Chartwell Re Corporation Reports 1998 Operating Earnings.STAMFORD Stamford, town, England Stamford, town (1991 pop. 18,127), in the Parts of Kesteven, Lincolnshire, E central England, on the Welland River. It is a market town. Products include diesel engines, electrical equipment, bricks, and tiles. , Conn.--(BUSINESS WIRE)--Feb. 3, 1999--Chartwell Re Corporation ("Chartwell") (NYSE NYSE See: New York Stock Exchange : CWL CWL Catholic Women's League CWL Campus Wide Login CWL Center for Writing and Learning CWL Concealed Weapons License CWL Cardiff, Wales, United Kingdom - Cardiff-Wales (Airport Code) CWL Congestion Window Limit CWL Crying With Laughter ) reported after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. 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. of $7,573,000 for the three months ended December December: see month. 31, 1998, excluding net realized capital gains on the sale of investments, compared with $7,127,000 for the same period in 1997. On a per share basis, after-tax operating income increased 8.5% to $0.77 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 three months ended December 31, 1998 compared to $0.71 per diluted share for the same period in 1997. For the year ended December 31, 1998, after-tax operating income amounted to $29,797,000, a 9.3% increase over the $27,265,000 reported for the same period in 1997. On a per share basis, after-tax operating income increased 9.5% to $3.00 per diluted share for the year ended December 31, 1998 from $2.74 per diluted share for 1997. Net income increased 9.4% to $29,816,000 for the year ended December 31, 1998 compared to $27,263,000 for the comparable period in 1997 and, on a per diluted share basis, increased 9.5% to $3.00 from $2.74 reported a year ago. Total revenues for the year ended December 31, 1998 decreased approximately 7.6% to $298,018,000 from $322,388,000 reported last year. The decrease in revenues is primarily attributable to decreases in premiums earned and profit commissions. For the year ended December 31, 1998, 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. decreased 5.5% to $342,951,000 from $362,770,000 for 1997 and net premiums written decreased 19.1% to $217,054,000 from $268,260,000 recorded for 1997. The decrease in both gross and net premiums written is principally attributable to the opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. 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. of certain 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. accounts in 1997, which did not renew for 1998, as well as Chartwell's response to the persistence (1) In a CRT, the time a phosphor dot remains illuminated after being energized. Long-persistence phosphors reduce flicker, but generate ghost-like images that linger on screen for a fraction of a second. of intense price competition in the reinsurance industry. On a consolidated basis, pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma for the elimination of the opportunistic accounts underwritten in 1997, gross premiums written grew by approximately 16.2% in 1998 compared to 1997. The decrease in premiums is offset in part by the continued growth of Chartwell's underwriting participation on syndicates managed by Chartwell Managing Agents Limited ("CMA CMA - Concert Multithread Architecture from DEC. "), which contributed $72.6 million and $64.9 million of premiums on a gross and net basis, respectively, in 1998 compared to $20.1 million and $20.0 million of gross and net premiums in 1997. Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a E. Cole, Chairman and Chief Executive Officer of Chartwell, said, "Chartwell continues to deliver solid financial results, despite the continuing competitive pressures in the insurance and reinsurance industry. Chartwell continues to benefit from adherence adherence /ad·her·ence/ (ad-her´ens) the act or condition of sticking to something. immune adherence to its strategy of diversifying revenue sources and allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as of its resources to those revenue sources which exhibit the greatest potential return." The composite underwriting result (defined as 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. less losses and loss adjustment expenses and policy acquisition expenses) improved to $32,675,000 for the year ended December 31, 1998 compared to $12,197,000 for the same period in 1997. Catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses were insignificant in both periods. After-tax net investment income from underwriting operations increased 12.0% to $33,742,000 for the period ended December 31, 1998 compared to $30,125,000 reported a year ago. Underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. before taxes increased to $55,892,000 for the year ended December 31, 1998 compared to $37,949,000 for 1997, an increase of 47.3%. The combined ratio, a measure of performance that excludes investment income, improved to 94.8% for the fourth quarter of 1998 from 102.4% reported for the same period last year. For the year ended December 31, 1998, the combined ratio improved to 96.2% compared to 101.9% a year ago. The composite ratio, which excludes overhead expenses, improved to 85.7% for the year ended December 31, 1998 from 