Argonaut Group Announces 2001 Results and Declares Quarterly Dividend.Business Editors SAN ANTONIO--(BUSINESS WIRE)--Feb. 5, 2002 Argonaut Group, Inc. (Nasdaq:AGII) today announced its results for the quarter and year ended December December: see month. 31, 2001, posting a net profit for the year and reporting increased operating revenues operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. and reductions in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . The Company reported a 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: net loss of $591,000 ($.03 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 total revenue of $119.1 million for the fourth quarter of 2001, compared to a consolidated net loss of $39.0 million ($1.78 per diluted common share) on total revenue of $47.0 million for the same quarter last year. For the twelve months ended December 31, 2001, the Company recorded consolidated net income of $2.9 million ($.13 per diluted common share) on total revenue of $292.6 million, compared to a net loss of $83.3 million ($3.77 per diluted common share) on total revenue of $209.9 million for the same period in 2000. Consolidated 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. after tax was $3.0 million for the quarter ended December 31, 2001, compared to $39.5 million for the same period last year. Factors contributing to the operating loss during the fourth quarter include $7.3 million of costs associated with an increase in the allowance for doubtful accounts Allowance for Doubtful Accounts An estimation made by a company and documented on its balance sheet for receivables that might go uncollected. Notes: It is standard practice for a company to have funds set aside for money that cannot be collected. related to reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. balances recoverable and premiums receivable. This was in addition to $7 million in reserve strengthening for California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). claims on 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. policies issued in prior years. The operating loss for the twelve months ended December 31, 2001 of $8.3 million compares to an operating loss of $98.4 million for the same period last year. For the year ended December 31, 2001 the Company incurred $5 million for losses related to the World Trade Center terrorist attack in addition to the $14.3 million in charges recognized in the fourth quarter. 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. or loss excludes gains on the sales of investments. Total revenue includes gains on sales of investments of $3.6 million for the current quarter, compared with $800,000 for the fourth quarter of 2000. For the twelve months ended December 31, 2001, gains on sales of investments were $17.1 million, compared with $23.3 million for the same period last year. SEGMENT RESULTS: 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. Excess & Surplus Lines -- This segment includes the results of the 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, acquired during the third quarter of 2001. 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 the quarter totaled $28.1 million generating 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 quarter of $1.8 million. Specialty Commercial Lines -- This segment includes results for the Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Insurance Group, acquired during the third quarter of 2001, and Argonaut Great Central Insurance Company. Net earned premiums for this segment totaled $24.8 million for the three months ended December 31, 2001, compared to $7.6 million for the same period in 2000. Rockwood contributed net earned premiums of $15.9 million for the current quarter. Net underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. for the three months ended December 31, 2001 was $2.7 million, compared to a net 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. loss of $1.2 million for the same period ended December 31, 2000. Rockwood contributed net underwriting income of $1.1 million to the current year fourth quarter results. Specialty Workers Compensation -- This segment includes the results of Argonaut Insurance Company. Net earned premiums were $46.3 million for the three months ended December 31, 2001, up from $23.4 million for the same quarter in 2000. Fourth quarter results reflect the benefits of an increase in premiums earned on retrospectively ret·ro·spec·tive adj. 1. Looking back on, contemplating, or directed to the past. 2. Looking or directed backward. 3. Applying to or influencing the past; retroactive. 