Archive for February, 2009
Donegal Group Inc. Announces Fourth Quarter and Full Year Earnings - Posted by Steven Wevodau
The Company’s combined ratio was 98.0% for the fourth quarter of 2008, compared to 90.5% for the fourth quarter of 2007. The Company’s loss ratio for the fourth quarter of 2008 was 66.8%, compared to 58.4% for the fourth quarter of 2007. The Company’s expense ratio was 30.9% for the fourth quarter of 2008, compared to 31.6% for the fourth quarter of 2007, reflecting the benefit of increased net premiums written during the quarter and decreased underwriting-based incentive compensation costs. The expense ratio for the fourth quarter of 2008 decreased in spite of a severance charge of approximately $1.3 million related to personnel reductions, which were part of the Company’s ongoing expense reduction program. The Company expects that the personnel reductions will result in expense savings of approximately $2.3 million in 2009 and subsequent years.
Net investment income was $5,468,308 for the fourth quarter of 2008, compared to $5,906,339 for the fourth quarter of 2007, reflecting reduced investment income due to increased holdings of short-term U.S. Treasury investments during the fourth quarter of 2008 and the use of invested assets to redeem $15.5 million of subordinated debentures in August 2008. Interest expense on subordinated debentures decreased by $448,623 during the fourth quarter of 2008 compared to the comparable period in 2007, with this decrease in expense more than offsetting the related decrease in investment income.
The Company reported net realized investment losses of $181,181, or $0.01 per Class A share on an after-tax basis, for the fourth quarter of 2008. The Company did not recognize any other than temporary impairments in the fourth quarter of 2008. Equity securities represented less than 1% of the Company’s investment portfolio at December 31, 2008.
As a result of the previously announced acquisition of Sheboygan Falls Insurance Company on December 1, 2008, the Company’s fourth quarter of 2008 financial statements include the results of Sheboygan Falls for the month of December 2008. The impact of the acquisition on fourth quarter results was not material.
Net income for the year ended December 31, 2008 was $25,541,978, compared to $38,279,905 reported for the year ended December 31, 2007. On a diluted basis, net income per share of Class A common stock for the year ended December 31, 2008 was $1.02, compared to $1.53 for the prior year. The Company’s net premiums written increased 16.3% during 2008 to $364,941,055, largely due to the change in the pooling agreement with Donegal Mutual Insurance Company effective March 1, 2008. The Company’s combined ratio for the full year 2008 was 97.2%, compared to its combined ratio of 91.3% for the full year 2007. The Company’s loss ratio was 64.7% for the full year 2008, compared to 57.4% for the full year 2007, with the increase reflecting increased weather-related claim activity and less favorable prior-accident-year reserve development. The Company’s expense ratio was 32.1% for the full year 2008, compared to 33.5% for the full year 2007.
The Company will adjust its financial statements for the first three quarters of 2008 to correct immaterial errors. Because of these errors, the Company overstated its reported net income for the nine months ended September 30, 2008 by approximately $1.7 million, or approximately $.07 per Class A share. The Company will include additional details related to this adjustment in its Annual Report on Form 10-K for the year ended December 31, 2008.
The Company’s total stockholders’ equity, or book value, increased to $363,583,865, a per common share amount of $14.29, at December 31, 2008, compared to $352,690,191, a per common share amount of $13.92, at December 31, 2007.
“We are pleased to be among a select few companies reporting an increase in book value for the year. This accomplishment can be attributed to our conservative investment philosophy as well as our achievement of underwriting profitability and solid investment returns in a difficult environment. We are operating from a position of financial strength and are continuing to follow our conservative business strategy in today’s challenging insurance and investment markets,” stated Donald H. Nikolaus, President and Chief Executive Officer of Donegal Group Inc.
The Company will hold a conference call and webcast on Wednesday, February 18, 2009, beginning at 11:00 A.M. Eastern Time. You may listen via the Internet by accessing the webcast link in the Investors area of the Company’s web site at http://www.donegalgroup.com. A replay of the conference call will also be available via the Company’s web site.
Donegal Group Inc. is an insurance holding company whose insurance subsidiaries offer personal and commercial property and casualty lines of insurance in five Mid-Atlantic states (Delaware, Maryland, New Hampshire, New York and Pennsylvania), eight Southeastern states (Alabama, Georgia, Louisiana, North Carolina, South Carolina, Tennessee, Virginia and West Virginia) and six Midwestern states (Iowa, Nebraska, Ohio, Oklahoma, South Dakota and Wisconsin).
All statements contained in this press release that are not historic facts are based on current expectations. Such statements are forward-looking in nature (as defined in the Private Securities Litigation Reform Act of 1995) and necessarily involve risks and uncertainties. Actual results could vary materially. The factors that could cause actual results to vary materially include, but are not limited to, the ability of the Company to maintain profitable operations, the adequacy of the Company’s reserves for losses and loss adjustment expenses, business and economic conditions in the areas in which the Company operates, conditions resulting from the ongoing recession in the United States, severe weather events, competition from various insurance and non-insurance businesses, terrorism, the availability and cost of reinsurance, legal and judicial developments, changes in regulatory requirements and other risks that are described from time to time in the Company’s filings with the Securities and Exchange Commission. The Company disclaims any obligation to update such statements or to announce publicly the results of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
Donegal Group Inc.
Financial Highlights
(unaudited)
Quarter Ended December 31
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2008 2007
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Net premiums earned $ 89,067,548 $ 78,188,948
Investment income, net of investment
expenses 5,468,308 5,906,339
Net realized investment (losses) gains (181,181) 1,397,394
Total revenues 95,840,537 86,890,271
Net income $ 6,394,297 $ 10,796,583
Net income per common share:
Class A common stock - basic $ 0.26 $ 0.44
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Class A common stock - diluted $ 0.26 $ 0.43
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Class B common stock - basic and diluted $ 0.23 $ 0.39
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Year Ended December 31
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2008 2007
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Net premiums earned $346,575,266 $310,071,534
Investment income, net of investment
expenses 22,755,784 22,785,252
Net realized investment (losses) gains (2,970,716) 2,051,050
Total revenues 372,312,162 340,618,294
Net income $ 25,541,978 $ 38,279,905
Net income per common share:
Class A common stock - basic $ 1.03 $ 1.55
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Class A common stock - diluted $ 1.02 $ 1.53
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Class B common stock - basic and diluted $ 0.92 $ 1.39
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Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Quarter Ended December 31
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2008 2007
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Net premiums earned $ 89,068 $ 78,189
Investment income, net of investment
expenses 5,468 5,906
Net realized investment (losses) gains (181) 1,397
Lease income 221 269
Installment payment fees 1,264 1,129
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Total revenues 95,840 86,890
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Net losses and loss expenses 59,451 45,628
Amortization of deferred policy
acquisition costs 15,141 13,315
Other underwriting expenses 12,397 11,397
Other expenses 352 400
Policyholder dividends 251 405
Interest 276 724
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Total expenses 87,868 71,869
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Income before income tax expense 7,972 15,021
Income tax expense 1,578 4,225
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Net income $ 6,394 $ 10,796
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Net income per common share:
Class A common stock - basic $ 0.26 $ 0.44
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Class A common stock - diluted $ 0.26 $ 0.43
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Class B common stock - basic and diluted $ 0.23 $ 0.39
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,914,130 19,717,747
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Class A common stock - diluted 19,918,941 19,949,711
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 78,600 $ 70,781
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Book value per common share at end of
period $ 14.29 $ 13.92
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Donegal Group Inc.
Consolidated Statements of Income
(unaudited; in thousands, except share data)
Year Ended December 31
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2008 2007
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Net premiums earned $ 346,575 $ 310,072
Investment income, net of investment
expenses 22,756 22,785
Net realized investment (losses) gains (2,971) 2,051
Lease income 927 1,060
Installment payment fees 5,025 4,650
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Total revenues 372,312 340,618
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Net losses and loss expenses 224,301 177,784
Amortization of deferred policy
acquisition costs 58,250 51,205
Other underwriting expenses 53,108 52,726
Other expenses 1,564 1,896
Policyholder dividends 1,176 1,273
Interest 1,821 2,885
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Total expenses 340,220 287,769
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Income before income tax expense 32,092 52,849
Income tax expense 6,550 14,569
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Net income $ 25,542 $ 38,280
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Net income per common share:
Class A common stock - basic $ 1.03 $ 1.55
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Class A common stock - diluted $ 1.02 $ 1.53
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Class B common stock - basic and diluted $ 0.92 $ 1.39
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Supplementary Financial Analysts' Data
Weighted-average number of shares
outstanding:
Class A common stock - basic 19,866,099 19,685,674
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Class A common stock - diluted 19,955,518 19,962,858
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Class B common stock - basic and diluted 5,576,775 5,576,775
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Net written premiums $ 364,941 $ 313,690
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Book value per common share at end of
period $ 14.29 $ 13.92
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Donegal Group Inc.
Consolidated Balance Sheets
(in thousands)
December 31,
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2008 2007
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(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity, at amortized cost $ 99,878 $ 154,290
Available for sale, at fair value 445,816 336,318
Equity securities, at fair value 5,895 36,361
Investments in affiliates 8,594 8,649
Short-term investments, at cost 71,953 70,252
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Total investments 632,136 605,870
Cash 1,831 4,289
Premiums receivable 55,337 51,038
Reinsurance receivable 79,953 78,897
Accrued investment income 6,656 5,875
Deferred policy acquisition costs 29,541 26,235
Prepaid reinsurance premiums 51,436 47,286
Property and equipment, net 6,687 5,608
Deferred tax asset, net 10,995 7,026
Other assets 5,537 1,972
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Total assets $ 880,109 $ 834,096
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Losses and loss expenses $ 239,809 $ 226,432
Unearned premiums 229,014 203,431
Accrued expenses 14,150 12,313
Subordinated debentures 15,465 30,929
Due to affiliate 3,148 242
Accounts payable - securities 1,821 --
Other liabilities 13,118 8,059
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Total liabilities 516,525 481,406
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Stockholders' equity:
Preferred stock -- --
Class A common stock 205 202
Class B common stock 56 56
Additional paid-in capital 163,137 156,851
Accumulated other comprehensive income 1,714 6,974
Retained earnings 207,182 193,807
Treasury stock, at cost (8,710) (5,200)
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Total stockholders' equity 363,584 352,690
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Total liabilities and stockholders'
equity $ 880,109 $ 834,096
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Contact:
Donegal Group Inc.
