| |
currency overseas
News and Information Article
3rd Quarter Highlights: * Gross written premiums: $175.1 million, up 30.2%
compared to Q3 2005. * Revenues: $79.5 million, up 20.8% compared to Q3
2005. * Combined ratio: 88.9%, 7.8 point improvement over Q3 2005. *
Quarterly net income: $8.3 million, up 92.5% compared to Q3 2005.
Year-to-Date Highlights * Gross written premiums: $440.6 million, an
increase of 20.3% over the first nine months of 2005. * Revenues: $220.0
million, up 15.4% versus YTD 2005. * Net income: $15.6 million, 6.9% higher
than YTD 2005.
DALLAS, Nov. 2 /-FirstCall/ -- Republic Companies Group, Inc.
(Nasdaq: RUTX) ("Republic" or the "Company") today reported revenues of
$79.5 million and net income of $8.3 million for the quarter ended
September 30, 2006 ("Q3 2006"). Shareholders equity was $175.8 million as
of September 30, 2006.
Republics revenues of $79.5 million for Q3 2006 represent an increase
of 20.8% when compared to Q3 2005. Net income for Q3 2006 was $8.3 million
compared to $4.3 million in Q3 2005. Net income per common share for Q3
2006 was $0.59 (basic and diluted). Pro forma net income per common share
for Q3 2005 (after giving effect to the IPO as if it had occurred at the
beginning of 2005) would have been $0.31 (basic and diluted). See comments
regarding non- GAAP measures in Footnote #1 below.
This strong revenue growth was balanced across our business segments,
with all segments reporting double digit premium growth. In addition,
higher interest rates coupled with a growing base of invested assets
produced a 28.4% increase in investment income in Q3 2006 over the prior
years third quarter.
The third quarter results reflected a continuation and acceleration of
Republics strong growth in 2006. For the first nine months of 2006 ("YTD
2006"), gross written premiums rose to $440.6 million, up 20.3% compared to
YTD 2005. Revenues of $220.0 million for YTD 2006 represented a 15.4%
increase over the prior year period through September 30.
The Companys disciplined underwriting pursuant to a focused operating
strategy, has continued to produce a strong, consistent, favorable trend in
the core loss ratio. For Q3 2006, the ex-catastrophe loss ratio dropped to
47.8%, an improvement of 5.6 points over Q3 2005.
Overall, Republics Q3 2006 combined ratio was 88.9% compared to the
96.7% reported for Q3 2005, a 7.8 point improvement. In addition to the
improvement in the ex-catastrophe loss ratio, the Q3 2006 combined ratio
also benefited from a 6.9 point improvement in the catastrophe loss ratio.
The 2006 third quarter was a period of benign hurricane activity, while the
losses related to Hurricanes Katrina and Rita were incurred in Q3 2005.
Overall, for the first nine months of 2006, Republics
catastrophe-related losses were more closely in line with normal
expectations. Through September 30, 2006, the Company incurred $13.5
million of catastrophe losses after reinsurance, most of which were the
result of a number of wind and hail storms in the second quarter. By
comparison, $12.1 million catastrophe losses after reinsurance were
incurred in the first nine months of 2005.
On a gross basis, losses from 2006 severe weather events were $20.5
million through the YTD 2006. The net loss was mitigated by the aggregate
loss component of Republics catastrophe reinsurance program. This
aggregate treaty provides $5.0 million of protection when severe weather
events (as defined by the treaty) aggregate more than $12.5 million in
losses. The coverage available under this treaty was fully utilized during
the third quarter of 2006, and the unrecognized portion of the related
reinsurance premium was fully recognized as ceded premium in the third
quarter.
Republics expense ratio for Q3 2006 was 4.7 points higher than
reported for Q3 2005. The interplay of increased underwriting profitability
and the related increase in contingent, profit-based commissions was a
major contributor to this expense increase. For the YTD 2006, the expense
ratio was 2.6 points higher than YTD 2005. This increase was primarily
caused by higher, profit-based contingent commissions and by costs
associated with public ownership.
