Exhibit 99.1
PROCENTURY CORPORATION logo
PROCENTURY CORPORATION ANNOUNCES
SECOND QUARTER RESULTS
COLUMBUS, OHIO, AUGUST 4, 2004 - ProCentury CORPORATION (NASDAQ: PROS) a
specialty property and casualty INSURANCE holding company, today announced
financial results for the three months and six months ended June 30, 2004. The
Company has provided combined ratios and net income (loss) for 2004 and earnings
per share for 2003 on a historical and a pro forma basis. The pro forma
information gives effect to certain adjustments related to the Company's
initial public offering and the related disposition of its Evergreen and
Continental subsidiaries as if they occurred on January 1, 2004. A
reconciliation of the pro forma results to the Company's reported results is
presented in the tables that accompany this release. The Company believes the
pro forma information provides useful information to investors because it
excludes items that are not reflective of its ongoing operations.
Highlights from the second quarter of 2004 include the following:
o Net income per share of $0.26 per diluted share on a historical basis
and $0.29 per diluted share on a pro forma basis
o Record gross written premium of $48.9 million, up 24 percent from the
same period a year ago
o Earned premium for the quarter of $35.8 million, up 35 percent over
the same period of 2003
o Combined ratio of 91.9% for the second quarter of 2004 and 92.1% for
the six months ended June 30, 2004
Edward Feighan, ProCentury's Chief Executive Officer said, "Our continued focus
on pursuing our selective growth strategy while maintaining a disciplined and
profitable underwriting practice has resulted in positive results for the
quarter. As we enter an increasingly competitive marketplace, we remain focused
on upholding our underwriting discipline and believe that we are well-positioned
to take advantage of the opportunities that continue to exist in the excess and
surplus lines market." Feighan continued, saying "We remain on track to achieve
our gross written premium objective of $190 to $205 million for the year."
THREE MONTH FINANCIAL RESULTS
ProCentury's net income for the second quarter of 2004 was $3.0 million or $0.26
per diluted share and pro forma net income was $3.3 million or $0.29 per diluted
share compared to a net loss of $7.3 million or a net loss of $1.46 per diluted
share based on the historical weighted average shares outstanding and a net
loss of $0.64 per diluted share on a pro forma basis, for the same quarter
of 2003.
The pro forma adjustments for the second quarter of 2004 included a reduction of
interest expense of $518,000 ($337,000 net of tax) related to the redemption of
our Class B shares immediately prior to the initial public offering that
occurred on April 20, 2004.
PROCENTURY CORPORATION logo
Included in the net loss for the first quarter of 2003 is $274,000 of income or
$0.05 per diluted share ($0.02 per diluted share on a pro forma basis) from
discontinued operations. Discontinued operations had no impact (after giving
effect to the minority interest ownership of our discontinued operations) on the
quarter ended June 30, 2004.
Gross written premiums increased to $48.9 million for the quarter ended June 30,
2004, up 24 percent from $39.4 million for the same period in 2003. The
Company's property and casualty segment represents 99.8 percent of its gross
written premium. Net premiums earned were $35.8 million in the second quarter
of 2004 up 35 percent compared with the $26.6 million reported for the second
quarter of 2003.
The combined ratio improved to 91.9% for the quarter ended June 30, 2004,
compared to 148.1% for the second quarter of 2003.
SIX MONTH FINANCIAL RESULTS
For the first six months of 2004, ProCentury's net income was $5.9 million or
$0.72 per diluted share and pro forma net income was $6.0 million or $0.74 per
diluted share. This was compared to a net loss of $6.5 million or a net loss of
$1.29 per diluted share on a historical basis or a net loss of $0.80 per
diluted share on a pro forma basis for the first half of 2003.
The pro forma adjustments for the first six months included $518,000 ($337,000
net of tax) related to the redemption of our Class B shares, and increased
expenses of $300,000 ($195,000 net of tax) related to nonrecurring IPO and
severance expenses, as well as income related to the termination of the
intercompany pooling agreement and implementation of loss portfolio transfer
agreements. The net loss for the first six months of 2003 included $563,000 of
income or $0.11 diluted per share ($.07 per diluted share on a pro forma basis)
from discontinued operations. Discontinued operations had no impact (after
giving effect to the minority interest ownership of our discontinued operations)
on the six months ended June 30, 2004.
Gross written premiums were $91.8 million for the six months ended June 30, 2004
up 26 percent from $73.0 million for the first half of 2003. The Company's
property and casualty segment represents 99.8 percent of its gross written
premium. Net premiums earned were $67.9 million in the first six months of 2004,
up 37 percent compared with $49.5 million reported for the same period of 2003.
The combined ratio for the six months ended June 30, 2004 was 92.1% (92.5% on a
pro forma basis) compared with 125.5% for the same period of 2003.
EARNINGS CONFERENCE CALL
ProCentury's second quarter 2004 results will be discussed in more detail on
Wednesday, August 4th at 4:30 p.m. EDT (1:30 p.m. PDT).
PROCENTURY CORPORATION logo
To listen to the call, please dial 800-374-1774 approximately five minutes prior
to the start of the call. The conference identification number is 8788812. For
those who cannot listen to the live conference call, a replay will be available
from approximately 6:30 p.m. EDT on August 4th, until midnight on August 6th.
The access number for the replay is 800-642-1687 and the pass code is 8788812.
Additionally, the conference call will be broadcast live over the Internet and
can be accessed by all interested parties on the Company's website at
www.procentury.com. Please access the website at least 15 minutes prior to the
start of the call to register and to download any necessary audio software.
ABOUT PROCENTURY CORPORATION
ProCentury Corporation (NASDAQ: PROS) is a specialty property and casualty
insurance holding company. Its subsidiary, Century Surety Company, underwrites
general liability, commercial property, and multi-peril insurance for small and
mid-sized businesses. Century Surety Company primarily writes excess and surplus
lines insurance and markets its products through a select network of general
agents and brokers.
NOTE ON FORWARD LOOKING STATEMENTS
Some of the statements in this press release that are not historical statements
are "forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are derived from information that
we currently have and assumptions that we make and may be identified by words
such as "believes," "anticipates," "expects," "plans," "should," "estimates" and
similar expressions. Our forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from those stated or implied in our forward-looking statements,
including but not limited to: 1) risks inherent in establishing loss and loss
adjustment expense reserves; 2) uncertainties related to the ratings of our
insurance subsidiary; 3) uncertainties related to government and regulatory
policies; 4) uncertainties relating to the cyclical nature of our business; 5)
changes in our relationships with, and the capacity of, our general agents; and
6) the risk that our reinsurers may not be able to fulfill their obligations to
us. You are cautioned not to place undue reliance on forward-looking statements,
which are made only as of the date of this press release. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. For additional
disclosure regarding potential risks, please refer to documents we file with the
Securities and Exchange Commission.
CONTACT:
Mary Magnani
Corporate Communications Manager
marymagnani@procentury.com
614-839-7528
PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)
Unaudited Consolidated Statements of Operations
(dollars in thousands, except per share data)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Premiums earned $ 35,819 26,586 67,877 49,531
Net investment income 2,410 1,680 4,375 3,028
Net realized investment gains 21 115 144 198
----------- ----------- ----------- -----------
Total revenues 38,250 28,381 72,396 52,757
----------- ----------- ----------- -----------
Losses and loss expenses 20,986 31,424 39,888 45,411
Amortization of deferred policy acquisition costs 8,643 5,958 15,493 11,106
Other operating expenses 3,272 2,001 7,100 5,661
Interest expense 345 357 760 675
Interest expense on the redemption of Class B shares 518 -- 518 --
----------- ----------- ----------- -----------
Total expenses 33,764 39,740 63,759 62,853
----------- ----------- ----------- -----------
Income (loss) before gain on sale of
minority interest in subsidiary, net 4,486 (11,359) 8,637 (10,096)
Gain on sale of minority interest in
subsidiary, net of transaction fees -- 9 -- 107
----------- ----------- ----------- -----------
Income (loss) before minority
interest and income taxes 4,486 (11,350) 8,637 (9,989)
Minority interest -- 254 -- 545
Income tax (benefit) expense 1,500 (4,024) 2,763 (3,513)
----------- ----------- ----------- -----------
Net income (loss) from continuing operations 2,986 (7,580) 5,874 (7,021)
Discontinued operations, net of minority interest
and taxes -- 274 -- 563
----------- ----------- ----------- -----------
Net income (loss) $ 2,986 (7,306) 5,874 (6,458)
