AmCOMP Reports Second Quarter 2008 Financial Results.NORTH PALM BEACH, Fla. -- AmCOMP Incorporated (Nasdaq:AMCP AMCP Academy of Managed Care Pharmacy AMCP Aeronautical Mobile Communications Panel AMCP Association of Managed Care Providers (now Association of Managed Care Dentists) AMCP Army Materiel Command Pamphlet AMCP Army Married Couples Program ) today announced results for the second quarter and six months ended June 30, 2008. Financial Results for the Second Quarter of 2008 For the second quarter of 2008, net income was $2.1 million, or $0.13 per share, compared to net income of $5.5 million, or $0.35 per 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. share, for the second quarter of 2007. Weighted average diluted shares outstanding were 15,409,000 for the quarter ended June 30, 2008, compared to 15,776,000 for the quarter ended June 30, 2007. Total revenue decreased 11.2% to $53.4 million in the second quarter of 2008 versus $60.2 million in the prior year's second quarter. For the second quarter of 2008, direct premiums written decreased $10.7 million, or 21.6%, to $38.8 million compared to $49.5 million for the comparable period in 2007. In Florida, the Company's largest market, direct premiums written decreased $5.5 million in the second quarter compared to the corresponding 2007 quarter. The decrease in Florida premiums is the result of an 18.4% rate decrease in 2008, a reduction in construction-related payrolls, while the number of in-force policies as of June 30, 2008 was relatively flat compared to June 30, 2007. Net investment income was $5.1 million, an increase of 2.6%, for the same three-month period in 2008 compared to the same quarter in 2007. During the second quarter of 2008, the Company recognized $6.7 million, net of 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. , in favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. loss development from prior years' loss reserve estimates. This is AmCOMP's 13th year of favorable loss development for redundancies from prior period loss reserves. AmCOMP's President and Chief Executive Officer, Fred R. Lowe, commented: "Consistent with the reports from most companies in our industry, our second quarter was challenging. The previous year's soft 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. market stretched on with even more competitive pricing at levels where we cannot maintain underwriting profitability - our main goal. A questionable economy continued to negatively impact most sectors, including construction, which was approximately 35% of our book of business in 2007. Additionally, the overlay (1) A preprinted, precut form placed over a screen, key or tablet for identification purposes. See keyboard template. (2) A program segment called into memory when required. of our pending merger with its associated transition activities and related expenses, while necessary, was disruptive to our short-term normal course of business. "We plan to stay the course and ride the soft cycle out, maintaining our underwriting discipline and opting for only profitable business while providing industry-leading customer service to our agents and policyholders. These hallmarks of our business model have helped us produce better than our industry's average loss ratios and adequate reserves for prior years' losses. Long-term this has been a winning formula for AmCOMP, and we are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that it will continue to position us for success," Mr. Lowe concluded. The net combined ratio, including policyholder Policyholder An individual who owns an insurance policy. dividends for the quarter ended June 30, 2008, was 102.6% compared to 91.5% for the same period in 2007. Loss and loss adjustment expenses ratios were 64.5% and 47.3% of net premiums earned in the three months ended June 30, 2008 and 2007, respectively. Total expenses were 34.3% and 32.7% of net premiums earned in the three months ended June 30, 2008 and 2007, respectively. Financial Results for the First Six Months of 2008 Net income for the six months ended June 30, 2008 was $6.5 million, or $0.43 per diluted share, compared to $9.5 million, or $0.61 per diluted share, in the first half of 2007. Weighted average diluted shares outstanding were 15,405,000 as of June 30, 2008, compared to 15,777,000 as of June 30, 2007. Six month revenue in 2008 was $110.9 million; a 10.8% decrease from revenue of $124.3 million for the first six months of 2007. For the first six months of 2008, direct premiums written decreased 17.9% to $101.7 million compared to $123.8 million in the same period in 2007. In Florida, direct premiums written decreased $15.8 million for the first six months of 2008 compared to the same period in 2007. During the first six months of 2008, the Company recognized $13.5 million in favorable loss development from prior years' loss reserve estimates. The net combined ratio, including policyholder dividends, for the six months ended June 30, 2008, was 99.0% compared to 93.9% for the same period in 2007. Loss and loss adjustment expenses were 58.4% and 53.3% of net premiums earned in the six months ended June 30, 2008 and 2007, respectively. Total expenses for the first six months of 2008 were 36.4% of net premiums earned compared to 33.1% in the prior year period. The increased expense ratio was largely due to a decrease in net earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. , a decrease in bad debt in the second quarter of 2007 resulting from a change in the method used to determine the allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. ; and, in part, documented out-of-pocket expenses out-of-pocket expenses n. moneys paid directly for necessary items by a contractor, trustee, executor, administrator or any person responsible to cover expenses not detailed by agreement. in excess of $1.0 