Meadowbrook Insurance Group, Inc. Reports Results
PR Newswire Association LLC |
Fourth Quarter
- Net income of
$38.0 million , or$0.76 per diluted share - Fourth quarter calendar year combined ratio of 104.5%
- Fourth quarter accident year combined ratio of 102.7%
- Fourth quarter accident year combined ratio of 99.6%, excluding Super Storm Sandy impact
- Net operating income of
$47,000 , or$0.00 per diluted share for fourth quarter - Quarterly dividend declared of
$0.02 per share - Statutory Surplus
$426.3 million , up$79.0 million from$347.3 million as ofSeptember 30, 2012
Year to Date
- Net income of
$11.7 million , or$0.23 per diluted share - Year to date calendar year combined ratio of 111.4%
- Year to date accident year combined ratio of 101.4%
- Year to date accident year combined ratio of 100.6%, excluding Super Storm Sandy impact
- Net operating loss of (
$28.4 million ), or($0.57) per diluted share for the year endedDecember 31, 2012 - Book value per share of
$11.22 atDecember 31, 2012 - Statutory Surplus
$426.3 million , up$40.9 million fromDecember 31, 2011
Fourth Quarter Overview:
Statutory surplus, a non-GAAP measure, increased to
Commenting on the quarterly results,
Fourth quarter 2012 results include a pre-tax increase in net ultimate loss estimates for accident years 2011 and prior of
The accident year loss and LAE ratio, a non-GAAP measure that excludes changes in net ultimate loss estimates from prior year loss reserves, was 71.6% for the fourth quarter of 2012, compared to 65.4% in the fourth quarter of 2011. As discussed above, the increase was partially driven by the impact of Super Storm Sandy, which added 3.1 percentage points in 2012 as compared to 2011. In addition, the 2012 accident year loss and LAE ratio reflects the cumulative effect of an increase in our accident year forecasted 2012 loss and LAE ratio based upon the year-to-date increase in net ultimate loss estimates for the 2009, 2010 and 2011 accident years previously recognized in prior quarters.
The expense ratio was 31.1% in the fourth quarter of 2012, compared to 32.1% in the prior year quarter. The improvement in the expense ratio reflects a lower level of technology expenses and leveraging of fixed costs over a larger premium base.
Fourth quarter 2012 gross written premium increased to
Pre-tax profit from net commissions and fee revenue for the fourth quarter of 2012 was
General corporate expenses increased to
Amortization expense increased to
Year to Date 2012
- Net income for the full year 2012 was
$11.7 million , or$0.23 per diluted share, compared to net income of$43.0 million , or$0.82 per diluted share in 2011. - Net operating loss for the full year 2012 was (
$28.4 million ), or($0.57) per diluted share, compared to net operating income of$40.3 million , or$0.77 per diluted share in 2011. - The GAAP combined ratio for the full year 2012 was 111.4%, compared to 99.8% in 2011; 2012 combined ratio increased 10.0 percentage points from an increase in net ultimate losses on 2011 and prior accident years, whereas the 2011 combined ratio increased 1.0 percentage points from an increase in net ultimate losses on 2010 and prior accident years.
- The year to date accident year combined ratio for the full year 2012 was 101.4%, compared to 98.8% for the same period in 2011; the increase primarily reflects the impact of Super Storm Sandy in 2012 and the increase in the 2012 forecasted loss ratio based upon the increase in net ultimate loss estimates for the 2009, 2010 and 2011 accident years previously recognized in prior quarters. These increases were partially offset by a reduction in profit sharing commissions and the leveraging of fixed costs over a larger premium base.
2013 Guidance
Management expects 2013 gross written premium to be between
Commenting on 2013 expectations,
Other Matters
On
Commenting on
Dividends:
On
Adoption of New Accounting Guidance:
In
Debt to Equity Ratio:
At
Investment Portfolio:
Pre-tax net investment income for the fourth quarter of 2012 decreased to
At
Shareholders' Equity:
Shareholders' equity was
Statutory Surplus:
At
Premium Leverage Ratios:As of
Cash Flows from Operations:
For the three months ended
For the twelve months ended
Share Repurchases:
The Company did not repurchase any shares during the fourth quarter of 2012.
The Company repurchased 1.3 million shares during 2012 at an average cost of
Under our Share Repurchase Plan, management is currently authorized to purchase approximately 3.7 million additional shares.
