Argonaut Group, Inc. Announces Third Quarter Results, Dividend Declaration; Quarter Reflects Steady Improvement In Underwriting Performance, Strong E&S Operations.Business Editors & Insurance Writers SAN ANTONIO--(BUSINESS WIRE)--Nov. 5, 2002 Argonaut Group, Inc. (Nasdaq:AGII) today announced financial results for the three- and nine-month periods ended Sept. 30, 2002. Additionally, the company's Board of Directors has declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. a regular quarterly cash dividend of $0.15 per common share, payable Dec. 3, 2002 to shareholders of record on Nov. 19, 2002. Highlights for the 2002 third quarter include the following: -- For the third consecutive quarter, Argonaut Group reported positive and improved operating results, with all four of the company's business segments generating income from operations. -- The GAAP combined ratio for core operations exclusive of run-off lines improved during the third quarter to 101.1 percent, compared with a combined ratio of 133.9 percent in the same quarter of 2001. 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 the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. pricing environment, particularly in the company's excess and surplus lines operations, had a positive impact on Argonaut's third quarter performance. "Argonaut Group's E&S operation exceeded our expectations in the third quarter and continues to be our strongest business segment," said Watson. Watson added that he was pleased with the 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. discipline of all of Argonaut's business segments, especially as it related to 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. 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. . "We are particularly encouraged by the consistent progress that Argonaut Insurance Company has made over the last year," said Watson. "With those improvements, Argonaut Group is well positioned to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the combined strength that our diversified diversified (di·verˑ·s specialty insurance products offer." FINANCIAL RESULTS During the third quarter of 2002, Argonaut reported net income after tax of $4.7 million, or $0.22 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, compared to $1.3 million or $0.06 per share for the same three-month period in 2001. Third quarter net 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. after tax increased $6.8 million year-over-year to $3.9 million, compared to an 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 $2.9 million for the same three-month period in 2001. Operating income excludes gains on sales of investments, which totaled $0.8 million after tax during the third quarter. Total revenue, which includes gains on sales of investments, was $110.4 million during the third quarter of 2002, compared to $72.4 million for the same period in 2001. Third quarter results include an underwriting loss of $7.2 million for run-off run-off n (in contest, election) → desempate m (= extra race); carrera de desempate run-off n (in contest, election) → lines of business primarily related to certain policies written in the late-1980s through early-1990s that did not exclude asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. coverage. The company believes the policies to be limited in number and attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a specific underwriting office. During the third quarter, Argonaut reduced the book value of its investment portfolio by $3.7 million, primarily due to write downs of certain common stock investments to reflect other than temporary declines in market value. For the nine months ended Sept. 30, 2002, the company reported net income after tax of $18.3 million, or $0.84 per share, compared to $3.5 million, or $0.16 per share, for the first nine months of 2001. For the first three quarters of 2002, total revenue was 320.1 million versus $173.5 million during the same nine-month period in 2001. SEGMENT RESULTS Specialty Excess & Surplus Lines - 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 Group, which was acquired by Argonaut Group during the third quarter of 2001, specializes in underwriting excess and surplus lines of insurance. For the third quarter, 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. for Argonaut's E&S lines were $39.8 million, generating underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. of $3.0 million and a combined ratio of 92.6 percent. Net of Fulcrum fulcrum: see lever. , Colony's results for the third quarter were $34.0 million in earned premiums, $3.9 million in underwriting income and a combined ratio of 88.7 percent. Fulcrum's net earned premium for the third quarter was $5.8 million, resulting in an underwriting loss of $0.9 million and a combined ratio of 115.4 percent. Fulcrum's underwriting loss for the quarter was impacted by underwriting expenses which included the full staffing of the operation that accompanied ac·com·pa·ny v. ac·com·pa·nied, ac·com·pa·ny·ing, ac·com·pa·nies v.tr. 1. To be or go with as a companion. 2. the renewal rights purchase earlier this year. Specialty Commercial Lines - Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Casualty Insurance Company and Argonaut Great Central Insurance Company comprise To embrace, cover, or include; to confine within; to consist of. In the law governing patents—grants of an exclusive right or privilege to make, use, or sell an invention or product for a term of years—the term comprise Argonaut Group's specialty commercial insurance lines. During the third quarter, these companies contributed net earned premiums of $27.1 million and underwriting income of $0.5 million, compared to net earned premiums of $13.1 million and underwriting income of $0.3 million during the same period in 2001. For the third quarter, Argonaut's specialty commercial lines reported a 98.0 percent combined ratio. Specialty Workers' Compensation - This segment includes the results of Argonaut Insurance Company. Net earned premiums were $26.3 million for the three months ended Sept. 30, 2002, resulting in net underwriting loss of $3.6 million, compared to net earned premiums of $30.0 million and a net underwriting loss of $17.0 million for the same period in 2001. For the third quarter, the combined ratio in this segment was 112.9 percent, down from 156.7 percent a year earlier. Public Entity - Trident Insurance Services underwrites Argonaut Group's public entity segment. Trident's net earned premiums for the third quarter were $3.0 million, versus $1.2 million for the quarter ended Sept. 30, 2001. For the third quarter of 2002, Trident broke even on an underwriting basis versus an underwriting loss of $0.4 million for the same period a year earlier. Trident's combined ratio during the third quarter was 101.5 percent. 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 and regulations, 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, Texas “San Antonio” redirects here. For other uses, see San Antonio (disambiguation). San Antonio is the second most populous city in Texas, the third most populous metropolitan area in Texas, and is the seventh most populous city in the United States. As of the 2006 U.S. , 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 & casualty market. 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 Insurance, The Rockwood Group, 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, specialty workers' compensation, and public entity. Information on Argonaut Group and its subsidiaries is available at www.argonautgroup.com.
