Exhibit 99.1
National Atlantic Reports Financial
Results for the Third Quarter and Nine Months Ended September 30, 2005
FREEHOLD, N.J.--(BUSINESS WIRE)--Nov. 11, 2005--National Atlantic Holdings
Corporation (Nasdaq: NAHC), a provider of specialized property-casualty
insurance products and related insurance services in New Jersey, today announced
financial results for the third quarter and nine months ended September 30,
2005. For the three months ended September 30, 2005, there was a net loss of
($1.6) million or ($0.15) per share, compared to $2.4 million or $0.49 cents per
share of net income for the same period in 2004. Net income for the nine months
ended September 30, 2005 was $4.3 million or $0.50 per share, compared with
$10.2 million or $2.07 per share for the nine months ended September 30, 2004.
Included in the third quarter results were compensation charges of
approximately $2.7 million (pre-tax) and reserve charges of approximately $7.7
million (pre-tax). Of the total compensation charges, $0.8 million relates to
the extension of options granted in 1995 to two current executive officers and
one current director, and $1.9 million relates to the grant of new options to
the estate of the Company's co-founder and former Vice Chairman, Skip Campion.
The effect of the compensation charges on net income was $0.17 per share, and
the effect of the reserve charges on net income was $0.49 per share. Excluding
these two items, net income for the three months ended September 30, 2005, would
have been $0.51 per share.
Total revenues for the three months ended September 30, 2005 were $47.2
million, compared to $51.2 million for the three months ended September 30,
2004. For the nine months ended September 30, 2005, total revenues were $142.8
million, compared to $150.6 million for the same period in 2004.
"In the marketplace overall, we are seeing broader and more intense price
competition in the auto sector than in the last eight years. As a result, there
are more consumers out shopping around for new coverage, and we believe they are
likely to be attracted to the cost savings and convenience provided through our
packaged High Proformance Policy," said James V. Gorman, chairman and chief
executive officer of National Atlantic Holdings Corporation. "Our three top
priorities as a Company are margin improvement, growing our customer base, and
building shareholder book value."
"For the nine months ended September 30, 2005, sales to new customers
represented more than 10 percent of total sales," Mr. Gorman said. "We are
aggressively marketing for new customers through our increased advertising
efforts, including a media campaign on local New Jersey television promoting our
partner agents, as well as sales promotion and new partner agency appointments.
We are pleased with the sales results we have achieved thus far," he said.
Premiums
Direct written premiums for the three months ended September 30, 2005
decreased by $12.4 million, or 22.8%, to $41.9 million from $54.3 million in the
comparable 2004 period. Direct written premiums for the nine months ended
September 30, 2005 increased by $10.2 million, or 6.6%, to $165.0 million from
$154.8 million in the comparable 2004 period.
Net written premiums for the three months ended September 30, 2005
increased by $0.4 million, or 1.0%, to $41.9 million from $41.5 million in the
comparable 2004 period. Net written premiums for the nine months ended September
30, 2005 increased by $17.5 million, or 12.4%, to $158.3 million from $140.8
million in the comparable 2004 period.
Net earned premiums for the three months ended September 30, 2005 decreased
by $4.8 million, or 10.0%, to $43.3 million from $48.1 million in the comparable
2004 period. Net earned premiums for the nine months ended September 30, 2005
increased by $1.4 million, or 1.1%, to $132.4 million from $131.0 million in the
comparable 2004 period.
Investment Income
Investment income for the three months ended September 30, 2005 increased
by $1.4 million, or 70.0%, to $3.4 million from $2.0 million in the comparable
2004 period. Investment income for the nine months ended September 30, 2005
increased by $3.8 million, or 76.0%, to $8.8 million from $5.0 million in the
comparable 2004 period.
Losses and loss adjustment expenses
Losses and loss adjustment expenses for the three months ended September
30, 2005 increased by $0.3 million, or 0.8%, to $36.9 million from $36.6 million
in the comparable 2004 period. Loss and loss adjustment expenses for the nine
months ended September 30, 2005 decreased by $0.6 million, or 0.6%, to $101.8
million from $102.4 million in the comparable 2004 period.
