COLUMBUS, Ohio, May 12, 2008 (PRIME NEWSWIRE) -- ProCentury Corporation (Nasdaq:PROS), a specialty property and casualty insurance holding company, reported net income for the quarter ended March 31, 2008, of $5.2 million, or $0.39 per diluted share, compared to net income of $5.4 million, or $0.40 per diluted share, for the first quarter of 2007. Net income for the three months ended March 31, 2008 includes $513,000 of after tax net realized investment losses, or $0.04 per diluted share, compared to $130,000, or $0.01 per diluted share, for the same period in 2007. As a result, operating income (which is a non-GAAP financial measure that includes net income plus net realized investment losses net of tax) was $0.43 per diluted share for the three months ended March 31, 2008, compared to $0.41 per diluted share for the three months ended March 31, 2007. Management believes that operating income, a non-GAAP financial measure, permits investors to evaluate the Company's results before the effects of realized investment gains and losses.
The Company's results for the first quarter of 2008 also include:
* Operating income was $0.43 per diluted share, compared to $0.40 for
the same period of 2007.
* A combined ratio of 93.4%, compared to a combined ratio of 94.6% for
the first quarter of 2007.
* Gross premiums written for the first quarter of 2008 were $53.9
million, compared to $58.5 million for the same period in 2007.
* Book value per share of $12.31 at March 31, 2008, compared to $12.05
at December 31, 2007.
* Our average credit quality of our investment portfolio at March 31,
2008 was AA+.
Edward Feighan, ProCentury's Chief Executive Officer, said, "We are pleased with our continued improvement in underwriting profitability. Despite the more competitive markets, we've remained focused on our underwriting discipline by not chasing prices below adequate levels and by exiting or non-renewing under-priced business. We continue to aggressively pursue new growth initiatives that meet our underwriting profitability criteria."
Christopher Timm, ProCentury's Executive Vice President and Century Surety Company's President and Chief Operating Officer, added, "We are enthusiastic about our future opportunities but remain cautious when evaluating our lines of business. We have seen significant pressure in our property lines as a result of other carriers offering wind coverage at the same price as a policy that we offer without coverage for the wind peril. We are very excited that our new growth initiatives, such as contractors, ocean marine, environmental and surety, continue to gain traction from not only a top line growth perspective but are also additive to our underwriting profit."
Commenting on the merger with Meadowbrook, Chris Timm stated, "Both of our and Meadowbrook's new business teams have met and begun to introduce each other's products to the other's distribution systems. Meadowbrook's program partners have expressed strong support for their new access to our surplus lines products. We have identified a significant number of new business initiatives that, while still in the early stages of product development, have given us reasons to be optimistic."
Financial Results for the First Quarter 2008
For the quarter ended March 31, 2008, ProCentury's net income was $5.2 million, or $0.39 per diluted share, compared to net income of $5.4 million, or $0.40 per diluted share, for the same period in 2007. Net income for the three months ended March 31, 2008 includes $513,000 of after tax net realized investment losses, or $0.04 per diluted share, compared to $130,000, or $0.01 per diluted share for the same period in 2007.
The combined ratio for the first quarter of 2008 was 93.4%, down from 94.6% for the first quarter of 2007. The loss ratio for the first quarter of 2008 was 57.5%, and the expense ratio was 35.9%. This compares to a loss ratio of 62.3% and expense ratio of 32.3% for the first quarter of 2007.
Gross premiums written for the first quarter of 2008 were $53.9 million compared to $58.5 million for the same period in 2007. Premiums earned were $48.3 million for the period ended March 31, 2008, compared to $54.4 million for the same period last year. Investment income for the first quarter of 2008 was $5.3 million compared to $5.4 million in the first quarter of 2007.
Our fixed income investment portfolio is 95.7% in investment grade securities. While 36.2% of our investment portfolio includes investments in asset-backed and agency-backed securities, our direct exposure to sub-prime risks is only $6.2 million or 1.3% of our total cash and investments. Our CMO and mortgage backed securities portfolios have an average credit quality of AAA, while our asset backed securities sector, which includes our sub-prime assets, has an average credit quality of AA-. All of these securities are adequately collateralized, and we expect they will continue to perform.
Other ProCentury News
-- On February 20, 2008, ProCentury entered into a merger
agreement with Meadowbrook Insurance Group, Inc. for a merger
transaction valued at approximately $272.6 million in cash and
Meadowbrook stock to be paid to ProCentury shareholders. The
parties anticipate that the transaction will be finalized
during the third quarter of 2008, subject to various customary
closing conditions, such as the approval of both ProCentury's
and Meadowbrook's shareholders, regulatory approval, the
effectiveness of the Form S-4 registration statement relating
to the Meadowbrook common stock to be issued in the transaction
and the compliance with certain covenants. During April 2008,
ProCentury and Meadowbrook filed a preliminary joint proxy
statement / prospectus with the Securities and Exchange
Commission relating to the proposed merger, and the parties
submitted required filings with various state insurance
regulators seeking their approval of the transaction.
-- On February 27, 2008, A.M. Best reaffirmed the A- (Excellent)
rating of the Company's primary subsidiary, Century Surety
Company with a stable outlook.
-- On April 16, 2008, ProCentury paid a dividend of $0.04 per
share to shareholders of record as of March 25, 2008.
About ProCentury Corporation
ProCentury Corporation (Nasdaq:PROS) is a specialty property and casualty insurance holding company. Its subsidiary, Century Surety Company, underwrites property and casualty insurance for small- and mid-sized businesses. Century Surety Company primarily writes excess and surplus lines insurance and markets its products through a select network of general agents.
The ProCentury Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3677
Additional Information about the Proposed Merger
The proposed merger will be submitted to Meadowbrook's and ProCentury's shareholders for their approval. Meadowbrook has filed a registration statement, and Meadowbrook and ProCentury has filed a preliminary joint proxy statement/prospectus, and both companies will file other relevant documents with the Securities and Exchange Commission (the "SEC"). Shareholders are urged to read the registration statement and joint proxy statement/prospectus when they become available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You can obtain a free copy of the registration statement and joint proxy statement/prospectus, as well as other filings containing information about Meadowbrook and ProCentury, at the SEC's website (http://www.sec.gov). You can also obtain these documents, free of charge, by accessing Meadowbrook's website (http://www.meadowbrook.com) or by accessing ProCentury's website (http://www.procentury.com).
Meadowbrook and ProCentury and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Meadowbrook and/or ProCentury in connection with the proposed merger. Information about the directors and executive officers of Meadowbrook is set forth in the proxy statement for Meadowbrook's 2007 annual meeting of shareholders, as filed with the SEC on April 6, 2007. Information about the directors and executive officers of ProCentury is set forth in the ProCentury's annual report on Form 10-K for the year ended December 31, 2007. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the preliminary joint proxy statement/prospectus regarding the proposed merger, and the final joint proxy statement/prospectus when it becomes available. You may obtain free copies of these documents as described above.
NOTE ON FORWARD-LOOKING STATEMENTS
Statements in this press release that are not historical statements are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are derived from information that we currently have and assumptions that we make and may be identified by words such as "believes," "anticipates," "expects," "plans," "should," "estimates" and similar expressions. Our forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those stated or implied in our forward-looking statements, including but not limited to: 1) risks inherent in establishing loss and loss adjustment expense reserves; 2) uncertainties related to the ratings of our insurance subsidiary; 3) uncertainties related to governmental and regulatory policies; 4) uncertainties relating to the cyclical nature of our business; 5) changes in our relationships with, and the capacity of, our general agents; 6) the risk that our reinsurers may not be able to fulfill their obligations to us; 7) the continued functionality of our online services; 8) the ability to obtain required governmental and shareholder approvals and satisfy other closing conditions that will enable us to complete the merger or to complete it in the expected timeframe; 9) the risk that the businesses of Meadowbrook and ProCentury will not be integrated successfully following the merger or such integration may be more difficult, time-consuming or costly than expected; and 10) customer and employee relationships and business operations may be disrupted by the merger. You are cautioned not to place undue reliance on forward-looking statements, which are made only as of the date of this press release. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For additional disclosure regarding potential risks, please refer to documents we file with the Securities and Exchange Commission.
PROCENTURY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(dollars in thousands, except per share data)
Quarter Ended Quarter Ended
March 31, 2008 March 31, 2007
---------------- ----------------
Gross premiums written $53,866 58,455
Net premiums written $45,153 50,060
Premiums earned $48,345 54,388
Net investment income 5,332 5,433
Net realized investment losses (462) (201)
Other income 86 123
---------------- ----------------
Total revenues 53,301 59,743
---------------- ----------------
Losses and loss expenses 27,785 33,877
Amortization of deferred
policy acquisition costs 14,176 13,699
Other operating expenses 3,193 3,851
Interest expense 596 686
---------------- ----------------
Total expenses 45,750 52,113
---------------- ----------------
Income before income
taxes 7,551 7,630
Income tax expense 2,327 2,251
---------------- ----------------
Net income $5,224 5,379
================ ================
Basic income per share $0.39 0.41
Diluted income per share $0.39 0.40
================ ================
Weighted average of shares
outstanding - basic 13,307,738 13,227,427
================ ================
Weighted average of shares
outstanding - diluted 13,446,658 13,421,607
================ ================
Loss and loss expense ratio 57.5% 62.3%
Expense ratio 35.9 32.3
---------------- ----------------
Combined ratio 93.4% 94.6%
================ ================
PROCENTURY CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share data)
Assets March 31, December 31,
2008 2007
------------- -------------
(unaudited)
Investments $479,238 455,510
Cash 7,357 11,766
Premiums in course of collection, net 34,195 31,805
Deferred policy acquisition costs 24,033 24,336
Prepaid reinsurance premiums 15,765 14,834
Reinsurance recoverable on paid
and unpaid losses, net 44,304 44,777
Receivable for securities 34,530 413
Other assets 26,321 23,613
------------- -------------
Total assets $665,743 607,054
============= =============
Liabilities and Shareholders' Equity
Loss and loss expense reserves $280,228 279,253
Unearned premiums 112,383 114,645
Long term debt 25,000 25,000
Payable for securities 55,007 304
Other liabilities 27,863 26,831
------------- -------------
Total liabilities 500,481 446,033
------------- -------------
Shareholders' equity:
Capital stock, without par value -- --
Additional paid-in capital 103,988 103,283
Retained earnings 71,135 66,448
Accumulated other comprehensive
loss, net of tax expense (9,861) (8,710)
------------- -------------
Total shareholders' equity 165,262 161,021
------------- -------------
Total liabilities and
shareholders' equity $665,743 607,054
============= =============
Book value per share $12.31 12.05
============= =============
Number of common shares
outstanding 13,420,967 13,363,867
============= =============