Fremont Michigan InsuraCorp, Inc. Reports Second Quarter 2008 Net Income of $1.1 Million, or $0.62 per Share
Wednesday August 6, 8:00 am ET
FREMONT, Mich., Aug. 6 /PRNewswire-FirstCall/ -- Fremont Michigan InsuraCorp, Inc. (Fremont) (OTC Bulletin Board: FMMH - News) today reported:
-- Second quarter recognized net income of $1.1 million, or $0.62 per
diluted share / $2.2 million, or $1.22 per diluted share, year-to-date
-- Second quarter revenues grow to $12.5 million / $24.5 million,
year-to-date
-- Second quarter combined ratio registered of 92.8% / 92.7%, year-to-date
-- Book value increased to $22.74 per share as of June 30, 2008
Consolidated Highlights
Quarter Ended June 30, Six Months Ended June 30,
2008 2007 % 2008 2007 %
Consolidated
revenues $12,462,149 $11,523,842 8.1% $24,492,033 $22,412,927 9.3%
Net income $1,116,986 $1,111,580 0.5% $2,221,440 $1,915,055 16.0%
Weighted
average
shares
outstanding 1,781,154 1,779,280 0.1% 1,780,581 1,778,847 0.1%
Basic earnings
per share $0.63 $0.62 1.6% $1.25 $1.08 15.7%
Diluted earnings
per share $0.62 $0.61 1.6% $1.22 $1.06 15.1%
Operating
income (1) $1,537,972 $1,338,870 14.9% $3,009,721 $2,470,592 21.8%
Operating
income per
share (1) $0.86 $0.75 14.7% $1.69 $1.39 21.6%
Book value per
share $22.74 $20.60 10.4% $22.74 $20.60 10.4%
(1) Please refer to the Non-GAAP financial measures section of this
release for further explanation of this measure.
"Most financial service companies continued to be undervalued, even with some reporting strong growth and operating results," stated Richard E. Dunning, President and CEO. "Our business fundamentals continue to provide excellent results in the marketplace. We recognize our commitment to our shareholders and agents, and this has been demonstrated during the first six months through our announcement of both a stock dividend and more recently a cash dividend. We also announced authorization to repurchase up to 100,000 shares of the Company's stock."
Consolidated
Statements of
Operations Three Months Ended Six Months Ended
(Unaudited) June 30, June 30,
2008 2007 2008 2007
Revenues:
Direct premiums
written $16,448,525 $14,536,048 $28,512,227 $25,498,953
Net premiums written $13,659,528 $12,019,732 $23,236,394 $20,651,541
Net premiums earned $11,778,423 $10,600,198 $22,995,328 $20,865,491
Net investment income 535,039 518,353 1,051,275 1,009,760
Net realized gains
(losses) on
investments - 293,993 158,602 321,972
Other income, net 148,687 111,298 286,828 215,704
Total revenues 12,462,149 11,523,842 24,492,033 22,412,927
Expenses:
Losses and loss
adjustment expenses,
net 6,910,578 6,085,947 13,247,077 11,916,617
Policy acquisition
and other
underwriting
expenses 4,013,599 3,754,452 8,076,633 7,602,586
Interest expense - 50,580 - 101,160
Total expenses 10,924,177 9,890,979 21,323,710 19,620,363
Income before
federal income tax
expense 1,537,972 1,632,863 3,168,323 2,792,564
Federal income tax
expense 420,986 521,283 946,883 877,509
Net income $1,116,986 $1,111,580 $2,221,440 $1,915,055
Earnings per share
Basic $.63 $.62 $1.25 $1.08
Diluted $.62 $.61 $1.22 $1.06
Combined ratio:
Loss and LAE ratio 58.7% 57.4% 57.6% 57.1%
Expense ratio 34.1% 35.4% 35.1% 36.4%
Combined ratio 92.8% 92.8% 92.7% 93.5%
Direct premiums written increased 13.2% during the quarter and 11.8% year- to-date led by the personal and commercial segments. Despite experiencing storm related losses during the month of June, the Company generated an underwriting profit of $854,000 during the second quarter and $1.7 million year-to-date. The Company's second quarter combined ratio was 92.8% and 92.7% on a year-to-date basis. The Company's expense ratio for the second quarter and year-to-date dropped 1.3 percentage points.
"Considering the competitive pricing pressure in the Michigan insurance market, our underwriting results have remained strong throughout the soft market cycle. Our results reflect the focus of all Fremont employees on writing and retaining profitable business," stated Kevin Kaastra, Vice President of Finance. "We continue to expand upon and add to the strong core book of business that has been built over the last several years. The strength of Fremont's book is a result of the quality target market business that we receive from our independent agency force and our strong partnership efforts."
Net investment income increased 3.2% for the second quarter and 4.1% year- to-date. As of June 30, 2008, the tax equivalent book yield in the fixed portfolio was 5.31%, an increase of 19 basis points as compared to 5.12% as of June 30, 2007.
Non-GAAP Financial Measures
We believe that disclosure of certain Non-GAAP financial measures enhances investor understanding of our financial performance. The following Non-GAAP financial measures are utilized in this release:
Operating income is income before federal income tax expense excluding net realized investment gains. Because our calculation may differ from similar measurements used by other companies, investors should be careful when comparing our measure of operating income to that of other companies. We include this measurement because we believe it illustrates the performance of normal, ongoing operation, which is important in understanding and evaluating the company's financial condition and results of operations.
Combined ratio is a commonly used financial measure of underwriting performance. A combined ratio below 100 percent generally indicates a profitable book of business. The combined ratio is the sum of two separately calculated ratios, the loss and loss adjustment expense ratio (referred to as the "loss and LAE ratio") and the expense ratio. When prepared in accordance with GAAP, the loss and LAE ratio is calculated by dividing the sum of losses and loss adjustment expenses by net premium earned. The expense ratio is calculated by dividing policy acquisition and other underwriting expenses by net premiums earned.
About Fremont Michigan InsuraCorp, Inc.
Fremont Michigan InsuraCorp, Inc. is the holding company for Fremont Insurance Company. Headquartered in Fremont, Michigan, the company provides property and casualty insurance to individuals, farms and small businesses exclusively in Michigan. Fremont Michigan InsuraCorp's common stock is listed on the OTC Bulletin Board (OTCBB) under the symbol "FMMH."
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.
Consolidated Balance Sheets June 30, December 31,
(Unaudited) 2008 2007
Assets
Investments:
Fixed maturities available for
sale, at fair value $52,251,394 $50,528,874
Equity securities available for
sale, at fair value 7,613,834 8,305,133
Mortgage loans on real estate from
related parties 250,137 253,656
Total investments 60,115,365 59,087,663
Cash and cash equivalents 4,375,054 4,033,158
Premiums due from policyholders, net 8,409,165 7,852,730
Amounts due from reinsurers 6,362,256 6,588,847
Prepaid reinsurance premiums 385,440 258,875
Accrued investment income 565,764 533,843
Deferred policy acquisition costs 3,294,953 3,334,001
Deferred federal income taxes 3,538,262 2,920,648
Property and equipment, net of
accumulated depreciation 2,563,189 2,500,988
Other assets 4,812 43,905
$89,614,260 $87,154,658
Liabilities and Stockholders' Equity
Liabilities:
Losses and loss adjustment
expenses $18,641,446 $18,058,919
Unearned premiums 23,085,792 22,727,515
Reinsurance balances payable 54,284 199,463
Accrued expenses and other liabilities 7,325,198 6,742,803
Total liabilities 49,106,720 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, 1,781,154 and 1,779,321
shares issued and outstanding at
June 30, 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 7,790,353 7,722,424
Retained earnings 32,617,211 30,395,771
Accumulated other comprehensive income 99,976 1,307,763
Total stockholders' equity 40,507,540 39,425,958
Total liabilities and
stockholders' equity $89,614,260 $87,154,658
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Source: Fremont Michigan InsuraCorp, Inc.
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