Full Story:
Attention Business/Financial Editors:
EGI Financial Reports Strong Second Quarter Results
Company continues to benefit from new business initiatives
<<
-------------------------------------------------------------------------
$000 3-months 3-months 6-months 6-months
ended ended ended ended
June 30, June 30, % June 30, June 30, %
2007 2006 Change 2007 2006 Change
-------------------------------------------------------------------------
Direct written and
assumed premiums $42,299 $36,622 15.5% $72,495 $62,714 15.6%
-------------------------------------------------------------------------
Net written and
assumed premiums $39,308 $32,970 19.2% $67,631 $56,463 19.8%
-------------------------------------------------------------------------
Net earned premiums $29,808 $26,189 13.8% $54,598 $51,263 6.5%
-------------------------------------------------------------------------
Underwriting income $ 4,533 $ 3,859 17.5% $ 5,837 $ 4,789 21.9%
-------------------------------------------------------------------------
Investment income $ 2,068 $ 1,801 14.8% $ 4,669 $ 4,435 5.3%
-------------------------------------------------------------------------
Net income $ 4,349 $ 3,857 12.8% $ 6,876 $ 6,291 9.3%
-------------------------------------------------------------------------
Net income per
diluted share $ 0.42 $ 0.38 10.5% $ 0.66 $ 0.62 6.5%
-------------------------------------------------------------------------
Book value $ 9.93 $ 7.90 25.7% $ 9.93 $ 7.90 25.7%
-------------------------------------------------------------------------
>>
TORONTO, Aug. 14 /CNW/ - EGI Financial Holdings Inc. (TSX:EFH) today
announced its results for the second quarter and six-months ended June 30,
2007.
In the second quarter of 2007, EGI Financial generated direct written and
assumed premiums totaling $42.3 million, 15.5% above the $36.6 million level
in the corresponding period last year. The increase was primarily attributable
to the growth in motorcycle premiums in Ontario, the new reinsurance treaties
with AssuranceAmerica and continued significant growth in the Niche Products
division, which combined to more than offset weakness in the Ontario
non-standard auto business.
Net written and assumed premiums increased 19.2% to $39.3 million,
attributable to the above-mentioned growth and more effective utilization of
the Company's capital, through increased risk retention. Net earned premiums
rose 13.8% in 2007 to $29.8 million from $26.2 million last year, reflecting
the year-over-year increase in direct premiums written and assumed.
In the quarter ended June 30, 2007 total underwriting income increased
17.5% to $4.5 million, compared to $3.9 million in the 2006 period. This
increase was attributable to a reduction in the loss ratio in the Personal
Lines division, which more than offset an increase in the loss ratio in the
Niche Products division, attributable to conservative IBNR reserves
established by the Company's external actuary.
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 2007 improved to 84.8% compared
with 85.3% for the same period last year. EGI Financial believes that the
combined ratio is the best measure of the profitability of its underwriting
business.
The loss ratio in the period ended June 30, 2007 - being net losses
incurred expressed as a percentage of net earned premiums - was 53.2%, while
the expense ratio -- being expenses incurred expressed as a percentage of net
earned premiums -- was 31.6%. This compares with 54.3% and 31.0% respectively
in the same period of 2006. The improvement in the loss ratio was primarily
attributable to non-standard automobile claims experience in the quarter.
Investment income in the second quarter of 2007 was $2.1 million compared
to $1.8 million last year, an increase of 14.8%. The improvement reflects an
increase in the investment portfolio as well as a small reduction in realized
losses compared with 2006. EGI's investment portfolio reflected a
$36.7 million, or 19.6%, increase in fair value as at June 30, 2007, compared
to June 30, 2006.
Net income was $4.3 million for the three months ended June 30, 2007, a
12.8% increase from $3.9 million in the second quarter of 2006. The primary
reason for the increase is the improvement in the loss ratio in the quarter to
53.2% compared to 54.3% last year. Fully diluted earnings per share were $0.42
in the second quarter of 2007, compared to $0.38 for the second quarter of
2006, an increase of 10.5%. This represents an annualized return on equity, on
a last-twelve-months basis, of 20.5%.
"The strong growth in premiums and net income achieved in the second
quarter of 2007, while maintaining profitability, is validation of our
strategy to diversify our business beyond the Ontario non-standard automobile
market," said Douglas McIntyre, Chief Executive Officer of EGI Financial.
"While underwriting results in the P&C insurance industry are trending down
toward the industry's historic norms, EGI's new businesses are driving steady
growth."
<<
Q2 2007 Personal Lines division performance:
- Net earned premiums increased 8.1% to $25.1 million
- Income before taxes increased 35.9% to $5.0 million(*)
- Combined ratio 80.0% compared with 84.1% for the 2006 period(*)
Q2 2007 Niche Products division performance:
- Net earned premiums increased 58.7%, to $4.7 million
- Income before taxes decreased from $0.5 million to a loss of
$0.2 million(*)
- Combined ratio 104.7% compared with 81.8% for the 2006 period(*)
(*) Note that, due to the commencement of a reallocation of overhead
expenses to the Niche Products division, income before taxes in the
Personal Lines division was positively impacted by $0.4 million, with
a corresponding negative impact on the Niche Products division.
Corporate expenses of $0.3 million were not allocated to the
divisions in the second quarter.
>>
For the six months ended June 30, 2007, EGI Financial generated direct
written and assumed premiums totaling $72.5 million, 15.6% above the
$62.7 million level in the corresponding period last year. As indicated in the
second quarter discussion, EGI's new business initiatives have resulted in an
increase in premiums despite competitive market conditions in Ontario
non-standard auto business.
Net written and assumed premiums increased 19.8% to $67.6 million. As
noted in Q2, the incremental growth above that of written premiums was
primarily attributable to more effective utilization of the Company's capital,
through greater retention of risk. Net earned premiums rose 6.5% in 2007 to
$54.6 million from $51.3 million. While this was less than the increase in net
written and assumed premiums due to the Company's changing mix of business,
the additional premiums will earn over the second half of the year.
In the six months ended June 30, 2007 total underwriting income increased
21.9% to $5.8 million, compared to $4.8 million in 2006. The increase was
attributable to an improved loss ratio and increased income from Niche
Products, before the change in allocated corporate expenses.
The combined ratio for the six-month period in 2007 was 89.3% compared
with 90.6% for the same period last year. The loss ratio in the 2007 period
was 56.7% and the expense ratio was 32.6%. This compares with 60.0% and 30.6%
respectively in the first half of 2006.
Investment income for the six months ended June 30, 2007 was $4.7 million
compared to $4.4 million for the same period in 2006. As in Q2, the
improvement in 2007 is the result of an increase in the investment portfolio
on a year-over-year basis.
Net income increased 9.3%, to $6.9 million for the six months ended
June 30, 2007, compared to $6.3 million for the same period in 2006, due
primarily to the improvement in the loss ratio in 2007. Fully diluted net
income per share, on the same basis, was $0.66 in the 2007 period, compared to
$0.62 in the same period last year, an increase of 6.5%.
<<
Six-months 2007 Personal Lines division performance:
- Net earned premiums decreased 0.8% to $45.5 million
- Income before taxes increased 15.3% to $5.8 million(*)
- Combined ratio 87.3% compared with 89.1% for the 2006 period(*)
Six-months 2007 Niche Products division performance:
- Net earned premiums increased 69.0% to $5.8 million
- Income before taxes increased 56.8% to $0.6 million(*)
- Combined ratio 93.9% compared with 93.5% for the 2006 period(*)
(*) Note that, due to the commencement of a reallocation of overhead
expenses to the Niche Products division, income before taxes in the
Personal Lines division was positively impacted by $0.4 million, with
a corresponding negative impact on the Niche Products division.
Corporate and other expenses of $0.5 million were not allocated to
the divisions in the six months ended June 30, 2007.
>>
EGI Financial also announced that its Board of Directors has declared a
dividend of $0.05 per common share, payable on September 28, 2007 to
shareholders of record on September 14, 2007.
Geographically, EGI Financial's business in the first half of 2007 was
derived from Ontario (71%), Quebec (9%), Alberta (3%), other jurisdictions in
Canada (7%) and United States (10%).
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. 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. This amount is offset by an
Other Comprehensive Loss of $1.4 million in the first half of 2007, reflecting
a decline in fair value of bonds in the period.
Attributable in part to these changes, total assets at June 30, 2007 were
$317.5 million. The investment portfolio at fair value, including cash and
premium finance receipts, increased to $237.2 million, or $24.59 per share,
compared to $205.9 million, or $21.43 per share, a year earlier. Book value
per share was $9.93 at June 30, 2007 compared with $8.93 per share as at
Dec. 31, 2006 and $7.90 per share at June 30, 2006.
