Meadowbrook Insurance Group, Inc. Reports Third Quarter Results
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SOUTHFIELD, Mich., Nov. 2 /PRNewswire-FirstCall/ --
-- Net operating income up 6.9% to $11.7 million, or $0.20 per diluted
share
-- Net income up 162.5% to $11.0 million, or $0.19 per diluted share
-- Combined Ratio of 95.3%
-- Gross Written Premium up 40.6%
-- Book Value per share of $8.91, up 16.6% year to date
-- Increased quarterly dividend to $0.03 per share
Third Quarter 2009 Highlights and Overview:
-- Net operating income, a non-GAAP measure, increased 6.9% to $11.7
million, or $0.20 per diluted share on 57.6 million shares, in the third
quarter of 2009 compared to $10.9 million, or $0.23 per diluted share on
47.6 million shares, in the third quarter of 2008.
-- Net income increased $6.8 million to $11.0 million, or $0.19 per diluted
share, in the third quarter of 2009 compared to $4.2 million, or $0.09
per diluted share for the third quarter of 2008.
-- The combined ratio was 95.3% in the third quarter of 2009, compared to
96.7% for the third quarter of 2008.
-- Book value per share increased by 16.6% year to date to $8.91 per share
compared to $7.64 per share at December 31, 2008. Unrealized gains, net
of tax, increased book value by $0.68 per share since December 31, 2008.
-- Increased quarterly dividend by $0.01 per share to $0.03 per share.
September 30, 2009 Year to Date Highlights:
-- 2009 year to date net operating income, a non-GAAP measure, increased
50.5% to $40.0 million, or $0.69 per diluted share on 57.5 million
shares, compared to $26.5 million, or $0.65 per diluted share on 40.7
million shares, for the same period in 2008.
-- 2009 year to date net income increased 83.9% to $36.2 million, or $0.63
per diluted share, compared to $19.7 million, or $0.48 per diluted share
for the same period in 2008.
-- The 2009 year to date combined ratio improved to 91.9% compared to 94.0%
for the same period in 2008.
-- Gross written premiums for the first nine months of 2009 grew by 58.5%
to $505.9 million compared to $319.3 for the period ended September 30,
2008.
Meadowbrook Insurance Group, Inc. (NYSE: MIG) reported that third quarter net operating income, a non-GAAP measure, grew by 6.9% to $11.7 million, or $0.20 per diluted share, compared to $10.9 million, or $0.23 per diluted share in the third quarter of 2008. Net income increased $6.8 million to $11.0 million, or $0.19 per diluted share in the third quarter of 2009 compared to $4.2 million, or $0.09 per diluted share in the third quarter of 2008. Third quarter 2009 net income includes after-tax losses of $3.7 million related to isolated hail and tornado storm losses and one large fire loss. Third quarter 2008 net income included the after-tax impact of $5.4 million in losses related to Hurricanes Gustav and Ike and a $6.7 million after-tax realized loss primarily due to the other than temporary impairments of Freddie Mac, Fannie Mae and Lehman Brothers preferred stock.
The third quarter 2009 GAAP combined ratio was 95.3%, compared to 96.7% for the third quarter of 2008. The loss ratio for the third quarter of 2009 was 64.5% compared to 65.7% for the third quarter of 2008. The third quarter 2009 loss ratio includes 4.5 percentage points of favorable prior year reserve development, compared to 5.5 percentage points of favorable prior year reserve development in the third quarter of 2008. The expense ratio for the third quarter of 2009 was 30.8% compared to 31.0% for the third quarter of 2008.
Third quarter 2009 gross written premium increased 40.6% to $189.0 million compared to $134.4 million in the third quarter of 2008. The increase in gross written premium in the third quarter of 2009 was primarily due to programs we initiated in 2008 and 2009. Additionally, third quarter 2009 gross written premiums include the full three months of premium from Century, but due to the timing of the merger in 2008, only two months of Century's premium are included for the third quarter of 2008.
Net commission and fee revenue for the third quarter of 2009 declined as expected to $10.8 million compared to $12.3 million in the third quarter of 2008. The decline was primarily the result of lower premium volume due to mandatory rate reductions and competition. Additionally, a program for which we previously provided policy administration services decided to perform those functions in-house.
