21st Century Insurance Group Reports 2002 Third Quarter Results.Business Editors WOODLAND HILLS, Calif.--(BUSINESS WIRE)--Oct. 23, 2002 21st Century Insurance Group (NYSE NYSE See: New York Stock Exchange : TW) today reported a net loss for the quarter ended September 30, 2002, of $45.2 million, or $0.53 loss per share, compared to net income of $2.7 million, or $0.03 earnings per share, for the quarter ended September 30, 2001. The results for the latest quarter included after-tax charges of $30 million related to SB 1899/Northridge Earthquake claims and the write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of $24 million of certain capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. software costs. For the nine months ended September 30, 2002, the Company incurred a net loss of $27.1 million, or $0.32 loss per share, compared to net income of $13.4 million, or $0.16 earnings per share for the first nine months of 2001. Personal auto lines operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (i.e., net income before realized investment gains or losses, excluding results of the homeowner and earthquake lines of business, which are in runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. , and the software write-off referred to above) for the three months ended September 30, 2002, was $11.2 million, or $0.13 per share. For the comparable third quarter of 2001 personal auto lines operating income was $8.5 million, or $0.10 per share. For the nine months ended September 30, 2002, personal auto lines operating income was $34.8 million ($0.41 per share) compared to $27.0 million ($0.32 per share) for the first nine months of 2001. Direct premiums written for the personal auto lines increased 15.0% to $258.0 million in the third quarter of 2002 compared to $224.4 million in the third quarter of 2001. Rate increases and unit growth contributed equally to the year-over-year increase. For the first nine months of 2002 and 2001, direct premiums written for the personal auto lines were $726.9 million and $674.6 million, respectively. The combined ratio was 98.9 for the personal auto lines in the third quarter of 2002 compared to 100.9 for the same quarter a year ago. For the nine months ended September 30, 2002, the combined ratio was 98.8 compared to 101.0 for the first nine months of 2001. "Growth and profitability in our auto business continued to improve in the third quarter," said Bruce Bruce, Scottish royal family descended from an 11th-century Norman duke, Robert de Brus. He aided William I in his conquest of England (1066) and was given lands in England. W. Marlow, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "The third quarter of 2002 was the biggest quarter for new customer acquisition in the 44-year history of the Company and the first quarter with 15+% growth since the third quarter of 1991. Volume continues to increase in response to our 'Get More: Coverage, Service, Savings' marketing campaign and rate increases by competitors, most notably State Farm, which has raised its California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). auto rates by 22% in 2002. We offer an unmatched package of more policy coverage than any other top ten company, convenient 24-hour-a-day service via phone or web, and very competitive pricing. "Since the passage of California SB 1899 in 2000, we have provided notice of the difficult to estimate and potentially large liability created by this unprecedented reopening Reopening Treasury offerings of additional amounts of outstanding issues, rather than an entirely new issue. A reopened issue will always have the same maturity date, CUSIP number, and interest rate as the original issue. of previously closed 1994 Northridge Earthquake The Northridge earthquake occurred on January 17, 1994 at 4:31 AM Pacific Standard Time in the city of Los Angeles, California. The earthquake had a "strong" moment magnitude of 6. homeowner claims. We have so far unsuccessfully challenged this law in the California courts -- and both the California and U.S. Supreme Courts have, to date, declined to review the constitutionality of the law. At the end of 2001, we recorded reserves to cover what we estimated to be the cost to repair the alleged damages. For much of 2002, SB 1899-related lawsuits for all companies have been under a stay by the Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. Superior Court as the court system sorted out how to manage the large number of suits filed. Since July, we have been able to review these cases further and formulate formulate /for·mu·late/ (for´mu-lat) 1. to state in the form of a formula. 2. to prepare in accordance with a prescribed or specified method. our plan to resolve them. We continue to adjust and settle claims whenever possible. We will vigorously defend our shareholders' interests against fraudulent The description of a willful act commenced with the Specific Intent to deceive or cheat, in order to cause some financial detriment to another and to engender personal financial gain. , exaggerated, or other invalid Null; void; without force or effect; lacking in authority. For example, a will that has not been properly witnessed is invalid and unenforceable. INVALID. In a physical sense, it is that which is wanting force; in a figurative sense, it signifies that which has no effect. claims asserted by attorneys, public adjusters A public adjuster is an an advocate for the policy holder in negotiating an insurance claim. Public Adjusters exist because of the inherent conflict of interest that exists when one person or entity attempts to represent two sides of a financial transaction. or claimants. Concurrently, we will also continue to seek other avenues and opportunities to challenge the constitutionality of SB 1899 or to narrow its scope." On October 10, 2002, a Los Angeles Superior Court granted the Company's motion for summary judgment motion for summary judgment n. a written request for a judgment in the moving party's favor before a lawsuit goes to trial and based on recorded (testimony outside court) affidavits (or declarations under penalty of perjury), depositions, admissions of fact, answers in the matter of 21st Century