Exhibit 99.1
HARLEYSVILLE GROUP REPORTS FIRST QUARTER 2005 RESULTS
HARLEYSVILLE, Pa., April 28 /PRNewswire-FirstCall/ -- Harleysville Group
Inc. (Nasdaq: HGIC) today reported diluted operating income of $0.39 per share
for the first quarter of 2005, compared to $0.28 per share in the first quarter
of 2004. Operating income is a non-GAAP financial measure defined by the company
as net income excluding after-tax realized gains and losses on investments.
The company reported diluted net income of $0.39 per share in the first
quarter of 2005, compared to $0.55 per share in the first quarter of 2004. First
quarter 2005 net income included no realized investment gains, compared to $0.27
per share of realized gains in the first quarter of 2004.
"Our first quarter results continued to demonstrate the consistent progress
we delivered throughout 2004, reflecting the sharpened focus on improving our
operations," commented Michael L. Browne, Harleysville Group's president and
chief executive officer. "We again successfully grew our commercial lines
business, and retention levels remained solid. Personal lines, too, has shown
loss ratio improvement from a year ago. As we've noted before, these are
positive indicators of the strength of our agency base and our solid
relationships with our agents. Underlying all of these results is our continuing
sound financial position, which is highlighted by a solid capital base and a
strong balance sheet."
Harleysville Group's overall statutory combined ratio* was 104.2 percent in
the first quarter of 2005, compared to 107.2 percent in the first quarter of
2004.
First quarter net written premiums were $210.4 million in 2005, compared to
$206.0 million in 2004.
First quarter pretax investment income increased 1 percent to $21.8 million,
while after-tax investment income was virtually unchanged at $16.7 million.
Operating cash flow for the first quarter was $29.6 million.
Commercial lines -- Net written premiums in commercial lines increased 5
percent in the first quarter of 2005 to $176.7 million. The commercial lines
statutory combined ratio was 104.3 percent in the first quarter of 2005, versus
104.7 percent in the first quarter of 2004.
Personal lines -- Harleysville Group's personal lines statutory combined
ratio was 103.7 percent in the first quarter of 2005, versus 116.2 percent
during the first quarter of 2004. Net written premiums decreased 11 percent to
$33.8 million in the first quarter of 2005.
Outlook -- "We remain on course to achieve our goal of underwriting
profitability - that is, producing an overall combined ratio under 100 percent
in 2006," Browne said. "Despite signs of an increasingly competitive market, we
will stay focused in 2005 on satisfying our customers, retaining our best
existing business, obtaining profitable new business and improving our overall
loss ratio. We will maintain our discipline and will not compromise underwriting
quality to chase a near-term growth target."
Webcast -- The company will host a live Webcast today, April 28, 2005, at
9:00 a.m. (ET) to discuss its first quarter results. The Webcast and a replay
will be available from the Investors section of the company's Web site
(http://www.harleysvillegroup.com).
GAAP and non-GAAP financial measures -- The company uses a non-GAAP
financial measure called "operating income" that management believes is useful
to investors because it illustrates the performance of normal, ongoing
operations, which is important in understanding and evaluating the company's
financial condition and results of operations. While this measure is utilized by
investors to evaluate performance, it is not a substitute for the U.S. GAAP
financial measure of net income. Therefore, a reconciliation of this non-GAAP
financial measure to the U.S. GAAP financial measure of net income is provided
following the Consolidated Statements of Income contained in this release.
Management also uses operating income for goal setting, determining employee and
senior management compensation, and evaluating performance.
Corporate profile -- Harleysville Insurance is a leading regional provider
of insurance products and services for small and mid-sized businesses, as well
as for individuals, and ranks among the top 60 U.S. property/casualty insurance
groups based on net written premiums. Harleysville Mutual Insurance Company owns
56 percent of Harleysville Group Inc. (Nasdaq: HGIC), a publicly traded holding
company for nine regional property/casualty insurance companies collectively
rated A- (Excellent) by A.M. Best Company. Harleysville Insurance, which
distributes its products exclusively through independent insurance agencies,
currently operates in 32 eastern and Midwestern states. Further information can
be found on the company's Web site at http://www.harleysvillegroup.com.
* "Statutory combined ratio" is a non-GAAP measure of underwriting
profitability and is based on numbers determined under statutory accounting
practices as filed with state insurance regulators. It is the sum of the ratio
of losses to premiums earned plus the ratio of underwriting expenses to premiums
written. A ratio of less than 100 percent indicates underwriting profitability.
