EXHIBIT 99.1
COLUMBUS, Ohio (July 30, 2003) Bancinsurance Corporation (NASDAQ: BCIS), a
specialty insurance holding company, today reported results for the three months
ended June 30, 2003. Net income improved to $1,146,128, or $0.23 per diluted
share, for the second quarter 2003 from $950,951, or $0.17 per diluted share,
for the same period last year.
The growth in net premiums earned for the second quarter 2003 was impacted by
higher claims and further strengthening of reserves in anticipation of increased
loss experience in future quarters. The improvement in second quarter pre-tax
income was principally due to a net realized gain on investments versus a net
realized loss on investments in 2002.
John Sokol, President, stated, "Market conditions continue to be influenced by
margin pressures, increased competition and the weak national economy. We are
responding to this environment by offering distinctive customer service combined
with innovative technology solutions. As a result, we are achieving solid
premium growth through new customers and an expanding line of insurance
products. These efforts are focused on attaining further improvement in our
long-term performance."
Second Quarter Results
Net premiums earned increased 49.5% to $15,095,790 for the second quarter 2003
from $10,097,226 the prior year. Strong growth was recorded in the Company's
lender/dealer business with particular strength in the ULTIMATE LOSS
INSURANCE(R) and creditor placed insurance products. Net premiums earned for
these products rose 53.0% to $12,899,228 for the second quarter 2003. We
attribute these increases primarily to net premiums earned of $2,209,749 for
creditor placed insurance, which was introduced in fourth quarter 2002, and an
increase in ULTIMATE LOSS INSURANCE(R) premiums, which is attributable to both
new policies added during 2003 and volume increases with existing customers. An
increase in automobile lending by some of our large financial institution
customers, driven by aggressive financing offers, was the primary cause of the
increased volume.
Net premiums earned for unemployment insurance protection and bail bond products
rose 4.4% to $1,530,973 for the second quarter 2003 as a result of a premium
rate increase for an existing customer. Guaranteed auto protection ("GAP") net
premiums earned were $665,589 for the second quarter 2003 compared with $199,822
last year. This increase was attributable to purchases of GAP coverage in the
first half of 2003 by two large financial institution customers.
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Other revenue improved $452,149 to $1,655,455 for the second quarter 2003. The
most significant factors contributing to this increase compared to last year
include a $288,991 favorable comparison regarding net realized gain on
investments, an increase in net investment income of $99,972 primarily driven by
an increase in invested assets generated by improved cash flow from operations,
and a $110,612 increase in codification and subscription fees attributable to
government customers added during the second half of 2002. The growth in other
revenue was partially offset by a $67,046 decline in management fees to $71,307
for the second quarter 2003 compared with a year ago. Higher unemployment
insurance protection obligations related to the increased level of unemployment
was the primary factor for this quarter-over-quarter difference.
Losses and loss adjustment expenses, net of reinsurance recoveries, rose 76.1%
to $9,794,907 for the second quarter 2003 versus $5,562,452 last year. The
largest increase was in the Company's lender/dealer business due to the
significant growth in premiums combined with higher frequency of claims as a
result of persistent weakness in the national economy. This weakness was
reflected in higher loan defaults, bankruptcies and automobile repossessions
among the Company's customers. However, the increased frequency of losses and
loss adjustment experience was partly offset by a decrease in the severity of
losses and loss adjustment experience. GAP losses and loss adjustment expenses
were higher due to the substantial growth in premiums combined with increased
severity of claims, which was impacted by the lower residual value for used
automobiles. This creates a larger outstanding balance between the customer's
loan or lease and the amount of primary insurance coverage. Additional reserve
strengthening for unemployment insurance and bail bond products combined with
increased benefit payments due to rising unemployment obligations increased
losses and loss adjustment expenses for the second quarter 2003 compared with a
year ago.
Operating expenses increased 18.6% to $5,225,787 for the second quarter 2003.
Other insurance operating expenses rose $560,458 to $1,458,237 due to higher
premium taxes, salaries and benefits compared with the same period last year.
The experience rating adjustment remained relatively constant for the second
quarter 2003 and 2002. Commission expense was $1,934,038 or 5.9% higher than the
second quarter 2002 due to the solid increase in premiums. The increase in
codification and subscription expense was primarily attributable to increases in
outside printing supplies and consulting fees.
Dividends on trust preferred securities, which were issued in December 2002,
were $107,627 for the second quarter 2003 compared with zero for the same period
last year.
Six Month Results
Net premiums earned increased 37.6% to $26,256,766 for the six months ended June
30, 2003 primarily due to growth in the lender/dealer business. ULTIMATE LOSS
INSURANCE(R) and creditor placed insurance products grew $5,926,131 during the
first half of 2003 compared with the same period last year. Creditor placed
insurance, introduced in fourth quarter 2002, represents $2,902,541 of the
increase. Unemployment and bail bond products rose 20.2% to $2,885,855 for the
first six months compared with last year, while GAP insurance products improved
to $1,108,713 for the first half of 2003 from $348,056 a year ago.
The most significant changes in other revenue included net realized gain on
investments of $467,060 for the first six months of 2003 versus net realized
loss on investments of $149,685 last year. Net investment income increased
$156,246 to $804,997 for the six months ended June 30, 2003. Codification and
subscription fees rose to $1,756,676 for the first half of 2003 from $1,514,709
a year ago. Management fees declined to $199,423 this year from $459,866 for the
first six months of 2002.
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Losses and loss adjustment expenses, net of reinsurance recoveries, were
$15,933,817 for the first half of 2003 compared with $11,943,392 last year. The
experience rating adjustment was $2,156,341 for the first six months of this
year versus $214,587 in 2002. This adjustment is primarily influenced by policy
experience to date and premium growth. Other insurance operating expenses rose
to $2,693,425 for the 2003 year-to-date period from $1,753,526 a year ago as a
result of higher premium taxes, salaries and benefits.
Dividends on trust preferred securities were $215,581 for the first six months
of 2003 compared with zero for the same period last year.
Net income increased to $2,175,131, or $0.43 per diluted share, for the first
half of 2003 versus $489,577, or $0.09 per diluted share, a year ago. The 2003
comparison with last year is influenced by the Company's adoption of SFAS 142
"Goodwill and Other Intangible Assets" in first quarter 2002. This resulted in a
net after-tax impairment charge of $1,481,858, or $0.25 per diluted share.
Combined Ratio
The Company's specialty insurance products are underwritten by Ohio Indemnity
Company ("Ohio Indemnity"), a wholly owned subsidiary. Ohio Indemnity's combined
ratio was 87.6% for the first six months of 2003 versus 88.9% a year ago. The
loss ratio declined to 60.7% for the first half of this year compared with 62.6%
in 2002 principally due to the growth in premiums earned. Reserves were further
strengthened in anticipation of higher losses due to prolonged weakness in the
national economy. The expense ratio rose slightly to 26.9% for the first six
months of 2003 from 26.3% last year.
Investment Portfolio
Total investments rose 20.6% to $63,617,324 at June 30, 2003 compared with
$52,739,354 at December 31, 2002. The largest single increase was in preferred
stock, which principally includes $7,000,000 of variable rate preferred stock
with reset provisions at par. Additionally, fixed maturities available for sale
increased $5,057,208, while common stock was $1,009,174 higher than year-end
2002. Short-term investments decreased $2,080,991.
Net realized gain on investments was $233,025 for second quarter 2003 versus a
net realized loss on investments of $55,966 the prior year. For the 2003
year-to-date period, net realized gain on investments was $467,060 compared with
a net realized loss on investments of $149,685 in 2002. There were $49,328 in
impairment charges included in net realized gain on investments for the second
quarter and first six months of 2003.
Net investment income for the second quarter and first six months of 2003
benefited from the solid increase in invested assets, which was attributable to
improved cash flow from operations. Net investment income was impacted by lower
interest rates and yields on the investment portfolio.
Shareholders' Equity
Shareholders' equity improved to $31,146,740 at June 30, 2003 from $28,901,838
at year-end 2002. A $2,175,130 increase in retained earnings and a $441,287
increase in unrealized gains, net of tax and reclassification adjustment, was
partially offset by a $371,515 increase in treasury shares for the six months
ended June 30, 2003. Book value per diluted share was $6.33 at June 30, 2003
versus $5.78 at December 31, 2002.
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BANCINSURANCE CORPORATION
Bancinsurance Corporation, headquartered in Columbus, Ohio, is principally
engaged through its property/casualty insurance subsidiary, Ohio Indemnity
Company, in underwriting specialty insurance. Lender/dealer insurance products
protect banks and other lenders against risk arising from theft or damage to
certain loan collateral where the borrower has failed to secure or maintain
adequate insurance coverage. The Company's surety products include bonds for
unemployment insurance servicing commitments for national administrative firms
that perform services for non-profit organizations as well as bail bond
coverage.
With the exception of historical information, this press release includes
forward-looking statements that involve risks and uncertainties, including, but
not limited to, the Company's emphasis on larger accounts, economic trends, and
short-term programs offered by captive automobile finance companies. These
statements involve risks and uncertainties, which have been detailed from time
to time in the Company's Securities and Exchange filings, including the
Company's Form 10-K for the year ended December 31, 2002. Actual results may
differ materially from management's expectations. All forward-looking statements
made in this news release are based on information presently available to
management of the Company. The Company assumes no obligation to update any
forward-looking statements.
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BANCINSURANCE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
Income:
Premiums earned ......................................... $ 19,169,063 $ 10,396,182 $ 31,863,297 $ 19,464,801
Premiums ceded ....................................... (4,073,273) (298,956) (5,606,531) (380,115)
------------ ------------ ------------ ------------
Net premiums earned ..................................... 15,095,790 10,097,226 26,256,766 19,084,686
Net investment income ................................... 432,203 332,231 804,997 648,751
Net realized gain (loss) on investments ................. 233,025 (55,966) 467,060 (149,685)
Codification and subscription fees ...................... 876,960 766,348 1,756,676 1,514,709
Management fees ......................................... 71,307 138,353 199,423 459,866
Commission fees ......................................... 936 5,321 1,645 6,727
Other income ............................................ 41,024 17,019 55,204 161,408
------------ ------------ ------------ ------------
Total revenue ..................................... 16,751,245 11,300,532 29,541,771 21,726,462
------------ ------------ ------------ ------------
Losses and operating expenses:
Losses and loss adjustment expenses ..................... 10,948,049 5,696,982 18,282,961 12,117,888
Reinsurance recoveries .................................. (1,153,142) (134,530) (2,349,144) (174,496)
Experience rating adjustments ........................... 582,210 578,821 2,156,341 214,587
Commission expense ...................................... 1,934,038 1,826,242 3,325,288 3,284,302
Other insurance operating expenses ...................... 1,458,237 897,779 2,693,425 1,753,526
Codification and subscription expenses .................. 895,759 634,846 1,625,983 1,208,916
General and administrative expenses ..................... 353,811 433,141 527,267 510,183
Interest expense ........................................ 1,732 35,230 3,610 39,863
------------ ------------ ------------ ------------
Total expenses .................................... 15,020,694 9,968,511 26,265,731 18,954,769
------------ ------------ ------------ ------------
Income before federal income taxes, provision for
trust preferred securities dividends and cumulative
effect of change in accounting principle .......... 1,730,551 1,332,021 3,276,040 2,771,693
Federal income tax expense ................................. 476,796 381,070 885,328 800,258
------------ ------------ ------------ ------------
Income before provision for trust preferred
securities dividends and cumulative effect of
change in accounting principle .................... 1,253,755 950,951 2,390,712 1,971,435
Preferred dividends in minority interest in consolidated
subsidiary - redeemable preferred securities of
subsidiary trust ........................................ 107,627 -- 215,581 --
------------ ------------ ------------ ------------
Income before cumulative effect of change in
accounting principle .............................. 1,146,128 950,951 2,175,131 1,971,435
Cumulative effect of change in accounting principle ........ -- -- -- (1,481,858)
------------ ------------ ------------ ------------
Net income ........................................... $ 1,146,128 $ 950,951 $ 2,175,131 $ 489,577
============ ============ ============ ============
Basic net income per share:
Before cumulative effect of change in accounting
principle ............................................. $ .23 $ .17 $ .43 $ .35
Cumulative effect of change in accounting principle ..... -- -- -- (.26)
------------ ------------ ------------ ------------
Basic net income per share ............................ $ .23 $ .17 $ .43 $ .09
============ ============ ============
Diluted net income per share:
Before cumulative effect of change in accounting
principle ............................................. $ .23 $ .17 $ .43 $ .34
Cumulative effect of change in accounting principle ..... -- -- -- (.25)
------------ ------------ ------------ ------------
Diluted net income per share .......................... $ .23 $ .17 $ .43 $ .09
============ ============ ============ ============
June 30, 2003
(Unaudited) December 31, 2002
------------ -----------------
Shareholders' equity...................................... $ 31,146,740 $28,901,838
Total assets.............................................. $ 92,205,534 $72,455,204
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