primarily
to a decrease in variable compensation, a slight reduction in staffing levels,
offset by merit pay increases for associates.
Other administrative expenses increased $1.2 million, or 4.7%, to $27.2 million
for the year ended December 31, 2005, from $26.0 million in 2004. This increase
is primarily attributable to consulting and audit expenses associated with
Section 404 of the Sarbanes-Oxley Act, as well as increases in expenses as a
result of information technology enhancements. Offsetting these increases was a
decrease in bad debt expense as a result of overall refinements in our
estimation of allowances for bad debt and expense control initiatives.
Interest expense increased $1.6 million to $3.9 million for the year ended
December 31, 2005, from $2.3 million in 2004. This increase is primarily the
result of the senior debentures issued in the second quarter of 2004 and the
junior subordinated debentures issued in the third quarter of 2005. The average
interest rate, excluding the debentures, was approximately 4.8% for 2005,
compared to 5.2% for 2004.
FOURTH QUARTER RESULTS:
As noted above, net income for the fourth quarter of 2005 was $4.9 million, or
$0.17 per diluted share. This was an increase of 78.6%, compared to $2.8
million, or $0.09 per diluted share, in the fourth quarter of 2004.
Revenues:
Revenues increased $5.2 million, or 7.4%, to $76.1 million for the quarter ended
December 31, 2005, from $70.9 million for the comparable period in 2004.
During the quarter, gross written premium decreased 3.8%, to $79.2 million, from
$82.3 million for the comparable period in 2004. This decrease is primarily the
result of a drop in premiums reported to us in relation to residual markets. In
addition, this decrease is partially attributable to a planned shift of written
premium to managed fee revenue related to one specific program.
Net earned premium increased $3.9 million, or 6.6%, to $62.6 million for the
quarter ended December 31, 2005, from $58.7 million for the comparable period in
2004.
Net commissions and fees increased $842,000, or 10.9%, to $8.6 million for the
quarter. Gross commissions and fees, before consolidation, were $21.4 million
this quarter, compared to $20.4 million in 2004. This increase was primarily the
result of growth in agency commissions, fees related to new managed programs,
and the planned shift of premium to a managed program.
Net investment income increased $806,000, or 20.1%, to $4.8 million for the
quarter ended December 31, 2005, from $4.0 million for the comparable period in
2004. Average invested assets increased $56.3 million, or 14.4%, to $447.2
million in 2005, from $390.9 million in 2004. The increase in average invested
assets reflects cash flows from underwriting activities and growth in gross
written premium. In addition, the increase in average invested assets reflects
$19.4 million and $24.3 million in net proceeds received in conjunction with the
debentures issued in the third quarter of 2005 and the second quarter of 2004,
respectively. This increase was also the result of a rise in the average
investment yield to 4.3%, compared to 4.1% for the comparable period in 2004.
PRESS RELEASE PAGE 4
Expenses:
Incurred losses decreased $563,000, or 1.5%, to $38.2 million for the quarter
ended December 31, 2005, from $38.8 million for the comparable period in 2004.
The loss and LAE ratio for the quarter ended December 31, 2005 improved to
65.5%, from 70.0% in 2004.
Policy acquisition and other underwriting expenses increased $1.9 million, or
21.0%, to $10.7 million for the quarter ended December 31, 2005, from $8.8
million in 2004. The GAAP expense ratio was 33.2% for the quarter ended December
31, 2005, compared to 32.6% for the quarter ended December 31, 2004.
The GAAP combined ratio for the fourth quarter of 2005 improved 3.9 percentage
points to 98.7%, from 102.6% in 2004.
Salaries and employee benefits for the quarter ended December 31, 2005 decreased
$715,000, or 5.6%, to $12.2 million, from $12.9 million in 2004, due primarily
to a decrease in variable compensation, a slight reduction in staffing levels,
offset by merit pay increases for associates.
