- Gross Premiums up +19% for the 2010 Second Quarter and +3% for the 2010 First Six Months
- Net Income of $.39 per Share for the 2010 Second Quarter and $.94 Year to Date
- Book Value per Share of $15.08 Increased 7.3% in the First Six Months of 2010
- Annualized ROE of 12.9% for the 2010 First Six Months
|Three Months Ended June 30,||Six Months Ended June 30,|
|(In thousands, except per share data)||(In thousands, except per share data)|
|Net after-tax earnings from operations||$ 6,534||$ 10,948||$ 15,736||$ 23,455|
|Change in valuation allowance related to net capital losses||--||481||810||605|
|After-tax net realized gain from investments||1,084||680||1,658||695|
|Net income||$ 7,618||$ 12,109||$ 18,204||$ 24,755|
|Net after-tax earnings from operations per share, diluted||$ 0.33||$ 0.57||$ 0.81||$ 1.21|
|Change in valuation allowance related to net capital losses per share, diluted||--||0.02||0.04||0.03|
|After-tax net realized gain from investments per share, diluted||0.06||0.04||0.09||0.04|
|Net income per share, diluted||$ 0.39||$ 0.63||$ 0.94||$ 1.28|
Claims: The loss and loss adjustment expense (LAE) ratio for the 2010 second quarter was 66.5% which is several percentage points higher than the Company has experienced in recent years. In contrast, the loss and LAE ratio of 56.6% for the 2009 second quarter was several percentage points better than the historical run rate. It is not unusual for the Company to experience quarterly loss and LAE ratio fluctuation given its niche orientation and policy loss limits for certain commercial coverages. The higher loss and LAE ratio in the 2010 second quarter was attributable to a variety of factors in several of the Company's niche product lines. In response to the elevated losses, starting in the 2009 fourth quarter and continuing in 2010 the Company has initiated underwriting and pricing actions for products in its Specialty Personal Lines component, but has not identified any other specific contributing factors. During the 2010 second quarter, the Company experienced favorable development from prior year claims of $1.5 million which reduced the loss and LAE ratio by 2.2 percentage points for the quarter and is consistent with the second quarter of 2009.
Expenses: The underwriting expense ratios of 25.6% for the 2010 second quarter and 25.4% for the 2010 first six months were in line with expectations. Exclusive of the costs associated with the recently completed Vanliner acquisition, the Company's underwriting expense ratio would have been 24.8% for both the three and six months ended June 30, 2010.The Company's niche products have varying commissions and other policy acquisition costs associated with them and, as a result, the mix of business written in a particular quarter contributes to quarterly fluctuations in the underwriting expenses.Dave Michelson, President and Chief Executive Officer, commented, "The loss and loss adjustment expense ratio for the 2009 second quarter was unusually low, but we can't look past the fact that the 2010 second quarter losses were slightly higher than we expected. We anticipated some deterioration in the operating earnings due to the cumulative effect of low to mid single digit rate decreases that have occurred over the past several years. However, a few of our 30+ products experienced higher than expected claims activity during the 2010 second quarter. Underwriting and pricing actions are underway in our Specialty Personal Lines component and we are closely monitoring our other products to determine if any of the elevation in losses for the second quarter was caused by factors other than timing."