Parker Rush, President and Chief Executive Officer, commented, "We are
very pleased with our continuing strong written premium growth from well-
established, profitable products and programs. During the 2006 third
quarter we were able to provide coverage to nearly 18,000 Texas
policyholders displaced by the collapse of one of our major competitors in
Texas personal property insurance. Additionally, we started writing a
promising program providing underwriting capacity to small, rural
businesses through a consistently profitable producer. These new
opportunities, coupled with continued organic growth in our areas of focus,
helped us to outpace industry growth. We continue to evaluate the stream of
similar opportunities for those that should be accretive to our
return-on-equity targets.
"We are also very pleased that our underlying core loss ratio has now
hovered around 50% for eight consecutive quarters. Underwriting discipline
remains the core of our operating strategy and was key to producing very
strong quarterly net income."
Financial Overview and Highlights
The highlights of Republics condensed consolidated financial
information for Q3 2006 and Q3 2005 are summarized in the following tables.
Condensed Consolidated
Third Quarter Highlights
($ in thousands except per share)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) (unaudited)
Gross written premiums $175,052 $134,459 $440,550 $366,211
Net written premiums 101,377 70,279 239,678 194,564
Net insurance premiums earned 74,096 61,273 204,266 177,643
Net investment income 3,875 3,019 11,029 8,068
Total revenues earned 79,505 65,834 219,956 190,529
Net income 8,256 4,289 15,615 14,607
Net income available
to common shareholders $ 8,256 $ 2,821 $ 15,615 $ 6,243
Net income per common share
Basic $ 0.59 $ 0.27 $ 1.13 $ 0.90
Diluted $ 0.59 $ 0.26 $ 1.12 $ 0.90
Weighted average shares
outstanding
Basic shares (in thousands) 13,900 10,639 13,862 6,899
Diluted shares
(in thousands) 14,004 10,696 13,969 6,922
Pro forma net income
per common share (1)
Basic n/a $ 0.31 n/a $ 1.06
Diluted n/a $ 0.31 n/a $ 1.06
Pro forma weighted average
shares outstanding (1)
Basic shares (in thousands) n/a 13,769 n/a 13,739
Diluted shares (in thousands) n/a 13,826 n/a 13,762
Net ex-catastrophe loss ratio 47.8% 53.4% 50.2% 52.0%
Net catastrophe loss ratio 0.9% 7.8% 6.6% 6.8%
Net expense ratio 40.2% 35.5% 38.9% 36.3%
Net combined ratio 88.9% 96.7% 95.7% 95.1%
Condensed Third Quarter
Consolidated Highlights
($ in thousands) As of As of
Sept. 30, 2006 Sept. 30, 2005
(unaudited) (unaudited)
Total assets $ 895,127 $ 835,504
Shareholders Equity (GAAP) 175,850 160,763
Annualized return on average equity (GAAP) 12.1% 11.6%
(1) This press release contains certain pro forma financial information
determined by methods other than in accordance with U.S. generally
accepted accounting principles ("GAAP"). In particular, the Q3
2005 and the year to date 2005 net income per common share have
been adjusted to give effect for the August 2005 IPO as if it
occurred at the beginning of the first quarter 2005 by excluding the
effect of the accrued preferred stock redeemed in the IPO and by
including the additional common shares issued in the IPO. A
reconciliation of the reported Q3 2005 net income per common share of
$0.27 (basic) and $0.26 (diluted) to the pro forma net income per
common share of $0.31 (basic and diluted) is as follows (amounts in
thousands except per share amounts):
a. Reported third quarter 2005 net income available to common
shareholders of $2,821 is increased by the accrued preferred
stock dividends of $1,468 to equal consolidated net income of
$4,289.
b. Reported third quarter 2005 weighted average common shares
outstanding of 10,639 (basic) and 10,696 (diluted) are increased
by the weighted average impact of the 8,726 of additional common
shares issued in the August 3, 2005 IPO for total pro forma
weighted average common shares outstanding of 13,769 (basic) and
13,826 (diluted).
c. Consolidated net income of $4,289 is then divided by pro forma
weighted average common shares outstanding of 13,769 (basic) and
13,826 (diluted) to obtain the pro forma third quarter 2005 net
income per share of $0.31 (basic and diluted).
