Argonaut Group, Inc. Announces 2005 First Quarter Results; Strong Underwriting Results, a Renewal Rights Acquisition and New Strategic Partnerships Provide Early Momentum for 2005.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 ended March 31, 2005. Highlights for the 2005 first quarter include the following:
-- The Group combined ratio was 95.6 percent versus 97.9 percent
during the first quarter of 2004;
-- Operating income increased substantially to $23.1 million, a
46 percent increase over the first quarter of last year;
-- Gross written, net written and earned premiums all exceeded
year-ago first quarter levels;
-- Cash flow from operations reached $53.6 million, up
substantially from the $14.9 million reported in the first
quarter a year ago;
-- Book value increased to $19.94 per fully diluted share versus
$19.68 per share at Dec. 31, 2004.
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, "A strong 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. performance was at the core of our positive first quarter financial results and gave us a solid start for 2005. The recent renewal rights acquisition by our Excess and Surplus Lines segment and the new strategic partnerships announced since January January: see month. by our Select Markets and Public Entity segments will further extend our geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. reach and provide additional underwriting opportunities going forward." FINANCIAL RESULTS For the first quarter of 2005, Argonaut Group reported net income of $26.0 million, or $0.83 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. common share on 31.1 million shares, 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 $23.1 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 $1.9 million and an income tax benefit of $1.0 million. This compares to 2004 first quarter net income of $18.3 million, or $0.60 per diluted common share on 30.7 million shares, which included pre-tax operating income of $15.8 million, realized gains on sales of investments of $2.5 million and no tax expense. The Company believes operating income is another meaningful measure of Argonaut Group's performance. 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). ) because it excludes income tax benefit or expense as well as net realized investment gains and losses. Operating income for the quarter ended March 31, 2005 excludes net realized investment gains of $1.9 million and an income tax benefit of $1.0 million. Operating income for the quarter ended March 31, 2004 excluded net realized investment gains of $2.5 million and no income tax expense or benefit. Operating income includes corporate, interest and other expenses, which during the first quarter of 2005 totaled $4.8 million versus $4.0 million for the first quarter of 2004. Total revenue, which includes gains on sales of investments, was $183.8 million during the first quarter of 2005, compared to $171.0 million for the same period in 2004, or a 7.5 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 March 31, 2005 were $162.1 million compared to $153.8 million for the comparable quarter in 2004, or a 5.4 percent increase. Total revenue includes realized gains on the sales of investments, which were $1.9 million and $2.5 million respectively for the first quarters of 2005 and 2004. SEGMENT RESULTS Excess & Surplus Lines (E&S) - For the first quarter of 2005, gross written premiums and operating income for E&S Lines totaled $100.8 million and $13.3 million, respectively. This compares to gross written premiums of $99.8 million and operating income of $11.9 million in the first quarter of 2004. The combined ratio for the 2005 first quarter was 91.4 percent, versus 90.3 percent for the same three-month period in 2004. Risk Management - Gross written premiums were $34.8 million for the three months ended March 31, 2005, and operating income was $7.6 million, compared to gross written premiums of $43.1 million and operating income of $4.3 million for the same period in 2004. For the first quarter of 2005, the combined ratio in this segment was 102.5 percent versus 107.8 percent a year earlier. Select Markets (fka 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) - During the first quarter, gross written premiums were $52.9 million and operating income totaled $5.1 million, compared to gross written premiums of $41.1 million and operating income of $2.7 million during the same period in 2004. The combined ratio for the first quarter of 2005 was 96.5 percent versus 99.6 percent in the first quarter last year. Public Entity - Gross written premiums for the first quarter were $18.2 million and operating income totaled $1.9 million, versus gross written premiums of $16.1 million and operating income of $0.9 million for the quarter ended March 31, 2004. For the first quarter of 2005, the combined ratio in this segment was 94.9 percent versus 96.0 percent during the same three-month period in 2004. CONFERENCE CALL Argonaut Group will Web cast an investor conference call at 11:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT (10:00 a.