EGI Financial Reports 2010 Second Quarter Results
TORONTO, Aug. 9 /CNW/ - EGI Financial Holdings Inc. ("EGI Financial") (TSX: EFH) today announced its results for the three and six-months ended June 30, 2010.
Q2 Financial Highlights
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- Net income of $1.9 million, compared to $4.8 million in the second
quarter of 2009
- Net income per fully diluted share of $0.15, compared to $0.38 in the
second quarter of 2009
- Direct written premiums increased by 15% over the second quarter of
2009
- Net earned premium of $40.4 million, compared to $35.5 million in the
second quarter of 2009
- Investment income increased to $6.1 million from $6.0 million in the
second quarter of 2009
- Book value per share increased to $11.01 from $10.98 at the end of
the second quarter 2009
- Total fair value of investment portfolio and premium finance
receivables increased to $329.6 million from $276.2 million as at
June 30, 2009.
"We reported continued growth in our Personal Lines and Niche Products divisions during the second quarter, despite operating in a challenging environment for property and casualty insurance companies. We believe our ongoing volume growth is another strong sign of hardening market conditions in the Ontario automobile insurance market. In the first six months of the year our premium volumes increased by 25% and we expect this trend to continue throughout the remainder of the year," said Douglas McIntyre, Chief Executive Officer of EGI Financial. "While insurance market conditions have had a negative impact on our business, our underwriting results have improved significantly from the first quarter of 2010."
"In our International division, we continue to make steady progress on our U.S. expansion. Our U.S. subsidiary launched business in Texas during the second quarter of the year and expects to launch in Florida during the third quarter," continued Mr. McIntyre. "Our U.S. expansion will be gradual and cautious, as we believe that by maintaining our strict underwriting and pricing practices, we will be able to capitalize on the tremendous opportunities that exist in the Southeastern U.S. as the economy there improves."
Financial Summary
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3-months 3-months 6-months 6-months
ended ended ended ended
$000s (except per June 30, June 30, % June 30, June 30, %
share amounts) 2010 2009 Change 2010 2009 Change
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Direct written
premiums 55,991 48,487 15.5 99,981 80,103 24.8
Net written
premiums 51,207 44,121 16.1 89,423 73,179 22.2
Net earned premiums 40,379 35,486 13.8 78,603 77,059 2.0
Underwriting loss (3,178) 1,703 (286.6) (8,988) (169) -
Interest expense 269 305 (11.8) 568 604 (6.0)
Investment income 6,135 6,017 2.0 9,819 7,891 24.4
Net income 1,902 4,831 (60.6) 131 4,601 (97.2)
Net income per
diluted share 0.15 0.38 (60.5) 0.01 0.36 (97.2)
Book value per share 11.01 10.98 0.3 11.01 10.98 0.3
Second Quarter Highlights
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In the second quarter of 2010, direct written premiums increased by 15.5% to $56.0 million over the same period in 2009. The majority of the increase was recorded in the Personal Lines division which grew by 18.3% during the quarter, with most of the growth coming from the automobile line of business. This growth provides further evidence of the hardening of the Ontario auto insurance market, as well as the impact of recently implemented rate changes. In the Niche Products division, direct written premiums increased by 3.0% to $13.7 million.
The International division, which continues to be in the business development phase, has begun operations in Texas and is expected to begin generating premium growth in Florida during the second half of 2010.
Company-wide, net written premiums increased 16.1% to $51.2 million over the same period in 2009. The increase was in line with the increase in direct written premiums during the period.
Net earned premiums totaled $40.4 million, compared to $35.5 million in the second quarter of 2009. Growth in net earned premiums is slightly lower than net written premiums due to the time lag associated with earning premiums on new business growth.
Operating Results
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Underwriting 3-months 3-months 6-months 6-months
Income (loss) ended June ended June ended June ended June
$millions 30, 2010 30, 2009 30, 2010 30, 2009
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Personal Lines $(1.4) $2.6 $(5.4) $3.0
Niche $(0.8) $1.0 $(2.1) $(0.3)
International and
Corporate $(1.0) $(1.9) $(1.5) $(2.9)
Total $(3.2) $1.7 $(9.0) $(0.2)
Underwriting losses for the second quarter of 2010 were $3.2 million. The primary cause of this is the sudden and rapid increase in claims costs for both new and previously reported claims in certain areas of the Ontario automobile insurance market. While the significant majority of EGI's business is profitable, large automobile claims, particularly in the greater Toronto and surrounding area, continue to grow in frequency and quantum and have a disproportionate effect on overall results.
