EXHIBIT 99.1
MEADOWBROOK INSURANCE GROUP, INC.
(NYSE - MIG)
CONTACT: 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 SECOND QUARTER NET INCOME UP 17.4% TO $5.4 MILLION
- EARNINGS PER SHARE OF $0.18
- GAAP COMBINED RATIO 97.2%
- 2006 YEAR TO DATE NET INCOME UP 32.2% TO $11.0 MILLION
SOUTHFIELD, MICHIGAN
AUGUST 1, 2006
SECOND QUARTER OVERVIEW:
Meadowbrook Insurance Group, Inc. (NYSE: MIG) reported $5.4 million in net
income, or $0.18 per diluted share, for the quarter ended June 30, 2006, up
17.4%, in comparison to net income of $4.6 million, or $0.16 per diluted share,
for the same period in 2005.
YEAR-TO-DATE OVERVIEW:
Net income for the six months ended June 30, 2006, was $11.0 million, or $0.37
per diluted share. This is an increase of $2.7 million, or 32.2%, from net
income of $8.3 million, or $0.28 per diluted share, for the comparable period in
2005.
YEAR-TO-DATE HIGHLIGHTS INCLUDED:
- Year-to-date earnings per diluted share increased to $0.37, compared
to $0.28 in 2005.
- Annualized return on beginning equity was 12.4%.
- Book value per share increased to $6.40.
- Book value per share, excluding unrealized gains/losses, net of taxes,
increased to $6.61.
- GAAP combined ratio improved to 96.7%.
Commenting on the results, Meadowbrook President and Chief Executive Officer
Robert S. Cubbin stated: "Our results continue to reflect our commitment to
disciplined underwriting. We are dedicated to increasing return on equity and
remain focused on growing our margins within our profitable specialty insurance
and fee-for-service programs. With our demonstrated ability to leverage fixed
costs and our focus on process improvements, we remain optimistic that year over
year results should continue to improve, even as our volume of gross written
premium has temporarily flattened out."
PRESS RELEASE PAGE 2
SECOND QUARTER RESULTS:
As noted above, net income for the second quarter of 2006 was $5.4 million, or
$0.18 per diluted share. This was an increase of 17.4%, compared to $4.6
million, or $0.16 per diluted share, in the second quarter of 2005.
Revenues:
Revenues increased $4.6 million, or 6.1%, to $80.6 million for the quarter ended
June 30, 2006, from $76.0 million for the comparable period in 2005.
Net earned premium increased $1.1 million, or 1.8%, to $64.5 million for the
quarter ended June 30, 2006, from $63.4 million for the comparable period in
2005.
Net commissions and fees increased $2.7 million, or 33.2%, to $10.7 million for
the quarter. This increase was the result of an increase in fee-for-service
revenue related to a Florida-based program implemented in 2005, a Nevada-based
program implemented in January 2006, an increase in commission revenue from a
retail agency acquisition in November 2005, and growth in existing programs.
Commenting on the increase in net commissions and fees, Cubbin stated: "We are
very pleased with the continued growth of our fee-based operations and remain
optimistic that additional growth opportunities exist in this area."
Net investment income increased $903,000, or 20.2%, to $5.4 million for the
quarter ended June 30, 2006, from $4.5 million for the comparable period in
2005. Average invested assets increased $59.5 million, or 14.5%, to $469.3
million for the quarter ended June 30, 2006. The increase in average invested
assets reflects cash flows from improved underwriting activities and an
incremental and anticipated increase in the duration of our reserves. The
increase in average invested assets also reflects $19.4 million in net proceeds
received in conjunction with the debentures issued in the third quarter of 2005.
The average investment yield increased to 4.6% for June 30, 2006, compared to
4.4% in 2005. The current pre-tax book yield was 4.3%. The current after-tax
book yield for the quarter ended June 30, 2006 was 3.3%, compared to 3.1% for
the comparable period in 2005. This increase was primarily the result of the
shift in our investment portfolio to tax-exempt investments. The duration of the
investment portfolio was 3.8 years.
Expenses:
Incurred losses decreased $582,000, or 1.5%, to $37.1 million for the quarter
ended June 30, 2006, from $37.7 million for the comparable period in 2005. The
loss and loss adjustment expense ratio improved to 62.4%, from 64.4% in 2005.