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT ) on Thursday Thursday: see week. , May 5, 2005. The call can be accessed on Argonaut Group's investor relations Investor relations The process by which the corporation communicates with its investors. Web page by visiting www.argonautgroup.com and clicking 'investor relations' and 'calendar,' or by telephone at 800-599-9816 (pass code: 77320209). Recorded replays of the earnings conference call will be available approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. one hour after the call's completion on the investor relations Web page, or by telephone at 888-286-8010 (pass code: 27513982). 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 may contain "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 with assets of approximately $3.1 billion. 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. Group, Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Casualty Group, Argonaut Insurance Company, Great Central Insurance, Grocers Insurance, 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, Select Markets (formerly 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)
March 31, December 31,
2005 2004
------------ -------------
(unaudited)
Assets
Total investments $1,829.7 $1,783.9
Cash and cash equivalents 17.6 31.7
Accrued investment income 16.9 16.9
Receivables 855.6 847.3
Goodwill 106.3 106.3
Other assets 301.1 287.1
------------ -------------
Total assets $3,127.2 $3,073.2
============ =============
Liabilities and Shareholders' Equity
Reserves for losses and loss adjustment
expenses $1,647.4 $1,607.5
Unearned premiums 376.1 390.8
Other liabilities 489.2 471.5
------------ -------------
Total liabilities 2,512.7 2,469.8
Total shareholders' equity 614.5 603.4
------------ -------------
Total liabilities and shareholders' equity $3,127.2 $3,073.2
============ =============
Book value per common share - basic $22.05 $21.78
============ =============
Book value per common share - diluted (a) $19.94 $19.68
============ =============
(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
March 31,
---------------------
2005 2004
(unaudited)
Gross Written Premiums $206.7 $200.1
Net Written Premiums 151.1 145.2
Earned Premiums 162.1 153.8
Net Investment Income 19.8 14.7
Gains on Sales of Investments 1.9 2.5
---------- ---------
Total Revenue 183.8 171.0
Losses and Loss Adjustment Expenses 97.1 96.0
Underwriting, Acquisition and Insurance Expense 57.9 54.6
Interest Expense 3.8 2.1
---------- ---------
Total Expenses 158.8 152.7
Income Before Tax 25.0 18.3
Income Tax Provision 7.9 6.0
Change in Deferred Tax Valuation Allowance (8.9) (6.0)
---------- ---------
Net Income $26.0 $18.3
========== =========
Net Income:
From Operations $23.1 $15.8
From Sale of Investments 1.9 2.5
---------- ---------
Income Before Taxes 25.0 18.3
Income Tax Provision (Benefit) (1.0) -
---------- ---------
Total Net Income: $26.0 $18.3
========== =========
Net Income per Common Share (Basic): $0.91 $0.64
========== =========
Net Income per Common Share (Diluted): $0.83 $0.60
========== =========
Weighted Average Common Shares (000's):
Basic 27,773.5 27,596.6
========== =========
Diluted 31,143.2 30,718.6
========== =========
ARGONAUT GROUP, INC.
SEGMENT DATA
(in millions)
Three Months Ended
March 31,
-------------------
2005 2004
(unaudited)
Excess & Surplus Lines
----------------------
Gross Written Premiums $100.8 $99.8
Net Written Premiums 74.3 71.2
Earned Premiums 78.2 74.1
Underwriting Income $6.8 $7.2
Net Investment Income 6.5 4.7
--------- --------
Operating Income Before Taxes $13.3 $11.9
========= ========
Loss Ratio 60.2 % 60.2 %
Expense Ratio 31.2 % 30.1 %
-------------------
GAAP Combined Ratio 91.4 % 90.3 %
========= ========
Risk Management
---------------
Gross Written Premiums $34.8 $43.1
Net Written Premiums 19.0 26.5
Earned Premiums 21.1 34.3
Underwriting Loss $(0.5) $(2.7)
Net Investment Income 8.1 7.0
--------- --------
Operating Income before Taxes $7.6 $4.3
========= ========
Loss Ratio 51.8 % 65.3 %
Expense Ratio 50.7 % 42.5 %
-------------------
GAAP Combined Ratio 102.5 % 107.8 %
========= ========
Select Markets (fka Specialty Commercial)
-----------------------------------------
Gross Written Premiums $52.9 $41.1
Net Written Premiums 43.6 35.0
Earned Premiums 46.2 31.8
Underwriting Income $1.7 $0.1
Net Investment Income 3.4 2.6
--------- --------
Operating Income Before Taxes $5.1 $2.7
========= ========
Loss Ratio 63.7 % 65.9 %
Expense Ratio 32.8 % 33.7 %
--------- --------
GAAP Combined Ratio 96.5 % 99.6 %
========= ========
Public Entity
-------------
Gross Written Premiums $18.2 $16.1
Net Written Premiums 14.2 12.5
Earned Premiums 16.6 13.6
Underwriting Income $0.8 $0.6
Net Investment Income 1.1 0.3
--------- --------
Operating Income Before Taxes $1.9 $0.9
========= ========
Loss Ratio 62.0 % 62.8 %
Expense Ratio 32.9 % 33.2 %
--------- --------
GAAP Combined Ratio 94.9 % 96.0 %
========= ========
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