Argonaut Group, Inc. Announces 2006 First Quarter Results; Record Underwriting Profits and Double-Digit Increases in Premium Growth Highlight Another Strong Quarter.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, 2006. Highlights for the 2006 first quarter include the following: --Pre-tax 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. increased 35 percent to a record $31.2 million; --Gross written premiums were $269.2 million, a 30 percent increase versus $206.7 million in last year's first quarter; 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. were up 23 percent for the first quarter; --Investment income rose to $24.7 million, a 25 percent increase over the first quarter of 2005; --Cash flow from operations was $48.8 million, compared to $53.6 million in the first quarter a year ago. 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, "Broader market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" in selected 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 business areas and a continued focus on 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. fundamentals produced excellent first quarter financial results, particularly in our two largest segments, Excess & Surplus Lines and Select Markets." FINANCIAL RESULTS For the first quarter of 2006, Argonaut Group reported net income of $20.5 million, or $0.61per 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 33.8 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 of $31.2 million and income tax expense of $10.7 million. This compares to 2005 first quarter net income of $26.0 million, or $0.83 per diluted common share on 31.1 million shares, which included pre-tax operating income of $23.1 million, 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. Net income in the first quarter of 2006 reflects $10.7 million of tax expense, compared to a $1.0 million tax benefit in the first quarter of 2005 due to a reduction in the deferred tax asset valuation allowance and a $1.0 million state tax benefit. The Company believes operating income is another meaningful measure of Argonaut Group's performance, yet 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. For a reconciliation of operating income to GAAP net income for the three months ended March 31, 2006 and 2005, respectively, please refer to the reconciliation table attached to this news release. Total revenue, which includes gains and losses on sales of investments, was $224.6 million during the first quarter of 2006, compared to $183.8 million for the same period in 2005, or a 22.2 percent increase. Earned premiums for the three months ended March 31, 2006 were $199.9 million compared to $162.1 million for the same quarter in 2005, a 23.3 percent increase. Total revenue includes realized gains and losses on the sales of investments, which were zero, and $1.9 million respectively for the first quarters of 2006 and 2005. The Group combined ratio for the first quarter of 2006 was 95.2 percent, versus 95.6 percent for the same three-month period in 2005. Included in the combined ratio for the first quarter of 2006 are losses of $4.3 million associated with catastrophes in March 2006. The combined ratios for Excess and Surplus Lines, Select Markets and Public Entity for the quarter were 93.4 percent, 93.9 percent, and 92.2 percent, respectively. SEGMENT RESULTS Excess & Surplus Lines (E&S) - For the first quarter of 2006, gross written premiums and operating income for E&S Lines totaled $178.0 million and $17.0 million, respectively. This compares to gross written premiums of $100.8 million and operating income of $13.3 million in the first quarter of 2005. The combined ratio for the 2006 first quarter was 93.4 percent, versus 91.4 percent for the same three-month period in 2005. Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses for E&S during the first quarter of 2006 totaled approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $3.3 million, representing approximately 2.7 percentage points of the quarter's loss ratio. Select Markets - During the first quarter, gross written premiums were $72.9 million and operating income totaled $7.1 million, compared to gross written premiums of $63.6 million and operating income of $5.7 million during the same period in 2005. The combined ratio for the first quarter of 2006 was 93.9 percent versus 95.3 percent in the first quarter last year. Catastrophe losses for Select Markets during the first quarter of 2006 totaled approximately $1.0 million, representing approximately 1.8 percentage points of the quarter's loss ratio. Public Entity - Gross written premiums for the first quarter were $17.8 million and operating income totaled $2.1 million, versus gross written premiums of $18.2 million and operating income of $1.9 million for the quarter ended March 31, 2005. For the first quarter of 2006, the combined ratio in this segment was 92.2 percent versus 94.9 percent during the same three-month period in 2005. Risk Management - As previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the third quarter of 2005, the renewal rights to a majority of the business that comprised Risk Management were sold to XL America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. , Inc. The remaining business activity for this segment generated gross written premiums of $0.5 million for the three months ended March 31, 2006, and operating income of $8.8 million, compared to gross written premiums of $24.1 million and operating income of $6.9 million for the same period in 2005. For the first quarter of 2006, the combined ratio in this segment was 95.7 percent versus 106.2 percent a year earlier. CONFERENCE CALL Argonaut Group will Web cast an investor conference call at 4:00 p.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 (3:00 p.