Acceptance Insurance Announces Third Quarter Results and Reserve Strengthening.OMAHA Omaha, city, United States Omaha (ō`məhä, –hô), city (1990 pop. 335,795), seat of Douglas co., E Nebr., on the west bank of the Missouri River; inc. 1857. , Neb.--(BUSINESS WIRE)--Nov. 15, 1999-- Acceptance Insurance Companies Inc. (NYSE NYSE See: New York Stock Exchange :AIF AIF Annual Information Form AIF Apoptosis-Inducing Factor AIF Agence Intergouvernementale de la Francophonie (French: Intergovernmental Agency for Francophony) AIF Australian Imperial Force ) announced today that it would record a loss of $25.2 million or $1.77 per share for the third quarter, and $18.3 million or $1.28 per share for the first nine months, of 1999. This loss resulted primarily from a strengthening of loss and loss adjustment expense reserves for prior periods of approximately $44.0 million, and to a lesser extent from nonrecurring Non`re`cur´ring a. 1. Nonrecurrent; as, the costs of a layoff are considered as a nonrecurring expense s>. expenses and 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. costs in the Company's crop insurance segment of $6.3 million and catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses from Hurricane Floyd This article is about the 1999 hurricane. For other storms of the same name, see Tropical Storm Floyd (disambiguation). Hurricane Floyd was the sixth named storm, fourth hurricane, and third major hurricane in the 1999 Atlantic hurricane season. of $1.7 million. On a normalized basis, excluding the reserve strengthening, nonrecurring crop segment expenses and reinsurance charges, the affects of Hurricane Floyd, previously announced restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and the 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. loss from non-standard automobile business, the sale of which closed in September 1999, the Company would have recorded net income of $9.6 million or $0.67 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis in the third quarter, and $17.8 million or $1.25 per share on a diluted basis for the first nine months of 1999. Commenting on 1999, Kenneth Coon coon: see raccoon. , Chairman 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. , said, "While we have had a number of unique and challenging events during the past nine months, the Company has maintained excellent financial strength with leverage, liquidity and capitalization ratios Capitalization ratios Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. at or above historic levels and preserved our strong franchises in the crop, general agency and special program businesses. We remain committed to realizing the value of these operating businesses for our shareholders." The Company's annual third quarter actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin study indicated an unexpected increase in previously unreported claims. The increase was primarily associated with policies the Company issued prior to 1996 to 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). contractors and subcontractors. In 1995, the California Supreme Court dramatically altered the framework of insurance coverage for construction defect defect - bug claims by adopting the "continuous trigger" theory for losses involving continuous or progressive damage. The increase in unreported claims arose primarily from policies issued before this court decision. The Company has since changed its underwriting standards and policy forms to avoid this unintended exposure for events which take place before the Company issues its policy. The Company has recorded loss and loss adjustment reserves at September 30, 1999 for all reported and unreported claims which are at the top of its independent actuary's range. In its crop segment, the Company experienced certain nonrecurring expenses associated with unprecedented demand for its proprietary CropRevenue CoveragePlus(TM) (CRCPlus) product which resulted in the early closing of its sales season, limitations on certain coverages, and a restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of its reinsurance program. As the premium associated with the record sales of CRCPlus was recorded in the third quarter, $4.1 million of nonrecurring expense also was recorded. The restructuring of the reinsurance program also increased reinsurance costs by $9.7 million, $2.2 million of which the Company believes will not reoccur. The Company said it also is continuing to work with Warburg Dillon Read Investment bank created by the 1997 merger of S.G. Warburg & Co. and Dillon, Read & Co. Subsequently renamed UBS Warburg and now part of UBS AG, where the Warburg name was eventually dropped. in reviewing strategic alternatives to realize value for shareholders. "Our property and casualty operations and our crop operations each are unique," said Mr. Coon, "and provide different types of opportunities. Over the past six months the investment bankers Investment Banker A person representing a financial institution that is in the business of raising capital for corporations and municipalities. Notes: An investment banker may not accept deposits or make commercial loans. have been very active in reviewing alternatives with the Board of Directors. While the developments announced today have slowed this process, we anticipate concluding our review by the time we report year-end earnings." Acceptance is an A- rated property and casualty insurance company concentrating on writing specialty coverages throughout the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. not generally emphasized by standard insurance carriers. The Company's insurance operations are conducted through its five insurance subsidiaries and one insurance agency. The Company selects underwriting specialties within the property and casualty industry that provide a diversified diversified (di·verˑ·s portfolio of products, with the goal of producing underwriting results better than the industry average. -0-
ACCEPTANCE INSURANCE COMPANIES INC.
for the three months and nine months ended
September 30, 1999 and 1998
(in thousands, except per share data)
Three Months Nine Months
-------------------- --------------------
1999 1998 1999 1998
--------- --------- --------- ----------
Gross premiums
written $304,553 $278,352 $597,534 $583,794
Ceded premiums
written (206,723) (163,346) (391,671) (324,895)
--------- --------- --------- ----------
Net premiums
written $97,830 $115,006 $205,863 $258,899
========= ========= ========= ==========
Revenues:
Insurance
premiums earned 98,857 117,240 210,429 258,327
Net investment
income 6,111 7,217 18,749 21,349
Net realized
capital gains (losses) 1,072 (129) 6,414 5,354
--------- --------- --------- ----------
106,040 124,328 235,592 285,030
--------- --------- --------- ----------
Costs and expenses:
Cost of revenues:
Insurance losses and
loss adjustment
expenses 97,502 60,450 176,333 158,233
Insurance underwriting
expenses 45,125 38,970 80,382 81,835
General and administrative
expenses 525 624 1,715 1,842
--------- --------- --------- ----------
143,152 100,044 258,430 241,910
--------- --------- --------- ----------
Operating profit (loss) (37,112) 24,284 (22,838) 43,120
--------- --------- --------- ----------
Other income (expense):
Interest expense (2,186) (2,278) (6,846) (6,608)
Net loss from investee -- -- -- (704)
Other, net (74) 1 (53) (56)
--------- --------- --------- ----------
(2,260) (2,277) (6,899) (7,368)
--------- --------- --------- ----------
Income (loss) before
income taxes and cumulative
effect of change in
accounting principles (39,372) 22,007 (29,737) 35,752
Income tax expense (14,169) 7,229 (11,797) 10,414
--------- --------- --------- ----------
Income (loss) before
cumulative effect of change
in accounting principles (25,203) 14,778 (17,940) 25,338
Cumulative effect of change
in accounting principles -- -- (338) --
--------- --------- --------- ----------
Net income (loss) $(25,203) $14,778 $(18,278) $25,338
========= ========= ========= =========
Income (loss) per share before
cumulative effect of change in
accounting principles:
Basic $(1.77) $1.01 $(1.26) $1.69
========= ========= ========= ==========
Diluted $(1.77) $1.00 $(1.26) $1.66
========= ========= ========= ==========
Net income (loss)
per share:
Basic $(1.77) $1.01 $(1.28) $1.69
========= ========= ========= ==========
Diluted $(1.77) $1.00 $(1.28) $1.66
========= ========= ========= ==========
Shares:
Basic 14,252 14,642 14,246 15,025
========= ========= ========= ==========
Diluted 14,252 14,834 14,246 15,242
========= ========= ========= ==========
Ratio - GAAP
Loss & LAE 98.6% 51.6% 83.8% 61.2%
Underwriting 45.7% 33.2% 38.2% 31.7%
--------- --------- --------- ----------
Combined 144.3% 84.8% 122.0% 92.9%
========= ========= ========= ==========
September 30, September 30,
1999 1998
-------- --------
Total Investments $459,759 $536,872
Net Reserves for Losses and LAE 284,650 264,982
Total Equity 205,843 258,664
Book Value per Share $14.44 $18.04
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