Exhibit 99.1
Affirmative Insurance Holdings, Inc. Announces 2005 Second Quarter
and First Half Results
ADDISON, Texas--(BUSINESS WIRE)--Aug. 11, 2005--Affirmative
Insurance Holdings, Inc. (Nasdaq:AFFM), a producer and provider of
personal non-standard automobile insurance, today announced financial
results for the quarter and six months ended June 30, 2005.
Highlights for the Company's 2005 second quarter and six months
included:
-- Net income for the second quarter of 2005 was $6.0 million, an
increase of 8.8% compared to $5.5 million for the second
quarter of 2004; net income for the six months ended June 30,
2005 was $14.0 million, an increase of 9.4% compared to $12.8
million for the same period last year.
-- Earnings per share for the second quarter of 2005 were $0.36
per diluted share with an annualized return on equity of
11.9%; earnings per share for the six months ended June 30,
2005 were $0.83 per diluted share with an annualized return on
equity of 14.1%.
-- Total revenues for the second quarter of 2005 were $98.8
million, an increase of 47.0% as compared to total revenue of
$67.2 million for the same period of 2004; total revenues for
the six months ended June 30, 2005 were $185.9 million, an
increase of 33.4% compared to $139.4 million for the same
period last year.
-- Book value per share was $12.81 as of June 30, 2005, as
compared to book value per share of $12.19 as of December 31,
2004.
"In the second quarter we continued to improve earnings and
revenues in an increasingly competitive environment," said Thomas E.
Mangold, chief executive officer of Affirmative Insurance Holdings,
Inc. "In the face of deteriorating conditions in some of our markets,
we remained steadfast to our strategy of maintaining underwriting
discipline to sustain our margins. We will continue to develop our
multiple distribution channel strategy throughout varying market
conditions and make acquisitions to position ourselves for profitable
growth."
Second Quarter Financial Results
Second quarter 2005 consolidated net income was $6.0 million or
$0.36 per diluted share, up 8.8% from net income of $5.5 million or
$0.47 per diluted share for the same period in 2004. Increases in
consolidated net income were primarily due to increased retention of
gross premium written in the insurance companies at favorable margins.
Weighted average diluted shares for the second quarter of 2005
increased to 16.4 million compared to 11.8 million for the same
quarter of the prior year, as a result of the Company's initial public
offering in July 2004, partially offset by the repurchase of 2.0
million shares in June 2005.
Consolidated revenues for the three months ended June 30, 2005
were $98.8 million, an increase of $31.6 million, or 47.0%, as
compared to revenues of $67.2 million for the three months ended June
30, 2004. The increase in consolidated revenues was primarily due to
increased retention of gross premiums written and increased invested
assets in the insurance company operations.
Total controlled premium decreased $20.2 million, or 20.9%, to
$76.6 million in the second quarter of 2005 as compared to total
controlled premium of $96.8 million in the second quarter of 2004. In
the Company's Retail distribution channel, total controlled premium
decreased $3.1 million, or 11.4%, to $24.3 million in the second
quarter of 2005, principally due to decreases in its Midwest and Texas
Retail Operations, partially offset by production at its Florida
Retail Operation which was acquired in December of 2004. Total
controlled premium from the Company's Independent Agency distribution
channel decreased $5.6 million, or 13.5%, to $35.9 million primarily
due to decreases at its Florida Underwriting Agency. Total controlled
premium from unaffiliated underwriting agencies decreased by $11.5
million, or 41.4%, to $16.4 million in the second quarter of 2005,
primarily due to the run-off of programs in California, Alabama and
Georgia.
Revenues from agency operations increased 2.6% to $41.4 million
with a pretax margin of 14.7%, compared to revenues of $40.3 million
with a pretax margin of 15.8% for the second quarter of 2004. Net
income from agency operations decreased 7.5% to $3.6 million from $3.9
million in the same quarter of the prior year.
Revenues from insurance company operations for the second quarter
of 2005 were $85.1 million, an increase of 66.2% as compared to second
quarter 2004 revenues of $51.2 million. The combined ratio for the
second quarter of 2005 was 95.6% as compared to 94.7% for the second
quarter of 2004. Net income from insurance company operations
increased 64.1% to $3.2 million from $2.0 million in the same quarter
of the prior year.
Six Months Financial Results
For the six months ended June 30, 2005 consolidated net income was
$14.0 million or $0.83 per diluted share, up 9.4% from $12.8 million
or $1.09 per diluted share for the same period in 2004. Weighted
average diluted shares for the first half of 2005 were 16.8 million
shares compared to 11.7 million for the same period last year.
Consolidated revenues for the six months ended June 30, 2005 were
$185.9 million, an increase of $46.5 million, 33.4% compared to $139.4
million for the six months ended June 30, 2004. The increase in
consolidated revenues was primarily due to increased retention of
gross premiums written and increased invested assets in the insurance
company operations.