Other administrative expenses increased $718,000, or 10.9%, to $7.3 million for
the quarter ended December 31, 2005, from $6.6 million in 2004. This increase
was primarily attributable to contract services expenses, information technology
enhancements, and policyholder dividends.
Interest expense increased $577,000, or 76.7%, to $1.3 million for the quarter,
from $752,000 in 2004. This increase is primarily the result of the senior
debentures issued in the second quarter of 2004 and the junior subordinated
debentures issued in the third quarter of 2005. The average interest rate for
the fourth quarter of 2005, excluding the debentures, was approximately 6.2%,
compared to 6.3% for 2004.
OTHER MATTERS:
Shareholders' Equity:
Shareholders' equity increased to $177.4 million, or $6.19 per common share, at
December 31, 2005, compared to $167.5 million, or $5.76 per common share, at
December 31, 2004. This $0.43 per share increase in book value reflects
year-to-date earnings offset by the retirement of 772,900 shares associated with
the share repurchase plan, as well as the change in unrealized gains/losses in
our investment portfolio as a result of changing interest rates. The investment
portfolio is invested 99.7% in investment grade securities. We continue to
invest in securities with minimum credit risk and have the ability and intent to
hold securities through interest rate market changes.
At December 31, 2005, our debt-to-equity ratio was 34.4%, compared to 26.5% at
December 31, 2004. Excluding the interest only, 30-year debentures, the
debt-to-equity ratio would be 2.8% at December 31, 2005, compared to 5.4% at
December 31, 2004.
PRESS RELEASE PAGE 5
Catastrophe Losses:
Total net losses for the year from property catastrophes were $103,000. This low
level of net loss reflects the risk profile of our book of business and is the
intended result of avoiding property catastrophe exposed business, as well as
the geographic diversification inherent in our targeted class approach to
underwriting.
Share Repurchases:
As previously announced on October 28, 2005, the Board of Directors authorized
management to purchase up to 1,000,000 shares, or approximately 3%, of our
common stock in market transactions over the next twenty-four months. During the
fourth quarter, we repurchased a total of 138,000 shares for a cost of
approximately $787,000. Of the 138,000 shares purchased during the fourth
quarter, 63,000 shares were purchased under the current share repurchase plan,
for a total cost of approximately $372,000. The remaining 75,000 shares were
purchased under the previously existing share repurchase plan, for a total cost
of approximately $415,000.
Statutory Surplus:
Statutory surplus increased to $141.1 million at December 31, 2005, from $120.7
million at December 31, 2004. The increase in statutory surplus was primarily
due to statutory net income and a $10.0 million capital contribution. We have
the ability to supplement statutory earnings with contributions from our
non-regulated earnings and capital raising initiatives.
Income Taxes:
The effective federal tax rate for the year ended December 31, 2005 was 28.3%,
compared to 31.0% in 2004. The effective federal tax rate for the quarter ended
December 31, 2005 was 22.9%, compared to 29.2% in 2004. The effective federal
tax rate for the quarter was favorably impacted by a $389,000 increase in the
deferred tax asset relating to the increase in the statutory federal tax rate
from 34% to 35%.
Cash Flow:
For the year ended December 31, 2005, cash flow provided by operations was $81.9
million, compared to $70.7 million in 2004. For the quarter ended December 31,
2005, cash flow provided by operations was $33.2 million, compared to $27.4
million in 2004. The increase in the cash flow provided by operations reflects
the improvement in underwriting results which were partially offset by 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 had been fully utilized.
2006 Guidance:
As previously announced, our full year 2006 anticipated earnings are expected to
grow by approximately 15% to between $0.64 and $0.68 cents per share. Our 2006
outlook includes a target of $350.0 to $360.0 million dollars in gross written
premium, gross commissions and fees of $90.0 to $92.0 million dollars, and a
combined ratio of between 97.5% and 99.0%.