Commenting on the results, Meadowbrook President and Chief Executive Officer Robert S. Cubbin stated: "While pricing remains adequate, we continue to see selective growth and as a result we are positioned to achieve results at the high end of the range we previously set of $46 million to $52 million of net operating income for 2009. This generates operating EPS at around $0.90 per share. Growth in gross written premium was 40.6% for the quarter, due primarily to select new programs that we implemented during 2008 and 2009. These program opportunities demonstrate our capability to grow in a manner that leverages our regional underwriting expertise with programs that have a history of underwriting profitability. Excluding the premium from the Century acquisition, our gross written premium grew by 36.2% during the third quarter and 18.6% on a year to date basis. In the context of our historically good operating results, our strong capital position and our expectations for the future, we increased our dividend by $0.01 per share in the third quarter to $0.03 per share. Also during the third quarter, we repurchased 300,000 shares, and given our current book value and share price, opportunities may emerge where we may be more active in the share repurchase market."
Year to Date September 30, 2009 Overview
Net operating income for the nine months ended September 30, 2009 increased 50.5% to $40.0 million, or $0.69 per diluted share on 57.5 million shares, compared to $26.5 million, or $0.65 per diluted share on 40.7 million shares for the same period in 2008. Net income for the first nine months of 2009 increased 83.9% to $36.2 million or $0.63 per share compared to $19.7 million or $0.48 per share for the same period in 2008. Our year to date results for 2009, include $3.3 million of other than temporary impairment charges on our investment portfolio compared to $7.6 million in other than temporary impairment charges for the first nine months of 2008. For the first nine months of 2009, pre-tax fee-for-service income, excluding amortization, declined by 72.0% to $2.7 million from $9.7 million for the nine months ended September 30, 2008.
For the nine months ended September 30, 2009, gross written premiums increased $186.6 million, or 58.5%, to $505.9 million compared to $319.3 million for the same period last year. Excluding Century Insurance Group premium, gross written premium grew by 18.6% for the comparative nine month period.
Our year to date GAAP combined ratio for 2009 improved to 91.9% compared to 94.0% for the year to date period ended September 30, 2008. The loss ratio for the nine months ended September 30, 2009 was 60.7% compared to 63.2% for the same period in 2008. The expense ratio for the nine months ended September 30, 2009 was 31.2% compared to 30.8% for same period in 2008. The year to date 2009 combined ratio includes 5.3 points of favorable prior year development compared to 4.6 points of favorable prior year development for year to date 2008.
Other Matters
Shareholders' Equity:
At September 30, 2009, shareholders' equity was $509.3 million, or $8.91 per common share compared to $438.2 million, or $7.64 per common share, at December 31, 2008. The book value increase of 16.6% includes unrealized gains from our investment portfolio of $0.68 per share since December 31, 2008.
At September 30, 2009, our debt-to-equity ratio was 26.2% compared to 32.2% at December 31, 2008. Our debt to equity ratio excluding debentures was 10.3% at September 30, 2009 compared to 13.8% at December 31, 2008.
Dividend and Share Repurchases:
On October 30, 2009, our Board of Directors declared a quarterly dividend of $0.03 per share payable on November 30, 2009 to shareholders of record as of November 13, 2009, up from $0.02 per share in the prior quarter.
We repurchased 300,000 shares during the third quarter of 2009 at $7.72 per share. As of September 30, 2009, we have available up to 1,900,000 shares remaining under our current share repurchase plan.
Investment Portfolio:
At September 30, 2009 our pre-tax book yield was 4.6%. The duration of the portfolio was 4.5 years at September 30, 2009, compared to 4.5 years at September 30, 2008. The year to date average reinvestment yield is 5.0% and the average pre-tax book yield on new purchases during the third quarter of 2009 was 4.4%.
Net investment income for the third quarter of 2009 was $12.8 million, up from $10.6 million in the third quarter of 2008. For the nine months ended September 30, 2009 net investment income was $37.5 million compared to $24.7 million for the same period in 2008. The increases in net investment income for the quarter and year to date periods are primarily related to investment income from the Century Insurance portfolio.
2009 and 2010 Expectations
Our 2009 annualized outlook for gross written premium and net operating income has not changed. We continue to expect gross written premium in a range of $695.0 million to $715.0 million and net operating income at the higher end of a range of $46.0 million to $52.0 million, or $0.80 to $0.90 per share.