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 Tuesday Tuesday: see week. , May 2, 2006. The conference call can be accessed by visiting Argonaut Group's investor relations Investor relations The process by which the corporation communicates with its investors. Web page at www.argonautgroup.com and clicking on 'investor relations,' or by telephone toll free at 800-561-2601 (pass code: 15068301). The international dial-in number for the conference call is 617-614-3518. A replay of the conference call will be available approximately one hour after the call's completion on Argonaut Group's investor relations Web page, or by telephone toll free at 888-286-8010 (pass code: 41466915). If calling from abroad, please access the conference call replay by dialing 617-801-6888. 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 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. insurance products in niche areas of the property and casualty market, with approximately $3.4 billion in assets. Through its insurance subsidiaries, Argonaut Group offers a full line of high quality products and services designed to meet the unique coverage and claims handling needs of businesses in three primary segments: Excess and Surplus Lines, Select Markets, and Public Entity. Members of Argonaut Group include 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, Argonaut Specialty, Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Casualty, Great Central, Grocers Insurance, Trident Insurance Services, and Argonaut Insurance Company. 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,
2006 2005
----------- -----------
(unaudited)
Assets
Total investments $ 2,208.4 $ 2,173.0
Cash and cash equivalents 28.3 29.7
Accrued investment income 16.5 17.4
Receivables 739.0 736.5
Goodwill 106.3 106.3
Other assets 341.6 341.7
----------- -----------
Total assets $ 3,440.1 $ 3,404.6
=========== ===========
Liabilities and Shareholders' Equity
Reserves for losses and loss
adjustment expenses $ 1,903.9 $ 1,875.4
Unearned premiums 473.2 475.8
Other liabilities 334.6 337.3
----------- -----------
Total liabilities 2,711.7 2,688.5
Total shareholders' equity 728.4 716.1
----------- -----------
Total liabilities and shareholders'
equity $ 3,440.1 $ 3,404.6
=========== ===========
Book value per common share - basic $ 23.31 $ 23.48
=========== ===========
Book value per common share -
diluted (a) $ 21.94 $ 21.73
=========== ===========
(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 per share amounts)
Three Months Ended
March 31,
-------------------------
2006 2005
(unaudited)
Gross Written Premiums $ 269.2 $ 206.7
Net Written Premiums 191.5 151.1
Earned Premiums 199.9 162.1
Net Investment Income 24.7 19.8
Gains on Sales of Investments - 1.9
--------- ---------
Total Revenue 224.6 183.8
Losses and Loss Adjustment Expenses 121.9 97.1
Underwriting, Acquisition and Insurance
Expense 68.4 57.9
Interest Expense 3.1 3.8
--------- ---------
Total Expenses 193.4 158.8
Income Before Tax 31.2 25.0
Income Tax Provision 10.7 7.9
Change in Deferred Tax Valuation Allowance - (8.9)
--------- ---------
Net Income $ 20.5 $ 26.0
========= =========
Net Income:
From Operations $ 31.2 $ 23.1
From Sale of Investments - 1.9
--------- ---------
Income Before Taxes 31.2 25.0
Income Tax Provision (Benefit) 10.7 (1.0)
--------- ---------
Total Net Income: $ 20.5 $ 26.0
========= =========
Net Income per Common Share (Basic): $ 0.65 $ 0.91
========= =========
Net Income per Common Share (Diluted): $ 0.61 $ 0.83
========= =========
Weighted Average Common Shares:
Basic 31.1 27.8
========= =========
Diluted 33.8 31.1
========= =========
ARGONAUT GROUP, INC.
SEGMENT DATA
(in millions)
Three Months Ended
March 31,
-----------------------
2006 2005
(unaudited)
Excess & Surplus Lines
----------------------
Gross Written Premiums $ 178.0 $ 100.8
Net Written Premiums 130.5 74.3
Earned Premiums 123.1 78.2
Underwriting Income $ 8.1 $ 6.8
Net Investment Income 8.9 6.5
--------- ---------
Operating Income Before Taxes $ 17.0 $ 13.3
========= =========
Loss Ratio 62.6% 60.2%
Expense Ratio 30.8% 31.2%
--------- ---------
GAAP Combined Ratio 93.4% 91.4%
========= =========
GAAP Combined Ratio excluding Cat Losses 90.7% 91.4%
========= =========
Select Markets
--------------
Gross Written Premiums $ 72.9 $ 63.6
Net Written Premiums 47.2 45.5
Earned Premiums 53.9 48.0
Underwriting Income $ 3.3 $ 2.3
Net Investment Income 3.8 3.4
--------- ---------
Operating Income Before Taxes $ 7.1 $ 5.7
========= =========
Loss Ratio 65.3% 65.2%
Expense Ratio 28.6% 30.1%
--------- ---------
GAAP Combined Ratio 93.9% 95.3%
========= =========
GAAP Combined Ratio excluding Cat Losses 92.1% 95.3%
========= =========
Public Entity
-------------
Gross Written Premiums $ 17.8 $ 18.2
Net Written Premiums 14.0 14.2
Earned Premiums 12.8 16.6
Underwriting Income $ 1.0 $ 0.8
Net Investment Income 1.1 1.1
--------- ---------
Operating Income Before Taxes $ 2.1 $ 1.9
========= =========
Loss Ratio 58.1% 62.0%
Expense Ratio 34.1% 32.9%
--------- ---------
GAAP Combined Ratio 92.2% 94.9%
========= =========
Risk Management
---------------
Gross Written Premiums $ 0.5 $ 24.1
Net Written Premiums (0.2) 17.1
Earned Premiums 10.1 19.3
Underwriting Income (Loss) $ 0.4 $ (1.2)
Net Investment Income 8.4 8.1
--------- ---------
Operating Income before Taxes $ 8.8 $ 6.9
========= =========
Loss Ratio 21.8% 46.9%
Expense Ratio 73.9% 59.3%
--------- ---------
GAAP Combined Ratio 95.7% 106.2%
========= =========
ARGONAUT GROUP, INC.
RECONCILIATION OF OPERATING INCOME TO NET INCOME
(in millions)
Three Months Ended
March 31,
---------------------
2006 2005
(unaudited)
Income (loss) before income tax
Excess & Surplus Lines 17.0 13.4
Select Markets 7.1 5.7
Public Entity 2.1 1.9
Risk Management 8.8 6.9
Run-off lines - -
Corporate & other (3.8) (4.8)
-------- --------
Operating income before taxes 31.2 23.1
Net realized investment gains - 1.9
-------- --------
Total income before income tax 31.2 25.0
Income tax provision (benefit) 10.7 (1.0)
-------- --------
Net Income $ 20.5 $ 26.0
======== ========
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion