Full Story:
Attention Business/Financial Editors
EGI Financial Holdings Reports Strong Third Quarter Results
Excellent Underwriting Performance Drives Significant Earnings Increase
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3-months 3-months 9-months 9-months
ended ended ended ended
Sep. 30, Sep. 30, % Sep. 30, Sep. 30, %
$000 2006 2005 Change 2006 2005 Change
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Direct
written
premiums $29,184 $28,466 1.0% $91,898 $88,925 3.4%
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Net earned
premiums $28,490 $20,060 42.0% $79,753 $56,500 41.2%
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Underwriting
income* $ 6,407 $410 N/A $11,750 $ 7,253 62.0%
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Investment
income $ 2,143 $ 2,296 (6.7%) $ 6,577 $ 5,712 15.1%
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Income
before
extra-
ordinary
gain $ 5,489 $ 1,728 217.7% $11,780 $ 8,151 44.5%
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Diluted
earnings
per share
before
extra-
ordinary
gain $ 0.54 $ 0.20 170.0% $ 1.16 $ 0.96 20.8%
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* Before unallocated corporate and other expenses of $179 in Q3/06;
$63 in Q3/05; $733 YTD 09/06 and $287 YTD 09/05
>>
TORONTO, Nov. 8 /CNW/ - EGI Financial Holdings Inc. (TSX:EFH) today
announced its results for the third quarter and nine-months ended
September 30, 2006. The third quarter was characterized by very strong
performance in EGI's underwriting business, driving a 170% improvement in
quarterly earnings per share.
In the third quarter of 2006, EGI Financial continued to show strong
growth in its Niche Products Division. This growth combined with the addition
of the Ontario motorcycle program has offset the reduction in the Ontario
non-standard automobile segment to produce a flat top line result. Direct
written premiums totaled $29.2 million, 1% above the $28.5 million level in
the corresponding period last year. Despite the modest increase in direct
written premiums, net earned premiums rose 42% in the 2006 period from $20.1
million to $28.5 million, as a result of the termination of the quota share
reinsurance arrangements, effective December 31, 2005.
Underwriting profit in the quarter increased sharply to $6.4 million
before allocation of corporate and other expenses, compared with $0.4 million
on the same basis last year. The strong increase was attributable to a
decrease in the loss ratio compared to the prior year in the Company's
non-standard automobile division, slightly offset by a $0.3 million 'Incurred
But Not Reported' (IBNR) charge in the current quarter in the Niche Products
Division. This charge reflects the view of the Company's independent actuary
that, due to premium growth in this relatively new line of business, it is
prudent to increase IBNR to ensure adequate claims reserving.
The combined ratio - 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 third quarter of 2006 improved substantially to 78.1%
compared with 98.6% 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 quarter - being net losses incurred expressed
as a percentage of net earned premiums - was 48.9%, while the expense ratio,
being expenses incurred expressed as a percentage of net earned premiums, was
29.2%. This compares with 71.7% and 26.9% respectively in the same period of
2005. The significant improvement in the loss ratio was the primary reason for
the Company's strong third quarter performance.
Investment income decreased 9% to $2.1 million in the third quarter,
compared to $2.3 million in 2005. This was primarily due to the realization of
$0.8 million in gains in the 2005 period.
Net income in the 2006 third quarter was $5.5 million compared with
$1.7 million last year, an increase of 218%. Fully diluted net income per
share was $0.54 in the 2006 period, compared to $0.20 in the same period last
year. This represents an annualized return on equity, on a last-twelve-months
basis, of 22.1%.
"We were very pleased by the performance of our business in the third
quarter, particularly given the competitive conditions in our core automobile
business," said Douglas McIntyre, Chief Executive Officer of EGI Financial.
"Our strong results, driven by steady growth in net revenue and excellent
performance in underwriting and claims, underlines our proven success in
analyzing risk and pricing appropriately."
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Q3 2006 Automobile Division performance:
- Underwriting revenue increased 34.2% to $24.4 million
- Underwriting income* increased to $6.5 million from $0.2 million
- Combined ratio 73.5% compared with 99.1% for the 2005 period
Q3 2006 Niche Products Division performance:
- Underwriting revenue increased 111.3% to $4.1 million
- Underwriting income* decreased from $0.3 million to a loss of
$0.1 million, primarily due to the IBNR charge
- Combined ratio 101.6% compared with 89.8% for the 2005 period
* Before corporate expenses and taxes, which are not allocated
by Division
>>
EGI Financial also announced that its Board of Directors has declared a
dividend of $0.04 per share, payable on December 29, 2006 to shareholders of
record on December 15, 2006.