For 2010, we expect net operating income to be in a range of $48.5 million to $54.5 million. We expect gross written premium in a range of $790 million to $815 million, and the combined ratio should be in a range of 95.5% to 96.5%. Achieving results within these ranges would result in net operating income in a range of $0.85 to $0.95 per share.
Commenting on the 2010 outlook, Mr. Cubbin stated: "As our new program initiatives from 2008 and 2009 continue to develop and gain traction, we expect that we can continue to grow profitably while maintaining price adequacy. We expect the market to remain competitive and somewhat unpredictable into 2010. While our guidance range for 2010 is rather wide at this point, we expect to be in a better position to narrow the range as we complete 2009 and begin 2010."
Conference Call
Meadowbrook's 2009 third quarter and year to date results will be discussed by management in more detail on Tuesday, November 3, 2009 at 9:00 a.m. Eastern Time.
To listen to the call, please dial 1-877-407-0782 approximately five minutes prior to the start of the call and ask for the Meadowbrook conference call. Additionally, the conference call will be broadcast live over the Internet and can be accessed by all interested parties via the investor relations section of our website at www.meadowbrook.com or www.investorcalendar.com.
For those who cannot listen to the live conference call, a replay of the call will be available through Tuesday November 10, 2009 by dialing 1-877-660-6853 and referring to conference ID 335080 and account number 286. The webcast will be archived and available for replay through Wednesday, March 3, 2010.
About Meadowbrook Insurance Group
Meadowbrook Insurance Group, Inc., based in Southfield, Michigan, is a leader in the specialty program management market. Meadowbrook includes several agencies, claims and loss prevention facilities, self-insured management organizations and seven property and casualty insurance underwriting companies, including one in Bermuda. Meadowbrook has twenty-six locations in the United States. Meadowbrook is a risk management organization, specializing in specialty risk management solutions for agents, professional and trade associations, and small to medium-sized insureds. Meadowbrook Insurance Group, Inc. common shares are listed on the New York Stock Exchange under the symbol "MIG". For further information, please visit Meadowbrook's corporate web site at www.meadowbrook.com.
Certain statements made by Meadowbrook Insurance Group, Inc. in this release may constitute forward-looking statements including, but not limited to, those statements that include the words "believes," "expects," "anticipates," "estimates," or similar expressions. Please refer to the Company's most recent 10-K, 10-Q, and other Securities and Exchange Commission filings for more information on risk factors. Actual results could differ materially. These forward-looking statements involve risks and uncertainties including, but not limited to the following: the frequency and severity of claims; uncertainties inherent in reserve estimates; catastrophic events; a change in the demand for, pricing of, availability or collectability of reinsurance; increased rate pressure on premiums; obtainment of certain rate increases in current market conditions; investment rate of return; changes in and adherence to insurance regulation; actions taken by regulators, rating agencies or lenders; obtainment of certain processing efficiencies; changing rates of inflation; and general economic conditions. Meadowbrook is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED BALANCE SHEET INFORMATION
SEPTEMBER DECEMBER
30, 31,
(In Thousands, Except Per Share Data) 2009 2008
------------------------------------- ----------- -----------
BALANCE SHEET DATA
ASSETS
Cash and invested assets $1,186,585 $1,085,648
Premium & agents balances 146,083 117,675
Reinsurance recoverable 273,065 268,703
