Fremont Michigan InsuraCorp, Inc. Reports First Quarter 2008 Results Highlighted by 37.5% Increase in Net Income
Monday May 5, 7:00 am ET
FREMONT, Mich., May 5 /PRNewswire-FirstCall/ -- Fremont Michigan InsuraCorp, Inc. (Fremont) (OTC Bulletin Board: FMMH - News) reported net income increased 37.5% for the first quarter 2008 to $1,104,000, or $.63 per share, compared to net income for the first quarter 2007 of $803,000 or $.46 per share. Underwriting profit increased 39.4% to $817,000 for the first quarter 2008 compared to $586,000 for the first quarter 2007. Stockholders' equity increased to $39.7 million or $22.98 per share at March 31, 2008 compared to $39.4 million or $22.82 as of December 31, 2007.
"Fremont Insurance continues to provide exceptional top line growth in the highly competitive Michigan marketplace. Risk selection within our target markets by our agency partners coupled with sound internal underwriting, provides the framework for improvement in the comparative net income," said Richard E. Dunning, President and CEO.
Consolidated Statement of Income (Unaudited)
Quarter Ended March 31,
2008 2007
Direct premiums written $12,063,702 $10,962,905
Net premiums written $9,576,866 $8,631,809
Net premiums earned $11,216,905 $10,265,293
Loss and LAE 6,336,499 5,830,670
Policy acquisition and other
underwriting expenses 4,063,034 3,848,134
Underwriting gain 817,372 586,489
Other revenue (expense) items
Net investment income 516,236 491,407
Net realized gains on investments 158,602 27,979
Other income 138,141 104,406
Interest expense - (50,580)
Total other revenue (expense) items 812,979 573,212
Income before federal income taxes 1,630,351 1,159,701
Federal income tax expense (525,897) (356,226)
Net income $1,104,454 $803,475
Loss and LAE ratio 56.5% 56.8%
Policy acquisition and other
underwriting expense ratio 36.2% 37.5%
Combined ratio 92.7% 94.3%
Underwriting
Direct premiums written increased 10.0% during the quarter led by continued growth in personal auto and homeowners product lines while net premiums earned increased 9.3%. The combined ratio for the first quarter 2008 dropped to 92.7% from 94.3% in the first quarter 2007, as result of a reduction in the expense ratio. The expense ratio was positively affected in the first quarter of 2008 by the increased level of earned premium.
"Our ability to generate a combined ratio in the low nineties during the current soft market is a testament to the focus and hard work of our employees and independent agency force," said Kevin G. Kaastra, Vice President of Finance. "We are committed to maintaining a quality book of business while not compromising on our philosophy of ensuring that our products are adequately priced for the risk assumed."
Investments
Net investment income increased 5.1% to $516,000 for the first quarter of 2008 from $491,000 in the first quarter 2007. The increase is driven by a higher tax equivalent book yield in the fixed portfolio. As of March 31, 2008, the tax equivalent book yield for the fixed portfolio was 5.29%, an increase of 36 basis points as compared to 4.93% as of March 31, 2007. Net realized investments gains increased to $159,000 during the first quarter 2008 compared to $28,000 during the first quarter 2007.
Safe Harbor Statement
Certain of the statements contained herein (other than statements of historical facts) are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include estimates and assumptions related to economic, competitive and legislative developments. These forward-looking statements are subject to change and uncertainty that are, in many instances, beyond the company's control and have been made based upon management's expectations and beliefs concerning future developments and their potential effect on Fremont Michigan InsuraCorp, Inc. For a list of factors which could affect the Company's results, see the Company's filings with the Securities and Exchange Commission, including "Item 1A. Risk Factors," set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2007. There can be no assurance that future developments will be in accordance with management's expectations so that the effect of future developments on the Company will be those anticipated by management.
FREMONT MICHIGAN INSURACORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
Assets 2008 2007
Investments:
Fixed maturities available for
sale, at fair value $49,823,840 $50,528,874
Equity securities available for
sale, at fair value 7,356,610 8,305,133
Mortgage loans on real estate from
related parties 251,792 253,656
Total investments 57,432,242 59,087,663
Cash and cash equivalents 4,561,774 4,033,158
Premiums due from policyholders, net 7,426,189 7,852,730
Amounts due from reinsurers 6,202,141 6,588,847
Prepaid reinsurance premiums 319,942 258,875
Accrued investment income 561,082 533,843
Deferred policy acquisition costs 3,075,821 3,334,001
Deferred federal income taxes 3,311,254 2,920,648
Property and equipment, net of
accumulated depreciation 2,485,196 2,500,988
Other assets 3,327 43,905
$85,378,968 $87,154,658
Liabilities and Stockholders' Equity
Liabilities:
Losses and loss adjustment expenses $17,928,231 $18,058,919
Unearned premiums 21,068,457 22,727,515
Reinsurance balances payable 35,791 199,463
Accrued expenses and other
liabilities 6,612,179 6,742,803
Total liabilities 45,644,658 47,728,700
Commitments and contingencies
Stockholders' Equity
Preferred stock, no par value,
authorized 4,500,000 shares, no
shares issued and outstanding - -
Class A common stock, no par
value, authorized 5,000,000
shares, 1,729,236 and 1,727,456
shares issued and outstanding at - -
March 31, 2008 and December 31,
2007, respectively
Class B common stock, no par
value, authorized 500,000 shares,
no shares issued and outstanding - -
Additional paid-in capital 7,765,021 7,722,424
Retained earnings 31,500,225 30,395,771
Accumulated other comprehensive
income 469,064 1,307,763
Total stockholders' equity 39,734,310 39,425,958
Total liabilities and
stockholders' equity $85,378,968 $87,154,658
FREMONT MICHIGAN INSURACORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Quarter Ended
March 31,
2008 2007
Revenues:
Net premiums earned $11,216,905 $10,265,293
Net investment income 516,236 491,407
Net realized gains on investments 158,602 27,979
Other income, net 138,141 104,406
Total revenues 12,029,884 10,889,085
Expenses:
Losses and loss
adjustment expenses, net 6,336,499 5,830,670
Policy acquisition and other underwriting
expenses 4,063,034 3,848,134
Interest expense - 50,580
Total expenses 10,399,533 9,729,384
Income before federal income tax expense 1,630,351 1,159,701
Federal income tax expense 525,897 356,226
Net income $1,104,454 $803,475
Earnings per share
Basic $.64 $.47
Diluted $.63 $.46
--------------------------------------------------------------------------------
Source: Fremont Michigan InsuraCorp, Inc.
