Fremont Michigan InsuraCorp, Inc. Reports Third Quarter 2007 Results
Monday November 5, 8:25 am ET
FREMONT, Mich., Nov. 5 /PRNewswire-FirstCall/ -- Fremont Michigan InsuraCorp, Inc. (OTC Bulletin Board: FMMH - News), a Michigan-based provider of property and casualty insurance, today announced net income of $569,000 or $.32 per diluted share for the third quarter of 2007, compared to net income of $781,000 or $.44 per diluted share in the third quarter of 2006.
For the first nine months of 2007, the Company generated net income of $2.5 million or $1.41 per diluted share, compared to net income of $3.9 million or $2.20 per diluted share for the 2006 period.
At September 30, 2007, the Company's book value per share was $21.42, up 7.4% from December 31, 2006 and 22.5% from September 30, 2006.
"We continue to focus on bottom line profitability in the continuing soft market conditions. Our top line growth is strong on a peer comparable basis and is recognition of the business focus, talent and teamwork of all Company associates. We are committed to delivering long-term profitable growth for our shareholders," stated Richard E. Dunning, President and CEO. "Although the competitive market has necessitated providing additional premium discounts it is important to note that we only provide increased discounts when it is supported by reduced loss experience."
Direct premiums written increased 10% during the quarter ended September 30, 2007 and 11.2%, during the nine month period. Year to date new business volume is up 27.7% while renewal volume grew 8.2%. All four of our segments (personal, commercial, farm and marine) are showing positive growth year to date. The growth is being driven by the relationships we have cultivated with our agency force and agent's ease of doing business with Fremont through Fremont Complete -- our online web-based rating platform. Total in-force policy count continues to grow and is up 8.2% over the in-force policy count as of December 31, 2006.
The loss and LAE ratio for the 2007 quarter was 71.4% compared to 58.5% in 2006 while the 2007 year to date loss and LAE ratio was 62% compared to 51.4% in 2006. The elevated loss ratio was affected by increased weather related losses. During the quarter we experienced losses from thunderstorm activity producing hail and wind damage which can be typical of the third quarter. Weather also impacted the loss ratio on a year to date basis given the winter weather experienced during the first quarter of 2007 coupled with the third quarter storm activity.
The expense ratio for the 2007 quarter was 37.3% and 35% in 2006 while the 2007 year to date expense ratio was 36.7% compared to 34.8% in 2006. Both the quarter and year to date expense ratios were impacted by higher depreciation expense associated with our investment in Fremont Complete coupled with increased assessments from state mandated pools and associations.
The combined ratios for the quarter ended September 30, 2007 and 2006 were 108.7% and 93.5%, respectively. For the nine months ended September 30, 2007 and 2006 the combined ratio was 98.7% and 86.2%, respectively.
Kevin G. Kaastra, Vice President of Finance stated, "We are pleased to report that for the 12th consecutive quarter the Company generated profitable operating results as well as quarter over quarter growth in direct premiums written. Strong investment results from this component of our business offset the weather challenges experienced during the third quarter."
The Company's investment portfolio produced solid investment income during both the quarter and year to date period. During the third quarter 2007 the Company generated net realized gains of $1.1 million. For the nine months ended September 30, 2007 and 2006 the Company generated $1.4 million and $295,000, respectively, in net realized gains.
Net investment income for the quarter and nine months grew 14.6% and 17.7%, respectively. The increase came primarily from the fixed maturity portfolio and cash and cash equivalents and is a result of a higher invested asset base and higher pre-tax yields during the 2007 periods. At September 30, 2007 the fixed maturity portfolio had a tax equivalent book yield of 5.31% compared to 4.78% at September 30, 2006.
Fremont's portfolio does not include investments in the sub-prime mortgage-backed market. The Company looks to higher-quality pools that are well-diversified, avoiding any regional concentrations. As added protection, the majority of Fremont's fixed maturity securities within the portfolio are agency-backed issues.
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.
There can be no assurance that future developments will be in accordance with management's expectations so that the effect of future developments on Fremont Michigan InsuraCorp, Inc. will be those anticipated by management. Actual financial results including premium growth and underwriting results could differ materially from those anticipated by Fremont Michigan InsuraCorp, Inc. depending on the outcome of certain factors, which may include changes in property and casualty loss trends and reserves; catastrophe losses; the insurance product pricing environment; changes in applicable law; government regulation and changes therein that may impede the ability to charge adequate rates; change in accounting principles; performance of the financial markets; fluctuations in interest rates; availability and price
of reinsurance; and the status of the labor markets in which the company operates.
FREMONT MICHIGAN INSURACORP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net premiums earned $10,874,446 $9,908,832 $31,739,937 $29,140,172
Net investment income 527,002 459,670 1,536,762 1,305,136
Net realized gains
investments 1,124,059 (217) 1,446,031 295,494
Other income, net 122,449 107,201 338,153 305,452
Total revenues 12,647,956 10,475,486 35,060,883 31,046,254
Losses and loss
net 7,768,458 5,804,215 19,685,075 14,983,839
underwriting expenses 4,058,431 3,463,918 11,661,017 10,132,178
Interest expense 45,010 50,580 146,170 177,823
Total expenses 11,871,899 9,318,713 31,492,262 25,293,840
tax expense 776,057 1,156,773 3,568,621 5,752,414
Federal income tax
expense 206,567 375,589 1,084,076 1,889,560
Net income $569,490 $781,184 $2,484,545 $3,862,854
Earnings per share
Basic $.33 $0.45 $1.44 $2.24
Diluted $.32 $0.44 $1.41 $2.20
FREMONT MICHIGAN INSURACORP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, December 31,
Assets 2007 2006
Fixed maturities available for sale,
at fair value $46,602,694 $44,959,266
Equity securities available for sale,
at fair value 8,346,773 11,689,756
Mortgage loans on real estate from
related parties 255,490 260,808
Total investments 55,204,957 56,909,830
Cash and cash equivalents 6,852,937 4,598,843
Premiums due from policyholders, net 8,186,900 7,528,683
Amounts due from reinsurers 8,164,790 7,883,153
Prepaid reinsurance premiums 1,619,975 404,016
Accrued investment income 518,490 447,411
Deferred policy acquisition costs 3,356,690 3,235,383
Deferred federal income taxes 3,097,493 3,070,713
Property and equipment, net of
accumulated depreciation 1,993,249 1,771,323
Other assets 5,525 28,078
Liabilities and Stockholders' Equity
Losses and loss adjustment expenses $22,015,170 $20,176,555
Unearned premiums 22,794,870 21,463,019
Reinsurance balances payable 48,060 50,313
Accrued expenses and other
liabilities 7,144,756 6,867,081
Surplus notes - 2,890,288
Total liabilities 52,002,856 51,447,256
Commitments and contingencies
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, 1,727,456 and 1,725,456
shares issued and outstanding at - -
September 30, 2007 and December 31,
Class B common stock, no par value,
authorized 500,000 shares,
no shares issued and outstanding - -
Additional paid-in capital 7,700,209 7,605,096
Retained earnings 27,995,958 25,511,413
Accumulated other comprehensive
income 1,301,983 1,313,668
Total stockholders' equity 36,998,150 34,430,177
Total liabilities and
stockholders' equity $89,001,006 $85,877,433
Source: Fremont Michigan InsuraCorp, Inc.