Insurance Company vs. People of the State of California ex rel ex rel. conj. abbreviation for Latin ex relatione, meaning "upon being related" or "upon information," used in the title of a legal proceeding filed by a state attorney general (or the federal Department of Justice) on behalf of the government, on the instigation of . Bill Lockyer William Westwood "Bill" Lockyer (born May 8, 1941) is the current State Treasurer of California. Prior to this, he served as California's Attorney General and head of the Department of Justice for the U.S. state of California. , Attorney General et al. The court determined that the Company's April 21, 1999, settlement with the California Department of Insurance The California Department of Insurance (CDI), established in 1868, is the angency charged with overseeing the regulation of insurance regulations, enforcing statutes mandating consumer protections, educating consumers, and fostering the stability of insurance markets in the state with respect to regulatory actions arising out of the 1994 Northridge Earthquake was fully valid and enforceable. The Court denied the Attorney General's motion seeking to have the settlement declared void and unenforceable Adj. 1. unenforceable - not enforceable; not capable of being brought about by compulsion; "an unenforceable law"; "unenforceable reforms" enforceable - capable of being enforced , a result that may have allowed the California Department of Insurance to reinstitute regulatory proceedings with respect to the Company's handling of claims arising out of the 1994 Northridge Earthquake. The State of California may appeal the ruling. "Technology is very important to a high volume, direct-to-consumer insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. such as 21st," said Marlow. "Current computer systems support the company's 24-hour-a-day operation as well as its website. Since 1997, the Company has worked with a major software vendor to develop an advanced personal lines processing system that would further reduce operating costs operating costs npl → gastos mpl operacionales for the Company. To date, the Company has spent nearly $100 million on this project, most of which was paid directly to the software development vendor. In the third quarter of 2002, it became evident through a series of tests and reviews conducted by the Company that material components of this new system do not currently perform at levels necessary to support the entire operations of the Company. We are pursuing solutions with our software vendor as well as exploring other alternatives." Concerning reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. , the Company has entered into a catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). reinsurance agreement for its auto lines for events up to $30.0 million in excess of $15.0 million. Also, the Company has reached an agreement to end its quota share For This article is about quota shares (shares of the quota). For other usages of quota, see, see . A quota share is a specified number or percentage of the allotment as a whole (quota), that is prescribed to each individual entity (see Non-tariff barriers to trade). treaty for auto lines with AIG AIG addressee indicator group (US DoD) AIG American International Group, Inc AiG Answers in Genesis (religious group in defense of Scripture) AIG Artificial Intelligence Group AIG Australian Industry Group , effective September 1, 2002. The agreement would have ceded 4% of premiums to AIG in the remainder of 2002 and 2% in 2003. About 21st Founded in 1958, 21st Century Insurance Group is a pioneer in the direct-to-consumer marketing of personal automobile insurance serving customers in California, Arizona, Nevada, Oregon and Washington. The Company provides full service 24 hours a day, 365 days a year at 1-800-211-SAVE and its website, www.21st.com. 21st Century is rated A+ (Superior) by A.M. Best and A+ by Standard & Poor's. 21st Century Insurance Group is traded on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the trading symbol Trading symbol See: Ticker symbol TW and is headquartered at 21st Century Plaza, 6301 Owensmouth Avenue, Woodland Hills, CA 91367. Cautionary Statement: Statements contained herein and within other publicly available documents may include, and the Company's officers and representatives may from time to time make, statements which may constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are not historical facts but instead represent only the Company's belief regarding future events, many of which, by their nature, are inherently uncertain and outside of the Company's control. These statements may address, among other things, the Company's strategy for growth, underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results, product development, computer systems, regulatory approvals, market position, financial results and reserves. It is possible that the Company's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause the Company's actual results to differ, possibly materially, from those in the specific forward-looking statements include the effects of competition and competitors' pricing actions; unanticipated adverse underwriting and claims experience, including revived re·vive v. re·vived, re·viv·ing, re·vives v.tr. 1. To bring back to life or consciousness; resuscitate. 2. To impart new health, vigor, or spirit to. 3. claims under SB 1899; systems and customer service problems, including potential negative effects of power shortages in California; adverse developments in financial markets or interest rates; and unanticipated results of legislative, regulatory or legal actions, including the inability to obtain approval for rate increases and product changes. The Company is not under any obligation to (and expressly disclaims any such obligations to) update or alter any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise. Additional financial information is available at the Company's website at www.21st.com (which shall not be deemed to be incorporated in or a part of this release) or by request to the Investor Relations Investor relations The process by which the corporation communicates with its investors. Department.
Exhibit A
21st Century Insurance Group and Subsidiaries
Condensed Financial Data -- Personal Auto
(amounts in thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Personal Auto Lines
Direct premiums written $257,978 $224,379 $726,932 $674,583
========= ========= ========= =========
Net premiums written $260,034 $210,279 $709,185 $632,455
========= ========= ========= =========
Net premiums earned $234,666 $210,340 $669,968 $629,306
Loss and loss adjustment
expenses incurred 193,081 181,041 559,805 545,150
Underwriting expenses
incurred 38,912 31,221 102,108 90,119
--------- --------- --------- ---------
Underwriting profit
(loss) 2,673 (1,922) 8,055 (5,963)
Net investment income 11,729 10,958 34,378 34,036
Federal income tax expense (3,216) (539) (7,594) (1,096)
--------- --------- --------- ---------
Operating income $11,186 $8,497 $34,839 $26,977
========= ========= ========= =========
Operating income per common
share (1) $0.13 $0.10 $0.41 $0.32
========= ========= ========= =========
Loss and loss adjustment
expense ratio 82.3% 86.1% 83.6% 86.7%
Underwriting expense ratio 16.6% 14.8% 15.2% 14.3%
--------- --------- --------- ---------
GAAP combined ratio 98.9% 100.9% 98.8% 101.0%
========= ========= ========= =========
(1) Basic and diluted amounts per common share are the same for all
periods shown.
Exhibit B
21st Century Insurance Group and Subsidiaries
Condensed Financial Data -- All Lines
(amounts in thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
--------- --------- --------- ---------
Total All Lines
Direct premiums written $257,930 $228,967 $729,386 $701,831
========= ========= ========= =========
Net premiums written $260,032 $213,861 $697,592 $656,483
========= ========= ========= =========
Net premiums earned $234,666 $216,631 $669,968 $648,608
Loss and loss adjustment
expenses incurred 239,944 195,220 618,482 582,327
Underwriting expenses
incurred 38,912 31,879 102,199 93,560
--------- --------- --------- ---------
Underwriting loss (44,190) (10,468) (50,713) (27,279)
Net investment income 11,729 10,958 34,378 34,036
Realized investment gains 3,045 962 7,343 2,512
Write-off of software (37,177) - (37,177) -
Federal income tax (expense)
benefit 21,358 1,227 19,116 4,129
--------- --------- --------- ---------
Net income (loss) $(45,235) $2,679 $(27,053) $13,398
========= ========= ========= =========
Net income (loss) per common
share (1) $(0.53) $0.03 $(0.32) $0.16
========= ========= ========= =========
Loss ratio 64.9% 69.7% 66.2% 70.2%
Loss adjustment expense ratio 37.3% 20.4% 26.1% 19.6%
Loss and loss adjustment
expense ratio 102.2% 90.1% 92.3% 89.8%
Underwriting expense ratio 16.6% 14.7% 15.3% 14.4%
--------- --------- --------- ---------
GAAP combined ratio 118.8% 104.8% 107.6% 104.2%
========= ========= ========= =========
September December September
Balance Sheet Data 30, 2002 31, 2001 30, 2001
----------- ----------- -----------
Invested assets $976,256 $884,633 $924,384
Total assets $1,401,268 $1,352,016 $1,362,271
Stockholders' equity $652,997 $659,306 $724,792
Number of common shares
outstanding 85,439,641 85,361,848 85,352,323
Book value per share $7.64 $7.72 $8.49
Additional Information
Statutory surplus $351,404 $393,119 $421,902
Net premiums written to
statutory surplus ratio 2.6 2.2 2.0
Cash and investments at
holding company $13,785 $52,847 $95,163
Auto units in force 1,145 1,075 1,084
Homeowner units in force (in
runoff) 13 74 74
California auto renewal ratio 93% 92% 92%
After-tax yield on investments 4.4% 4.5% 4.5%
(1) Basic and diluted amounts per common share are the same for all
periods shown.
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