Deferred policy acquisition costs 65,879 56,454
Prepaid reinsurance premiums 33,408 31,885
Goodwill 118,842 119,028
Other assets 130,152 134,523
----------- -----------
Total Assets $1,954,014 $1,813,916
=========== ===========
LIABILITIES
Loss and loss adjustment expense
reserves $924,227 $885,697
Unearned premium reserves 316,777 282,086
Debt 52,688 60,250
Debentures 80,930 80,930
Other liabilities 70,108 66,783
----------- -----------
Total Liabilities 1,444,730 1,375,746
STOCKHOLDERS' EQUITY
Common stockholders' equity 509,284 438,170
----------- -----------
Total Liabilities & Stockholders' Equity $1,954,014 $1,813,916
=========== ===========
Book value per common share $8.91 $7.64
Book value per common share excluding
unrealized gain/loss, net of deferred
taxes $8.29 $7.70
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(In Thousands, Except
Share & Per Share Data
FOR THE QUARTER FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
SUMMARY DATA 2009 2008 2009 2008
------------ ---- ---- ---- ----
Gross written premiums $188,985 $134,418 $505,867 $319,256
Net written premiums 158,705 112,465 426,745 259,935
REVENUES
Net earned premiums $137,399 $104,243 $393,577 $247,296
Net commissions and fees 10,753 12,309 29,386 33,972
Net investment income 12,764 10,622 37,503 24,687
Net realized losses (742) (7,290) (3,692) (7,467)
Total Revenues 160,174 119,884 456,774 298,488
EXPENSES
Net losses & loss
adjustment expenses (1) 83,553 63,932 223,804 145,135
Salaries & employee Benefits 19,629 17,056 59,401 43,954
Interest expense 2,620 2,333 8,061 4,898
Policy acquisition and other
underwriting expenses (1) 28,824 19,470 79,932 45,333
Amortization expense 1,422 1,531 4,350 4,645
Other administrative expenses 9,013 8,055 29,323 24,847
----- ----- ------ ------
Total Expenses 145,061 112,377 404,871 268,812
INCOME BEFORE INCOME TAXES
AND EQUITY EARNINGS 15,113 7,509 51,903 29,676
Income tax expense 4,167 3,338 15,868 10,128
Equity earnings of affiliates 73 26 169 143
-- -- --- ---
NET INCOME $11,019 $4,197 $36,204 $19,691
======= ====== ======= =======
NET OPERATING INCOME (2) $11,688 $10,938 $39,956 $26,549
======= ======= ======= =======
Amortization expense 1,422 1,531 4,350 4,645
NET OPERATING INCOME,
excluding amortization
expense (3) $13,110 $12,469 $44,306 $31,194
======= ======= ======= =======
Diluted earnings per common share
Net income $0.19 $0.09 $0.63 $0.48
Net operating income $0.20 $0.23 $0.69 $0.65
Net operating income, excluding
amortization expense $0.23 $0.26 $0.77 $0.77
Diluted weighted average
common shares outstanding 57,563,263 47,595,572 57,531,391 40,657,894
GAAP ratios:
Loss & LAE ratio 64.5% 65.7% 60.7% 63.2%
Other underwriting
expense ratio 30.8% 31.0% 31.2% 30.8%
---- ---- ---- ----
GAAP combined ratio 95.3% 96.7% 91.9% 94.0%
==== ==== ==== ====
(1) Both the loss and loss adjustment and expense ratios are calculated
based upon the unconsolidated insurance company operations. The
following supplemental information sets forth the intercompany fees,
which are eliminated upon consolidation.
(2) While net operating income is a non-GAAP disclosure, management
believes this information is beneficial to reviewing the financial
statements. Net operating income is net income less realized gains
(losses) net of taxes associated with such gains (losses).
(3) While net operating income, excluding amortization expense, is a non-
GAAP disclosure, management believes this information is beneficial to
reviewing the financial statements. Management believes this
information is beneficial as amortization expense reflects an interim
non-cash charge and in the long-term cash earnings will reflect GAAP
earnings as we complete the amortization periods associated with
current acquisitions. Net operating income, excluding amortization
expense, is net income less realized gains (losses) net of taxes
associated with such gains (losses) and less amortization expense.