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 6
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED BALANCE SHEET INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, DECEMBER 31,
2005 2004
------------ ------------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $460,233 $402,156
Premium & agents balances 84,807 84,094
Reinsurance recoverable 202,581 169,069
Deferred policy acquisition costs 26,371 25,167
Prepaid reinsurance premiums 24,588 26,075
Goodwill 30,802 28,997
Other assets 71,962 66,138
-------- --------
TOTAL ASSETS $901,344 $801,696
======== ========
LIABILITIES
Loss and loss adjustment expense reserves $458,677 $378,157
Unearned premium reserves 140,990 134,302
Debt 7,000 12,144
Debentures 55,930 35,310
Other liabilities 61,382 74,273
-------- --------
TOTAL LIABILITIES 723,979 634,186
STOCKHOLDERS' EQUITY
Common stockholders' equity 177,365 167,510
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $901,344 $801,696
======== ========
BOOK VALUE PER COMMON SHARE $ 6.19 $ 5.76
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE
SECURITIES, NET OF DEFERRED TAXES $ 6.23 $ 5.60
EARNINGS RELEASE PAGE 7
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(IN THOUSANDS, EXCEPT SHARE & PER SHARE DATA)
FOR THE QUARTER FOR THE YEAR
ENDED DECEMBER 31, ENDED DECEMBER 31,
------------------------- -------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 79,183 $ 82,334 $ 332,209 $ 313,493
Net written premiums 60,436 61,682 258,134 233,961
REVENUES
Net earned premiums $ 62,603 $ 58,734 $ 249,959 $ 214,493
Commissions and fees (net) 8,583 7,741 35,916 40,535
Net investment income 4,816 4,010 17,975 14,911
Net realized gains 136 412 167 339
----------- ----------- ----------- -----------
TOTAL REVENUES 76,138 70,897 304,017 270,278
EXPENSES
Net losses & loss adjustment expenses (1) 38,211 38,774 151,542 135,938
Salaries & employee benefits 12,165 12,880 51,331 52,297
Interest expense 1,329 752 3,856 2,281
Policy acquisition and other underwriting expenses (1) 10,699 8,839 44,439 33,424
Other administrative expenses 7,315 6,597 27,183 25,964
----------- ----------- ----------- -----------
TOTAL EXPENSES 69,719 67,842 278,351 249,904
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 6,419 3,055 25,666 20,374
Income tax expense 1,507 309 7,757 6,352
Equity earnings of affiliates 13 11 1 39
----------- ----------- ----------- -----------
NET INCOME $ 4,925 $ 2,757 $ 17,910 $ 14,061
=========== =========== =========== ===========
NET OPERATING INCOME (2) $ 4,837 $ 2,485 $ 17,801 $ 13,837
=========== =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE
Net income $ 0.17 $ 0.09 $ 0.60 $ 0.48
Net operating income $ 0.16 $ 0.08 $ 0.60 $ 0.47
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,406,994 29,439,194 29,653,067 29,420,508
GAAP RATIOS:
Loss & LAE ratio 65.5% 70.0% 65.2% 67.9%
Other underwriting expense ratio 33.2% 32.6% 33.5% 33.5%
----------- ----------- ----------- -----------
GAAP combined ratio 98.7% 102.6% 98.7% 101.4%
=========== =========== =========== ===========
(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 8 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 8
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,
------------------ -------------------
2005 2004 2005 2004
------- -------- -------- --------
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $62,603 $58,734 $249,959 $214,493
Consolidated net loss and LAE (1) $38,211 $38,774 $151,542 $135,938
Intercompany claim fees 2,786 2,315 11,523 9,691
------- ------- -------- --------