Jeffrey D. Miller, Senior Vice President & Chief Financial
Officer
(717) 426-1931
Fax: (717) 426-7009
jeffmiller@donegalgroup.com
Source: Donegal Group Inc
Posted by Steven Wevodau
Harleysville Insurance Names Toth Chief Underwriting Officer
Posted by Steven Wevodau
Toth joined Harleysville in 2005 as vice president, associate general counsel and chief litigation counsel. He was named senior vice president of claims later that year. Prior to that, he was an attorney in the litigation department of the law firm of Reed Smith LLP in Philadelphia.
Toth earned a bachelor’s degree from Temple University and a juris doctor degree from the Temple University School of Law, where he has also served as an adjunct professor of trial advocacy and coach of Temple’s national trial team.
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 was listed recently as #30 in the InformationWeek 500, the publication’s annual listing of the most innovative information technology organizations in the U.S., and has been ranked on the list in each of the last three years. Harleysville Mutual Insurance Company owns 52 percent of Harleysville Group Inc. (NASDAQ: HGIC - News), a publicly traded holding company for eight regional property/casualty insurance companies collectively rated A- (Excellent) by A.M. Best Company. Harleysville Group is listed on the NASDAQ Global Select Market, which is comprised of the top third of all NASDAQ member companies and has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements. Harleysville Insurance—which distributes its products exclusively through independent insurance agencies and reflects that commitment to its agency force by being a Trusted Choice® company partner—currently operates in 32 eastern and midwestern states. Further information can be found on the company’s Web site at www.harleysvillegroup.com.
Contact:
Harleysville Insurance Randy Buckwalter 215.256.5288 (office) 267.718.3766 (cell) rbuckwalter@harleysvillegroup.com
Source: Harleysville Insurance
AIG Vice Chairman Frank G. Wisner Announces Retirement - Posted by Steven Wevodau
Commenting on Ambassador Wisner’s retirement, AIG Chairman and Chief Executive Officer Edward M. Liddy said, “Throughout his tenure with AIG, Frank Wisner brought his deep knowledge of international affairs and public policy to AIG’s businesses in vibrant markets throughout the world. On behalf of all AIG colleagues who have benefited from his many contributions and tireless leadership over the years, we wish Ambassador Wisner the very best in the future.”
American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.
Contact:
AIG Joe Norton, 212-770-3144 Director of Public Relations
Source: American International Group, Inc.
A.M. Best Withdraws Ratings of Seaboard Surety Company Due to Merger With Affiliate - Posted by Steven Wevodau
OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best Co. has withdrawn the financial strength rating (FSR) of A+ (Superior) and ICR of “aa-” and assigned a category NR-5 (Not Formally Followed) to the FSR and an “nr” to the ICR of Seaboard Surety Company (Seaboard) (New York, NY).
The withdrawal of the ratings reflects the merger of Seaboard with and into the separately rated entity, Travelers Casualty and Surety Company of America (TCSA) (Hartford, CT), an affiliate, effective January 2, 2009, following the approvals of the New York and Connecticut insurance departments. Prior to the merger, Seaboard was a wholly owned indirect property/casualty subsidiary of The Travelers Companies, Inc. (St. Paul, MN) [NYSE: TRV] and a member of Travelers Group.
The FSRs of A+ (Superior) and ICRs of “aa-” of Travelers Group and TCSA are unchanged as a result of this merger.
For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
Contact:
A.M. Best Co. Analysts Michael J. Lagomarsino, CFA, 908-439-2200, ext. 5810 michael.lagomarsino@ambest.com or W. Dolson Smith, CFA, 908-439-2200, ext. 5379 w.dolson.smith@ambest.com or Public Relations Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow, 908-439-2200, ext. 5378 rachelle.morrow@ambest.com
Harleysville Group to Hold Fourth Quarter 2008 Earnings Conference Call on February 20, 2009
Posted by Steven Wevodau
HARLEYSVILLE, Pa.–(BUSINESS WIRE)–Harleysville Group Inc. (NASDAQ:HGIC - News) will hold a live Webcast on Friday, February 20, 2009, beginning at 8 a.m. (ET) to discuss its fourth quarter 2008 earnings. The company will release its results on Thursday, February 19, 2009, after the close of regular trading on the NASDAQ Stock Market.
The Webcast and a replay will be available from the Investors section of the company’s Web site (www.harleysvillegroup.com).
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 was listed recently as #30 in the InformationWeek 500, the publication’s annual listing of the most innovative information technology organizations in the U.S., and has been ranked on the list in each of the last three years. Harleysville Mutual Insurance Company owns 52 percent of Harleysville Group Inc. (NASDAQ: HGIC - News), a publicly traded holding company for eight regional property/casualty insurance companies collectively rated A- (Excellent) by A.M. Best Company. Harleysville Group is listed on the NASDAQ Global Select Market, which is comprised of the top third of all NASDAQ member companies and has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements. Harleysville Insurance—which distributes its products exclusively through independent insurance agencies and reflects that commitment to its agency force by being a Trusted Choice® company partner—currently operates in 32 eastern and midwestern states. Further information can be found on the company’s Web site at www.harleysvillegroup.com.
Certain of the statements made during this presentation (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 operating return on equity, 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; performance of and instability in the financial markets; investment losses; fluctuations in interest rates; availability and price of reinsurance; and the status of the labor markets in which the company operates.
Contact:
Harleysville Group Inc. Investors: Mark Cummins, 215-256-5025 mcummins@harleysvillegroup.com or Media: Randy Buckwalter, 215-256-5288 rbuckwalter@harleysvillegroup.com
Markel Muscles Its Way Forward - Posted by Steven Wevodau
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http://www.fool.com/investing/value/2009/02/04/markel-muscles-its-way-forward.aspx Toby Shute
Whereas I nominated Fairfax Financial (NYSE: FFH) for the Overall Most Foolish category in our recent Fool Awards, Markel (NYSE: MKL) was the insurer/investor to ultimately take home the statue. Since then, I’ve committed to digging deeper into both of these businesses, and I intend to give them fuller Foolish coverage going forward. That task begins today, with Markel’s fourth-quarter and full-year results. For the full year, Markel’s combined ratio was nominally positive at 99% (sub-100% results indicate profitable underwriting). Just as with Chubb (NYSE: CB), Hurricanes Ike and Gustav caused a five-point drag on this ratio. Still, you can’t wave away the effects of catastrophes in this business. As they say on The Wire: all in the game. That 99% combined ratio isn’t great, but it’s comparable to that reported by Allstate (NYSE: ALL) and others, and tolerable in a soft market. As for the insurance outlook, there are forces that may eventually work in Markel’s favor. The economic recession will drive down premium dollars, as businesses have lower coverage needs. Markel thinks it can make up for this decline with higher rates, driving rates per unit of exposure — and by extension, underwriting margins — higher. Competitors may undercut Markel on rates in the near term, but that’s their loss — literally. They risk underestimating the coming rise in claims, if Steve Markel is correct that people are “more likely to make claims and be unhappy” in this environment. On the investment side, Markel’s equity portfolio shed 34%, so it outpaced the market slightly. The largest realized losses in stocks stemmed from positions in General Electric (NYSE: GE), Citigroup (NYSE: C), and Bank of America (NYSE: BAC). Fortunately, the firm has been scaling back its equity exposure since 2006. In sum, the total investment portfolio lost 6.9%. In that light, Markel’s performance in 2008 was rock solid, especially compared to those aforementioned portfolio companies. Resident Markel investing genius Tom Gayner noted that he’s modestly buying stocks for the first time in 18 months. He cautions that this isn’t a bottom call on the market by any means, but he does believe that the stock market is pricing in “depression-like conditions.” On that assessment, he’s happy to ratchet up Markel’s exposure to quality stocks, as long as the insurance market firms from here. |
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Aspen Insurance Holdings Reports Results for Fourth Quarter and Twelve Months of 2008 - Steven Wevodau
Diluted book value per share of $28.10, up 3.8% over 2007 and 7.2% over the third quarter of 2008. Full year net income of $103.8 million and fourth quarter net income of $21.8 million, down 78.8% on 2007 and 83.9% over the same quarter last year. Total investment return of $117.1 million or a simple 2% yield, including losses from funds of hedge funds, impairment charges and changes in unrealized gains in fixed income portfolio. Full year net investment income of $139.2 million and fourth quarter net investment income of $10.3 million, down 53.4% on 2007 and 87.2% over the same quarter last year. Operating earnings per share of $1.44 for 2008, down 71.1% on 2007 and $0.17 for the quarter, down 88.4% on the fourth quarter of 2007. Operating return on equity of 5.4% for the twelve months, down from 21.1% for 2007, and annualized 2.4% for the quarter, down from 23.2% for the fourth quarter of 2007. Combined ratio for the twelve months of 95.6% and 93.4% for the quarter up from 83.0% and 79.4% for the respective periods in 2007. Expense ratio for the twelve months of 29.8% and 28.5% for the quarter, down from 29.9% on 2007 and 31.8% over the same quarter last year.
- Wednesday February 4, 2009, 6:09 pm EST
HAMILTON, Bermuda–(BUSINESS WIRE)–Aspen Insurance Holdings Limited (NYSE:AHL - News) today reported a net profit after tax for 2008 of $103.8 million or an operating profit of $1.44 per diluted ordinary share and net profit after tax for the fourth quarter of 2008 of $21.8 million or an operating profit of $0.17 per diluted ordinary share. This compares to a net profit after tax of $489.0 million for 2007, or operating earnings of $4.99 per diluted share and net profit after tax of $135.2 million, or operating earnings of $1.47 per diluted share for the fourth quarter last year.
Book value per share on a diluted basis of $28.10 has increased by $1.02 when compared to December 31, 2007 and by $1.89 since the end of September 2008, mainly as a result of net income after tax and increased unrealized gains in the investment portfolio.
Operating income after tax was $151.5 million for the full year and $20.5 million for the fourth quarter of 2008 compared with $478.6 million for 2007 and $138.0 million for the fourth quarter last year. Operating income, excluding losses from our funds of hedge funds, net of taxes, was $66.5 million for the quarter and $237.9 million for the year. Annualized operating return on equity for the quarter was 2.4% and 5.4% for the year. Annualized operating return on equity excluding losses from our investments in funds of hedge funds, net of taxes, was 10.6% for the quarter and 9.2% for the year.
The funds of hedge funds performance within the Company’s net investment income accounted for $0.55 of the reduction in diluted earnings per share for the fourth quarter of 2008 and a reduction of $1.01 for the twelve months. Losses from Hurricanes Ike and Gustav accounted for $2.00 in earnings per share for the year.
The effective tax rate in the fourth quarter of 2008 was 47.4% compared to 14.3% in the fourth quarter of 2007. The increase was mainly driven by the distribution of insurance and investment-related losses within the group in the fourth quarter of 2008. As a result, the effective tax rate for the year was 26.0% compared to 14.8% in 2007.
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Fourth Quarter 2008 Financial Highlights ($ in millions, except per share amounts and percentages) (Unaudited) |
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Q4 2008 |
Q4 2007 | Change | ||||
| Gross written premium | $435.4 | $305.0 | 42.8% | |||
| Net earned premium | $478.6 | $423.7 | 13.0% | |||
| Net investment income | $10.3 | $80.3 | (87.2)% | |||
| Net income after tax | $21.8 | $135.2 | (83.9)% | |||
| Diluted operating earnings per share | $0.17 | $1.47 | (88.4)% | |||
| Net income annualized return on equity | 2.8% | 22.8% | ||||
| Annualized operating return on equity | 2.4% | 23.2% | ||||
| Combined ratio | 93.4% | 79.4% | ||||
| Diluted book value per share | $28.10 | $27.08 | 3.8% | |||
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Twelve Months 2008 Financial Highlights ($ in millions, except per share amounts and percentages) (Unaudited) |
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| 2008 | 2007 | Change | ||||
| Gross written premium | $2,001.7 | $1,818.5 | 10.1% | |||
| Net earned premium | $1,701.7 | $1,733.6 | (1.8)% | |||
| Net investment income | $139.2 | $299.0 | (53.4)% | |||
| Net income after tax | $103.8 | $489.0 | (78.8)% | |||
| Combined ratio | 95.6% | 83.0% | ||||
| Net income return on equity | 3.3% | 21.6% | ||||
| Operating return on equity | 5.4% | 21.1% | ||||
| Diluted operating earnings per share | $1.44 | $4.99 | (71.1)% | |||
Chris O’Kane, Chief Executive Officer said, “We enter 2009 with a strong capital position and expanded product range despite difficult underwriting and investment conditions in 2008. Global economic stress will continue to provide challenges, but current signs are that rates are firming across many sectors and business flows remain strong as customers respond to Aspen’s combination of specialist expertise and balance sheet strength.”
Business Segment Highlights
A summary of the operating highlights for each of Aspen’s four business segments is presented below.
Property Reinsurance
The property reinsurance segment recorded a combined ratio of 85.2% for the fourth quarter compared with 74.8% for the same period in 2007. The quarter was impacted by a $7.8 million increase in losses reported for Hurricanes Ike and Gustav. For the twelve-month period, as of December 31, 2008, taking into account losses from Hurricanes Ike and Gustav, this segment performed well and had a combined ratio of 91.1% compared to 72.6% in the comparative period in 2007. The current year has been impacted by losses of $128.3 million, net of reinstatement premiums, from Hurricanes Ike and Gustav. Gross written premium of $81.5 million for the fourth quarter of 2008 and $589.0 million for the twelve months are broadly in line with those for the equivalent periods in 2007.
Casualty Reinsurance
The combined ratio for the casualty reinsurance segment improved to 92.0% for the quarter from 96.1% in the fourth quarter of 2007. For the twelve-month period ending December 31, 2008, the combined ratio has improved to 92.0% compared to 94.6% in 2007. The improvement in the combined ratio for the year and the fourth quarter is due largely to favorable development on prior accident years. Gross written premium for the fourth quarter of 2008 was $97.7 million, an increase of $46.4 million over the same period in 2007 due mainly to favorable prior year premium adjustments and increased contribution from our U.S. and Bermudian operations. For the twelve-month period, gross written premium decreased by 3.5% to $416.3 million when compared to 2007.
International Insurance
The international insurance segment reported a combined ratio for the fourth quarter of 104.9% compared with 70.5% for the same period in 2007. The fourth quarter of 2008 has been impacted by reserve deterioration associated mainly with a 2007 loss in our specialty insurance lines and an $8.4 million increase in estimated hurricane losses. For the twelve months ended December 31, 2008, the combined ratio for the segment has increased to 99.8% compared to 80.7% for the same period in 2007 mainly as a result of losses associated with Hurricane Ike in our energy and specialty liability lines. The combined ratio has also been impacted by net reserve deterioration of $3.9 million for the full year 2008, compared with net reserve releases of $80.8 million for the same period in 2007. Gross written premium in the quarter increased by 52.7% to $228.8 million. For the twelve-month period, gross written premium increased to $867.8 million from $663.0 million in 2007.
U.S. Insurance
The combined ratio in the fourth quarter for the U.S. insurance segment has improved significantly to 59.0% compared with 77.0% in the fourth quarter of 2007 due mainly to favorable loss experience in the current quarter. The combined ratio for the twelve months was 105.8% with Hurricanes Ike and Gustav accounting for 14.9 percentage points of the increase in the combined ratio. This compares with 98.3% for the same period in 2007. Gross written premium increased by 12.8% when compared to the fourth quarter of 2007 and 5.0% for the twelve-month period.
Investment Performance
Net investment income for the quarter was $10.3 million compared with $80.3 million in the fourth quarter of 2007 due primarily to the performance of the funds of hedge funds. Funds of hedge funds have been materially impacted by the turmoil in the financial markets, with performance, measured by funds net asset value, down by 9.5% or $49.0 million in the quarter and by 17.3% or $97.3 million for the twelve months. In the prior year, funds of hedge funds returned 2.4% in the fourth quarter of 2007 and 11.1% for the twelve months of 2007. We have reduced our exposure to funds of hedge funds by redeeming approximately 40% of these investments on December 31, 2008 with the remaining funds of hedge funds accounting for 5.0% of our investment assets and less than 10.3% of total shareholders’ equity. Other-than-temporary impairment charges were $3.8 million for the fourth quarter of 2008 and $59.6 million for the year.
The book yield on the fixed income portfolio was 4.64% at the end of the fourth quarter of 2008, down from 5.05% at the end of 2007. Unrealized gains on the fixed income portfolio at the end of December 2008 were $67.4 million, an increase of $138.3 million from the end of the third quarter of 2008. This was also an increase of $25.7 million when compared with unrealized gains of $41.7 million at the end of 2007. The increase in unrealized gains during the year is due mainly to price increases in government, agency and agency mortgage-backed securities, in addition to declines in yields on corporate bonds.
The portfolio consists of high quality, diversified assets, with 32.2% of fixed maturities invested in U.S. Government and other foreign government bonds and 24.6% invested in agency-rated mortgage-backed securities. The average credit quality of the portfolio remains AAA with an average duration of 3.12 years.
Outlook for 2009
Many of the Company’s lines of business began re-pricing in January 2009 and the Company expects this to accelerate, a least in its property, marine and energy lines throughout the year. The Company believes its investment portfolio is well positioned to benefit from any recovery in investment markets. Nevertheless, recession-related risks are real and the Company will be trading with the right level of caution in what could be another turbulent year for the global economy. The Company anticipates, for 2009, total gross written premium of $2 billion +/- 5%, premium ceded of 10% to 12% of gross earned premium, a combined ratio in the range of 90% to 96%, a tax rate of 13% to 16% and a cat-load of $170 million assuming normal loss experience.
Earnings conference call
Aspen will hold a conference call to discuss its financial results on Thursday, February 5, 2009 at 8:30 a.m. (Eastern Time).
CONFERENCE CALL PARTICIPATION DETAILS – February 5, 2009 at 8:30 a.m. (EST)
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Participant Dial-In Numbers: |
+1 (888) 459-5609 (US Toll Free) |
| +1 (404) 665-9920 (International) | |
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Conference ID: |
78437042 |
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Please call to register at least 10 minutes before the conference call begins. |
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The conference call will be webcast live in the ‘presentations’ section of the Investor Relations page of Aspen’s website, which is located at www.aspen.bm. The earnings press release and a detailed financial supplement will be posted to the website, as well as a brief slide presentation which may be used for reference during the earnings call.
REPLAY DETAILS
A replay of the call will be available for 14 days via telephone and Internet starting two hours following the end of the live call.
| Replay Access: | +1 (800) 642-1687 (US Toll Free) | |||
| +1 (706) 645-9291 (International) | ||||
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Aspen Insurance Holdings Limited Summary Consolidated Balance Sheet ($ in millions, except per share data) (Unaudited) |
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| (in US$ millions) |
As at December 31, 2008 |
As at December 31, 2007 |
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| ASSETS | ||||||
| Total investments | 4,944.9 | 5,227.3 | ||||
| Cash and cash equivalents | 809.1 | 651.4 | ||||
| Reinsurance recoverable | 329.6 | 381.7 | ||||
| Premiums receivable | 677.5 | 575.6 | ||||
| Other assets | 527.7 | 365.3 | ||||
| Total assets | 7,288.8 | 7,201.3 | ||||
| LIABILITIES | ||||||
| Losses and loss adjustment expenses | 3,070.3 | 2,946.0 | ||||
| Unearned premiums | 810.7 | 757.6 | ||||
| Other payables | 379.2 | 430.6 | ||||
| Long-term debt | 249.5 | 249.5 | ||||
| Total liabilities | 4,509.7 | 4,383.7 | ||||
| SHAREHOLDERS’ EQUITY | ||||||
| Total shareholders’ equity | 2,779.1 | 2,817.6 | ||||
| Total liabilities and shareholders’ equity | 7,288.8 | 7,201.3 | ||||
| Tangible book value per share | 28.85 | 27.95 | ||||
| Diluted book value per share (treasury stock method) | 28.10 | 27.08 | ||||
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Aspen Insurance Holdings Limited Summary Consolidated Statements of Income ($ in millions, except share, per share data and ratios) (Unaudited) |
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| (in US$ millions) |
Three Months Ended December 31, 2008 |
Three Months Ended December 31, 2007 |
Twelve Months Ended December 31, 2008 |
Twelve Months Ended December 31, 2007 |
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| UNDERWRITING REVENUES | ||||||||||
| Gross written premiums | 435.4 | 305.0 | 2,001.7 | 1,818.5 | ||||||
| Premiums ceded | (29.3) | (26.0) | (166.2) | (217.1) | ||||||
| Net written premiums | 406.1 | 279.0 | 1,835.5 | 1,601.4 | ||||||
| Change in unearned premiums | 72.5 | 144.7 | (133.8) | 132.2 | ||||||
| Net earned premiums | 478.6 | 423.7 | 1,701.7 | 1,733.6 | ||||||
| UNDERWRITING EXPENSES | ||||||||||
| Losses and loss expenses | 310.6 | 201.7 | 1,119.5 | 919.8 | ||||||
| Acquisition expenses | 87.5 | 78.4 | 299.3 | 313.9 | ||||||
| General and administrative expenses | 48.6 | 56.5 | 208.1 | 204.8 | ||||||
| Total underwriting expenses | 446.7 | 336.6 | 1,626.9 | 1,438.5 | ||||||
| Underwriting income | 31.9 | 87.1 | 74.8 | 295.1 | ||||||
| OTHER OPERATING REVENUE | ||||||||||
| Net investment income | 10.3 | 80.3 | 139.2 | 299.0 | ||||||
| Interest expense | (3.9) | (2.9) | (15.6) | (15.7) | ||||||
| Total other operating revenue | 6.4 | 77.4 | 123.6 | 283.3 | ||||||
| Other income (expense) | (0.5) | (3.8) | (2.1) | (11.9) | ||||||
| OPERATING INCOME BEFORE TAX | 37.8 | 160.7 | 196.3 | 566.5 | ||||||
| OTHER | ||||||||||
| Net realized exchange gains | (4.8) | (2.1) | (8.2) | 20.6 | ||||||
| Net realized investment losses | 8.4 | (0.8) | (47.9) | (13.1) | ||||||
| INCOME BEFORE TAX | 41.4 | 157.8 | 140.2 | 574.0 | ||||||
| Income taxes expense | (19.6) | (22.6) | (36.4) | (85.0) | ||||||
| NET INCOME AFTER TAX | 21.8 | 135.2 | 103.8 | 489.0 | ||||||
| Dividends paid on ordinary shares | (12.3) | (13.3) | (50.2) | (53.0) | ||||||
| Dividend paid on preference shares | (6.9) | (6.9) | (27.7) | (27.7) | ||||||
| Retained income | 2.6 | 115.0 | 25.9 | 408.3 | ||||||
| Components of net income (after tax) | ||||||||||
| Operating income | 20.5 | 138.0 | 151.5 | 478.6 | ||||||
| Net realized and unrealized exchange gains (after tax) | (4.8) | (2.1) | (8.2) | 20.6 | ||||||
| Net realized investment losses (after tax) | 6.1 | (0.7) | (39.5) | (10.2) | ||||||
| NET INCOME AFTER TAX | 21.8 | 135.2 | 103.8 | 489.0 | ||||||
| Loss ratio | 64.9% | 47.6% | 65.8% | 53.1% | ||||||
| Policy acquisition expense ratio | 18.3% | 18.5% | 17.6% | 18.1% | ||||||
| General and administrative expense ratio | 10.2% | 13.3% | 12.2% | 11.8% | ||||||
| Expense ratio | 28.5% | 31.8% | 29.8% | 29.9% | ||||||
| Combined ratio | 93.4% | 79.4% | 95.6% | 83.0% | ||||||
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Aspen Insurance Holdings Limited Summary Consolidated Financial Data ($ in millions, except share, per share data and ratios) (Unaudited) |
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| Three Months Ended | Twelve Months Ended | |||||||||
| (in US$ except for number of shares) |
December 31, 2008 |
December 31, 2007 |
December 31, 2008 |
December 31, 2007 |
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| Basic earnings per ordinary share | ||||||||||
| Net income adjusted for preference share dividend | $0.18 | $1.48 | $0.92 | $5.25 | ||||||
| Operating income adjusted for preference dividend | $0.17 | $1.52 | $1.49 | $5.14 | ||||||
| Diluted earnings per ordinary share | ||||||||||
| Net income adjusted for preference share dividend | $0.18 | $1.44 | $0.89 | $5.11 | ||||||
| Operating income adjusted for preference dividend | $0.17 | $1.47 | $1.44 | $4.99 | ||||||
| Weighted average number of ordinary shares outstanding (in millions) | 81.485 | 86.503 | 82.963 | 87.808 | ||||||
| Weighted average number of ordinary shares outstanding and dilutive potential ordinary shares (in millions) | ||||||||||
| 83.423 | 89.211 | 85.532 | 90.355 | |||||||
| Book value per ordinary share | $28.85 | $27.95 | ||||||||
| Diluted book value per ordinary share (treasury stock method) | $28.10 | $27.08 | ||||||||
| Ordinary shares outstanding at end of the period (in millions) | 81.507 | 85.511 | ||||||||
| Ordinary shares outstanding and dilutive potential ordinary shares at end of the period (treasury stock method) (in millions) | ||||||||||
| 83.706 | 88.269 | |||||||||
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Aspen Insurance Holdings Limited Summary Consolidated Segment Information ($ in millions except ratios) (Unaudited) |
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Three Months Ended December 31, 2008 |
Three Months Ended December 31, 2007 |
Twelve Months Ended December 31, 2008 |
Twelve Months Ended December 31, 2007 |
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| Gross written premiums | |||||||||
| Property Reinsurance | 81.5 | 79.6 | 589.0 | 601.5 | |||||
| Casualty Reinsurance | 97.7 | 51.3 | 416.3 | 431.5 | |||||
| International Insurance | 228.8 | 149.8 | 867.8 | 663.0 | |||||
| U.S. Insurance | 27.4 | 24.3 | 128.6 | 122.5 | |||||
| Total | 435.4 | 305.0 | 2,001.7 | 1,818.5 | |||||
| Premiums ceded | |||||||||
| Property Reinsurance | (1.5) | 8.8 | 24.9 | 106.5 | |||||
| Casualty Reinsurance | (0.9) | (2.0) | 3.4 | 6.4 | |||||
| International Insurance | 26.8 | 14.6 | 110.0 | 72.9 | |||||
| U.S. Insurance | 4.9 | 4.6 | 27.9 | 31.3 | |||||
| Total | 29.3 | 26.0 | 166.2 | 217.1 | |||||
| Net written premiums | |||||||||
| Property Reinsurance | 83.0 | 70.8 | 564.1 | 495.0 | |||||
| Casualty Reinsurance | 98.6 | 53.3 | 412.9 | 425.1 | |||||
| International Insurance | 202.0 | 135.2 | 757.8 | 590.1 | |||||
| U.S. Insurance | 22.5 | 19.7 | 100.7 | 91.2 | |||||
| Total | 406.1 | 279.0 | 1,835.5 | 1,601.4 | |||||
| Net earned premiums | |||||||||
| Property Reinsurance | 143.0 | 132.6 | 532.4 | 555.6 | |||||
| Casualty Reinsurance | 120.1 | 119.5 | 413.5 | 475.3 | |||||
| International Insurance | 190.1 | 147.7 | 661.8 | 597.2 | |||||
| U.S. Insurance | 25.4 | 23.9 | 94.0 | 105.5 | |||||
| Total | 478.6 | 423.7 | 1,701.7 | 1,733.6 | |||||
| Underwriting profit/(loss) | |||||||||
| Property Reinsurance | 21.1 | 33.4 | 47.0 | 152.2 | |||||
| Casualty Reinsurance | 9.8 | 4.7 | 32.7 | 25.7 | |||||
| International Insurance | (9.4) | 43.5 | 0.5 | 115.4 | |||||
| U.S. Insurance | 10.4 | 5.5 | (5.4) | 1.8 | |||||
| Total | 31.9 | 87.1 | 74.8 | 295.1 | |||||
| Combined ratio | |||||||||
| Property Reinsurance | 85.2% | 74.8% | 91.1% | 72.6% | |||||
| Casualty Reinsurance | 92.0% | 96.1% | 92.0% | 94.6% | |||||
| International Insurance | 104.9% | 70.5% | 99.8% | 80.7% | |||||
| U.S. Insurance | 59.0% | 77.0% | 105.8% | 98.3% | |||||
| Total | 93.4% | 79.4% | 95.6% | 83.0% | |||||
About Aspen Insurance Holdings Limited
Aspen provides reinsurance and insurance coverage to clients in various domestic and global markets through wholly-owned subsidiaries and offices in Bermuda, France, Ireland, the United States, the United Kingdom, and Switzerland. For the twelve months ended December 31, 2008, Aspen reported gross written premiums of $2.0 billion, net income of $103.8 million and total assets of $7.3 billion. For more information about Aspen, please visit www.aspen.bm.
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
This press release contains, and Aspen’s earnings conference call will contain, written or oral “forward-looking statements” within the meaning of the U.S. federal securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “seek,” “will,” “estimate,” “may,” “continue,” “guidance,” and similar expressions of a future or forward-looking nature.
All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. Aspen believes these factors include, but are not limited to: the continuing impact of the global financial crisis and credit crunch; a decline in the value of our investment portfolio or a rating downgrade of the securities in our portfolio; changes in prevailing market conditions that could adversely impact the execution of the business plan; in respect of large losses such as hurricane losses, Aspen’s reliance on loss reports received from cedants and loss adjustors, Aspen’s reliance on industry loss estimates and those generated by modeling techniques, any changes in Aspen’s reinsurers’ credit quality, changes in assumptions on flood damage exclusions as a result of prevailing lawsuits and case law, the amount and timing of reinsurance recoverables and reimbursements actually received by Aspen from its reinsurers; the impact that our future operating results, capital position and rating agency and other considerations have on the execution of any capital management initiatives; our ability to execute our business plan to enter new markets, introduce new products and develop new distribution channels, including their integration into our existing operations; the impact of any capital management activities on our financial condition; the impact of acts of terrorism and related legislation and acts of war; the possibility of greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events than our underwriting, reserving or investment practices have anticipated; evolving interpretive issues with respect to coverage after major loss events; the level of inflation in repair costs due to limited availability of labor and materials after catastrophes; the effectiveness of Aspen’s loss limitation methods; changes in the availability, cost or quality of reinsurance or retrocessional coverage, which may affect our decision to purchase such coverage; the reliability of, and changes in assumptions to, catastrophe pricing, accumulation and estimated loss models; loss of key personnel; a decline in our operating subsidiaries’ ratings with Standard & Poor’s, A.M. Best Company or Moody’s Investors Service; changes in general economic conditions including inflation, foreign currency exchange rates, interest rates and other factors that could affect our investment portfolio; the number and type of insurance and reinsurance contracts that we wrote at the January 1st and other renewal periods in 2008 and 2009 and the premium rates available at the time of such renewals within our targeted business lines; increased competition on the basis of pricing, capacity, coverage terms or other factors; decreased demand for Aspen’s insurance or reinsurance products and cyclical downturn of the industry; changes in governmental regulations, interpretations or tax laws in jurisdictions where Aspen conducts business; proposed and future changes to insurance laws and regulations, including with respect to U.S. state- and other government-sponsored reinsurance funds and primary insurers; Aspen or its Bermudian subsidiary becoming subject to income taxes in the United States or the United Kingdom; the effect on insurance markets, business practices and relationships of ongoing litigation, investigations and regulatory activity by insurance regulators and prosecutors. For a more detailed description of these uncertainties and other factors, please see the “Risk Factors” section in Aspen’s Annual Reports on Form 10-K as filed, and to be filed, with the U.S. Securities and Exchange Commission on February 29, 2008 and in early 2009. Aspen undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made.
In addition, any estimates relating to loss events involve the exercise of considerable judgment and reflect a combination of ground-up evaluations, information available to date from brokers and cedants, market intelligence, initial tentative loss reports and other sources. Due to the complexity of factors contributing to the losses and the preliminary nature of the information used to prepare these estimates, there can be no assurance that Aspen’s ultimate losses will remain within the stated amount.