A reconciliation of the reported year to date 2005 net income per
common share of $0.90 (basic and diluted) to the pro forma net income per
common share of $1.06 (basic and diluted) is as follows (amounts in
thousands except per share amounts):
a. Reported year to date 2005 net income available to common
shareholders of $6,243 is increased by the accrued preferred
stock dividends of $8,364 to equal consolidated net income of
$14,607.
b. Reported year to date 2005 weighted average common shares
outstanding of 6,899 (basic) and 6,922 (diluted) are increased
by the weighted average impact of the 8,726 of additional common
shares issued in the August 3, 2005 IPO for total pro forma
weighted average common shares outstanding of 13,739 (basic) and
13,762 (diluted).
c. Consolidated net income of $14,607 is then divided by pro forma
weighted average common shares outstanding of 13,739 (basic) and
13,762 (diluted) to obtain the pro forma year to date 2005 net
income per share of $1.06 (basic and diluted).
Management believes this presentation provides useful supplemental
information in evaluating the operating results of our business. These
disclosures should not be viewed as a substitute for net income per common
share determined in accordance with GAAP.
Contributions by business segment to the Q3 and year to date results
through September 30, 2006 and 2005 can be summarized as follows:
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited) (unaudited)
Condensed Third Quarter
Highlights by Segment
($ in thousands)
Gross Written Premium
Independent Agents
- Personal Lines $ 61,297 $ 38,140 $ 132,197 $ 105,487
Independent Agents
- Commercial Lines 25,777 21,469 73,128 62,363
Program Management 42,440 38,551 109,026 97,670
Insurance Services
and Corporate 45,538 36,299 126,199 100,691
Consolidated $ 175,052 $ 134,459 $ 440,550 $ 366,211
Net Income (Loss)
Independent Agents
- Personal Lines $ 4,776 $ 1,237 $ 6,949 $ 7,918
Independent Agents
- Commercial Lines 1,140 (770) 664 (198)
Program Management 2,159 1,830 5,452 3,533
Insurance Services
and Corporate 181 1,992 2,550 3,354
Consolidated $ 8,256 $ 4,289 $ 15,615 $ 14,607
Net Combined Ratio (GAAP)
Independent Agents
- Personal Lines 83.3% 96.1% 93.6% 91.1%
Independent Agents
- Commercial Lines 96.6% 113.8% 104.7% 106.2%
Program Management 91.8% 86.7% 90.6% 93.5%
Consolidated 88.9% 96.7% 95.7% 95.1%
Third Quarter and Year to Date Highlights
Personal Lines
Gross written premiums in Personal Lines increased 60.7% in Q3 2006 as
compared to the same quarter in the prior year. This growth included a
105.6% increase in personal property insurance, primarily from new agency
appointments and blocks of policies related to: the collapse of Texas
Select Lloyds Insurance Company, a major competitor in Texas; growth in our
book of policies covering low-value dwellings; and, rate increases in Texas
and Louisiana. Personal auto gross written premiums declined by 12.5% in Q3
2006, as we continue to shrink our participation in this intensely
competitive line. Personal Lines net insurance premiums earned in Q3 2006
were 12.5% higher than Q3 2005. Year to date, the Companys gross written
premiums in Personal Lines were up 25.3% in 2006 from the levels reported
in the comparable period of 2005. Net insurance premiums earned were 3.0%
higher than in the comparable nine month period in 2005, but earned premium
growth will accelerate in the coming quarters as the premiums related to
the conversion of the Texas Select book of business are recognized as
earned premium.
