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Selected Operating and Balance Sheet Data
(Dollars in millions, For the Three Months For the Six Months
except per share data) Ended June 30, Ended June 30,
2009 2008 2009 2008
Net income/(loss) $ 16.3 $ (9.0) $ 23.4 $ (1.5)
Net income/(loss) per share $ 0.32 $ (0.24) $ 0.54 $ (0.04)
Operating income/(loss) $ 12.7 $ (7.4) $ 26.2 $ 0.7
Operating income/ $ 0.25 $ (0.20) $ 0.61 $ .02
(loss) per share
Operating income, a non-GAAP financial measure, is equal to net income excluding after-tax net realized investment gains (losses). A reconciliation of operating income is set forth at the end of this press release.
(Dollars in millions) As of
June 30, 2009
Book value per share $ 12.62
Tangible book value per share $ 12.52
Cash & invested assets $ 1,678.7
Selected Financial Data for the Three Months Ended June 30, 2009:
-- Operating income of $12.7 million or $0.25 per share.
-- Gross premiums written of $91.5 million.
-- Current accident year combined ratio of 101.9.
-- After tax annualized investment return of 8.6%, including $15.8 million
of after tax unrealized gains.
-- $91.5 million of capital raised through the Rights Offering announced
in the 1st quarter of 2009.
-- Equity growth of 5.2% excluding the impact of the Rights Offering.
Selected Financial Data for the Six Months Ended June 30, 2009:
-- Operating income of $26.2 million or $0.61 per share.
-- Gross premiums written of $190.7 million.
-- Current accident year combined ratio of 101.5.
-- After tax annualized investment return of 5.5%, including $14.7 million
of after tax unrealized gains.
-- Equity growth of 6.3% excluding the impact of the Rights Offering.
United America Indemnity's Three Months Ended June 30, 2009 and 2008 Gross and Net Premiums Written Results by Business Unit
(Dollars in thousands) Three Months Ended June 30,
Gross Premiums Written Net Premiums Written
2009 2008 2009 2008
Insurance Operations
Penn-America $ 34,256 $ 49,166 $ 27,500 $ 45,511
United National 16,607 24,370 13,222 20,963
Diamond State 21,824 21,319 18,069 17,697
Total Insurance Operations 72,687 94,855 58,791 84,171
Reinsurance Operations
Wind River 18,793 9,463 18,687 1,038
Total $ 91,480 $ 104,318 $ 77,478 $ 85,209
Insurance Operations: Gross premiums written for the three months ended June 30, 2009 decreased 23.4%, and net premiums written for the three months ended June 30, 2009 decreased 30.2%, compared to the same period in 2008. The reduction in gross premium is comprised mainly of the following:
-- $9.6 million of the decline is due to terminated programs and agents.
-- $12.6 million of the decline is due to price decreases in aggregate of
approximately 3.0% and other market factors.
Reinsurance Operations: Gross premiums written for the three months ended June 30, 2009 increased $9.3 million and net premiums written increased $17.6 million, excluding the intercompany reinsurance treaty, compared to the same period in 2008. The increase in gross and net premiums written is primarily due to new excess of loss and quota share treaties.
United America Indemnity's Combined Ratio for the Three Months Ended June 30, 2009 and 2008
The combined ratio is a key measure of insurance profitability. The components comprising the combined ratio are as follows:
Three Months Ended June 30,
2009 2008
Loss Ratio:
Current Accident Year 61.8 66.7
Changes to Prior Accident Year (2.9) 16.4
Loss Ratio - Calendar Year 58.9 83.1
Expense Ratio 40.1 37.9
Combined Ratio 99.0 121.0
The calendar year loss ratio improved 24.2 points to 58.9 points in 2009 from 83.1 points in 2008.
-- The current accident year loss ratio improved 4.9 points to 61.8 points
from 66.7 points in 2008 due to improvements in both the property and
casualty loss ratios.
-- The property loss ratio improved 7.3 points to 51.9 points in 2009
from 59.2 points in 2008 due primarily to the growth and performance
of our property business in reinsurance operations.
-- The casualty loss ratio improved 1.5 points to 69.3 points in 2009
from 70.8 points in 2008 due primarily to improved performance in
our reinsurance operations.
