Argonaut Group Announces 2003 First Quarter Results.Business Editors SAN ANTONIO--(BUSINESS WIRE)--May 8, 2003 Argonaut Group, Inc. (Nasdaq:AGII) today announced financial results for the three months ended March 31, 2003. First quarter highlights: -- The Company's Excess & Surplus Lines (E&S) segment reported a 107 percent increase in gross written premium and 172 percent increase in income before taxes for the first quarter of 2003 compared to the same period in 2002. For the quarter the segment represented 49 percent of Argonaut Group's total gross written premium. The GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). combined ratio for the segment was 92.6 percent for the quarter, compared to 97.5 percent in the same quarter a year ago. -- Three of the Company's four segments reported improved combined ratios, each under 100 percent, compared to the same quarter one year ago. -- Gross written premium increased by 42% over the same period one year ago to $173.9 million versus $122.8 million in the first quarter of 2002. -- Capital (shareholder's equity) increased by $64.5 million in the quarter through issuance of mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , sale of real estate and earnings. FINANCIAL RESULTS During the first quarter of 2003, Argonaut reported net income of $33.6 million or $1.55 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 21.6 million shares, which included a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. $34.2 million (net of tax) or $1.58 per share gain from sales of select real estate holdings, compared to net income of $7.5 million or $0.34 per diluted share, for the same three-month period in 2002. The Company reported 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. (a) of $0.4 million or $0.02 per diluted common share, compared to net operating income of $2.2 million or $0.10 per diluted share for the same period in 2002. First quarter operating income was adversely affected by a $5.0 million strengthening of reserves for adverse development in lines of business that the Company has previously announced it is exiting. Additionally, the Company incurred a $1.0 million restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. for the previously announced reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. of its Risk Management segment. The Company expects to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. an additional charge of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $2.0 million over the next two quarters to complete the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). . Operating results exclude gains on sales of investments, including real estate, which totaled $33.2 million after tax during the first quarter of 2003 versus $5.3 million during the same period of 2002. "The focus on our core competencies A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahalad (1990):
A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and focus on 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 has positioned us to take advantage of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. market conditions in the coming quarters." SEGMENT RESULTS Excess & Surplus Lines (E&S) - For the first quarter of 2003, gross written premiums for E&S lines were $84.6 million, generating underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. before taxes of $7.9 million and a combined ratio of 92.6 percent. This is compared to gross written premiums of $40.9 million, income before taxes of $2.9 million and a combined ratio of 97.5 percent for the same period in 2002. Risk Management (formerly 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. )- Gross written premiums were $43.6 million for the three months ended March 31, 2003, resulting in a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss of $8.0 million, compared to gross written premiums of $47.2 million and a pre-tax loss of $1.3 million for the same period in 2002. For the first quarter, the combined ratio in this segment was 153.6 percent versus 133.5 percent a year earlier. The increase in combined ratio is primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the restructuring charge and strengthening of reserves for adverse development in one large construction account in lines of business that the Company has previously announced it is exiting. Specialty Commercial Lines - During the first quarter of 2003, these companies contributed gross written premiums of $34.4 million and pre-tax income of $2.3 million, compared to gross written premiums of $29.8 million and a pre-tax income of $2.0 million during the same period in 2002. For the first quarter of 2003, the combined ratio was 99.5 percent versus 102.3 percent during the same period in 2002. Public Entity - Gross written premiums for the first quarter of 2003 were $11.3 million