million related to the pending merger, consisting of legal, investment banking, other professional fees and filing fees, as well as un-quantified internal costs. At June 30, 2008, the Company's investment portfolio totaled $434.1 million and had an overall credit rating of AA+. The Company regularly reviews its investment portfolio for other than temporary impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. declines in fair value considering, among other things, the length of time and the extent to which fair value has been below cost, the financial condition and near-term prospects of the issuer, the Company's ability and intent to hold the security until its expected recovery, and the underlying credit quality of any insured or uninsured bonds. In early 2008, several bond insurers had their credit ratings downgraded or placed under review by the major nationally recognized credit rating agencies Credit Rating Agencies Firms that compile information on and issue public credit ratings for a large number of companies. . As the Company has traditionally not relied upon bond insurers for credit rating but instead bought bonds with underlying ratings that are considered investment grade, AmCOMP does not expect a material impact to its investment portfolio or financial position as a result of the problems currently facing bond insurers. As of June 30, 2008, the Company held $85.1 million of municipal fixed maturity securities. As the result of the downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. of the bond insurers, AmCOMP's municipal portfolio went from an average credit rating of AA+ to AA. Additionally, the Company had no subprime or auction rate securities exposure at June 30, 2008. Book value per outstanding share as of June 30, 2008 was $10.71. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on equity for the three months ended June 30, 2008 and 2007 was 5.1% and 15.2%, respectively. The annualized return on equity for the six months ended June 30, 2008 and 2007 was 8.1% and 13.4%, respectively. Conference Call The Company will host a conference call on Friday, August 8, 2008, at 8:00 AM ET, featuring remarks by Fred Lowe Fred Lowe was an Olympic weightlifter from the United States. Weightlifting achievements
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. ; and Kumar Gursahaney, Senior Vice President, Chief Financial Officer and Treasurer. The conference call is available via webcast on the Company's website and can be accessed by clicking on the following link: http://ir.amcomp.com/eventdetail.cfm?eventid=57796. The dial-in number for the conference call is 719-325-4772. Please call at least five minutes before the scheduled start time. There will be an audio replay of the call, which will be available starting at 11:00 AM ET through 11:59 PM ET August 11th and can be accessed by calling 719-457-0820 or 888-203-1112 and using the pass code 5376849. The conference call webcast will be available on the Company's website for 60 days. Update Regarding Previously Announced Definitive Agreement and Florida Office of Insurance Regulation On January 10, 2008, AmCOMP announced that it signed a definitive agreement to be acquired by Employers Holdings, Inc. ("Employers[R]") (NYSE NYSE See: New York Stock Exchange :EIG EIG Excellence in Government EIG Engineering Installation Group EIG Evènement Indésirable Grave (French) EIG Erie Insurance Group EIG Ecole Internationale de Genève (French) ), a provider of workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. insurance to small U.S. businesses. Under the terms of the merger agreement, Employers will acquire 100% of AmCOMP's outstanding stock and its subsidiaries for approximately $194 million in cash, or $12.50 per share of common stock. The transaction is subject to regulatory approval by the Florida Office of Insurance Regulation, approval by AmCOMP stockholders and customary conditions of closing. On May 23, 2008, AmCOMP announced that it received a Notice of Intent to Issue Order to Return Excess Profit (the "2008 Notice") from the Florida Office of Insurance Regulation (FOIR FOIR Florida Office of Insurance Regulation FOIR Fixed Obligation to Income Ratio (loan eligibility assessment) FOIR Friends of the Illinois River (Springfield, IL) FOIR Field of Interest Register ). The 2008 Notice indicates on a preliminary basis that FOIR proposes to make a finding, following its review of data submitted by AmCOMP on June 22, 2007, for accident years 2003, 2004 and 2005, that "Florida excessive profits" (as defined in Florida Statute Section 627.215) in the amount of approximately $11.7 million have been realized by AmCOMP and are required to be returned to policyholders. AmCOMP believes, in part based on advice from legal counsel, that the formulation used by FOIR in computing computing - computer Florida excessive profits is not the only one permitted by Florida law The jurisprudence of this state offers major differences from doctrines prevailing in the United States at either the federal level or that of the various states. Homestead exemption from forced sale, the dangerous instrumentality doctrine, the right to privacy, and the Williams . On May 22, 2008, AmCOMP amended its previously filed returns to include additional items deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). in calculating Florida excessive profits. Both the original filing and the amended filing reflect that there were no Florida excessive profits for the applicable reporting periods. FOIR is in the process of reviewing AmCOMP's amended filing. There can be no assurance that FOIR will accept AmCOMP's position. On May 27, 2008, AmCOMP postponed the special meeting of its stockholders scheduled for May 29, 2008 to vote on the proposed merger. The special meeting was postponed in order to give AmCOMP additional time to address the