Policy acquisition and other underwriting expenses increased $2.2 million, or
20.1%, to $13.2 million for the quarter ended June 30, 2006, from $11.0 million
in 2005. The GAAP expense ratio was 34.8% for the quarter, compared to 32.7% in
2005. The increase in our expense ratio reflects an increase in gross external
commissions because of changes in the mix of business and a change in estimated
profit sharing commissions related to our excess reinsurance on a commercial
transportation program. Offsetting these increases was a reduction in insurance
related assessments, as well as the impact from our continued leveraging of
fixed costs.
The GAAP combined ratio for the second quarter of 2006 was 97.2% compared to
97.1% in 2005.
PRESS RELEASE PAGE 3
Salaries and employee benefits for the quarter ended June 30, 2006 increased
$198,000, or 1.5%, to $13.8 million, from $13.6 million in 2005.
Other administrative expenses increased $1.3 million, or 20.3%, to $7.3 million
for the quarter ended June 30, 2006, from $6.0 million in 2005. This increase
was the result of various increases in other general operating expenses,
primarily related to the recent additions of our Florida-based retail agency and
the expansion of our Nevada-based branch into fee-for-service business.
Interest expense increased $693,000, or 86.0%, to $1.5 million for the quarter,
from $806,000 in 2005. This increase was primarily the result of the junior
subordinated debentures issued in the third quarter of 2005, as well as an
overall increase in the average interest rates on our debentures. The average
interest rate, excluding the debentures, was approximately 6.3% for 2006,
compared to 5.4% for 2005.
YEAR TO DATE RESULTS:
As noted above, net income for the six months ended June 30, 2006, was $11.0
million, or $0.37 per diluted share. This was an increase of 32.2% over 2005 net
income of $8.3 million, or $0.28 per diluted share.
Revenues:
Revenues increased $9.4 million, or 6.2%, to $160.2 million for the six months
ended June 30, 2006, compared to $150.8 million in 2005.
Net earned premium increased $3.5 million, or 2.8%, to $127.6 million for the
six months ended June 30, 2006, from $124.1 million in 2005. This increase was
primarily the result of selective growth consistent with our corporate
underwriting guidelines and our controls over price adequacy, as well as the
favorable impact from an increase in our retention levels on certain reinsurance
treaties. Offsetting these increases was an overall decrease in audit related
premiums in comparison to 2005.
Net commissions and fees increased $3.9 million, or 21.3%, to $22.0 million for
the six months ended June 30, 2006, from $18.1 million in 2005. Gross
commissions and fees, before consolidation, were $46.7 million, compared to
$43.4 million in 2005. These increases were the result of an increase in
fee-for-service revenue related to a Florida-based program implemented in 2005,
a Nevada-based program implemented in January 2006, an increase in commission
revenue from a retail agency acquisition in November 2005, and growth in
existing programs.
Net investment income increased $2.0 million, or 23.9%, to $10.6 million for the
six months ended June 30, 2006, from $8.6 million in 2005. Average invested
assets increased $60.7 million, or 15.0%, to $465.5 million. The increase in
average invested assets reflects cash flows from improved underwriting
activities and an incremental and anticipated increase in the duration of our
reserves. The increase in average invested assets also reflects $19.4 million in
net proceeds received in conjunction with the debentures issued in the third
quarter of 2005. The average investment yield increased to 4.6% for June 30,
2006, compared to 4.2% in 2005. The current pre-tax book yield was 4.3% and
current after-tax book yield was 3.3%.
Expenses:
Incurred losses were $74.2 million for the six months ended June 30, 2006, down
from $74.9 million in 2005. The loss and loss adjustment expense ratio improved
2.0 percentage points to 63.0%, from 65.0% in 2005.
PRESS RELEASE PAGE 4
Policy acquisition and other underwriting expenses increased to $24.6 million
for the six months ended June 30, 2006, from $21.8 million in 2005. The GAAP
expense ratio increased 0.5 percentage points to 33.7%, from 33.2% in 2005. The
increase in the expense ratio reflects a slight increase in gross external
commissions because of a change in the mix of business and accrued profit
sharing commissions to our agent-partners, offset by a reduction in insurance
related assessments and the impact from our continued leveraging of fixed costs.
The GAAP combined ratio improved 1.5 percentage points to 96.7% for the six
months ended June 30, 2006, from 98.2% in 2005.
Salaries and employee benefits for the six months ended June 30, 2006 increased
$961,000, or 3.7%, to $27.2 million, from $26.3 million in 2005. This increase
primarily reflects merit pay increases for associates and an increase in
variable compensation. Staffing levels for 2006 were slightly higher in
comparison to 2005.
Other administrative expenses increased $1.4 million, or 10.1%, to $15.2
million, from $13.8 million for the comparable period in 2005. This increase was
the result of various increases in general operating expenses, primarily as a
result of the recent additions of our Florida-based retail agency and the
expansion of our Nevada-based branch.
Interest expense increased $1.3 million to $2.9 million for the six months ended
June 30, 2006, from $1.6 million in 2005. This increase was primarily the result
of the junior subordinated debentures issued in the third quarter of 2005, as
well as an overall increase in the average interest rates on our debentures. The
average interest rate, excluding the debentures, was approximately 6.6% for
2006, compared to 5.1% for 2005.
OTHER MATTERS:
Shareholders' Equity:
Shareholders' equity increased to $184.6 million, or $6.40 per common share, at
June 30, 2006, compared to $177.4 million, or $6.19 per common share, at
December 31, 2005. This $0.21 per share increase in book value reflects
year-to-date earnings, offset by the change in unrealized gains/losses in our
investment portfolio as a result of rising interest rates. Book value, excluding
unrealized gains/losses would be $6.61 per common share. The investment
portfolio is invested 99.7% in investment grade fixed income securities. We
continue to invest in securities with minimum credit risk and have the ability
and intent to hold those securities to maturity.
At June 30, 2006, our debt-to-equity ratio was 36.8%, compared to 34.4% at
December 31, 2005. Excluding the interest only, 30-year debentures, the
debt-to-equity ratio would be 6.5% at June 30, 2006, compared to 2.8% at
December 31, 2005.
Statutory Surplus:
Statutory surplus increased to $155.7 million at June 30, 2006, from $141.1
million at December 31, 2005. The increase in statutory surplus was primarily
due to statutory net income and a decrease in our provision for reinsurance.
Income Taxes:
The effective federal tax rate for the six months ended June 30, 2006 was 30.1%,
compared to 31.0% in 2005. Our effective tax rate differs from the 35% statutory
rate, primarily due to a shift towards increasing investments in tax-exempt
securities.
PRESS RELEASE PAGE 5
Full Year 2006 Earnings Expectations:
As previously announced, our outlook for the full year 2006 included an earnings
target of $0.64-$0.68 per share. We are likely to exceed the top end of the
range. Based upon the first six months of 2006, we have revised full year 2006
anticipated earnings to reflect an expected growth rate of approximately 15% to
$0.68-$0.71 per share. This outlook includes the following targets: gross
written premiums of $340.0 million to $350.0 million, gross commissions and fees
of $90.0 million to $92.0 million, and a combined ratio between 97.0% and 98.0%.
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 small to medium-sized insureds. 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.
PRESS RELEASE PAGE 6
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) 2006 2005
-------- ------------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $470,822 $460,233
Premium & agents balances 99,509 84,807
Reinsurance recoverable 206,648 202,581
Deferred policy acquisition costs 25,877 26,371
Prepaid reinsurance premiums 23,518 24,588
Goodwill 30,802 30,802
Other assets 76,253 71,962
-------- --------
TOTAL ASSETS $933,429 $901,344
======== ========
LIABILITIES
Loss and loss adjustment expense reserves $484,569 $458,677
Unearned premium reserves 140,868 140,990
Debt 11,900 7,000
Debentures 55,930 55,930
Other liabilities 55,581 61,382
-------- --------
TOTAL LIABILITIES 748,848 723,979
STOCKHOLDERS' EQUITY
Common stockholders' equity 184,581 177,365
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $933,429 $901,344
======== ========
BOOK VALUE PER COMMON SHARE $ 6.40 $ 6.19
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE
SECURITIES, NET OF DEFERRED TAXES $ 6.61 $ 6.23
PRESS RELEASE PAGE 7
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) 2006 2005 2006 2005
----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 74,261 $ 75,959 $ 163,271 $ 166,951
Net written premiums 59,205 61,288 128,586 130,278
REVENUES
Net earned premiums $ 64,514 $ 63,364 $ 127,638 $ 124,151
Commissions and fees (net) 10,698 8,034 21,987 18,133