Unconsolidated net loss and LAE $40,997 $41,089 $163,065 $145,629
======= ======= ======== ========
GAAP loss and LAE ratio 65.5% 70.0% 65.2% 67.9%
Consolidated policy acquisition and other underwriting expenses (1) $10,699 $ 8,839 $ 44,439 $ 33,424
Intercompany administrative and other underwriting fees 10,060 10,327 39,231 38,359
------- ------- -------- --------
Unconsolidated policy acquisition and other underwriting expenses $20,759 $19,166 $ 83,670 $ 71,783
======= ======= ======== ========
GAAP other underwriting expense ratio 33.2% 32.6% 33.5% 33.5%
GAAP combined ratio 98.7% 102.6% 98.7% 101.4%
2005 2004 2005 2004
------- -------- -------- --------
UNCONSOLIDATED GAAP DATA - GROSS COMMISSIONS AND FEES:
Managed programs:
Management fees $ 4,117 $ 3,696 $ 16,741 $ 16,253
Claims fees 1,796 1,780 7,113 13,207
Loss control fees 521 545 2,260 2,174
Reinsurance placement 97 119 660 420
------- ------- -------- --------
Total managed programs 6,531 6,140 26,774 32,054
Agency commissions 2,445 2,159 11,304 9,805
Intersegment revenue (393) (558) (2,162) (1,324)
------- ------- -------- --------
Net commissions and fees 8,583 7,741 35,916 40,535
Intercompany commissions and fees 12,846 12,642 50,754 48,050
------- ------- -------- --------
Gross commissions and fees $21,429 $20,383 $ 86,670 $ 88,585
======= ======= ======== ========
(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 9
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 Q404A
----------- ----------- ----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 183,637 $ 253,280 $ 81,054 $ 70,871 $ 79,234 $ 82,334
Net written premiums 139,795 189,827 62,951 53,025 56,303 61,682
INCOME STATEMENT
REVENUES
Net earned premiums $ 145,383 $ 151,205 $ 49,713 $ 53,083 $ 52,963 $ 58,734
Commissions and fees (net) 37,581 45,291 11,281 8,844 12,669 7,741
Net Investment income 13,958 13,484 3,597 3,547 3,757 4,010
Net realized gains (losses) 666 823 (120) (32) 79 412
Gain on sale of subsidiary 199 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
TOTAL REVENUES 197,787 210,803 64,471 65,442 69,468 70,897
EXPENSES
Net losses & loss adjustment expenses 98,734 98,472 32,509 32,826 31,829 38,774
Policy acquisition and other underwriting
expenses 33,573 23,606 7,546 8,870 8,169 8,839
Other administrative expenses 22,612 23,232 6,096 6,469 6,802 6,597
Salaries & employee benefits 37,659 48,238 12,808 12,325 14,284 12,880
Gain on debt reduction (359) -- -- -- -- --
Interest expense 3,021 977 315 528 686 752
----------- ----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES 195,240 194,525 59,274 61,018 61,770 67,842
INCOME BEFORE TAXES AND EQUITY EARNINGS 2,547 16,278 5,197 4,424 7,698 3,055
Income tax expense 897 6,182 1,988 1,546 2,509 309
Equity earnings of affiliates -- 3 23 (58) 63 11
----------- ----------- ----------- ----------- ----------- -----------
NET INCOME $ 1,650 $ 10,099 $ 3,232 $ 2,820 $ 5,252 $ 2,757
Net realized capital gain (loss), net of tax 571 543 (79) (21) 52 272
----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME $ 1,079 $ 9,556 $ 3,311 $ 2,841 $ 5,200 $ 2,485
=========== =========== =========== =========== =========== ===========
Weighted average common shares outstanding 20,543,878 29,268,799 29,395,208 29,459,390 29,425,674 29,439,194
Shares O/S at end of the period 29,591,494 29,022,435 29,034,433 29,040,733 29,067,883 29,074,832
PER SHARE DATA (DILUTED)
Net income $ 0.08 $ 0.35 $ 0.11 $ 0.10 $ 0.18 $ 0.09
Net realized gain (loss), net of tax $ 0.03 $ 0.02 $ -- $ -- $ -- $ 0.01