issues raised by the 2008 Notice from FOIR. AmCOMP will provide information on the new date for the special meeting of stockholders promptly after it has been scheduled. On June 9, 2008, AmCOMP's insurance subsidiaries, AmCOMP Assurance and AmCOMP Preferred, through counsel filed a Petition For Administrative Hearing administrative hearing n. a hearing before any governmental agency or before an administrative law judge. Such hearings can range from simple arguments to what amounts to a trial. There is no jury, but the agency or the administrative law judge will make a ruling. Involving Disputed Issues of Fact (the "Petition") with FOIR, challenging FOIR's 2008 Notice. In the Petition, AmCOMP has asked, among other things, that the Petition be referred to the Florida Division of Administrative Hearings for assignment of an administrative law judge administrative law judge n. a professional hearing officer who works for the government to preside over hearings and appeals involving governmental agencies. They are generally experienced in the particular subject matter of the agency involved or of several agencies. in order to conduct a proceeding involving the matters set forth in the 2008 Notice, and that such administrative law judge recommend that FOIR withdraw or rescind To declare a contract void—of no legal force or binding effect—from its inception and thereby restore the parties to the positions they would have occupied had no contract ever been made. rescind v. its 2008 Notice or otherwise find that AmCOMP does not owe any excessive profits for accident years 2003, 2004 and 2005. As the 2008 Notice was issued on a preliminary basis, AmCOMP will not be required to return the allegedly excessive profits unless required to do so upon the conclusion of the above proceedings. There can be no assurance that the Division of Administrative Hearings will refer the Petition for assignment to an administrative law judge or that an administrative law judge will accept AmCOMP's position. On June 29, 2008, the Company made its annual filing related to Florida excessive profits with the Florida OIR OIR Office of Institutional Research OIR Online Insertion and Removal (Cisco) OIR Office of Insurance Regulation OIR Old Irish OIR Office of Intramural Research OIR Office of Information Resources OIR Office of Instructional Resources for the accident years 2004, 2005 and 2006. The basis of preparation of the Company's filing was consistent with that of previous years' filings and the Company's interpretation of applicable law. As explained above, the Florida OIR is using a different formulation than the Company in calculating the amount of excessive profits realized by the Company, and it may be expected to object to the Company's basis of preparation. As of June 30, 2008 and December 31, 2007, $0.5 million was accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. for Florida excessive profits. Any person wishing to acquire control of AmCOMP or any substantial portion of its outstanding shares would first be required to obtain the approval of FOIR. In connection with the proposed merger, Employers has filed a Form A with FOIR requesting the required approvals, which request is currently pending. The original "deemer" date applicable to FOIR's review of Employers' application i.e., the date on which such filing would be deemed approved absent action to the contrary, was June 20, 2008, but has since been extended twice. The current "deemer" date is the close of business on October 31, 2008. AmCOMP does not believe that the Employers' Form A will be approved, unless AmCOMP and FOIR reach agreement on the amounts, if any, of excessive profits realized by AmCOMP for some or all of the 2002-2006 accident years. About AmCOMP With roots dating back to 1982, AmCOMP Incorporated is an insurance holding company whose wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , AmCOMP Preferred and AmCOMP Assurance, are mono-line workers' compensation insurers with products that focus on value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. to policyholders. Currently marketing insurance policies in 17 core states and targeting small to mid-sized in a variety of industries, AmCOMP distributes its products through independent agencies. 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. Statements made in this press release, including those about the Company's financial condition and results of operations and about its future plans and objectives, which are not based on historical facts, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "believe," "expect," "plans," "intend," "project," "estimate," "may," "should," "will," "continue," "potential," "forecast" and "anticipate" and similar expressions identify forward-looking statements. Any such statements involve known and unknown risks, uncertainties and other factors, including those set forth under the heading "Risk Factors" in the Company's filings with the Securities and Exchange Commission, including AmCOMP's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for fiscal year ended December 31, 2007. Such factors may cause AmCOMP's actual performance, condition and achievements to be materially different than any future performance, condition and achievement set forth in this press release. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by these cautionary statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Set forth in the tables below are summary results of operations for the three month and six month periods ended June 30, 2008 and 2007, as well as selected balance sheet data as of June 30, 2008 and December 31, 2007. The following information is preliminary and unaudited and is subject to change until final results are publicly distributed. [TABLE OMITTED] [TABLE OMITTED] |
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