4. rated policies of $16.0 million, as well as premium rate increases and new accounts. Loss and loss adjustment expenses were $51.0 million for the quarter ended December 31, 2001 and include reserve strengthening of $7 million related to California business written in prior years. Loss and loss adjustment expenses for the fourth quarter of 2000 totaled $62.1 million, when loss reserves were strengthened $49 million. Underwriting expenses were $10.4 million versus $22.9 million for the quarters ended December 31, 2001 and 2000, respectively. The net underwriting loss was $15.2 million for the quarter ended December 31, 2001, compared with $61.5 million for the quarter ended December 31, 2000. Managing General Underwriters -- This segment includes business written by various Argonaut Group insurance subsidiaries, primarily Trident Insurance Services. Net earned premiums were $2.2 million, compared with $400,000 for the quarters ended December 31, 2001 and 2000, respectively. The net underwriting gain for the quarter ended December 31, 2001 was $600,000, compared to a net operating loss of $300,000 for the same period in 2000. Argonaut Group also announced today that its 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 quarterly cash dividend of $0.15 per common share. This dividend will be payable March 5 to shareholders of record February February: see month. 19, 2002. Under its stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program announced in 1989, the Company has acquired 7,906,236 out of an aggregate authorization The right or permission to use a system resource; the process of granting access. See access control. of ten million shares. As of December 31, 2001, 21,557,238 common shares were outstanding, compared with 21,758,812 shares as of December 31, 2000. This news release contains "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. " 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. 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 $1.8 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 Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors 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 Twelve Months
Ended Ended
December 31 December 31
------------------ ------------------
2001 2000 2001 2000
Direct Written Premiums $ 96.4 $ 66.9 $ 263.2 $ 184.0
Net Written Premiums 77.9 59.8 219.6 163.9
Earned Premiums 101.5 31.5 221.9 124.6
Net Investment Income 14.0 14.7 53.6 62.0
Gain on Sale of Investments 3.6 0.8 17.1 23.3
-------- -------- -------- --------
Total Revenue 119.1 47.0 292.6 209.9
Losses and Loss Adjustment
Expenses 81.8 78.4 189.7 247.6
Underwriting, Acquisition,
and Insurance Expenses 37.5 28.1 96.8 83.1
Other Expenses 0.7 0.7 2.8 8.4
-------- -------- -------- --------
Total Expenses 120.0 107.2 289.3 339.1
Income (Loss) Before Tax (0.9) (60.2) 3.3 (129.2)
Income Tax Provision (0.3) (21.2) 0.4 (45.9)
-------- -------- -------- --------
Net Income (Loss) $ (0.6) $ (39.0) $ 2.9 $ (83.3)
======== ======== ======== ========
Net Income (Loss):
From Operations (3.0) (39.5) (8.3) (98.4)
From Sale of Investments 2.4 0.5 11.2 15.1
-------- -------- -------- --------
Total Net Income (Loss): $ (0.6) $ (39.0) $ 2.9 $ (83.3)
======== ======== ======== ========
Net Income (Loss) per Common
Share (Diluted):
From Operations $ (0.14) $ (1.81) $ (0.39) $ (4.45)
-------- -------- -------- --------
From Sale of Investments $ 0.11 $ .02 $ 0.52 $ 0.68
-------- -------- -------- --------
Total $ (0.03) $ (1.78) $ 0.13 $ (3.77)
======== ======== ======== ========
Net Income (Loss) per Common
Share (Basic): $ (0.03) $ (1.78) $ 0.13 $ (3.77)
======== ======== ======== ========
Weighted Average Common
Shares (000's):
Basic 21,557.3 21,869.8 21,610.9 22,069.7
======== ======== ======== ========
Diluted 21,581.0 21,874.7 21,620.2 22,093.3
======== ======== ======== ========
SEGMENT DATA:
Three Months Twelve Months
Ended Ended
December 31 December 31
------------------ ------------------
2001 2000 2001 2000
Excess & Surplus Lines:
-----------------------
Net Premiums Written $ 30.2 -- $ 39.8 --
Premiums Earned 28.1 -- 36.8 --
Pre-tax Operating Income (Loss) 4.4 -- 5.6 --
Loss Ratio 59.9% -- 60.6% --
Expense Ratio 33.9% -- 33.5% --
GAAP Combined Ratio 93.8% -- 94.1% --
Specialty Commercial:
---------------------
Net Premiums Written $ 23.9 $ 8.4 $ 55.3 $ 32.7
Premiums Earned 24.8 7.6 54.3 29.7
Pre-tax Operating Income (Loss) 5.3 0.1 4.8 (6.7)
Loss Ratio 65.3% 76.3% 74.0% 95.6%
Expense Ratio 24.2% 40.8% 29.5% 45.8%
GAAP Combined Ratio 89.5% 117.1% 103.5% 141.1%
Specialty Workers Compensation:
-------------------------------
Net Premiums Written $ 21.0 $ 50.4 $ 115.7 $ 129.8
Premiums Earned 46.3 23.4 124.8 94.3
Pre-tax Operating Income (Loss) (6.9) (49.0) (16.4) (132.0)
Loss Ratio 110.2% 264.6% 100.9% 219.4%
Expense Ratio 22.5% 97.8% 44.6% 76.6%
GAAP Combined Ratio 132.7% 362.4% 145.5% 296.0%
Managing General Underwriters:
------------------------------
Net Premiums Written $ 2.8 $ 1.0 $ 8.8 $ 1.3
Premiums Earned 2.2 0.4 5.8 0.5
Pre-tax Operating Income (Loss) 0.6 (0.3) (0.4) (0.3)
Loss Ratio 99.2% 141.8% 107.1% 134.6%
Expense Ratio (26.9)% 21.9% 1.5% 22.1%
GAAP Combined Ratio 72.3% 163.7% 108.6% 156.7%
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