Book value per share increased 4.8% and cash flow from operations increased
78.9% in the second quarter of 2005 as compared to the first quarter of 2005
Annualized return on average equity was 12.3% for the second quarter of 2005
GEORGE TOWN, Cayman Islands, Aug. 2 /PRNewswire-FirstCall/ -- United
America Indemnity, Ltd. (Nasdaq: INDM) today reported results for the
second-quarter of 2005 and for the six months ended June 30, 2005.
(LOGO: http://www.newscom.com/cgi-bin/prnh/20040211/MXW002LOGO )
United America Indemnity's Second-Quarter 2005 Results
United America Indemnity's (the "Company's") second-quarter 2005 net
operating income increased 133.0% to $18.2 million ($0.49 per fully diluted
share) compared with $7.8 million ($0.27 per fully diluted share) for the same
period in 2004.
United America Indemnity's net income for the second quarter of 2005
increased 127.7% percent to $18.5 million ($0.50 per fully diluted share)
compared with $8.1 million ($0.28 per fully diluted share) in the second
quarter of 2004. Net income for both the second quarter of 2005 and the
second quarter of 2004 included after-tax net realized investment gains of
$0.3 million.
The Company's combined ratio, a key measure of insurance profitability,
was 90.4 compared with 90.6 in the same quarter last year.
Gross premiums written increased 86.0% to $163.9 million, from $88.1
million in the second quarter of 2004. Net premiums written increased 99.9%
to $136.3 million from $68.2 million in the comparable quarter of 2004. These
increases resulted from the merger of United America Indemnity with
Penn-America Group ("Penn America") combined with an increase in net premiums
written by United National Insurance Company, a wholly-owned subsidiary of
United America Indemnity.
Agency commission and fee revenues for Penn Independent Corporation ("Penn
Independent") were $10.1 million for the second quarter of 2005.
The Company ended the second quarter of 2005 with cash and invested assets
of $1,319.9 million, an increase of $45.2 million, or 3.5%, from March 31,
2005. Investment income for the second quarter of 2005 increased 151.6%
compared to the same quarter in 2004 due primarily to the merger of United
America Indemnity with Penn-America, increased retentions at United National
Insurance Company, and increased investment yields resulting from an increase
in market interest rates coupled with an increase in the average duration of
the Company investment portfolio. Cash flow from operations for the second
quarter of 2005 was $38.7 million.
On July 20, 2005, U.N. Holdings II, Inc., a wholly-owned subsidiary of the
Company, sold $90.0 million of unsecured guaranteed ten-year senior notes, due
July 20, 2015. These senior notes have an interest rate of 6.22%, payable
semi-annually. On July 20, 2011 and on each anniversary thereafter to and
including July 20, 2014, U.N. Holdings II, Inc. is required to prepay $18.0
million of the principal amount. On July 20, 2015, U.N. Holdings II, Inc is
required to pay the remaining outstanding principal amount of the notes. The
notes are guaranteed by United America Indemnity, Ltd. and will be applied to
the repayment of the unsecured senior notes payable to the Ball Family Trusts
and for other corporate purposes.
The July 2005 named storms are not expected to have a material impact on
the financial results of the Company. Reported claims to date approximate
$0.2 million, well within the expected level of catastrophe losses for the
third quarter, 2005.
Edward J. Noonan, acting chief executive officer noted, "United America
Indemnity had an excellent second quarter. Book value per share, our most
important metric, grew by 4.8%. Our underwriting results were outstanding as
evidenced by our combined ratio of 90.4%. Finally, we reduced our net
reinsurance receivable during the quarter by 11.7%, or $97.0 million.
Reinsurance receivables, net of the collateral we hold, are now 1.2 times
shareholders' equity."
The ratio of reinsurance receivables net of collateral to shareholders'
equity was 1.2 at June 30, 2005 down from 1.4 at March 31, 2005. Reinsurance
receivables, net of collateral at June 30, 2005, decreased by 11.7%, or $97.0
million, to $733.0 million from $830.0 million at March 31, 2005. The
aggregate amount of collateral securing the reinsurance receivables held by
United America Indemnity was $695.8 million at June 30, 2005. Reinsurance
receivables, gross of collateral at June 30, 2005, decreased $101.7 million,
to $1,428.8 million from $1,530.5 million at March 31, 2005.
United America Indemnity's book value on June 30, 2005 of $614.5 million
represents a 5.0% increase from United America Indemnity's book value of
$585.0 million on March 31, 2005 and a 53.0% increase from United America
Indemnity's book value of $401.6 million on June 30, 2004. The Company's book
value per share increased 4.8% to $16.87 per share, compared to $16.09 per
share at March 31, 2005 and an 18.7% increase compared to $14.21 since June
30, 2004. Book value per share at June 30, 2005 is based on 36.4 million
aggregate Class A and Class B common shares outstanding.