Operating income $ 0.05 $ 0.33 $ 0.11 $ 0.10 $ 0.18 $ 0.08
----------- ----------- ----------- ----------- ----------- -----------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 72.1% 70.1% 70.2% 66.5% 64.8% 70.0%
GAAP Expense ratio 36.5% 34.3% 31.8% 34.7% 34.7% 32.6%
----------- ----------- ----------- ----------- ----------- -----------
GAAP COMBINED RATIO 108.6% 104.4% 102.0% 101.2% 99.5% 102.6%
=========== =========== =========== =========== =========== ===========
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $ 145,383 $ 151,205 $ 49,713 $ 53,083 $ 52,963 $ 58,734
Consolidated net loss and LAE $ 98,734 $ 98,472 $ 32,509 $ 32,826 $ 31,829 $ 38,774
Intercompany claim fees 6,154 7,514 2,402 2,463 2,511 2,315
----------- ----------- ----------- ----------- ----------- -----------
Unconsolidated net loss and LAE $ 104,888 $ 105,986 $ 34,911 $ 35,289 $ 34,340 $ 41,089
=========== =========== =========== =========== =========== ===========
GAAP NET LOSS AND LAE RATIO 72.1% 70.1% 70.2% 66.5% 64.8% 70.0%
Consolidated Policy acquisition and other
underwriting expenses $ 33,573 $ 23,606 $ 7,546 $ 8,870 $ 8,169 $ 8,839
Intercompany administrative and other underwriting
fees 19,445 28,296 8,270 9,575 10,187 10,327
----------- ----------- ----------- ----------- ----------- -----------
Unconsolidated policy acquisition and other
underwriting expenses $ 53,018 $ 51,902 $ 15,816 $ 18,445 $ 18,356 $ 19,166
=========== =========== =========== =========== =========== ===========
GAAP EXPENSE RATIO 36.5% 34.3% 31.8% 34.7% 34.7% 32.6%
GAAP COMBINED RATIO 108.6% 104.4% 102.0% 101.2% 99.5% 102.6%
----------- ----------- ----------- ----------- ----------- -----------
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 12,761 $ 18,751 $ 4,711 $ 3,898 $ 3,948 $ 3,696
Claims fees 8,076 14,756 2,701 2,728 5,998 1,780
Loss control fees 2,590 2,303 545 532 552 545
Reinsurance brokerage 309 308 147 (30) 184 119
----------- ----------- ----------- ----------- ----------- -----------
Total managed programs 23,736 36,118 8,104 7,128 10,682 6,140
Agency commissions 14,330 9,378 3,219 1,770 2,657 2,159
Intersegment commissions and fees (485) (205) (42) (54) (670) (558)
----------- ----------- ----------- ----------- ----------- -----------
Net Commissions and fees 37,581 45,291 11,281 8,844 12,669 7,741
Intercompany commissions and fees 25,599 35,810 10,672 12,038 12,698 12,642
----------- ----------- ----------- ----------- ----------- -----------
Gross commissions and fees $ 63,180 $ 81,101 $ 21,953 $ 20,882 $ 25,367 $ 20,383
=========== =========== =========== =========== =========== ===========
2004A Q105A Q205A Q305A Q405A 2005A
----------- ------------ ----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 313,493 $ 90,992 $ 75,959 $ 86,075 $ 79,183 $ 332,209
Net written premiums 233,961 68,990 61,288 67,420 60,436 258,134
INCOME STATEMENT
REVENUES
Net earned premiums $ 214,493 $ 60,787 $ 63,364 $ 63,205 $ 62,603 $ 249,959
Commissions and fees (net) 40,535 10,099 8,034 9,200 8,583 35,916
Net Investment income 14,911 4,091 4,477 4,591 4,816 17,975
Net realized gains (losses) 339 (114) 104 41 136 167
Gain on sale of subsidiary -- -- -- -- -- --
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TOTAL REVENUES 270,278 74,863 75,979 77,037 76,138 304,017
EXPENSES
Net losses & loss adjustment expenses 135,938 37,134 37,728 38,469 38,211 151,542
Policy acquisition and other underwriting
expenses 33,424 10,822 10,971 11,947 10,699 44,439
Other administrative expenses 25,964 7,785 6,046 6,037 7,315 27,183
