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8-K - FORM 8-K - PENN MILLERS HOLDING CORP | c21350e8vk.htm |
Exhibit 99.1
PRESS
RELEASE
For Immediate Release
Contact: Michael O. Banks 570-200-1340
For Immediate Release
Contact: Michael O. Banks 570-200-1340
PENN MILLERS REPORTS ON SECOND QUARTER RESULTS ENDED JUNE 30, 2011
Wilkes-Barre, Pennsylvania, (Business Wire) August 12, 2011 Penn Millers Holding Corporation
(NASDAQ: PMIC) (Penn Millers or the Company) reported today its financial results for the
second quarter and six months ended June 30, 2011. For the three months ended June 30, 2011, Penn
Millers reported a net loss of $4.4 million, or $0.98 per diluted share, compared to a net loss
of $1.3 million, or $0.27 per diluted share for the second quarter of 2010. For the six months
ended June 30, 2011, Penn Millers reported a net loss of $2.5 million, or $0.56 per diluted
share, compared to a net loss of $1.5 million, or $0.32 per diluted share for the six months
ended June 30, 2010. Key highlights for the second quarter and year to date periods are:
| Total consolidated revenues for the second quarter of 2011 were $18.3 million, compared to $19.5 million for the same quarter in 2010. For the six month period, total consolidated revenues were $37.6 million in 2011, compared to $38.6 million in 2010. The net decrease in the three and six month periods resulted primarily from a lower level of realized investment gains. |
| Investment income continues to be impacted by declining investment yields in this low interest rate environment. | ||
| Net premiums written for the second quarter of 2011 were $0.8 million lower than the second quarter of 2010. For the first six months of 2011, net premiums written were $1.2 million lower than the first six months of 2010. The declines in both the three and six month periods were in the Commercial Business segment, and resulted from the financial underwriting and pricing actions being taken on the Solutions product. Penn Millers Agribusiness segment had increases in 2011 net premiums written of $0.5 million in the second quarter, and $1.1 million in the six months ended June 30th, versus the comparable periods of 2010. |
| Penn Millers combined ratio for the second quarter of 2011 was 138.7%, compared to 130.4% for the second quarter of 2010. On a year to date basis, the Companys combined ratio was 119.3% in 2011 and 121.9% in 2010. |
| The Company was adversely impacted by unprecedented catastrophe losses in the second quarter of 2011 that accounted for approximately 40 loss ratio points of its 101.1% second quarter loss ratio. The catastrophe losses resulted from multiple tornadoes, wind storms and hail storms, mostly in the Midwest and Southeast that affected policyholders primarily in the Companys Agribusiness segment. Over the last five years, the loss ratio from catastrophes in the second quarter of the year has averaged about 13 points. | ||
| Excluding the catastrophe losses reported for 2011 and 2010, the six month combined ratio of the Companys Agribusiness segment improved by 10.4 points compared to 2010. The six month period combined ratio for the Commercial Business segment increased from 122.1% in 2010 to 126.3% in 2011, and was unfavorably impacted by the decline in earned premium and several large fire losses in 2011. | ||
| The loss ratios for both segments in the quarter and year to date periods were positively impacted by net favorable loss development on prior accident year reserves. |
| Book value per share decreased by $0.58 per share compared to December 31, 2010, and was $20.27 per share at June 30, 2011. | |
| Shareholders equity decreased from $93.0 million at December 31, 2010 to $91.7 million at June 30, 2011, primarily as a result of the net loss for the year to date period. |
Douglas A. Gaudet, President and Chief Executive Officer, commented on the Companys results,
The impact of the second quarter storms surpassed the catastrophe losses we experienced in the
second quarter of 2010, which at the time, was an unprecedented quarter of catastrophe losses for
us. Notwithstanding the negative impact on our results from these storms, our underlying results
are showing improvement. Our Agribusiness segment continues to show written premium growth, and
outstanding loss ratios excluding catastrophe losses. Our Commercial Business segment continues
to experience favorable reserve development and we are achieving price increases and renewal
retention rates that are above our expectations. As we run off the less desirable business in
that segment, we believe our specialty PennEdge product will produce underwriting results much
more in line with our agribusiness operation.
Penn Millers management will host an investor conference call and webcast on August 16, 2011 at
10:00 a.m. Eastern Time to discuss second quarter 2011 results. Registration for the event can be
accessed via the Companys website at www.pennmillers.com located under Investor News.
The conference call will be available for replay through August 31, 2011 through the Companys
website, www.pennmillers.com.
The Company provides property and casualty insurance through its wholly owned subsidiary, Penn
Millers Insurance Company. Penn Millers Insurance Company provides agribusiness insurance and
commercial lines insurance in 34 states. Penn Millers Insurance Company is rated A- (Excellent)
by A.M. Best Company, Inc. The Company is located at 72 North Franklin Street in Wilkes-Barre,
PA. The Companys web address is http://www.pennmillers.com.
Some of the statements contained herein are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. In some cases, you can identify
forward-looking statements by terminology such as may, will, should, expect, plan,
intend, anticipate, believe, estimate, predict, potential or continue, or the
negative of these terms or other terminology. Forward-looking statements are based on the
opinions and estimates of management at the time the statements are made and are subject to
certain risks and uncertainties that could cause actual results to differ materially from those
anticipated in the forward-looking statements. Factors that could affect the Companys actual
results include, among others, the fact that our loss reserves are based on estimates and may be
inadequate to cover our actual losses; the uncertain effects of emerging claim and coverage
issues on our business, including the effects of climate change; the geographic concentration of
our business; an inability to obtain or collect on our reinsurance protection; a downgrade in the
A.M. Best rating of our insurance subsidiaries; the impact of extensive regulation of the
insurance industry and legislative and regulatory changes; a failure to realize our investment
objectives; the effects of intense competition; the loss of one or more principal employees; the
inability to acquire additional capital on favorable terms; a failure of independent insurance
brokers to adequately market our products; and the effects of acts of terrorism or war. More
information about these and other factors that potentially could affect our financial results is
included in our Annual Report on Form 10-K, filed with the SEC and in our other public filings
with the SEC. Readers are cautioned not to place undue reliance upon these forward-looking
statements, which speak only as of the date of this release. The Company undertakes no obligation
to update any forward-looking statements.
Contact: Michael O. Banks of Penn Millers Holding Corporation, (570) 200-1340
Page 2
PENN MILLERS HOLDING CORPORATION AND SUBSIDIARY
Financial Highlights
Financial Highlights
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
U.S. GAAP ratios: |
||||||||||||||||
Loss and loss adjustment
expense ratio |
101.1 | % | 95.2 | % | 80.8 | % | 86.7 | % | ||||||||
Underwriting expense ratio |
37.6 | % | 35.2 | % | 38.5 | % | 35.2 | % | ||||||||
Combined ratio |
138.7 | % | 130.4 | % | 119.3 | % | 121.9 | % | ||||||||
Return on average shareholders equity (1) |
-17.7 | % | -5.1 | % | -5.4 | % | -3.1 | % | ||||||||
Basic net loss per common share |
$ | (0.98 | ) | $ | (0.27 | ) | $ | (0.56 | ) | $ | (0.32 | ) | ||||
Diluted net loss per common share |
$ | (0.98 | ) | $ | (0.27 | ) | $ | (0.56 | ) | $ | (0.32 | ) | ||||
Net book value per share |
$ | 20.27 | $ | 21.44 |
(1) | Return on average shareholders equity is annualized. |
Page 3
PENN MILLERS HOLDING CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 2011 and December 31, 2010
(Dollars in thousands, except share data)
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
Assets |
||||||||
Investments: |
||||||||
Fixed maturities: |
||||||||
Available for sale, at fair value (amortized cost $156,970 in
2011 and $158,193 in 2010) |
$ | 162,096 | 162,771 | |||||
Equity Securities: |
||||||||
Available for sale, at fair value (cost $11,274 in 2011
and $10,885 in 2010) |
11,382 | 10,874 | ||||||
Cash and cash equivalents |
4,732 | 6,510 | ||||||
Premiums and fees receivable |
24,339 | 28,394 | ||||||
Reinsurance receivables and recoverables |
20,906 | 24,912 | ||||||
Deferred policy acquisition costs |
8,821 | 9,735 | ||||||
Prepaid reinsurance premiums |
3,737 | 4,320 | ||||||
Accrued investment income |
1,581 | 1,621 | ||||||
Property and equipment, net of accumulated depreciation |
3,145 | 3,323 | ||||||
Income taxes receivable |
783 | 1,253 | ||||||
Other |
3,001 | 1,008 | ||||||
Total assets |
$ | 244,523 | 254,721 | |||||
Liabilities and Shareholders Equity |
||||||||
Liabilities: |
||||||||
Losses and loss adjustment expense reserves |
$ | 106,630 | 109,973 | |||||
Unearned premiums |
38,254 | 42,807 | ||||||
Accounts payable and accrued expenses |
7,917 | 8,913 | ||||||
Total liabilities |
152,801 | 161,693 | ||||||
Shareholders equity: |
||||||||
Preferred stock, no par value, authorized 1,000,000; no shares
issued or outstanding |
| | ||||||
Common stock, $0.01 par value, authorized 10,000,000; issued
2011, 5,444,022 and 2010, 5,444,022; outstanding 2011,
4,524,415 shares and 2010, 4,462,131 shares |
54 | 54 | ||||||
Additional paid-in capital |
51,169 | 51,068 | ||||||
Accumulated other comprehensive income |
2,522 | 2,054 | ||||||
Retained earnings |
48,487 | 50,993 | ||||||
Unearned ESOP, 449,999 and 476,999 shares |
(4,500 | ) | (4,770 | ) | ||||
Treasury stock, at cost, 469,608 and 504,892 shares |
(6,010 | ) | (6,371 | ) | ||||
Total shareholders equity |
91,722 | 93,028 | ||||||
Total liabilities and
shareholders equity |
$ | 244,523 | 254,721 | |||||
Page 4
PENN MILLERS HOLDING CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, 2011 and 2010
(Dollars in thousands, except share data)
2011 | 2010 | |||||||
Revenues: |
||||||||
Premiums earned |
$ | 16,808 | 16,679 | |||||
Investment income, net of investment expense |
1,404 | 1,452 | ||||||
Realized investment gains, net: |
||||||||
Total other-than-temporary impairment losses |
| | ||||||
Portion of loss recognized in other
comprehensive income |
| | ||||||
Other realized investment gains, net |
64 | 1,294 | ||||||
Total realized investment gains, net |
64 | 1,294 | ||||||
Other income |
70 | 88 | ||||||
Total revenues |
18,346 | 19,513 | ||||||
Losses and expenses: |
||||||||
Losses and loss adjustment expenses |
16,990 | 15,885 | ||||||
Amortization of deferred policy acquisition costs |
4,965 | 5,159 | ||||||
Underwriting and administrative expenses |
1,349 | 712 | ||||||
Interest expense |
1 | | ||||||
Other expense, net |
8 | 37 | ||||||
Total losses and
expenses |
23,313 | 21,793 | ||||||
Loss before income
taxes |
(4,967 | ) | (2,280 | ) | ||||
Income tax expense benefit |
(555 | ) | (1,005 | ) | ||||
Net loss |
$ | (4,412 | ) | (1,275 | ) | |||
Earnings per share: |
||||||||
Basic net loss per common share |
$ | (0.98 | ) | (0.27 | ) | |||
Diluted net loss per common share |
$ | (0.98 | ) | (0.27 | ) | |||
Page 5
PENN MILLERS HOLDING CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Six Months Ended June 30, 2011 and 2010
(Dollars in thousands, except share data)
2011 | 2010 | |||||||
Revenues: |
||||||||
Premiums earned |
$ | 33,722 | 33,735 | |||||
Investment income, net of investment expense |
2,845 | 3,024 | ||||||
Realized investment gains, net: |
||||||||
Total other-than-temporary impairment losses |
| | ||||||
Portion of loss recognized in other
comprehensive income |
| | ||||||
Other realized investment gains, net |
852 | 1,666 | ||||||
Total realized investment gains, net |
852 | 1,666 | ||||||
Other income |
156 | 180 | ||||||
Total revenues |
37,575 | 38,605 | ||||||
Losses and expenses: |
||||||||
Losses and loss adjustment expenses |
27,263 | 29,257 | ||||||
Amortization of deferred policy acquisition costs |
9,740 | 10,036 | ||||||
Underwriting and administrative expenses |
3,249 | 1,831 | ||||||
Interest expense |
16 | | ||||||
Other expense, net |
54 | 70 | ||||||
Total losses and
expenses |
40,322 | 41,194 | ||||||
Loss before income
taxes |
(2,747 | ) | (2,589 | ) | ||||
Income tax expense benefit |
(241 | ) | (1,072 | ) | ||||
Net loss |
$ | (2,506 | ) | (1,517 | ) | |||
Earnings per share: |
||||||||
Basic net loss per common share |
$ | (0.56 | ) | (0.32 | ) | |||
Diluted net loss per common share |
$ | (0.56 | ) | (0.32 | ) | |||
Page 6
Reconciliation of non-GAAP Measures
The Company uses a non-GAAP financial measure called operating income (loss) from operations
which excludes realized investment gains or losses. Management believes this is useful to investors
because investment gains and losses could distort the analysis of insurance operating trends. While
these measures are utilized by investors to evaluate performance, they are not a substitute for the
U.S. GAAP financial measure of net income (loss). Therefore, a reconciliation of these non-GAAP
financial measures to the U.S. GAAP financial measure of net income (loss) is provided below:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Operating loss from operations |
$ | (4,454 | ) | (2,129 | ) | $ | (3,068 | ) | (2,617 | ) | ||||||
Net realized investment
gains, net of income taxes |
42 | 854 | 562 | 1,100 | ||||||||||||
Net loss |
$ | (4,412 | ) | (1,275 | ) | $ | (2,506 | ) | (1,517 | ) | ||||||
Page 7