Capital Re Corporation reports record third quarter net income of $11.4 million or $0.77 per share.Corporation (NYSE NYSE See: New York Stock Exchange :KRE KRE Kauffman Racing Equipment KRE Kuwait Real Estate (bank) KRE Keffalas Real Estate, Inc KRE Key Results Expected KRE Karl Real Estate KRE Kernel Rules Enforcement KRE Korea Research Environment ) today reported record net income of $11.4 million or $0.77 per share for the third quarter ended Sept. 30, 1995 compared to $9.6 million or $0.65 per share for the third quarter of 1994, an increase of 18.8%. Net income for the nine months ended Sept. 30, 1995 increased 10.5% to $33.7 million or $2.28 per share, from $30.5 million or $2.06 per share for the comparable period in 1994. Book value rose 17.3% to $25.82 per share from $22.02 at year end 1994. Michael E. Satz, chairman and chief executive officer said, "The company's momentum from its diversification into mortgage guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. 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. , credit reinsurance and other related product lines is accelerating. Capital Re's profile as a specialty reinsurance group is gaining substance as our financial performance reflects continued growth and profitability." Financial Results Third quarter 1995 total revenues, comprised primarily of net premiums earned and net investment income, grew 8.3% to $24.9 million. Total revenues increased to $78.6 million for the first nine months of 1995 from $77.5 million for the same period in 1994. Net premiums earned for the third quarter of 1995 increased approximately 10% to $13.3 million from $12.1 million the prior year. Excluding the effects of $0.5 million of refunded 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. in the third quarter of 1994, net premiums earned grew approximately 15%. For the nine months ended September 30, 1995, net premiums earned decreased to $43.8 million from $46.2 million in the prior year due to the decline in refunded earned premium to $0.8 million from $10.5 million in 1994. When the impact of refunded earned premium is excluded for the first nine months of 1995, net premiums earned increased 20% over the comparable period in 1994. For the three months ended September 30, 1995 and 1994, gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. increased to $24.0 million from $22.0 million or approximately 9%. The increase was due primarily to several large municipal facultative facultative /fac·ul·ta·tive/ (fak´ul-ta?tiv) not obligatory; pertaining to the ability to adjust to particular circumstances or to assume a particular role. fac·ul·ta·tive adj. 1. transactions written in the third quarter of 1995. Gross premiums written decreased to $69.4 million from $79.1 million or approximately 12.3% for the first nine months of 1995. The decrease is attributable to a decline in the financial guaranty market and the attendant reinsurance premiums assumed, as well as the positive effect of premiums from 1993 mortgage guaranty business recorded by the company in 1994. Net premiums written for the three months and nine months ended September 30, 1995 were $20.8 million and $61.8 million, respectively, compared to $21.1 million and $66.3 million a year ago. The decrease in net premium volume was primarily the result of a revision in timing of reinsurance premium payments due in connection with certain of the company's retrocessional contracts. For the quarter ended September 30, 1995, total expenses were $9.8 million compared to $10.2 million for the third quarter of 1994. The reduction in expenses is due in part to the recording of profit commission income on ceded reinsurance contracts. Total expenses for the nine months ended September 30, 1995 declined to $34.1 million from $36.3 million for the first nine months of 1994 due to a decrease in gross premiums written and related commissions as well as the positive effect of profit commission income. For the three and nine months ended September 30, 1995, the expense ratio decreased to 47.9% and 52.7%, respectively, from 57.4% and 58.2% in the prior periods. The loss ratio for the third quarter and first nine months of 1995 increased minimally to 1.9% and 3.5%, respectively, from 1.3% and 1.2% in the prior year. At September 30, 1995, Capital Re's investment portfolio was $710.6 million. Total stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $381.7 million at the end of the third quarter compared to $325.5 million at year end 1994. Capital Re Corporation, headquartered in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , is an insurance holding company with three specialized professional reinsurance companies as its principal 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. : Capital Reinsurance Company, Capital Mortgage Reinsurance Company and Capital Credit Reinsurance Company Ltd. Capital Reinsurance Company, rated triple A by Standard & Poor's Corporation and Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. , is the leading reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. of financial guarantees of investment-grade debt obligations. Capital Mortgage Reinsurance Company, rated AA by Standard & Poor's Corporation and Fitch Investors Service Fitch Investors Service A financial services company best known for the bond ratings it provides investors. , Inc., is a professional reinsurer dedicated exclusively to serving the mortgage guaranty insurance industry. Capital Credit Reinsurance Company specializes in providing reinsurance capacity to the trade credit insurance market and to other credit-related insurance lines. -0-
Capital Re Corp. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands except per share amounts)
Three months ended Nine months ended
Sept. 30, Sept. 30,
(Unaudited) (Unaudited)
1995 1994 1995 1994
Revenues:
Gross premiums
written $23,977 $22,003 $69,368 $79,089
Ceded premiums 3,188 875 7,529 12,791
Net premuims
written 20,789 21,128 61,839 66,298
Increase in
deferred
premium revenue (7,467) (8,984) (18,004) (20,140)
Net premiums earned
(net of ceded earned
