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CII NET INCOME RISES 101.6 PERCENT IN FIRST NINE MONTHS OF 1991 COMPANY; SETS NEW RECORDS FOR THIRD QUARTER AND NINE MONTHS

CII NET INCOME RISES 101.6 PERCENT IN FIRST NINE MONTHS OF 1991
 COMPANY; SETS NEW RECORDS FOR THIRD QUARTER AND NINE MONTHS
 BURBANK, Calif., Nov. 5 /PRNewswire/ -- CII Financial Inc. (AMEX: CII) registered sharply higher earnings for the third quarter and first nine months of 1991, Joseph G. Havlick, chairman and president, announced today.
 For the three months ended Sept. 30, 1991, net income totaled $3,097,000, up 79.7 percent from $1,723,000 for the comparable three months a year ago. Third quarter revenues climbed 24.4 percent to $28,664,000 from $23,051,000 in the prior year period.
 Reflecting the increased number of shares outstanding as a result of the company's public offerings, per share earnings improved 38.0 percent to 41 cents from 30 cents per share in the prior year. Weighted shares outstanding (primary) totaled 7,447,342 in the third quarter of 1991, 32 percent greater than 5,679,558 in the comparable quarter of 1990.
 For the first nine months of 1991, net income rose 101.6 percent to $8,983,000 from $4,455,000 in the prior year. Nine month revenues increased 27.1 percent to $79,596,000 from $62,649,000 in the corresponding period of 1990.
 Again reflecting the increased number of shares outstanding as a result of the company's public offerings, net income per share was $1.20, up 36.4 percent from 88 cents per share last year. Weighted shares outstanding (primary) were 7,471,498, 47.7 percent greater than 5,057,987 in the 1990 period.
 Havlick commented: "Earnings for the quarter were very positive, but would have been even higher except for certain factors. Due to currently lower interest rates, we experienced lower levels of interest income from the investment portfolio on our short-term investments. Also, CII Premium Finance, while profitable, has only produced modest revenues and profits under current highly competitive conditions. The third significant factor is the rise in excessive forensic medical exams and 'stress and strain' claims in California.
 "As has been chronicled in the press, the California workers' compensation industry has recently begun to experience an increase in the number of claims
that do not involve traumatic physical loss or injury. Our insurance operations have experienced an increase in both of these types of claims in addition to higher costs for forensic medical exams and litigation per claim.
 "We have moved proactively to address this situation. A special unit has been formed within the company to scrutinize and carefully evaluate 'stress and strain' and potentially fraudulent claims. It is our belief that we must be aggressive in defending ourselves against all claims that are improper and/or fraudulent.
 "However, if these efforts are not sufficiently successful in combating these abuses, actuarial and loss reserving assumptions may have to be changed in order to account for the frequency and severity in types of claims. Also, adequate rates remain essential to the continued health, profitability and stability of the workers' compensation insurance industry in California.
 "The Workers' Compensation Insurance Rating Bureau has proposed a rate increase for Jan. 1, 1992 of 11.3 percent. This increase is designed to provide for benefit increases of 1.2 percent and for loss development of 10.1 percent. The company's future earnings will depend upon the rate increase actually approved by the California Commissioner of Insurance."
 Havlick continued: "In the present challenging business environment, the company is implementing several important strategies. Through our subsidiary California Indemnity Insurance Company (CIIC), we focus on serving our chosen market niche, primarily small to medium size companies, and our traditional emphasis on service, careful underwriting and selectivity are more important than ever.
 "Achieving an improved geographic mix of business between Southern California and the rest of California will be important to our future. The amount of litigation in Southern California is significantly higher than in other parts of the state.
 "Our regional offices in Sacramento and in the 'Inland Empire' are both performing well, and in 1992, we expect to open a third regional office in the San Jose area to expand our Northern California operations.
 "With respect to premium financing, we decreased our interest rates in late October more closely to approximate market rates with a view to expanding volume and number of contracts outstanding. However, growth may still be hampered by competitive market conditions.
 "The company has also taken significant steps to support its longer-term growth. In September, the company sold a total $58,250,000 of its 7.5 percent Convertible Subordinated Debentures due 2001. Net proceeds to the company equaled $56,666,000. These proceeds are being used to increase the capital and surplus of its insurance subsidiaries in order to expand their capacity to write insurance, to fund the operations of our premium finance company and to repay certain indebtedness. Following this third highly successful public offering within the last two years, the company is in strong financial condition.
 "On Sept. 30, we occupied our new 47,000 square foot facility in Burbank which will accommodate our expansion for years to come. On a cost per square foot basis, terms are very favorable, and actually lower than our previous smaller facility. The higher level of overhead is not reflected in third quarter results.
 "Despite current challenges, we are optimistic about the company's future.


CIIC's emphasis on small to medium-size companies, which generally have better employee relations and a lower level of litigation, is clearly helpful in the present market, although like the workers' compensation insurance industry generally, we are also experiencing an increase in the types of claims previously mentioned. Hopefully, the present rate proposal will be approved, and California will continue to maintain adequate rates in order to preserve a viable, effective workers' compensation industry.
 "Finally, we continue to believe that our financial strength, seasoned management and sound strategies represent important advantages as we seek to further develop our business."
 CII Financial, Inc. is a financial services holding company, whose insurance subsidiaries are California Indemnity Insurance Company and Commercial Casualty Insurance Company. Through these subsidiaries, the company is engaged in writing workers' compensation insurance in California. These insurance companies service workers' compensation accounts of all sizes but concentrate on small to medium-size companies.
 Based in Burbank, the company's insurance subsidiaries service Northern California through a Sacramento regional office and California's Inland Empire through an office in San Bernardino County. Policies are sold through a network of approximately 450 independent insurance agents and brokers in California. The company also finances premium finance loans through CII Premium Finance Company.
 CII FINANCIAL INC. & SUBSIDIARIES
 Summary Financial Information
 Income Statement Data
 Nine months ended Sept. 30,
 1991 1990
 Total revenues $79,596,000 $62,649,000
 Income before federal
 income taxes $11,734,000 $5,637,000
 Federal income taxes $2,751,000 $1,182,000
 Net income $8,983,000 $4,455,000
 Primary earnings per share $1.20 $0.88
 Primary weighted shares
 outstanding 7,471,498 5,057,987
 Fully diluted weighted
 shares outstanding 7,516,777 5,070,144
 Three months ended Sept. 30,
 1991 1990
 Total revenues $28,664,000 $23,051,000
 Income before federal
 income taxes $3,964,000 $2,297,000
 Federal income taxes $867,000 $574,000
 Net income $3,097,000 $1,723,000
 Primary earnings per share $0.41 $0.30
 Primary weighted
 shares outstanding 7,477,342 5,679,558
 Fully diluted weighted
 shares outstanding 7,618,129 5,692,981
 Balance Sheet Data
 Sept. 30, Dec. 31,
 1991 1990
 Total assets $235,862,000 $160,378,000
 Total liabilities $155,805,000 $89,123,000
 Total shareholder's equity $80,057,000 $71,255,000
 -0- 11/5/91
 /CONTACT: Joseph G. Havlick, chairman of the board, president, and CEO of CII Financial Inc., 818-846-5297/
 (CII) CO: CII Financial Inc. ST: California IN: INS SU: ERN AL -- LA015 -- 1300 11/05/91 14:01 EST
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Date:Nov 5, 1991
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