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CITATION INSURANCE REPORTS RECORD EARNINGS FOR 1992; ARIZONA BRANCH OFFICE OPENS

 SAN JOSE, Calif., Feb. 16 /PRNewswire/ -- Citation Insurance Group (NASDAQ-NMS: CITN) today announced that total revenues grew 12 percent in 1992 to $82.5 million, up from $73.5 million in 1991. Net income for the year was the highest in the company's history, $3.9 million, or 94 cents per share on 4.1 million shares outstanding, compared with a loss of $2 million, or 53 cents per share on 3.7 million shares outstanding in 1991.
 Net premiums earned totaled $72.0 million for the year, up 10 percent from 1991, primarily a result of continuing growth in the company's commercial property and casualty business segment. Net investment income was $10.1 million for the year, up 30 percent from 1991, reflecting an increase in the company's investment portfolio and realized capital gains.
 Revenues for the quarter ended Dec. 31, 1992, increased 7 percent to $21.5 million, up from $20.1 million in the same quarter of last year. Net income for the quarter was $1.4 million, or 35 cents per share, a significant turnaround from the $4.5 million loss incurred, or $1.10 per share, in the last quarter of 1991.
 Don Young, president and chief executive officer, said, "Our commercial property and casualty business continued to be a key factor in both revenue and earnings growth. Net premiums earned for our commercial property and casualty products increased 86 percent over the same quarter last year, and grew 73 percent for the year. Our clearly defined underwriting requirements in this market segment continue to generate underwriting profits, rewarding us with a combined ratio for this segment of 92.0 percent in 1992.
 "On the other hand, the environment surrounding workers' compensation continued to be extremely difficult. As a result, we finished 1992 with a combined ratio of 111.4 percent for this line of business. While this was a substantial improvement over the 116.7 percent combined ratio in 1991, it nevertheless underscores the ongoing crisis in California workers' compensation and strengthens our resolve to continue shifting our emphasis to the more profitable commercial property and casualty segment of our business while at the same time refining our book of workers' compensation business in favor of smaller accounts in targeted classes.
 "Finally, net investment income of over $10 million was a major contributor to our profitable results for the year."
 First Step in Western States Expansion; Phoenix Branch Office Now Open
 In other news, the company opened its first office outside of California just before the end of the year in Phoenix, headed by a branch manager with substantial experience in Citations' commercial property and casualty business segment. The new Phoenix branch has already begun establishing relationships with independent brokers throughout Arizona, and is actively engaged in quoting and writing the company's commercial property and casualty products in that state. In addition to California and Arizona, the company is currently licensed to do business in Colorado and Nevada, and has applications for admission pending in most of the other western states. "This is our first step toward expanding our operations into most of the other western states, which we expect to pursue aggressively in 1993," said Young.
 Focused Underwriting and Effective Expense Control Result in Record Earnings
 For the year, workers' compensation net premiums earned increased 4 percent to $61.3 million, up from $59.2 million in 1991. The continuing recession was a contributing factor to slow growth, together with the California Insurance Commissioner approving rate increases significantly below what was requested by the industry. More important, however, was the company's implementation of a planned shift in the type of workers' compensation business it is willing to write in the current economic and regulatory environment.
 "Early in 1992, we recognized the need to shift the emphasis of our workers' compensation business away from the larger accounts, with their unrealistic expectations of significant policyholder dividend returns, to medium-sized accounts in historically profitable business classifications. As a consequence, we are now writing a greater number of policies with a lower average premium size than we did last year," Young said.
 "In addition, we used 1992 to position ourselves for significant growth in our commercial property and casualty business segment by reorganizing and strengthening our underwriting staff and designing systems enhancements for more efficient processing," added Young, "while at the same time increasing our premium revenues in that segment by more than 70 percent."
 Total net premiums earned increased 10 percent to $72.0 million and net investment income increased 30 percent to $10.1 million. While total revenues increased by 12 percent to $82.5 million, loss and loss adjustment expenses increased only 5 percent in 1992, primarily due to an improvement in the workers' compensation loss ratio from 91.2 percent in 1991 to 87.8 percent for 1992. Young said, "The steps we took over the past 18 months to reduce our book of workers' compensation business in the Los Angeles area by over 70 percent, along with our aggressive stance toward suspected fraudulent claims have begun to pay off in terms of improved loss ratios. However, it will take more time before we can expect to reap the full benefit of our actions."
 The underwriting expense ratio edged up slightly to 21.8 percent in 1992 from 21.7 percent in 1991, due to the rapid increase of premiums in the commercial property and casualty business segment, which carries a higher commission expense than workers' compensation. The commercial property and casualty underwriting expense ratio increased to 27.3 percent in 1992 from 25.9 percent in 1991. The workers' compensation underwriting expense ratio declined to 20.9 percent in 1992 from 21.2 percent in 1991. Said Young, "We are particularly proud of this performance in light of the significant increase in the number of policies processed during the year. Constant attention to expense control is a must, particularly in these difficult times, and we are continuously looking for ways to use our systems capabilities to operate our


