Argonaut Group, Inc. Announces 2004 Fourth Quarter and Full Year Results; Record 2004 Results Attributed to Continuous Improvements in All Four Business Segments.SAN ANTONIO San Antonio (săn ăntō`nēō, əntōn`), city (1990 pop. 935,933), seat of Bexar co., S central Tex., at the source of the San Antonio River; inc. 1837. -- Argonaut Group, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AGII) today announced financial results for the three months and year ended Dec. 31, 2004. Highlights include the following:
For the quarter ended Dec. 31, 2004
-----------------------------------
-- The combined ratio was 94.7 percent versus 98.4 percent during
the fourth quarter of 2003;
-- Each of Argonaut Group's four business segments generated an
underwriting profit;
-- Operating income increased to $23.8 million, a 78 percent
increase over the fourth quarter of 2003.
For the year ended Dec. 31, 2004
--------------------------------
-- Argonaut Group marked record performances in gross written,
net written and earned premiums as well as in underwriting
income and the combined ratio;
-- Argonaut Group's combined ratio of 99.8 percent, 96.7 percent
exclusive of hurricane losses of approximately $19.5 million,
compares to a combined ratio of 104.2 percent for the year
ended 2003, which was not impacted significantly by
catastrophe losses;
-- Gross written premiums grew 14.6 percent over 2003 levels,
finishing at a record $903.4 million;
-- Operating income rose 156 percent to $55.5 million from 2003
levels;
-- Book value increased 11.5 percent to $19.68 per fully diluted
share versus $17.65 per share at Dec. 31, 2003.
Argonaut Group 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. Mark E. Watson III said, "Our solid fourth quarter performance capped off a very productive and successful year for Argonaut Group. During 2004, the Company had several notable achievements -- we showed continued improvement in the risk management segment, generated an underwriting profit Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. for the first time in the Company's history despite the hurricane hurricane, tropical cyclone in which winds attain speeds greater than 74 mi (119 km) per hr. Wind speeds reach over 190 mi (289 km) per hr in some hurricanes. activity in the third quarter, and produced record results in several key performance areas. "Since 2002, fully 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. book value per share has increased by almost 30 percent, consistent with our focus on maximizing max·i·mize tr.v. max·i·mized, max·i·miz·ing, max·i·miz·es 1. To increase or make as great as possible: value for our shareholders. Looking ahead, we believe the Company's strong fundamentals, diversified diversified (di·verˑ·s product offering, customized approach and national presence position us well for 2005," said Watson. FINANCIAL RESULTS For the fourth quarter of 2004, Argonaut Group reported net income of $26.2 million or $0.84 per diluted common share, which includes pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta 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. of $23.8 million, pre-tax realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on sales of investments of $2.4 million and no tax expense. This compares to net income of $31.0 million or $1.10 per diluted common share, which includes pre-tax operating income of $13.4 million, realized gains on sales of investments of $1.4 million and a tax benefit of $16.2 million during the same three-month period in 2003. The Company believes operating income is another meaningful measure of Argonaut Group's performance. Operating income includes corporate, interest and other expenses, which during the fourth quarter of 2004 totaled $6.7 million versus $1.9 million for the fourth quarter of 2003. Operating income differs from net income under accounting principles generally accepted in 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. (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ) in that operating income excludes income tax benefit or expense and net realized investment gains and losses. Operating income for the quarter ended Dec. 31, 2004 excludes net realized investment gains of $2.4 million and an income tax expense of $0. Operating income for the quarter ended Dec. 31, 2003 excluded net realized investment gains of $1.4 million and an income tax benefit of $16.2 million. Total revenue, which includes gains on sales of investments, was $186.5 million during the fourth quarter of 2004, compared to $160.6 million for the same period in 2003, or a 16.1 percent increase. 