The combined ratio for Personal Lines was 83.3% in Q3 2006, 12.8 points
better than in the comparable period in 2005. This improvement was
virtually identical to the 12.9 point decline in the catastrophe loss
ratio. Net income was nearly four times that achieved Q3 2005, primarily
because hurricane activity in Q3 2006 was benign, while the significant
losses related to Hurricanes Katrina and Rita occurred in Q3 2005.
Year to date, the Personal Lines combined ratio of 93.6% was 2.5 points
higher than the comparable period in 2005. This deterioration in the
combined ratio was primarily attributable to higher losses in the highly
competitive personal auto business and a 1.4 point increase in the expense
ratio reflecting incremental costs associated with public ownership.
Commercial Lines
In Q3 2006, gross written premiums in commercial Lines were up 20.1%,
compared to Q3 2005. The YTD growth was 17.3% versus the comparable period
in 2005. This growth was spread across our target markets and business
classes, including our farm and ranch initiatives. Net insurance premiums
earned by Commercial Lines in Q3 2006 increased 20.4% over Q3 2005.
The combined ratio in Commercial Lines for Q3 2006 was 96.6%, 17.2
points better than the 113.8% in Q3 2005. The Q3 2006 combined ratio
improvement resulted primarily from reductions in the ex-catastrophe
(primarily casualty insurance products) and catastrophe loss ratios
(primarily due to the benign hurricane season in 2006).
The combined ratio for YTD 2006 was 104.7%, 1.5 points better than in
2005. The expense ratio for 2006 YTD was 1.8 points higher than in 2005,
primarily reflecting incremental costs associated with public ownership and
the cost of new system installations. Because of improvements in
underwriting results and higher investment yields, the Commercial Lines
segment reported net income of $0.7 million for the first nine months of
2006 compared to a net loss of $(0.2) million for the same period in 2005.
Program Management
Gross written premiums in Program Management for Q3 2006 and for the
first nine months of the year, grew 10.1% and 11.6% respectively, over the
levels achieved in the comparable 2005 periods. This progress primarily
reflects the development of Republics new voluntary non-subscriber program
(for businesses choosing to opt out of the Texas Workers Compensation
system), growth in our new program offering workers compensation insurance
to small businesses through FirstComp Underwriters Group, Inc., a well
established specialist in this market niche and growth in business produced
by Texas General Agency, Inc. ("TGA").
Net insurance premiums earned in Program Management increased 52.3% for
the first nine months of 2006 over the similar period of 2005 primarily
because of Republics higher retention of business produced by TGA and
growth in the non-subscriber program. The year to date combined ratio in
Program Management was 90.6%, 2.9 points better than for the same period in
2005, primarily reflecting improved loss ratios in the TGA business and the
profitability of our non-subscriber program. A 7.2 point reduction in the
year to date loss ratio was partially offset by a 4.3 point increase in the
related expense ratio as improved underwriting profits resulted in higher
profit-based contingent commissions. The net benefit of increased
underwriting profitability plus increased investment income resulted in a
54.3% increase in Program Management net income for the nine month period
ending September 30.
Insurance Services
In its Insurance Services segment, Republic acts as the issuing (or
"fronting") carrier for several large, national carriers and certain
regional companies that meet our standards and guidelines. As the issuing
carrier, Republic earns a fee for its services but reinsures 100% of the
related underwriting risk.
Fee income in Insurance Services was 19.3% higher in Q3 2006 than in Q3
2005 reflecting the higher volume of fronted premiums. This increase in fee
income was the result of a 25.5% increase in gross written premiums in Q3
2006, driven by increases in personal auto premium volume on certain
fronted programs. Year to date, gross written premiums were 25.3% higher in
2006 than in 2005, and fee income was up 25.8%.
For the first nine months of 2006, the equity earnings of Seguros Atlas
("Atlas"), a well-established Mexican multi-line insurance company in which
Republic holds a 30% ownership interest, were $2.6 million, slightly lower
than the $2.9 million reported for the same period in 2005. This decrease
was primarily due to higher losses in Atlas life operations, partially
offset by increases in investment income.
Overall, Insurance Services net income for the nine months ending
September 30, 2006 was $2.6 million, 24.0% less than the comparable period
in 2005. The decrease was primarily attributable to higher interest expense
on the Companys floating rate debt.
Consolidated Results
Republics consolidated net investment income in Q3 2006 of $3.9
million represented a 28.4% increase over Q3 2005. The primary factors
contributing to this increase were a larger investment portfolio and
increases in short- term interest rates. Year to date 2006 net investment
income of $11.0 million was 36.7% higher than for the comparable period in
2005 for the same reasons.
Reported quarterly and year to date net income per common share
comparisons between 2006 and 2005 are distorted for comparative purposes by
the effects of the preferred stock that was outstanding prior to Republics
August 2005 IPO and the additional shares issued in the IPO to retire this
preferred stock. Since all of the net proceeds from the IPO were used to
redeem preferred stock, we believe a meaningful supplemental comparison of
the Q3 2005 net income per common share can be computed using the pro forma
13.8 million basic and diluted weighted average shares that would have been
outstanding during Q3 2005 if the IPO had occurred on January 1, 2005. On
this pro forma basis, the Q3 2005 basic and diluted net income per common
share would have been $0.31. See comments regarding non-GAAP measures in
Footnote #1 above.
Shareholders equity as of September 30, 2006 of $175.8 million was
$11.3 million higher than the $164.5 million reported at December 31, 2005.
The most significant offsetting, contributing elements were $15.6 million
of net income and common stock cash dividends of $5.1 million.
2006 Guidance
Republic reaffirms its previously announced guidance for double digit
premium growth in 2006 and a 13-15% return on average equity. Investors are
advised to read the precautionary statement regarding forward-looking
information included in this press release and in our Annual Report filed
on Form 10-K and other filings with the Securities and Exchange Commission
(available at http://www.sec.gov ).
Supplemental Consolidated Information
Supplemental comparative summary consolidated and segment results of
operations and key financial measures for the three months and nine months
ended September 30, 2006 and 2005 will be posted to the Companys website.
Merger with Delek
On August 4, 2006 Republic Companies Group, Inc. entered into an
Agreement and Plan of Merger with a subsidiary of Delek Group Ltd., a
corporation organized under the laws of Israel ("Delek"). Additional
information regarding the merger is available in other filings with the
Securities and Exchange Commission (available at http://www.sec.gov ) and
on our website at http://www.RepublicGroup.com
Conference Call
The Company will conduct a teleconference call to discuss information
included in this news release and related matters at 8:00 a.m. Central Time
on Friday, November 3, 2006. Investors may access the call telephonically
by dialing (866) 202-4367 with pass code 62190645 approximately 10 minutes
prior to the scheduled start time. International callers may access the
call telephonically by dialing (617) 213-8845 with pass code 62190645. To
listen to a simultaneous internet broadcast, go to the Event Calendar
within the Investor Relations section of our website
http://www.RepublicGroup.com . The conference call will be available for
replay from November 3, 2006 to November 10, 2006 by dialing (888) 286-8010
with the pass code 29654464. International callers may access the replay by
dialing (617) 801-6888 with pass code 29654464. Additional information is
available on our website at http://www.RepublicGroup.com .
Quiet Period
The Company observes a quiet period and will not comment on financial
results or expectations during quiet periods. The quiet period for the
third quarter started October 1, 2006 and will extend through November 6,
2006.
About Republic
Republic Companies Group, Inc. through a group of insurance companies
and related entities provides personal and commercial property and casualty
insurance products. In its Independent Agents segments, Republic
distributes these products to individuals and small to medium-size
businesses through a network of independent agents primarily in Texas,
Louisiana, Oklahoma and New Mexico. In its Program Management and Insurance
Services segments Republic capitalizes on its unique combination of
charters and licenses to develop and manage target-niche insurance products
that are distributed through managing general agents and other insurers in
many additional states. We are rated A- (Excellent) by A.M. Best Company,
Inc. The rating is under review with developing implications pending
completion of the merger with Delek. We completed our Initial Public
Offering in August 2005. Visit http://www.RepublicGroup.com for more
information.
Precautionary Statement Regarding Forward-Looking Information
Some of the statements in this press release may include
forward-looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995 (PSLRA), that reflect our current
views with respect to future events and financial performance. These
forward-looking statements, which include, without limitation, our 2006
guidance and our merger with Delek, may apply to us specifically or the
insurance industry in general, are made pursuant to the safe harbor
provisions of the PSLRA and include estimates and assumptions related to
economic, competitive, regulatory, judicial, legislative and other
developments. Statements that include the words "expect", "intend", "plan",
"believe", "project", "estimate", "may", "should", "anticipate", "will" and
similar statements of a future or forward-looking nature identify
forward-looking statements for purposes of the federal securities laws or
otherwise.
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that
could cause our actual results to differ materially from those indicated in
these statements. You should carefully consider these factors. We believe
that these factors include but are not limited to the following: the fact
that there is a merger pending and/or the failure to complete the proposed
merger; ineffectiveness or obsolescence of our business strategy due to
changes in current or future insurance market conditions; increased
competition on the basis of pricing, capacity, coverage terms or other
factors; 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 anticipate based on
historical experience or industry data; developments in the worlds
financial and capital markets that adversely affect the performance of our
investments; changes in regulations or laws applicable to us, our
subsidiaries, agents or customers; changes in the level of demand for
independent agents and managing general agents and our insurance products
and services, including new products and services; changes in the insurance
product pricing environment; changes in the availability, cost or quality
of reinsurance, failure of our reinsurers to pay claims timely or at all,
or inability to recover increases in reinsurance costs; loss of the
services of any of our executive officers or other key personnel; the
effects of mergers, acquisitions and divestitures; changes in rating agency
policies or practices; changes in legal theories of liability under our
insurance policies, including any loss limitation methods and emerging
claim and coverage issues; changes in accounting policies or practices;
unavailability of future capital or availability of future capital on
unfavorable terms; a few large stockholders may be able to influence
stockholder decisions, which may conflict with other stockholder interests;
and general economic conditions, including inflation and other factors.
This list of factors should not be construed as exhaustive and should
be read in conjunction with the other precautionary statements described in
our Annual Report filed on Form 10-K and other filings with the Securities
and Exchange Commission (available at http://www.sec.gov ). Unless
otherwise required by law, we undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
If one or more risks or uncertainties materialize, or if our underlying
assumptions otherwise prove to be incorrect, our actual results may vary
materially from what we project. Any forward-looking statements you read in
this news release reflect our views as of the date of this press release
with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to our operations, financial
condition, results of operations, growth strategy and liquidity. All
subsequent written and oral forward-looking statements attributable to us
or individuals acting on our behalf are expressly qualified in their
entirety by this paragraph.
s.server=server()
s.channel="News Release"
s.pageName="Republic Companies Group, Inc. Announces Operating Results for the Third Quarter and Year-To-Date 2006"
s.prop2="109"
s.prop3="11-02-2006"
s.prop4=""
s.prop5=""
/************* DO NOT ALTER ANYTHING BELOW THIS LINE ! **************/
var s_code=s.t();if(s_code)document.write(s_code);
| |
|
|
 |
currency overseas |
|
|
|
|
|
|
|
|
|
Locations
