- Net Operating Income of $0.21 per diluted share - Net Income of
$0.20 per diluted share - Combined Ratio of 92.7% - Gross Written
Premium up 66.3% - Book Value per share of $8.31 SOUTHFIELD, Mich.,
Aug. 3 /PRNewswire-FirstCall/ -- MEADOWBROOK INSURANCE GROUP, INC.
(NYSE:MIG) Second Quarter 2009 Highlights and Overview: -- Net
operating income, a non-GAAP measure, increased 39.8% to $11.9
million, or $0.21 per diluted share on 57.5 million shares, in the
second quarter of 2009 compared to $8.5 million, or $0.23 per
diluted share on 37.1 million shares, in the second quarter of
2008. -- Net income increased 38.0% to $11.6 million, or $0.20 per
diluted share, in the second quarter of 2009 compared to $8.4
million, or $0.23 per diluted share for the second quarter of 2008.
-- Combined ratio was 92.7% in the second quarter of 2009, compared
to 90.5% for the second quarter of 2008. -- Book value per share
increased to $8.31 per share compared to $7.98 per share at March
31, 2009 and $7.64 per share at December 31, 2008. Meadowbrook
Insurance Group, Inc. (NYSE:MIG) reported that second quarter net
operating income, a non-GAAP measure, grew by 39.8% to $11.9
million or $0.21 per diluted share, compared to $8.5 million or
$0.23 per diluted share in the second quarter of 2008. Net income
increased by 38.0% to $11.6 million, or $0.20 per diluted share in
the second quarter of 2009, compared to $8.4 million, or $0.23 per
diluted share in the second quarter of 2008. Second quarter 2009
net income included after-tax realized losses of $287,000, or
approximately $0.01 per diluted share, due to other than temporary
impairments on investments in certain asset-backed securities,
corporate bonds and preferred stocks. The second quarter 2009 GAAP
combined ratio was 92.7%, compared to 90.5% for the second quarter
of 2008. The loss ratio for the second quarter of 2009 was 59.4%,
compared to 61.2% for the second quarter of 2008. The second
quarter 2009 loss ratio includes 5.0 percentage points of favorable
prior year reserve development, compared to 3.5 percentage points
of favorable prior year reserve development in the second quarter
of 2008. The expense ratio for the second quarter of 2009 was
33.3%, compared to 29.3% in the second quarter of 2008. The
increase in the expense ratio is due primarily to higher commission
levels and internal costs associated with our excess and surplus
lines operations and a planned for reduction in reinsurance ceding
commissions due to restructuring of those agreements. Second
quarter 2009 gross written premium increased 66.3% to $156.9
million, compared to $94.4 million in the second quarter of 2008.
As expected, net commission and fee revenue for the second quarter
of 2009 was down to $8.4 million compared to $9.6 million in the
second quarter of 2008. Additionally, there was a pre-tax loss,
excluding amortization, on fee-for-service business of $378,000
compared to $1.7 million of pre-tax income, excluding amortization
in the second quarter of 2008. Commenting on the results,
Meadowbrook President and Chief Executive Officer Robert S. Cubbin
stated: "Throughout the first half of 2009 we have focused on price
adequacy and selective growth with strict adherence to underwriting
discipline, and as a result, our performance in the second quarter
and first half of the year has positioned us to achieve results at
the high end of the range we previously set of $46 million to $52
million of net operating income. This generates operating EPS at
the high end of the range of $0.80 to $0.90 per share. Growth in
gross written premium was 66.3% for the quarter, and we continue to
be optimistic about our prospects for revenue growth. We will
continue to be selective in our approach to premium growth, as our
markets have remained competitive. In certain classes of business,
rate decreases that we saw in the recent past are moderating, but
in our opinion the market is stabilizing, not hardening. We are
pleased with our combined ratio results for the second quarter,
which includes favorable development on prior year accident year
loss reserves in our workers' compensation, general liability and
auto liability lines. We expected that the revenue and income from
our commission and fee-for-service business would decline in 2009
because a fee-based client decided to assume the administration of
the program in-house. Also, management fees and commissions based
on premium have declined because of the competitive market and poor
economic conditions." Commenting on the integration progress of the
ProCentury merger, Mr. Cubbin stated, "A year after the merger, it
is gratifying to see that the opportunities we contemplated during
due diligence are coming to fruition and producing real results. We
have moved past the hypotheses and rationale for the merger and we
are working from a largely integrated back office, product and
distribution platform. We are leveraging fixed costs, we have
created reinsurance purchasing efficiencies and we can cite
specific examples of revenue enhancing initiatives that would not
have otherwise been possible. We have expanded the size, expertise
and scope of our organization, and because we have distinct
capabilities in both the admitted and surplus lines markets, we
have unique tools to manage through cycles: during softer cycles we
can lean on the stability of our admitted and program business, and
we have the flexibility in our surplus lines business to act
quickly and opportunistically when the market firms." Year to Date
June 30, 2009 Overview Net operating income for the six months
ended June 30, 2009 increased 81.1% to $28.3 million, or $0.49 per
diluted share on 57.5 million shares, compared to $15.6 million, or
$0.42 per diluted share on 37.1 million shares for the same period
in 2008. Net income for the first half of 2009 increased 62.5% to
$25.2 million or $0.44 per share compared to $15.5 million or $0.42
per share for the same period in 2008. Our 2009 year to date
results include $3.1 million of other than temporary impairment
charges on our investment portfolio. For the first six months of
2009, pre-tax fee-for-service income, excluding amortization,
declined by 71.4% to $1.2 million from $4.2 million for the six
months ended June 30, 2008. The year to date GAAP combined ratio
for 2009 improved to 90.2% compared to 92.1% for the year to date
period ended June 30, 2008. The loss ratio for the six months ended
June 30, 2009 improved to 58.7% compared to 61.5% for the same
period in 2008. The expense ratio for the six months ended June 30,
2009 was 31.5% compared to 30.6% for same period in 2008. The year
to date 2009 combined ratio includes 5.7 points of favorable prior
year development compared to 3.9 points of favorable prior year
development for year to date 2008. Other Matters Shareholders'
Equity: At June 30, 2009, shareholders' equity was $477.4 million,
or $8.31 per common share compared to $438.2 million, or $7.64 per
common share, at December 31, 2008. Common shares outstanding at
June 30, 2009 were 57,447,707 compared to 37,021,032 at June 30,
2008. The increase in outstanding shares is primarily due to the
issuance of 21.1 million shares, or $122.7 million of new equity in
conjunction with the ProCentury merger on July 31, 2008. At June
30, 2009, our debt-to-equity ratio was 28.6% compared to 32.2% at
December 31, 2008. Our debt to equity ratio excluding debentures
was 11.6% at June 30, 2009 compared to 13.8% at December 31, 2008.
Dividend and Share Repurchases: On July 31, 2009, our Board of
Directors declared a quarterly dividend of $0.02 per share payable
on August 31, 2009 to shareholders of record as of August 14, 2009.
We did not repurchase any shares during the second quarter of 2009.
As of June 30, 2009, we have available up to 2,200,000 shares
remaining under the share repurchase authorization. Investment
Portfolio: At June 30, 2009 our pre-tax book yield was 4.6%
compared to 4.3% at June 30, 2008. The duration of the portfolio
was 4.1 years at June 30, 2009, compared to 4.5 years at December
31, 2008 and 3.9 years at June 30, 2008. The average pre-tax book
yield on new purchases during the second quarter of 2009 was 5.1%.
Net investment income for the second quarter of 2009 was $12.4
million, up from $6.9 million in the second quarter of 2008. For
the six months ended June 30, 2009 net investment income was $24.7
million compared to $14.1 million for the same periods in 2008. The
increases in net investment income for the quarter and year to date
periods are primarily related to investment income from the Century
Insurance portfolio. A- (Excellent) A.M. Best Rating Affirmed: On
June 24, 2009, A.M. Best Company affirmed the financial strength
rating of A- (Excellent) for Meadowbrook Insurance Group and its
pooled members. The rating reflects Meadowbrook's sustained
operating profitability, its supportive capitalization and
management's expertise in both the specialty program business and
alternative risk market. 2009 Expectations We anticipate continued
growth throughout the year, and while the level of rate decreases
has moderated, we continue to operate in a very competitive market
and difficult economic environment. Therefore, we now believe a
better estimate of full year gross written premium to be between
$695.0 million and $715.0 million. Our outlook for net operating
income has not changed, and we continue to expect net operating
income at the higher end of a range of $46.0 million to $52.0
million, or $0.80 to $0.90 per share. Commenting on the 2009
outlook, Mr. Cubbin stated: "We expect to continue to grow
profitably, and maintaining price adequacy requires us to grow
selectively. A competitive insurance market and a poor economy have
created downward pressure on revenue growth. Therefore, we now
anticipate gross written premium in a range of $695.0 million to
$715.0 million. We continue to expect that the higher end of our
range of net operating income is achievable." Conference Call
Meadowbrook's 2009 second quarter and year to date results will be
discussed by management in more detail on Tuesday, August 4, 2009
at 9:00 a.m. Eastern Time. To listen to the call, please dial
1-877-407-0782 approximately five minutes prior to the start of the
call and ask for the Meadowbrook conference call. Additionally, the
conference call will be broadcast live over the Internet and can be
accessed by all interested parties via the investor relations
section of our website at http://www.meadowbrook.com/ or
http://www.investorcalendar.com/. For those who cannot listen to
the live conference call, a replay of the call will be available
through Tuesday August 11, 2009 by dialing 1-877-660-6853 and
referring to conference ID 327551 and account number 286. The
webcast will be archived and available for replay through Friday,
December 4, 2009. About Meadowbrook Insurance Group Meadowbrook
Insurance Group, Inc., based in Southfield, Michigan, is a leader
in the specialty program management market. Meadowbrook includes
several agencies, claims and loss prevention facilities,
self-insured management organizations and seven property and
casualty insurance underwriting companies, including one in
Bermuda. Meadowbrook has twenty-six locations in the United States.
Meadowbrook is a risk management organization, specializing in
specialty risk management solutions for agents, professional and
trade associations, and small to medium-sized insureds. Meadowbrook
Insurance Group, Inc. common shares are listed on the New York
Stock Exchange under the symbol "MIG". For further information,
please visit Meadowbrook's corporate web site at
http://www.meadowbrook.com/. Certain statements made by Meadowbrook
Insurance Group, Inc. in this release may constitute
forward-looking statements including, but not limited to, those
statements that include the words "believes," "expects,"
"anticipates," "estimates," or similar expressions. Please refer to
the Company's most recent 10-K, 10-Q, and other Securities and
Exchange Commission filings for more information on risk factors.
Actual results could differ materially. These forward-looking
statements involve risks and uncertainties including, but not
limited to the following: the frequency and severity of claims;
uncertainties inherent in reserve estimates; catastrophic events; a
change in the demand for, pricing of, availability or
collectability of reinsurance; increased rate pressure on premiums;
obtainment of certain rate increases in current market conditions;
investment rate of return; changes in and adherence to insurance
regulation; actions taken by regulators, rating agencies or
lenders; obtainment of certain processing efficiencies; changing
rates of inflation; and general economic conditions. Meadowbrook is
not under any obligation to (and expressly disclaims any such
obligation to) update or alter its forward-looking statements
whether as a result of new information, future events or otherwise.
MEADOWBROOK INSURANCE GROUP, INC. FINANCIAL INFORMATION SUPPLEMENT
TO THE EARNINGS RELEASE UNAUDITED BALANCE SHEET INFORMATION JUNE
30, DECEMBER 31, (In Thousands, Except Per Share Data) 2009 2008
------------------------------------- ---- ---- BALANCE SHEET DATA
ASSETS Cash and invested assets $1,142,511 $1,085,648 Premium &
agents balances 136,213 117,675 Reinsurance recoverable 267,890
268,703 Deferred policy acquisition costs 59,027 56,454 Prepaid
reinsurance premiums 28,829 31,885 Goodwill 119,092 119,028 Other
assets 124,527 134,523 ------- ------- Total Assets $1,878,089
$1,813,916 ========== ========== LIABILITIES Loss and loss
adjustment expense reserves $902,406 $885,697 Unearned premium
reserves 290,891 282,086 Debt 55,500 60,250 Debentures 80,930
80,930 Other liabilities 70,920 66,783 ------ ------ Total
Liabilities 1,400,647 1,375,746 STOCKHOLDERS' EQUITY Common
stockholders' equity 477,442 438,170 ------- ------- Total
Liabilities & Stockholders' Equity $1,878,089 $1,813,916
========== ========== Book value per common share $8.31 $7.64 Book
value per common share excluding unrealized gain/loss, net of
deferred taxes $8.10 $7.70 MEADOWBROOK INSURANCE GROUP, INC.