United America Indemnity's Second-Quarter Gross- and Net-Written Premium
Results by Business Lines
United America Indemnity, Ltd. completed its merger with Penn-America and
its acquisition of Penn Independent on January 24, 2005. The results for
United America Indemnity do not reflect the results of Penn-America and Penn
Independent before this date.
Quarter Ended June 30,
(Dollars in thousands)
Gross Written Premiums Net Written Premiums
2005 2004 2005 2004
Property and General
Liability $146,993 $70,797 $121,859 $50,881
Professional Liability 16,909 17,341 14,435 17,302
Total $163,902 $88,138 $136,294 $68,183
Property and General Liability products: Gross premiums written increased
107.6% as a result of the merger with Penn-America combined with a 13.0%
growth in United National Insurance Company's gross written premiums. Net
premiums written increased 139.5% compared with the second quarter of 2004 due
to the Penn-America merger, the growth in United National Insurance Company's
gross written premiums, and reduced reinsurance cessions.
Professional Liability: Gross premiums written decreased 2.5% compared
with the second quarter of 2004 as a result of underwriting and pricing
actions in response to market conditions. Net premiums written decreased
16.6% compared with the second quarter of 2004.
United America Indemnity's Six Months Ended June 30, 2005 Results
United America Indemnity's net operating income for the six months ended
June 30, 2005 increased 114.3% to $32.7 million ($0.91 per fully diluted
share) compared with $15.3 million ($0.53 per fully diluted share) for the
same period in 2004.
United America Indemnity's net income for the six months ended June 30,
2005 increased 119.3% to $34.0 million ($0.95 per fully diluted share)
compared with $15.5 million ($0.54 per fully diluted share) in the same period
in 2004. Net income for the six months ended June 30, 2005 included after-tax
net realized investment losses of $0.1 million, compared with after-tax net
realized investment gains of $0.3 million for the 2004 period. Net income for
the six months ended June 30, 2005 also included an extraordinary gain of $1.4
million.
The Company's combined ratio was 91.5 for the six months ended June 30,
2005 compared with 90.1 in the same period last year. The combined ratio for
the six months ended June 30, 2004 reflects income from certain reinsurance
programs in which the Company no longer participates.
Gross premiums written for the six months ended June 30, 2005 increased
45.3% to $299.4 million, from $206.1 million in the same period in 2004. Net
premiums written increased 93.9% to $245.8 million from $126.8 million in the
comparable period of 2004. These increases resulted from the merger of United
America Indemnity with Penn-America combined with an increase in net premiums
written by United National Insurance Company, a wholly-owned subsidiary of
United America Indemnity.
Agency commission and fee revenues for Penn Independent were $16.4 million
for the period January 25, 2005 through June 30, 2005.
United America Indemnity's Six Months Ended June 30, 2005 Gross- and Net-
Written Premium Results by Business Lines
Six Months Ended June 30,
(Dollars in thousands)
Gross Written Premiums Net Written Premiums
2005 2004 2005 2004
Property and General
Liability $263,959 $163,209 $215,716 $99,246
Professional Liability 35,403 42,867 30,099 27,554
Total $299,362 $206,076 $245,815 $126,800
Property and General Liability products: Gross premiums written increased
61.7% as a result of the merger with Penn-America partially offset by the
termination of several heavily reinsured programs. Net premiums written
increased 117.4% compared with the six months ended June 30, 2004 due to the
Penn-America merger and reduced reinsurance cessions.
Professional Liability: Gross premiums written decreased 17.4% compared
with the six months ended June 30, 2004 as a result of underwriting and
pricing actions in response to market conditions. However, net premiums
written increased 9.2% compared with the six months ended June 30, 2004 due to
decrease reinsurance cessions.
About United America Indemnity, Ltd.
United America Indemnity, through its wholly-owned operating subsidiaries
which include United National Group, Penn-America Group, Inc. and Penn
Independent Corporation, is one of the leading specialty property and casualty
insurers in the industry as well as a significant originator of and placement
agent for specialty property and casualty insurance coverage. United America
Indemnity is a holding company formed under the laws of the Cayman Islands and
its U.S. insurance subsidiaries are either licensed or authorized to write
surplus lines or specialty admitted business in all states. With a combined
operating history of more than one century, United America Indemnity's
underwriting network includes approximately 140 professional general agents
and its focus centers on self-generated proprietary products, niche programs
and brokered lines. Its non-U.S. operations consist of recently formed
Barbados-based and Bermuda-based insurance companies.
