Argonaut Group, Inc. Announces Second Quarter Results, Quarterly Dividend.Business Editors SAN ANTONIO--(BUSINESS WIRE)--Aug. 6, 2002 Argonaut Group, Inc. (Nasdaq:AGII) today announced financial results for the three- and six-month periods ended June 30, 2002. Additionally, the company's Board of Directors has declared a regular quarterly cash dividend of $0.15 per common share, payable Sept. 4, 2002 to shareholders of record on Aug. 20, 2002. The company also said it will comply with newly enacted certification requirements in its second quarter public filings in advance of their effective dates. FINANCIAL RESULTS During the second quarter of 2002, Argonaut reported net income after tax of $6.1 million, or $0.28 per diluted common share, compared to $1.9 million or $0.09 per share for the same three-month period in 2001. For the six months ended June 30, 2002, the company reported net income after tax of $13.6 million, or $0.63 per share, compared to $2.2 million, or $0.10 per share, for the first six months of 2001. Second quarter results include a charge of $1.1 million related to the previously announced acquisition of renewal rights for Fulcrum Insurance Company. Net operating income after tax increased $3.7 million to $2.3 million for the second quarter, compared to an operating loss of $1.4 million for the same period in 2001. Operating income excludes gains on sales of investments, which totaled $3.8 million after tax during the second quarter. For the second quarter, total revenue, which includes gains on sales of investments, was $103.7 million, compared to $55.7 million for the same period in 2001. For the first six months of 2002, revenue totaled $209.7 million, compared to $101.1 million during the first half of 2001. "We are encouraged by our second-quarter performance, which demonstrates measurable progress in each of our business segments on a sequential and year-over-year basis," said Mark E. Watson III, Argonaut Group president and chief executive officer. "Of particular note is the growth of our specialty excess and surplus (E&S) operations, which in the short span of three quarters have become a major contributor to our bottom line. Adding to this trend is our recent Fulcrum acquisition, which now provides Argonaut Group with an established Western U.S. presence operated by tested and proven management. By year end, E&S operations are likely to account for as much as 40 percent of our total written premiums." SEGMENT RESULTS Specialty Excess & Surplus Lines -- Colony Insurance Group, which was acquired by Argonaut Group during the third quarter of 2001, specializes in underwriting excess and surplus lines of insurance. For the second quarter of 2002, Colony's net earned premiums totaled $30.9 million, generating an underwriting profit of $0.7 million. The Fulcrum transaction, which added an essential element in the diversification of Argonaut's product and service offering in the excess and surplus marketplace, generated $5.7 million in gross written premium during its first two months. Specialty Commercial Lines -- Rockwood Casualty Insurance Company and Argonaut Great Central Insurance Company comprise Argonaut Group's specialty commercial insurance lines. During the second quarter, these companies contributed net earned premiums of $25.8 million and underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. of $0.1 million, compared to net earned
premiums of $8.5 million and an underwriting loss of $2.0 million during
the same period in 2001.Specialty Workers' Compensation -- This segment includes the results of Argonaut Insurance Company. Net earned premiums were $25.4 million for the three months ended June 30, 2002, resulting in a net underwriting loss of $9.0 million, compared to net earned premiums of $28.5 million and a net underwriting loss of $12.3 million for the same period in 2001. Public Entity -- Trident Insurance Services underwrites Argonaut Group's public entity segment. Trident's net earned premiums for the second quarter were $1.9 million, versus $0.9 million for the quarter ended June 30, 2001. The net underwriting loss of $0.2 million for the second quarter of 2002 was unchanged from the same period a year earlier. EXECUTIVES TO CERTIFY FINANCIALS Argonaut Group also announced that, commencing with the filing of the company's Form 10-Q for 2002 second quarter results, the company's top corporate officers shall comply with the SEC's newly issued certification requirements as well as all provisions of the Sarbanes-Oxley Act of 2002 enacted on July 30, 2002. Argonaut Group President and CEO Mark E. Watson III, Vice President and CFO Mark W. Haushill, and Vice President and General Counsel Byron L. LeFlore, Jr., each will file written statements attesting to the accuracy of information contained in all of Argonaut Group's periodic filings to the SEC beginning this quarter regardless of the date such requirements may legally become binding on the company. "Argonaut Group has consistently applied the highest standards in its financial reporting process, with our top officers routinely signing the company's Forms 10-K and 10-Q," said Watson. "Even though many of the new certification requirements are not yet applicable to Argonaut, we will voluntarily and as a matter of principle sign and file the certification statements." FORWARD-LOOKING STATEMENTS DISCLOSURE This news release contains "forward-looking statements" which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act 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 and regulations, developments relating to 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 Argonaut Group is a national provider of specialty insurance products focused on high-quality customer service for specific niches of property-casualty insurance. The Company has superior financial strength with assets of $1.9 billion, no debt, and financial strength of its principal subsidiary rated "A (Excellent)" by A.M. Best and "A" by Standard & Poor's. Argonaut Group is traded on NASDAQ's National Market System, ticker symbol AGII. More information can be found on their website at www.argonautgroup.com.
ARGONAUT GROUP, INC.
Financial Highlights
(In Millions, Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2002 2001 2002 2001
Gross Written Premiums $ 135.7 $ 50.4 $ 259.4 $ 96.8
Net Written Premiums 106.4 40.9 202.4 80.0
Earned Premiums 84.0 37.9 168.6 67.5
Net Investment Income 13.8 12.8 27.1 26.5
Gains on Sales of Investments 5.9 5.0 14.0 7.1
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Total Revenue 103.7 55.7 209.7 101.1
Losses and Loss
Adjustment Expenses 61.6 34.4 124.2 60.8
Underwriting, Acquisition
and Insurance Expenses 32.8 18.6 65.4 38.0
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Total Expenses 94.4 53.0 189.6 98.8
Income (Loss) Before Tax 9.3 2.7 20.1 2.3
Income Tax Provision (Benefit) 3.2 0.8 6.5 0.1
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Net Income $ 6.1 $ 1.9 $ 13.6 $ 2.2
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Net Income (Loss):
From Operations 2.3 (1.4) 4.5 (2.4)
From Sale of Investments 3.8 3.3 9.1 4.6
------- ------- ------- -------
Total Net Income: $ 6.1 $ 1.9 $ 13.6 $ 2.2
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Net Income (Loss) per Common
Share (Diluted):
From Operations $ 0.10 $ (0.06) $ 0.21 $ (0.11)
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From Sale of Investments $ 0.18 $ 0.15 $ 0.42 $ 0.21
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Total $ 0.28 $ 0.09 $ 0.63 $ 0.10
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Net Income per Common
Share (Basic): $ 0.28 $ 0.09 $ 0.63 $ 0.10
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Weighted Average Common Shares:
Basic 21.6 21.6 21.6 21.7
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Diluted 21.7 21.6 21.7 21.7
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ARGONAUT GROUP, INC.
SEGMENT DATA
(In Millions)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2002 2001 2002 2001
Excess & Surplus Lines:
----------------------
Gross Premiums Written $ 48.9 $ -- $ 90.7 $ --
Net Premiums Written 41.8 -- 75.1 --
Premiums Earned 30.9 -- 59.6 --
Underwriting Income 0.7 -- 1.4 --
Loss Ratio 63.7 % -- % 63.1 % -- %
Expense Ratio 34.0 % -- % 34.5 % -- %
------- ------- ------- -------
GAAP Combined Ratio 97.7 % -- % 97.6 % -- %
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Specialty Commercial:
--------------------
Gross Premiums Written $ 30.0 $ 10.0 $ 59.7 $ 21.0
Net Premiums Written 26.3 8.6 52.7 17.9
Premiums Earned 25.8 8.5 50.7 16.6
Underwriting Income (Loss) 0.1 (2.0) (0.5) (4.8)
Loss Ratio 69.4 % 88.6 % 70.1 % 92.0 %
Expense Ratio 30.4 % 34.4 % 30.9 % 37.1 %
------- ------- ------- -------
GAAP Combined Ratio 99.8 % 123.0 % 101.0 % 129.1 %
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Specialty Workers Compensation:
------------------------------
Gross Premiums Written $ 52.6 $ 36.6 $ 98.8 $ 70.2
Net Premiums Written 36.4 30.5 70.1 59.5
Premiums Earned 25.4 28.5 54.6 49.6
Underwriting Loss (9.0) (12.3) (18.7) (24.8)
Loss Ratio 89.8 % 91.9 % 88.9 % 89.5 %
Expense Ratio 45.8 % 51.4 % 45.8 % 60.3 %
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GAAP Combined Ratio 135.6 % 143.3 % 134.7 % 149.8 %
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Public Entity:
-------------
Gross Premiums Written $ 4.2 $ 3.8 $ 10.2 $ 5.7
Net Premiums Written 1.9 1.8 4.4 2.6
Premiums Earned 1.9 0.9 3.7 1.3
Underwriting Loss (0.2) (0.2) (0.4) (0.5)
Loss Ratio 69.0 % 70.3 % 70.5 % 75.0 %
Expense Ratio 40.4 % 57.2 % 40.5 % 64.5 %
------- ------- ------- -------
GAAP Combined Ratio 109.4 % 127.5 % 111.0 % 139.5 %
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