FOR IMMEDIATE RELEASE Contact: Paul Breitnauer
Phone: 608-232-0402
CAPITOL TRANSAMERICA CORPORATION REPORTS
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SECOND QUARTER RESULTS
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MADISON, WISCONSIN, AUGUST 8, 2001 - Capitol Transamerica Corporation
(NASDAQ: CATA) reported a second quarter written premium increase of 20.8 % on
$34.3 million of gross premiums written in 2001 compared to $28.4 million for
the same three months of 2000, the sixth consecutive double digit quarterly top
line growth increase. For the six months ended June 30, gross written premiums
were $61.9 million, 19.6 % higher than the $51.8 million for the same period in
2000. While a portion of the growth is attributable to premium rate increases
on retained renewals, significant new business growth also occurred,
particularly in the property and casualty lines.
For the quarter ended June 30, 2001, the Company had a net loss of $2.2
million, or $0.20 per share (reported on a diluted share basis), versus a $3.4
million in income, or $0.31 per share, the prior year. On a year-to-date basis,
the net loss for 2001 was $0.3 million, or $0.03 per share compared to $9.1
million in income or $0.81 per share in 2000. Excluding after-tax realized
investment losses of $1.1 million, net operating income for the first six months
of 2001 was $0.8 million compared to $6.5 million in net operating income
(excluding $2.6 million in after-tax realized gains) for the same period in
2000.
Pre-tax realized investment losses for the second quarter of 2001 included
$6.2 million of other-than-temporary market value declines for certain
securities held in the Company's portfolio. Year to date, other-than-temporary
market value losses recognized pursuant to Accounting FASB Statement No. 115
equaled $8.2 million on a pre-tax basis. No such write-downs were recognized in
2000.
Net comprehensive income, which includes after-tax unrealized investment
results, was $5.2 million, or $0.47 per share, for the six months ended June 30,
2001. For the same period last year, comprehensive income was $7.4 million, or
$0.66 per share. Net investment income for the six month period increased 7.6%
from $4.5 million in 2000 to $4.8 million this year.
The Company's combined ratio for the first six months of 2001 was 105.7%
versus 87.6% for the first half of 2000. For comparison purposes, the overall
industry average combined ratio was 106.2% for the first quarter of 2001.
There were several causes for the weaker underwriting results during the
quarter. Similar to prior periods, the contract surety loss experience
continued to develop adversely though signs of stabilization occurred during the
second quarter. In addition, unusually high losses in the property lines
occurred in the past three months due to an unexpected high level of claims
related to storm damage in the Midwest. Another factor is that the Company's
written premium growth has not yet been fully experienced as earnings given that
the earned premium increase year to date is 12.4 % compared to the 19.6 %
written premium growth.
Book value per share increased to $13.57 as of June 30, 2001, from $13.23
and $12.34 at December 31, 2000, and June 30, 2000, respectively. Shareholders'
equity rose 2.0% from $145.7 million at December 31, 2000 to $148.6 million at
June 30, 2001. Total assets increased 4.5% to $296.1 million from $283.3
million during the same six-month period. The Company distributed an $0.08
dividend per share during the second quarter compared to $0.07 per share for the
same quarter in 2001.
Company Chairman George A. Fait stated that "We continue to be pleased at
our top line growth as well as our increased book value per share figure as of
June 30. On the down side, we have written down several of our equity holdings
due to stock market declines in the past year. Though already fully written
down under generally accepted accounting principles on our balance sheet,
recognizing these declines as other-than-temporary has negatively impacted our
bottom line profitability thus far in 2001."
"Additionally, persistent loss development in the contract bond portion of
our fidelity and surety line in addition to early summer storm damage losses
resulted in disappointing underwriting results thus far in 2001. To attain our
corporate goals, management continues to focus on growth in the more profitable
lines as well as forcefully managing claims activity where needed."
Capitol Transamerica Corporation is an insurance holding company operating
nationally and writing specialty lines of commercial property and casualty
policies as well as fidelity and surety coverages through its subsidiary
companies Capitol Indemnity Corporation and Capitol Specialty Insurance
Corporation. A third subsidiary, Capitol Facilities Corporation, is a
non-insurance entity available for other business opportunities. The Capitol
Transamerica Group operates in 37 states and is rated A+ (Superior) by A.M. Best
Company, Inc., an independent organization that analyzes the insurance industry.
The Company recently announced the signing of a merger agreement under which
Alleghany Corporation (NYSE: Y) will acquire Capitol Transamerica at a $16.50
per share cash price, subject to shareholder and regulatory approvals. Details
of this press release, additional financial information, and recent filings can
be found at the Company's website http://www.captrans.com through the NASDAQ
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Easy Links page.
SAFE HARBOR STATEMENT - Some of the statements in this news release, as
well as statements by the company in periodic press releases and oral statements
made by the company's officials to analysts and shareholders in the course of
presentations about the company, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, estimates subject to
change in circumstances, uncertainties and other factors that may cause the
actual results, performance or achievements of the company to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements.
FINANCIAL HIGHLIGHTS FOLLOW
CAPITOL TRANSAMERICA CORPORATION
SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE)
Six months ended Three months ended
June 30, June 30,
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2001 2000 2001 2000
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REVENUES
Gross premiums written $61,884 $51,758 $34,311 $28,393
Net premiums written 54,732 47,896 30,342 25,948
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Net premiums earned $47,320 $42,081 $24,477 $21,414
EXPENSES
Claims and claim expenses 33,590 22,046 21,334 14,207
Other underwriting expenses 18,217 15,732 9,325 7,802
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Total Losses and Expenses Incurred 51,807 37,778 30,659 22,009
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Underwriting (loss) income (4,487) 4,303 (6,182) (595)
Investment income 4,843 4,503 2,389 2,244
Realized investment (losses) gains (1,748) 3,979 75 2,933
Other income 268 157 142 86
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(Loss) Income Before Income Tax (1,124) 12,942 (3,576) 4,668
Income tax (benefit) expense (811) 3,869 (1,363) 1,276
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NET (LOSS) INCOME $ (313) $ 9,073 $(2,213) $ 3,392
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(LOSS) EARNINGS PER SHARE- BASIC $ (0.03) $ 0.81 $ (0.20) $ 0.31
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(LOSS) EARNINGS PER SHARE- DILUTED $ (0.03) $ 0.81 $ (0.20) $ 0.31
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COMPARATIVE FINANCIAL HIGHLIGHTS - SIX MONTHS ENDED JUNE 30,
2001 2000 1999 1998 1997
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PER SHARE INFORMATION:
Book value per share $ 13.57 $ 12.34 $ 13.10 $ 12.95 $ 11.18
(Loss) earnings per share - diluted (0.03) 0.81 1.00 0.93 0.24
COMPANY STATISTICS:
Gross premiums written $ 61,884 $ 51,758 $ 44,659 $ 46,464 $ 47,449
Net investment income 4,843 4,503 4,439 4,583 4,120
Realized investment (losses) gains (1,748) 3,979 5,260 7,538 379
(Loss) income before income tax (1,124) 12,942 16,413 14,692 3,069
Net (loss) income (313) 9,073 11,257 10,493 2,664
Net operating earnings 823 6,487 7,838 5,593 2,418
Comprehensive income 5,177 7,406 7,533 7,213 10,360
Cash and invested assets 245,144 215,826 239,510 243,858 208,948
Total assets 296,123 270,022 284,729 288,942 252,218
Shareholders' investment 148,595 136,800 147,627 145,307 124,692
Dividends paid 1,754 1,565 1,574 1,569 2,676
INSURANCE OPERATING RATIOS, STATUTORY BASIS:
Loss and loss adjustment expenses 71.1% 52.6% 47.9% 60.4% 61.9%
Underwriting expenses 34.6% 35.0% 36.7% 33.7% 34.8%
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Combined ratios 105.7% 87.6% 84.6% 94.1% 96.7%
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CAPITOL TRANSAMERICA CORPORATION
SELECTED FINANCIAL DATA
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE)
June 30, December 31, June 30,
2001 2000 2000
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ASSETS
Investments
Available-for-sale investments, at fair value
U.S. Government bonds (cost $28, $34 and $37, respectively) $ 30 $ 36 $ 38
State and municipal bonds (cost $94,846, $84,236 and
$77,473, respectively) 99,652 89,732 80,913
Corporate bonds (cost $1,095, $1,100 and $1,119, respectively) 1,072 1,074 1,091
Common stock (cost $112,753, $123,504 and
$125,727, respectively) 116,991 119,413 114,457
Preferred stock (cost $5,344, $6,470 and $5,810, respectively) 5,195 5,516 5,007
Investment real estate 11,385 11,009 10,800
Short-term investments 6,249 5,587 2,398
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Total Investments 240,574 232,367 214,704
Cash 4,570 3,642 1,122
Receivables 31,100 28,942 35,494
Other assets 19,879 18,307 18,702
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TOTAL ASSETS $296,123 $283,258 $270,022
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LIABILITIES
Reserves for losses and loss adjustment expenses $ 77,401 $ 77,981 $ 77,858
Unearned premiums 53,590 45,588 45,540
Other liabilities 16,537 13,989 9,824
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TOTAL LIABILITIES $147,528 $137,558 $133,222
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SHAREHOLDERS' EQUITY
Common stock, $1.00 par value, authorized 15,000
shares, issued 11,561, 11,559 and 11,558 shares, respectively $ 11,561 $ 11,559 $ 11,558
Paid-in surplus 22,745 22,733 22,728
Accumulated other comprehensive income (loss), net of
deferred taxes of $3,107, $149 and ($3,031), respectively 5,767 278 (5,629)
Retained earnings 113,084 114,944 111,085
Less treasury stock, 611, 550 and 476 shares,
respectively, at cost (4,562) (3,814) (2,942)
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TOTAL SHAREHOLDERS' EQUITY 148,595 145,700 136,800
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $296,123 $283,258 $270,022
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BOOK VALUE PER SHARE $ 13.57 $ 13.23 $ 12.34
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SHARES OUTSTANDING 10,950 11,009 11,082
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