FINANCIAL INFORMATION SUPPLEMENT TO THE EARNINGS RELEASE UNAUDITED
INCOME STATEMENT INFORMATION (In Thousands, Except FOR THE QUARTER
FOR THE SIX MONTHS Share & Per Share Data) ENDED JUNE 30, ENDED
JUNE 30, ------------------------ ----------------
------------------ SUMMARY DATA 2009 2008 2009 2008 ------------
---- ---- ---- ---- Gross written premiums $156,891 $94,370
$316,882 $184,838 Net written premiums 134,524 76,071 268,040
147,470 REVENUES Net earned premiums $127,140 $77,031 $256,178
$143,053 Net commissions and fees 8,396 9,632 18,633 21,663 Net
investment income 12,397 6,917 24,739 14,065 Net realized losses
(958) (146) (2,950) (177) Total Revenues 146,975 93,434 296,600
178,604 EXPENSES Net losses & loss adjustment expenses (1)
70,464 43,542 140,251 81,203 Salaries & employee benefits
19,945 14,143 39,772 26,898 Interest expense 2,659 1,254 5,441
2,565 Policy acquisition and other underwriting expenses (1) 27,139
12,716 51,108 25,863 Amortization expense 1,420 1,563 2,928 3,114
Other administrative expenses 9,917 7,961 20,310 16,793 ----- -----
------ ------ Total Expenses 131,544 81,179 259,810 156,436 INCOME
BEFORE INCOME TAXES AND EQUITY EARNINGS 15,431 12,255 36,790 22,168
Income tax expense 3,827 3,879 11,701 6,790 Equity earnings of
affiliates 41 61 96 117 -- -- -- --- NET INCOME $11,645 $8,437
$25,185 $15,495 ======= ====== ======= ======= NET OPERATING INCOME
(2) $11,932 $8,532 $28,269 $15,610 ======= ====== ======= =======
Amortization expense 1,420 1,563 2,928 3,114 NET OPERATING INCOME,
excluding amortization expense (3) $13,352 $10,095 $31,197 $18,724
======= ======= ======= ======= Diluted earnings per common share
Net income $0.20 $0.23 $0.44 $0.42 Net operating income $0.21 $0.23
$0.49 $0.42 Net operating income, excluding amortization expense
$0.23 $0.27 $0.54 $0.50 Diluted weighted average common shares
outstanding 57,516,750 37,126,911 57,481,241 37,126,782 GAAP
ratios: Loss & LAE ratio 59.4% 61.2% 58.7% 61.5% Other
underwriting expense ratio 33.3% 29.3% 31.5% 30.6% ---- ---- ----
---- GAAP combined ratio 92.7% 90.5% 90.2% 92.1% ==== ==== ====
==== (1) Both the loss and loss adjustment and expense ratios are
calculated based upon the unconsolidated insurance company
operations. The following supplemental information sets forth the
intercompany fees, which are eliminated upon consolidation. (2)
While net operating income is a non-GAAP disclosure, management
believes this information is beneficial to reviewing the financial
statements. Net operating income is net income less realized gains
(losses) net of taxes associated with such gains (losses). (3)
While net operating income, excluding amortization expense, is a
non-GAAP disclosure, management believes this information is
beneficial to reviewing the financial statements. Management
believes this information is beneficial as amortization expense
reflects an interim non-cash charge and in the long-term cash
earnings will reflect GAAP earnings as we complete the amortization
periods associated with current acquisitions. Net operating income,
excluding amortization expense, is net income less realized gains
(losses) net of taxes associated with such gains (losses) and less
amortization expense. MEADOWBROOK INSURANCE GROUP, INC. FINANCIAL
INFORMATION SUPPLEMENT TO THE EARNINGS RELEASE UNAUDITED
UNCONSOLIDATED GAAP DATA FOR THE QUARTER FOR THE SIX MONTHS ENDED
JUNE 30, ENDED JUNE 30, -------------- -------------- (In
Thousands) 2009 2008 2009 2008 -------------- ---- ---- ---- ----
Unconsolidated GAAP data - Ratio Calculation Table: Net earned
premiums $127,140 $77,031 $256,178 $143,053 Consolidated net loss
and LAE (1) $70,464 $43,542 $140,251 $81,203 Intercompany claim
fees 4,995 3,629 10,103 6,735 ----- ----- ------ -----
Unconsolidated net loss and LAE $75,459 $47,171 $150,354 $87,938
======= ======= ======== ======= GAAP loss and LAE ratio 59.4%
61.2% 58.7% 61.5% Consolidated policy acquisition and other
underwriting expenses (1) $27,139 $12,716 $51,108 $25,863
Intercompany administrative and other underwriting fees 15,201
9,832 29,567 17,920 ------ ----- ------ ------ Unconsolidated
policy acquisition and other underwriting expenses $42,340 $22,548
$80,675 $43,783 ======= ======= ======= ======= GAAP other
underwriting expense ratio 33.3% 29.3% 31.5% 30.6% GAAP combined
ratio 92.7% 90.5% 90.2% 92.1% ---- ---- ---- ---- 2009 2008 2009
2008 ---- ---- ---- ---- Unconsolidated GAAP data - Gross
Commissions and Fees: Managed programs: Management fees $3,821
$4,174 $9,099 $10,206 Claims fees 2,006 2,305 3,972 4,485 Loss
control fees 520 625 1,009 1,135 Reinsurance brokerage 90 98 155
394 -- -- --- --- Total managed programs 6,437 7,202 14,235 16,220
Agency commissions 2,171 2,681 4,965 6,009 Intersegment revenue
(212) (251) (567) (566) ---- ---- ---- ---- Net commissions and
fees 8,396 9,632 18,633 21,663 Intercompany commissions and fees
20,196 13,461 39,670 24,655 ------ ------ ------ ------ Gross
commissions and fees $28,592 $23,093 $58,303 $46,318 =======
======= ======= ======= Fee-for-service pre-tax income, excluding
amortization $(378) $1,708 $1,213 $4,246 ===== ====== ====== ======
Pre-tax margin on fee-for- service income -1.3% 7.4% 2.1% 9.2% (1)
Both the loss and loss adjustment and expense ratios are calculated
based upon the unconsolidated insurance company operations. The
above table sets forth the intercompany fees, which are eliminated
in consolidation. The GAAP combined ratio is the sum of the GAAP
loss and loss adjustment expense ratio and the GAAP expense ratio.
The GAAP loss and loss adjustment expense ratio is the
unconsolidated net loss and loss adjustment expense in relation to
net earned premium. The GAAP expense ratio is the unconsolidated
policy acquisition and other underwriting expenses in relation to
net earned premium. MEADOWBROOK INSURANCE GROUP, INC. FINANCIAL
INFORMATION SUPPLEMENT TO THE EARNINGS RELEASE UNAUDITED ADJUSTED
GAAP EXPENSE RATIO SUMMARY FOR THE QUARTER FOR THE SIX MONTHS ENDED
JUNE 30, ENDED JUNE 30, -------------- -------------- (In
Thousands) 2009 2008 2009 2008 -------------- ---- ---- ---- ----
Net earned premiums $127,140 $77,031 $256,178 $143,053 Less:
Unconsolidated net loss and LAE 75,459 47,171 150,354 87,938
Unconsolidated policy acquisition and other underwriting expenses
42,340 22,548 80,675 43,783 ------ ------ ------ ------
Underwriting income $9,341 $7,312 $25,149 $11,332 ====== ======
======= ======= GAAP combined ratio as reported 92.7% 90.5% 90.2%
92.1% Specialty risk management operations pre-tax income $20,875
$15,617 $48,286 $28,529 Less: Underwriting income 9,341 7,312
25,149 11,332 Net investment income and capital losses 11,439 6,771
21,789 13,888 ------ ----- ------ ------ Fee-based operations
pre-tax income 95 1,534 1,348 3,309 Agency operations pre-tax
(loss) income (473) 174 (135) 937 ---- --- ---- --- Total
fee-for-service pre-tax income $(378) $1,708 $1,213 $4,246 =====
====== ====== ====== GAAP expense ratio as reported 33.3% 29.3%
31.5% 30.6% Adjustment to include pre- tax income from total fee-
for-service income (1) -0.3% 2.2% 0.5% 3.0% ---- --- --- --- GAAP
expense ratio as adjusted (2) 33.6% 27.1% 31.0% 27.6% GAAP loss and
LAE ratio as reported 59.4% 61.2% 58.7% 61.5% ---- ---- ---- ----
GAAP combined ratio as adjusted 93.0% 88.3% 89.7% 89.1% ==== ====
==== ==== Reconciliation of consolidated pre-tax income:
--------------------- Specialty risk management operations pre-tax
income: Fee-based operations pre-tax income $95 $1,534 $1,348