"As a result of the New Jersey Supreme Court's decision in the DiProspero
case in June of this year, we have seen an increase in claims payments for
medical treatment by individuals who have been involved in automobile accidents
but are not seriously injured," Mr. Gorman said. "To take into account the
potential for longer treatment times, we have had to increase our average claims
severity for PIP claims, and continue to make adjustments to our reserves as
necessary on an ongoing basis. It is possible that we may be ahead of our
competitors in adjusting to this trend, due to our knowledge of the local New
Jersey market," he said.
Conference Call Details
The Company will host a conference call the morning of November 11, 2005,
at 11:00 a.m. Eastern Time (ET). Following a brief presentation by management,
participants will have the opportunity to ask questions.
The conference call can be accessed by dialing (800) 591-6942 (U.S.
callers) or (617) 614-4909 (international callers). Those who intend to
participate in the teleconference should register at least ten minutes in
advance to ensure access to the call, using the passcode 83958259. The
conference call can also be accessed via webcast through the Company's web site
at www.national-atlantic.com.
The teleconference will be recorded and a replay will be available from
1:00 p.m. ET on November 11, 2005 until 12:59 p.m. ET on November 25, 2005. To
access the replay by telephone, dial (888) 286-8010 (U.S. callers) or (617)
801-6888 (international callers) and specify passcode 91359756. The
teleconference will also be archived on the Investor Relations section of NAHC's
website at www.national-atlantic.com.
About NAHC
National Atlantic Holdings Corporation (NAHC) and its subsidiaries provide
property and casualty insurance and insurance-related services to individuals,
families and businesses in the State of New Jersey.
The Company's flagship insurance product to personal insurance customers is
the "High Proformance Policy." This product is designed to attract a broad
spectrum of New Jersey residents for their private passenger automobile,
homeowners, and personal excess ("umbrella") and specialty property liability
coverage.
For businesses, the Company offers a range of commercial insurance
products, including commercial property, commercial general liability, and
business auto, as well as claims administrative services to self-insured
corporations.
National Atlantic distributes its products exclusively through independent
insurance agents, known as "Partner Agents," who are required to become
shareholders in National Atlantic in order to represent the Company as an agent.
The Company offers insurance products through its subsidiaries, Proformance
Insurance Company and Mayfair Reinsurance Company, and insurance-related
services through Riverview Professional Services and the National Atlantic
Insurance Agency.
Safe Harbor Statement Regarding Forward-Looking Statements
Management believes certain statements in this press release may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include all statements that do not relate solely to
historical or current facts, and can be identified by the use of words such as
"may," "should," "estimate," "expect," "anticipate," "intend," "believe,"
"predict," "potential," or words of similar import. Forward-looking statements
are necessarily based on estimates and assumptions that are inherently subject
to significant business, economic and competitive uncertainties and risks, many
of which are subject to change. These uncertainties and risks include, but are
not limited to, economic, regulatory or competitive conditions in the private
passenger automobile insurance carrier industry; regulatory, economic,
demographic, competitive and weather conditions in the New Jersey market;
significant weather-related or other natural or man-made disasters over which we
have no control; the effectiveness of our efforts to manage and develop our
subsidiaries; our ability to attract and retain independent agents; our ability
to maintain our A.M. Best rating; the adequacy of the our reserves for unpaid
losses and loss adjustment expenses; our ability to maintain an effective system
of internal controls over financial reporting; market fluctuations and changes
in interest rates; the ability of our subsidiaries to dividend funds to us; and
our ability to obtain additional capital in the future. As a consequence,
current plans, anticipated actions and future financial condition and results
may differ from those expressed in any forward-looking statements made by or on
behalf of the Company. Additionally, forward-looking statements speak only as of
the date they are made, and we undertake no obligation to release publicly the
results of any future revisions or updates we may make to forward-looking
statements to reflect new information or circumstances after the date hereof or
to reflect the occurrence of future events.