-- A 19.3 point improvement in net loss and loss adjustment expense
related to prior accident years. In 2009, $2.2 million of reserves were
released due to positive emergence primarily in the property lines,
compared to $16.5 million of prior year adverse reserve development in
2008 related primarily to liability lines.
The expense ratio increased from 37.9 in 2008 to 40.1 in 2009.
-- The expense ratio increase is mainly attributable to a decline in net
premiums earned.
United America Indemnity's Six Months Ended June 30, 2009 and 2008 Gross and Net Premiums Written Results by Business Unit
(Dollars in thousands) Six Months Ended June 30,
Gross Premiums Written Net Premiums Written
2009 2008 2009 2008
Insurance Operations
Penn-America $ 66,595 $ 93,348 $ 54,657 $ 84,914
United National 31,927 50,239 25,639 43,071
Diamond State 41,785 44,560 33,964 36,854
Total Insurance Operations 140,307 188,147 114,260 164,839
Reinsurance Operations
Wind River 50,361 15,233 49,831 2,334
Total $ 190,668 $ 203,380 $ 164,091 $ 167,173
Insurance Operations: Gross premiums written for the six months ended June 30, 2009 decreased 25.4%, and net premiums written for the six months ended June 30, 2009 decreased 30.7%, compared to the same period in 2008. The reduction in gross premium is comprised mainly of the following:
-- $21.8 million of the decline is due to terminated programs and agents.
-- $26.0 million of the decline is due to price decreases in aggregate of
approximately 3.0% and other market factors.
Reinsurance Operations: Gross premiums written for the six months ended June 30, 2009 increased $35.1 million and net premiums written increased $47.5 million, excluding the intercompany reinsurance treaty, compared to the same period in 2008. The increase in gross and net premiums written is primarily due to new excess of loss and quota share treaties.
United America Indemnity's Combined Ratio for the Six Months Ended June 30, 2009 and 2008
The combined ratio is a key measure of insurance profitability. The components comprising the combined ratio are as follows:
Six Months Ended June 30,
2009 2008
Loss Ratio:
Current Accident Year 61.8 67.3
Changes to Prior Accident Year (1.9) 7.7
Loss Ratio - Calendar Year 59.9 75.0
Expense Ratio 39.7 35.7
Combined Ratio 99.6 110.7
The calendar year loss ratio improved by 15.1 points to 59.9 points in 2009 from 75.0 points in 2008.
-- The current accident year loss ratio improved by 5.5 points to 61.8
points in 2009 from 67.3 points in 2008 due to improvements in both the
property and casualty loss ratios.
-- The property loss ratio improved by 11.1 points to 52.2 points in
2009 from 63.3 points in 2008 due primarily to the growth and
performance of our property business in reinsurance operations and
improved performance of our property business in insurance
operations.
-- The casualty loss ratio improved 0.7 points to 68.7 points in 2009
from 69.4 points in 2008 due primarily to improved performance in
our reinsurance operations.
-- A 9.6 point improvement in net loss and loss adjustment expense related
to prior accident years. In 2009, $2.9 million of reserves were
released due to positive emergence primarily in the property lines,
compared to $16.5 million of prior year adverse reserve development in
2008 related primarily to liability lines.
The expense ratio increased from 35.7 in 2008 to 39.7 in 2009.
-- The expense ratio increase is mainly attributable to a decline in net
premiums earned.
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.
Teleconference and Webcast for Interested Parties
Larry A. Frakes, President and Chief Executive Officer of United America Indemnity Ltd., and Thomas McGeehan, Interim Chief Financial Officer of United America Indemnity, Ltd. will conduct a teleconference for interested parties on August 5, 2009 at 8:30 a.m. Eastern Time to discuss the second quarter 2009 results.
To participate in the teleconference, please telephone (800) 288-8975 (U.S. and Canada) or (612) 332-0345 (International) and you will be greeted by an operator. Please reference UAI Second Quarter Earnings Release Call or reference Larry Frakes.
The teleconference is being webcast by AT&T and can be accessed at the Company's website at 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 AT&T's Audio-Only Web ConferenceCast. To access live or archived event, please use this URL: http://65.197.1.5/att/confcast, Conference ID#: 109543 and click GO.
The teleconference will be available for replay beginning at 10:30 a.m. Eastern Time on August 5, 2009 until 11:59 p.m. September 5, 2009. To listen to the replay, please telephone (800) 475-6701 (U.S. and Canada) or (320) 365-3844 (International) then enter 109543.
Forward-Looking Information
This release contains forward-looking information about United America Indemnity, Ltd. and the operations of United America Indemnity, Ltd. 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, Ltd. 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, Ltd.'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, Ltd.'s underwriting, reserving or investment practices have anticipated; (4) decreased level of demand for United America Indemnity, Ltd.'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, Ltd.'s insurance subsidiaries; (7) uncertainties arising from the cyclical nature of United America Indemnity, Ltd.'s business; (8) changes in United America Indemnity, Ltd.'s relationships with, and the capacity of, its general agents; (9) the risk that United America Indemnity, Ltd.'s reinsurers may not be able to fulfill obligations; (10) investment performance and credit risk; and (11) 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, Ltd.'s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as well as in the materials filed and to be filed with the U.S. Securities and Exchange Commission (SEC). United America Indemnity, Ltd. 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.
Note: Tables Follow
United America Indemnity, Ltd.
Consolidated Statements of Operations
(Unaudited)
(Dollars and shares in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2009 2008 2009 2008
Gross premiums written $91,480 $104,318 $190,668 $203,380
Net premiums written $77,478 $85,209 $164,091 $167,173
Net premiums earned $74,732 $100,673 $153,272 $213,730
Investment income, net 16,605 17,072 38,782 34,858
Net realized investment
gains (losses) 5,398 (2,480) (3,198) (3,550)
Total revenues 96,735 115,265 188,856 245,038
Net losses and loss
adjustment expenses 44,047 83,644 91,787 160,294
Acquisition costs and
other underwriting
expenses 29,972 38,112 60,786 76,307
Corporate and other
operating expenses 3,663 2,269 7,638 6,214
Interest expense 1,832 2,188 3,686 4,727
Income before
income taxes 17,221 (10,948) 24,959 (2,504)
Income tax expense
(benefit) 2,758 (2,003) 3,481 (1,442)
Net income before equity
in net income (loss)
of partnership 14,463 (8,945) 21,478 (1,062)
Equity in net income
(loss) of partnership,
net of tax 1,798 (26) 1,933 (469)
Net income $16,261 $(8,971) $23,411 $(1,531)
Weighted average shares
outstanding-basic 50,824 37,679 43,005 38,194
Weighted average shares
outstanding-diluted 50,863 37,679 43,038 38,194
Net income per
share - basic $0.32 $(0.24) $0.54 $(0.04)
Net income per
share - diluted $0.32 $(0.24) $0.54 $(0.04)
Combined ratio analysis:
Loss ratio 58.9 83.1 59.9 75.0
Expense ratio 40.1 37.9 39.7 35.7
Combined ratio 99.0 121.0 99.6 110.7
Certain prior period amounts have been reclassified to conform to the 2009 presentation.
In 2008, "Diluted" loss per share is the same as "Basic" loss per share since there was a net loss for the quarter and six months ended June 30, 2008.
The loss ratio, expense ratio and combined ratio are non-GAAP financial measures that are generally viewed in the insurance industry as indicators of underwriting profitability. The loss ratio is the ratio of net losses and loss adjustment expenses to net premiums earned. The expense ratio is the ratio of acquisition costs and other underwriting expenses to net premiums earned. The combined ratio is the sum of the loss and expense ratios.
UNITED AMERICA INDEMNITY, LTD.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share data)
ASSETS As of As of
June 30, December 31,
2009 2008
Bonds:
Available for sale securities, at fair value
(amortized cost: 2009 - $1,254,330
and 2008 - $1,192,385) $1,286,530 $1,204,974
Preferred shares:
Available for sale securities, at fair value
(cost: 2009 - $3,561 and 2008 - $4,665) 4,308 4,665
Common shares:
Available for sale securities, at fair value
(cost: 2009 - $44,418 and 2008 - $46,316) 50,724 50,613
Other invested assets:
Available for sale securities, at fair value
(cost: 2009 - $3,644 and 2008 - $19,689) 10,627 39,219
Securities classified as trading, at fair value
(cost: $35,151 and $5,151) 40,190 7,453
Total investments 1,392,379 1,306,924
Cash and cash equivalents 286,375 292,604
Agents' balances 78,873 57,117
Reinsurance receivables 620,101 679,277
Federal income taxes receivables 14,954 16,487
Deferred federal income taxes 19,247 32,532
Deferred acquisition costs 37,481 34,734
Intangible assets 9,272 9,309
Prepaid reinsurance premiums 18,848 23,960
Other assets 27,871 24,115
Total assets $2,505,401 $2,477,059
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses $1,394,818 $1,506,429
Unearned premiums 155,383 149,677
Ceded balances payable 19,664 25,165
Contingent commissions 7,274 6,695
Notes and debentures payable 121,712 121,845
Other liabilities 43,188 35,255
Total liabilities 1,742,039 1,845,066
Shareholders' equity:
Common shares, $0.0001 par value,
900,000,000 common shares authorized;
Class A common shares issued: 42,385,514
and 25,032,618, respectively; Class A
common shares outstanding: 36,350,388
and 19,013,462, respectively; Class B
common shares issued and outstanding:
24,122,744 and 12,687,500, respectively 7 4
Additional paid-in capital 617,750 524,345
Accumulated other comprehensive income 33,507 25,108
Class A common shares in treasury, at cost:
6,035,126 and 6,019,156 shares, respectively (100,615) (100,446)
Retained earnings 212,713 182,982
Total shareholders' equity 763,362 631,993
Total liabilities and
shareholders' equity $2,505,401 $2,477,059
UNITED AMERICA INDEMNITY, LTD.
SELECTED INVESTMENT DATA
(Unaudited)
(Dollars in millions)
Market Value as of
June 30, 2009 Dec 31, 2008
Bonds $1,286.5 $1,205.0
Cash & cash equivalents 286.4 292.6
Total bonds and cash and cash equivalents 1,572.9 1,497.6
Equities and other invested assets 105.8 101.9
Total cash and invested assets $1,678.7 $ 1,599.5
June 30, 2009 (a)
Three Months Ended Six Months Ended
Net investment income $12.9 $25.3
Net realized investment gain (loss) 3.5 (2.8)
Net Equity in net income of partnerships 1.8 1.9
Net unrealized investment gains 15.8 14.7
Net gain from liquidation of partnerships 0.8 5.6
Net realized and unrealized investment 21.9 19.4
Total investment return $34.8 $44.7
Total investment return annualized $139.3 $89.5
Cash and invested assets December 2008 $1,599.5
Cash and invested assets March 2009 $1,574.7
Cash and invested assets June 2009 1,678.7 1,678.7
Sum of cash and invested assets $3,253.4 $3,278.2
Average total cash and
invested assets $1,626.7 $ 1,639.1
Total investment return % annualized 8.6% 5.5%
(a) Amounts in this table are shown on an after-tax basis.
UNITED AMERICA INDEMNITY, LTD.
SUMMARY OF OPERATING INCOME / (LOSS)
(Unaudited)
(Dollars and shares in thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2009 2008 2009 2008
Operating income $12,712 $(7,415) $26,183 $725
Adjustments:
Net realized investment
gains (losses), net of tax 3,549 (1,556) (2,772) (2,256)
Total after-tax adjustments 3,549 (1,556) (2,772) (2,256)
Net income $16,261 $(8,971) $23,411 $(1,531)
Weighted average shares
outstanding - basic 50,824 37,679 43,005 38,194
Weighted average shares
outstanding - diluted 50,863 37,679 43,038 38,194
Operating income per
share - basic $0.25 $(0.20) $0.61 $0.02
Operating income per
share - diluted $0.25 $(0.20) $0.61 $0.02
In 2008, "Diluted" loss per share is the same as "Basic" loss per share since there was a net loss for the quarter and six months ended June 30, 2008.
In computing the basic and diluted weighted share counts the number of shares outstanding prior to May 5, 2009 (the date that the common stock was issued in conjunction with the stockholders' rights offering) was adjusted by a factor of 1.116 to reflect the impact of a bonus element associated with the rights offering in accordance with SFAS 128, Earnings per Share.
Note Regarding Operating Income
Operating income, a non-GAAP financial measure, is equal to net income 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.
SOURCE United America Indemnity, Ltd.
http://65.197.1.5/att/confcast
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