-- Net Operating Income of $0.28 per diluted share
-- Net Income of $0.24 per diluted share
-- Combined Ratio improved to 87.7%
-- Gross Written Premium up 76.8%
-- Book Value per share of $7.98
SOUTHFIELD, Mich., May 4 /PRNewswire-FirstCall/ --
First Quarter 2009 Highlights and Overview:
-- Net operating income, a non-GAAP measure, increased 130.8% to $16.3
million, or $0.28 per diluted share on 57.4 million shares, in the first
quarter of 2009, up from $7.1 million, or $0.19 per diluted share on
37.1 million shares, in the first quarter of 2008.
-- Net income increased by 91.8% to $13.5 million, or $0.24 per diluted
share, in the first quarter of 2009, compared to $7.1 million or $0.19
per diluted share for the first quarter of 2008.
-- Combined ratio improved by 6.2 percentage points to 87.7% in the first
quarter of 2009, compared to 93.9% for the first quarter of 2008.
-- Book value per share increased to $7.98 per share, compared to $7.64 per
share at December 31, 2008.
Meadowbrook Insurance Group, Inc. (NYSE: MIG) reported first quarter net operating income, a non-GAAP measure, grew by 130.8% to $16.3 million or $0.28 per diluted share, up from $7.1 million or $0.19 per diluted share in the first quarter of 2008. Despite after-tax realized losses of $2.8 million or $0.04 per diluted share, due to other than temporary impairments of certain investments, net income increased by 91.8% to $13.5 million, or $0.24 per diluted share in the first quarter of 2009, compared to $7.1 million, or $0.19 per diluted share in the first quarter of 2008. The other than temporary impairments represent just 2/10ths of 1 percent of invested assets of $1.1 billion and were related to certain asset-backed securities, corporate bonds, and to a lesser extent, preferred stocks.
The 2009 first quarter GAAP combined ratio was 87.7%, compared to 93.9% for the first quarter of 2008. The loss ratio for the first quarter of 2009 was 58.0%, compared to 61.7% for the first quarter of 2008. The first quarter 2009 loss ratio includes 6.5 percentage points of favorable prior year reserve development, compared to 4.3 percentage points of favorable prior year reserve development in the first quarter of 2008. The expense ratio for the first quarter of 2009 was 29.7%, compared to 32.2% in the first quarter of 2008. The expense ratio improvement is due primarily to the reduction of insurance related assessments, expense savings and leveraging of post-merger fixed costs.
First quarter gross written premium was $160.0 million, compared to $90.5 million in the first quarter of 2008. First quarter gross written premium includes $52.1 million from Century Insurance. Excluding gross written premium from Century Insurance, Meadowbrook's gross written premium increased by 19.3%.
Commenting on the results, Meadowbrook President and Chief Executive Officer Robert S. Cubbin stated: "We are pleased with our results for the first quarter, particularly our net operating income, (excluding amortization) of $17.8 million, or $0.31 per diluted share. Growth in gross written premium was 76.8%, which includes Century Insurance. We remain optimistic about our current revenue growth prospects and the development of additional revenue enhancing synergies from the merger. Overall, we have been selective about our growth and we are maintaining our focus on price adequacy. Our combined ratio improvement is due to our consistent underwriting discipline and favorable development on prior accident year loss reserves, primarily in the general liability line, as well as a reduction in the residual market charges on our workers' compensation line of business. While we had an after-tax realized loss of $2.8 million on our investment portfolio, we continue to be conservatively positioned and hold high quality investments. 2.0% of our portfolio is in equities, and our fixed income portfolio has an average S&P rating of AA+."
Other Matters
Shareholders' Equity:
At March 31, 2009, shareholders' equity was $458.2 million, or $7.98 per common share, compared to $438.2 million, or $7.64 per common share, at December 31, 2008. Common shares outstanding at March 31, 2009 were 57,447,707 compared to 37,021,032 at March 31, 2008. The increase in outstanding shares is primarily due to the issuance of 21.1 million shares, or $122.7 million of new equity in conjunction with the ProCentury merger on July 31, 2008.