Teleconference and Webcast for Interested Parties
Edward J. Noonan and Kevin L. Tate, CPA, chief financial officer, will
conduct a teleconference for interested parties on August 3, 2005 at 8:30 a.m.
Eastern Time to discuss the second quarter 2005 results. To participate,
telephone 800-901-5241 (U.S. and Canada) or 617-786-2963 (International) and
enter 24274044 when prompted for a password. The teleconference will be
available for replay until August 10, 2005. To listen to the replay,
telephone 888-286-8010 (U.S. and Canada) or 617-801-6888 (International) and
enter 62266052 when prompted for a password.
This teleconference is also being webcast by CCBN and can be accessed at
the Company's website at http://www.uai.ky. Please access the site at least
15 minutes prior to the teleconference to register, download and install any
necessary software.
The webcast is also being distributed over CCBN's Investor Distribution
Network both to institutional and individual investors. Individual investors
can listen to the teleconference through CCBN's individual investor center at
http://www.fulldisclosure.com or by visiting any of the investor sites in
CCBN's Individual Investor Network. Institutional investors can access the
teleconference via CCBN's password protected event management site,
StreetEvents (http://www.streetevents.com).
Forward-Looking Information
This release contains forward-looking information about United America
Indemnity and the operations of United America Indemnity that is intended to
be covered by the safe harbor for forward-looking statements provided by the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
are statements that are not historical facts. These statements can be
identified by the use of forward-looking terminology such as "believe,"
"expect," "may," "will," "should," "project," "plan," "seek," "intend," or
"anticipate" or the negative thereof or comparable terminology, and include
discussions of strategy, financial projections and estimates and their
underlying assumptions, statements regarding plans, objectives, expectations
or consequences of the transactions, and statements about the future
performance, operations, products and services of the companies.
The business and operations of United America Indemnity is and will be
subject to a variety of risks, uncertainties and other factors. Consequently,
actual results and experience may materially differ from those contained in
any forward-looking statements. Such risks, uncertainties and other factors
that could cause actual results and experience to differ from those projected
include, but are not limited to, the following: (1) the ineffectiveness of
United America Indemnity's business strategy due to changes in current or
future market conditions; (2) the effects of competitors' pricing policies,
and of changes in laws and regulations on competition, including industry
consolidation and development of competing financial products; (3) greater
frequency or severity of claims and loss activity than United America
Indemnity's underwriting, reserving or investment practices have anticipated;
(4) decreased level of demand for United America Indemnity's insurance
products or increased competition due to an increase in capacity of property
and casualty insurers; (5) risks inherent in establishing loss and loss
adjustment expense reserves; (6) uncertainties relating to the financial
ratings of United America Indemnity's insurance subsidiaries; (7)
uncertainties arising from the cyclical nature of United America Indemnity's
business; (8) changes in United America Indemnity's relationships with, and
the capacity of, its general agents; (9) the risk that United America
Indemnity's reinsurers may not be able to fulfill obligations; and (10)
uncertainties relating to governmental and regulatory policies. The foregoing
review of important factors should be read in conjunction with the other
cautionary statements that are included in United America Indemnity's Annual
Report on Form 10-K for the fiscal year ended December 31, 2004, as well as in
the materials filed and to be filed with the U.S. Securities and Exchange
Commission (SEC). United America Indemnity does not make any commitment to
revise or update any forward-looking statements in order to reflect events or
circumstances occurring or existing after the date any forward-looking
statement is made.