For the nine months ended September 30, 2006, EGI Financial generated
direct written premiums totaling $91.9 million, 3% above the $88.9 million
level in the corresponding period last year. Net earned premiums rose 41% in
2006 from $56.5 million to $79.8 million.
Underwriting profit in the nine months increased to $11.8 million before
allocation of corporate and other expenses, compared with $7.3 million on the
same basis last year. The increase was attributable to the year-over-year
improvement in the loss ratio, which was achieved despite unusually large
claims in the second quarter.
The combined ratio for the nine-month period in 2006 was 86.2% compared
with 87.9% for the same period last year. The loss ratio in the 2006 period
was 56.1% and the expense ratio was 30.1%. This compares with 60.1% and 27.8%
respectively in the 2005 nine month period.
Investment income for the first nine months of 2006 was $6.6 million
compared to $5.7 million last year, an increase of 15%.
Net income in the first nine months of 2006 was $11.8 million compared
with $8.2 million last year, before extraordinary gains, an increase of 45%.
Fully diluted net income per share, on the same basis, was $1.16 in the 2006
period, compared to $0.96 in the same period last year.
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Nine months ended September 30, 2006 Automobile Division performance:
- Underwriting revenue increased 35.2% to $70.3 million
- Underwriting income* increased 66.1% to $11.5 million
- Combined ratio 83.6% compared with 86.8% for the 2005 period
Nine months ended September 30, 2006 Niche Products Division performance:
- Underwriting revenue increased 104.2% to $9.5 million
- Underwriting income* decreased from $0.4 million to $0.3 million,
primarily due to the IBNR charge
- Combined ratio 97.0% compared with 94.9% for the 2005 period
* Before corporate expenses and taxes, which are not allocated
by Division
>>
Geographically, EGI Financial's business in the first nine months of 2006
was derived from Ontario (87%), Quebec (7%), Alberta (2%) and other
jurisdictions in Canada (4%).
Total assets at September 30, 2006 were $282.9 million. The investment
portfolio at book value, including cash and premium finance receipts,
increased to $207.7 million (market value was $215.5 million or $22.43 per
share), compared to $166.2 million (market value $173.4 million or $21.92 per
share) a year earlier. The fair value increment over book value of the
investment portfolio decreased to $0.81 per share from $0.92 per share at
September 30, 2005.
At September 30, 2006, the common share portfolio had a market value of
$35.6 million including $6.0 million of net unrealized gains ($0.62 per common
share outstanding), while the bond portfolio included net unrealized gains
totaling $1.8 million ($0.19 per common share outstanding).
Book value per share was $8.44 at September 30, 2006 compared with $6.75
per share a year earlier.
The annualized ratio of net written premiums in the first nine months of
2006 to shareholders' equity was 1.4 times. Echelon's Minimum Capital Test
(MCT) margin at September 30, 2006 was 345%, 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 at www.sedar.com and on the Company's web site at:
www.egi.ca/financial.html.
"Our plan is to continue to selectively expand our non-standard
Automobile business with a view to achieving similar success, while continuing
to build our Niche Products business," added Mr. McIntyre. "In our Automobile
segment, we continue to appoint new producers while expanding vehicle types
and exploring other geographic markets. Niche Products continues to be very
exciting, as we are broadening our product line while also looking for
complementary 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
-------------------
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
---------------------------
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
Thursday, November 9, 2006 at 9:00 a.m. (ET). The call-in numbers for
participants are 416-644-3434 or 800-814-3911. A live audio feed of the call
will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1640100br>
A replay of the call will be available from 11:00 a.m. (ET) on
November 9, 2006 until 11:59 p.m. on November 17, 2006. To access the replay,
call 416-640-1917 or 877-289-8525, enter pass code number 21207642, and then
press the pound # key. The replay can also be accessed over the Internet at
the above address.
-30-
/For further information: Douglas E. McIntyre, Chief Executive Officer,
EGI Financial Holdings Inc., Telephone: (905) 564-9215/
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