Net investment income 5,380 4,477 10,619 8,568
Net realized gains (losses) 25 104 18 (10)
----------- ----------- ----------- -----------
TOTAL REVENUES 80,617 75,979 160,262 150,842
EXPENSES
Net losses & loss adjustment expenses (1) 37,146 37,728 74,189 74,862
Salaries & employee benefits 13,846 13,648 27,214 26,253
Interest expense 1,499 806 2,887 1,579
Policy acquisition and other underwriting expenses (1) 13,180 10,971 24,604 21,793
Other administrative expenses 7,275 6,046 15,234 13,831
----------- ----------- ----------- -----------
TOTAL EXPENSES 72,946 69,199 144,128 138,318
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 7,671 6,780 16,134 12,524
Income tax expense 2,312 2,250 5,159 4,202
Equity earnings of affiliates 16 50 25 1
----------- ----------- ----------- -----------
NET INCOME $ 5,375 $ 4,580 $ 11,000 $ 8,323
=========== =========== =========== ===========
NET OPERATING INCOME (2) $ 5,359 $ 4,512 $ 10,988 $ 8,329
=========== =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE
Net income $ 0.18 $ 0.16 $ 0.37 $ 0.28
Net operating income $ 0.18 $ 0.15 $ 0.37 $ 0.28
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,571,925 29,443,933 29,579,217 29,419,606
GAAP RATIOS:
Loss & LAE ratio 62.4% 64.4% 63.0% 65.0%
Other underwriting expense ratio 34.8% 32.7% 33.7% 33.2%
----------- ----------- ----------- -----------
GAAP combined ratio 97.2% 97.1% 96.7% 98.2%
=========== =========== =========== ===========
(1) Both the loss and loss adjustment and expense ratios are calculated based
upon the unconsolidated insurance company operations. The following
supplemental information sets forth the intercompany fees, which are
eliminated upon 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).
PRESS RELEASE PAGE 8
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) 2006 2005 2006 2005
------- ------- -------- --------
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums .................................................. $64,514 $63,364 $127,638 $124,151
Consolidated net loss and LAE (1) .................................... $37,146 $37,728 $ 74,189 $ 74,862
Intercompany claim fees .............................................. 3,115 3,077 6,273 5,793
------- ------- -------- --------
Unconsolidated net loss and LAE ...................................... $40,261 $40,805 $ 80,462 $ 80,655
======= ======= ======== ========
GAAP loss and LAE ratio ........................................... 62.4% 64.4% 63.0% 65.0%
Consolidated policy acquisition and other underwriting expenses (1) .. $13,180 $10,971 $ 24,604 $ 21,793
Intercompany administrative and other underwriting fees .............. 9,291 9,772 18,408 19,428
------- ------- -------- --------
Unconsolidated policy acquisition and other underwriting expenses .... $22,471 $20,743 $ 43,012 $ 41,221
======= ======= ======== ========
GAAP other underwriting expense ratio ............................. 34.8% 32.7% 33.7% 33.2%
GAAP combined ratio .................................................. 97.2% 97.1% 96.7% 98.2%
2006 2005 2006 2005
------- ------- -------- --------
UNCONSOLIDATED GAAP DATA - GROSS COMMISSIONS AND FEES:
Managed programs:
Management fees ................................................... $ 5,090 $ 4,100 $ 9,621 $ 8,296
Claims fees ....................................................... 2,351 1,766 4,451 3,518
Loss control fees ................................................. 593 555 1,131 1,128
Reinsurance brokerage ............................................. 143 94 561 439
------- ------- -------- --------
Total managed programs ............................................... 8,177 6,515 15,764 13,381
Agency commissions ................................................... 2,878 1,982 7,139 5,942
Intersegment revenue ................................................. (357) (463) (916) (1,190)
------- ------- -------- --------
Net commissions and fees ............................................. 10,698 8,034 21,987 18,133
Intercompany commissions and fees .................................... 12,406 12,849 24,681 25,221
------- ------- -------- --------
Gross commissions and fees ........................................... $23,104 $20,883 $ 46,668 $ 43,354
======= ======= ======== ========
(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.