NATIONAL ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited) (Unaudited)
September 30, December 31,
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2005 2004
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Investments: (Note 3)
Fixed maturities available-for-sale
(amortized cost at September 30, 2005
and December 31, 2004 was $267,030 and
$210,636, respectively) $265,701 $210,830
Short-term investments (cost at
September 30, 2005 and December 31,
2004, was $9,463 and $13,820,
respectively) 9,463 13,820
Equity securities (cost at September 30,
2005 and December 31, 2004 was $18,862
and $12,719, respectively) 18,569 12,801
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Total investments 293,734 237,451
Cash and cash equivalents 39,730 15,542
Accrued investment income 3,581 2,085
Premiums receivable 58,247 31,185
Reinsurance recoverable on paid and unpaid
losses 40,313 34,677
Prepaid reinsurance 1,246 467
Receivable from Ohio Casualty, a related
party - 4,350
Receivable from Sentry - 1,250
Deferred acquisition costs 17,099 10,872
Property and equipment - Net 2,772 2,021
Federal income taxes recoverable 1,043 -
State income taxes recoverable 23 -
Other assets 5,678 7,272
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Total assets $463,466 $347,172
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Liabilities and Stockholders' Equity:
Liabilities:
Unpaid losses and loss adjustment expenses $214,101 $184,283
Unearned premiums 90,887 64,170
Accounts payable and accrued expenses 2,664 2,900
Reinsurance payable 71 4,621
Deferred income taxes 11,751 11,995
Federal income taxes payable - 1,512
State income taxes payable - 89
Other liabilities 7,918 9,763
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Total liabilities 327,392 279,333
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Stockholders' equity:
Common stock, Class A, no par value
(4,300,000 shares authorized; 0 and
2,747,743 shares issued as of September 30,
2005 and December 31, 2004) - 3,002
Common stock, Class B, no par value
(4,300,000 shares authorized; 0 and
2,194,247 shares issued as of September 30,
2005 December 31, 2004) - 28,738
Common Stock, $0.01 par value (50,000,000
shares authorized; 10,926,990, and 0
shares issued as of September 30, 2005 and
December 31, 2004) 96,928 -
Retained earnings 40,217 35,917
Accumulated other comprehensive (loss)
income (1,071) 182
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Total stockholders' equity 136,074 67,839
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Total liabilities and stockholders' equity $463,466 $347,172
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NATIONAL ATLANTIC HOLDINGS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except earnings per share data)
Three Months ended Nine Months ended
September 30, September 30,
---------- --------- ---------- -----------
(unaudited)(unaudited) (unaudited)(unaudited)
2005 2004 2005 2004
---------- --------- ---------- -----------
Revenue:
Net premiums earned $43,267 $48,062 $132,376 $131,048
Net investment income 3,448 1,969 8,798 4,961
Realized gains (losses)
on investments - net 40 108 416 1,182
Replacement carrier
revenue from related
party - - - 9,530
Replacement carrier
revenue from Sentry - 875 - 2,625
Other income 472 202 1,186 1,255
---------- --------- ---------- -----------
Total revenue 47,227 51,216 142,776 150,601
---------- --------- ---------- -----------
Costs and Expenses:
Loss and loss adjustment
expenses incurred 36,871 36,575 101,754 102,359
Acquisition expenses 7,205 7,589 26,412 26,034
Other operating and
general expenses 2,647 3,244 5,090 6,467
Stock based
compensation expense 2,749 120 2,989 360
---------- --------- ---------- -----------
Total costs
and expenses 49,472 47,528 136,245 135,220
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(Loss) Income before
income taxes (2,245) 3,688 6,531 15,381
(Benefit) Provision for
income taxes (607) 1,253 2,231 5,136
---------- --------- ---------- -----------
Net (Loss) Income $(1,638) $2,435 $4,300 $10,245
---------- --------- ---------- -----------
Net income (loss) per
share Common Stock -
Basic $(0.15) $0.49 $0.50 $2.07
Net income (loss) per
share Common Stock -
Diluted $(0.15) $0.43 $0.47 $1.82
MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5018093
CONTACT: National Atlantic Holdings Corporation
Frank J. Prudente, 732-665-1145
investorrelations@national-atlantic.com