95.1% for last year. The improvement in the underwriting result is principally attributable to the changing mix of Chartwell's underwriting portfolio toward more Controlled Source Insurance business, which is exhibiting greater profit potential than reinsurance business in today's marketplace, as well as the continued purchasing of reinsurance programs at attractive terms. The overhead expense ratio for the year ended December 31, 1998 was 10.5% compared to 6.8% reported for last year, reflecting the reduced level of premium volume. In addition, 1998 overhead expenses include an increased share of expenses related to Chartwell's underwriting participation on syndicates managed by CMA. Revenue from service operations decreased 39.5% to $20,708,000 for the year ended December 31, 1998 compared to $34,220,000 for 1997, principally reflecting a reduction in profit commissions from CMA. Income before taxes from service operations amounted to $5,522,000 for the year ended December 31, 1998 compared to $13,839,000 for last year. Interest and amortization expense increased to $13,499,000 for the year ended December 31, 1998 from $12,254,000 for 1997. The increase is due principally to bank fees paid for letters of credit used to support Chartwell's growth in underwriting participation on syndicates managed by CMA and an increase in variable interest rates on debt denominated in pounds sterling. 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. increased by approximately 12.4% to $292,863,000 at December 31, 1998 from $260,497,000 at December 31, 1997. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). book value per share increased 12.2% to $30.42 at December 31, 1998 from $27.11 at December 31, 1997. Chartwell's ratio of 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. to total capitalization Total capitalization The total long-term debt and all types of equity of a company that constitutes its capital structure. total capitalization See capitalization. improved to 27.0% at December 31, 1998 from 28.6% reported at December 31, 1997. Chartwell's Board of Directors has declared a quarterly cash dividend of $0.04 per share, payable on March 3, 1999 to stockholders of record as of February February: see month. 17, 1999. For the year ended December 31, 1998, consolidated after-tax net investment income amounted to $34,603,000 compared to $31,000,000 for 1997. The average annual tax equivalent yield on invested assets held by Chartwell decreased to 6.28% for the year ended December 31, 1998 compared to 6.50% for last year, reflecting the declining interest rate environment. Chartwell realized net capital gains of $29,000 for the year ended December 31, 1998 compared to net capital losses of $3,000 for 1997. Cash provided by operations for the year ended December 31, 1998 was $33,268,000 compared to $28,261,000 for the year ended December 31, 1997. The increase is due to the inclusion in 1998 of Chartwell's share of the operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of syndicates managed by CMA, offset by a decline in cash provided by the reinsurance segment due to a reduction in premiums written and the collection of premiums on a monthly installment basis on certain accounts in the Controlled Source Insurance client segment. Chartwell Re Corporation is an insurance holding company with global underwriting and service operations, conducting its business 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. and in the Lloyd's market through 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. , Chartwell Reinsurance Company, The Insurance Corporation of 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 ("INSCORP") and CMA. Chartwell Reinsurance Company underwrites treaty reinsurance through reinsurance brokers for casualty and, to a lesser extent, property risks as well as for marine and aviation risks. INSCORP writes property and casualty insurance through specialty program administrators. Chartwell Reinsurance Company and INSCORP are rated "A" (Excellent) and "A-" (Excellent), respectively, by A.M. Best Company and are assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. an A- claims paying ability rating by Standard & Poor's. CMA manages seven Lloyd's syndicates with a total underwriting capacity for 1999 of approximately (pound)300 million (approximately $500 million). All of CMA's syndicates enjoy the benefit of the ratings of Lloyds, which is rated "A" (Excellent) by A.M. Best Company and has an A+ claims paying ability rating from Standard & Poor's. 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 Certain statements that appear in this press release which do not relate to historical financial information may constitute 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. . Statements containing words such as: believes, anticipates, plans, expects, projects, forecasts, estimates, may or could, are forward-looking. Any forward-looking statement is subject to various risk factors which could cause actual results to differ materially from expectations. The various risk factors that could affect Chartwell's future results are set forth in Chartwell's Securities and Exchange Commission filings. For more information on Chartwell, please visit our web site at www.chartwellre.com.
CHARTWELL RE CORPORATION
INCOME STATEMENT AND PER SHARE DATA
(Dollars in thousands, except per share amounts)
Three Month Periods
Ended December 31 Year Ended December 31,
1998 1997 1998 1997
Gross premiums written $ 86,416 $ 64,730 $342,951 $362,770
Ceded premiums written 27,002 17,230 125,897 94,510
Net premiums written $ 59,414 $ 47,500 $217,054 $268,260
Underwriting Operations:
Premiums earned $ 60,998 $ 51,023 $229,504 $245,700
Net losses incurred 33,319 32,549 135,265 160,848
Net acquisition expenses 16,040 15,995 61,564 72,655
Composite underwriting
result 11,639 2,479 32,675 12,197
Overhead expenses 8,470 3,721 23,989 16,473
Total underwriting
result 3,169 (1,242) 8,686 (4,276)
Net investment income 12,097 10,939 47,545 42,228
Net realized capital gains
(losses) (230) (66) (339) (3)
Total investment
income 11,867 10,873 47,206 42,225
Income before taxes -
underwriting operations 15,036 9,631 55,892 37,949
Service Operations:
Service and other revenue 3,391 6,812 14,289 28,322
Equity in net earnings of
investees 2,853 1,521 5,327 4,794
Net investment income 410 224 1,092 1,104
Total revenues 6,654 8,557 20,708 34,220
Overhead expenses 3,726 4,374 12,888 18,084
Amortization of goodwill 576 776 2,298 2,297
Income before taxes -
service operations 2,352 3,407 5,522 13,839
Corporate:
Net investment income 115 57 232 243
Net realized capital gains - - 368 -
General and administrative
expenses 963 645 2,988 1,903
Interest and amortization 3,259 3,037 13,499 12,254
Loss before taxes -
corporate (4,107) (3,625) (15,887) (13,914)
Consolidated income before
taxes 13,281 9,413 45,527 37,874
Income tax expense 5,858 2,329 15,711 10,611
Net income $ 7,423 $ 7,084 $ 29,816 $ 27,263
Per Share Data:
Basic earnings per share $ 0.77 $ 0.74 $ 3.10 $ 2.84
Weighted average common
shares outstanding 9,627,718 9,607,358 9,625,900 9,601,314
Diluted earnings per
share $ 0.75 $ 0.70 $ 3.00 $ 2.74
Operating income per
common share - diluted $ 0.77 $ 0.71 $ 3.00 $ 2.74
Weighted average common
and common equivalent
shares outstanding 9,839,998 10,073,519 9,948,164 9,965,815
Gross Premiums Written
by Segment:
Reinsurance $ 30,566 $ 33,510 $159,247 $236,114
Specialty Insurance:
Controlled Source
Insurance 23,825 25,613 111,131 106,543
Lloyd's Underwriting 32,025 5,607 72,573 20,113
Total Specialty Insurance 55,850 31,220 183,704 126,656
Total $ 86,416 $ 64,730 $342,951 $362,770
CHARTWELL RE CORPORATION
BALANCE SHEET INFORMATION
(Dollars in thousands, except per share amounts)
As of December 31,
1998 1997
----
Total investments and cash(1) $ 876,465 $ 764,253
Total assets 1,516,167 1,375,484
Reserves for loss and loss
adjustment expenses 878,617 788,240
Long-term debt 108,477 104,126
Common stockholders' equity 292,863 260,497
Book value per common share $ 30.42 $ 27.11
SUPPLEMENTAL FINANCIAL INFORMATION
(Dollars in thousands)
Year Ended December 31,
1998 1997
GAAP:
Pre-tax investment income $ 48,869 $ 43,575
After-tax net investment income 34,603 31,000
Tax equivalent yield (2) 6.28% 6.50%
Cash flow from operations (3) $ 33,268 $ 28,261
ROE (Average equity) 11.0% 11.1%
GAAP Combined Ratios:
Loss and LAE ratio 58.9% 65.5%
Acquisition expense ratio 26.8 29.6
Overhead expense ratio 10.5 6.8
Combined ratio 96.2% 101.9%
(1) Includes Chartwell's share of cash and invested assets of
syndicates managed by CMA, totaling $100.2 million for 1998.
(2) Chartwell's pro rata share of investment income from CMA managed
syndicates is excluded from this calculation because information
required to perform the calculation is not readily available from
syndicate accounts.
(3) The cash provided by operations for the year ended December 31,
1998 includes $36.1 million related to Chartwell's pro rata share of
the operations of syndicates managed by CMA. The corresponding amount
for the year ended December 31, 1997 was not material.
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