CastlePoint Reports First Quarter 2007 Results.HAMILTON, Bermuda -- CastlePoint Holdings, Ltd. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : CPHL CPHL Central Public Health Laboratory (London, UK) CPHL Central Professional Hockey League CPHL Calgary Puck Hockey League ) today reported its financial results for the first quarter of 2007. CastlePoint reported net income of approximately $7.1 million in its first quarter as a public company. CastlePoint reported diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $0.23 for the first quarter of 2007 as compared to $(0.29) per share for the same period in 2006. Key Highlights: * Net premiums written for the quarter were $72.0 million, compared to zero in the prior year period * 28% of total written premiums generated from clients other than 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. of Tower Group, Inc., CastlePoint's sponsor * Consolidated combined ratio was 93.7% * Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. increased by $121.3 million including $114 million of net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). to us from successful completion of IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. [TABLE OMITTED] Michael H. Lee, Chief Executive Officer of CastlePoint Holdings, stated "This was our first quarter as a public company and our fourth quarter since our inception in April 2006. With $72.0 million in net premiums written including 28% of net premiums written in the quarter from clients other than Tower, we are pleased that our 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. , risk sharing, and programs solutions are continuing to find excellent reception in the marketplace. Our consolidated combined ratio of 93.7% reflects continued excellent underlying loss ratios from Tower, our largest customer, as well as continued reduction in our overall expense ratio as our business has expanded. The substantial increase in business from clients other than Tower also demonstrates our success in marketing our unique risk sharing and other reinsurance and insurance solutions. Total revenues were $54.0 million in the first quarter of 2007. Net premiums earned represented 64.8% of net premiums written for the three months ended March 31, 2007. Tower ceded 49% of its brokerage business written premiums to CastlePoint Reinsurance Company, Ltd., our reinsurance subsidiary, in the quarter, and for the three months ended March 31, 2007 we received $51.6 million total written premiums and $37.7 million total 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. from Tower. From clients other than Tower we generated $20.3 million in written premiums and $8.9 million in net earned premiums for the three months ended March 31, 2007. Our pipeline of programs and risk sharing as well as reinsurance deals continues to be strong. A.M. Best has confirmed CPRe's "A-" rating. Our subsidiary CastlePoint Insurance Company, our U.S. domestic primary insurer, received an A- rating from A.M. Best during the quarter. We expect CastlePoint Insurance Company to begin receiving a share of Tower's brokerage business during the second quarter of this year, subject to regulatory approval. We also expect our services income as a result of managing programs to increase throughout the year. We generated investment income of $5.8 million during the quarter, and our average cash and invested assets were 1.69 times average shareholders' equity for the quarter. We expect the ratio of our invested assets to shareholders' equity to increase throughout the year and consequently our investment income to increase. Additional Highlights and Disclosures: Completion of IPO On March 22, 2007, CastlePoint Holdings completed its initial public offering. We issued and sold 8,697,148 common shares, including 1,134,410 shares pursuant to the exercise of the underwriters' over-allotment option, at a price of $14.50 per share. We received net proceeds from the IPO, after deducting 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. discounts and other offering expenses, of $114.0 million. Redemption of Tower's Perpetual 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. In December 2006, CastlePoint purchased 40,000 of Tower's perpetual preferred stock for an aggregate consideration of $40 million. On January 26, 2007, Tower redeemed all of such stock at the redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. of $40 million in the aggregate plus approximately $0.3 million in 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. dividends that were paid in January 2007. Dividend Declaration The board of directors of CastlePoint Holdings has approved a quarterly dividend of $0.025 per share payable on June 27, 2007 to its shareholders of record as of June 15, 2007. 2007 Guidance We believe our business strategies and platform position us very well to continue to grow. In addition, we expect that our net income and return on equity will increase, as agreements we have already executed both with Tower and other clients become earned premiums and as our invested assets continue to grow relative to our shareholders' equity. For the second quarter of 2007, we project net income to increase to a range between $9.0 million and $11.0 million. We project CastlePoint's diluted earnings per share in the second quarter to be in the range between $0.24 and $0.27 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. share. For the full year, we anticipate diluted earnings per share to be between $1.10 and $1.20. About CastlePoint Holdings, Ltd. CastlePoint, a Bermuda-based holding company, through its subsidiaries, CastlePoint Reinsurance Company, CastlePoint Management Corp., and CastlePoint Insurance Company, provides property and casualty insurance and reinsurance business solutions, products and services to small insurance companies and program underwriting agents 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. . CPHL-F Cautionary Note Regarding 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. 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 provides a "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. " for forward-looking statements. This press release or any other written or oral statements made by or on behalf of CastlePoint may include forward-looking statements that reflect CastlePoint's current views with respect to future events and financial performance. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "will," "plan," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause CastlePoint's actual results to differ materially from those indicated in these statements. The company believes that these factors include but are not limited to ineffectiveness or obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. of its business strategy due to changes in current or future market conditions; increased competition on the basis of pricing, capacity, coverage terms or other factors; greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than CastlePoint's underwriting, reserving or investment practices anticipate based on historical experience or industry data; the ability to obtain necessary governmental licenses; the ability to hire and retain executive officers and other key personnel; the ability to make certain acquisitions in a timely fashion necessary to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. the company's business plan; the effects of acts of terrorism or war; developments in the world's financial and capital markets that adversely affect the performance of the company's investments; changes in regulations or laws applicable to CastlePoint, its subsidiaries, brokers or customers including tax laws in Bermuda and the United States; acceptance of CastlePoint's products and services, including new products and services; changes in the availability, cost or quality of reinsurance and failure of CastlePoint's reinsurers to pay claims timely or at all; decreased demand for the company's insurance or reinsurance products; the effects of mergers, acquisitions and divestitures; changes in rating agency policies or practices; changes in legal theories of liability under CastlePoint's insurance policies or the policies that it reinsures; changes in accounting policies or practices; and changes in general economic conditions, including inflation and other factors. Forward-looking statements speak only as of the date on which they are made, and CastlePoint undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. For more information visit CastlePoint's website at http://www.castlepoint.bm/. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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