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CII FINANCIAL INC. POSTS SHARP TURNAROUND IN FIRST QUARTER INCOME

 PLEASANTON, Calif., May 12 /PRNewswire/ -- CII Financial Inc. (AMEX: CII) returned to profitability in the first quarter of 1993, reflecting the continuing progress of the company's strategic program to improve operating results.
 For the three months ended March 31, 1993, the company reported net income of $335,000, or 5 cents per share, compared to a net loss of $26,373,000, or $3.65 per share, in the same period a year ago. Last year's loss primarily reflected substantial additions to loss reserves as a result of the rapid deterioration of the workers' compensation market in the six-county area of Southern California.
 As anticipated, first quarter revenues decreased modestly to $28,402,000 from $29,907,000 in the corresponding quarter of 1992.
 Net investment income for the quarter increased 19.8 percent to $3,660,000, compared with $3,055,000 one year earlier. The increase primarily reflected higher net realized gains on sales of investments from the trading portfolio.
 Joseph G. Havlick, chairman and president, commented: "After steadily reducing our losses on a quarterly basis last year, we were very pleased to return to profitability in the first quarter of 1993. While market conditions remain difficult, our strategic program is beginning to produce positive results.
 "Our efforts have been directed at reducing our risk-sensitive book of business in those Southern California counties that have been most seriously impacted by high unemployment as well as fraud and abuse of the workers' compensation system, surcharging accounts to obtain an adequate premium, expanding our writings in Northern California and other `preferred' areas of the state, establishing a presence in new states that offer a more favorable environment for workers' compensation and developing new activities that fit well with our existing capabilities. Gains have been made in all these areas.
 "At March 31, 1993, 39.2 percent of our total inforce premiums were written in the six-county Southern California area, a substantial reduction from 57.0 percent one year earlier. Our first quarter 1993 results reflect conservative loss reserves for the current year with no adverse case development on prior accident years. While we are cautiously optimistic about the favorable trends as to prior years' case development during the last two quarters, additional quarterly trend development is required to validate these indications, due to the current state of turmoil in the California workers' compensation environment. We also continue to keep a tight rein on expenses while maintaining the ability to deliver timely, responsive service to our agents and insureds.
 "In line with our marketing strategy, we are continuing to increase our writings in the `preferred' areas of the state despite highly competitive conditions. Given the size of the six-county market, and competitive conditions elsewhere, it is not possible to replace all of our Southern California writings, which is the primary reason we're experiencing lower revenues this year.
 "Our entry into the Colorado market remains on a favorable course. Inforce premiums in Colorado continue to grow and reached $4,670,000 at the end of the quarter, compared with approximately $2 million at Dec. 31, 1992. We are carefully studying expansion strategies directed at Utah and Texas as well as pursuing licensing for our insurance subsidiaries in additional states. In terms of allied activities, premium financing, while a minor component of our business, showed strong growth in the first quarter."
 Havlick concluded: "We continue to press aggressively for desperately needed reform of California's workers' compensation system. Primary abuses include inordinate forensic medical expenses, misuse of the system and potentially fraudulent stress and strain claims. These problems have received much more public attention, and workers' compensation has been identified as a major element in what is considered to be California's unfavorable business climate.
 "Hopefully, these factors will cause the legislature to enact comprehensive, meaningful reforms to address these abuses and enable the system to effectively perform its traditional role of caring for legitimately injured workers. At the same time, insurance companies will continue to press for much-needed rate relief, or we will see further strategic withdrawals from the market.
 "Despite the uncertain environment, we are encouraged by the success of our programs to date, and we will continue to implement these strategies. Our approach will remain careful and cautious, with a clear focus on bottom line results. We look forward to further progress in the balance of 1993."
 CII Financial is a financial services holding company. Its two operating insurance subsidiaries are California Indemnity Insurance Co. and Commercial Casualty Insurance Co. CII also has an operating premium finance subsidiary, CII Premium Finance Co. Through its insurance subsidiaries, the company is engaged in writing workers' compensation insurance in California and Colorado. These insurance companies service workers' compensation accounts of all sizes, but concentrate on small- to medium-size companies.
 Based in Pleasanton, the company also has offices in Burbank, Sacramento, San Diego, Fresno and San Bernardino, Calif., as well as Denver. Policies are sold through a network of approximately 435 independent agents and brokers.
 CII FINANCIAL INC. & SUBSIDIARIES
 Summary Financial Information
 Three Months Ended March 31,
 1993 1992
 Income Statement Data:
 Total revenues $28,402,000 $29,907,000
 Income (loss) before
 federal income tax
 and extraordinary gain $335,000 ($26,830,000)
 Federal income taxes $0 $0
 Extraordinary gain on
 debenture repurchase
 net of federal income tax $0 $457,000
 Net income (loss) $335,000 ($26,373,000)
 Earnings (loss) per share:
 Primary earnings (loss)
 per share
 Income (loss) before
 extraordinary gain $0.05 ($3.71)
 Extraordinary gain $0.00 $0.06
 Primary earnings (loss)
 per share $0.05 ($3.65)
 Primary weighted shares
 outstanding 7,346,438 7,217,519
 Fully diluted earnings
 (loss) per share
 Income (loss) before
 extraordinary item $0.05 ($3.71)
 Extraordinary item $0 $0.06
 Fully diluted earnings
 (loss) per share $0.05 ($3.65)
 Fully diluted weighted
 shares outstanding 7,398,934 7,217,519
 March 31, Dec. 31,
 1993 1992
 Balance Sheet Data:
 Total assets $269,530,000 $265,735,000
 Total liabilities $257,137,000 $253,682,000
 Total shareholders' equity $12,393,000 $12,053,000
 -0- 5/12/93
 /CONTACT: Joseph G. Havlick, chairman, president and CEO of CII Financial, 510-416-8700/
 (CII)


CO: CII Financial Inc. ST: California IN: INS FIN SU: ERN

EH-JL -- LA027 -- 7697 05/12/93 15:32 EDT
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Publication:PR Newswire
Date:May 12, 1993
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