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED UNCONSOLIDATED GAAP DATA
FOR THE QUARTER FOR THE NINE
ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(In Thousands)
2009 2008 2009 2008
---- ---- ---- ----
Unconsolidated GAAP
data - Ratio
Calculation Table:
Net earned premiums $137,399 $104,243 $393,577 $247,296
Consolidated net loss
and LAE (1) $83,553 $63,932 $223,804 $145,135
Intercompany claim fees 5,049 4,508 15,152 11,243
----- ----- ------ ------
Unconsolidated net
loss and LAE $88,602 $68,440 $238,956 $156,378
======= ======= ======== ========
GAAP loss and LAE
ratio 64.5% 65.7% 60.7% 63.2%
Consolidated policy
acquisition and other
underwriting
expenses (1) $28,824 $19,537 $79,932 $45,400
Intercompany
administrative
and other
underwriting fees 13,428 12,821 42,995 30,741
------ ------ ------ ------
Unconsolidated policy
acquisition and
other underwriting
expenses $42,252 $32,358 $122,927 $76,141
======= ======= ======== =======
GAAP other underwriting
expense ratio 30.8% 31.0% 31.2% 30.8%
GAAP combined ratio 95.3% 96.7% 91.9% 94.0%
---- ---- ---- ----
2009 2008 2009 2008
---- ---- ---- ----
Unconsolidated
GAAP data -Gross
Commissions and Fees:
Managed programs:
Management fees $6,142 $6,972 $15,241 $17,178
Claims fees 1,802 2,304 5,774 6,789
Loss control fees 493 467 1,502 1,602
Reinsurance Brokerage 333 177 488 571
--- --- --- ---
Total managed programs 8,770 9,920 23,005 26,140
Agency commissions 2,031 2,631 6,996 8,640
Intersegment revenue (48) (241) (615) (807)
--- ---- ---- ----
Net commissions
and fees 10,753 12,310 29,386 33,973
Intercompany
commissions and
fees 18,477 17,329 58,147 41,984
------ ------ ------ ------
Gross commissions
and fees $29,230 $29,639 $87,533 $75,957
======= ======= ======= =======
Fee-for-service pre-tax income,
excluding
amortization $1,506 $5,471 $2,719 $9,717
====== ====== ====== ======
Pre-tax margin on
fee-for-service income 5.2% 18.5% 3.1% 12.8%
(1) Both the loss and loss adjustment and expense ratios are calculated
based upon the unconsolidated insurance company operations. The above
table sets forth the intercompany fees, which are eliminated in
consolidation. The GAAP combined ratio is the sum of the GAAP loss
and loss adjustment expense ratio and the GAAP expense ratio. The
GAAP loss and loss adjustment expense ratio is the unconsolidated net
loss and loss adjustment expense in relation to net earned premium.
The GAAP expense ratio is the unconsolidated policy acquisition and
other underwriting expenses in relation to net earned premium.
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED ADJUSTED GAAP EXPENSE RATIO SUMMARY
FOR THE QUARTER FOR THE NINE
ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(In Thousands)
2009 2008 2009 2008
---- ---- ---- ----
Net earned premiums $137,399 $104,243 $393,577 $247,296
Less: Unconsolidated net loss
and LAE 88,602 68,440 238,956 156,378
Unconsolidated policy
acquisition and other
underwriting expenses 42,252 32,358 122,927 76,141
------ ------ ------- ------
Underwriting income $6,545 $3,445 $31,694 $14,777
====== ====== ======= =======
GAAP combined ratio as reported 95.3% 96.7% 91.9% 94.0%
Specialty risk management operations
pre-tax income $20,501 $11,857 $68,787 $40,386
Less: Underwriting income 6,545 3,445 31,694 14,777
Net investment income and
capital losses 12,022 3,332 33,811 17,220
------ ----- ------ ------
Fee-based operations pre-tax income 1,934 5,080 3,282 8,389
Agency operations pre-tax
(loss) income (428) 391 (563) 1,328
---- --- ---- -----
Total fee-for-service pre-tax income $1,506 $5,471 $2,719 $9,717
====== ====== ====== ======
GAAP expense ratio as reported 30.8% 31.0% 31.2% 30.8%
Adjustment to include pre-tax
income from total fee-for-service
income (1) 1.1% 5.2% 0.7% 3.9%
--- --- --- ---
GAAP expense ratio as adjusted (2) 29.7% 25.8% 30.5% 26.9%
GAAP loss and LAE ratio as reported 64.5% 65.7% 60.7% 63.2%
---- ---- ---- ----
GAAP combined ratio as adjusted 94.2% 91.5% 91.2% 90.1%
==== ==== ==== ====
Reconciliation of Consolidated
pre-tax income:
Specialty risk management operations
pre-tax income:
Fee-based operations pre-tax
income $1,934 $5,080 $3,282 $8,389
Underwriting income 6,545 3,445 31,694 14,777
Net investment income and capital
losses 12,022 3,332 33,811 17,220
------ ----- ------ ------
Total specialty risk management
operations pre-tax income 20,501 11,857 68,787 40,386
Agency operations pre-tax (loss)
income (428) 391 (563) 1,328
Less: Holding company expenses 918 875 3,910 2,495
Interest expense 2,620 2,333 8,061 4,898
Amortization expense 1,422 1,531 4,350 4,645
----- ----- ----- -----
Consolidated pre-tax income $15,113 $7,509 $51,903 $29,676
======= ====== ======= =======
(1) Adjustment to include pre-tax income from total fee-for-service income
is calculated by dividing total fee-for-service income by net earned
premiums.
(2) While the adjusted GAAP expense ratio is a non-GAAP disclosure,
management believes this information is beneficial to reviewing the
financial statements. The adjusted GAAP expense ratio is the GAAP
expense ratio, as reported, less the adjustment to include pre-tax
income from total fee-for-service income. Management believes this
information is beneficial as our GAAP expense ratio includes the
impact of the margin associated with our fee-based operations. If the
profit margin from our fee-for-service business is recognized as an
offset to our underwriting expense, a more realistic picture of our
operating efficiency emerges.
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED HISTORICAL INCOME STATEMENT INFORMATION
(In Thousands, Except
Share & Per Share Data)
-------------------------
2006A 2007A
----- -----
SUMMARY DATA
------------
Gross written premiums $330,872 $346,451
Net written premiums 262,668 280,211
INCOME STATEMENT
----------------
REVENUES
Net earned premiums $254,920 $268,197
Commissions and fees (net) 41,172 45,988
Net investment income 22,075 26,400
Net realized gains (losses) 69 150
-- ---
Total Revenues 318,236 340,735
EXPENSES
Net losses & loss
adjustment expenses 146,293 150,969
Policy acquisition and
other underwriting expenses 50,479 53,717
Other administrative expenses 28,824 32,269
Salaries & employee benefits 54,569 56,433
Amortization expense 590 1,930
Interest expense 5,976 6,030
----- -----
Total Expenses 286,731 301,348
INCOME BEFORE TAXES AND
EQUITY EARNINGS 31,505 39,387
Income tax expense 9,599 11,726
Equity earnings of affiliates 128 331
--- ---
NET INCOME $22,034 $27,992
Net realized capital gain
(loss), net of tax 45 97
-- --
OPERATING INCOME $21,989 $27,895
======= =======
Amortization expense 590 1,930
OPERATING INCOME, excluding
amortization expense $22,579 $29,825
======= =======
Weighted average common
shares outstanding 29,566,141 33,101,965
Shares O/S at end of the
period 29,107,818 36,996,287
PER SHARE DATA (Diluted)
Net income $0.75 $0.85
Net realized gain (loss),
net of tax $0.01 $0.01
Operating income $0.74 $0.84
Operating income,
excluding amortization expense $0.76 $0.90
OPERATING RATIO ANALYSIS
------------------------
GAAP Loss & LAE ratio 62.3% 61.2%
GAAP Expense ratio 34.5% 34.2%
---- ----
GAAP Combined ratio 96.8% 95.4%
==== ====
Unconsolidated GAAP data -
Ratio Calculation Table:
--------------------------- -------- --------
Net earned premiums $254,920 $268,197
Consolidated net loss and LAE $146,293 $150,969
Intercompany claim fees 12,553 13,058
------ ------
Unconsolidated net loss and LAE $158,846 $164,027
======== ========
GAAP Net loss and LAE ratio 62.3% 61.2%
Consolidated Policy
acquisition and other
underwriting expenses $50,479 $53,717
Intercompany administrative
and other underwriting fees 37,442 37,890
------ ------
Unconsolidated policy
acquisition and other
underwriting expenses $87,921 $91,607
======= =======
GAAP Expense ratio 34.5% 34.2%
GAAP Combined Ratio 96.8% 95.4%
---- ----
Unconsolidated Commissions & Fees
Managed programs:
Management fees $18,714 $23,963
Claims fees 8,776 9,025
Loss control fees 2,216 2,151
Reinsurance brokerage 735 929
--- ---
Total managed programs 30,441 $36,068
Agency commissions 12,285 11,316
Intersegment commissions and fees (1,554) (1,396)
------ ------
Net Commissions and fees 41,172 45,988
Intercompany commissions and fees 49,995 50,948
------ ------
Gross commissions and fees $91,167 $96,936
======= =======
Q108A Q208A Q308A Q408A
----- ----- ----- -----
SUMMARY DATA
------------
Gross written premiums $90,468 $94,370 $134,418 $138,427
Net written premiums 71,399 76,071 112,465 115,259
INCOME STATEMENT
----------------
REVENUES
Net earned premiums $66,022 $77,031 $104,243 $122,425
Commissions and
fees (net) 12,031 9,632 12,309 8,932
Net investment income 7,148 6,917 10,622 11,937
Net realized gains(losses) (31) (146) (7,290) (3,955)
--- ---- ------ ------
Total Revenues 85,170 93,434 119,884 139,339
EXPENSES
Net losses & loss
adjustment expenses 37,661 43,542 63,932 67,750
Policy acquisition and
other underwriting
expenses 13,147 12,716 19,470 23,961
Other administrative
expenses 8,832 7,960 8,055 10,153
Salaries & employee
benefits 12,755 14,143 17,056 18,908
Amortization expense 1,551 1,563 1,531 1,665
Interest expense 1,311 1,254 2,333 2,783
----- ----- ----- -----
Total Expenses 75,257 81,178 112,377 125,220
INCOME BEFORE TAXES
AND EQUITY EARNINGS 9,913 12,256 7,509 14,119
Income tax expense 2,911 3,879 3,338 6,539
Equity earnings of
affiliates 56 61 26 126
-- -- -- ---
NET INCOME $7,058 $8,438 $4,199 $7,706
Net realized capital gain
(loss), net of tax (20) (95) (6,739) (4,562)
--- --- ------ ------
OPERATING INCOME $7,078 $8,533 $10,938 $12,268
====== ====== ======= =======
Amortization expense 1,551 1,563 1,531 1,665
OPERATING INCOME, excluding
amortization expense $8,629 $10,096 $12,469 $13,933
====== ======= ======= =======
Weighted average common
shares
outstanding 37,103,270 37,126,911 47,595,572 57,780,625
Shares O/S at end
of the period 37,021,032 37,021,032 57,644,022 57,341,989
PER SHARE DATA (Diluted)
Net income $0.19 $0.23 $0.09 $0.13
Net realized gain
(loss), net of tax $- $- $(0.14) $(0.08)
Operating income $0.19 $0.23 $0.23 $0.21
Operating income,
excluding amortization
expense $0.23 $0.27 $0.26 $0.24
OPERATING RATIO ANALYSIS
------------------------
GAAP Loss & LAE ratio 61.7% 61.2% 65.7% 59.5%
GAAP Expense ratio 32.2% 29.3% 31.0% 32.3%
---- ---- ---- ----
GAAP Combined ratio 93.9% 90.5% 96.7% 91.8%
==== ==== ==== ====
Unconsolidated GAAP data -
Ratio Calculation Table:
------------------- ------- ------- -------- --------
Net earned premiums $66,022 $77,031 $104,243 $122,425
Consolidated net loss
and LAE $37,661 $43,542 $63,932 $67,750
Intercompany claim fees 3,106 3,629 4,508 5,053
----- ----- ----- -----
Unconsolidated net
loss and LAE $40,767 $47,171 $68,440 $72,803
======= ======= ======= =======
GAAP Net loss and
LAE ratio 61.7% 61.2% 65.7% 59.5%
Consolidated Policy
acquisition and other
underwriting expenses $13,147 $12,716 $19,537 $23,949
Intercompany
administrative and other
underwriting fees 8,088 9,832 12,821 15,630
----- ----- ------ ------
Unconsolidated policy
acquisition and other
underwriting expenses $21,235 $22,548 $32,358 $39,579
======= ======= ======= =======
GAAP Expense ratio 32.2% 29.3% 31.0% 32.3%
GAAP Combined Ratio 93.9% 90.5% 96.7% 91.8%
---- ---- ---- ----
Unconsolidated Commissions
& Fees
Managed programs:
Management fees $6,032 $4,174 $6,972 $3,990
Claims fees 2,180 2,305 2,304 2,090
Loss control fees 510 625 467 467
Reinsurance
brokerage 296 98 177 157
--- -- --- ---
Total managed
programs 9,018 7,202 9,920 6,704
Agency commissions 3,328 2,681 2,631 2,425
Intersegment
commissions and
fees (315) (251) (241) (197)
---- ---- ---- ----
Net Commissions and fees 12,031 9,632 12,310 8,932
Intercompany commissions
and fees 11,194 13,461 17,329 20,683
------ ------ ------ ------
Gross commissions
and fees $23,225 $23,093 $29,639 $29,615
======= ======= ======= =======
2008A Q109A Q209A Q309A
----- ----- ----- -----
SUMMARY DATA
------------
Gross written
premiums $457,683 $159,991 $156,891 $188,985
Net written premiums 375,194 133,516 134,524 158,705
INCOME STATEMENT
----------------
REVENUES
Net earned premiums $369,721 $129,038 $127,140 $137,399
Commissions and
fees (net) 42,904 10,237 8,396 10,753
Net investment income 36,624 12,342 12,397 12,764
Net realized gains
(losses) (11,422) (1,992) (958) (742)
------- ------ ---- ----
Total Revenues 437,827 149,625 146,975 160,174
EXPENSES
Net losses & loss
adjustment expenses 212,885 69,787 70,464 83,553
Policy acquisition
and other underwriting
expenses 69,294 23,969 27,139 28,824
Other administrative
expenses 35,000 10,393 9,917 9,013
Salaries & employee
benefits 62,862 19,827 19,945 19,629
Amortization expense 6,310 1,508 1,420 1,422
Interest expense 7,681 2,782 2,659 2,620
----- ----- ----- -----
Total Expenses 394,032 128,266 131,544 145,061
INCOME BEFORE TAXES
AND EQUITY EARNINGS 43,797 21,359 15,431 15,113
Income tax expense 16,667 7,874 3,827 4,167
Equity earnings of
affiliates 269 55 41 73
--- -- -- --
NET INCOME $27,401 $13,540 $11,645 $11,019
Net realized capital gain
(loss), net of tax (11,416) (2,797) (287) (669)
------- ------ ---- ---
OPERATING INCOME $38,817 $16,337 $11,932 $11,688
======= ======= ======= =======
Amortization expense 6,310 1,508 1,420 1,422
OPERATING INCOME,
excluding
amortization expense $45,127 $17,845 $13,352 $13,110
======= ======= ======= =======
Weighted average
common shares
outstanding 44,995,712 57,410,327 57,516,750 57,563,263
Shares O/S at end
of the period 57,341,989 57,447,707 57,447,707 57,147,872
PER SHARE DATA (Diluted)
Net income $0.61 $0.24 $0.20 $0.19
Net realized gain
(loss), net of tax $(0.25) $(0.04) $(0.01) $(0.01)
Operating income $0.86 $0.28 $0.21 $0.20
Operating income,
excluding amortization
expense $1.00 $0.31 $0.23 $0.23
OPERATING RATIO ANALYSIS
------------------------
GAAP Loss & LAE ratio 62.0% 58.0% 59.4% 64.5%
GAAP Expense ratio 31.3% 29.7% 33.3% 30.8%
---- ---- ---- ----
GAAP Combined ratio 93.3% 87.7% 92.7% 95.3%
==== ==== ==== ====
Unconsolidated GAAP
data - Ratio
Calculation Table:
------------------- -------- -------- -------- --------
Net earned premiums $369,721 $129,038 $127,140 $137,399
Consolidated net loss
and LAE $212,885 $69,787 $70,464 $83,553
Intercompany claim fees 16,296 5,108 4,995 5,049
------ ----- ----- -----
Unconsolidated net
loss and LAE $229,181 $74,895 $75,459 $88,602
======== ======= ======= =======
GAAP Net loss and
LAE ratio 62.0% 58.0% 59.4% 64.5%
Consolidated Policy
acquisition and other
underwriting expenses $69,349 $23,969 $27,139 $28,824
Intercompany
administrative and
other underwriting fees 46,371 14,366 15,201 13,428
------ ------ ------ ------
Unconsolidated policy
acquisition and other
underwriting expenses $115,720 $38,335 $42,340 $42,252
======== ======= ======= =======
GAAP Expense ratio 31.3% 29.7% 33.3% 30.8%
GAAP Combined Ratio 93.3% 87.7% 92.7% 95.3%
---- ---- ---- ----
Unconsolidated Commissions & Fees
Managed programs:
Management fees $21,168 $5,278 $3,821 $6,142
Claims fees 8,879 1,966 2,006 1,802
Loss control fees 2,069 489 520 493
Reinsurance brokerage 728 65 90 333
--- -- -- ---
Total managed
programs $32,844 7,798 6,437 8,770
Agency commissions 11,065 2,794 2,171 2,031
Intersegment commissions
and fees (1,004) (355) (212) (48)
------ ---- ---- ---
Net Commissions and
fees 42,905 10,237 8,396 10,753
Intercompany commissions
and fees 62,667 19,474 20,196 18,477
------ ------ ------ ------
Gross commissions
and fees $105,572 $29,711 $28,592 $29,230
======== ======= ======= =======
SOURCE Meadowbrook Insurance Group, Inc.
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