Hartville Group Announces Financial Results for the Fourth Quarter of 2006.33% Increase in Pets insured for Fiscal 2006; 40% Higher Adjusted Revenues for Fiscal 2006; 30% Lower Cash Losses for Fiscal 2006 CANTON, Ohio Canton is a city in the U.S. state of Ohio and the county seat of Stark CountyGR6. The municipality is located in northeastern Ohio and is situated on the Nimishillen Creek, approximately 24 miles (38 km) south of Akron[4] -- Hartville, Group, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :HTVL HTVL Horizontal Takeoff Vertical Landing ) today announced financial results for the Company's fourth quarter and full-year period of 2006, ended December 31, 2006. In conjunction with improvements to the company's operations commenced in prior periods, a number of exceptional items were reflected in the fourth quarter of 2006. Effective the 1st of October 2006, the company changed its underwriter underwriter n. a company or person which/who underwrites an insurance policy, issue of corporate securities, business, or project. (See: underwrite) UNDERWRITER, insurances. One who signs a policy of insurance, by which he becomes an insurer. to provide a more stable platform to market its products. With the change in underwriter, Hartville Re retained zero percent of the risk on new business written during this quarter, while it continued to retain fifty percent of the risk on renewal business. This arrangement concluded at the end of the fiscal year, with the result that Hartville Re will once again reinsure 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. fifty percent of the total risk in fiscal 2007. Also, there were two non-cash items in the fourth quarter: (1) a reduction of a liability which was established in fiscal year 2005 for prior years' treaties, where certain new facts and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurred during fiscal year 2006 eliminating the need for such liability, and (2) a modification to the calculation for unearned premium and commission. Gross revenue for the three months ended December 31, 2006 of $2.5 million was $1.2 million (96%) higher than the $1.3 million of gross revenue for the comparative period of 2005. Adjusting for the unusual items, gross revenue was $2.0 million for an increase of $718,000 (56%) compared to 2005. The net loss for the three months ending December 31, 2006 was $268,000, or $(0.01) per fully 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 based on 54.8 million shares compared to a net loss of $1.8 million, or $(0.12) per fully diluted share based on 14.9 million shares for the comparative period of 2005. Adjusting the net losses for non-cash items of $918,000 and $790,000, the cash loss was $1.2 million and $1.0 million for the three months ending December 31, 2006 and 2005, respectively for a $171,000 (17%) higher loss. Gross revenue for the twelve months ended December 31, 2006 of $6.7 million was $2.3 million (51%) higher than the $4.4 million of gross revenue for the comparative period of 2005. Adjusting for the unusual items, gross revenue was $6.2 million for an increase of $1.8 million (40%) compared to 2005. The net loss for the twelve months ending December 31, 2006 was $11.2 million, or $(0.33) per fully diluted share based on 33.9 million shares compared to a net loss of $8.0 million, or $(0.55) per fully diluted share based on 14.6 million shares for the comparative period of 2005. Adjusting the net losses for non-cash items of $3.6 million and $1.8 million, and loss on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt of $3.2 and $0 the cash loss was $4.4 million and $6.2 million for the twelve months ending December 31, 2006 and 2005, respectively for a $1.9 million (30%) improvement. Effective August 1, 2006, the Company entered into a Conversion Agreement and Release for the $11,038,780 and $1,103,141 of convertible debt due November 2006. In order to extinguish Extinguish Retire or pay off debt. these debentures, the Company transferred assets to the debt holders with a fair market value of $1,373,303 (cash) and $3,516,938 (35,169,377 shares at $0.10 per share), for a total fair market value of $4,890,241. The loss generated from the extinguishment therefore was $3,169,032, which is equal to shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. of the $2,465,917 carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the debt (less the $744,708 prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. asset balance), over the $4,890,241 fair market value
of the assets transferred.