PRESS 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) 2003A 2004A Q105A Q205A Q305A
----------- ----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 253,280 $ 313,493 $ 90,992 $ 75,959 $ 86,075
Net written premiums 189,827 233,961 68,990 61,288 67,420
INCOME STATEMENT
REVENUES
Net earned premiums $ 151,205 $ 214,493 $ 60,787 $ 63,364 $ 63,205
Commissions and fees (net) 45,291 40,535 10,099 8,034 9,200
Net investment income 13,484 14,911 4,091 4,477 4,591
Net realized gains (losses) 823 339 (114) 104 41
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES 210,803 270,278 74,863 75,979 77,037
EXPENSES
Net losses & loss adjustment expenses 98,472 135,938 37,134 37,728 38,469
Policy acquisition and other
underwriting expenses 23,606 33,424 10,822 10,971 11,947
Other administrative expenses 23,232 25,964 7,785 6,046 6,037
Salaries & employee benefits 48,238 52,297 12,605 13,648 12,913
Interest expense 977 2,281 773 806 948
----------- ----------- ----------- ----------- -----------
TOTAL EXPENSES 194,525 249,904 69,119 69,199 70,314
INCOME BEFORE TAXES AND EQUITY EARNINGS 16,278 20,374 5,744 6,780 6,723
Income tax expense 6,182 6,352 1,952 2,250 2,048
Equity earnings of affiliates 3 39 (49) 50 (13)
----------- ----------- ----------- ----------- -----------
NET INCOME $ 10,099 $ 14,061 $ 3,743 $ 4,580 $ 4,662
Net realized capital gain (loss),
net of tax 543 224 (74) 68 27
----------- ----------- ----------- ----------- -----------
OPERATING INCOME $ 9,556 $ 13,837 $ 3,817 $ 4,512 $ 4,635
=========== =========== =========== =========== ===========
Weighted average common
shares outstanding 29,268,799 29,420,508 29,481,870 29,443,933 29,269,638
Shares O/S at end of the period 29,022,435 29,074,832 29,017,682 29,172,892 28,759,282
PER SHARE DATA (DILUTED)
Net income $ 0.35 $ 0.48 $ 0.13 $ 0.16 $ 0.16
Net realized gain (loss), net of tax $ 0.02 $ 0.01 $ -- $ 0.01 $ --
Operating income $ 0.33 $ 0.47 $ 0.13 $ 0.15 $ 0.16
----------- ----------- ----------- ----------- -----------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 70.1% 67.9% 65.6% 64.4% 65.5%
GAAP Expense ratio 34.3% 33.5% 33.7% 32.7% 34.3%
----------- ----------- ----------- ----------- -----------
GAAP COMBINED RATIO 104.4% 101.4% 99.3% 97.1% 99.8%
=========== =========== =========== =========== ===========
UNCONSOLIDATED GAAP DATA -
RATIO CALCULATION TABLE:
Net earned premiums $ 151,205 $ 214,493 $ 60,787 $ 63,364 $ 63,205
Consolidated net loss and LAE $ 98,472 $ 135,938 $ 37,134 $ 37,728 $ 38,469
Intercompany claim fees 7,514 9,691 2,716 3,077 2,944
----------- ----------- ----------- ----------- -----------
Unconsolidated net loss and LAE $ 105,986 $ 145,629 $ 39,850 $ 40,805 $ 41,413
=========== =========== =========== =========== ===========
GAAP NET LOSS AND LAE RATIO 70.1% 67.9% 65.6% 64.4% 65.5%
Consolidated Policy acquisition
and other underwriting expenses $ 23,606 $ 33,424 $ 10,822 $ 10,971 $ 11,947
Intercompany administrative and
other underwriting fees 28,296 38,359 9,656 9,772 9,743
----------- ----------- ----------- ----------- -----------
Unconsolidated policy acquisition
and other underwriting expenses $ 51,902 $ 71,783 $ 20,478 $ 20,743 $ 21,690
=========== =========== =========== =========== ===========
GAAP EXPENSE RATIO 34.3% 33.5% 33.7% 32.7% 34.3%
GAAP COMBINED RATIO 104.4% 101.4% 99.3% 97.1% 99.8%
----------- ----------- ----------- ----------- -----------
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 18,751 $ 16,253 $ 4,196 $ 4,100 $ 4,328
Claims fees 14,756 13,207 1,752 1,766 1,799
Loss control fees 2,303 2,174 573 555 611
Reinsurance brokerage 308 420 345 94 124
----------- ----------- ----------- ----------- -----------
Total managed programs 36,118 32,054 6,866 6,515 6,862
Agency commissions 9,378 9,805 3,960 1,982 2,917
Intersegment commissions and fees (205) (1,324) (727) (463) (579)
----------- ----------- ----------- ----------- -----------
Net Commissions and fees 45,291 40,535 10,099 8,034 9,200
Intercompany commissions and fees 35,810 48,050 12,372 12,849 12,687
----------- ----------- ----------- -----------
Gross commissions and fees $ 81,101 $ 88,585 $ 22,471 $ 20,883 $ 21,887
=========== =========== =========== =========== ===========
Q405A 2005A Q106A Q206A
----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 79,183 $ 332,209 $ 89,010 $ 74,261
Net written premiums 60,436 258,134 69,381 59,205
INCOME STATEMENT
REVENUES
Net earned premiums $ 62,603 $ 249,959 $ 63,124 $ 64,514
Commissions and fees (net) 8,583 35,916 11,289 10,698
Net investment income 4,816 17,975 5,239 5,380
Net realized gains (losses) 136 167 (7) 25
----------- ----------- ----------- -----------
TOTAL REVENUES 76,138 304,017 79,645 80,617
EXPENSES
Net losses & loss adjustment expenses 38,211 151,542 37,043 37,146
Policy acquisition and other
underwriting expenses 10,699 44,439 11,424 13,180
Other administrative expenses 7,315 27,183 7,959 7,275
Salaries & employee benefits 12,165 51,331 13,368 13,846
Interest expense 1,329 3,856 1,388 1,499
----------- ----------- ----------- -----------
TOTAL EXPENSES 69,719 278,351 71,182 72,946
INCOME BEFORE TAXES AND EQUITY EARNINGS 6,419 25,666 8,463 7,671
Income tax expense 1,507 7,757 2,847 2,312
Equity earnings of affiliates 13 1 9 16
----------- ----------- ----------- -----------
NET INCOME $ 4,925 $ 17,910 $ 5,625 $ 5,375
Net realized capital gain (loss),
net of tax 88 109 (4) 16
----------- ----------- ----------- -----------
OPERATING INCOME $ 4,837 $ 17,801 $ 5,629 $ 5,359
=========== =========== =========== ===========
Weighted average common
shares outstanding 29,406,994 29,653,067 29,452,693 29,571,925
Shares O/S at end of the period 28,672,009 28,672,009 28,814,544 28,833,616
PER SHARE DATA (DILUTED)
Net income $ 0.17 $ 0.60 $ 0.19 $ 0.18
Net realized gain (loss), net of tax $ 0.01 $ -- $ -- $ --
Operating income $ 0.16 $ 0.60 $ 0.19 $ 0.18
----------- ----------- ----------- -----------
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 65.5% 65.2% 63.7% 62.4%
GAAP Expense ratio 33.2% 33.5% 32.5% 34.8%
----------- ----------- ----------- -----------
GAAP COMBINED RATIO 98.7% 98.7% 96.2% 97.2%
=========== =========== =========== ===========
UNCONSOLIDATED GAAP DATA -
RATIO CALCULATION TABLE:
Net earned premiums $ 62,603 $ 249,959 $ 63,124 $ 64,514
Consolidated net loss and LAE $ 38,211 $ 151,542 $ 37,043 $ 37,146
Intercompany claim fees 2,786 11,523 3,158 3,115
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Unconsolidated net loss and LAE $ 40,997 $ 163,065 $ 40,201 $ 40,261
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GAAP NET LOSS AND LAE RATIO 65.5% 65.2% 63.7% 62.4%
Consolidated Policy acquisition
and other underwriting expenses $ 10,699 $ 44,439 $ 11,424 $ 13,180
Intercompany administrative and
other underwriting fees 10,060 39,231 9,117 9,291
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Unconsolidated policy acquisition
and other underwriting expenses $ 20,759 $ 83,670 $ 20,541 $ 22,471
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GAAP EXPENSE RATIO 33.2% 33.5% 32.5% 34.8%
GAAP COMBINED RATIO 98.7% 98.7% 96.2% 97.2%
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UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 4,117 $ 16,741 $ 4,531 $ 5,090
Claims fees 1,796 7,113 2,100 2,351
Loss control fees 521 2,260 538 593
Reinsurance brokerage 97 660 418 143
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Total managed programs 6,531 26,774 7,587 8,177
Agency commissions 2,445 11,304 4,261 2,878
Intersegment commissions and fees (393) (2,162) (559) (357)
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Net Commissions and fees 8,583 35,916 11,289 10,698
Intercompany commissions and fees 12,846 50,754 12,275 12,406
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Gross commissions and fees $ 21,429 $ 86,670 $ 23,564 $ 23,104
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