Total controlled premium for the first half of 2005 was $189.9
million, a decrease of $25.7 million, or 11.9%, as compared to $215.6
million for the same period last year. In the Company's Retail
distribution channel, first half 2005 total controlled premium was up
slightly to $65.3 million compared to $65.0 million for the first half
of 2004, primarily due to increases in its Texas and Florida Retail
Operations, partially offset by decreases in its Midwest Retail
Operation. In the Company's Independent Agency distribution channel,
total controlled premium decreased $12.5 million, or 13.1%, to $82.9
million compared to $95.4 million for the same period in 2004,
principally due to decreases in its Florida Underwriting Agency. Total
controlled premium from unaffiliated underwriting agencies decreased
by $13.6 million, or 24.5%, to $41.6 million compared to $55.2 million
for the same period last year, primarily due to the run-off of
programs in California, Alabama and Georgia.
Revenues for the first half of 2005 for agency operations were
$89.1 million, an increase of $6.2 million, or 7.5%, as compared to
$82.9 million of revenues for the first half of 2004. Pretax margin
for the six months ended June 30, 2005 was 16.0%, as compared to the
17.5% for the six months ended June 30, 2004. Net income from agency
operations for the six months ended June 30, 2005 was $8.8 million, a
decrease of 1.5% from $9.0 million for the same period last year.
Revenues from insurance company operations for the six months
ended June 30, 2005 were $161.1 million, an increase of $55.4 million,
or 52.5% from the $105.7 million for the six months ended June 30,
2004. The combined ratio for the first half of 2005 was 95.2% compared
to 93.9% for the first half of 2004. Net income for the six months
ended June 30, 2005 was $6.6 million, an increase of $2.1 million, or
47.4%, as compared to net income of $4.5 million for the six months
ended June 30, 2004.
Recent Events
Affirmative announced on July 19, 2005 that it had completed the
acquisition of the assets of a personal non-standard auto insurance
underwriting agency with operations in Michigan. The agency generates
non-standard auto insurance premiums of approximately $20 million
annually. Affirmative paid $600,000 at closing to the former owners
and assumed certain liabilities for processing of claims and providing
customer service for the existing business, and may pay up to an
additional $1.3 million if certain performance criteria are met.
Affirmative announced on June 1, 2005 that it had completed the
purchase of 2.0 million shares of its common stock from Vesta
Insurance Group, Inc. ("Vesta") at a price of $14.00 per share. The
transaction was funded with the proceeds from a private placement of
trust preferred securities and cash on hand.
In relation to the purchase of shares from Vesta, Affirmative's
newly formed Delaware trust subsidiary Affirmative Insurance Holdings
Statutory Trust II completed the private placement of $25.0 million of
30-year floating rate trust preferred securities. The trust preferred
securities bear an initial interest rate of 7.792 percent until June
15, 2010, at which time the securities will adjust quarterly to the 90
day LIBOR rate plus 355 basis points.
Affirmative Insurance Holdings, Inc. received a $5.0 million
dividend from Affirmative Insurance Company in the second quarter. The
policyholders' surplus of Affirmative Insurance Company was $132.5
million as of June 30, 2005 as compared to $133.8 million as of March
31, 2005.
Guidance and Supplemental Information
Based on its current expectations of market conditions,
Affirmative is adjusting its guidance for 2005 and estimates full year
earnings to be in the range of $1.55 to $1.70 per diluted share from
its earlier guidance of $1.75 to $1.85 per diluted share. This
guidance is based on 15.9 million diluted shares, as compared to 17.1
million shares in the earlier guidance, and does not include the
impact from any acquisitions that may occur in the future.
To provide a more complete understanding of Affirmative's
financial results, the Company has posted supplemental financial data
on the investor relations portion of the Company's Web site,
www.affirmativeholdings.com. The data pertains to second quarter
financial results for 2004 and 2005.
Conference call
Affirmative will hold a conference today, Thursday, August 11th,
at 11:00 a.m. Eastern Time, 10:00 a.m. Central Time. Following a brief
presentation, participants will have the opportunity to ask questions.
To participate in the call, dial 1-800-798-2796 (international dial
1-617-614-6204), 10 minutes before the conference call begins and use
passcode 12219238.
A real-time audio webcast of the conference call will also be
available. To listen to the live call, select the webcast icon from
the investor relations section of Affirmative's Web site
www.affirmativeholdings.com at least 15 minutes before the start of
the call to register, download and install any necessary audio
software. Individuals accessing the audio webcast will be "listen
only" and will not have the ability to participate in the Q&A session.
A digital replay will be available one hour after the conclusion
of the call. Interested individuals can access the webcast replay at
www.affirmativeholdings.com, by clicking on the webcast link. The
webcast replay will be available for 30 days after the call. Phone
replay will be available through August 19th and may be accessed by
dialing 1-888-286-8010 (international dial 1-617-801-6888), then enter
passcode 58922291.
About Affirmative Insurance Holdings, Inc.
Headquartered in Addison, Texas, Affirmative Insurance Holdings,
Inc., is a producer and provider of personal non-standard automobile
insurance policies to individual consumers in highly targeted
geographic markets. Affirmative currently offers products and services
in 12 states, including Texas, Illinois, California and Florida.
Forward-Looking Statements Disclosure
Certain information in this news release and other statements or
materials are not historical facts but are forward-looking statements
relating to such matters as: assumed future results of the Company's
business; financial condition; liquidity; results of operations;
plans; and objectives. In connection with the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company
provides the following cautionary remarks regarding important factors
which, among others, could cause the Company's actual results and
experience to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements.
The risks and uncertainties that may affect the operations,
performance, results of the Company's business, and the other matters
referred to above include, but are not limited to: general volatility
of the non-standard personal automobile and reinsurance markets; the
market price of our common stock; changes in business strategy; severe
weather conditions; availability, terms and deployment of capital; the
degree and nature of competitor product and pricing activity; changes
in the non-standard personal automobile insurance industry, interest
rates or the general economy; identification and integration of
potential acquisitions; claims experience; availability of qualified
personnel; and the loss of one or more members of the Company's
management team.
Affirmative Insurance Holdings, Inc.
Consolidated Statements of Operations - Unaudited
(dollars in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Revenues
Net premiums earned $77,441 $43,738 $145,377 $90,948
Commissions and fees 19,990 23,111 37,892 47,872
Net investment income 1,353 363 2,610 590
Realized gains (losses) 3 (3) 6 (20)
----------- ----------- ----------- -----------
Total revenues 98,787 67,209 185,885 139,390
----------- ----------- ----------- -----------
Expenses
Losses and loss
adjustment expenses 51,217 28,149 95,784 59,857
Policy acquisition and
operating expenses 37,034 29,632 66,551 58,131
Interest expense 796 174 1,375 391
----------- ----------- ----------- -----------
Total expenses 89,047 57,955 163,710 118,379
----------- ----------- ----------- -----------
Net income before
income taxes,
minority interest
and equity interest
in unconsolidated
subsidiaries 9,740 9,254 22,175 21,011
Income tax expense 3,452 3,311 7,858 7,518
Minority interest, net
of income taxes 326 212 359 307
Equity interest in
unconsolidated
subsidiaries, net of
income taxes - 250 - 423
----------- ----------- ----------- -----------
Net income $5,962 $5,481 $13,958 $12,763
=========== =========== =========== ===========
Net income per common
share - Basic $0.37 $0.47 $0.84 $1.10
=========== =========== =========== ===========
Net income per common
share - Diluted $0.36 $0.47 $0.83 $1.09
=========== =========== =========== ===========
Weighted average shares
- Basic 16,218,769 11,671,883 16,530,619 11,627,149
Weighted average shares
- Diluted 16,434,410 11,770,892 16,774,473 11,735,771
Affirmative Insurance Holdings, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
June 30, December 31,
2005 2004
----------- -------------
(Unaudited)
Assets
Fixed maturities - available for sale $162,307 $157,666
Short-term investments - 1,995
-------------------------
162,307 159,661
Cash and cash equivalents 41,360 24,096
Fiduciary and restricted cash 24,470 16,267
Premiums and fees receivable 114,345 107,411
Commissions receivable 9,964 11,890
Receivable from reinsurers 46,048 75,403
Deferred acquisition costs 27,796 19,118
Other assets 110,388 107,074
----------- -------------
Total assets $536,678 $520,920
=========== =============
Liabilities and Stockholders' Equity
Liabilities
Reserves for losses and loss adjustment
expenses 113,068 93,030
Unearned premium 112,242 90,695
Amounts due reinsurers 15,187 43,167
Deferred revenue 27,948 24,478
Other liabilities 77,822 64,244
----------- -------------
Total liabilities 346,267 315,614
----------- -------------
Stockholders' equity
Common stock 169 168
Additional paid-in capital 152,049 151,752
Treasury stock (28,000) -
Accumulated other comprehensive income
(loss) (226) 251
Retained earnings 66,419 53,135
----------- -------------
Total stockholders' equity 190,411 205,306
----------- -------------
Total liabilities and stockholders'
equity $536,678 $520,920
=========== =============
CONTACT: Affirmative Insurance Holdings, Inc., Addison
Chief Financial Officer
Timothy A. Bienek, 972-728-6318