3-months 3-months 6-months 6-months
ended June ended June ended June ended June
Loss Ratio 30, 2010 30, 2009 30, 2010 30, 2009
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Personal Lines 74.1% 61.4% 80.5% 65.7%
Niche 70.2% 47.2% 72.1% 61.7%
International - 145.0% - 111.1%
The loss ratio in Personal Lines was 74.1% for the quarter ended June 30, 2010, compared to 61.4% for the same period in 2009. Escalating claims costs, particularly in the Ontario automobile line, continue to negatively impact this result. Partially offsetting the adverse current year claims experience was favourable prior year loss development related to Personal Lines claims reserves in the second quarter of 2010, totaling $2.3 million compared to positive development of $1.4 million in the same period in 2009.
The Niche Products division loss ratio was 70.2% in the second quarter of 2010 compared to 47.2% for the same period in 2009. The commercial property and commercial automobile lines of business experienced higher than expected loss ratios. Adverse results in prior period claims reserves for Errors and Omissions insurance also contributed to the results.
The combined ratio for the second quarter of 2010 was 107.9% compared with 95.2% for the same period last year. EGI Financial believes that the full-year combined ratio is the best measure of profitability in its underwriting business.
Investment income increased slightly to $6.1 million during the second quarter of 2010 from $6.0 million earned in the same period last year. Realized gains were recorded in both years, with $2.7 million recorded in the second quarter of 2010 compared to $3.2 million in the same period last year.
Six Month Review
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For the six months ended June 30, 2010, the Company recorded net income of $0.1 million, compared with net income of $4.6 million in the first half of 2009. During the first six months of 2010, an underwriting loss of $9.0 million was incurred, an increase of $8.8 million from the first half of 2009. Partially offsetting the underwriting loss for the period was a 25% increase in investment income to $9.8 million from $7.9 million the prior year.
Direct written premiums increased by 25% to $100.0 million during the first six months of 2010 compared to 2009. Direct written premiums for the Personal Lines division increased 21.6% to $71.5 million for the first half. The Niche Products division reported a 29.5% increase to $28.5 million for the period compared to the first six months of 2009.
The total Company loss ratio was 78.2% for the first six months of 2010 compared to 67.2% during the first half of the prior year. Both the Personal Lines and Niche Products divisions experienced higher than expected loss ratios.
The combined ratio for the first six months of 2010 was 111.5% compared to 100.2% for the first half of 2009.
For the six months ended June 30, 2010, shareholders' equity decreased by $0.8 million from December 31, 2009, to $132.6 million.
As at June 30, 2010, Echelon General's Minimum Capital Test (MCT) ratio was 235%, compared to 314% as at December 31, 2009, significantly exceeding the minimum regulatory capital level required by the Office of the Superintendent of Financial Institutions. The main reason for the reduction in the MCT ratio was to provide funding to repay outstanding long-term debt of $19.6 million.
EGI Financial is currently debt-free and remains well capitalized with a Net Premiums Written to Equity ratio of 1.3:1.
Full Financial Statements and Management's Discussion and Analysis (MD&A) will be available at a later time today on SEDAR and on the Company's web site at: www.egi.ca.
About EGI Financial
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Founded in 1997, EGI Financial operates in the property and casualty insurance industry in Canada and the United States, 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
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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 may not 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).
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 2010 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 9, 2010, at 2:00 p.m. (ET). The call-in numbers for participants are 647-427-7450 or toll free, 1-888-231-8191, Conference ID 85830509. A live audio feed of the call will be broadcast on the internet through the Company's website at www.egi.ca, or directly at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3132800
A replay of the call will be available from 5:00 p.m. (ET) on August 9, 2010, until 11:59 p.m. on August 16, 2010. To access the replay, call 416-849-0833 or toll free, 1-800-642-1687, enter password number 85830509. 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: 905-214-7880, Email: [email protected]
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