The Company completed the year with $2.4 million in cash and equivalents, compared with $4.1 million in cash as of December 31, 2005. In early fiscal 2007 the Company received $2,000,000 additional working capital by means of debt funding, with a commitment for an additional $2,000,000 of working capital through a committed line of credit. "In 2006 we continued our overhaul of the company's infrastructure while building a foundation for sustainable growth," commented Dennis Rushovich, Chief Executive Officer. "Important additions to the company's financial controls were accompanied by significant strengthening of the balance sheet and critical operations improvements, including multiple upgrades to our call center and information systems. Beginning with the hiring of a Chief Marketing Officer, we also began to develop resources necessary to create and implement long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. online and offline marketing programs. Our investments in sales reporting and policy administration, our launch of a strategic partnership with the American Society for the Prevention of Cruelty to Animals American Society for the Prevention of Cruelty to Animals (A.S.P.C.A.), chartered in 1866 in New York by Henry Bergh to shelter homeless animals, to assist farmers in caring for their livestock, and to cooperate with law enforcement agencies in the prosecution of , and our development of a new 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. relationship all position us for significant policy expansion in 2007. Accordingly, in the first quarter of 2007 we continued to expand the marketing programs initiated in the fourth quarter of 2006. Compared to a net addition of 5,203 pet policies in the fourth quarter of 2006, we expect to add approximately 7,000 net pet policies in the first quarter of 2007." BUSINESS SEGMENT RESULTS 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. Company Three Month Results 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. for the fourth quarter 2006 of $1.5 million were $205,000 (12%) lower than total premium of $1.7 million for the comparative period in 2005. Adjusting earned premium for the unusual items, premium was $2.6 million for a $923,000 (55%) increase over 2005. Sequentially, fourth quarter premium was $649,000 (33%) higher than the third quarter 2006 premium of $2.0 million. Total premium increased primarily due to the increase in number of pets insured and average premium per pet. The number of pets insured at December 31, 2006, was 32,352, an increase of 5,203 (19%) pets for the three months ended December 31, 2006. By way of comparison, the number of pets insured at December 31, 2005, was 24,356 with an increase of 374 (1.6%) pets for the fourth quarter of 2005. Prior to adjustments, premiums retained by Hartville Re for the fourth quarter ended December 31, 2006 of $567,000 were $273,000 (33%) lower than the comparable period in 2005 of $840,000 and $409,000 (42%) lower than the third quarter 2006 premium of $976,000. Adjusting for the unusual items, premium retained was $1.3 million for a $460,000 (55%) increase over 2005. Compared to the third quarter 2006 premiums, adjusted retained premium increased $324,000 (33%) sequentially. Twelve Month Results Total earned premiums for fiscal year 2006 of $7.1 million were $760,000 (12%) higher than total premium of $6.3 million for fiscal year 2005. Adjusting earned premium for the unusual items, premium was $8.2 million for a $1.9 million (30%) increase. Total premium increased primarily due to the increase in number of pets insured and average premium per pet. The number of pets insured at December 31, 2006, was 32,352, an increase of 7,996 (33%) pets for fiscal year 2006. By way of comparison, the number of pets insured at December 31, 2005, was 24,356 with an increase of 3,452 (17%) pets for the prior fiscal year 2005. Although the increase in number of pets insured was substantial, the effect on earned premium was muted mut·ed adj. 1. a. Muffled; indistinct: a muted voice. b. Mute or subdued; softened: muted colors. 2. because seventy-one percent (5,024 pets) were added in the last two months of the year (premiums are earned on a pro-rata Pro-rata Used to describe a proportionate allocation. Notes: For example, a pro-rata dividend means that every shareholder gets an equal proportion for each share they own. See also: Dividend basis over the twelve month period of the annual insurance policies). Prior to adjustments, premiums retained by Hartville Re for fiscal year 2006 of $3.4 million was $124,000 (4%) higher than premiums retained of $3.2 million for fiscal year 2005. Adjusting for the unusual items, premium retained was $4.1 million for a $858,000 (26%) increase over 2005. While the total earned premium increased 12%, retained premium only increased 4% due to an agreement to retrocede ret·ro·cede v. ret·ro·ced·ed, ret·ro·ced·ing, ret·ro·cedes v.intr. To go back; recede. v.tr. To cede or give back (a territory, for example); return. 