Non-GAAP Financial Measures
In presenting Aspen’s results, management has included and discussed certain “non-GAAP financial measures” as such term is defined in Regulation G. Management believes that these non-GAAP measures, which may be defined differently by other companies, better explain Aspen’s results of operations in a manner that allows for a more complete understanding of the underlying trends in Aspen’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such non-GAAP financial measures to their respective most directly comparable GAAP financial measures in accordance with Regulation G is included in the financial supplement, which can be obtained from the Investor Relations section of Aspen’s website at www.aspen.bm.
(1) Annualized Operating Return on Average Equity (“Operating ROE”) is a non-GAAP financial measure. Annualized Operating Return on Average Equity 1) is calculated using operating income, as defined below and 2) excludes from average equity, the average after-tax unrealized appreciation or depreciation on investments and the average after-tax unrealized foreign exchange gains or losses and the aggregate value of the liquidation preferences of our preference shares. Unrealized appreciation (depreciation) on investments is primarily the result of interest rate movements and the resultant impact on fixed income securities, and unrealized appreciation (depreciation) on foreign exchange is the result of exchange rate movements between the U.S. dollar and the British pound. Such appreciation (depreciation) is not related to management actions or operational performance (nor is it likely to be realized). Therefore, Aspen believes that excluding these unrealized appreciations (depreciations) provides a more consistent and useful measurement of operating performance, which supplements GAAP information. Average equity is calculated as the arithmetic average on a monthly basis for the stated periods.
Aspen presents Operating ROE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.
See page 28 of Aspen’s financial supplement for a reconciliation of operating income to net income and page 7 for a reconciliation of average equity.
(2) Annualized Operating Return on Average Equity excluding gains or losses from funds of hedge funds (“Adjusted Operating ROE”) is a non-GAAP financial measure. Annualized Operating Return on Average Equity excluding gains or losses from funds of hedge funds 1) is calculated using adjusted operating income, as defined below and 2) excludes from average equity, the average after-tax unrealized appreciation or depreciation on investments and the average after-tax unrealized foreign exchange gains or losses and the aggregate value of the liquidation preferences of our preference shares. Unrealized appreciation (depreciation) on investments is primarily the result of interest rate movements and the resultant impact on fixed income securities, and unrealized appreciation (depreciation) on foreign exchange is the result of exchange rate movements between the U.S. dollar and the British pound. Such appreciation (depreciation) is not related to management actions or operational performance (nor is it likely to be realized). Therefore, Aspen believes that excluding these unrealized appreciations (depreciations) provides a more consistent and useful measurement of operating performance, which supplements GAAP information. Average equity is calculated as the arithmetic average on a monthly basis for the stated periods.
Aspen presents Adjusted Operating ROE as a measure that is commonly recognized as a standard of performance by investors, analysts, rating agencies and other users of its financial information.
See page 30 of Aspen’s financial supplement for a reconciliation of adjusted operating income to net income and page 7 for a reconciliation of average equity.
(3) Operating income is a non-GAAP financial measure. Operating income is an internal performance measure used by Aspen in the management of its operations and represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses.
Aspen excludes after-tax net realized capital gains or losses and after-tax net foreign exchange gains or losses from its calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Aspen believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with GAAP, Aspen believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Aspen’s results of operations in a manner similar to how management analyzes Aspen’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. Please see above and page 28 of Aspen’s financial supplement for a reconciliation of operating income to net income. Aspen’s financial supplement can be obtained from the Investor Relations section of Aspen’s website at www.aspen.bm.
(4) Adjusted Operating income is a non-GAAP financial measure. Adjusted operating income is an internal performance measure used by Aspen in the management of its operations and represents after-tax operational results excluding, as applicable, after-tax net realized capital gains or losses, after-tax net foreign exchange gains or losses and excludes after tax net gains or losses from our investments in funds of hedge funds.
Aspen excludes after-tax net realized capital gains or losses, after-tax net foreign exchange gains or losses and after tax net gains or losses from our investments in funds of hedge funds from its calculation of operating income because the amount of these gains or losses is heavily influenced by, and fluctuates in part, according to the availability of market opportunities. Aspen believes these amounts are largely independent of its business and underwriting process and including them distorts the analysis of trends in its operations. In addition to presenting net income determined in accordance with GAAP, Aspen believes that showing operating income enables investors, analysts, rating agencies and other users of its financial information to more easily analyze Aspen’s results of operations in a manner similar to how management analyzes Aspen’s underlying business performance. Operating income should not be viewed as a substitute for GAAP net income. Please see above and page 30 of Aspen’s financial supplement for a reconciliation of adjusted operating income to net income. Aspen’s financial supplement can be obtained from the Investor Relations section of Aspen’s website at www.aspen.bm.
(5) Diluted book value per ordinary share is a non-GAAP financial measure. Aspen has included diluted book value per ordinary share because it takes into account the effect of dilutive securities; therefore, Aspen believes it is a better measure of calculating shareholder returns than book value per share. Please see page 26 of Aspen’s financial supplement for a reconciliation of diluted book value per share to basic book value per share. Aspen’s financial supplement can be obtained from the Investor Relations section of Aspen’s website at www.aspen.bm.
Contact:
Aspen Insurance Holdings Limited Investor Contact: Aspen Insurance Holdings Limited Noah Fields, Head of Investor Relations, +1 441-297-9382 or European Press Contact: Citigate Dewe Rogerson Justin Griffiths/Sarah Gestetner, +44 (0) 20 7282 2920 or North American Press Contact: Abernathy MacGregor Carina Davidson/Allyson Morris +1 212-371-5999
Horace Mann Reports Results for Fourth Quarter and Full Year
Posted by Steven Wevodau
SPRINGFIELD, Ill., Feb. 4 /PRNewswire-FirstCall/ — Horace Mann Educators Corporation (NYSE: HMN - News) today reported net income of $22.9 million (58 cents per share) and $10.9 million (27 cents per share) for the three and twelve months ended December 31, 2008, respectively, compared to net income of $18.0 million (41 cents per share) and $82.8 million ($1.86 per share) for the same periods in 2007. Included in net income were net realized losses on securities of $8.2 million (a gain of $2.7 million after tax, or 7 cents per share, reflecting the reduction of the deferred tax allowance established at September 30, 2008) and $63.9 million ($41.5 million after tax, or $1.02 per share) for the three and twelve months ended December 31, 2008, respectively. In 2007, net income reflected net realized investment losses of $5.5 million ($3.6 million after tax, or 8 cents per share) and $3.4 million ($2.2 million after tax, or 5 cents per share) for the three and twelve months, respectively. All per-share amounts are stated on a diluted basis.
“Horace Mann’s fourth quarter earnings were adversely impacted by the poor performance and continued volatility of the financial markets and by reestimates of prior period catastrophe losses. In spite of those impacts, our underlying profit fundamentals remained strong, with net income before realized investment gains and losses of 51 cents and $1.29 per share for the quarter and full year exceeding our guidance range,” said Louis G. Lower II, President and Chief Executive Officer. “For the current accident year and excluding catastrophes, our property and casualty combined ratio of approximately 90 percent for both the quarter and full year was 1 percentage point better than the respective prior year periods. In addition, excluding the impact of the valuation of deferred policy acquisition costs and change in the guaranteed minimum death benefit reserve, combined annuity and life segment pretax earnings were only modestly below our strong prior year results,” continued Lower. “Meanwhile, compared to both fourth quarter and full year 2007, average productivity of the nearly 250 agents who have completed our Agency Business School (”ABS”) training continued to be notably better than their non-ABS counterparts in our lead auto and annuity lines, in spite of the difficult competitive and economic environments.”
“Our underlying 2008 results support a preliminary estimate of full-year 2009 net income before realized investment gains and losses of between $1.45 and $1.65 per share,” said Lower. “This projection anticipates, for property and casualty, a return to more normal catastrophe levels, a reduced level of favorable prior years’ reserve development and a modest increase in underlying combined ratios; and, for annuity, a return to historical market appreciation levels for 2009.”
Segment Earnings
The property and casualty segment recorded net income of $14.5 million for the quarter, a decrease of $1.6 million compared to the same period in 2007, including a $2.7 million increase in after tax catastrophe costs. Pretax catastrophe costs in the current quarter were $9.9 million compared to $5.9 million incurred in the fourth quarter of 2007. The fourth quarter 2008 amount included approximately $7 million pretax of adverse reserve development for catastrophe activity in the third quarter of 2008 related to Hurricanes Gustav and Ike. The fourth quarter 2008 property and casualty combined ratio was 92.9 percent, including 7.2 percentage points due to catastrophe costs, compared to 91.9 percent, including 4.3 percentage points due to catastrophe costs, in the prior year period. Favorable prior years’ reserve development totaling $6.7 million was recorded in the fourth quarter, which represented 4.8 percentage points on the combined ratio, compared to $5.2 million, or 3.8 percentage points on the combined ratio, recorded in the fourth quarter of 2007. For full year 2008, favorable prior years’ reserve development of $18.1 million was $1.9 million less than the favorable development recorded in 2007.
Annuity segment net income was $2.9 million and $17.3 million for the three and twelve months ended December 31, 2008, respectively, reflecting decreases of $1.0 million and $0.3 million compared to the same periods in 2007. In 2008, improvements in the interest margin were offset by the adverse impact of the financial markets on the level of contract charges earned. For the three and twelve months ended December 31, 2008, the valuation of annuity deferred policy acquisition costs had a $4 million net negative impact on pretax earnings, with the favorable impact related to the investment losses recognized in the periods more than offset by the adverse impact of the financial markets on variable deposit fund performance. In addition, the poor financial markets performance had an adverse impact on the company’s guaranteed minimum death benefit reserve, which increased by approximately $1 million in the three and twelve months ended December 31, 2008. Annuity segment net income for the fourth quarter and full year of 2008 also benefited from a reduction of $2.6 million in federal income tax expense as a result of the IRS completing its examination of the 2002, 2004, 2005 and 2006 tax years during the current quarter. “Fourth quarter annuity net fund flows were positive, as they have been throughout 2008, while cash value persistency of over 93 percent increased 2 percentage points during the year,” noted Lower.
Life segment net income of $4.2 million and $16.4 million for the fourth quarter and full year decreased $0.4 million and $0.9 million compared to the respective periods in 2007, as growth in earned premium and investment income was more than offset by higher mortality costs. Life persistency remained in excess of 94 percent.
Segment Revenues
The company’s total premiums written and contract deposits were comparable to the fourth quarter of 2007 and declined a modest 1 percent compared to full year 2007, primarily reflecting the expected decreases in single premium annuity deposit receipts in 2008.
Property and casualty premiums written increased 4 percent and 2 percent compared to the prior year three and twelve month periods, respectively, reflecting lower catastrophe reinsurance premiums and an increase in average property and auto premiums per policy.
Annuity new contract deposits decreased 6 percent and 8 percent compared to the three and twelve months ended December 31, 2007, respectively. Scheduled, flexible-premium annuity deposit receipts decreased moderately compared to the prior year, while rollover deposits declined 6 percent and 14 percent compared to the fourth quarter and full year 2007, respectively. Life segment insurance premiums and contract deposits were comparable to the prior year.
Sales and Distribution
For the three and twelve months ended December 31, 2008, total new auto sales units were 9 percent and 7 percent lower in the current periods than in the prior year, respectively. “In spite of the adverse prior year comparisons, fourth quarter true new auto sales volume improved sequentially, reflecting continued productivity gains in the current period,” said Lower. Horace Mann agent flexible premium annuity sales declined 7 percent in the quarter but increased 1 percent year to date versus prior year. Reduced independent agent sales and an anticipated decline in single premium rollover deposits adversely impacted total annuity sales. “IRS transition regulations for the 403(b) annuity marketplace continued to reduce new rollover deposits industry-wide,” said Lower.
The number of Horace Mann agents declined 15 percent to 670 agents at December 31, 2008 compared to 12 months earlier. “As expected, our decline in agent count primarily reflects the loss of lower-producing agents and a reduction in new agent hires as we continue to transition our hiring standards to target only those individuals we believe will be successful in the new Agency Business Model,” Lower said. Including 394 licensed producers who work for the agents, Horace Mann’s total points of distribution increased to 1,064, a growth of 2 percent over prior year. “In spite of the decline in agent count, a difficult competitive and economic environment, and our continuing actions to reduce risk exposure in hurricane-prone areas, we recorded positive property and casualty written premium growth and only a slight decline in property and casualty policies in force in 2008. Growth in Agency Business School graduate productivity, policyholder retention, and educator policies in force — the primary focal points of our strategic initiatives — have contributed significantly to these results.”
Investment Gains and Losses
In 2008, pretax net realized investment losses were $8.2 million for the fourth quarter, including $5.8 million of impairment write-downs and $4.6 million of realized impairment losses on securities that were disposed of during the quarter, primarily high-yield investments, with these amounts partially offset by $2.2 million of realized gains on security sales. The $5.8 million of impairment write-downs were related primarily to high-yield and preferred stock investments that the company no longer intends to hold until the value fully recovers, with the remainder related to securities for which impairment write-downs were previously recorded. Based on an assessment that gross realized and unrealized investment gains are now sufficient, in conjunction with other tax planning strategies, to offset gross unrealized investment losses, the $11.5 million deferred tax allowance that was established at September 30, 2008 was reduced to zero at year-end. Approximately $8.2 million of the allowance release was reflected as an increase to the company’s tax benefit on realized investment losses.
“While we realized additional investment losses in the quarter, they were very manageable in terms of our ability to maintain acceptable insurance subsidiary capital and operating ratios, particularly in light of the flexibility afforded us by our existing bank credit facility,” said Lower. Consistent with the company’s previously disclosed intent, in December 2008 it repaid $37 million of the $75 million borrowed under its bank credit facility in October 2008. The remaining $38 million balance currently continues to be held at the holding company level.
Net unrealized investment losses on fixed maturity and equity securities continued to be under pressure in the fourth quarter, and Horace Mann’s December 31, 2008 balance of $327.2 million increased compared to the $271.1 million level recorded at the end of the third quarter. “With credit spreads for some asset classes widening further during the fourth quarter, on top of unprecedented September 30 levels, it remains our considered judgment that our unrealized balance predominantly reflects a remarkably disruptive credit market in a crisis mode where liquidity has been severely impaired, with spreads and prices disconnected from rational valuation across all asset classes,” said Lower. “Given our insignificant exposure to sub-prime, Alt-A and other lower-quality structured securities, coupled with the credit enhancement of the existing TARP program and the ongoing commitments of the United States and European governments to support most of our financial institution holdings, and the overall quality and performance of our CMBS holdings, we remain comfortable with the underlying credit quality of our investment portfolio.”
Horace Mann — the largest national multiline insurance company focusing on educators’ financial needs — provides auto and homeowners insurance, retirement annuities, life insurance and other financial solutions. Founded by educators for educators in 1945, the company is headquartered in Springfield, Ill. For more information, visit http://www.horacemann.com.
Statements included in this news release that are not historical in nature are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties. Horace Mann is not under any obligation to (and expressly disclaims any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Please refer to the company’s Quarterly Report on Form 10-Q for the period ended September 30, 2008 and the company’s past and future filings and reports filed with the Securities and Exchange Commission for information concerning the important factors that could cause actual results to differ materially from those in forward-looking statements.
HORACE MANN EDUCATORS CORPORATION
Digest of Earnings and Highlights (Unaudited)
(Dollars in Millions, Except Per Share Data)
Quarter Ended Year Ended
December 31, December 31,
Est. Est.
2008 2007 % Change 2008 2007 % Change
DIGEST OF EARNINGS
Net income $22.9 $18.0 27.2% $10.9 $82.8 -86.8%
Net income per share:
Basic $0.59 $0.42 40.5% $0.27 $1.92 -85.9%
Diluted (A) $0.58 $0.41 41.5% $0.27 $1.86 -85.5%
Weighted average
number of shares
and equivalent
shares (in
millions) (B):
Basic 39.1 43.0 -9.1% 39.8 43.1 -7.7%
Diluted (A) 39.8 43.9 -9.3% 40.6 44.6 -9.0%
HIGHLIGHTS
Operations
Insurance premiums
written and
contract deposits $239.1 $239.2 0.0% $960.1 $974.7 -1.5%
Return on equity
© 1.9% 12.3% N.M.
Property & Casualty
GAAP combined
ratio 92.9% 91.9% N.M. 100.7% 91.9% N.M.
Effect of
catastrophe costs
on the Property &
Casualty
combined ratio 7.2% 4.3% N.M. 13.7% 4.4% N.M.
Experienced agents 524 569 -7.9%
Financed agents 146 221 -33.9%
Total Horace Mann
agents 670 790 -15.2%
Licensed producers 394 253 55.7%
Total points of
distribution (D) 1,064 1,043 2.0%
Additional Per
Share Information
Dividends paid $0.0525 $0.105 -50.0% $0.3675 $0.42 -12.5%
Book value (E) $11.47 $16.41 -30.1%
Financial Position
Total assets $5,507.2 $6,259.3 -12.0%
Short-term debt 38.0 - N.M.
Long-term debt 199.5 199.5 -
Total shareholders'
equity 447.9 693.3 -35.4%
N.M. - Not meaningful.
(A) Effective December 31, 2004, the Company adopted EITF Consensus 04-8,
"The Effect of Contingently Convertible Instruments on Diluted
Earnings per Share". Diluted per share information for all periods
is presented on a basis consistent with this consensus. On May 14,
2007, the Company redeemed all remaining Senior Convertible Notes.
For the year ended December 31, 2007, the Senior Convertible Notes
represented 0.4 million equivalent shares and had after tax interest
expense of $0.3 million.
(B) In November and December 2007, the Company repurchased 1,111,600
shares of its common stock at an aggregate cost of $20.7 million, or
an average cost of $18.66 per share. During the three months ended
March 31, 2008, the Company repurchased 1,636,376 shares of its
common stock at an aggregate cost of $29.5 million, or an average
cost of $18.01 per share. During the three months ended June 30,
2008, the Company repurchased 1,561,849 shares of its common stock at
an aggregate cost of $24.8 million, or an average cost of $15.93 per
share.
© Based on trailing 12-month net income and average quarter-end
shareholders' equity.
(D) Includes licensed producers working in Horace Mann agents' offices
and excludes independent agents.
(E) Book value per share excluding the fair value adjustment for
investments was $16.15 at December 31, 2008 and $16.47 at December
31, 2007. Ending shares outstanding were 39,061,788 at December 31,
2008 and 42,240,484 at December 31, 2007.
- 1 -
HORACE MANN EDUCATORS CORPORATION
Statements of Operations and Supplemental GAAP Consolidated Data
(Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
Est. Est.
2008 2007 % Change 2008 2007 % Change
STATEMENTS OF
OPERATIONS
Insurance premiums and
contract charges
earned $168.8 $166.3 1.5% $658.5 $654.3 0.6%
Net investment income 58.1 57.5 1.0% 230.3 223.8 2.9%
Net realized
investment losses (8.2) (5.5) 49.1% (63.9) (3.4) N.M.
Other income 2.4 3.3 -27.3% 9.9 12.3 -19.5%
Total revenues 221.1 221.6 -0.2% 834.8 887.0 -5.9%
Benefits, claims and
settlement expenses 111.3 101.5 9.7% 471.5 408.5 15.4%
Interest credited 33.9 32.2 5.3% 131.8 127.2 3.6%
Policy acquisition
expenses amortized 23.1 20.0 15.5% 79.1 75.7 4.5%
Operating expenses 33.7 37.8 -10.8% 132.4 139.0 -4.7%
Amortization of
intangible assets 1.2 1.4 -14.3% 5.3 5.4 -1.9%
Interest expense 4.3 3.5 22.9% 14.5 14.1 2.8%
Total benefits,
losses and expenses 207.5 196.4 5.7% 834.6 769.9 8.4%
Income before income
taxes 13.6 25.2 -46.0% 0.2 117.1 -99.8%
Income tax expense
(benefit) (9.3) 7.2 N.M. (10.7) 34.3 N.M.
Net income $22.9 $18.0 27.2% $10.9 $82.8 -86.8%
ANALYSIS OF PREMIUMS
WRITTEN AND CONTRACT
DEPOSITS
Property & Casualty
Automobile and
property (voluntary) $134.8 $129.5 4.1% $542.2 $530.6 2.2%
Involuntary and other
property & casualty 2.3 2.6 -11.5% 3.7 4.6 -19.6%
Total Property &
Casualty 137.1 132.1 3.8% 545.9 535.2 2.0%
Annuity deposits 73.9 78.8 -6.2% 311.7 337.1 -7.5%
Life 28.1 28.3 -0.7% 102.5 102.4 0.1%
Total $239.1 $239.2 0.0% $960.1 $974.7 -1.5%
ANALYSIS OF SEGMENT
NET INCOME (LOSS)
Property & Casualty $14.5 $16.1 -9.9% $28.1 $61.2 -54.1%
Annuity 2.9 3.9 -25.6% 17.3 17.6 -1.7%
Life 4.2 4.6 -8.7% 16.4 17.3 -5.2%
Corporate and other
(A) 1.3 (6.6) N.M. (50.9) (13.3) N.M.
