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Attention Business/Financial Editors:
EGI Financial Reports Second Quarter Results
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Declares quarterly dividend of $0.04 per share
3-months 3-months 6-months 6-months
$000 ended ended ended ended
June June % June June %
30, 2006 30, 2005 Change 30, 2006 30, 2005 Change
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Direct written
premiums $36,622 $34,528 6.1% $62,714 $60,459 3.7%
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Net earned
premiums $26,189 $19,790 32.3% $51,263 $36,440 40.7%
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Underwriting
income(*) $4,229 $6,324 (33.1%) $5,343 $6,843 (21.9%)
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Investment
income $1,801 $1,518 18.6% $4,434 $3,416 29.8%
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Net income
before
extraordinary
gain $3,857 $4,928 (21.7%) $6,291 $6,423 (2.1%)
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Diluted earnings
per share
before
extraordinary
gain $0.38 $0.58 (34.5%) $0.62 $0.76 (18.4%)
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(*)Before allocated corporate and other expenses
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TORONTO, Aug. 11 /CNW/ - EGI Financial Holdings Inc. (TSX:EFH) today
announced its results for the second quarter and six-months ended June 30,
2006.
In the second quarter of 2006, EGI Financial generated direct written
premiums totaling $36.6 million, 6% above the $34.5 million level in the
corresponding period last year. Net earned premiums rose 32.3% in 2006 from
$19.8 million to $26.2 million, reflecting a significant reduction in premiums
ceded to re-insurers, the result of the investment of the proceeds of the
Company's IPO to retain more business for its net account.
Underwriting profit in the quarter decreased to $4.2 million before
allocation of corporate and other expenses, compared with $6.3 million on the
same basis last year. The decrease was attributable to an unusual number of
large auto claims in the 2006 period, exacerbated by a comparison with 2005
when results were very strong and the Company retained less of its written
premiums.
The combined ratio, being the addition of the ratio of net losses
incurred to net earned premiums, and the ratio of underwriting expenses to net
earned premiums, for the second quarter of 2006 was 85.3% compared with 68.9%
for the same period last year. EGI Financial believes that the combined ratio
is the best measure of the profitability of its underwriting business.
The loss ratio in the 2006 period, being net losses incurred expressed as
a percentage of net earned premiums was 54.3%, while the expense ratio, being
expenses incurred expressed as a percentage of net earned premiums, was 31%.
This compares with 40.7% and 28.2% respectively in the same period of 2005.
The increase in the loss ratio is primarily attributable to the unusual number
of large auto claims.
Investment income in the second quarter of 2006 was $1.8 million compared
to $1.5 million last year, an increase of 20%.
Net income in the 2006 second quarter was $3.9 million compared with $4.9
million last year, a decrease of 22%. Fully diluted net income per share was
$0.38 in the 2006 period, compared to $0.58 in the same period last year. This
represents an annualized return on equity, on a last-twelve-months basis, of
17.4%.
"While our top line performance continued strong in the second quarter,
our bottom line was negatively impacted by the large and unusual claims in our
Automobile segment," said Douglas McIntyre, Chief Executive Officer of EGI
Financial. "The year-over-year comparison was further affected by the fact
that the 2005 period was very strong and we retained more to our net this year
as a result of reduction in reinsurance arrangements."
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Q2 2006 Automobile Division performance:
- Net earned premiums increased 27.5% to $23.2 million
- Income before taxes decreased 41.5% to $3.7 million
- Combined ratio 84.2% compared with 65.4% for the 2005 period
Q2 2006 Niche Products Division performance:
- Net earned premiums increased 82.8% to $3.0 million
- Income before taxes increased from a nominal level to $0.5 million
- Combined ratio 81.8% compared with 96.3% for the 2005 period
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EGI Financial also announced that its Board of Directors has declared a
dividend of $0.04 per share, payable on September 29, 2006 to shareholders of
record on September 15, 2006.
For the six months ended June 30, 2006, EGI Financial generated direct
written premiums totaling $62.7 million, 4% above the $60.5 million level in
the corresponding period last year. Net earned premiums rose 41% in 2006 from
$36.4 million to $51.3 million.
Underwriting profit in the six-months decreased to $5.3 million before
allocation of corporate and other expenses, compared with $6.8 million on the
same basis last year, attributable to the unusual auto claims referenced
above.
The combined ratio for the six-month period in 2006 was 90.7% compared
with 81.9% for the same period last year. The loss ratio in the 2006 period
was 60.1% and the expense ratio was 30.6%. This compares with 53.7% and 28.2%
respectively in the first half of 2005.
Investment income for the first six months of 2006 was $4.4 million
compared to $3.4 million last year, an increase of 29.4%.
Net income in the first half of 2006 was $6.3 million compared with
$6.4 million last year, before extraordinary gains, a decrease of 2%. Fully
diluted net income per share, on the same basis, was $0.62 in the 2006 period,
compared to $0.76 in the same period last year.
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Six-months ended June 30, 2006 Automobile Division performance:
- Net earned premiums increased 35.8% to $45.9 million
- Income before taxes decreased 26% to $5.0 million
- Combined ratio 89.1% compared with 80.0% for the 2005 period
Six-months ended June 30, 2006 Niche Products Division performance:
- Net earned premiums increased 99.2% to $5.4 million
- Income before taxes increased from $0.1 to $0.4 million
- Combined ratio 93.5% compared with 98.4% for the 2005 period
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Geographically, EGI Financial's business in the first half of 2006 was
derived from Ontario (88%), Quebec (8%), Alberta (1%) and other jurisdictions
in Canada (3%).
Total assets at June 30, 2006 were $279.3 million. The investment
portfolio at book value, including cash and premium finance receipts,
increased to $202.2 million (market value was $205.8 million or $21.42 per
share), compared to $157.7 million (market value $164.2 million or $20.78 per
share) a year earlier. The fair value increment over book value of the
investment portfolio decreased to $0.38 per share from $0.83 per share at
June 30, 2005.
At June 30, 2006, the common share portfolio had a market value of
$33.6 million including $6.2 million of net unrealized gains ($0.64 per common
share outstanding), while the bond portfolio included net unrealized losses
totaling $2.4 million.
Book value per share was $7.90 at June 30, 2006 compared with $6.53 per
share a year earlier.
The annualized ratio of net written premiums in the first half of 2006 to
shareholders' equity was 1.6 times. Echelon's Minimum Capital Test (MCT)
margin at June 30, 2006 was 329%, providing EGI Financial with the financial
strength to grow its business utilizing its current resources.
Full Financial Statements and Management's Discussion and Analysis (MD&A)
are available on the Company's web site at: www.egi.ca/financial.html.
"While we were disappointed by the unusual claims experience in the
Automobile segment in the quarter and are monitoring the business closely, we
remain very optimistic about the prospects for the Company," added Mr.
McIntyre. "In our Automobile segment, we are actively appointing new producers
and expanding into other geographic regions and vehicle types. The Niche
products segment continues to be very exciting, as we continue to broaden our
product line, to grow organically, while continuing to seek acquisitions."
EGI Financial uses both Canadian generally accepted accounting principles
(GAAP) and certain non-GAAP measures to assess performance. Readers are
cautioned that non-GAAP measures do not have a standardized meaning under GAAP
and are unlikely to be comparable to similar measures used by other companies.
EGI Financial analyzes performance based on underwriting ratios such as
combined, expense and loss ratios as defined in regulations established under
the Insurance Companies Act (Canada). Return on equity (ROE) is a non-GAAP
measure which represents EGI Financial's net income for the twelve months
ended on the date indicated divided by the average shareholders' equity over
the same twelve-month period.
About EGI Financial
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Founded in 1997, EGI Financial operates in the property and casualty
insurance industry in Canada, primarily focusing on non-standard automobile
insurance and other niche and specialty general insurance products. EGI
Financial's common shares are traded on the Toronto Stock Exchange under the
symbol EFH.
Forward-looking Information
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This news release contains forward-looking information based on current
expectations. This information includes, but is not limited to, statements
about the operations, business, financial condition, priorities, targets,
ongoing objectives, strategies and outlook of EGI Financial for 2006 and
subsequent periods.
This information is based upon certain material factors or assumptions
that were applied in drawing a conclusion or making a projection as reflected
in the forward-looking information. By its nature, this information is subject
to inherent risks and uncertainties that may be general or specific. A variety
of material factors, many of which are beyond EGI Financial's control, affect
the operations, performance and results of EGI Financial and its business, and
could cause actual results to differ materially from the expectations
expressed in any of this forward-looking information.
EGI Financial does not undertake to update any forward-looking
information. Additional information about the risks and uncertainties about
EGI Financial's business is provided in its disclosure materials, including
its annual information form, filed with the securities regulatory authorities
in Canada, available at www.sedar.com.
Conference call
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A conference call for analysts and interested listeners will be held
Monday, August 14, 2006 at 11:00 a.m. (ET). The call-in numbers for
participants are 416-644-3431 or 800-814-4857. A live audio feed of the call
will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1550780br> A replay of the call will be available from 1:00 p.m. (ET) on August 14,
2006 until 11:59 p.m. on August 21, 2006. To access the replay, call
416-640-1917 or 877-289-8525, enter pass code number 21198087, and then press
the pound key. The replay can also be accessed over the Internet at the above
address.
%SEDAR: 00022868E
For further information: Douglas E. McIntyre, Chief Executive Officer,
EGI Financial Holdings Inc., Telephone: (905) 564-9215
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