100% of its reinsurance business through Hartville Re for new pets issued with an effective date of October 1, 2006 to December 31, 2006. Insurance Agency and Holding Company Three Month Results Commission income earned by Petsmarketing of $2.0 million for the fourth quarter 2006 was $1.5 million (340%) higher than commission income earned of $445,000 for the comparative period of 2005 and $1.4 million (281%) higher than the third quarter 2006 commission of $514,000. Adjusting for the unusual items, commissions were $703,000 for a $258,000 (58%) increase over 2005. Compared to third quarter commissions, adjusted commissions increased $190,000 (37%) sequentially. General and administrative expenses were $2.2 million for the fourth quarter, an increase of $439,000 (25%) compared to the $1.7 million for the same quarter last year, and with a decrease of $53,000 (2.4%) compared to the third quarter of 2006. General and administrative expenses increased compared to 2005 due primarily to the following factors:
-- Compensation increased by approximately $301,000:
-- Increased $211,000 due to the valuation and expensing of vested
options to employees
-- Increased $90,000 due to the valuation and expensing of 500,000
vested shares of restricted stock issued to an employee
-- Amortization has increased approximately $49,000 as a result of an
increase in deferred acquisition cost from increased marketing
activities
Twelve Month Results Commission income earned by Petsmarketing of $3.3 million for the year ending December 31, 2006 was $2.2 million (181%) higher than commission income earned of $1.2 million for the comparative period of 2005. Adjusting for the unusual items, commissions were $2.1 million for a $901,000 (76%) increase over 2005. With the unusual items removed, the remaining increase is attributable to the increase in total premiums, the addition of a 2.5% premium fee for handling claims, the implementation of the $10 annual policy holder fee, and the 5% premium tax passed through to customers, which was previously paid by Petsmarketing. General and administrative expenses of $8.7 million for the year ending December 31, 2006 were $1.3 million (18%) higher than general and administrative expenses of $7.4 million for the comparative period of 2005. General and administrative expenses increased due primarily to the following factors:
-- Compensation increased by approximately $1,092,000:
-- Increased $732,000 due to the valuation and expensing of
5,686,000 vested options to employees
-- Increased $360,000 due to the valuation and expensing of
2,000,000 vested shares of restricted stock issued to an
employee
-- Marketing expenses increased by approximately $605,000 due to the
strategic partnership with the ASPCA and associated marketing
campaigns. Amortization has increased approximately $132,000 as a
result of an increase in deferred acquisition cost from increased
marketing activities
-- Professional, audit and legal fees decreased approximately $617,000
due mainly to the cost of restating the financial statements in
2005 and from the Company discontinuing the pursuit of acquiring a
property & casualty insurance company
About Hartville Corporation Hartville Group, Inc. (Hartville Group) is a holding company whose wholly owned subsidiaries 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. include Hartville Re Ltd. (Hartville) and Petsmarketing Insurance.com Agency, Inc. (the Agency). Hartville is a reinsurance company that is registered in the Cayman Islands Cayman Islands (kā`mən), British dependency (2005 est. pop. 44,300), 100 sq mi (259 sq km), comprising three islands in the West Indies. , British West Indies British West Indies: see West Indies; West Indies Federation. . Hartville was formed to reinsure pet health insurance that is being marketed by the Agency. The Agency is primarily a marketing/administration company concentrating on the sale of its proprietary health insurance plans for domestic pets. Its business plan calls for introducing its product effectively and efficiently through a variety of distribution systems. The Company accepts applications, underwrites and issues policies. Except for historical information, all other information in this news release consists of 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. within the meaning of 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. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and Form 10-Q Form 10-Q See 10-Q. reports. The Company undertakes no obligation to update or revise any forward-looking statement. [TABLE OMITTED] [TABLE OMITTED] |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion