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 THIRD QUARTER 2006 NET INCOME OF $5.1 MILLION
- THIRD QUARTER EARNINGS PER SHARE OF $0.17
- 2006 YEAR-TO-DATE NET INCOME UP 23.9% TO $16.1 MILLION
- YEAR-TO-DATE GAAP COMBINED RATIO 96.9%
SOUTHFIELD, MICHIGAN
OCTOBER 31, 2006
THIRD QUARTER OVERVIEW:
Meadowbrook Insurance Group, Inc. (NYSE: MIG) reported $5.1 million in net
income, or $0.17 per diluted share, for the quarter ended September 30, 2006, up
9.2%, compared to net income of $4.7 million, or $0.16 per diluted share, for
the same period in 2005.
YEAR-TO-DATE OVERVIEW:
Net income for the nine months ended September 30, 2006, was $16.1 million, or
$0.55 per diluted share. This was an increase of $3.1 million, or 23.9%, from
net income of $13.0 million, or $0.44 per diluted share, for the comparable
period in 2005.
YEAR-TO-DATE HIGHLIGHTS INCLUDED:
- Year-to-date earnings up 23.9%.
- Annualized return on beginning equity was 12.1%.
- Book value per share increased to $6.73.
- GAAP combined ratio improved to 96.9%.
Commenting on the results, Meadowbrook President and Chief Executive Officer
Robert S. Cubbin stated: "Our strong year-to-date results reflect our commitment
to underwriting discipline. We remain dedicated to increasing return on equity
and continue to focus on growing our margins within our profitable specialty
insurance and fee-for-service programs. We have been pleased with the continued
growth within our fee-based operations and remain optimistic that additional
growth opportunities exist. With our on-going success at leveraging fixed costs
and the favorable impact of overall process improvements, our full year 2006
results should be in line with the high end of our revised guidance. This
overall improvement continues even as our gross written premium volume
temporarily flattens out as a result of isolated market pressures in some
programs and our steadfast resolve to maintain underwriting profitability."
YEAR-TO-DATE RESULTS:
PR1406
PRESS RELEASE PAGE 2
As noted above, net income for the nine months ended September 30, 2006, was
$16.1 million, or $0.55 per diluted share. This was an increase of 23.9% over
2005 net income of $13.0 million, or $0.44 per diluted share.
Revenues:
Revenues increased $11.3 million, or 5.0%, to $239.2 million for the nine months
ended September 30, 2006, compared to $227.9 million in 2005.
Net earned premiums increased $4.0 million, or 2.1%, to $191.3 million for the
nine months ended September 30, 2006, from $187.3 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. Year-to-date overall rates were down 2.5%.
Net commissions and fees increased $4.3 million, or 15.6%, to $31.6 million for
the nine months ended September 30, 2006, from $27.3 million in 2005. Gross
commissions and fees, before consolidation, were $68.9 million, compared to
$65.2 million in 2005. These increases were the result of an increase in
fee-for-service revenue from a Florida-based program implemented in 2005, our
entry into the self-insured workers' compensation market in Nevada, an increase
in commission revenue from our retail agency acquisition in November 2005, and
organic growth within existing programs.
Net investment income increased $3.0 million, or 23.1%, to $16.2 million for the
nine months ended September 30, 2006, from $13.2 million in 2005. Average
invested assets increased $70.8 million, or 17.3%, to $480.8 million. The
increase in average invested assets reflects cash flows from 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 4.5% for September
30, 2006, compared to 4.3% in 2005. The current pre-tax book yield was 4.3% and
current after-tax book yield was 3.3%.
Expenses:
Incurred losses were $110.3 million for the nine months ended September 30,
2006, down from $113.3 million in 2005. The loss and loss adjustment expense
ratio improved 2.6 percentage points to 62.6%, from 65.2% in 2005. This
improvement primarily reflects overall improved results within the workers'
compensation and professional liability lines of business, partially offset by a
single property claim.
Policy acquisition and other underwriting expenses increased to $37.7 million
for the nine months ended September 30, 2006, from $33.7 million in 2005. The
GAAP expense ratio increased to 34.3%, from 33.6% in 2005. The increase in the
expense ratio reflects a slight increase in gross external commissions because
of the shift in the mix of business and a reduction in an accrual for estimated
profit-based ceding commissions on an excess reinsurance treaty for a specific
commercial transportation program. This decrease was the result of unfavorable
loss development on a limited number of excess of loss claims from prior
accident years on that specific program. As of September 30, 2006, the recorded
accrual for this estimated profit-based ceding commission was less than
$100,000; therefore we do not anticipate any further unfavorable adjustments as
a result of this. This change in estimate increased the expense ratio by 0.9
percentage points for the year. Offsetting these increases was a reduction in
insurance related assessments.