business more efficiently."
 Policyholder dividends were down in 1992 to $1.7 million, 35 percent less than the prior year, as a result of the continuing high level of the workers' compensation loss ratio. The policyholder dividend ratio was 2.3 percent, compared with 3.9 percent in 1991.
 For the year, the company reported a net profit of $3.9 million, or 94 cents per share, compared with a net loss of $2.0 million, or 53 cents per share in 1991.
 Commercial Property and Casualty Earned Premiums Up 86 Percent in Fourth Quarter
 For the quarter, total revenues increased 7 percent to $21.5 million, due primarily to a 38 percent increase in investment income to $3.0 million. Net premiums earned were $18.3 million, an increase of 2 percent from the fourth quarter of 1991.
 Commercial property and casualty net premiums earned were $3.4 million, an increase of 86 percent over $1.8 million in the fourth quarter of 1991. This growth was due primarily to an expansion of the producer network through which these products are sold.
 Workers' compensation net premiums earned declined to $14.9 million compared with $16.0 million for the fourth quarter of last year. Said Young, "This premium decrease was a direct result of the company's long-standing unwillingness to renew policies or write new business where price adequacy is questionable. For that reason, we chose not to renew some large accounts, but we partially offset the loss of that premium revenue by actively pursuing and writing medium-sized accounts in classes which have been historically profitable. Our emphasis continues to be on bottom-line profit potential, not top-line revenue."
 The loss ratio for the quarter was 85.8 percent, a significant improvement from the fourth quarter of 1991. The policyholder dividend ratio declined further from 1.5 percent in the last quarter of 1991 to 0.8 percent in 1992, and the underwriting expense ratio improved to 22.3 percent from 23.6 percent in the last quarter of the prior year. As a result, net income was $1.4 million, or 35 cents per share, compared with a loss of $4.6 million, or $1.10 per share in the last quarter of 1991.
 Financial Position
 For the year, net cash provided by operating activities totaled $17.7 million, up from $13.9 million in 1991. Cash flow was used primarily to increase the company's investment portfolio. At Dec. 31, 1992, invested assets, including cash and cash equivalents, totaled $123.8 million, or $31.17 per outstanding share, up 15 percent from $107.2 million, or $25.66 per share at the end of 1991. Stockholders' equity was $34.3 million, or $8.63 per outstanding share, up from $31.8 million, or $7.62 per share at Dec. 31, 1991.
 Citation also reported, under its previously announced stock repurchase program, the company has purchased a total of 236,100 shares of its common stock at an average price of $5.93 per share, for a total of $1.4 million.
 Headquartered in San Jose, Citation Insurance Group is a regional multiple-line specialist operating in tightly focused segments of the workers' compensation and commercial property and casualty marketplace, through its insurer subsidiary, Citation Insurance Co. Citation's 4.2 million common shares are traded on the NASDAQ National Market System, symbol CITN. Citation Insurance Co. is rated B++ (Very Good) by the A.M. Best Co. The company has approximately 170 employees at offices in San Jose, Tustin, Sacramento, San Diego, Fresno, Calif.; and Phoenix.
 -0- 2/16/93
 /NOTE TO EDITORS: Additional information can be obtained on Citation Insurance Group via fax, at no cost. Dial 1-800-PRO-INFO, code 108./
 /CONTACT: Dennis Pastirik, chief financial officer of Citation Insurance, 408-292-0222; or Lise Needham of the Financial Relations Board, 415-986-1591, for Citation Insurance/
 (CITN)


CO: Citation Insurance Group ST: California, Arizona IN: INS SU: ERN

TM-BR -- SF007 -- 6739 02/16/93 09:10 EST
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