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. for the three months ended Dec. 31, 2004 were $165.6 million compared to $145.7 million for the comparable quarter in 2003, or a 13.7 percent increase. Total revenue includes realized gains on the sales of investments, which were $2.4 million and $1.4 million, respectively, for the fourth quarters of 2004 and 2003. The consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: combined ratio for the fourth quarter of 2004 was 94.7 percent versus 98.4 percent for the same three-month period in 2003. All four business segments delivered sub-100 combined ratios, led by the Excess and Surplus Lines segment reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four a combined ratio of 87.6 percent. For the year ended Dec. 31, 2004, Argonaut Group reported net income of $71.8 million or $2.33 per diluted common share, which included catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $19.5 million from the third quarter hurricane activity. This compares to net income in 2003 of $109.0 million, or $4.40 per diluted common share, which includes realized gains of $113.6 million arising from sales of real estate assets and sales of certain equity securities. Total revenue in 2004 was $704.2 million versus $730.0 million in 2003. Total revenue includes realized gains of $5.2 million and $113.6 million for the years ended Dec. 31, 2004 and Dec. 31, 2003, respectively. Earned premiums for 2004 were $633.9 million compared to $562.8 million in 2003, a 13 percent increase. SEGMENT RESULTS Excess & Surplus Lines (E&S) - For the fourth quarter of 2004, gross written premiums and operating income for E&S Lines totaled $105.6 million and $15.4 million, respectively. This compares to gross written premiums of $99.9 million and operating income of $10.5 million in the fourth quarter of 2003. The combined ratio for the 2004 fourth quarter was 87.6 percent, versus 91.6 percent for the same three-month period in 2003. For the year ended Dec. 31, 2004, gross written premiums for E&S Lines were $421.2 million, generating operating income of $36.9 million and a combined ratio of 94.8 percent. This compares to 2003 gross written premiums of $384.5 million, operating income of $41.1 million and a combined ratio of 91.2 percent. E&S Line's 2004 combined ratio net of the third quarter catastrophic losses was 90.0 percent. Risk Management - Gross written premiums were $44.8 million for the three months ended Dec. 31, 2004, and operating income was $8.3 million, compared to gross written premiums of $46.1 million and pre-tax operating income of $2.2 million for the same period in 2003. For the fourth quarter, the combined ratio in this segment was 99.8 percent versus 116.1 percent a year earlier. For the year ended Dec. 31, 2004, gross written premiums for Risk Management were $181.7 million, generating pre-tax operating income of $22.0 million and a combined ratio of 106.9 percent. For the year ended Dec. 31, 2003, gross written premiums were $197.4 million, generating a pre-tax operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $11.6 million and a combined ratio of 131.8 percent. Risk Management was unaffected by catastrophe losses in the third quarter of 2004. Specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. Commercial Lines - During the fourth quarter, gross written premiums were $56.6 million and operating income totaled $5.0 million, compared to gross written premiums of $34.1 million and operating income of $4.3 million during the same period in 2003. The combined ratio for the 2004 fourth quarter was 96.1 percent versus 94.2 percent in the fourth quarter last year. For the year ended Dec. 31, 2004, gross written premiums for Specialty Commercial were $212.6 million, generating operating income of $15.9 million and a combined ratio of 96.7 percent. This compares to 2003 gross written premiums of $143.9 million, pre-tax operating income of $10.2 million and a combined ratio of 99.5 percent. Specialty Commercial's 2004 combined ratio net of third quarter catastrophic losses was 96.0 percent. Public Entity - Gross written premiums for the fourth quarter were $13.2 million and operating income totaled $1.8 million, versus gross written premiums of $14.6 million and operating income of $0.8 million for the quarter ended Dec. 31, 2003. For the fourth quarter, the combined ratio in this segment was 95.5 percent, unchanged from the same three month period in 2003. For the year ended Dec. 31, 2004, gross written premiums for Public Entity were $87.9 million, generating pre-tax operating income of $3.4 million and a combined ratio of 98.2 percent. This compares to 2003 gross written premiums of $62.5 million, operating income of $2.5 million and a combined ratio of 94.8 percent. Public Entity's 2004 combined ratio net of third quarter catastrophic losses was 96.2 percent. CONFERENCE CALL Argonaut Group will Webcast an investor conference call at 11:00 a.m. ET (10:00 a.m. CT) Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , Feb. 4, 2005. The call will be accessible on Argonaut Group's investor relations Investor relations The process by which the corporation communicates with its investors. Web page, which can be found by visiting www.argonautgroup.com and clicking "investor relations" and "calendar," or by telephone at 800-510-9691 (pass code: 14804899). Recorded replays of the earnings conference call will be available approximately one hour after the call's completion on the investor relations Web page, or by telephone at 888-286-8010 (pass code: 26849592). 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. DISCLOSURE This news release contains "forward-looking statements" which are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions 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. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation, regulations and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. investigations into industry practices, developments relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. For a more detailed discussion of risks and uncertainties, see the Company's public filings made with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statements. About Argonaut Group, Inc. Headquartered in San Antonio, Argonaut Group, Inc. (NASDAQ:AGII) is a national underwriter underwriter n. a company or person which/who underwrites an insurance policy, issue of corporate securities, business, or project. (See: underwrite) UNDERWRITER, insurances. One who signs a policy of insurance, by which he becomes an insurer. of specialty insurance products in niche niche: see ecology. niche Smallest unit of a habitat that is occupied by an organism. A habitat niche is the physical space occupied by the organism; an ecological niche is the role the organism plays in the community of organisms found in the areas of the property and casualty market. Argonaut Group's assets totaled $3.1 billion at Dec. 31, 2004. Through its operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , Argonaut Group offers high quality customer service in programs tailored to the needs of its customers' business and risk management strategies. Collectively, Colony colony, any nonself-governing territory subject to the jurisdiction of a usually distant country. The term is also applied to a group of nationals who settle in a foreign country or territory but retain political or cultural connections with their parent state. Insurance Company, Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Casualty Insurance Company, Argonaut Insurance Company, Argonaut Great Central, and Trident Insurance Services underwrite To insure; to sell an issue of stocks and bonds or to guarantee the purchase of unsold stocks and bonds after a public issue. The word underwrite has two meanings. a full line of products in four primary areas: Excess and Surplus, Specialty Commercial, Risk Management, and Public Entity. Information on Argonaut Group and its subsidiaries is available at www.argonautgroup.com.
ARGONAUT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
December 31,
2004 2003
----------- -----------
(unaudited)
Assets
Total investments $1,783.9 $1,553.2
Cash and cash equivalents 31.7 75.6
Accrued investment income 16.9 14.6
Receivables 847.3 781.1
Goodwill 106.3 105.7
Other assets 287.1 216.6
----------- -----------
Total assets $3,073.2 $2,746.8
=========== ===========
Liabilities and
Shareholders' Equity
Reserves for losses and loss
adjustment expenses $1,607.5 $1,480.8
Unearned premiums 390.8 353.3
Other liabilities 471.5 373.5
----------- -----------
Total liabilities 2,469.8 2,207.6
Total shareholders' equity 603.4 539.2
----------- -----------
Total liabilities and
shareholders' equity $3,073.2 $2,746.8
=========== ===========
Book value per common share - basic $21.78 $19.54
=========== ===========
Book value per common share -
diluted (a) $19.68 $17.65
=========== ===========
(a) Book value per common share - diluted, includes the impact of the
Series A Mandatory Convertible Preferred Stock on an as if
converted basis.
ARGONAUT GROUP, INC.
FINANCIAL HIGHLIGHTS
ALL SEGMENTS
(in millions, except share and per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2004 2003 2004 2003
(unaudited) (unaudited)
Gross Written Premiums $220.2 $194.7 $903.4 $788.3
Net Written Premiums 162.9 143.2 669.5 592.5
Earned Premiums 165.6 145.7 633.9 562.8
Net Investment Income 18.5 13.5 65.1 53.6
Gains on Sales of
Investments 2.4 1.4 5.2 113.6
--------- --------- --------- ---------
Total Revenue 186.5 160.6 704.2 730.0
Losses and Loss Adjustment
Expenses 99.7 100.9 409.7 395.3
Underwriting, Acquisition
and Insurance Expense 57.1 42.5 222.8 191.0
Interest Expense 3.5 2.4 11.0 8.4
--------- --------- --------- ---------
Total Expenses 160.3 145.8 643.5 594.7
Income Before Tax 26.2 14.8 60.7 135.3
Income Tax Provision 8.9 4.7 12.8 49.1
Change in Deferred Tax
Valuation Allowance (8.9) (20.9) (23.9) (22.8)
--------- --------- --------- ---------
Net Income $26.2 $31.0 $71.8 $109.0
========= ========= ========= =========
Net Income:
From Operations $23.8 $13.4 $55.5 $21.7
From Sale of Investments 2.4 1.4 5.2 113.6
--------- --------- --------- ---------
Income Before Taxes 26.2 14.8 60.7 135.3
Income Tax Provision
(Benefit) -- (16.2) (11.1) 26.3
--------- --------- --------- ---------
Total Net Income: $26.2 $31.0 $71.8 $109.0
========= ========= ========= =========
Net Income per Common Share
(Basic): $0.92 $1.21 $2.51 $4.76
========= ========= ========= =========
Net Income per Common Share
(Diluted): $0.84 $1.10 $2.33 $4.40
========= ========= ========= =========
Weighted Average Common
Shares (000's):
Basic 27,681.0 25,234.1 27,638.5 22,520.7
========= ========= ========= =========
Diluted 30,900.0 28,283.7 30,792.3 24,790.9
========= ========= ========= =========
ARGONAUT GROUP, INC.