The annualized ratio of net written premiums in the first half of 2007 to
shareholders' equity was 1.4 times. Echelon's Minimum Capital Test (MCT)
margin at June 30, 2007 was 315%, 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.
"The first half of 2007 was in line with management's expectations,"
added Mr. McIntyre. "As we look out to the balance of 2007, we expect to
continue to produce solid financial results."
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.
Non-GAAP Financial Measures
---------------------------
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.
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 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.
Conference Call
---------------
A conference call for analysts and interested listeners will be held
Wednesday, August 15, 2007 at 10:00 a.m. (ET). The call-in numbers for
participants are 416-644-3423 or 800-594-3790. A live audio feed of the call
will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1951400br> A replay of the call will be available from 12:00 p.m. (ET) on August 15,
2007 until 11:59 p.m. on August 22, 2007. To access the replay, call
416-640-1917 or 877-289-8525, enter pass code number 21242413, and then press
the pound (No.) key. The replay can also be accessed over the Internet at the
above address.
<<
EGI FINANCIAL HOLDINGS INC.
Consolidated Balance Sheets
(in $ thousands)
June 30 December 31
Assets 2007 2006
(unaudited)
Cash and short-term deposits ................. $ 12,959 $ 17,153
Investments (note 3) ......................... 203,841 179,383
Reinsurers' share - unearned premiums ........ 3,343 3,831
- unpaid claims ............ 49,596 48,385
Accounts receivable .......................... 25,290 22,182
Income taxes recoverable ..................... 658 572
Due from insurance companies ................. 6,839 3,996
Deferred policy acquisition costs ............ 10,226 7,465
Capital assets ............................... 1,112 799
Future income taxes .......................... 3,313 4,403
Prepaid expenses and other assets ............ 323 270
------------ ------------
$ 317,500 $ 288,439
------------ ------------
------------ ------------
Liabilities
Provision for unpaid claims (note 4) ......... 156,003 146,101
Unearned premiums ............................ 55,355 43,154
Unearned commission .......................... 472 733
Accounts payable and accrued liabilities ..... 4,858 4,746
Payable to insurance companies ............... 3,636 4,428
Income taxes payable ......................... 1,056 3,151
Other liabilities ............................ 280 85
------------ ------------
221,660 202,398
------------ ------------
Shareholders' Equity
Share capital (note 6) ....................... 45,871 45,833
Contributed surplus .......................... 200 149
Retained earnings ............................ 45,971 40,059
Accumulated other comprehensive income ....... 3,798 -
------------ ------------
95,840 86,041
------------ ------------
$ 317,500 $ 288,439
------------ ------------
------------ ------------
EGI FINANCIAL HOLDINGS INC.
Consolidated Statements of Income
for the Quarters ended June 30
(in $ thousands, except per share amounts)
Quarter to June 30 6 months to June 30
---------------------- ----------------------
2007 2006 2007 2006
(unaudited)
----------------------------------------------
Revenue:
Direct written and
assumed premiums $ 42,299 $ 36,622 $ 72,495 $ 62,714
---------- ---------- ---------- ----------
Net written and assumed
premiums 39,308 32,970 67,631 56,463
---------- ---------- ---------- ----------
Net earned premiums 29,808 26,189 54,598 51,263
Investment income 2,068 1,801 4,669 4,435
---------- ---------- ---------- ----------
$ 31,876 $ 27,990 $ 59,267 $ 55,698
---------- ---------- ---------- ----------
Expenses
Incurred claims 15,844 14,213 30,975 30,792
Acquisition costs 6,518 4,939 12,148 9,919
Operating costs 2,913 3,178 5,638 5,764
---------- ---------- ---------- ----------
25,275 22,330 48,761 46,475
---------- ---------- ---------- ----------
Income before income taxes 6,601 5,660 10,506 9,223
Income tax expense 2,252 1,803 3,630 2,932
---------- ---------- ---------- ----------
Net income $ 4,349 $ 3,857 $ 6,876 $ 6,291
---------- ---------- ---------- ----------
Earnings per share
(note 7)
Net income per share $ 0.45 $ 0.40 $ 0.71 $ 0.65
Net income per diluted
share $ 0.42 $ 0.38 $ 0.66 $ 0.62
EGI FINANCIAL HOLDINGS INC.