$3,309 Underwriting income 9,341 7,312 25,149 11,332 Net investment
income and capital losses 11,439 6,771 21,789 13,888 ------ -----
------ ------ Total specialty risk management operations pre- tax
income 20,875 15,617 48,286 28,529 Agency operations pre-tax (loss)
income (473) 174 (135) 937 Less: Holding company expenses 892 719
2,992 1,619 Interest expense 2,659 1,254 5,441 2,565 Amortization
expense 1,420 1,563 2,928 3,114 ----- ----- ----- -----
Consolidated pre-tax income $15,431 $12,255 $36,790 $22,168 =======
======= ======= ======= (1) Adjustment to include pre-tax income
from total fee-for-service income is calculated by dividing total
fee-for-service income by net earned premiums. (2) While the
adjusted GAAP expense ratio is a non-GAAP disclosure, management
believes this information is beneficial to reviewing the financial
statements. The adjusted GAAP expense ratio is the GAAP expense
ratio, as reported, less the adjustment to include pre-tax income
from total fee-for-service income. Management believes this
information is beneficial as our GAAP expense ratio includes the
impact of the margin associated with our fee-based operations. If
the profit margin from our fee-for-service business is recognized
as an offset to our underwriting expense, a more realistic picture
of our operating efficiency emerges. MEADOWBROOK INSURANCE GROUP,
INC. FINANCIAL INFORMATION SUPPLEMENT TO THE EARNINGS RELEASE
UNAUDITED HISTORICAL INCOME STATEMENT INFORMATION (In Thousands,
Except Share & Per Share Data) ------------------------- 2006A
2007A Q108A ----- ----- ----- SUMMARY DATA ------------ Gross
written premiums $330,872 $346,451 $90,468 Net written premiums
262,668 280,211 71,399 INCOME STATEMENT ---------------- REVENUES
Net earned premiums $254,920 $268,197 $66,022 Commissions and fees
(net) 41,172 45,988 12,031 Net investment income 22,075 26,400
7,148 Net realized gains (losses) 69 150 (31) -- --- --- Total
Revenues 318,236 340,735 85,170 EXPENSES Net losses & loss
adjustment expenses 146,293 150,969 37,661 Policy acquisition and
other underwriting expenses 50,479 53,717 13,147 Other
administrative expenses 28,824 32,269 8,832 Salaries & employee
benefits 54,569 56,433 12,755 Amortization expense 590 1,930 1,551
Interest expense 5,976 6,030 1,311 ----- ----- ----- Total Expenses
286,731 301,348 75,257 INCOME BEFORE TAXES AND EQUITY EARNINGS
31,505 39,387 9,913 Income tax expense 9,599 11,726 2,911 Equity
earnings of affiliates 128 331 56 --- --- -- NET INCOME $22,034
$27,992 $7,058 Net realized capital gain (loss), net of tax 45 97
(20) -- -- --- OPERATING INCOME $21,989 $27,895 $7,078 =======
======= ====== Amortization expense 590 1,930 1,551 OPERATING
INCOME, excluding amortization expense $22,579 $29,825 $8,629
======= ======= ====== Weighted average common shares outstanding
29,566,141 33,101,965 37,103,270 Shares O/S at end of the period
29,107,818 36,996,287 37,021,032 PER SHARE DATA (Diluted) Net
income $0.75 $0.85 $0.19 Net realized gain (loss), net of tax $0.01
$0.01 $- Operating income $0.74 $0.84 $0.19 Operating income,
excluding amortization expense $0.76 $0.90 $0.23 OPERATING RATIO
ANALYSIS ------------------------ GAAP Loss & LAE ratio 62.3%
61.2% 61.7% GAAP Expense ratio 34.5% 34.2% 32.2% ---- ---- ----
GAAP Combined ratio 96.8% 95.4% 93.9% ==== ==== ==== Unconsolidated
GAAP data - Ratio Calculation Table: ---------------------------
-------- -------- ------- Net earned premiums $254,920 $268,197
$66,022 Consolidated net loss and LAE $146,293 $150,969 $37,661
Intercompany claim fees 12,553 13,058 3,106 ------ ------ -----
Unconsolidated net loss and LAE $158,846 $164,027 $40,767 ========
======== ======= GAAP Net loss and LAE ratio 62.3% 61.2% 61.7%
Consolidated Policy acquisition and other underwriting expenses
$50,479 $53,717 $13,147 Intercompany administrative and other
underwriting fees 37,442 37,890 8,088 ------ ------ -----
Unconsolidated policy acquisition and other underwriting expenses
$87,921 $91,607 $21,235 ======= ======= ======= GAAP Expense ratio
34.5% 34.2% 32.2% GAAP Combined Ratio 96.8% 95.4% 93.9% ---- ----
---- Unconsolidated Commissions & Fees Managed programs:
Management fees $18,714 $23,963 $6,032 Claims fees 8,776 9,025
2,180 Loss control fees 2,216 2,151 510 Reinsurance brokerage 735
929 296 --- --- --- Total managed programs 30,441 $36,068 9,018
Agency commissions 12,285 11,316 3,328 Intersegment commissions and
fees (1,554) (1,396) (315) ------ ------ ---- Net Commissions and
fees 41,172 45,988 12,031 Intercompany commissions and fees 49,995
50,948 11,194 ------ ------ ------ Gross commissions and fees
$91,167 $96,936 $23,225 ======= ======= ======= Q208A Q308A Q408A
----- ----- ----- SUMMARY DATA ------------ Gross written premiums
$94,370 $134,418 $138,427 Net written premiums 76,071 112,465
115,259 INCOME STATEMENT ---------------- REVENUES Net earned
premiums $77,031 $104,243 $122,425 Commissions and fees (net) 9,632
12,309 8,932 Net investment income 6,917 10,622 11,937 Net realized
gains (losses) (146) (7,290) (3,955) ---- ------ ------ Total
Revenues 93,434 119,884 139,339 EXPENSES Net losses & loss
adjustment expenses 43,542 63,932 67,750 Policy acquisition and
other underwriting expenses 12,716 19,470 23,961 Other
administrative expenses 7,960 8,055 10,153 Salaries & employee
benefits 14,143 17,056 18,908 Amortization expense 1,563 1,531
1,665 Interest expense 1,254 2,333 2,783 ----- ----- ----- Total
Expenses 81,178 112,377 125,220 INCOME BEFORE TAXES AND EQUITY
EARNINGS 12,256 7,507 14,119 Income tax expense 3,879 3,338 6,539
Equity earnings of affiliates 61 26 126 -- -- --- NET INCOME $8,438
$4,195 $7,706 Net realized capital gain (loss), net of tax (95)
(6,743) (4,562) --- ------ ------ OPERATING INCOME $8,533 $10,938
$12,268 ====== ======= ======= Amortization expense 1,563 1,531
1,665 OPERATING INCOME, excluding amortization expense $10,096
$12,469 $13,933 ======= ======= ======= Weighted average common
shares outstanding 37,126,911 47,595,572 57,780,625 Shares O/S at
end of the period 37,021,032 57,644,022 57,341,989 PER SHARE DATA
(Diluted) Net income $0.23 $0.09 $0.13 Net realized gain (loss),
net of tax $- $(0.14) $(0.08) Operating income $0.23 $0.23 $0.21
Operating income, excluding amortization expense $0.27 $0.26 $0.24
OPERATING RATIO ANALYSIS ------------------------ GAAP Loss &
LAE ratio 61.2% 65.7% 59.5% GAAP Expense ratio 29.3% 31.0% 32.3%
---- ---- ---- GAAP Combined ratio 90.5% 96.7% 91.8% ==== ==== ====
Unconsolidated GAAP data - Ratio Calculation Table:
--------------------------- ------- -------- -------- Net earned
premiums $77,031 $104,243 $122,425 Consolidated net loss and LAE
$43,542 $63,932 $67,750 Intercompany claim fees 3,629 4,508 5,053
----- ----- ----- Unconsolidated net loss and LAE $47,171 $68,440
$72,803 ======= ======= ======= GAAP Net loss and LAE ratio 61.2%
65.7% 59.5% Consolidated Policy acquisition and other underwriting
expenses $12,716 $19,537 $23,949 Intercompany administrative and
other underwriting fees 9,832 12,821 15,630 ----- ------ ------
Unconsolidated policy acquisition and other underwriting expenses
$22,548 $32,358 $39,579 ======= ======= ======= GAAP Expense ratio
29.3% 31.0% 32.3% GAAP Combined Ratio 90.5% 96.7% 91.8% ---- ----
---- Unconsolidated Commissions & Fees Managed programs:
Management fees $4,174 $6,972 $3,990 Claims fees 2,305 2,304 2,090
Loss control fees 625 467 467 Reinsurance brokerage 98 177 157 --
--- --- Total managed programs 7,202 9,920 6,704 Agency commissions
2,681 2,630 2,425 Intersegment commissions and fees (251) (241)
(197) ---- ---- ---- Net Commissions and fees 9,632 12,309 8,932
Intercompany commissions and fees 13,461 17,329 20,683 ------
------ ------ Gross commissions and fees $23,093 $29,638 $29,615
======= ======= ======= 2008A Q109A Q209A ----- ----- ----- SUMMARY
DATA ------------ Gross written premiums $457,683 $159,991 $156,891
Net written premiums 375,194 133,516 134,524 INCOME STATEMENT
---------------- REVENUES Net earned premiums $369,721 $129,038
$127,140 Commissions and fees (net) 42,904 10,237 8,396 Net
investment income 36,624 12,342 12,397 Net realized gains (losses)
(11,422) (1,992) (958) ------- ------ ---- Total Revenues 437,827
149,625 146,975 EXPENSES Net losses & loss adjustment expenses
212,885 69,787 70,464 Policy acquisition and other underwriting
expenses 69,294 23,969 27,139 Other administrative expenses 35,000
10,393 9,917 Salaries & employee benefits 62,862 19,827 19,945
Amortization expense 6,310 1,508 1,420 Interest expense 7,681 2,782
2,659 ----- ----- ----- Total Expenses 394,032 128,266 131,544
INCOME BEFORE TAXES AND EQUITY EARNINGS 43,795 21,359 15,431 Income
tax expense 16,667 7,874 3,827 Equity earnings of affiliates 269 55
41 --- -- -- NET INCOME $27,397 $13,540 $11,645 Net realized
capital gain (loss), net of tax (11,420) (2,797) (287) -------
------ ---- OPERATING INCOME $38,817 $16,337 $11,932 =======
======= ======= Amortization expense 6,310 1,508 1,420 OPERATING
INCOME, excluding amortization expense $45,127 $17,845 $13,352
======= ======= ======= Weighted average common shares outstanding
44,995,712 57,410,327 57,516,750 Shares O/S at end of the period
57,341,989 57,447,707 57,447,707 PER SHARE DATA (Diluted) Net
income $0.61 $0.24 $0.20 Net realized gain (loss), net of tax
$(0.25) $(0.04) $(0.01) Operating income $0.86 $0.28 $0.21
Operating income, excluding amortization expense $1.00 $0.31 $0.23
OPERATING RATIO ANALYSIS ------------------------ GAAP Loss &
LAE ratio 62.0% 58.0% 59.4% GAAP Expense ratio 31.3% 29.7% 33.3%
---- ---- ---- GAAP Combined ratio 93.3% 87.7% 92.7% ==== ==== ====
Unconsolidated GAAP data - Ratio Calculation Table:
--------------------------- -------- -------- -------- Net earned
premiums $369,721 $129,038 $127,140 Consolidated net loss and LAE
$212,885 $69,787 $70,464 Intercompany claim fees 16,296 5,108 4,995
------ ----- ----- Unconsolidated net loss and LAE $229,181 $74,895
$75,459 ======== ======= ======= GAAP Net loss and LAE ratio 62.0%
58.0% 59.4% Consolidated Policy acquisition and other underwriting
expenses $69,349 $23,969 $27,139 Intercompany administrative and
other underwriting fees 46,371 14,366 15,201 ------ ------ ------
Unconsolidated policy acquisition and other underwriting expenses
$115,720 $38,335 $42,340 ======== ======= ======= GAAP Expense
ratio 31.3% 29.7% 33.3% GAAP Combined Ratio 93.3% 87.7% 92.7% ----
---- ---- Unconsolidated Commissions & Fees Managed programs:
Management fees $21,168 $5,278 $3,821 Claims fees 8,879 1,966 2,006
Loss control fees 2,069 489 520 Reinsurance brokerage 728 65 90 ---
-- -- Total managed programs $32,844 7,798 6,437 Agency commissions
11,064 2,794 2,171 Intersegment commissions and fees (1,004) (355)
(212) ------ ---- ---- Net Commissions and fees 42,904 10,237 8,396
Intercompany commissions and fees 62,667 19,474 20,196 ------
------ ------ Gross commissions and fees $105,571 $29,711 $28,592
======== ======= ======= DATASOURCE: Meadowbrook Insurance Group,
Inc. CONTACT: Karen M. Spaun, SVP & Chief Financial Officer,
+1-248-204-8178, or Holly Moltane, Controller - GAAP Financial
Reporting, +1-248-204-8590, both of Meadowbrook Insurance Group,
Inc. Web Site: http://www.meadowbrook.com/
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