GEORGE TOWN, Grand Cayman, Cayman Islands, Oct. 30 /PRNewswire-FirstCall/ -- United America Indemnity, Ltd. (Nasdaq: INDM) today reported a third quarter net loss of ($19.6) million or ($0.62) per share compared to net income of $24.0 million or $0.64 per share for the comparable period last year. For the nine months ending September 20, 2008, net loss was ($21.1) million or ($0.63) per share compared to net income of $72.5 million or $1.93 per share for the same period last year.
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Selected Operating and Balance Sheet Data
(Dollars in millions, For the Three Months For the Nine Months
except per share data) Ended September 30, Ended September 30,
2008 2007 2008 2007
Net income / (loss) $(19.6) $24.0 $(21.1) $72.5
Net income / (loss) per share $(0.62) $0.64 $(0.63) $1.93
Operating income / (loss) (a) $(5.8) $24.4 $(5.1) $71.8
Operating income / (loss) per
share $(0.19) $0.65 $(0.15) $1.91
(a) Operating income, a non-GAAP financial measure, is equal to net
income / (loss) excluding after-tax net realized investment gains
(losses).
As of As of As of
Sept 30, June 30, Dec 31,
(Dollars in millions) 2008 2008 2007
Book value per share $23.17 $24.16 $23.89
Tangible book value per share $20.07 $21.10 $21.07
Cash & invested assets $1,637.4 $1,674.7 $1,765.1
Selected Financial Data for the Three Months Ended September 30, 2008:
-- After-tax total investment return (loss) of ($15.6) million or ($0.49) per share. After-tax total investment return (loss) was (1.0%) of average invested assets.
-- Impact on net loss of ($14.8) million or ($0.47) per share resulting from catastrophes (primarily Hurricanes Ike and Gustav).
-- ($4.1) million increase to net loss or ($0.13) per share due to an increase to prior accident year reserves.
Selected Financial Data for the Three Months Ended September 30, 2008 (continued):
-- Current accident year combined ratio of 117.4, which includes the impact of 20.1 points from catastrophe losses as compared to 93.5 for the three months ended September 30, 2007.
-- A 29.7% decline in gross premiums written to $99.0 million as compared to $140.9 million for the three months ended September 30, 2007.
-- After tax realized losses of ($3.8) million from the sale of Fannie Mae & Freddie Mac preferred stock, ($4.4) million from the sale of Lehman bonds, and ($4.0) million from Other Than Temporary Impairments (which were largely related to investments in common equities of financial institutions).
-- Book value per share and tangible book value per share declined 4.1% and 4.9%, respectively, from June 30, 2008.
-- The repurchase of 0.6 million shares of its stock for $8.8 million at an average price of $13.97 per share.
Selected Financial Data for the Nine Months Ended September 30, 2008:
-- After-tax total investment return (loss) of ($6.1) million or ($0.19) per share. After-tax total investment return (loss) was (0.4%) of average invested assets.
-- Impact on net loss of ($18.7) million or ($0.56) per share resulting from catastrophes (primarily Hurricanes Ike and Gustav during the 3rd quarter of 2008 and wind storms in the Midwest during the 1st half of 2008).
-- ($16.1) million increase to net loss or ($0.48) per share due to an increase to prior year accident year reserves.
-- Current accident year combined ratio of 107.2, which includes the impact of 7.5 points from catastrophe losses as compared to 93.9 for the nine months ended September 30, 2007.
-- A 31.6% reduction in gross premiums written to $302.4 million as compared to $442.1 million for the nine months ended September 30, 2007. Book value per share and tangible book value per share declined 3.0% and 4.8%, respectively, from December 31, 2007.
-- The repurchase of 3.5 million shares of its stock for $51.7 million at an average price of $14.59 per share.
United America Indemnity's Selected Investment Data:
Market Value as of
Sept 30, June 30, Dec. 31,
(Dollars in millions) 2008 2008 2007
Bonds - Average Credit Quality AA+
Duration 3.8 Years at $1,218.8 $1,286.4 $1,370.6
September 30, 2008
Cash & cash equivalents 295.4 249.0 244.3
Total bonds and cash and cash
equivalents 1,514.2 1,535.4 1,614.9
Equities and other invested assets 123.2 139.3 150.2
Total cash and invested assets $1,637.4 $1,674.7 $1,765.1
September 30, 2008 (a)
Three Months Nine Months
(Dollars in millions) Ended Ended
Net investment income $13.7 $42.2
Net realized investment losses (13.8) (16.0)
Net unrealized investment losses (15.5) (32.3)
Net realized and unrealized investment
losses (29.3) (48.3)
Total investment return (loss) $(15.6) $(6.1)
Total investment return (loss) % (1.0%) (0.4%)
(a) Amounts in this table are shown on an after-tax basis.
United America Indemnity's Three Months Ended September 30, 2008 and 2007 Gross and Net Premiums Written Results by Business Unit
(Dollars in thousands) Three Months Ended September 30,
Gross Premiums Written Net Premiums Written
2008 2007 2008 2007
Insurance Operations
Penn-America $44,321 $67,494 $40,988 $62,931
United National 19,878 32,412 16,192 26,481
Diamond State 28,259 34,137 21,959 28,832
Total Insurance
Operations 92,458 134,043 79,139 118,244
Reinsurance Operations
Wind River 6,572 6,872 567 4,324
Total $99,030 $140,915 $79,706 $122,568
Insurance Operations: Gross premiums written for the three months ended September 30, 2008 decreased 31.0%, and net premiums written for the three months ended September 30, 2008 decreased 33.1%, compared to the same period in 2007. The reduction in gross premium is comprised of the following:
-- $14.1 million decline due to terminations of business that did not meet the Company's profitability requirements,
-- Reduction of $11.1 million from agents writing business in coastal catastrophe prone areas,
-- $16.4 million is due to price decreases in aggregate of approximately 4.5% and other market factors.
Wind River Reinsurance Company, Ltd. ("Wind River"): Gross premiums written for the three months ended September 30, 2008 decreased 4.4% and net premiums written decreased 86.9%, excluding the intercompany reinsurance treaty, compared to the same period in 2007. The decrease in gross and net premiums written is primarily due to non-renewal of a treaty that did not meet the Company's profitability requirements.
United America Indemnity's Three Months Ended September 30, 2008 and 2007 Combined Ratio
The combined ratio is a key measure of insurance profitability. The components comprising the combined ratio are as follows:
Three Months Ended September 30,
2008 2007
Loss Ratio:
Current Accident Year 80.3 61.0
Changes to Prior Accident Year 4.8 (5.2)
Loss Ratio - Calendar Year 85.1 55.8
Expense Ratio 37.1 32.5
Combined Ratio 122.2 88.3
The calendar year loss ratio increased 29.3 points from 55.8 in 2007 to 85.1 in 2008.
-- The impact of changes to prior accident years was 10.0 points resulting from an increase in net loss and loss adjustment expenses related to prior accident years of $4.2 million in 2008 compared to a $6.9 million reduction in net loss and loss adjustment expenses related to prior accident years in 2007.
-- The $4.2 million increase to net loss and loss adjustment expenses in the 3rd quarter related to prior accident years is comprised of a reduction in prior accident year loss reserves of $1.5 million and an increase in the allowance for uncollectible reinsurance of $5.7 million.
-- The casualty loss ratio increased 4.2 points from 66.2 in 2007 to 70.4 in 2008 primarily due to increased loss trends. The property loss ratio increased 46.4 points from 51.5 in 2007 to 97.9 in 2008 primarily due to a 50.5 point increase in the catastrophe loss ratio from 0.3 in 2007 to 50.8 in 2008 primarily due to Hurricanes Ike and Gustav.
About United America Indemnity, Ltd.
United America Indemnity, Ltd. (NASDAQ: INDM), through its several direct and indirect wholly owned subsidiary insurance and reinsurance companies, is a national and international provider of excess and surplus lines and specialty property and casualty insurance and reinsurance, both on an admitted and non- admitted basis. The Company's four principal divisions include:
-- Insurance Operations:
-- Penn-America, which includes property and general liability products
for small commercial businesses distributed through a select network
of wholesale general agents with specific binding authority;
-- United National, which includes property, general liability, and
professional lines products distributed through program
administrators with specific binding authority;
-- Diamond State, which includes property, general liability, and
professional lines products distributed through wholesale brokers
and program administrators with specific binding authority.
-- Reinsurance Operations:
-- Wind River Reinsurance Company, Ltd., a Bermuda based treaty and
facultative reinsurer of excess and surplus lines and specialty
property and casualty insurance.
For more information, visit the United America Indemnity, Ltd. website at
www.uai.ky.
United America Indemnity, Ltd.
Consolidated Statements of Operations
(Dollars and shares in thousands, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
Gross premiums written $99,030 $140,915 $302,410 $442,134
Net premiums written $79,706 $122,568 $246,879 $387,137
Net premiums earned $89,511 $133,449 $303,241 $408,471
Investment income, net 16,627 19,870 51,485 58,055
Net realized investment gains
(losses) (20,510) (614) (24,060) 1,153
Total revenues 85,628 152,705 330,666 467,679
Net losses and loss
adjustment expenses 76,134 74,511 236,428 231,596
Acquisition costs and other
underwriting expenses 33,164 43,376 109,471 130,920
Corporate and other operating
expenses 3,039 3,080 9,494 9,537
Interest expense 1,963 2,770 6,690 8,574
Income (loss) before
income taxes (28,672) 28,968 (31,417) 87,052
Income tax expense (benefit) (10,260) 4,664 (11,786) 14,688
Net income (loss) before
equity in net income
of partnership (18,412) 24,304 (19,631) 72,364
Equity in net income (loss)
of partnership, net of tax (1,088) (206) (1,557) 155
Net income (loss) before (19,500) 24,098 (21,188) 72,519
discontinued operations
Discontinued operations, net
of tax (98) (118) 59 2
Net income (loss) $(19,598) $23,980 $(21,129) $72,521
Weighted average shares
outstanding - basic 31,449 37,229 33,302 37,185
Weighted average shares
outstanding - diluted 31,625 37,521 33,493 37,513
Net income (loss) per share -
basic $(0.62) $0.64 $(0.63) $1.95
Net income (loss) per share -
diluted $(0.62) $0.64 $(0.63) $1.93
Combined ratio analysis:
Loss ratio 85.1 55.8 78.0 56.7
Expense ratio 37.1 32.5 36.1 32.1
Combined ratio 122.2 88.3 114.1 88.8
Certain prior period amounts have been reclassified to conform to the 2008 presentation. Earnings per share includes results of discontinued operations. The presentation above is not in conformity with generally accepted accounting principles (GAAP) which requires earnings per share for discontinued operations to be disclosed separately.
In 2008 "Net loss per share - diluted" is the same as "Net loss loss per share - basic" since there was a net operating loss for the three months and nine months ended September 30, 2008.
UNITED AMERICA INDEMNITY, LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
As of As of
ASSETS September 30, December 31,
2008 2007
Bonds:
Available for sale securities, at fair
value $1,218,831 $1,370,566
(amortized cost: 2008 - $1,234,212 and
2007 - $1,356,439)
Preferred shares:
Available for sale securities, at fair value 5,468 11,883
(cost: 2008 - $5,468 and 2007 - $11,802)
Common shares:
Available for sale securities, at fair value 62,617 73,794
(cost: 2008 - $57,795 and 2007 - $61,032)
Other invested assets:
Available for sale securities, at fair value 55,106 64,539
(cost: 2008 - $24,840 and 2007 - $24,563)
Total investments 1,342,022 1,520,782
Cash and cash equivalents 295,344 244,321
Agents' balances 60,816 64,719
Reinsurance receivables 679,901 719,706
Federal income taxes receivables 10,784 -
Deferred federal income taxes 25,471 8,219
Deferred acquisition costs 38,622 52,505
Goodwill 84,246 84,246
Intangible assets 21,764 22,520
Prepaid reinsurance premiums 27,795 29,218
Other assets 24,230 28,936
Total assets $2,610,995 $2,775,172
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $1,525,864 $1,503,237
Unearned premiums 170,577 228,363
Federal income taxes payable - 3,455
Ceded balances payable 24,965 15,758
Contingent commissions 5,542 9,600
Notes and debentures payable 121,925 137,602
Other liabilities 27,507 40,881
Total liabilities 1,876,380 1,938,896
Shareholders' equity:
Common shares, $0.0001 par value, 900,000,000
common shares authorized; Class A common
shares issued: 25,032,618 and 24,770,507,
respectively; Class A common shares outstanding:
19,018,793 and 22,316,420, respectively; Class
B common shares issued and outstanding:
12,687,500 4 4
Additional paid-in capital 523,678 519,980
Accumulated other comprehensive income 7,902 40,172
Class A common shares in treasury, at cost:
6,013,825 and 2,454,087 shares, respectively (100,382) (48,422)
Retained earnings 303,413 324,542
Total shareholders' equity 734,615 836,276
Total liabilities and shareholders' equity $2,610,995 $2,775,172
UNITED AMERICA INDEMNITY, LTD.
SUMMARY OF OPERATING INCOME / (LOSS)
(Dollars and shares in thousands, except per share data)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
Operating income (loss) $(5,833) $24,380 $(5,108) $71,781
Adjustments:
Net realized investment gains
(losses), net of tax (13,765) (400) (16,021) 740
Total after-tax adjustments (13,765) (400) (16,021) 740
Net income (loss) $(19,598) $23,980 $(21,129) $72,521
Weighted average shares
outstanding - basic 31,449 37,229 33,302 37,185
Weighted average shares
outstanding - diluted 31,625 37,521 33,493 37,513
Operating income (loss) per
share - basic $(0.19) $0.65 $(0.15) $1.93
Operating income (loss) per
share - diluted $(0.19) $0.65 $(0.15) $1.91
Note Regarding Operating Income / (Loss)
Operating income, a non-GAAP financial measure, is equal to net income / (loss) excluding after-tax net realized investment gains (losses). Operating income is not a substitute for net income determined in accordance with GAAP, and investors should not place undue reliance on this measure.
In 2008 "Operating loss per share - diluted" is the same as "Operating loss per share - basic" since there was a net operating loss for the three months and nine months ended September 30, 2008.
SOURCE United America Indemnity, Ltd.