=========== =========== =========== ===========
Basic earnings (loss) per share:
Income (loss) from continuing operations $ 0.27 (1.51) 0.73 (1.40)
Discontinued operations, net of taxes -- 0.05 -- 0.11
----------- ----------- ----------- -----------
Net income (loss) $ 0.27 (1.46) 0.73 (1.29)
=========== =========== =========== ===========
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ 0.26 (1.51) 0.72 (1.40)
Discontinued operations, net of taxes -- 0.05 -- 0.11
----------- ----------- ----------- -----------
Net income (loss) $ 0.26 (1.46) 0.72 (1.29)
=========== =========== =========== ===========
Weighted average of shares outstanding - basic 11,222,340 5,000,532 8,062,828 5,000,532
=========== =========== =========== ===========
Weighted average of shares outstanding - diluted 11,328,595 5,000,532 8,115,125 5,000,532
=========== =========== =========== ===========
Key Financial Ratios
Loss and Loss Expense Ratio 58.6% 118.2% 58.8% 91.7%
Expense Ratio 33.3% 29.9% 33.3% 33.9%
----------- ----------- ----------- -----------
Combined Ratio 91.9% 148.1% 92.1% 125.5%
=========== =========== =========== ===========
PROCENTURY CORPORATION AND SUBSIDIARIES
(Formerly ProFinance Holdings Corporation)
Unaudited Consolidated Statements of Operations
(dollars in thousands, except per share data)
PRO FORMA PRO FORMA
THREE THREE SIX SIX
MONTHS MONTHS MONTHS MONTHS
ENDED PRO ENDED ENDED PRO ENDED
JUNE 30, FORMA JUNE 30, JUNE 30, FORMA JUNE 30,
2004 ADJ. 2004 2004 ADJ. 2004
-------- ------ -------- ------- ------- -------
Premiums earned $35,819 -- 35,819 67,877 -- 67,877
Net investment income 2,410 -- 2,410 4,375 -- 4,375
Net realized investment gains 21 -- 21 144 -- 144
------- ------ ------- ------- ------- -------
Total revenues 38,250 -- 38,250 72,396 -- 72,396
------- ------ ------- ------- ------- -------
Losses and loss expenses 20,986 -- 20,986 39,888 -- 39,888
Amortization of deferred policy acquisition costs 8,643 -- 8,643 15,493 655 (2) 16,148
Other operating expenses 3,272 -- 3,272 7,100 (355)(3) 6,745
Interest expense 345 -- 345 760 -- 760
Interest expense on the redemption of Class B shares 518 (518)(1) -- 518 (518)(1) --
------- ------ ------- ------- ------- -------
Total expenses 33,764 (518) 33,246 63,759 (218) 63,541
------- ------ ------- ------- ------- -------
Income (loss) before gain on sale of
minority interest in subsidiary, net 4,486 518 5,004 8,637 218 8,855
Gain on sale of minority interest in
subsidiary, net of transaction fees -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Income (loss) before minority
interest and income taxes 4,486 518 5,004 8,637 218 8,855
Minority interest -- -- -- -- -- --
Income tax (benefit) expense 1,500 181(4) 1,681 2,763 76 (4) 2,839
------- ------ ------- ------- ------- -------
Net income (loss) from continuing operations 2,986 337 3,323 5,874 142 6,016
Discontinued operations, net of minority interest
and taxes -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Net income (loss) $ 2,986 337 3,323 5,874 142 6,016
======= ====== ======= ======= ======= =======
Basic earnings (loss) per share:
Income (loss) from continuing operations $ 0.27 0.03 0.30 0.73 0.02 0.75
Discontinued operations, net of minority interest
and taxes -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Net income (loss) $ 0.27 0.03 0.30 0.73 0.02 0.75
======= ====== ======= ======= ======= =======
Diluted earnings (loss) per share:
Income (loss) from continuing operations $ 0.26 0.03 0.29 0.72 0.02 0.74
Discontinued operations, net of minority interest
and taxes -- -- -- -- -- --
------- ------ ------- ------- ------- -------
Net income (loss) $ 0.26 0.03 0.29 0.72 0.02 0.74
======= ====== ======= ======= ======= =======
Key Financial Ratios
Loss and Loss Expense Ratio 58.6% 58.6% 58.8% 58.8%
Expense Ratio 33.3% 33.3% 33.3% 33.7%
------- ------- ------- -------
Combined Ratio 91.9% 91.9% 92.1% 92.5%
======= ======= ======= =======
- --------------------
(1) This adjustment relates to the interest expense on the redemption of the
Class B shares that occurred simultaneously with the IPO.
(2) This adjustment relates to income received as a result of changes in
deferred policy acquisition costs that occurred with the termination of the
intercompany pooling agreement and the implementation of the loss portfolio
transfers.
(3) This adjustment relates to nonrecurring expenses related to the IPO.
(4) These adjustments represent the tax effect of the pro forma adjustment as
described above.