Consolidated Statements of Changes in Shareholders' Equity
and Comprehensive Income
for the Quarters ended June 30
(in $ thousands)
Quarter to June 30 6 months to June 30
---------------------- ----------------------
2007 2006 2007 2006
(unaudited)
----------------------------------------------
Share capital
Balance, beginning of
period $ 45,852 $ 45,522 $ 45,833 $ 47,660
Common shares issued 19 148 38 165
Redemption of Series F
special shares - - - (2,155)
---------- ---------- ---------- ----------
Balance, end of period 45,871 45,670 45,871 45,670
---------- ---------- ---------- ----------
Contributed surplus
Balance, beginning
of period 174 107 149 80
Stock options - granted 28 21 55 48
- exercised (2) (4)
---------- ---------- ---------- ----------
Balance, end of period 200 128 200 128
---------- ---------- ---------- ----------
Retained earnings
Balance, beginning of
period 42,104 26,667 40,059 24,845
Net income 4,349 3,857 6,876 6,291
Dividends - Series F
special
shares - - - (229)
- Common shares (482) (384) (964) (767)
---------- ---------- ---------- ----------
Balance, end of period 45,971 30,140 45,971 30,140
---------- ---------- ---------- ----------
Accumulated other
comprehensive income
Balance beginning of
period 5,307 -
Transition adjustment
- financial instruments - 5,173
Net change in unrealized
gains/losses on
available-for-sale
securities (1,509) (1,375)
---------- ----------
Balance, end of period 3,798 3,798
---------- ----------
Shareholders' equity, end
of period $ 95,840 $ 75,938 $ 95,840 $ 75,938
---------- ---------- ---------- ----------
Comprehensive income
Net income 4,349 6,876
Other comprehensive
income, net of taxes
Net unrealized gains
(losses) on available-
for-sale securities (1,192) (793)
Reclassification
adjustment for gains/
losses included in
net income (317) (582)
---------- ----------
Other comprehensive
income (1,509) (1,375)
---------- ----------
Total comprehensive
income $ 2,840 $ 5,501
---------- ----------
EGI FINANCIAL HOLDINGS INC.
Consolidated Statements of Cash Flows
for the Quarters ended June 30
(in $ thousands)
Quarter to June 30 6 months to June 30
---------------------- ----------------------
2007 2006 2007 2006
(unaudited)
----------------------------------------------
Cash provided by (used in):
Operating activities:
Net income $ 4,349 $ 3,857 $ 6,876 $ 6,291
Items not involving cash:
Amortization of capital
assets 93 104 193 223
Amortization of premium
on bonds 105 105 228 173
Realized losses (gains)
on investments 277 406 (107) (453)
Other 28 - 55 -
---------- ---------- ---------- ----------
4,852 4,472 7,245 6,234
Net change in other non-
cash balances 8,510 11,030 8,348 9,663
---------- ---------- ---------- ----------
$ 13,362 $ 15,502 $ 15,593 $ 15,897
---------- ---------- ---------- ----------
Financing activities:
Issue of common shares 17 148 34 165
Redemption of Series F
special shares - - - (2,384)
Common share dividends (482) (384) (964) (767)
---------- ---------- ---------- ----------
$ (465) $ (236) $ (930) $ (2,986)
---------- ---------- ---------- ----------
Investing activities:
Purchase of capital
assets (278) (116) (506) (191)
Purchase of investments (59,122) (48,643) (106,396) (110,468)
Sale/maturity of
investments 51,728 38,313 88,045 100,021
---------- ---------- ---------- ----------
$ (7,672) $ (10,446) $ (18,857) $ (10,638)
---------- ---------- ---------- ----------
Increase (decrease) in cash
and short-term deposits 5,225 4,820 (4,194) 2,273
Cash and short-term
deposits, beginning of
period 7,734 13,352 17,153 15,899
---------- ---------- ---------- ----------
Cash and short-term
deposits, end of period $ 12,959 $ 18,172 $ 12,959 $ 18,172
---------- ---------- ---------- ----------
Supplementary information
Income taxes paid $ 2,145 $ 542 $ 6,836 $ 6,568
---------- ---------- ---------- ----------
>>
%SEDAR: 00022868E
For further information: Douglas E. McIntyre, Chief Executive Officer,
EGI Financial Holdings Inc., Telephone: (905) 564-9215
|
