FSA Holdings' Core Earnings Per Share up 22% in Fourth Quarter.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 , New York--(BUSINESS WIRE)--January 28, 1997-- Adjusted Book Value Per Share Rose 13% From Operations in 1996 Record Full-Year Originations produced $226 Million of PV Premiums Concluding a year of record business production, Financial Security Assurance Holdings Ltd. (FSA FSA Financial Services Authority FSA Food Standards Agency (UK) FSA Farm Service Agency (USDA) FSA Financial Services Agency (Japan) Holdings, or the Company), the holding company for bond insurer An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. Financial Security Assurance Inc. (FSA), announced a new high of $34.53 for adjusted book value per share as of December December: see month. 31, 1996. KEY RESULTS: FOURTH QUARTER 1996 - Core earnings reached $0.66 per share, up 22.2% over the fourth quarter result in 1995. - Operating net income per share increased 17.5% to $0.74. - Net income per share was $0.83, compared with $0.33 in the fourth quarter of 1995. - New business in the quarter generated $54.9 million in present value (PV) premiums, up 25.8%. KEY RESULTS: FULL YEAR 1996 - Adjusted book value per share, with dividends, grew 12.9% from insurance operations alone and 12.0% including realized and unrealized capital gains and losses. (Adjusted book value is book value plus the 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. present value of all deferred premium income, less deferred expenses.) - Core earnings per share reached $2.45, a 17.8% increase over the full-year 1995 result. - Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before were $78.7 million. Operating earnings per share rose 10.3% to $2.58. - Net income per share rose 23.9% to $2.64. - New business generated $226.3 million in PV premiums, up 62.6%. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. P. Cochran, president and chief executive officer of FSA, said, "During 1996, FSA continued to build on its market leadership in the fast-growing adj. 1. tending to spread quickly; - used mostly of plants. Adj. 1. fast-growing - tending to spread quickly; "an aggressive tumor" strong-growing, aggressive asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. market. We expanded our presence in the municipal bond industry, meeting our objective of becoming a major competitor in that sector. We also found great opportunities in the international markets, particularly in the expanding infrastructure finance sector." NEW BUSINESS PRODUCTION In the fourth quarter, FSA insured bonds Insured bond A municipal bond backed both by the credit of the municipal issuer and by commercial insurance policies. insured bond A municipal debt obligation for which interest and principal are guaranteed by a private insurance company. totaling $9.4 billion, a 103.4% increase. This brought full year par insured up 104.2% to $31.1 billion, exceeding the record achieved in 1995. Fourth quarter and full year asset-backed par originated rose 144.7% and 91.9%, respectively, to $5.9 billion and $18.9 billion. "As asset-backed issuance reached new heights in 1996, FSA benefited from its long history as a leader in this market," said Mr. Cochran. "Our ongoing relationships with issuers in the ABS (Automatic Backup System) See backup program. and MBS See Mb/sec. MBS - mobile broadband services markets gave us a solid base, which was supplemented by special opportunities in both the U.S. and abroad." FSA insured $3.5 billion and $12.2 billion par of municipal obligations with closing dates in the fourth quarter and full year, respectively. These represent increases of 57.7% and 126.9% over FSA's results in the prior year's comparable periods. FSA insured $11.1 billion of U.S. municipal new issues in 1996, or approximately 13% of the insured market. Capital 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. Insurance Company (now Financial Security Assurance of Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). Inc.) became a subsidiary of FSA in December 1995. Compared with the combined FSA and Capital Guaranty production in all of 1995, FSA's municipal par insured increased 76.5% with respect to U.S. new issues and 42.2% when secondary-market and international transactions are included. "Our success in the municipal market came from more than the acquisition alone," said Mr. Cochran. "During 1996, we intensified in·ten·si·fy v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: our municipal marketing and analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. efforts. The result is an expanded market presence, increased market share and improved trading value." The present value of gross premiums originated (which includes the present value of installment premiums) was $54.9 million in the fourth quarter, up 25.8%. Helped by the additional 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. ability created by the merger, municipal PV premiums reached $27.9 million for the quarter, an increase of 35.3%. The asset-backed portion of fourth quarter PV premiums grew 17.3% to $27.0 million. For the full year, the present value of gross premiums originated was $226.3 million, consisting of $125.8 million of asset-backed PV premiums and $100.5 million of municipal PV premiums. These represent increases of 70.4% and 53.9%, respectively, over FSA's results in 1995. ANALYSIS OF FINANCIAL RESULTS CORE NET INCOME. Core net income excludes factors that may cause fluctuations in net income that do not reflect the performance of core operations. These factors are principally capital gains and losses and the effects of refundings and prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. . Fourth quarter core net income increased 41.9% to $19.8 million. This reflected an $11.3 million increase in total core revenues while total core operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. plus interest expense increased only $2.6 million. Fourth quarter additions to the general loss reserve increased to $2.2 million to reflect the increased volume of business being written. On a per share basis, fourth quarter core net income rose 22.2% to $0.66 per share. Full year core net income grew 39.6% to $74.9 million and 17.8% to $2.45 per share. Results were positively affected by the Capital Guaranty merger, which increased the size of the insured portfolio, created economies of scale, and allowed for greater leveraging of resources. OPERATING NET INCOME. Operating net income (which excludes capital gains or losses capital gains or losses n. particularly when calculating the tax liability of an individual or business, this is the difference between the original cost plus the cost of capital improvements, excluding maintenance, called "basis" and the sales price. and other non-operating items) was $22.0 million, or $0.74 per share, in the fourth quarter of 1996, and $16.0 million, or $0.63 per share, in the prior fourth quarter. Despite a $0.12 per share increase in core net income, operating net income grew at a slower pace because of a $0.01 per share decrease in the contribution from refundings. Lower refundings also limited growth in full year operating net income, which was $2.58 per share, up 10.3% compared with last year's operating net income of $2.34 per share. The contribution from refundings was $3.8 million, or $0.13 per share, compared with the 1995 full year contribution of $6.6 million, or $0.26 per share. Refundings for both the fourth quarter and full year of 1996 were primarily from non- non- word element [L.]not . non- pref. Not: noninvasive. municipal transactions. REPORTED NET INCOME. Fourth quarter net income was $25.3 million, or $0.83 per share, compared with $8.5 million, or $0.33 per share, for the same period in the prior year. Fourth quarter 1995 earnings reflected a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. additional accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of $15.4 million to the general reserve as a result of the Capital Guaranty merger. Full-year net income was $80.8 million ($2.64 per share), compared with $55.0 million ($2.13 per share) for 1995. After-tax capital gains were $2.1 million, or $0.06 per share, compared with 1995's after-tax capital gains of $3.3 million, or $0.13 per share. In 1995, the Company recorded a net non-operating loss of $8.6 million or $0.34 per share. The net non-operating loss consisted of the additional after-tax accrual of $10.0 million to the general reserve, related to the acquired Capital Guaranty portfolio, net of a $1.4 million after-tax gain on the sale of a subsidiary. 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. . Core net premiums earned for the fourth quarter were $21.6 million, 53.5% higher than FSA's result in the same period of 1995 and 25.9% above the combined results of FSA and Capital Guaranty in that period. Total fourth quarter net premiums earned, including refundings, equaled $26.3 million, a 42.2% increase over FSA's result in fourth quarter 1995 and 19.7% higher than the combined net premiums earned by FSA and Capital Guaranty in that period. This result includes $4.7 million of refundings and prepayments, which may be compared with $4.8 million earned by both companies in the same period of the prior year. Core net premiums earned for the year were $80.2 million, 44.3% higher than FSA's result in 1995 and 21.4% above the combined results of FSA and Capital Guaranty in that period. Total 