Full Story:
EGI Financial Holdings Reports Solid First Quarter Results
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Three-months Three-months
ended ended
March 31, March 31,
$000 2007 2006 % Change
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Direct written and assumed
premiums $30,196 $26,092 15.7%
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Net written and assumed
premiums $28,323 $23,493 20.6%
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Net earned premiums $24,790 $25,075 (1.1%)
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Underwriting income $ 1,304 $ 930 40.2%
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Investment income $ 2,601 $ 2,633 (1.2%)
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Net income $ 2,527 $ 2,434 3.8%
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Net income per diluted share $ 0.24 $ 0.24 -
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TORONTO, May 9 /CNW/ - EGI Financial Holdings Inc. (TSX:EFH) today
announced its results for the first quarter ended March 31, 2007. The quarter
featured continued strong growth in underwriting income, which reflects the
Company's disciplined focus on profitability, as well as a strong top line
increase, which positions the company well for future earned premium growth.
For the 2007 period, EGI Financial generated direct written and assumed
premiums totaling $30.2 million, compared with $26.1 million in the
corresponding period last year, an increase of 15.7%. This strong increase
reflected the impact of EGI's efforts in new business development.
Specifically, the Company benefited from the contributions of its assumed
reinsurance treaty with AssuranceAmerica, growth in motorcycle premiums and
the continued expansion of its Niche Products business. This growth offset a
decline in premiums from the Ontario non-standard automobile business.
Net written and assumed premiums rose 20.6% in 2007 from $23.5 million to
$28.3 million. This increase reflects the growth in gross written premiums and
EGI's reduced reliance on (ceded) reinsurance, resulting in more business
retained for EGI's net account and enhanced utilization of the Company's
capital.
Net earned premiums for the three months ended March 31, 2007, were
$24.8 million, a 1.1% decline from $25.1 million in the first three months of
2006. The decline reflects the fact that the new business initiatives - which
generated a 15.7% increase in written premiums in the quarter - have altered
the Company's business mix but have not yet significantly impacted earned
premiums. However, these premiums are expected to earn over the term of the
new policies - primarily six and twelve months - throughout the remainder of
2007.
Underwriting income in the quarter increased 40.2% to $1.3 million
compared with $0.9 million last year. The increase was attributable to an
improvement in the loss ratio of the Niche Products division, partially offset
by a decline in earned premiums in the Personal Lines division.
The loss ratio in the 2007 period, being net losses incurred expressed as
a percentage of net earned premiums, was 61.0%, while the expense ratio, being
expenses incurred expressed as a percentage of net earned premiums, was 33.7%.
This compares with 66.1% and 30.2% respectively in the same period of 2006.
The improvement in the loss ratio was the result of consistent underwriting
and an improved claims experience in Niche Products, while the higher expense
ratio was attributable to higher proportion of niche business which carries a
higher acquisition cost.
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 first quarter of 2007 was 94.7% compared with 96.3%
for the same period last year. EGI Financial believes that the combined ratio
is the best measure of the profitability of its underwriting business.
Investment income in the first quarter of 2007 was essentially level with
last year at $2.6 million. This was accomplished despite the fact that lower
capital gains were realized in the first quarter of 2007 than last year.
Realized gains in the 2007 period were $0.4 million compared to $0.9 million
in the first three months of 2006. EGI's investment portfolio has experienced
a $37.5 million, or 21%, increase in fair value as at March 31, 2007, compared
to March 31, 2006, due to investment returns and positive cash flows from
operations during the period.
Net income in the 2007 first quarter was $2.5 million compared with $2.4
million last year, an increase of 3.8%. Net income per share, on a
fully-diluted basis, was level with 2006 at $0.24 per share. This represents
an annualized return on equity, on a last-twelve-months basis, of 20.6%.
"These financial results reflect our focus on profitability," said
Douglas McIntyre, Chief Executive Officer of EGI Financial. "Through strategic
diversification, we were able to achieve a 3.8% year-over-year net income
increase, despite the competitive conditions in our core business and the fact
that last year's results included larger realized investment gains."
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Q1 2007 Personal Lines division performance:
- Underwriting revenue decreased 9.9% to $20.4 million
- Underwriting income(*) decreased to $0.7 million from $1.3 million
- Combined ratio 96.4% compared with 94.3% in 2006
Q1 2007 Niche Products division performance:
- Underwriting revenue increased 81.5% to $4.4 million
- Underwriting income(*) increased to $0.8 million from a loss of
$0.2 million
- Combined ratio 82.2% compared with 107.9% in 2006
(*) Before corporate expenses (2007 - $0.2 million; 2006 - $0.2 million)
and taxes, which are not allocated by division
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EGI Financial also announced that its Board of Directors has declared a
dividend of $0.05 per common share, payable on June 29, 2007 to shareholders
of record on June 15, 2007.
Geographically, EGI Financial's business in the first quarter of 2007 was
derived from Ontario (71%), Quebec (9%), Alberta (2%), other jurisdictions in
Canada (4%) and United States (14%).
On January 1, 2007 the Company adopted, on a prospective basis, two new
accounting standards related to financial instruments, which were issued by
the Canadian Institute of Chartered Accountants. The new standards result in
the recording of all investments at fair value in the Consolidated Balance
Sheet as at March 31, 2007. In addition, cumulative changes in the fair value
of investments are reported in Accumulated Other Comprehensive Income (AOCI),
a new component of Shareholders' Equity.
Upon adoption of these standards, total assets of EGI increased by $8.0
million to reflect the adjustment to fair value of investments as at
January 1, 2007 previously measured at cost or amortized cost. In addition,
the AOCI was credited an amount of $5.2 million representing the adjustment to
fair value of investments, net of income tax. Attributable in part to these
changes, total assets at March 31, 2007 increased to $296.7 million.
The investment portfolio at fair value, including cash and premium
finance receipts, increased to $223.7 million or $23.20 per share, compared to
$191.8 million, or $20.02 per share a year earlier. Book value per share,
which includes the fair value increment described above, was $9.69 at
March 31, 2007 compared with $7.54 a year earlier.
The annualized ratio of net written premiums in the first quarter of 2007
to shareholders' equity was 1.2 times. Echelon's Minimum Capital Test (MCT)
margin at March 31, 2007 was 330%, 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.
"Looking out to the balance of the year, the top-line growth achieved
through diversification in the first quarter is expected to lead to continued
increases in profitability," added Mr. McIntyre. "While competitive conditions
continue in our core non-standard auto business, the new personal lines
products and niche businesses are expected to perform strongly."
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.
Conference Call
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A conference call for analysts and interested listeners will be held
Thursday, May 10, 2007 at 10:00 a.m. (ET). The call-in numbers for
participants are 416-644-3433 or 800-595-8550. A live audio feed of the call
will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1841840br> A replay of the call will be available from 12:00 p.m. (ET) on May 10,
2007 until 11:59 p.m. on May 17, 2007. To access the replay, call 416-640-1917
or 877-289-8525, enter pass code number 21228856, and then press the pound
(No.) key. The replay can also be accessed over the Internet at the above
address.
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 entered the U.S. market in 2007, underwriting non-standard
automobile insurance through reinsurance agreements with U.S. domiciled
insurers. 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 2007 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.
%SEDAR: 00022868E
For further information: Douglas E. McIntyre, Chief Executive Officer,
EGI Financial Holdings Inc., Telephone: (905) 564-9215
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