Capital Re reports third quarter net operating income of $14.1 million or $0.89 per share.NEW YORK--(BUSINESS WIRE)--Oct. 21, 1996--Capital Re 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 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. , net income excluding realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. and losses, of $14.1 million for the third quarter ended Sept. 30, 1996, an increase of 23.7 percent over the $11.4 million reported for the third quarter of 1995. Earnings per share, excluding realized gains and losses, for the third quarter of 1996 was $0.89 as compared to $0.77 in the prior year, a 15.6 percent increase. For the nine months ended Sept. 30, 1996 net operating income increased 21.1 percent to $40.7 million, or $2.61 per share, from $33.6 million, or $2.27 per share, for the nine months ended Sept. 30, 1995, a per share increase of 15 percent. Capital Re's net income, including realized gains and losses, for the third quarter of 1996 was $14.0 million, or $0.88 per share, compared to $11.4 million or $0.77 per share for the same period in 1995. For the nine months ended Sept. 30, 1996, net income was $40.0 million, or $2.57 per share, as compared to the $33.7 million, or $2.28 per share, for the same period in 1995. Michael E. Satz, chairman and chief executive officer, said, "Diversification Diversification 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. continues to be an important driver of Capital Re's financial performance. Earned premium 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. increased approximately 65 percent in the third quarter and 47 percent for the first three quarters of this year, reflecting the impact of new business written in the non-municipal financial 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. , mortgage guaranty and credit 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. lines. As previously announced, our proposed acquisition of RGB (Red Green Blue) The computer's native color space, which is the color system for capturing and displaying images. RGB was derived from our own perception of color because human eyes are sensitive to red, green and blue (see trichromaticity). , a Lloyd's managing agency, will provide Capital Re with access to the principal international market for the development and distribution of specialty insurance and reinsurance products, and should facilitate the company's ability to both sustain and enhance its earnings growth over time." Financial Results 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 80.0 percent in the third quarter of 1996, to $43.2 million compared to $24.0 million in the third quarter of 1995, reflecting new business written primarily in the mortgage, credit and non-municipal financial guaranty lines of business. For the nine months ended Sept. 30, 1996, gross premiums written grew to $108.4 million from $69.4 million the prior year, an increase of 56.2 percent. Net premiums written for the three months ended Sept. 30, 1996 grew 94.7 percent to $40.5 million from $20.8 million a year ago. For the nine months ended Sept. 30, 1996, net premiums written increased to $85.5 million from $61.8 million, or 38.4 percent. Net premiums earned for the third quarter of 1996 increased 65.4 percent to $22.0 million from $13.3 million the prior year. For the nine months ended Sept. 30, 1996, net premiums earned increased to $64.4 million from $43.8 million, a 47.0 percent increase from the prior year. Third quarter 1996 total revenues, comprised primarily of net premiums earned, net investment income and other income, grew 40.0 percent to $35.0 million. Total revenues increased 31.2 percent to $103.0 million for the nine months ended Sept. 30, 1996, compared to $78.5 million for the same period in 1995. For the quarter ended Sept. 30, 1996, net investment income rose to $13.0 million from $11.7 million in the third quarter of 1995. Net investment income for the nine months of 1996 grew 9.9 percent to $37.8 million from $34.4 million for the nine months ended Sept. 30, 1995. Total expenses, including loss and loss adjustment expenses, for the quarter ended Sept. 30, 1996 rose to $16.0 million from $9.8 million in the third quarter of 1995. For the nine months ended Sept. 30, 1996, total expenses increased to $47.8 million from $34.1 million for the same period in 1995. These increases are primarily attributable to commissions associated with the increased level of premiums assumed, normal loss development from the mortgage and credit lines of business and net profit commissions payable under certain of the corporation's reinsurance contracts. In accordance with expectations, the combined ratio has increased for the quarter and the nine months as a result of our diversification strategy, which is shifting our business from historically lower combined ratio municipal bond reinsurance toward lines with relatively higher combined ratios. The combined ratio increased for the quarter to 58.8 percent from 49.8 percent a year ago. For the nine months ended Sept. 30, 1996, the combined ratio increased to 59.5 percent from 56.2 percent in 1995. At Sept 30, 1996, Capital Re's investment portfolio was $881 million. Total assets reached $1.1 billion. 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 $468 million as of Sept. 30, 1996, compared to $412 million at Dec. 31, 1995. Book value increased to $29.52 per share from $27.82 at the end of 1995. After-tax intrinsic book value was $39.40 as of Sept. 30, 1996. Intrinsic book value is defined as book value, which includes unrealized capital gains and losses on the investment portfolio, the discounted present value of installment premiums and deferred premium revenue, net of expenses. 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 the holding company for several specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. professional reinsurance companies, Capital Reinsurance Co., Capital Mortgage Reinsurance Co., Capital Credit Reinsurance Co., Ltd. and Capital Title Reinsurance Co. Capital Reinsurance Co., rated triple-A by Standard & Poor's Corp. 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 Co., rated AA by Standard & Poor's Corp., is a professional reinsurer dedicated exclusively to serving the mortgage guaranty insurance industry. Capital Credit Reinsurance Co., Ltd. specializes in providing reinsurance capacity to the trade credit insurance market and to other credit-related insurance lines. Capital Title Reinsurance Co., rated AA- by Standard & Poor's Corp. and Duff & Phelps Inc., is the first professional reinsurer dedicated exclusively to the title insurance industry. -0-
Capital Re Corp. and Subsidiaries
Consolidated Statements of Income
(Unaudited)
(Dollars in thousands except per share amounts)
Three months ended Nine months ended
Sept. 30, Sept. 30,
1996 1995 1996 1995
Revenues:
Gross premiums
written $43,221 $23,977 $108,433 $69,368
Ceded premiums 2,721 3,188 22,971 7,529
Net premiums
written 40,500 20,789 85,462 61,839
Increase in
deferred
premium revenue (18,495) (7,467) (21,031) (18,004)
Net premiums earned 22,005 13,322 64,431 43,835
Net investment income 13,010 11,687 37,792 34,448
Other income 25 35 788 173
Total revenue 35,040 25,044 103,011 78,456
Expenses:
Loss and loss adjustment
expenses 1,854 252 5,621 1,548
Acquisition costs 13,436 8,431 31,621 23,015
Increase in deferred
acquisition costs (5,958) (4,281) (10,357) (8,005)
Profit commission expense 1,851 48 4,191 802
Other operating expenses 1,749 2,031 7,253 7,134
Interest expense 1,676 1,732 5,156 5,173
Foreign exchange loss (40) 157 (24) 157
Minority interest in
Capital Re LLC 1,434 1,434 4,303 4,303
Total expenses 16,002 9,804 47,764 34,127
Income before
provision for
federal income taxes 19,038 15,240 55,247 44,329
Provision for federal
income taxes
Current 2,472 2,289 5,761 6,170
Deferred 2,462 1,506 8,804 4,543
Provision for federal
income taxes 4,934 3,795 14,565 10,713
Net Operating Income $14,104 $11,445 $40,682 $33,616
Net realized (loss)
gain, net of tax (148) (92) (675) 78
Net Income $13,956 $11,353 $40,007 $33,694
Net Operating Earnings
per Common Share $0.89 $0.77 $2.61 $2.27
Earnings per common
share $0.88 $0.77 $2.57 $2.28
Cash dividends per
common share $0.06 $0.05 $0.18 $0.15
Weighted average number
of common shares
outstanding 15,798 14,784 15,589 14,784
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 amounts) Sept. 30, Dec. 31 1996 1995 (unaudited) Assets Fixed maturity securities available for sale, at market (amortized cost: $742,042 in 1996 and $652,966 in 1995) $760,712 $687,657 Short-term investments, at cost, which approximates market 120,014 84,110 Total investments 880,726 771,767 Cash 1,992 4,537 Accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. investment income 10,110 9,481 Deferred acquisition costs 112,709 102,353 Prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. reinsurance premiums 74,087 62,133 Reinsurance
recoverable on ceded losses 6,619 2,524 Funds held under
reinsurance agreements 3,884 3,832 Premiums receivable
16,345 17,907 Other assets other assetsAssets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. 7,889 7,351 Total assets $1,114,361 $981,885 Liabilities Deferred premium revenue $347,436 $314,451 Reserve for losses and loss adjustment expenses 19,629 12,783 Profit commission liability 15,488 8,806 Ceded balances payable 8,036 8,000 Deferred federal income taxes payable 53,384 50,187 Subordinated notes payable 16,000 16,000 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. 74,772 74,744 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. 36,682 9,971 Total liabilities $571,427 $494,942 Company Obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. Mandatorily Redeemable Preferred Securities of Capital Re LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control 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 1996 and 1995 -- -- Common stock - $.01 par value per share; 75,000,000 shares authorized, 15,853,175 and 14,805,055 shares issued and outstanding in 1996 and 1995, respectively 160 150 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 221,110 191,654 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. 238,399 201,228 Treasury stock; 189,700 and 182,700 shares in 1996 and 1995, respectively (3,870) (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. on fixed maturities securities available for sale, net of tax 12,135 22,549 Total stockholders' equity 467,934 411,943 Total liabilities, preferred securities of Capital Re LLC and Stockholders' Equity $1,114,361 $981,885 -0- Capital Re Corp. Supplemental Line of Business Report (Dollars in thousands) (unaudited) Three Months Ended Nine Months Ended Sept. 30, Sept. 30, 1996 1995 1996 1995 Gross premiums written: Municipal $17,753 $15,183 $39,167 $35,583 Mortgage 17,941 6,326 47,420 22,911 Non-Municipal 2,448 1,547 9,688 5,718 Credit 4,268 921 11,057 5,156 Title 811 0 1,101 0 43,221 23,977 108,433 69,368 Net premiums written: Municipal 15,118 12,995 30,030 31,064 Mortgage 18,103 5,290 33,834 20,233 Non-Municipal 2,448 1,547 9,688 5,718 Credit 4,020 957 10,809 4,824 Title 811 0 1,101 0 40,500 20,789 85,462 61,839 Net premiums earned: Municipal 5,907 5,665 19,231 18,789 Mortgage 10,158 4,646 31,164 15,932 Non-Municipal 1,797 2,561 5,052 4,529 Credit 3,454 450 8,055 4,585 Title 689 0 929 0 22,005 13,322 64,431 43,835 Refunded earned premium 1,007 0 3,451 792 Total earned premium less refundings 20,998 13,322 60,980 43,043 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 8.4% 1.9% 8.7% 3.5% Expense 50.3% 47.9% 50.8% 52.7% Combined 58.8% 49.8% 59.5% 56.2% CONTACT: Capital Re Corporation, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of David A. Buzen Chief Financial Officer 212/974-0100 |
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