Net income 22.9 18.0 27.2% 10.9 82.8 -86.8%
Catastrophe costs,
after tax, included
above (B) (6.5) (3.8) 71.1% (48.1) (15.3) 214.4%
N.M. - Not meaningful.
(A) The Corporate and Other segment includes interest expense on debt and
the impact of realized investment gains and losses and other
corporate level items. The Company does not allocate the impact of
corporate level transactions to the insurance segments consistent
with how management evaluates the results of those segments. See
detail for this segment on page 4.
(B) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums. See also page 3.
- 2 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
Est. Est.
2008 2007 % Change 2008 2007 % Change
PROPERTY & CASUALTY
Premiums written $137.1 $132.1 3.8% $545.9 $535.2 2.0%
Premiums earned 139.1 135.9 2.4% 541.1 535.1 1.1%
Net investment income 8.7 10.2 -14.7% 35.7 38.0 -6.1%
Other income 0.4 0.9 -55.6% 1.5 2.9 -48.3%
Losses and loss
adjustment expenses
(LAE) 95.9 90.1 6.4% 416.1 360.4 15.5%
Operating expenses
(includes policy
acquisition expenses
amortized) 33.2 34.8 -4.6% 128.5 130.9 -1.8%
Income before tax 19.1 22.1 -13.6% 33.7 84.7 -60.2%
Net income 14.5 16.1 -9.9% 28.1 61.2 -54.1%
Net investment income,
after tax 7.2 8.3 -13.3% 29.8 31.3 -4.8%
Catastrophe costs,
after tax (A) 6.5 3.8 71.1% 48.1 15.3 214.4%
Catastrophe losses
and LAE, before tax 9.9 5.9 67.8% 73.9 23.6 213.1%
Reinsurance
reinstatement
premiums, before tax - - - - - -
Operating statistics:
Loss and loss
adjustment expense
ratio 69.0% 66.3% N.M. 76.9% 67.4% N.M.
Expense ratio 23.9% 25.6% N.M. 23.8% 24.5% N.M.
Combined ratio 92.9% 91.9% N.M. 100.7% 91.9% N.M.
Effect of
catastrophe costs
on the combined
ratio 7.2% 4.3% N.M. 13.7% 4.4% N.M.
Automobile and
property detail:
Premiums written
(voluntary) (B) $134.8 $129.5 4.1% $542.2 $530.6 2.2%
Automobile 92.6 90.7 2.1% 367.8 365.3 0.7%
Property 42.2 38.8 8.8% 174.4 165.3 5.5%
Premiums earned
(voluntary) (B) 136.1 132.5 2.7% 537.8 525.1 2.4%
Automobile 91.9 91.3 0.7% 365.5 364.6 0.2%
Property 44.2 41.2 7.3% 172.3 160.5 7.4%
Policies in force
(voluntary) (in
thousands) 798 801 -0.4%
Automobile 535 535 -
Property 263 266 -1.1%
Policy renewal rate
(voluntary)
Automobile (6 months) 91.1% 91.0% N.M.
Property (12 months) 88.6% 88.3% N.M.
Voluntary automobile
operating
statistics:
Loss and loss
adjustment expense
ratio 67.0% 70.2% N.M. 68.0% 69.7% N.M.
Expense ratio 23.4% 25.3% N.M. 23.5% 24.5% N.M.
Combined ratio 90.4% 95.5% N.M. 91.5% 94.2% N.M.
Effect of
catastrophe costs
on the combined
ratio 0.0% 0.3% N.M. 1.2% 0.5% N.M.
Total property
operating
statistics:
Loss and loss
adjustment expense
ratio 74.7% 58.2% N.M. 97.2% 60.4% N.M.
Expense ratio 24.8% 26.7% N.M. 24.2% 25.2% N.M.
Combined ratio 99.5% 84.9% N.M. 121.4% 85.6% N.M.
Effect of
catastrophe costs
on the combined
ratio 21.6% 12.9% N.M. 40.4% 13.6% N.M.
Prior years' reserves
favorable (adverse)
development, pretax
Voluntary automobile $6.3 $5.1 23.5% $16.0 $12.3 30.1%
Total property (0.6) 0.1 N.M. (0.5) 7.7 N.M.
Other property and
casualty 1.0 - N.M. 2.6 - N.M.
Total 6.7 5.2 28.8% 18.1 20.0 -9.5%
N.M. - Not meaningful.
(A) Includes allocated loss adjustment expenses and catastrophe
reinsurance reinstatement premiums.
(B) Amounts are net of additional ceded premiums to reinstate the
Company's property and casualty catastrophe reinsurance coverage, if
any, as quantified above.
- 3 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
Est. Est.
2008 2007 % Change 2008 2007 % Change
ANNUITY
Contract deposits $73.9 $78.8 -6.2% $311.7 $337.1 -7.5%
Variable 31.8 38.7 -17.8% 134.4 149.9 -10.3%
Fixed 42.1 40.1 5.0% 177.3 187.2 -5.3%
Contract charges
earned 3.9 5.4 -27.8% 17.7 21.8 -18.8%
Net investment
income 34.7 32.8 5.8% 136.2 128.9 5.7%
Net interest
margin (without
realized investment
gains and losses) 10.5 10.0 5.0% 42.7 38.9 9.8%
Other income 0.8 1.5 -46.7% 4.9 5.7 -14.0%
Mortality loss
and other reserve
changes (1.3) 0.7 N.M. (1.7) (0.2) N.M.
Operating expenses
(includes policy
acquisition expenses
amortized) 12.8 10.6 20.8% 39.0 36.2 7.7%
Amortization of
intangible assets 0.9 1.1 -18.2% 4.0 4.1 -2.4%
Income (loss)
before tax 0.2 5.9 -96.6% 20.6 25.9 -20.5%
Net income 2.9 3.9 -25.6% 17.3 17.6 -1.7%
Pretax income increase
(decrease) due to
valuation of:
Deferred policy
acquisition
costs $(4.1) $(1.4) 192.9% $(4.0) $(1.2) 233.3%
Value of acquired
insurance in
force - (0.1) -100.0% - (0.2) -100.0%
Guaranteed minimum
death benefit
reserve (1.0) 0.8 N.M. (1.3) 0.7 N.M.
Annuity contracts
in force
(in thousands) 171 167 2.4%
Accumulated value
on deposit $3,262.3 $3,714.1 -12.2%
Variable 965.2 1,562.2 -38.2%
Fixed 2,297.1 2,151.9 6.7%
Annuity accumulated
value retention -
12 months
Variable accumulations 93.2% 90.9% N.M.
Fixed accumulations 93.5% 91.6% N.M.
LIFE
Premiums and
contract deposits $28.1 $28.3 -0.7% $102.5 $102.4 0.1%
Premiums and
contract charges
earned 25.8 25.0 3.2% 99.7 97.4 2.4%
Net investment
income 14.8 14.6 1.4% 59.3 57.0 4.0%
Income before tax 6.4 7.0 -8.6% 25.6 26.6 -3.8%
Net income 4.2 4.6 -8.7% 16.4 17.3 -5.2%
Pretax income increase
(decrease) due to
valuation of:
Deferred policy
acquisition
costs $(0.3) $(0.2) 50.0% $(0.2) $(0.2) -
Life policies
in force
(in thousands) 221 226 -2.2%
Life insurance
in force $13,672 $13,577 0.7%
Lapse ratio -
12 months
(Ordinary life
insurance) 5.4% 5.8% N.M.
CORPORATE AND OTHER (A)
Components of
loss before tax:
Net realized
investment
losses $(8.2) $(5.5) 49.1% $(63.9) $(3.4) N.M.
Interest expense (4.3) (3.5) 22.9% (14.5) (14.1) 2.8%
Other operating
expenses, net
investment
income and
other income 0.4 (0.8) N.M. (1.3) (2.6) -50.0%
Loss before tax (12.1) (9.8) 23.5% (79.7) (20.1) N.M.
Net income (loss) 1.3 (6.6) N.M. (50.9) (13.3) N.M.
N.M. - Not meaningful.
(A) The Corporate and Other segment includes interest expense on debt and
the impact of realized investment gains and losses and other
corporate level items. The Company does not allocate the impact of
corporate level transactions to the insurance segments consistent
with how management evaluates the results of those segments.
- 4 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Quarter Ended Year Ended
December 31, December 31,
Est. Est.
2008 2007 % Change 2008 2007 % Change
INVESTMENTS
Annuity and Life
Fixed maturities,
at fair value
(amortized cost
2008, $3,145.4;
2007, $3,136.8) $2,876.7 $3,135.1 -8.2%
Equity securities,
at fair value
(cost 2008, $55.6;
2007, $55.7) 38.3 50.8 -24.6%
Short-term
investments 154.1 33.5 360.0%
Short-term
investments,
securities
lending collateral - 76.7 -100.0%
Policy loans
and other 109.2 102.8 6.2%
Total Annuity
and Life
investments 3,178.3 3,398.9 -6.5%
Property & Casualty
Fixed maturities,
at fair value
(amortized cost
2008, $642.5;
2007, $733.5) 608.6 737.9 -17.5%
Equity securities,
at fair value (cost
2008, $30.6;2007,
$38.4) 23.3 35.7 -34.7%
Short-term
investments 66.0 7.7 N.M.
Short-term
investments,
securities
lending collateral - - -
Total Property &
Casualty investments 697.9 781.3 -10.7%
Corporate investments 25.6 0.1 N.M.
Total investments 3,901.8 4,180.3 -6.7%
Net investment income
Before tax $58.1 $57.5 1.0% $230.3 $223.8 2.9%
After tax 39.3 39.1 0.5% 156.3 152.1 2.8%
Net realized investment
gains (losses)
by investment
portfolio included in
Corporate and Other
segment income (loss)
Property &
Casualty $(2.8) $(0.5) N.M. $(16.4) $(0.7) N.M.
Annuity (5.3) (5.0) N.M. (47.1) (1.5) N.M.
Life (0.1) - N.M. (0.4) (1.2) N.M.
Corporate and Other 0.0 - N.M. 0.0 - N.M.
Total, before tax (8.2) (5.5) N.M. (63.9) (3.4) N.M.
Total, after tax 2.7 (3.6) N.M. (41.5) (2.2) N.M.
Per share,
diluted $0.07 $(0.08) N.M. $(1.02) $(0.05) N.M.
N.M. - Not meaningful.
- 5 -
HORACE MANN EDUCATORS CORPORATION
Supplemental Business Segment Overview (Unaudited)
(Dollars in Millions)
Est.
December 31, September June 30, December
2008 30, 2008 2008 31, 2007
Net Net Net Net
Unrealized Unrealized Unrealized Unrealized
Fair Gain Gain Gain Gain
Value (Loss) (Loss) (Loss) (Loss)
FIXED MATURITY & EQUITY
SECURITY INVESTMENTS
Fixed income securities
U.S. government and
federally sponsored
agency bonds $139.0 $4.9 $0.2 $0.8 $2.3
Municipal bonds 493.3 (14.1) (22.8) (5.1) 6.0
Corporate bonds
Financial
institutions 181.1 (19.9) (31.6) (13.5) (3.0)
Other 1,285.3 (122.6) (113.5) (34.1) 11.0
High yield 129.2 (38.0) (17.2) (9.5) (4.6)
Foreign government
bonds 14.9 0.5 0.5 0.9 1.5
Mortgage-backed
securities
Prime agency 849.5 20.5 (0.6) (2.3) 1.9
Prime other 15.7 (0.6) (0.1) (1.6) 0.5
Sub-prime, Alt-A 7.1 (0.7) (0.7) (0.6) (0.1)
Commercial mortgage-
backed securities 221.7 (108.6) (47.1) (23.9) (5.4)
Asset-backed securities
Sub-prime, Alt-A 3.9 0.1 (0.3) (0.1) -
Collateralized debt
obligations,
collateralized loan
obligations 16.7 (0.4) (1.2) (2.5) (3.8)
Other 88.5 (8.5) (3.8) (1.1) 0.4
Preferred stocks
Financial
institutions 65.7 (29.8) (25.1) (9.4) (7.6)
Other 33.0 (10.0) (8.1) (4.2) (3.4)
Total fixed income
securities 3,544.6 (327.2) (271.4) (106.2) (4.3)
Common stocks 2.3 - 0.3 0.3 (0.5)
Derivatives - - - - -
Total fixed
maturity and
equity security
investments $3,546.9 $(327.2) $(271.1) $(105.9) $(4.8)
Est. September
December 31, 2008 30, 2008
Net Net
Unrealized Unrealized
Investment Fair Gain Gain
Positions Value (Loss) (Loss)
COMMERCIAL MORTGAGE-BACKED
SECURITIES
By Standard & Poor's Corporation
Rating:
AAA 74 $133.4 $(32.2) $(12.1)
AA 25 57.4 (17.4) (7.6)
A 28 30.4 (58.9) (27.4)
BBB or below 1 0.5 (0.1) -
Total 128 $221.7 $(108.6) $(47.1)
By Vintage Year:
2003 and prior 17 $25.9 $(4.2) $(1.6)
2004 14 14.5 (8.7) (2.4)
2005 37 58.4 (71.3) (29.2)
2006 25 32.7 (21.8) (10.4)
2007 and later 35 90.2 (2.6) (3.5)
Total 128 $221.7 $(108.6) $(47.1)
- 6 -
EMC Insurance Group Inc. Comments on Financial Ratio Information Released by Its Parent Company, Employers Mutual Casualty Company - posted by Steven Wevodau
DES MOINES, Iowa–(BUSINESS WIRE)–Employers Mutual Casualty Company (Employers Mutual), the parent company of EMC Insurance Group Inc. (Nasdaq:EMCI - News), today announced to its employees that the statutory combined trade ratio of the EMC Insurance Companies for the year ended December 31, 2008 was 109.8 percent. This announcement was made in conjunction with a company-wide disclosure of the results of Employers Mutual’s 2008 contingent salary plan. This statutory combined trade ratio is not prepared on the basis of generally accepted accounting principles (GAAP) and reflects the operating results of all subsidiaries and affiliates of Employers Mutual, including the subsidiaries of EMC Insurance Group Inc.
For EMC Insurance Group Inc., the statutory combined trade ratio for the year ended December 31, 2008 was 109.1 percent. This statutory combined trade ratio should not be considered indicative of the GAAP-basis combined ratio or operating results that will be reported by EMC Insurance Group Inc. for the year ended December 31, 2008 on February 27, 2009.
EMC Insurance Group Inc., the publicly-held insurance holding company of EMC Insurance Companies, owns subsidiaries with operations in property and casualty insurance and reinsurance. EMC Insurance Companies is one of the largest property and casualty entities in Iowa and among the top 60 insurance entities nationwide based on premium volume. For more information, visit our website www.emcinsurance.com.
Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 provides issuers the opportunity to make cautionary statements regarding forward-looking statements. Accordingly, any forward-looking statement contained in this report is based on management’s current beliefs, assumptions and expectations of the Company’s future performance, taking into account all information currently available to management. These beliefs, assumptions and expectations can change as the result of many possible events or factors, not all of which are known to management. If a change occurs, the Company’s business, financial condition, liquidity, results of operations, plans and objectives may vary materially from those expressed in the forward-looking statements. The risks and uncertainties that may affect the actual results of the Company include, but are not limited to the following: catastrophic events and the occurrence of significant severe weather conditions; the adequacy of loss and settlement expense reserves; state and federal legislation and regulations; changes in our industry, interest rates or the performance of financial markets and the general economy; rating agency actions and other risks and uncertainties inherent to the Company’s business, including those discussed under the heading “Risk Factors” in the Company’s annual report on Form 10-K. Management intends to identify forward-looking statements when using the words “believe”, “expect”, “anticipate”, “estimate”, “project” or similar expressions. Undue reliance should not be placed on these forward-looking statements.
Contact:
EMC Insurance Group Inc. Anita Novak, 515-345-2515 (Investors) Lisa Hamilton, 515-345-7589 (Media)
PMA Capital Expects to Report Improved Operating Results from Ongoing Operations, Charge at Discontinued Operations - posted by Steven Wevodau
The Company also expects to report a net loss per share of between $0.11 and $0.15 for the fourth quarter of 2008, compared to a net loss of $1.17 per share for fourth quarter of 2007, and net income of between $0.16 and $0.20 per share for the full year 2008, compared to a net loss of $1.31 per share in 2007. Net realized investment gains are expected to be negligible for the fourth quarter of 2008. All earnings per share amounts discussed in this release are on a diluted basis.
In order to comply with a commitment made to an independent rating agency, the Company made a $13.0 million capital contribution to its Run-off Operations. The capital contribution, which included $5.0 million of cash and a promissory note of $8.0 million, $4.0 million payable in each of March 2009 and March 2010, increased the statutory capital of the Run-off Operations. The Company expects to record an after-tax charge of $8.5 million, or $0.26 per share, from discontinued operations in the fourth quarter of 2008 to write-off this capital contribution as it believes that the additional capital will not result in an increase to the cash it expects to receive at the closing of its previously disclosed sale of the Run-off Operations. The Company continues to work with the buyer to ensure that the Pennsylvania Insurance Department has the information it needs to approve the transaction.
The Company expects to report book value per share of between $10.73 and $10.83, compared to $11.20 at September 30, 2008. Book value per share will be reduced by approximately $0.30 in the fourth quarter due to an increase in the Company’s net pension liabilities, primarily as a result of a decrease in the value of the asset portfolio that supports these obligations. Although this change does not affect earnings, it does reduce shareholders’ equity and book value. We expect book value per share to be positively impacted in the fourth quarter as a result of a modest improvement in the unrealized position on the Company’s available for sale fixed income portfolio.
At the time the Company releases its results, a copy of its earnings release and quarterly statistical supplement will be available on the Company’s website at www.pmacapital.com in the Investor Information section (choose Current Investor Information). Click on News Releases to access the earnings release and Financial Reports to access the quarterly statistical supplement.
Management will hold a conference call with investors beginning at 8:30 a.m. Eastern Time on Friday, February 20th to review the Company’s financial results in detail.
To listen to the conference call, please dial 888-679-8040 (domestic) or 617-213-4851 (international) approximately five minutes before start time and use passcode 98250473. You may pre-register for the conference call using the following link: www.theconferencingservice.com/prereg/key.process?key=PRXAL4CWH.
Pre-registering is not mandatory but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the conference. Pre-registration only takes a few moments and you may pre-register at anytime, including up to and after the call start time. Alternatively, if you would rather be placed into the call by an operator, please use the dial-in information above at least 5 minutes prior to the call start time.
To access the webcast, enter the Investor Information section (choose Current Investor Information). Click on News Releases to find this announcement and then click on the microphone next to this release. Please allow approximately 15 minutes prior to the call to visit the site and download the necessary software to listen to the webcast. Please note that by accessing the conference call via the Internet, you will be in a listen-only mode.
A replay of the conference call will be available through Friday, March 20th by dialing 888-286-8010 (domestic) or 617-801-6888 (international) using passcode 71082241.
Operating income, which the Company defines as net income (loss) under accounting principles generally accepted in the United States (GAAP) excluding net realized investment gains (losses) and results from discontinued operations, is the financial performance measure used by its management and Board of Directors to evaluate and assess the results of its businesses. Net realized investment activity is excluded because (i) net realized investment gains and losses are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments and (ii) in many instances, decisions to buy and sell securities are made at the holding company level, and such decisions result in net realized gains and losses that do not relate to the operations of the individual segments. Operating income does not replace net income (loss) as the GAAP measure of the Company’s consolidated results of operations.
This press release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 with respect to the Company’s financial condition and results of operations and the plans and objectives of its management. Forward-looking statements can generally be identified by use of forward-looking terminology such as “may,” “will,” “plan,” “expect,” “intend,” “anticipate,” and “believe.” These forward looking statements may include estimates, assumptions or projections and are based on currently available financial, competitive and economic data and the current operating plans of the Company. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Accordingly, you should not place undue reliance on any forward-looking statements in this press release. Factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, the Company’s ability to negotiate a definitive sales agreement with a third party and obtain regulatory approval in a reasonable period of time in order to transfer ownership of its Run-off Operations, the adequacy of the Company’s loss reserves and the need to adjust those reserves over time, the availability and collectibility of reinsurance, downgrades in the Company’s financial strength ratings, emerging claim and coverage issues and changes in laws and regulations applicable to the Company. More information about these and other factors that could affect the Company’s results are described in documents the Company has filed with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, available at www.pmacapital.com. Forward-looking statements are not generally required to be publicly revised as circumstances change and the Company does not intend to update the forward-looking statements in this press release.
PMA Capital Corporation, headquartered in Blue Bell, Pennsylvania, is a holding company whose operating subsidiaries provide insurance and fee-based services. Insurance products include workers’ compensation and other commercial property and casualty lines of insurance, primarily in the eastern part of the United States, underwritten and marketed under the trade name The PMA Insurance Group. Fee-based services include third party administrator, managing general agent and program administrator services.
For additional information, visit www.pmacapital.com.
Contact:
PMA Capital Corporation William E. Hitselberger 610-397-5298
Source: PMA Capital Corporation
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