1996 net premiums earned, including refundings, equaled $90.4 million, a 30.4% increase over FSA's result in 1995 and 10.9% higher than the combined net premiums earned by FSA and Capital Guaranty in that year. Refundings and prepayments totaled $10.3 million for the year, compared with $15.5 million earned by both companies in the previous year. INVESTMENT PORTFOLIO. Net investment income for the fourth quarter was $16.9 million, an increase of 40.1%, primarily due to the additional invested assets acquired in the merger. Capital gains were $5.0 million in the fourth quarter, compared with a capital gain of $3.8 million in the fourth quarter of 1995. The Company's effective tax rate on investment income (excluding the effects of capital gains and losses) was 20.9% for the fourth quarter, compared with 20.6% for the same period a year earlier. The investment portfolio had an after-tax total return of 2.09% during the fourth quarter and 4.10% for the year. EXPENSES AND RESERVES. Policy acquisition and other operating expenses (total operating expenses) for the fourth quarter were $10.2 million, up from $8.0 million in the comparable quarter of the prior year. Total operating expenses rose due to higher amortization of deferred acquisition costs (DAC See D/A converter and discretionary access control. DAC - Digital to Analog Converter ) and increased accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. for performance plan payouts. For the same reasons, total operating expenses excluding the effects of refundings (core operating expenses) rose to $8.9 million, or $2.1 million higher than in the prior year's fourth quarter. The core operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. ratio (core operating expenses divided by core earned premiums) for the quarter declined 7.3 percentage points to 41.4%, largely because of efficiencies brought about by the merger and growth of the overall business. For all of 1996, total operating expenses were $40.2 million, compared with $30.6 million for 1995, and core operating expenses were $35.8 million, compared with $27.0 million. The core operating expense ratio declined 4.0 percentage points to 44.6%, with the component related to expenses other than policy acquisition costs declining 4.2 percentage points to 20.4%. Such other operating expenses primarily reflect general corporate expenses and surveillance costs and are non-deferrable. Losses and loss adjustment expenses were $2.2 million and $6.9 million in the fourth quarter and full year, respectively, and $1.4 million and $6.3 million, respectively, in the prior comparable periods, exclusively reflecting additions to the general reserve in all periods. At December 31, 1996, FSA's unallocated general reserve totaled $29.7 million, net of the reclassification Reclassification The process of changing the class of mutual funds once certain requirements have been met. These requirements are generally placed on load mutual funds. Reclassification is not considered to be a taxable event. of $8.4 million from general reserves to case reserves. FSA Holdings, through its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , FSA, guarantees scheduled payments of principal and interest of municipal bonds and asset-backed securities, including residential mortgage-backed securities Residential mortgage-backed securities (RMBS) are a type of bond commonly issued in American security markets. They are a type of Mortgage-backed security which are backed by mortgages on residential rather than commercial real estate. . FSA's claims-paying ability is rated Triple-A by 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. , Inc., Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. , Nippon Nippon (nĭp`ŏn, nĭpŏn`), name for Japan, derived from Dai Nippon, meaning Great Japan. The expression comes from the Chinese ideograph for the place where the sun comes from, or Land of the Rising Sun. Investors Service Inc., and Standard & Poor's (Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. ) Pty. Ltd. Headquartered in New York, FSA has additional offices in San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden and Dallas Dallas, city (1990 pop. 1,006,877), seat of Dallas co., N Tex., on the Trinity River near the junction of its three forks; inc. 1871. The second largest Texas city, after Houston, and the eighth largest U.S. . It also has a London-based U.K. subsidiary, Financial Security Assurance (U.K.) Limited, and representative offices in Madrid Madrid (mədrĭd`, Span. mäthhrēth`), city (1990 pop. 3,120,732), capital of Spain and of Madrid prov., central Spain, and the focus of its own autonomous region, on the Manzanares River. , Paris and Sydney Sydney, city, Australia Sydney, city (1991 pop. 3,097,956), capital of New South Wales, SE Australia, surrounding Port Jackson inlet on the Pacific Ocean. Sydney is Australia's largest city, chief port, and main cultural and industrial center. . -0-