UNITED AMERICA INDEMNITY, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share data)
For the Quarter For the Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
Gross premiums written $163,902 $88,138 $299,362 $206,076
Net premiums written $136,294 $68,183 $245,815 $126,800
Net premiums earned $119,802 $59,396 $221,914 $104,818
Agency commission and
fee revenues 10,115 - 16,367 -
Investment income, net 11,114 4,417 22,982 8,627
Net realized investment
gains (losses) 394 463 (222) 393
Total revenues 141,425 64,276 261,041 113,838
Net losses and loss
adjustment expense 71,221 34,509 134,818 63,779
Acquisition costs and other
underwriting expenses 37,033 19,286 68,148 30,610
Agency commission and
operating expenses 10,174 - 17,093 -
Corporate and other
operating expenses 2,507 1,488 4,473 2,958
Interest expense 2,180 1,394 4,096 2,709
Income before income taxes 18,310 7,599 32,413 13,782
Income tax expense (benefit) 145 (470) 226 (1,126)
Net income before equity in
net income of partnerships 18,165 8,069 32,187 14,908
Minority interests, net of tax (23) - 9 -
Equity in net income of
partnerships 314 38 425 617
Net income before
extraordinary gain 18,456 8,107 32,621 15,525
Extraordinary gain - - 1,426 -
Net Income $18,456 $8,107 $34,047 $15,525
Weighted average shares
outstanding - basic 36,393 28,257 35,331 28,239
Weighted average shares
outstanding - diluted 37,045 28,823 36,015 28,855
Net income per share - basic $0.51 $0.29 $0.96 $0.55
Net income per share - diluted $0.50 $0.28 $0.95 $0.54
Combined ratio analysis:
Before purchase accounting
adjustments:
Loss ratio 56.1 56.8 57.1 58.5
Expense ratio 34.7 30.9 34.7 29.7
Combined ratio 90.8 87.7 91.8 88.2
Impact of purchase accounting adjustments:
Loss ratio 3.3 1.3 3.7 2.3
Expense ratio (3.7) 1.6 (4.0) (0.4)
Combined ratio (0.4) 2.9 (0.3) 1.9
As reported, after purchase accounting adjustments:
Loss ratio 59.4 58.1 60.8 60.8
Expense ratio 31.0 32.5 30.7 29.3
Combined ratio 90.4 90.6 91.5 90.1
UNITED AMERICA INDEMNITY, LTD.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
ASSETS As of As of
June 30, 2005 December 31, 2004
Bonds:
Available for sale securities,
at fair value $1,053,911 $585,385
(amortized cost: $1,044,767 and $575,298)
Preferred shares:
Available for sale securities,
at fair value 6,893 5,112
(cost: $7,134 and $4,804)
Common shares:
Available for sale securities,
at fair value 57,804 37,894
(cost: $53,595 and $34,004)
Other invested assets 51,975 53,756
Total investments 1,170,583 682,147
Cash and cash equivalents 149,292 242,123
Accounts receivable 22,941 -
Agents' balances, net 77,907 47,132
Reinsurance receivables, net 1,428,846 1,531,863
Accrued investment income 11,875 7,141
Federal income taxes receivable 1,183 -
Deferred federal income taxes, net 15,830 28,372
Deferred acquisition costs, net 48,255 29,735
Goodwill 97,955 -
Prepaid reinsurance premiums 46,803 42,623
Other assets 59,108 14,801
Total assets $3,130,578 $2,625,937
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $1,998,390 $1,876,510
Unearned premiums 257,265 152,166
Federal income taxes payable - 1,943
Amounts held for the account of others 13,757 10,234
Ceded balances payable 27,043 22,698
Insurance premiums payable 30,843 -
Payable for securities 6,274 -
Senior notes payable to related party 72,848 72,848
Junior subordinated debentures 61,857 30,929
Notes and loans payable 6,914 -
Other liabilities 40,711 26,056
Total liabilities 2,515,902 2,193,384
Minority interest 131 -
Shareholders' equity:
Common shares, $0.0001 par value 4 3
Additional paid-in capital 501,400 356,725
Accumulated other comprehensive income 18,776 15,507
Retained earnings 94,365 60,318
Total shareholders' equity 614,545 432,553
Total liabilities and shareholders' equity $3,130,578 $2,625,937
UNITED AMERICA INDEMNITY, LTD.
SUMMARY OF NET OPERATING INCOME
(Dollars and shares in thousands, except per share data)
For the Quarter For the Six Months
Ended June 30, Ended June 30,
2005 2004 2005 2004
Net operating income $ 18,187 $ 7,806 $ 32,728 $ 15,270
Adjustments:
Net realized investment
gains (losses), net of tax 269 301 (107) 255
Extraordinary gain - - 1,426 -
Total after-tax adjustments 269 301 1,319 255
GAAP reported:
Net income $ 18,456 $ 8,107 $ 34,047 $15,525
Weighted average shares
outstanding - basic 36,393 28,257 35,331 28,239
Weighted average shares
outstanding - diluted 37,045 28,823 36,015 28,855
Net operating income
per share -basic $0.50 $0.28 $0.93 $0.54
Net operating income per
share - diluted $0.49 $0.27 $0.91 $0.53
Note Regarding Net Operating Income
In managing its business and evaluating its performance, United America
Indemnity's management focuses on net operating income (net income excluding
after-tax net realized investment gains (losses) and extraordinary items that
do not reflect overall operating trends) as a more appropriate measure of the
net income attributable to the ongoing operations of the business. Net
operating income is not a substitute for net income determined in accordance
with GAAP, and investors should not place undue reliance on this measure.
SOURCE United America Indemnity, Ltd.
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Related links:
http://www.uai.ky
Photo Notes:
NewsCom:
http://www.newscom.com/cgi-bin/prnh/20040211/MXW002LOGO
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Financial: Kevin L. Tate, CPA, Chief
Financial Officer, +1-610-660-6813, ktate@unitednat.com, or
Media: Paula Negro, Assistant Vice President, Marketing,
+1-610-668-6938, pnegro@unitednat.com
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