Salaries & employee benefits 52,297 12,605 13,648 12,913 12,165 51,331
Gain on debt reduction -- -- -- -- -- --
Interest expense 2,281 773 806 948 1,329 3,856
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TOTAL EXPENSES 249,904 69,119 69,199 70,314 69,719 278,351
INCOME BEFORE TAXES AND EQUITY EARNINGS 20,374 5,744 6,780 6,723 6,419 25,666
Income tax expense 6,352 1,952 2,250 2,048 1,507 7,757
Equity earnings of affiliates 39 (49) 50 (13) 13 1
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NET INCOME $ 14,061 $ 3,743 $ 4,580 $ 4,662 $ 4,925 $ 17,910
Net realized capital gain (loss), net of tax 224 (74) 68 27 88 109
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OPERATING INCOME $ 13,837 $ 3,817 $ 4,512 $ 4,635 $ 4,837 $ 17,801
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Weighted average common shares outstanding 29,420,508 29,481,870 29,443,933 29,269,638 29,406,994 29,653,067
Shares O/S at end of the period 29,074,832 29,017,682 29,172,892 28,759,282 28,672,009 28,672,009
PER SHARE DATA (DILUTED)
Net income $ 0.48 $ 0.13 $ 0.16 $ 0.16 $ 0.17 $ 0.60
Net realized gain (loss), net of tax $ 0.01 $ -- $ 0.01 $ -- $ 0.01 $ --
Operating income $ 0.47 $ 0.13 $ 0.15 $ 0.16 $ 0.16 $ 0.60
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OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 67.9% 65.6% 64.4% 65.5% 65.5% 65.2%
GAAP Expense ratio 33.5% 33.7% 32.7% 34.3% 33.2% 33.5%
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GAAP COMBINED RATIO 101.4% 99.3% 97.1% 99.8% 98.7% 98.7%
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UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $ 214,493 $ 60,787 $ 63,364 $ 63,205 $ 62,603 $ 249,959
Consolidated net loss and LAE $ 135,938 $ 37,134 $ 37,728 $ 38,469 $ 38,211 $ 151,542
Intercompany claim fees 9,691 2,716 3,077 2,944 2,786 11,523
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Unconsolidated net loss and LAE $ 145,629 $ 39,850 $ 40,805 $ 41,413 $ 40,997 $ 163,065
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GAAP NET LOSS AND LAE RATIO 67.9% 65.6% 64.4% 65.5% 65.5% 65.2%
Consolidated Policy acquisition and other
underwriting expenses $ 33,424 $ 10,822 $ 10,971 $ 11,947 $ 10,699 $ 44,439
Intercompany administrative and other underwriting
fees 38,359 9,656 9,772 9,743 10,060 39,231
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Unconsolidated policy acquisition and other
underwriting expenses $ 71,783 $ 20,478 $ 20,743 $ 21,690 $ 20,759 $ 83,670
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GAAP EXPENSE RATIO 33.5% 33.7% 32.7% 34.3% 33.2% 33.5%
GAAP COMBINED RATIO 101.4% 99.3% 97.1% 99.8% 98.7% 98.7%
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UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 16,253 $ 4,196 $ 4,100 $ 4,328 $ 4,117 $ 16,741
Claims fees 13,207 1,752 1,766 1,799 1,796 7,113
Loss control fees 2,174 573 555 611 521 2,260
Reinsurance brokerage 420 345 94 124 97 660
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Total managed programs 32,054 6,866 6,515 6,862 6,531 26,774
Agency commissions 9,805 3,960 1,982 2,917 2,445 11,304
Intersegment commissions and fees (1,324) (727) (463) (579) (393) (2,162)
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Net Commissions and fees 40,535 10,099 8,034 9,200 8,583 35,916
Intercompany commissions and fees 48,050 12,372 12,849 12,687 12,846 50,754
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Gross commissions and fees $ 88,585 $ 22,471 $ 20,883 $ 21,887 $ 21,429 $ 86,670
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