premium of $2,109 and
$2,720 in three months
1995 and 1994; $5,859
and $8,008 in nine
months 1995 and 1994) 13,322 12,144 43,835 46,158
Net investment income 11,687 10,292 34,448 28,926
Net realized gains/(losses) (141) 248 120 1,917
Other income 35 340 173 488
Total revenue $24,903 $23,024 $78,576 $77,489
Expenses:
Loss and loss adjustment
expenses (net of ceded
loss and loss
adjustment expenses of
$1,241 and $2,275 in
three months 1995 and
1994; $2,242 and $2,621
in nine months 1995 and
1994) $252 $160 $1,548 $534
Acquisition costs 8,431 6,541 23,015 27,098
Increase in deferred
acquisition costs (4,281) (2,564) (8,005) (10,608)
Profit commission expense 48 1,038 802 2,875
Other operating expenses 2,031 1,959 7,134 7,480
Foreign exchange (gain/
loss) 157 -- 157 --
Interest expense 1,732 1,646 5,173 4,936
Minority interest in
subsidiary 1,434 1,434 4,303 3,952
Total expenses $9,804 $10,214 $34,127 $36,267
Income before provision for federal income taxes $15,099 $12,810 $44,449 $41,222
Provision for federal
income taxes
Current 2,240 1,892 6,212 5,639
Deferred 1,506 1,335 4,543 5,043
Total provision for
federal income taxes $3,746 $3,227 $10,755 $10,682
Net income $11,353 $9,583 $33,694 $30,540 Earnings per common share $0.77 $0.65 $2.28 $2.06 Cash dividends per common share $0.77 $0.64 $2.27 $1.97 Weighted average number of common shares outstanding 14,784,055 14,796,882 14,783,720 14,834,613 Capital Re Corp. and Subsidiaries Consolidated Balance Sheets consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. (Dollars in thousands except per share amount) As of As of Sept. 30, Dec. 31 1995 1994 (unaudited) Assets Fixed maturity securities held to maturity, at amortized cost (market value: $154,850 in 1995 and $148,964 in 1994) $144,639 $147,252 Fixed maturity securities available for sale, at market (amortized cost: $490,002 in 1995 and $459,182 in 1994) 495,705 426,878 Short-term investments, at cost, which approximates market 70,290 62,461 Total investments $710,634 $636,591 Cash $13,399 $3,523 Accrued investment income 8,906 9,943 Deferred acquisition costs 98,654 90,648 Prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. reinsurance premiums 53,679 52,009 Reinsurance
recoverable on ceded losses 3,552 1,310 Funds held under
reinsurance agreements 3,839 3,848 Premiums receivable
10,367 4,043 Property and equipment (net of accumulated
depreciation accumulated depreciationThe total amount of depreciation that has been recorded for an asset since its date of acquisition. For example, a computer with a 5-year estimated life that was purchased for $2,000 would have accumulated depreciation of $800 [( and amortization of $1,032 in 1995 and $723 in 1994) 1,746 1,848 Other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. 6,195 6,277 Total assets $910,971 $810,040 Liabilities Deferred premium revenue $294,591 $274,916 Reserve for losses and loss adjustment expenses 12,181 9,012 Profit commission liability 6,828 6,301 Deferred federal income taxes payable 39,211 21,388 Long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. 90,734 90,706 Other liabilities other liabilities Small and relatively insignificant liabilities. For financial reporting purposes, firms often combine small liabilities into this single category rather than listing each liability separately. 10,680 7,203 Total liabilities $454,225 $409,526 Preferred Shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. of Subsidiary $75,000 $75,000 Stockholders' Equity 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. - $.01 par value per share; 25,000,000 shares authorized Shares authorized The maximum number of shares of stock of a company allowed in the articles of incorporation, which may be changed only by a shareholder vote. See: Issued and outstanding. shares authorized See authorized capital stock. ; no shares issued and outstanding in 1995 and 1994, respectively --- --- Common stock - $.01 par value per share; 75,000,000 shares authorized; 14,784,055 and 14,782,480 shares issued and outstanding in 1995 and 1994, respectively 150 150 Additional paid-in capital additional paid-in capital Stockholder contributions that are in excess of a stock's stated or par value. For example, if a firm issues stock with a par value of $1 per share but sells the stock to investors at $10 per share, the firm's financial statements 191,245 191,214 Retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. 190,283 158,806 Treasury stock; 182,700 shares in 1995 and 1994 (3,638) (3,638) Net unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. (loss) on fixed maturities securities available for sale, net of tax 3,706 (20,998) Net unrealized loss Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. on foreign currency translation (20) Total stockholders' equity $381,746 $325,514 Total liabilities, preferred shares of subsidiary & stockholders' equity $910,971 $810,040 CAPITAL RE CORP. Supplemental Line of Business Report (Dollars in thousands) Three Months Ended Nine Months Ended Sept. 30, Sept. 30, 1995 1994 1995 1994 Gross premiums written: Municipal $15,183 $10,492 $35,583 $45,356 Mortgage 6,326 6,928 22,911 26,094 Non-Municipal 1,547 3,043 5,718 5,693 Credit 921 1,540 5,156 1,946 23,977 22,003 69,368 79,089 Net premiums written: Municipal 12,995 9,749 31,064 37,588 Mortgage 5,290 6,928 20,233 19,894 Non-Municipal 1,547 2,911 5,718 6,870 Credit 957 1,540 4,824 1,946 20,789 21,128 61,839 66,298 Net premiums earned: Municipal 5,665 6,239 18,789 28,755 Mortgage 4,646 3,314 15,932 12,339 Non-Municipal 2,561 1,606 4,529 3,936 Credit 450 985 4,585 1,128 13,322 12,144 43,835 46,158 Refunded earned premium 0 495 792 10,539 Total earned premium less refundings 13,322 11,649 43,044 35,619 GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). operating ratios Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: Loss 1.9% 1.3% 3.5% 1.2% Expense 47.9% 57.4% 52.7% 58.2% Combined 49.8% 58.7% 56.2% 59.4% CONTACT: Capital Re Corporation David A. Buzen Catherine C. Bailey 212/974-0100 |
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