The GAAP combined ratio improved 1.9 percentage points to 96.9% for the nine
months ended September 30, 2006, from 98.8% in 2005.
PRESS RELEASE PAGE 3
Salaries and employee benefits for the nine months ended September 30, 2006
increased $2.2 million, or 5.7%, to $41.4 million, from $39.2 million in 2005.
This increase primarily reflects an increase in variable compensation. In
addition, this increase was the result of an increase in staffing levels,
primarily as a result of the recent additions of our Florida-based retail agency
and our entry into the self-insured workers' compensation market in Nevada.
Excluding those additions, overall staffing levels for 2006 were slightly higher
in comparison to 2005.
Other administrative expenses increased $2.2 million, or 11.4%, to $22.1
million, from $19.9 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 our entry
into the self-insured workers' compensation market in Nevada.
Interest expense increased $1.9 million to $4.4 million for the nine months
ended September 30, 2006, from $2.5 million in 2005. This increase was primarily
the result of the 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 our debentures, was approximately 6.8% for 2006,
compared to 4.6% for 2005.
THIRD QUARTER RESULTS:
As noted above, net income for the third quarter of 2006 was $5.1 million, or
$0.17 per diluted share. This was an increase of 9.2%, compared to $4.7 million,
or $0.16 per diluted share, in the third quarter of 2005.
Revenues:
Revenues increased $1.9 million, or 2.4%, to $78.9 million for the quarter ended
September 30, 2006, from $77.0 million for the comparable period in 2005.
Net earned premiums increased $483,000 to $63.7 million for the quarter ended
September 30, 2006, from $63.2 million for the comparable period in 2005.
Net commissions and fees increased $412,000, or 4.5%, to $9.6 million for the
quarter. This increase was primarily due to an increase in fee-for-service
revenue as a result of our entry into the self-insured workers' compensation
market in Nevada and organic growth within existing programs. In addition, this
increase was the result of an increase in commission revenue from our retail
agency acquisition in November 2005, offset by a decrease in commission revenue
due to a reduction in premium on client renewals in our retail agency division.
Net investment income increased $993,000, or 21.6%, to $5.6 million for the
quarter ended September 30, 2006, from $4.6 million for the comparable period in
2005. Average invested assets increased $73.4 million, or 17.8%, to $486.1
million for the quarter ended September 30, 2006. The increase in average
invested assets reflects cash flows from 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 September 30, 2006, compared
to 4.5% in 2005. The current pre-tax book yield was 4.3%. The current after-tax
book yield for the quarter ended September 30, 2006 was 3.3%, compared to 3.0%
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 3.9 years.
Expenses:
Incurred losses decreased $2.3 million, or 6.1%, to $36.1 million for the
quarter ended September 30, 2006, from $38.4 million for the comparable period
in 2005. The loss and loss adjustment expense ratio improved
PRESS RELEASE PAGE 4
3.8 percentage points to 61.7%, from 65.5% in 2005. This improvement primarily
reflects overall improved results within the workers' compensation and
professional liability lines of business, partially offset by a single property
claim.
Policy acquisition and other underwriting expenses increased $1.2 million, or
9.3%, to $13.1 million for the quarter ended September 30, 2006, from $11.9
million in 2005. The GAAP expense ratio was 35.5% for the quarter, compared to
34.3% in 2005. The increase in the expense ratio reflects a slight increase in
gross external commissions because of the shift in the mix of business and a
reduction in an accrual for estimated profit-based ceding commissions on an
excess reinsurance treaty for a specific commercial transportation program. As
previously indicated, this decrease was the result of unfavorable loss
development on a limited number of excess of loss claims from prior accident
years on that specific program. As previously indicated, we do not anticipate
any further unfavorable adjustments as a result of this. This change in estimate
increased the expense ratio by 1.3 percentage points in the quarter.
The GAAP combined ratio for the third quarter of 2006 was 97.2% compared to
99.8% in 2005.
Salaries and employee benefits for the quarter ended September 30, 2006
increased $1.3 million, or 9.8%, to $14.2 million, from $12.9 million in 2005.