versus $4.9 million for the same quarter in 2002. During the first quarter of 2003, Trident generated income before taxes of $0.3 million versus a loss of $0.1 million for the same period a year earlier. The segment's combined ratio during the first quarter was 98.8 percent, down from 112.7 percent during the same period a year earlier. (a) In addition to providing net income (loss), Argonaut Group provides operating income (loss) as the Company believes that it is a meaningful measure of the profit or loss generated by our operating segments. Operating income (loss) differs from net income (loss) under accounting principals 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) in that the Company excludes net realized investment gains and losses. Operating income (loss) does not replace net income (loss) as the GAAP measure of our results of operations. The Company provides a reconciliation of our operating results to GAAP net income (loss) in the financial tables of this release. 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 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, Rockwood Rock´wood` n. 1. (Min.) Ligniform asbestus; also, fossil wood. Casualty Insurance Company, 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, Risk Management, and Public Entity. Information on Argonaut Group and its subsidiaries is available at www.argonautgroup.com (Financials follow)
ARGONAUT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
March 31, December 31,
2003 2002
-------------- --------------
Assets
Total investments $ 1,249.9 $ 1,181.3
Cash and cash equivalents 88.2 77.4
Accrued investment income 11.4 13.0
Receivables 688.9 691.7
Goodwill 105.7 105.7
Other assets 192.2 139.8
-------------- --------------
Total assets $ 2,336.3 $ 2,208.9
============== ==============
Liabilities and Shareholders' Equity
Reserves for losses and loss
adjustment expenses $ 1,312.2 $ 1,281.6
Unearned premiums 293.5 284.9
Other liabilities 338.4 314.7
-------------- --------------
Total liabilities 1,944.1 1,881.2
Total shareholders' equity 392.2 327.7
-------------- --------------
Total liabilities and shareholders'
equity $ 2,336.3 $ 2,208.9
============== ==============
Book value per common share -
basic $ 18.15 $ 15.17
============== ==============
Book value per common share -
diluted(a) $ 15.97 $ 15.17
============== ==============
(a) Book value per common share - diluted, includes the impact of the
Series A Mandatory Convertible Preferred Stock on an as if
converted basis.
All Segments
Financial Highlights
(in millions)
Three Months Ended
March 31,
-----------------------------
2003 2002
----------- -----------
Gross Written Premiums $ 173.9 $ 122.8
Net Written Premiums 130.9 96.0
Earned Premiums 124.1 84.6
Net Investment Income 11.3 13.3
Gains on Sales of Investments 56.0 8.1
----------- -----------
Total Revenue 191.4 106.0
Losses and Loss Adjustment Expenses 87.3 62.6
Underwriting, Acquisition and Insurance
Expenses 47.4 32.6
----------- -----------
Total Expenses 134.7 95.2
Income (Loss) Before Tax 56.7 10.8
Income Tax Provision (Benefit) 23.1 3.3
----------- -----------
Net Income $ 33.6 $ 7.5
=========== ===========
Net Income (Loss):
Operating 0.4 2.2
Sale of Investments 33.2 5.3
----------- -----------
Total Net Income: $ 33.6 $ 7.5
=========== ===========
Net Income (Loss) per Common Share
(Diluted):
Operating $ 0.02 $ 0.10
----------- -----------
Sale of Investments $ 1.53 $ 0.24
----------- -----------
Total $ 1.55 $ 0.34
=========== ===========
Net Income (loss) per Common Share
(Basic): $ 1.55 $ 0.35
=========== ===========
Weighted Average Common Shares (000's):
Basic 21,603.5 21,557.9
=========== ===========
Diluted 21,636.3 21,663.7
=========== ===========
ARGONAUT GROUP, INC.
SEGMENT DATA
(in millions)
Three Months Ended
March 31,
--------------------------
2003 2002
Excess & Surplus Lines:
-----------------------
Gross Written Premiums $ 84.6 $ 40.9
Net Written Premiums 74.7 33.3
Earned Premiums 62.0 28.7
Income before taxes 7.9 2.9
---------- -----------
GAAP Combined Ratio 92.6 % 97.5 %
---------- -----------
Risk Management:
----------------
Gross Written Premiums $ 43.6 $ 47.2
Net Written Premiums 19.9 33.8
Earned Premiums 28.5 29.2
Loss before taxes (8.0) (1.3)
---------- -----------
GAAP Combined Ratio 153.6 % 133.5 %
---------- -----------
Specialty Commercial:
---------------------
Gross Written Premiums $ 34.4 $ 29.8
Net Written Premiums 29.7 26.4
Earned Premiums 28.1 24.9
Income before taxes 2.3 2.0
---------- -----------
GAAP Combined Ratio 99.5 % 102.3 %
---------- -----------
Public Entity:
-------------
Gross Written Premiums $ 11.3 $ 4.9
Net Written Premiums 6.6 2.5
Earned Premiums 5.5 1.8
Income (loss) before
taxes 0.3 (0.1)
---------- -----------
GAAP Combined Ratio 98.8 % 112.7 %
---------- -----------
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