SEGMENT DATA
(in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------- --------------------
2004 2003 2004 2003
(unaudited) (unaudited)
Excess & Surplus Lines
------------------------
Gross Written Premiums $105.6 $99.9 $421.2 $384.5
Net Written Premiums 79.0 74.1 309.6 301.3
Earned Premiums 79.1 76.7 305.1 286.6
Underwriting Income $9.8 $6.5 $15.9 $25.6
Net Investment Income 5.6 4.0 21.0 15.5
----------- ------- ----------- --------
Operating Income
Before Taxes $15.4 $10.5 $36.9 $41.1
=========== ======= =========== ========
Loss Ratio 59.7 % 65.2 % 65.4 % 62.0 %
Expense Ratio 27.9 % 26.4 % 29.4 % 29.2 %
----------------------------------------
Combined Ratio 87.6 % 91.6 % 94.8 % 91.2 %
=========== ======= =========== ========
Combined Ratio excluding
Cat Losses 87.6 % 91.6 % 90.0 % 91.2 %
=========== ======= =========== ========
Risk Management
---------------
Gross Written Premiums $44.8 $46.1 $181.7 $197.4
Net Written Premiums 30.9 28.3 115.4 115.8
Earned Premiums 25.5 26.7 116.0 122.4
Underwriting Income (Loss) $0.2 $(4.3) $(7.9) $(38.9)
Net Investment Income 8.1 6.5 29.9 27.3
----------- ------- ----------- --------
Operating Income (Loss)
Before Taxes $8.3 $2.2 $22.0 $(11.6)
=========== ======= =========== ========
Loss Ratio 52.5 % 73.4 % 62.1 % 81.9 %
Expense Ratio 47.3 % 42.7 % 44.8 % 49.9 %
----------------------------------------
Combined Ratio 99.8 % 116.1 % 106.9 % 131.8 %
=========== ======= =========== ========
Specialty Commercial
--------------------
Gross Written Premiums $56.6 $34.1 $212.6 $143.9
Net Written Premiums 46.3 29.2 176.9 124.1
Earned Premiums 43.9 30.7 151.1 120.8
Underwriting Income $1.8 $1.8 $4.9 $0.6
Net Investment Income 3.2 2.5 11.0 9.6
----------- ------- ----------- --------
Operating Income Before
Taxes $5.0 $4.3 $15.9 $10.2
=========== ======= =========== ========
Loss Ratio 67.1 % 66.6 % 66.6 % 70.8 %
Expense Ratio 29.0 % 27.6 % 30.1 % 28.7 %
----------- ------- ----------- --------
Combined Ratio 96.1 % 94.2 % 96.7 % 99.5 %
=========== ======= =========== ========
Combined Ratio excluding
Cat Losses 96.1 % 94.2 % 96.0 % 96.3 %
=========== ======= =========== ========
Public Entity
-------------
Gross Written Premiums $13.2 $14.6 $87.9 $62.5
Net Written Premiums 6.7 11.6 67.6 51.3
Earned Premiums 17.1 11.6 61.7 33.0
Underwriting Income $0.7 $0.5 $1.1 $1.7
Net Investment Income 1.1 0.3 2.3 0.8
----------- ------- ----------- --------
Operating Income
Before Taxes $1.8 $0.8 $3.4 $2.5
=========== ======= =========== ========
Loss Ratio 62.4 % 63.8 % 64.7 % 63.3 %
Expense Ratio 33.1 % 31.7 % 33.5 % 31.5 %
----------- ------- ----------- --------
Combined Ratio 95.5 % 95.5 % 98.2 % 94.8 %
=========== ======= =========== ========
Combined Ratio excluding
Cat Losses 95.5 % 95.5 % 96.2 % 94.8 %
=========== ======= =========== ========
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion