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Fortegra Financial Corporation Reports First Quarter Results

Any forward-looking statement made by us in this press release speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.

Further information concerning Fortegra and its business, including factors that potentially could materially affect Fortegra's financial results, is contained in Fortegra's filings with the SEC, which are available free of charges at the SEC's website at http://www.sec.gov and or from Fortegra's website in the "Investor Relations" section under "SEC Filings" at http://www.fortegra.com.

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(All Amounts in Thousands Except Share and Per Share Amounts)
 
For the Three Months Ended
March 31, 2011   March 31, 2010
Revenues:
Service and administrative fees $ 9,116 $ 7,975
Brokerage commissions and fees 7,867 6,730
Ceding commission 8,158 6,624
Net investment income 941 948
Net realized gains 95 2
Net earned premium 28,437 28,493
Other income 82   81
Total Revenues 54,696   50,853
 
Net losses and loss adjustment expenses 9,373 8,777
Commissions 18,517   19,349
Net Revenues 26,806   22,727
 
Expenses:
Personnel costs 10,992 9,081
Other operating expenses 6,944 5,136
Depreciation and amortization of intangibles 1,635 1,054
Interest expense 2,031   1,891
Total Expenses 21,602   17,162
 
Income before income taxes and non-controlling interest 5,204 5,565
Income Taxes 1,775   2,076
Income before non-controlling interest 3,429 3,489
Less: net income (loss) attributable to non-controlling interest (174 ) 15
Net income $ 3,603   $ 3,474
 

Earnings per share:
Basic $ 0.18 $ 0.22
Diluted $ 0.17 $ 0.21

Weighted average common shares outstanding:
Basic 20,464,592 15,742,336
Diluted 21,668,333 16,941,372

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED BALANCE SHEETS (Unaudited)

(All Amounts in Thousands Except Share Amounts)
   
March 31, 2011 December 31, 2010
Assets:
Investments
Fixed maturity securities available-for-sale at fair value (amortized cost of $83,205 in 2011 and $82,124 in 2010) $ 86,412 $ 85,786
Equity securities available-for-sale at fair value (cost of $1,955 in 2011 and $1,955 in 2010) 1,951 1,935
Short-term investments 1,070   1,170  
Total investments 89,433 88,891
Cash and cash equivalents 18,360 43,389
Restricted cash 11,793 15,722
Accrued investment income 992 880
Notes receivable 1,443 1,485
Other receivables 26,496 25,473
Reinsurance receivables 161,674 169,382
Deferred acquisition costs 61,883 65,142
Property and equipment, net 13,985 11,996
Goodwill 120,672 84,387
Other intangibles, net 30,894 29,283
Other assets 6,506   5,505  
Total assets $ 544,131   $ 541,535  
 
Liabilities:
Unpaid claims $ 30,534 $ 32,693
Unearned premiums 200,588 210,430
Accrued expenses and accounts payable 40,476 41,844
Deferred revenue 25,171 25,611
Notes payable 61,463 36,713
Preferred trust securities 35,000 35,000
Redeemable preferred stock 575 11,040
Deferred income taxes 23,416   24,317  
Total liabilities 417,223   417,648  
 
 
Stockholders' Equity:
Preferred stock, par value $0.01; 10,000,000 shares authorized; none issued
Common stock, par value $0.01; 150,000,000 shares authorized; 20,515,035 and 20,256,735 shares issued in 2011 and 2010, respectively 205 203
Treasury stock (44,578 shares in 2011 and 2010, respectively) (176 ) (176 )
Additional paid-in capital 95,559 95,556
Accumulated other comprehensive income, net of tax (expense) of $(658) and $(1,235), in 2011 and 2010, respectively 1,880 2,293
Retained earnings 28,911   25,308  
Stockholders' equity before non-controlling interest 126,379 123,184
Non-controlling interest 529   703  
Total stockholders' equity 126,908   123,887  
Total liabilities and stockholders' equity $ 544,131   $ 541,535  

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME- Segments (Unaudited)

(All Amounts in Thousands)
 
(Unaudited) For the Three Months Ended
March 31, 2011   March 31, 2010
Segment Net Revenue
Payment Protection
Service and administrative Fees $ 4,528 $ 1,883
Ceding commission 8,158 6,624
Net investment income 941 948
Net realized gains (losses) 95 2
Other income 82 81
Net earned premium 28,437 28,493
Net losses and loss adjustment expenses (9,373 ) (8,777 )
Commissions (18,517 ) (19,349 )
Payment Protection 14,351 9,905
BPO 3,564 4,563
Brokerage
Brokerage Commissions and fees 7,867 6,728
Service and administrative Fees 1,024   1,531  
Total Brokerage 8,891   8,259  
Total 26,806   22,727  
 
Operating Expenses
Payment Protection 8,498 5,094
BPO 2,619 2,774
Brokerage 6,819 6,119
Corporate   230  
Total 17,936   14,217  
 
EBITDA
Payment Protection 5,853 4,811
BPO 945 1,789
Brokerage 2,072 2,140
Corporate   (230 )
Total 8,870   8,510  
 
Depreciation and amortization
Payment Protection 953 470
BPO 240 174
Brokerage 442   410  
Total 1,635   1,054  
 
Interest
Payment Protection 1,526 1,661
BPO 63 106
Brokerage 442   124  
Total 2,031   1,891  
 
Income before income taxes and non-controlling interest
Payment Protection 3,374 2,680
BPO 642 1,509
Brokerage 1,188 1,606
Corporate   (230 )
Total income before income taxes and non-controlling interest 5,204 5,565
Income taxes 1,775 2,076
Less: net income (loss) attributable to non-controlling interest (174 ) 15  
Net income $ 3,603   $ 3,474  

FORTEGRA FINANCIAL CORPORATION

CONSOLIDATED STATEMENTS OF INCOME- Segments (Unaudited)

(All Amounts in Thousands)
 
Reconciliation of Segment Net Revenue and EBITDA to Total Revenue and Net Income For the Three Months Ended
(Unaudited) March 31, 2011   March 31, 2010
Revenue
Payment Protection $ 14,351 $ 9,905
BPO 3,564 4,563
Brokerage 8,891   8,259  
Segment revenue 26,806 22,727
Net losses and loss adjustment expenses 9,373 8,777
Commissions 18,517   19,349  
Total revenue 54,696   50,853  
 
Operating Expenses
Payment Protection 8,498 5,094
BPO 2,619 2,774
Brokerage 6,819 6,119
Corporate

-
  230  
Total Operating Expenses 17,936 14,217
Net losses and loss adjustment expenses 9,373 8,777
Commissions 18,517   19,349  
Total expenses before depreciation, amortization and interest 45,826   42,343  
 
EBITDA
Payment Protection 5,853 4,811
BPO 945 1,789
Brokerage 2,072 2,140
Corporate

-
  (230 )
Total 8,870   8,510  
 
Depreciation and amortization
Payment Protection 953 470
BPO 240 174
Brokerage 442   410  
Total 1,635   1,054  
 
Interest
Payment Protection 1,526 1,661
BPO 63 106
Brokerage 442   124  
Total 2,031   1,891  
 
Income before income taxes and non-controlling interest
Payment Protection 3,374 2,680
BPO 642 1,509
Brokerage 1,188 1,606
Corporate

-
  (230 )
Total Income before income taxes and non-controlling interest 5,204 5,565
Income taxes 1,775 2,076
Less: net income (loss) attributable to non-controlling interest (174 ) 15  
Net income $ 3,603   $ 3,474  

We present EBITDA and Adjusted EBITDA in this Earning Release to provide investors with a supplemental measure of our operating performance and, in the case of Adjusted EBITDA, information utilized in the calculation of the financial covenants under our revolving credit facility and in the determination of compensation. EBITDA, as used in this Earnings Release is defined as net income before interest expense, income taxes, non-controlling interest and depreciation and amortization. Adjusted EBITDA differs from the term "EBITDA" as it is commonly used. Adjusted EBITDA, as used in this Earnings Release, means "Consolidated Adjusted EBITDA" as that term is defined under our revolving credit facility, which is generally consolidated net income before consolidated interest expense, consolidated amortization expense, consolidated depreciation expense and consolidated tax expense, in each case as defined more fully in the agreement governing our revolving credit facility. The other items excluded in this calculation include, but are not limited to, specified acquisition costs and unusual or non-recurring charges. The calculation below does not give effect to certain additional adjustments that are permitted under our revolving credit facility which, if included, would increase the amount reflected in this table.

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