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
December December
31, 31,
ASSETS 1996 1995
Bonds, at market value (amortized
cost of $1,058,417 and $1,072,439 $1,058,076
$1,027,414)
Stocks, at market value (cost of 8,336 -
$8,336)
Short-term investments 56,733 14,567
Cash equivalents 16,908 38,099
Total investments 1,154,416 1,110,742
Cash 8,146 1,118
Deferred acquisition costs 146,233 132,951
Prepaid reinsurance premiums 151,224 133,548
Reinsurance recoverable on unpaid 29,875 61,532
losses
Receivable for securities sold - 2,326
Other assets 47,848 48,045
TOTAL ASSETS $1,537,742 $1,490,262
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deferred premium revenue $511,196 $ 463,897
Losses and loss adjustment 72,079 111,759
expenses
Deferred federal income taxes 41,167 41,936
Ceded reinsurance balances payable 12,599 13,664
Payable for securities purchased 14,390 9,516
Notes payable 30,000 30,000
Accrued expenses and other
liabilities 55,051 41,543
TOTAL LIABILITIES 736,482 712,315
Preferred stock (3,000,000 shares
authorized; 2,000,000
issued and outstanding; par
value of $.01 per share) 20 20
Common stock (50,000,000 shares
authorized; 32,276,301
issued; par value of $.01 per
share) 323 323
Additional paid-in capital -
preferred 680 680
Additional paid-in capital -
common 695,118 696,253
Unrealized gain on investments
(net of deferred
income tax provision of $4,908
and $10,731) 9,114 19,931
Accumulated earnings 142,721 72,410
Deferred equity compensation 12,069 6,504
Less treasury stock at cost
(2,303,407 and 774,276 shares
held) (58,785) (18,174)
TOTAL SHAREHOLDERS' EQUITY 801,260 777,947
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,537,742 $1,490,262
-0-
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Three Months Year Ended
Ended
December 31 December 31
1996 1995 1996 1995
Revenues:
Net premiums written
(net of premiums ceded
of $12,944, $9,752,
$55,965 and $33,166) $ 27,686 $22,659 $121,000 $77,576
Decrease (increase) in
deferred premium revenue (1,359) (4,149) (30,552) (8,229)
Premiums earned (net of
premiums ceded of 26,327 18,510 90,448 69,347
$9,869, $10,993,
$38,723 and $38,013)
Net investment income 16,929 12,088 65,064 48,965
Net realized gains 5,015 3,787 3,189 5,120
Other income 73 1,136 297 3,841
TOTAL REVENUES 48,344 35,521 158,998 127,273
Expenses:
Losses and loss adjustment
expenses:
Related to merger - 15,400 - 15,400
Other 2,237 1,436 6,874 6,258
Interest expense 542 - 2,166 57
Policy acquisition costs 5,748 4,475 23,829 16,888
Other operating expenses 4,439 3,572 16,358 13,628
TOTAL EXPENSES 12,966 24,883 49,227 52,231
INCOME BEFORE INCOME TAXES 35,378 10,638 109,771 75,042
Provision for income taxes 10,120 2,161 29,011 20,004
NET INCOME $25,258 $ 8,477 $ 80,760 $55,038
Weighted average common
shares outstanding 29,975 25,610 30,547 25,797
Earnings per common share $ 0.83 $ 0.33 $ 2.64 $ 2.13
-0-
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
Net Income Per Common Share
Three Months Ended Year Ended
December 31 December 31
1996 1995 1996 1995
Core net income $0.66 $0.54 $2.45 $2.08
Refundings, calls or
other accelerations 0.08 0.09 0.13 0.26
Operating net income 0.74 0.63 2.58 2.34
Realized capital gains 0.09 0.09 0.06 0.13
Other non-operating
income -- (0.39) -- (0.34)
Net income $0.83 $0.33 $2.64 $2.13
Components of Adjusted Book Value Per Common Share
December December
31, 31,
1996 1995
Book value $ 26.71 $ 24.67
After-tax value of:
Net deferred premium
revenue, net of DAC 4.63 4.07
Present value of
installment premiums 3.19 2.42
Adjusted book value $ 34.53 $31.16
-0-
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
Selected Statutory Data
December 31, 1996 and 1995
(Dollars in thousands, except ratios)
December December
31, 31,
1996 1995
Qualified statutory capital $ 675,944 $ 644,653
Unearned premium reserve 411,732 376,597
Loss and loss adjustment expense
reserves 12,544 18,429
Policyholders' capital and $1,100,220 $1,039,679
reserves
Net insurance in force $93,703,617 $75,360,277
Policyholders' leverage ratio (a) 139:1 117:1
(a) Policyholders' leverage ratio is net insurance in force divided
by qualified statutory capital.
CONTACT: PRESS RELATIONS BETSY Betsy is an English name for females, used as a nickname for Elizabeth. It is also a surname. Famous uses or users of Betsy include:
(212) 339-3424 or INVESTOR RELATIONS Investor relations The process by which the corporation communicates with its investors. PETER HOEY (212) 339-3483 |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion