Fremont Michigan InsuraCorp, Inc. Reports Third Quarter 2008 Net Income of $1.3 Million, or $0.72 per Share
Monday November 10, 8:00 am ET
FREMONT, Mich., Nov. 10 /PRNewswire-FirstCall/ -- Fremont Michigan InsuraCorp, Inc. (Fremont) (OTC Bulletin Board: FMMH - News) today reported:
-- Third quarter recognized net income of $1.3 million, or $0.72 per
diluted share / $3.5 million, or $1.94 per diluted share, year-to-date
-- Third quarter combined ratio registered of 87.1% / 90.8%, year-to-date
-- Third quarter operating income of $2.3 million / $5.3 million,
year-to-date
-- Book value of $22.65 per share as of September 30, 2008
Consolidated Highlights Three Months Ended September 30,
(Unaudited) 2008 2007 %
Consolidated revenues $12,430,693 $12,647,956 -1.7%
Net income $1,301,866 $569,490 128.6%
Weighted average shares outstanding 1,771,044 1,779,280 -0.5%
Basic earnings per share $0.74 $0.32 131.3%
Diluted earnings per share $0.72 $0.31 132.3%
Operating income (loss) (1) $2,281,000 $(348,002) 755.5%
Operating income per share (1) $1.29 $(0.20) 745.0%
Book value per share $22.65 $20.79 8.9%
Consolidated Highlights Nine Months Ended September 30,
(Unaudited) 2008 2007 %
Consolidated revenues $36,922,726 $35,060,883 5.3%
Net income $3,523,306 $2,484,545 41.8%
Weighted average shares outstanding 1,777,364 1,778,992 -0.1%
Basic earnings per share $1.98 $1.40 41.4%
Diluted earnings per share $1.94 $1.37 41.6%
Operating income (loss) (1) $5,290,721 $2,122,590 149.3%
Operating income per share (1) $2.98 $1.19 150.4%
Book value per share $22.65 $20.79 8.9%
(1) Please refer to the Non-GAAP financial measures section of this
release for further explanation of this measure.
Commenting on the Company's third quarter results, Richard Dunning, President and CEO, stated: "Income from insurance operations continues to be strong in 2008 on a comparative basis to last year. This strength has offset the performance challenge registered within the investment arena for both individuals and companies. Our peer analysis indicates top quartile performance continues compared to our competitors."
Consolidated
Statements of
Operations Three Months Ended Nine Months Ended
(Unaudited) September 30, September 30,
2008 2007 2008 2007
Revenues:
Direct premiums
written $16,620,491 $14,892,593 $45,132,718 $40,391,546
Net premiums written $13,920,858 $12,399,487 $37,157,252 $33,051,028
Net premiums earned $12,066,502 $10,874,446 $35,061,830 $31,739,937
Net investment income 563,572 527,002 1,614,847 1,536,762
Net realized gains
(losses) on
investments (351,782) 1,124,059 (193,180) 1,446,031
Other income, net 152,401 122,449 439,229 338,153
Total revenues 12,430,693 12,647,956 36,922,726 35,060,883
Expenses:
Losses and loss
adjustment expenses,
net 6,559,562 7,768,458 19,806,639 19,685,075
Policy acquisition
and other
underwriting
expenses 3,941,913 4,058,431 12,018,546 11,661,017
Interest expense - 45,010 - 146,170
Total expenses 10,501,475 11,871,899 31,825,185 31,492,262
Income before
federal income tax
expense 1,929,218 776,057 5,097,541 3,568,621
Federal income tax
expense 627,352 206,567 1,574,235 1,084,076
Net income $1,301,866 $569,490 $3,523,306 $2,484,545
Earnings per share
Basic $.74 $.32 $1.98 $1.40
Diluted $.72 $.31 $1.94 $1.37
Combined ratio:
Loss and LAE ratio 54.4% 71.4% 56.5% 62.0%
Expense ratio 32.7% 37.3% 34.3% 36.7%
Combined ratio 87.1% 108.7% 90.8% 98.7%
Direct premiums written increased 11.6% during the quarter and 11.7% year-to-date, led by the personal and commercial segments. From a loss standpoint, the Company did not experience as much volatile weather during the 2008 third quarter compared to the same period in 2007. Less severe weather and lower loss severity from fire related losses contributed to the significant improvement in the third quarter 2008 loss and LAE ratio. The Company's expense ratio for the third quarter and year-to-date dropped 4.6 and 2.4 percentage points, respectively. The declining expense ratio is driven by premium growth and lower assessments from state mandated pools and associations in 2008 as compared to 2007. These factors contributed to the improved underwriting results in both the 2008 third quarter and year-to-date periods. During the quarter and nine months ended September 30, 2008, the Company generated an underwriting profit of $1,565,000 and $3,237,000, respectively.
"We are very pleased with our underwriting results in this challenging market," stated Kevin Kaastra, Vice President of Finance. "Our discipline in appropriately pricing our products and our focus on obtaining target market business from our agency force, are evident in our strong underwriting results."
Net investment income increased 6.9% in the third quarter of 2008, compared to the 2007 quarter, and 5.1% year-to-date. The increase was driven by an increase in invested assets. As of September 30, 2008, the tax equivalent book yield in the fixed portfolio was 5.14% compared to 5.31% as of September 30, 2007. The Company incurred a net realized loss during the third quarter 2008 of approximately $352,000 compared to a net realized gain of $1,124,000 in 2007. The third quarter 2008 net realized loss included an other than temporary impairment write-down of $350,000 on a fixed maturity security.
"Given the recent volatility in the financial markets, we believe that our conservative investment strategy coupled with our disciplined underwriting has helped minimize the impact of these difficult financial markets on the Company's shareholder equity," commented Kaastra.
During the nine months ended September 30, 2008, the Company's book value per share has increased 2.2%.
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 September 30, December 31,
(Unaudited) 2008 2007
Assets
Investments:
Fixed maturities available for
sale, at fair value $52,866,633 $50,528,874
Equity securities available for
sale, at fair value 6,245,502 8,305,133
Mortgage loans on real estate from
related parties 248,212 253,656
Total investments 59,360,347 59,087,663
Cash and cash equivalents 5,764,437 4,033,158
Premiums due from policyholders, net 8,766,527 7,852,730
Amounts due from reinsurers 6,034,673 6,588,847
Prepaid reinsurance premiums 409,335 258,875
Accrued investment income 612,877 533,843
Deferred policy acquisition costs 3,551,265 3,334,001
Deferred federal income taxes 4,461,070 2,920,648
Property and equipment, net of
accumulated depreciation 2,500,906 2,500,988
Other assets 5,376 43,905
$91,466,813 $87,154,658
Liabilities and Stockholders' Equity
Liabilities:
Losses and loss adjustment expenses $18,193,233 $18,058,919
Unearned premiums 24,973,398 22,727,515
Reinsurance balances payable 48,665 199,463
Accrued expenses and other liabilities 8,367,598 6,742,803
Total liabilities 51,582,894 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, 1,761,154 and 1,779,321
shares issued and outstanding at
September 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 8,728,816 7,722,424
Retained earnings 32,580,726 30,395,771
Accumulated other comprehensive
(loss) income (1,425,623) 1,307,763
Total stockholders' equity 39,883,919 39,425,958
Total liabilities and
stockholders' equity $91,466,813 $87,154,658
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Source: Fremont Michigan InsuraCorp, Inc.