This increase is primarily the result of the recent additions of our
Florida-based retail agency and our entry into the self-insured workers'
compensation market in Nevada. Excluding those additions, overall staffing
levels in 2006 were slightly higher in comparison to 2005. In addition, this
increase is the result of a slight increase in variable compensation in
comparison to 2005.
Other administrative expenses increased $871,000, or 14.4%, to $6.9 million for
the quarter ended September 30, 2006, from $6.0 million in 2005. This increase
was the result of various increases in other general operating expenses,
primarily as a result of the recent additions of our Florida-based retail agency
and our entry into the self-insured workers' compensation market in Nevada.
Interest expense increased $610,000, or 64.4%, to $1.6 million for the quarter,
from $948,000 in 2005. This increase was primarily the result of the 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
our debentures, was approximately 6.6% for 2006, compared to 4.9% for 2005.
OTHER MATTERS:
Shareholders' Equity:
Shareholders' equity increased to $195.5 million, or $6.73 per common share, at
September 30, 2006, compared to $177.4 million, or $6.19 per common share, at
December 31, 2005. This $0.54 per share increase in book value primarily
reflects year-to-date earnings. 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 September 30, 2006, our debt-to-equity ratio was 33.6%, compared to 34.4% at
December 31, 2005. Excluding the interest only, 30-year debentures, the
debt-to-equity ratio would be 5.0% at September 30, 2006, compared to 2.8% at
December 31, 2005.
Statutory Surplus:
Statutory surplus increased $19.8 million, to $160.9 million at September 30,
2006, from $141.1 million at December 31, 2005. The increase in statutory
surplus was primarily due to statutory net income.
Income Taxes:
PRESS RELEASE PAGE 5
The effective federal tax rate for the nine months ended September 30, 2006 was
29.5%, compared to 30.1% in 2005 due to a shift towards increasing investments
in tax-exempt securities. Our effective tax rate differs from the 35% statutory
rate, primarily due to interest income from tax-exempt securities.
Earnings Outlook:
As previously announced, our revised outlook for the full year 2006, included an
earnings target of $0.68-$0.71 per share. This outlook included 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%. Based upon the results of the first nine months of
2006, we believe we are on target with the high end of our revised guidance. The
full year 2007 anticipated earnings are expected to grow to $0.80-$0.85 per
share. This outlook includes the following targets: gross written premiums of
$375.0 million to $385.0 million, gross commissions and fees of $92.0 million to
$94.0 million, and a combined ratio between 97.5% and 98.5%.
Commenting on the earnings outlook, Meadowbrook President and Chief Executive
Officer Robert S. Cubbin stated: "Our 2007 full year guidance anticipates
earnings growth of 10% to 17%, or $0.80 to $0.85 net operating income per share.
The low end of this range would result in a two year compound average growth
rate of approximately 15.0%, which is consistent with our stated long-term goal
of achieving average annual growth in earnings of 15%, while maintaining
underwriting discipline through softer insurance market cycles. Our corporate
strategy emphasizes a balance of revenue growth between commissions, fees, and
underwritten premiums, and improving productivity and customer service through
investments in technology, training, and overall improvements in our business
processes."
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
SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2006 2005
------------- ------------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $501,410 $460,233
Premium & agents balances 106,560 84,807
Reinsurance recoverable 201,422 202,581
Deferred policy acquisition costs 27,118 26,371
Prepaid reinsurance premiums 22,964 24,588
Goodwill 30,802 30,802
Other assets 73,829 71,962
-------- --------
TOTAL ASSETS $964,105 $901,344
======== ========
LIABILITIES
Loss and loss adjustment expense reserves $493,641 $458,677
Unearned premium reserves 145,531 140,990
Debt 9,700 7,000
Debentures 55,930 55,930
Other liabilities 63,846 61,382
-------- --------
TOTAL LIABILITIES 768,648 723,979
STOCKHOLDERS' EQUITY
Common stockholders' equity 195,457 177,365
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $964,105 $901,344
======== ========
BOOK VALUE PER COMMON SHARE $ 6.73 $ 6.19
BOOK VALUE PER COMMON SHARE EXCLUDING
UNREALIZED GAIN/LOSS ON AVAILABLE FOR SALE
SECURITIES, NET OF DEFERRED TAXES $ 6.75 $ 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 NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
(IN THOUSANDS, EXCEPT SHARE & PER SHARE DATA) ------------------------- -------------------------
SUMMARY DATA 2006 2005 2006 2005
- ------------ ----------- ----------- ----------- -----------
Gross written premiums $ 85,827 $ 86,075 $ 249,098 $ 253,027
Net written premiums 68,905 67,420 197,491 197,698
REVENUES
Net earned premiums $ 63,688 $ 63,205 $ 191,326 $ 187,356
Commissions and fees (net) 9,612 9,200 31,599 27,333
Net investment income 5,584 4,591 16,203 13,159
Net realized gains 28 41 46 31
----------- ----------- ----------- -----------
TOTAL REVENUES 78,912 77,037 239,174 227,879
EXPENSES
Net losses & loss adjustment expenses (1) 36,129 38,469 110,318 113,331
Salaries & employee benefits 14,183 12,913 41,397 39,166
Interest expense 1,558 948 4,445 2,527
Policy acquisition and other underwriting expenses (1) 13,059 11,947 37,663 33,740
Other administrative expenses 6,908 6,037 22,142 19,868
----------- ----------- ----------- -----------
TOTAL EXPENSES 71,837 70,314 215,965 208,632
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 7,075 6,723 23,209 19,247
Income tax expense 2,056 2,048 7,215 6,250
Equity earnings (loss) of affiliates 74 (13) 99 (12)
----------- ----------- ----------- -----------
NET INCOME $ 5,093 $ 4,662 $ 16,093 $ 12,985
=========== =========== =========== ===========
NET OPERATING INCOME (2) $ 5,075 $ 4,635 $ 16,063 $ 12,965
=========== =========== =========== ===========
DILUTED EARNINGS PER COMMON SHARE
Net income $ 0.17 $ 0.16 $ 0.55 $ 0.44
Net operating income $ 0.17 $ 0.16 $ 0.54 $ 0.44
DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 29,498,596 29,269,638 29,509,892 29,363,045
GAAP RATIOS:
Loss & LAE ratio 61.7% 65.5% 62.6% 65.2%
Other underwriting expense ratio 35.5% 34.3% 34.3% 33.6%
----------- ----------- ----------- -----------
GAAP combined ratio 97.2% 99.8% 96.9% 98.8%
=========== =========== =========== ===========
(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 NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------- -------------------
(IN THOUSANDS) 2006 2005 2006 2005
------- ------- -------- --------
UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $63,688 $63,205 $191,326 $187,356
Consolidated net loss and LAE (1) $36,129 $38,469 $110,318 $113,331
Intercompany claim fees 3,145 2,944 9,418 8,737
------- ------- -------- --------
Unconsolidated net loss and LAE $39,274 $41,413 $119,736 $122,068
======= ======= ======== ========
GAAP loss and LAE ratio 61.7% 65.5% 62.6% 65.2%
Consolidated policy acquisition and other underwriting expenses (1) $13,059 $11,947 $ 37,663 $ 33,740
Intercompany administrative and other underwriting fees 9,522 9,743 27,930 29,171
------- ------- -------- --------
Unconsolidated policy acquisition and other underwriting expenses $22,581 $21,690 $ 65,593 $ 62,911
======= ======= ======== ========
GAAP other underwriting expense ratio 35.5% 34.3% 34.3% 33.6%
GAAP combined ratio 97.2% 99.8% 96.9% 98.8%
2006 2005 2006 2005
------- ------- ------- -------
UNCONSOLIDATED GAAP DATA - GROSS COMMISSIONS AND FEES:
Managed programs:
Management fees $ 4,699 $ 4,328 $14,320 $12,624
Claims fees 2,295 1,799 6,746 5,317
Loss control fees 552 611 1,683 1,739
Reinsurance brokerage 79 124 640 563
------- ------- ------- -------
Total managed programs 7,625 6,862 23,389 20,243
Agency commissions 2,401 2,917 9,540 8,859
Intersegment revenue (414) (579) (1,330) (1,769)
------- ------- ------- -------
Net commissions and fees 9,612 9,200 31,599 27,333
Intercompany commissions and fees 12,667 12,687 37,348 37,908
------- ------- ------- -------
Gross commissions and fees $22,279 $21,887 $68,947 $65,241
======= ======= ======= =======
(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 (loss) 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
=========== =========== =========== =========== ===========
(IN THOUSANDS, EXCEPT
SHARE & PER SHARE DATA) Q405A 2005A Q106A Q206A Q306A
----------- ----------- ----------- ----------- -----------
SUMMARY DATA
Gross written premiums $ 79,183 $ 332,209 $ 89,010 $ 74,261 $ 85,827
Net written premiums 60,436 258,134 69,381 59,205 68,905
INCOME STATEMENT
REVENUES
Net earned premiums $ 62,603 $ 249,959 $ 63,124 $ 64,514 $ 63,688
Commissions and fees (net) 8,583 35,916 11,289 10,698 9,612
Net investment income 4,816 17,975 5,239 5,380 5,584
Net realized gains (losses) 136 167 (7) 25 28
----------- ----------- ----------- ----------- -----------
TOTAL REVENUES 76,138 304,017 79,645 80,617 78,912
EXPENSES
Net losses & loss adjustment expenses 38,211 151,542 37,043 37,146 36,129
Policy acquisition and other underwriting expenses 10,699 44,439 11,424 13,180 13,059
Other administrative expenses 7,315 27,183 7,959 7,275 6,908
Salaries & employee benefits 12,165 51,331 13,368 13,846 14,183
Interest expense 1,329 3,856 1,388 1,499 1,558
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TOTAL EXPENSES 69,719 278,351 71,182 72,946 71,837
INCOME BEFORE TAXES AND EQUITY EARNINGS 6,419 25,666 8,463 7,671 7,075
Income tax expense 1,507 7,757 2,847 2,312 2,056
Equity earnings (loss) of affiliates 13 1 9 16 74
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NET INCOME $ 4,925 $ 17,910 $ 5,625 $ 5,375 $ 5,093
Net realized capital gain (loss), net of tax 88 109 (4) 16 18
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OPERATING INCOME $ 4,837 $ 17,801 $ 5,629 $ 5,359 $ 5,075
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Weighted average common shares outstanding 29,406,994 29,653,067 29,452,693 29,571,925 29,498,596
Shares O/S at end of the period 28,672,009 28,672,009 28,814,544 28,833,616 29,048,146
PER SHARE DATA (DILUTED)
Net income $ 0.17 $ 0.60 $ 0.19 $ 0.18 $ 0.17
Net realized gain (loss), net of tax $ 0.01 $ -- $ -- $ -- $ --
Operating income $ 0.16 $ 0.60 $ 0.19 $ 0.18 $ 0.17
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 65.5% 65.2% 63.7% 62.4% 61.7%
GAAP Expense ratio 33.2% 33.5% 32.5% 34.8% 35.5%
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GAAP COMBINED RATIO 98.7% 98.7% 96.2% 97.2% 97.2%
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UNCONSOLIDATED GAAP DATA - RATIO CALCULATION TABLE:
Net earned premiums $ 62,603 $ 249,959 $ 63,124 $ 64,514 $ 63,688
Consolidated net loss and LAE $ 38,211 $ 151,542 $ 37,043 $ 37,146 $ 36,129
Intercompany claim fees 2,786 11,523 3,158 3,115 3,145
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Unconsolidated net loss and LAE $ 40,997 $ 163,065 $ 40,201 $ 40,261 $ 39,274
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GAAP NET LOSS AND LAE RATIO 65.5% 65.2% 63.7% 62.4% 61.7%
Consolidated Policy acquisition and other
underwriting expenses $ 10,699 $ 44,439 $ 11,424 $ 13,180 $ 13,059
Intercompany administrative and other underwriting fees 10,060 39,231 9,117 9,291 9,522
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Unconsolidated policy acquisition and other
underwriting expenses $ 20,759 $ 83,670 $ 20,541 $ 22,471 $ 22,581
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GAAP EXPENSE RATIO 33.2% 33.5% 32.5% 34.8% 35.5%
GAAP COMBINED RATIO 98.7% 98.7% 96.2% 97.2% 97.2%
UNCONSOLIDATED COMMISSIONS & FEES
Managed programs:
Management fees $ 4,117 $ 16,741 $ 4,531 $ 5,090 4,699
Claims fees 1,796 7,113 2,100 2,351 2,295
Loss control fees 521 2,260 538 593 552
Reinsurance brokerage 97 660 418 143 79
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Total managed programs 6,531 26,774 7,587 8,177 7,625
Agency commissions 2,445 11,304 4,261 2,878 2,401
Intersegment commissions and fees (393) (2,162) (559) (357) (414)
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Net Commissions and fees 8,583 35,916 11,289 10,698 9,612
Intercompany commissions and fees 12,846 50,754 12,275 12,406 12,667
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Gross commissions and fees $ 21,429 $ 86,670 $ 23,564 $ 23,104 $ 22,279
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