ARGONAUT GROUP, INC.
Financial Highlights
(In Millions, Except per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2002 2001 2002 2001
Gross Written Premiums $ 192.1 $ 75.7 $ 451.4 $ 172.6
Net Written Premiums 146.5 61.7 348.9 141.8
Earned Premiums 96.3 52.9 264.9 120.4
Net Investment Income 12.9 13.1 40.0 39.6
Gains on Sales of Investments 1.2 6.4 15.2 13.5
------- -------- ------- --------
Total Revenue 110.4 72.4 320.1 173.5
Losses and Loss Adjustment
Expenses 70.9 47.1 195.1 107.9
Underwriting, Acquisition and
Insurance
Expenses 33.4 23.4 98.8 61.4
------- -------- ------- --------
Total Expenses 104.3 70.5 293.9 169.3
Income Before Tax 6.1 1.9 26.2 4.2
Income Tax Provision 1.4 0.6 7.9 0.7
------- -------- ------- --------
Net Income $ 4.7 $ 1.3 $ 18.3 $ 3.5
======= ======== ======= ========
Net Income (Loss):
From Operations 3.9 (2.9) 8.4 (5.3)
From Sale of Investments 0.8 4.2 9.9 8.8
------- -------- ------- --------
Total Net Income: $ 4.7 $ 1.3 $ 18.3 $ 3.5
======= ======== ======= ========
Net Income (Loss) per Common
Share (Diluted):
From Operations $ 0.18 $ (0.13) $ 0.39 $ (0.24)
------- -------- ------- --------
From Sale of Investments $ 0.04 $ 0.19 $ 0.46 $ 0.41
------- -------- ------- --------
Total $ 0.22 $ 0.06 $ 0.84 $ 0.16
======= ======== ======= ========
Net Income per Common Share
(Basic): $ 0.22 $ 0.06 $ 0.85 $ 0.16
======= ======== ======= ========
Weighted Average Common
Shares:
Basic 21.6 21.6 21.6 21.6
======= ======== ======= ========
Diluted 21.6 21.6 21.7 21.6
======= ======== ======= ========
ARGONAUT GROUP, INC.
SEGMENT DATA
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2001 2002 2001
Excess & Surplus Lines:
-----------------------
Gross Premiums Written $ 83.0 $ 11.7 $ 173.7 $ 11.7
Net Premiums Written 70.3 9.6 145.5 9.6
Premiums Earned 39.8 8.6 99.5 8.6
Underwriting Income 3.0 0.4 4.4 0.4
Loss Ratio 62.1 % 63.0 % 62.7 % 63.0 %
Expense Ratio 30.5 % 32.0 % 32.9 % 32.0 %
--------- ---------- ---------- ---------
GAAP Combined Ratio 92.6 % 95.0 % 95.6 % 95.0 %
========= ========== ========== =========
Specialty Commercial:
---------------------
Gross Premiums Written $ 35.1 $ 15.7 $ 95.0 $ 36.7
Net Premiums Written 30.5 13.4 83.2 31.4
Premiums Earned 27.2 13.1 77.8 29.7
Underwriting Income (Loss) 0.5 0.3 - (4.5)
Loss Ratio 68.0 % 66.9 % 69.4 % 81.0 %
Expense Ratio 30.0 % 30.6 % 30.6 % 34.2 %
--------- ---------- ---------- ---------
GAAP Combined Ratio 98.0 % 97.5 % 100.0 % 115.2 %
========= ========== ========== =========
Specialty Workers
Compensation:
-----------------
Gross Premiums Written $ 63.9 $ 44.5 $ 163.9 $ 115.2
Net Premiums Written 40.2 36.7 110.3 96.2
Premiums Earned 26.4 30.0 80.9 79.6
Underwriting Loss (3.6) (17.0) (22.3) (41.8)
Loss Ratio 70.0 % 108.2 % 82.7 % 96.7 %
Expense Ratio 42.9 % 48.5 % 44.9 % 55.8 %
--------- ---------- ---------- ---------
GAAP Combined Ratio 112.9 % 156.7 % 127.6 % 152.5 %
========= ========== ========== =========
Public Entity:
--------------
Gross Premiums Written $ 10.1 $ 3.8 $ 18.8 $ 9.0
Net Premiums Written 5.5 2.0 9.9 4.6
Premiums Earned 2.9 1.2 6.7 2.5
Underwriting Income (Loss) - (0.4) 0.4 (0.9)
Loss Ratio 66.3 % 73.5 % 68.6 % 74.3 %
Expense Ratio 35.2 % 57.8 % 38.2 % 61.3 %
--------- ---------- ---------- ---------
GAAP Combined Ratio 101.5 % 131.3 % 106.8 % 135.6 %
========= ========== ========== =========
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