Non-GAAP Measures
Statutory Surplus
Statutory surplus is a non-GAAP measure with the most directly comparable financial GAAP measure being shareholders' equity. The following is a reconciliation of statutory surplus to shareholders' equity:
Consolidated Statutory Surplus to GAAP Shareholders' Equity |
|||
For Period Ending: |
|||
(In thousands) |
|||
Statutory Consolidated Surplus |
$ 426,257 |
||
Statutory to GAAP differences: |
|||
Deferred policy acquisition costs |
45,417 |
||
Unrealized gain (loss) on securities available for sale |
62,877 |
||
Non-admitted assets and other |
(2,993) |
||
Total Statutory to GAAP differences |
105,301 |
||
Total Non-Regulated Entities |
26,721 |
||
GAAP Consolidated Shareholders' Equity |
$ 558,279 |
Net Operating Income (Loss) and Net Operating Income (Loss) Per Share
Net operating income (loss) and net operating income (loss) per share are non-GAAP measures that represent net income (loss) excluding net realized gains or losses, net of tax. The most directly comparable financial GAAP measures to net operating income (loss) and net operating income (loss) per share are net income (loss) and net income (loss) per share, respectively. Net operating income (loss) and net operating income (loss) per share are intended as supplemental information and are not meant to replace net income (loss) or net income (loss) per share. Net operating income (loss) and net operating income (loss) per share should be read in conjunction with our GAAP financial results. The following is a reconciliation of net operating income (loss) to net income (loss), as well as net operating income (loss) per share to net income (loss) per share:
For the Three Months |
For the Twelve Months |
||||
2012 |
2011 |
2012 |
2011 |
||
(In thousands, except share and per share data) |
|||||
Net operating income (loss) |
$ 47 |
$ 8,529 |
$ (28,401) |
$ 40,333 |
|
Net realized gains, net of tax |
37,940 |
431 |
40,150 |
2,699 |
|
Net income |
$ 37,987 |
$ 8,960 |
$ 11,749 |
$ 43,032 |
|
Diluted earnings per common share: |
|||||
Net operating income (loss) |
$ 0.00 |
$ 0.17 |
$ (0.57) |
$ 0.77 |
|
Net income |
$ 0.76 |
$ 0.18 |
$ 0.23 |
$ 0.82 |
|
Diluted weighted average common |
49,776,011 |
51,050,204 |
50,177,484 |
52,404,377 |
Management uses net operating income (loss) and net operating income (loss) per share as components to assess our performance and as measures to evaluate the results of our business. Management believes these measures provide investors with valuable information relating to our ongoing performance that may be obscured by the net effect of realized gains and losses as a result of the Company's market risk sensitive instruments, which primarily relate to fixed income securities that are available for sale and not held for trading purposes. Realized gains and losses may vary significantly between periods and are generally driven by external economic developments, such as capital market conditions. Additionally, in 2012 realized gains were also generated by the sale of a portion of the Company's bond portfolio. Accordingly, net operating income (loss) excludes the effect of items that tend to be highly variable from period to period and highlights the results from the Company's ongoing business operations and the underlying profitability of the Company's business. Accordingly, management believes it is useful for investors to evaluate net operating income (loss) and net operating income (loss) per share, along with net income (loss) and net income (loss) per share when reviewing and evaluating Meadowbrook's performance.
Accident Year Loss and LAE Ratio
The accident year loss and LAE ratio is a non-GAAP measure and represents the Company's net loss and LAE ratio excluding the impact of any adverse or favorable development on prior year loss and LAE reserves. The most directly comparable financial GAAP measure to the accident year loss ratio and LAE is the net loss and LAE ratio. The accident year loss and LAE ratio is intended as supplemental information and is not meant to replace the loss and LAE ratio. The accident year loss ratio should be read in conjunction with the GAAP financial results. The following is a reconciliation of the accident year loss ratio to the net loss and LAE ratio:
For the Three Months Ended |
For the Twelve Months Ended December 31, |
|||||
2012 |
2011 |
2012 |
2011 |
|||
Accident year loss and LAE ratio |
71.6% |
65.4% |
69.3% |
65.3% |
||
Adverse development |
1.8% |
3.8% |
10.0% |
1.0% |
||
Net loss & LAE ratio |
73.4% |
69.2% |
79.3% |
66.3% |
Management uses the accident year loss and LAE ratio as one component to assess the Company's current year performance and as a measure to evaluate, and if necessary, adjust pricing and underwriting. Meadowbrook's net loss and LAE ratio is based on calendar year information. Adjusting this ratio to an accident year loss and LAE ratio allows us to evaluate information based on the current year activity. Management believes this measure provides investors with valuable information for comparison to historical trends and current industry estimates. Management also believes that it is useful for investors to evaluate the accident year loss and LAE ratio and net loss and LAE ratio separately when reviewing and evaluating the Company's performance.
Conference Call
Meadowbrook's 2012 fourth quarter results will be discussed by management in more detail on
To listen to the call please dial 1-877-407-8035 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
About
Certain statements made by
EARNINGS RELEASE PAGE 8 |
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FINANCIAL INFORMATION |
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SUPPLEMENT TO THE EARNINGS RELEASE |
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UNAUDITED BALANCE SHEET INFORMATION |
||||||
As Adjusted |
||||||
|
|
|||||
(In Thousands, Except Per Share Data) |
2012 |
2011 |
||||
BALANCE SHEET DATA |
||||||
ASSETS |
||||||
Cash and invested assets |
$ |
1,651,592 |
$ |
1,487,680 |
||
Premium and agents balances |
208,743 |
183,160 |
||||
Reinsurance recoverable |
395,517 |
325,754 |
||||
Deferred policy acquisition costs |
45,417 |
74,467 |
||||
Prepaid reinsurance premiums |
143,180 |
33,754 |
||||
Goodwill |
121,041 |
120,792 |
||||
Other assets |
147,784 |
144,491 |
||||
Total Assets |
$ |
2,713,274 |
$ |
2,370,098 |
||
LIABILITIES |
||||||
Loss and loss adjustment expense reserves |
$ |
1,455,980 |
$ |
1,194,977 |
||
Unearned premium reserves |
439,418 |
386,750 |
||||
Debt |
78,500 |
28,375 |
||||
Debentures |
80,930 |
80,930 |
||||
Other liabilities |
100,167 |
93,915 |
||||
Total Liabilities |
2,154,995 |
1,784,947 |
||||
STOCKHOLDERS' EQUITY |
||||||
Common stockholders' equity |
558,279 |
585,151 |
||||
Total Liabilities & Stockholders' Equity |
$ |
2,713,274 |
$ |
2,370,098 |
||
Book value per common share |
|
|
||||
Book value per common share excluding |
||||||
unrealized gain/loss, net of deferred taxes |
|
|
EARNINGS RELEASE |
PAGE 9 |
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FINANCIAL INFORMATION |
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SUPPLEMENT TO THE EARNINGS RELEASE |
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UNAUDITED INCOME STATEMENT INFORMATION |
||||||||||
(In Thousands, Except |
FOR THE THREE MONTHS |
FOR THE TWELVE MONTHS |
||||||||
Share & Per Share Data) |
ENDED |
ENDED |
||||||||
As Adjusted |
As Adjusted |
|||||||||
SUMMARY DATA |
2012 |
2011 |
2012 |
2011 |
||||||
Gross written premiums |
$ |
246,661 |
$ |
223,117 |
$ |
1,066,633 |
$ |
904,026 |
||
Net written premiums |
110,653 |
191,712 |
797,503 |
776,253 |
||||||
REVENUES |
||||||||||
Net earned premiums |
$ |
226,734 |
$ |
201,920 |
$ |
854,259 |
$ |
747,635 |
||
Net commissions and fees |
9,122 |
8,487 |
34,049 |
32,115 |
||||||
Net investment income |
11,913 |
13,683 |
53,143 |
54,522 |
||||||
Net realized gains |
52,111 |
680 |
55,312 |
2,949 |
||||||
Total Revenues |
299,880 |
224,770 |
996,763 |
837,221 |
||||||
EXPENSES |
||||||||||
Net losses and loss adjustment expenses |
166,481 |
139,730 |
677,684 |
495,351 |
||||||
Policy acquisition and other underwriting expenses |
70,587 |
64,851 |
274,066 |
250,535 |
||||||
General selling and administrative expenses |
6,052 |
7,024 |
24,463 |
24,775 |
||||||
General corporate expenses |
724 |
(509) |
3,572 |
400 |
||||||
Amortization expense |
3,201 |
1,327 |
7,296 |
4,973 |
||||||
Interest expense |
2,047 |
2,027 |
8,429 |
8,347 |
||||||
Total Expenses |
249,092 |
214,450 |
995,510 |
784,381 |
||||||
INCOME BEFORE INCOME TAXES AND EQUITY EARNINGS OF AFFILIATES AND UNCONSOLIDATED SUBSIDIARIES |
50,788 |
10,320 |
1,253 |
52,840 |
||||||
Income tax expense (benefit) |
13,442 |
1,856 |
(7,842) |
12,169 |
||||||
Equity earnings of affiliates, net of tax |
611 |
523 |
2,652 |
2,418 |
||||||
Equity earnings (loss) of unconsolidated subsidiaries, net of tax |
30 |
(27) |
2 |
(57) |
||||||
NET INCOME |
$ |
37,987 |
$ |
8,960 |
$ |
11,749 |
$ |
43,032 |
||
Less: Net realized gains, net of tax |
37,940 |
431 |
40,150 |
2,699 |
||||||
NET OPERATING INCOME (LOSS) (1) |
$ |
47 |
$ |
8,529 |
$ |
(28,401) |
$ |
40,333 |
||
Diluted earnings (losses) per common share |
||||||||||
Net income |
$ |
0.76 |
$ |
0.18 |
$ |
0.23 |
$ |
0.82 |
||
Net operating income (loss) |
$ |
0.00 |
$ |
0.17 |
$ |
(0.57) |
$ |
0.77 |
||
Diluted weighted average common shares outstanding |
49,776,011 |
51,050,204 |
50,177,484 |
52,404,377 |
||||||
GAAP ratios: |
||||||||||
73.4% |
69.2% |
79.3% |
66.3% |
|||||||
Other underwriting expense ratio |
31.1% |
32.1% |
32.1% |
33.5% |
||||||
GAAP combined ratio |
104.5% |
101.3% |
111.4% |
99.8% |
||||||
(1) While net operating income (loss) is a non-GAAP disclosure, management believes this information is beneficial to reviewing the financial statements. Net operating income (loss) is net income less realized gains net of taxes associated with such gains. |
EARNINGS RELEASE |
PAGE 10</span> |
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FINANCIAL INFORMATION |
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SUPPLEMENT TO THE EARNINGS RELEASE |
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UNAUDITED INCOME STATEMENT INFORMATION |
|||||||||
(In Thousands) |
FOR THE THREE MONTHS |
FOR THE TWELVE MONTHS |
|||||||
ENDED |
ENDED |
||||||||
As Adjusted |
As Adjusted |
||||||||
2012 |
2011 |
2012 |
2011 |
||||||
Net earned premium |
$ |
226,734 |
$ |
201,920 |
$ |
854,259 |
$ |
747,635 |
|
Net losses & loss adjustment expenses(1) |
166,481 |
139,730 |
677,684 |
495,351 |
|||||
Policy acquisition and other underwriting expenses |
70,587 |
64,851 |
274,066 |
250,535 |
|||||
(Loss) profit from net earned premium |
(10,334) |
(2,661) |
(97,491) |
1,749 |
|||||
Net investment income |
11,913 |
13,683 |
53,143 |
54,522 |
|||||
Profit (loss) from insurance operations |
1,579 |
11,022 |
(44,348) |
56,271 |
|||||
Net commissions and fees |
$ |
9,122 |
$ |
8,487 |
$ |
34,049 |
$ |
32,115 |
|
General selling & administrative expenses |
6,052 |
7,024 |
24,463 |
24,775 |
|||||
Profit from net commissions & fees |
3,070 |
1,463 |
9,586 |
7,340 |
|||||
General corporate expense |
$ |
724 |
$ |
(509) |
$ |
3,572 |
$ |
400 |
|
Amortization expense |
3,201 |
1,327 |
7,296 |
4,973 |
|||||
Interest expense |
2,047 |
2,027 |
8,429 |
8,347 |
|||||
Other expenses |
5,972 |
2,845 |
19,297 |
13,720 |
|||||
Profit (loss) from insurance operations |
$ |
1,579 |
$ |
11,022 |
$ |
(44,348) |
$ |
56,271 |
|
Profit from net commissions & fees |
3,070 |
1,463 |
9,586 |
7,340 |
|||||
Other expenses |
(5,972) |
(2,845) |
(19,297) |
(13,720) |
|||||
Net capital gains |
52,111 |
680 |
55,312 |
2,949 |
|||||
Pretax income |
$ |
50,788 |
$ |
10,320 |
$ |
1,253 |
$ |
52,840 |
|
Key ratios: |
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GAAP combined ratio |
104.5% |
101.3% |
111.4% |
99.8% |
|||||
Accident year combined ratio(2) |
102.7% |
97.5% |
101.4% |
98.8% |
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(1) The three months ended |
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(2) The accident year combined ratio is the sum of the expense ratio and accident year loss ratio. The accident year loss ratio measures loss and LAE occurring in a particular year, regardless of when they are reported and does not take into consideration changes in estimates in loss reserves from prior accident years. |
SOURCE
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