Certain of the statements contained herein (other than statements of
historical facts) are forward-looking statements. Such forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995 and include estimates and assumptions
related to economic, competitive and legislative developments. These forward-
looking statements are subject to change and uncertainty that are, in many
instances, beyond the company's control and have been made based upon
management's expectations and beliefs concerning future developments and their
potential effect on Harleysville Group Inc. There can be no assurance that
future developments will be in accordance with management's expectations so that
the effect of future developments on Harleysville Group will be those
anticipated by management. Actual financial results including premium growth and
underwriting results could differ materially from those anticipated by
Harleysville Group depending on the outcome of certain factors, which may
include changes in property and casualty loss trends and reserves; catastrophe
losses; the insurance product pricing environment; changes in applicable law;
government regulation and changes therein that may impede the ability to charge
adequate rates; changes in accounting principles; performance of the financial
markets; fluctuations in interest rates; availability and price of reinsurance;
and the status of the labor markets in which the company operates.
Harleysville Group Inc. and Subsidiaries
FINANCIAL HIGHLIGHTS
Quarter ended March 31
-----------------------------
(in thousands, except per share data) 2005 2004
- --------------------------------------------- ------------ ------------
OPERATING RESULTS
Diluted earnings per common share:
Operating income* $ 0.39 $ 0.28
Realized gains, net of tax 0.27
Net income $ 0.39 $ 0.55
Cash dividend per common share $ 0.17 $ 0.17
FINANCIAL CONDITION
March 31, 2005 December 31, 2004
----------------- -----------------
Assets $ 2,705,101 $ 2,718,063
Shareholders' equity $ 580,887 $ 587,924
Per common share $ 19.17 $ 19.47
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended March 31
---------------------------
(in thousands, except per share data) 2005 2004
- ---------------------------------------- ------------ ------------
REVENUES:
Premiums earned $ 206,680 $ 206,948
Investment income, net
of investment expense 21,761 21,642
Realized investment gains 12,488
Other income 4,283 4,564
Total revenues 232,724 245,642
LOSSES AND EXPENSES:
Losses and loss settlement expenses 147,868 151,110
Amortization of deferred policy
acquisition costs 50,918 50,688
Other underwriting expenses 16,355 19,638
Interest expense 1,620 1,577
Other expenses 1,507 1,419
Total expenses 218,268 224,432
Income before income taxes 14,456 21,210
Income taxes 2,474 4,717
Net income $ 11,982 $ 16,493
Weighted average number of shares
outstanding:
Basic 30,253,967 29,960,760
Diluted 30,399,346 30,048,135
Per common share:
Basic earnings $ 0.40 $ 0.55
Diluted earnings $ 0.39 $ 0.55
RECONCILIATION TO OPERATING INCOME:
Net income $ 11,982 $ 16,493
Less realized investment gains, net
of taxes 8,117
Operating income $ 11,982 $ 8,376
These financial figures are unaudited.
* Operating income is a non-GAAP financial measure defined by the company as
net income excluding after-tax realized gains and losses on investments.
Harleysville Group Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data) March 31, 2005* December 31, 2004
- ---------------------------------------- ----------------- -----------------
ASSETS
Investments:
Fixed maturities:
Held to maturity, at
amortized cost (fair
value $502,155
and $519,400) $ 493,177 $ 501,322
Available for sale, at
fair value (amortized
cost $1,217,402
and $1,156,640) 1,241,391 1,201,524
Equity securities, at fair
value (cost $112,034 and
$110,495) 148,975 150,249
Short-term investments, at
cost, which approximates
fair value 75,347 113,822
Total investments 1,958,890 1,966,917
Cash 2,893 328
Premiums in course of collection 139,335 141,601
Reinsurance receivable 182,872 193,209
Accrued investment income 21,990 23,236
Deferred policy acquisition costs 102,271 100,755
Prepaid reinsurance premiums 32,331 32,675
Property and equipment, net 18,488 20,891
Deferred income taxes 62,065 53,137
Securities lending collateral 139,226 139,486
Other assets 44,740 45,828
Total assets $ 2,705,101 $ 2,718,063
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss
settlement expenses $ 1,343,517 $ 1,317,735
Unearned premiums 445,088 441,697
Accounts payable and accrued
expenses 76,481 99,098
Securities lending
obligation 139,226 139,486
Debt 119,625 119,625
Due to affiliate 277 12,498
Total liabilities 2,124,214 2,130,139
Shareholders' equity:
Preferred stock, $1 par
value; authorized 1,000,000
shares; none issued
Common stock, $1 par value,
authorized 80,000,000 shares;
issued 31,704,753 and
31,589,474 shares; outstanding
30,306,844 and 30,191,565 shares 31,705 31,589
Additional paid-in capital 163,608 161,689
Accumulated other comprehensive
income 26,641 42,051
Retained earnings 384,113 377,282
Deferred compensation (693) (200)
Treasury stock, at cost, 1,397,909
shares (24,487) (24,487)
Total shareholders'
equity 580,887 587,924
Total liabilities and shareholders'
equity $ 2,705,101 $ 2,718,063
*These financial figures are unaudited.
