Republic Companies Group, Inc. Announces an Increase in Net Income for the Second Quarter and Year-To-Date 2005
August 23 2005 - 6:27PM
PR Newswire (US)
DALLAS, Aug. 23 /PRNewswire-FirstCall/ -- Republic Companies Group,
Inc. (NASDAQ:RUTX) ("Republic") today reported revenues of $66.2
million and net income of $2.9 million for the quarter ended June
30, 2005. Shareholders' equity increased to $159.7 million, and the
statutory surplus of our principal insurance subsidiary increased
to $164.2 million as of June 30, 2005. Republic's 2005 second
quarter revenues were $66.2 million and, compared to the second
quarter of 2004, represent an increase of 11.9%. On a year-to- date
basis, revenues through June 30, 2005 were $129.7 million and,
compared to $120.3 million for the comparable period in 2004,
represent an increase of 7.8%. Net written premiums of $68.5
million for the second quarter of 2005 were 9.5% higher than for
the comparable period in 2004. Net insurance premiums earned of
$62.2 million for the second quarter of 2005 were 11.2% higher than
for the comparable period in 2004. Net insurance premiums earned in
2004 were negatively impacted by amortization of the purchase
accounting fair value adjustment of unearned premium reserves
related to the Company's 2003 acquisition. Republic's 2005 second
quarter net income was $2.9 million and, compared to the second
quarter of 2004, represents an increase of 2.0%. On a year-to- date
basis, net income was $10.3 million through June 30, 2005 and,
compared to net income of $9.5 million for the comparable period in
2004, represents an increase of 8.4%. The net combined ratio for
the quarter was 100.1%, slightly higher than the net combined ratio
of 98.6% in the comparable period in 2004. Excluding "catastrophe
losses," the net loss ratio for the quarter was 49.7%, down from
60.2% in the comparable period in 2004. On a year-to-date basis,
the net combined ratio was 93.7%, an improvement from 94.6% in the
comparable period in 2004. Excluding "catastrophe losses," the net
loss ratio for the year-to-date was 48.8%, down from 59.1% in the
comparable period in 2004. Republic's expense ratio for the second
quarter 2005 was 40.1% compared to 31.0% for the comparable period
in 2004. The expense ratio in 2004 was favorably impacted by the
amortization of the purchase accounting fair value adjustment of
unearned premium reserves related to the Company's 2003
acquisition. Parker Rush, President and Chief Executive Officer,
commented, "We are pleased to report improved underwriting results
for the second quarter, which is typically our most challenging
period due to seasonal weather patterns. Our catastrophe weather
related losses, which are generally greatest in the second quarter
due to hail season, were favorably low compared to historic norms,
but were higher than the extraordinarily low level we experienced
in 2004. The strong improvement in net loss ratio excluding
catastrophe losses is evidence of our continuing effort to shape
our business mix to emphasize growth and profitability in
underserved markets that are less vulnerable to broad market
competition. We believe this strategy will continue to produce
favorable and increasing returns on equity for our investors in the
coming quarters." Financial Overview and Highlights Highlights of
Republic's condensed consolidated financial information for the
second quarter and for the first six months of 2005 and 2004 are as
follows: Condensed Consolidated Second Quarter and First Six Months
Highlights ($ in millions) Three Months Three Months Six Months Six
Months Ended Ended Ended Ended June 30, June 30, June 30, June 30,
2005 2004 2005 2004 Gross written premiums $124.1 $123.0 $237.7
$232.2 Net written premiums 68.5 62.6 130.2 118.1 Net insurance
premiums earned 62.2 56.0 122.3 113.4 Net investment income 2.7 2.1
5.0 4.0 Total revenues earned 66.2 59.2 129.7 120.3 Net income
(loss) $2.9 $2.8 $10.3 $9.5 Net ex-catastrophe loss ratio 49.7%
60.2% 48.8% 59.1% Net catastrophe loss ratio 10.3% 7.4% 6.0% 5.8%
Net expense ratio 40.1% 31.0% 38.9% 29.7% Net combined ratio 100.1%
98.6% 93.7% 94.6% Condensed Consolidated Highlights ($ in millions)
As of June 30, As of June 30, 2005 2004 Total assets $763.8 $713.7
Shareholders' Equity (GAAP) $159.7 $154.1 Return on average equity
(GAAP) 12.1% 12.0% Statutory surplus of principal insurance company
$164.2 $141.6 Contributions by business segment for the second
quarter and year-to-date through June 2005 and 2004 can be
summarized as follows: Condensed First Six Months Highlights by
Segment ($ in millions) Three Months Three Months Six Months Six
Months Ended Ended Ended Ended June 30, June 30, June 30, June 30,
2005 2004 2005 2004 Gross written Premium Independent Agents -
Personal Lines $35.6 $33.5 $67.3 $66.2 Independent Agents -
Commercial Lines 21.0 17.6 40.9 31.7 Program Management 32.3 42.1
61.8 79.6 Insurance Services and Corporate 35.2 29.8 67.7 54.7
Consolidated $124.1 $123.0 $237.7 $232.2 Net Income Independent
Agents - Personal Lines $0.2 $1.0 $6.7 $4.5 Independent Agents -
Commercial Lines 0.7 (0.5) 0.6 0.1 Program Management 1.3 1.6 1.7
3.0 Insurance Services and Corporate 0.7 0.7 1.3 1.9 Consolidated
$2.9 $2.8 $10.3 $9.5 Net Combined Ratio (GAAP) Independent Agents -
Personal Lines 102.6% 98.0% 87.3% 92.1% Independent Agents -
Commercial Lines 99.5% 109.1% 102.2% 103.6% Program Management
93.8% 91.6% 98.7% 92.1% Consolidated 100.1% 98.6% 93.7% 94.6%
Second Quarter Highlights In the second quarter, the gross written
premiums generated in our Independent Agents - Personal Lines
Segment were up 6.2% over prior year, led by a strong start for our
low-value dwelling initiative that more than offset a planned
reduction in the presently highly competitive market for non-
standard auto business in Texas. Our Independent Agents -
Commercial Lines Segment produced strong growth, up 19.6%, largely
driven by new business in our target markets replacing purposeful
non-renewals in certain classes in 2004. While severe
weather-related, or "catastrophe," losses (including from
thunderstorms, hailstorms, windstorms, tornadoes, hurricanes and
lightning) can occur in any calendar quarter, the second quarter
historically has experienced the highest frequency of such losses.
Catastrophe losses for the first half of 2005 were relatively
modest on a gross basis, and were well contained through
reinsurance, such that net catastrophe losses for the second
quarter were 19.0% for our Independent Agents - Personal Lines
Segment and 2.1% for our Independent Agents - Commercial Lines
Segment. Excluding the net catastrophe loss ratios, the 2005 second
quarter net combined ratios were substantially improved when
compared to the 2004 second quarter, reflecting the continuing
implementation of our redefined operating strategy and a resulting
improvement in business mix. Second quarter gross written premiums
for our Program Management Segment were 23.3% lower than in 2004,
primarily reflecting the planned run-off of two programs that were
terminated by Republic in 2004. Partially offsetting this decline
was a new program offering "non-subscriber products" (unique
products for employers who have opted out of the Texas workers'
compensation system) and increased retention on a long-standing,
profitable commercial auto/small casualty program. This segment of
our business continued to produce a solid net combined ratio of
93.8% for the second quarter. Republic's Insurance Services and
Corporate Segment produced an 18.2% increase in the quarterly gross
written premiums, reflecting increased fees for fronting services
provided to national carriers on specialty programs. Investment
income grew by 28.5% to $2.7 million for the second quarter, but
continued to be constrained by historically low interest rates.
First Six Months Highlights Improving combined ratios, excluding
catastrophe weather losses, coupled with better than average
weather patterns and higher net investment income primarily drove
the 8.4% increase in consolidated net income for the first six
months of 2005 over the same period in 2004. Our Independent Agent
Segments performed well in the first six months of 2005, producing
growth in gross written premiums and net income and improving their
combined ratios. The Program Management Segment also produced
growth from continuing programs, largely offsetting the premium
reduction caused by the termination of two unprofitable programs in
2004. The consolidated net combined ratio for the first six months
was 93.7%, an improvement when compared to 2004 results and ahead
of our year-to-date plan. 2005 Guidance We believe our focus on
underserved, target markets continues to provide opportunities for
profitable growth that are relatively protected from competitive
offerings in a generally softening market climate. The continued
implementation of our business strategy should provide the
opportunity for double digit percentage growth in net written
premium for the balance of 2005 and high single digit percentage
net written premium growth through 2006. Assuming weather patterns
remain broadly consistent with prior years' experience, our net
combined ratios should continue to improve throughout the remainder
of the year. For the full year 2005, we continue to anticipate
producing a return on average equity that is in the range of 13% to
15%. Investors are advised to read the precautionary statement
regarding forward-looking information included at the end of this
press release. Conference Call The Company will conduct a
teleconference call to discuss information included in this news
release and related matters at 8:00 a.m. CDT on Wednesday August
24, 2005. Investors may access the call telephonically by dialing
(888) 873-4896 with pass code 33845095. International callers may
access the call by dialing (617) 213-8850. The conference call will
be available for replay through August 31, 2005 by dialing (888)
286-8010 (617 801-6888 for international) with the pass code
25574144. Additional information is available on our website at
http://www.republicgroup.com/ . Quiet Period The Company observes a
quiet period and will not comment on financial results or
expectations during quiet periods. The quiet period for the third
quarter will start September 15, 2005 and will extend through the
time of the earnings conference call tentatively scheduled for
October 26, 2005. About Republic Republic Companies Group, Inc. is
a holding company of a group of insurance companies and related
entities that provide personal and commercial property and casualty
insurance products to individuals and small to medium- size
businesses primarily in Texas, Louisiana, Oklahoma and New Mexico.
Our focus on this large and fast-growing region helps us identify
profitable underserved niche opportunities primarily in rural and
small to medium-sized metropolitan areas. We have written insurance
in Texas consistently throughout our entire 101-year history and
have developed a deep market knowledge and a loyal network of
independent agents and a select group of managing general agents
who provide us access to what we believe are among the most
profitable markets. We are rated "A- (Excellent)" by A.M. Best
Company, Inc. with a stable outlook. We completed our Initial
Public Offering in early August 2005. Precautionary Statement
Regarding Forward-Looking Information Some of the statements in
this press release may include forward-looking statements, as that
term is defined in the Private Securities Litigation Reform Act of
1995 (PSLRA), that reflect our current views with respect to future
events and financial performance. These forward-looking statements,
which may apply to us specifically or the insurance industry in
general, are made pursuant to the safe harbor provisions of the
PSLRA and include estimates and assumptions related to economic,
competitive, regulatory, judicial, legislative and other
developments. Statements that include the words "expect," "intend,"
"plan," "believe," "project," "estimate," "may," "should,"
"anticipate," "will" and similar statements of a future or
forward-looking nature identify forward-looking statements for
purposes of the federal securities laws or otherwise. All
forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors
that could cause our actual results to differ materially from those
indicated in these statements. We believe that these factors
include but are not limited to the following: * greater frequency
or severity of claims and loss activity than our underwriting,
reserving or investment practices anticipate based on historical
experience or industry data, including activity resulting from
natural or man-made catastrophic events or severe weather; *
changes in general economic conditions, including inflation and
other factors; * failure to adequately price our insurance policies
and create sufficient reserves; * industry developments that
centralize and commoditize insurance products to the detriment of
agency distribution models; * lack of acceptance of our products
and services, including new products and services; * decreased
demand for our insurance products; * difficulty in expanding our
book of business; * changes in the availability, cost or quality of
reinsurance and failure of our reinsurers to pay claims timely or
at all; * the creditworthiness of our reinsurers or of the insurers
for whom we provide fronting services; * the occurrence of one or
more catastrophic events or a series of severe weather events in
the concentrated geographic area where we focus our insurance
underwriting; * loss of independent insurance agents to distribute
our products; * failure of one or more of our MGAs to appropriately
underwrite our products or administer claims; * inability to
maintain our business relationship with our largest producing MGA;
* loss of the services of any of our executive officers,
underwriters or other key personnel; * decline of our A.M. Best
Company, Inc. ("A.M. Best") financial strength rating; * changes in
rating agency policies or practices; * failure of any loss
limitation method we employ; * changes in legal theories of
liability under our insurance policies; * economic or regulatory
developments in the State of Texas, or other states in which we
operate, that adversely affect our financial condition and results
of operations; * increased competition on the basis of pricing,
capacity, coverage terms or other factors; * developments in the
world's financial and capital markets that adversely affect the
performance of our investments; * inability to obtain capital on
acceptable terms; * changes in regulations, laws and accounting
standards applicable to us or our subsidiaries, agents or
customers; * increases in the amount of assessments we are required
to pay; * the effect our holding company structure and regulatory
constraints may have on our ongoing cash requirements and ability
to pay dividends; * failure of our information technology systems;
* the effects of future acquisitions on our business; and *
difficulty in effecting a change of control of our company. This
list of factors should not be construed as exhaustive and should be
read in conjunction with the other cautionary statements that are
included in our filings with the Securities and Exchange Commission
(available at http://www.sec.gov/ ). Unless otherwise required by
law, we undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future developments or otherwise. If one or more of these or other
risks or uncertainties materialize, or if our underlying
assumptions otherwise prove to be incorrect, our actual results may
vary materially from what we project. Any forward-looking
statements you read in this news release reflect our views as of
the date of this press release with respect to future events and
are subject to these and other risks, uncertainties and assumptions
relating to our operations, financial condition, results of
operations, growth strategy and liquidity. All subsequent written
and oral forward-looking statements attributable to us or
individuals acting on our behalf are expressly qualified in their
entirety by this paragraph.
http://www.newscom.com/cgi-bin/prnh/20050801/REPUBLICLOGO
http://photoarchive.ap.org/ DATASOURCE: Republic Companies Group,
Inc. CONTACT: media and investors, Michael E. Ditto, Esq., Vice
President, General Counsel and Secretary of Republic Companies
Group, Inc., +1-972-788-6100 Web site:
http://www.republicgroup.com/
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