At March 31, 2009, our debt-to-equity ratio was 30.3%, compared to 32.2% at December 31, 2008. Our debt to equity ratio excluding debentures was 12.6% at March 31, 2009, compared to 13.8% at December 31, 2008.
Dividend and Share Repurchases:
On May 1, 2009, our Board of Directors declared a quarterly dividend of $0.02 per share payable on June 1, 2009 to shareholders of record as of May 15, 2009.
We did not repurchase any shares during the first quarter of 2009. As of March 31, 2009, we have available up to 2,200,000 shares remaining under the share repurchase authorization.
Investment Portfolio:
For the first quarter of 2009 our pre-tax book yield was 4.4%, which was unchanged compared to the first quarter of 2008. The duration of the portfolio was 4.3 years at March 31, 2009, compared to 4.1 years at March 31, 2008 and 4.5 years at December 31, 2008. The average pre-tax book yield on new purchases during the first quarter of 2009 was 5.3%.
Net investment income for the first quarter of 2009 was $12.3 million, up from $7.1 million in the first quarter of 2008. The increase is primarily related to investment income from the Century Insurance portfolio.
2009 Expectations
The range of full year 2009 guidance remains unchanged. We expect net operating income in a range of $46 million to $52 million, or $0.80 to $0.90 per share. We are still comfortable with our gross written premium range of $725 million to $740 million. While our combined ratio is now expected to be at or below the low end of the range of 95.0% to 97.0%, margins on fee-for-service revenue, which include the impact of variable compensation, may be lower than expected. Accordingly, our overall guidance remains unchanged although we now expect our full year results to be in the higher end of the earnings per share range. Commenting on the 2009 outlook, Mr. Cubbin stated: "Our new program launches in 2008 and early 2009 have begun to contribute to our earned premium levels in a meaningful way, and we expect that our new initiatives in the workers' compensation market and our continuing work on merger-related revenue enhancements will support our production goals. We continue to observe some minor rate declines, but each month appears to be closer to the overall upward trend that is much anticipated in the market."
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
MARCH 31, DECEMBER 31,
(In Thousands, Except Per Share Data) 2009 2008
BALANCE SHEET DATA
ASSETS
Cash and invested assets $1,116,023 $1,085,648
Premium & agents balances 127,011 117,675
Reinsurance recoverable 270,842 268,703
Deferred policy acquisition costs 57,265 56,454
Prepaid reinsurance premiums 32,385 31,885
Goodwill 119,205 119,028
Other assets 126,762 134,523
Total Assets $1,849,493 $1,813,916
LIABILITIES
Loss and loss adjustment expense reserves $897,690 $885,697
Unearned premium reserves 287,064 282,086
Debt 57,875 60,250
Debentures 80,930 80,930
Other liabilities 67,753 66,783
Total Liabilities 1,391,312 1,375,746
STOCKHOLDERS' EQUITY
Common stockholders' equity 458,181 438,170
Total Liabilities & Stockholders' Equity $1,849,493 $1,813,916
Book value per common share $7.98 $7.64
Book value per common share excluding
unrealized gain/loss, net of deferred taxes $7.89 $7.70
MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION
SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED INCOME STATEMENT INFORMATION
(In Thousands, Except FOR THE QUARTER
Share & Per Share Data) ENDED MARCH 31,
SUMMARY DATA 2009 2008
Gross written premiums $159,991 $90,468
Net written premiums 133,516 71,399
REVENUES
Net earned premiums $129,038 $66,022
Net commissions and fees 10,237 12,031
Net investment income 12,342 7,148
Net realized losses (1,992) (31)
Total Revenues 149,625 85,170
EXPENSES
Net losses & loss adjustment expenses (1) 69,787 37,661
Salaries & employee benefits 19,827 12,755
Interest expense 2,782 1,311
Policy acquisition and other underwriting
expenses (1) 23,969 13,147
Amortization expense 1,508 1,551
Other administrative expenses 10,393 8,832
Total Expenses 128,266 75,257
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS 21,359 9,913
Income tax expense 7,874 2,911
Equity earnings of affiliates 55 56
NET INCOME $13,540 $7,058
NET OPERATING INCOME (2) $16,337 $7,078
Amortization expense 1,508 1,551
NET OPERATING INCOME, excluding amortization
expense (3) $17,845 $8,629
Diluted earnings per common share
Net income $0.24 $0.19
Net operating income $0.28 $0.19
Net operating income, excluding amortization
expense $0.31 $0.23
Diluted weighted average common shares
outstanding 57,410,327 37,103,270
GAAP ratios:
Loss & LAE ratio 58.0% 61.7%
Other underwriting expense ratio 29.7% 32.2%
GAAP combined ratio 87.7% 93.9%
(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
ENDED MARCH 31,
(In Thousands)
2009 2008
Unconsolidated GAAP data - Ratio Calculation Table:
Net earned premiums $129,038 $66,022
Consolidated net loss and LAE (1) $69,787 $37,661
Intercompany claim fees 5,108 3,106
Unconsolidated net loss and LAE $74,895 $40,767
GAAP loss and LAE ratio 58.0% 61.7%
Consolidated policy acquisition and other
underwriting expenses (1) $23,969 $13,147
Intercompany administrative and other
underwriting fees 14,366 8,088
Unconsolidated policy acquisition and other
underwriting expenses $38,335 $21,235
GAAP other underwriting expense ratio 29.7% 32.2%
GAAP combined ratio 87.7% 93.9%
2009 2008
Unconsolidated GAAP data - Gross Commissions and Fees:
Managed programs:
Management fees $5,278 $6,032
Claims fees 1,966 2,180
Loss control fees 489 510
Reinsurance brokerage 65 296
Total managed programs 7,798 9,018
Agency commissions 2,794 3,328
Intersegment revenue (355) (315)
Net commissions and fees 10,237 12,031
Intercompany commissions and fees 19,474 11,194
Gross commissions and fees $29,711 $23,225
Fee-for-service pre-tax income, excluding
amortization $1,591 $2,538
Pre-tax margin on fee-for-service income 5.4% 10.9%
(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
ENDED MARCH 31,
(In Thousands)
2009 2008
Net earned premiums $129,038 $66,022
Less: Unconsolidated net loss and LAE 74,895 40,767
Unconsolidated policy acquisition and other
underwriting expenses 38,335 21,235
Underwriting income $15,808 $4,020
GAAP combined ratio as reported 87.7% 93.9%
Specialty risk management operations pre-tax
income $27,411 $12,912
Less: Underwriting income 15,808 4,020
Net investment income and capital losses 10,350 7,117
Fee-based operations pre-tax income 1,253 1,775
Agency operations pre-tax income 338 763
Total fee-for-service pre-tax income $1,591 $2,538
GAAP expense ratio as reported 29.7% 32.2%
Adjustment to include pre-tax income from
total fee-for-service income (1) 1.2% 3.8%
GAAP expense ratio as adjusted (2) 28.5% 28.4%
GAAP loss and LAE ratio as reported 58.0% 61.7%
GAAP combined ratio as adjusted 86.5% 90.1%
Reconciliation of consolidated pre-tax income:
Specialty risk management operations pre-tax income:
Fee-based operations pre-tax income $1,253 $1,775
Underwriting income 15,808 4,020
Net investment income and capital losses 10,350 7,117
Total specialty risk management operations pre-
tax income 27,411 12,912
Agency operations pre-tax income 338 763
Less: Holding company expenses 2,100 900
Interest expense 2,782 1,311
Amortization expense 1,508 1,551
Consolidated pre-tax income $21,359 $9,913
(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 Q108A Q208A
SUMMARY DATA
Gross written premiums $330,872 $346,451 $90,468 $94,370
Net written premiums 262,668 280,211 71,399 76,071
INCOME STATEMENT
REVENUES
Net earned premiums $254,920 $268,197 $66,022 $77,031
Commissions and fees
(net) 41,172 45,988 12,031 9,632
Net investment income 22,075 26,400 7,148 6,917
Net realized gains
(losses) 69 150 (31) (146)
Total Revenues 318,236 340,735 85,170 93,434
EXPENSES
Net losses & loss
adjustment expenses 146,293 150,969 37,661 43,542
Policy acquisition
and other underwriting
expenses 50,479 53,717 13,147 12,716
Other administrative
expenses 28,824 32,269 8,832 7,960
Salaries & employee
benefits 54,569 56,433 12,755 14,143
Amortization expense 590 1,930 1,551 1,563
Interest expense 5,976 6,030 1,311 1,254
Total Expenses 286,731 301,348 75,257 81,178
INCOME BEFORE TAXES AND
EQUITY EARNINGS 31,505 39,387 9,913 12,256
Income tax expense 9,599 11,726 2,911 3,879
Equity earnings of
affiliates 128 331 56 61
NET INCOME $22,034 $27,992 $7,058 $8,438
Net realized capital
gain (loss), net of
tax 45 97 (20) (95)
OPERATING INCOME $21,989 $27,895 $7,078 $8,533
Amortization expense 590 1,930 1,551 1,563
OPERATING INCOME,
excluding amortization
expense $22,579 $29,825 $8,629 $10,096
Weighted average
common shares
outstanding 29,566,141 33,101,965 37,103,270 37,126,911
Shares O/S at end of
the period 29,107,818 36,996,287 37,021,032 37,021,032
PER SHARE DATA (Diluted)
Net income $0.75 $0.85 $0.19 $0.23
Net realized gain
(loss), net of tax $0.01 $0.01 $- $-
Operating income $0.74 $0.84 $0.19 $0.23
Operating income,
excluding amortization
expense $0.76 $0.90 $0.23 $0.27
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 62.3% 61.2% 61.7% 61.2%
GAAP Expense ratio 34.5% 34.2% 32.2% 29.3%
GAAP Combined ratio 96.8% 95.4% 93.9% 90.5%
Unconsolidated GAAP data
- Ratio Calculation Table:
Net earned premiums $254,920 $268,197 $66,022 $77,031
Consolidated net loss
and LAE $146,293 $150,969 $37,661 $43,542
Intercompany claim fees 12,553 13,058 3,106 3,629
Unconsolidated net loss
and LAE $158,846 $164,027 $40,767 $47,171
GAAP Net loss and LAE
ratio 62.3% 61.2% 61.7% 61.2%
Consolidated Policy
acquisition and other
underwriting expenses $50,479 $53,717 $13,147 $12,716
Intercompany administrative
and other underwriting
fees 37,442 37,890 8,088 9,832
Unconsolidated policy
acquisition and other
underwriting expenses $87,921 $91,607 $21,235 $22,548
GAAP Expense ratio 34.5% 34.2% 32.2% 29.3%
GAAP Combined Ratio 96.8% 95.4% 93.9% 90.5%
Unconsolidated Commissions
& Fees Managed programs:
Management fees $18,714 $23,963 $6,032 $4,174
Claims fees 8,776 9,025 2,180 2,305
Loss control fees 2,216 2,151 510 625
Reinsurance brokerage 735 929 296 98
Total managed programs 30,441 $36,068 9,018 7,202
Agency commissions 12,285 11,316 3,328 2,681
Intersegment commissions
and fees (1,554) (1,396) (315) (251)
Net Commissions and fees 41,172 45,988 12,031 9,632
Intercompany
commissions and fees 49,995 50,948 11,194 13,461
Gross commissions and
fees $91,167 $96,936 $23,225 $23,093
Q308A Q408A 2008A Q109A
SUMMARY DATA
Gross written premiums $134,418 $138,427 $457,683 $159,991
Net written premiums 112,465 115,259 375,194 133,516
INCOME STATEMENT
REVENUES
Net earned premiums $104,243 $122,425 $369,721 $129,038
Commissions and fees
(net) 12,309 8,932 42,904 10,237
Net investment income 10,622 11,937 36,624 12,342
Net realized gains
(losses) (7,290) (3,955) (11,422) (1,992)
Total Revenues 119,884 139,339 437,827 149,625
EXPENSES
Net losses & loss
adjustment expenses 63,932 67,750 212,885 69,787
Policy acquisition
and other underwriting
expenses 19,470 23,961 69,294 23,969
Other administrative
expenses 8,055 10,153 35,000 10,393
Salaries & employee
benefits 17,056 18,908 62,862 19,827
Amortization expense 1,531 1,665 6,310 1,508
Interest expense 2,333 2,783 7,681 2,782
Total Expenses 112,377 125,220 394,032 128,266
INCOME BEFORE TAXES AND
EQUITY EARNINGS 7,507 14,119 43,795 21,359
Income tax expense 3,338 6,539 16,667 7,874
Equity earnings of
affiliates 26 126 269 55
NET INCOME $4,195 $7,706 $27,397 $13,540
Net realized capital
gain (loss), net of
tax (6,743) (4,562) (11,420) (2,797)
OPERATING INCOME $10,938 $12,268 $38,817 $16,337
Amortization expense 1,531 1,665 6,310 1,508
OPERATING INCOME,
excluding amortization
expense $12,469 $13,933 $45,127 $17,845
Weighted average
common shares
outstanding 47,595,572 57,780,625 44,995,712 57,410,327
Shares O/S at end of
the period 57,644,022 57,341,989 57,341,989 57,447,707
PER SHARE DATA (Diluted)
Net income $0.09 $0.13 $0.61 $0.24
Net realized gain
(loss), net of tax $(0.14) $(0.08) $(0.25) $(0.04)
Operating income $0.23 $0.21 $0.86 $0.28
Operating income,
excluding amortization
expense $0.26 $0.24 $1.00 $0.31
OPERATING RATIO ANALYSIS
GAAP Loss & LAE ratio 65.7% 59.5% 62.0% 58.0%
GAAP Expense ratio 31.0% 32.3% 31.3% 29.7%
GAAP Combined ratio 96.7% 91.8% 93.3% 87.7%
Unconsolidated GAAP data
- Ratio Calculation Table:
Net earned premiums $104,243 $122,425 $369,721 $129,038
Consolidated net loss
and LAE $63,932 $67,750 $212,885 $69,787
Intercompany claim fees 4,508 5,053 16,296 5,108
Unconsolidated net loss
and LAE $68,440 $72,803 $229,181 $74,895
GAAP Net loss and LAE
ratio 65.7% 59.5% 62.0% 58.0%
Consolidated Policy
acquisition and other
underwriting expenses $19,537 $23,949 $69,349 $23,969
Intercompany administrative
and other underwriting
fees 12,821 15,630 46,371 14,366
Unconsolidated policy
acquisition and other
underwriting expenses $32,358 $39,579 $115,720 $38,335
GAAP Expense ratio 31.0% 32.3% 31.3% 29.7%
GAAP Combined Ratio 96.7% 91.8% 93.3% 87.7%
Unconsolidated Commissions
& Fees Managed programs:
Management fees $6,972 $3,990 $21,168 $5,278
Claims fees 2,304 2,090 8,879 1,966
Loss control fees 467 467 2,069 489
Reinsurance brokerage 177 157 728 65
Total managed programs 9,920 6,704 $32,844 7,798
Agency commissions 2,630 2,425 11,064 2,794
Intersegment commissions
and fees (241) (197) (1,004) (355)
Net Commissions and fees 12,309 8,932 42,904 10,237
Intercompany commissions
and fees 17,329 20,683 62,667 19,474
Gross commissions and
fees $29,638 $29,615 $105,571 $29,711
SOURCE Meadowbrook Insurance Group, Inc.
For further information: Karen M. Spaun, SVP & Chief Financial Officer, +1-248-204-8178, or Holly Moltane, Controller - GAAP Financial Reporting, +1-248-204-8590, both of Meadowbrook Insurance Group, Inc.
© PR Newswire