Harleysville Group Inc. and Subsidiaries
SUPPLEMENTARY FINANCIAL ANALYSTS' DATA
Quarter ended March 31
-----------------------------
(dollars in thousands) 2005 2004
- ---------------------------------------- ------------ ------------
Net premiums written* $ 210,414 $ 206,026
Statutory surplus* $ 518,097 $ 488,264
Pretax investment income $ 21,761 $ 21,642
Related federal income taxes 5,033 4,864
After-tax investment income $ 16,728 $ 16,778
SEGMENT INFORMATION
Quarter ended March 31
-----------------------------
(dollars in thousands) 2005 2004
- ---------------------------------------- ------------ ------------
Revenues:
Premiums earned:
Commercial lines $ 167,313 $ 162,320
Personal lines 39,367 44,628
Total premiums earned 206,680 206,948
Net investment income 21,761 21,642
Realized investment gains 12,488
Other 4,283 4,564
Total revenues $ 232,724 $ 245,642
Income before income taxes:
Underwriting gain (loss):
Commercial lines $ (10,238) $ (9,648)
Personal lines 417 (4,860)
SAP underwriting loss (9,821) (14,508)
GAAP adjustments 1,360 20
GAAP underwriting loss (8,461) (14,488)
Net investment income 21,761 21,642
Realized investment gains 12,488
Other 1,156 1,568
Income before income taxes $ 14,456 $ 21,210
Income taxes on net investment income $ 5,033 $ 4,864
Income tax benefit on remaining loss (2,559) (147)
Total income taxes $ 2,474 $ 4,717
Effective tax rate on:
Net investment income 23.1% 22.5%
Net income 17.1% 22.2%
These financial figures are unaudited.
*Statutory data is a non-GAAP measure. Because it is prepared in accordance
with statutory accounting rules as defined by the National Association of
Insurance Commissioners' Accounting Practices and Procedures Manual, a
reconciliation to GAAP is not required.
Harleysville Group Inc. and Subsidiaries
STATUTORY DATA BY LINE OF BUSINESS*
Quarter ended March 31
-----------------------------
(dollars in thousands) 2005 2004
- ---------------------------------------- ------------ ------------
Net premiums written:
Commercial:
Automobile $ 57,289 $ 56,761
Workers' compensation 26,519 26,740
Commercial multi-peril 75,080 68,198
Other commercial 17,775 16,481
Total commercial $ 176,663 $ 168,180
Personal:
Automobile $ 19,733 $ 23,201
Homeowners 12,092 12,968
Other personal 1,926 1,677
Total personal $ 33,751 $ 37,846
Total personal and commercial $ 210,414 $ 206,026
Combined ratios:
Commercial:
Automobile 100.1% 103.1%
Workers' compensation 125.7% 122.9%
Commercial multi-peril 105.2% 105.1%
Other commercial 84.9% 81.7%
Total commercial 104.3% 104.7%
Personal:
Automobile 106.1% 118.3%
Homeowners 102.9% 109.3%
Other personal 87.8% 147.6%
Total personal 103.7% 116.2%
Total personal and commercial 104.2% 107.2%
Losses paid $ 111,402 $ 134,060
Net catastrophe losses incurred $ 997 $ 2,625
These financial figures are unaudited.
*Statutory data is a non-GAAP measure. Because it is prepared in accordance
with statutory accounting rules as defined by the National Association of
Insurance Commissioners' Accounting Practices and Procedures Manual, a
reconciliation to GAAP is not required.
SOURCE Harleysville Group Inc.
-0- 04/28/2005
/CONTACT: Mark Cummins (Investors), +1-215-256-5025,
mcummins@harleysvillegroup.com, or Randy Buckwalter (Media), +1-215-256-5288,
rbuckwalter@harleysvillegroup.com, both of Harleysville Group/
/Web site: http://www.harleysvillegroup.com /
_