Argonaut Group, Inc. Announces Record 2006 Results
biz.yahoo.com
Monday February 5, 8:00 am ET
Profitable, Organic Growth Drives Strong Business Segment Performance and Higher ROE
SAN ANTONIO--(BUSINESS WIRE)--Argonaut Group, Inc. (NasdaqGS: AGII) today announced record financial results for the three months and year ended Dec. 31, 2006.
Highlights include the following:
For the quarter ended Dec. 31, 2006:
Return on equity was 17.5 percent versus 16.8 percent for the fourth quarter of 2005;
Net income was $31.4 million versus $25.4 million in the 2005 fourth quarter, a 23.6 percent increase;
Gross written premiums increased 14.2 percent to a record $320.1 million;
Earned premiums of $206.7 million set a new high versus $187.8 million in 2005 fourth quarter;
Underwriting income was a record $15.9 million versus $6.1 million in the last quarter of 2005;
Combined ratios for E&S, Select Markets and Public Entity were 83.0 percent, 87.6 percent and 78.0 percent, respectively.
For the year ended Dec. 31, 2006:
Return on equity increased to 14.8 percent versus 13.3 percent in 2005;
Net income rose 31.7 percent to $106.0 million versus $80.5 million a year earlier;
Gross written premiums set a new high in 2006, increasing nearly $100 million to $1.2 billion;
Earned premiums were at a record $813.0 million, up 16.3 percent versus $699.0 million in 2005;
Underwriting income of $50.3 million established a new high versus $9.3 million in the prior year;
Cash flow from operations remained strong at $299.0 million;
Book value at year end was $25.34 per fully diluted share, up 16.6 percent versus $21.73 per share at Dec. 31, 2005.
Argonaut Group President and Chief Executive Officer Mark E. Watson III said, "Our record performance in 2006 demonstrates Argonaut Group's ability to grow organically while maintaining our underwriting discipline in a competitive marketplace. We are proud to deliver these positive results to our shareholders.
"I want to extend praise to our first-class team, who continues to improve Argonaut Group's customer focus and portfolio of products and services, which has made our Company a valued partner among our distribution partners and policyholders," said Watson. "We continue to strengthen our underlying business infrastructure, and we are well positioned to make further progress in 2007."
FINANCIAL RESULTS
For the fourth quarter of 2006, Argonaut Group reported net income of $31.4 million, or $0.92 per diluted common share on 34.1 million shares. This compares to 2005 fourth quarter net income of $25.4 million, or $0.76 per share on 33.2 million shares. Net income for the three-month period ended Dec. 31, 2006 includes income tax expense of $17.9 million, while net income for the comparable three-month period in 2005 included income tax expense of $2.3 million.
The Company believes operating income is another meaningful measure of Argonaut Group's performance, although it differs from net income under accounting principles generally accepted in the United States (GAAP) in that operating income excludes income tax benefit or expense and net realized investment gains and losses. For a reconciliation of operating income to GAAP net income for the three and twelve months ended Dec. 31, 2006 and 2005, respectively, please refer to the reconciliation table attached to this news release. Pre-tax operating income increased 56 percent for the quarter ended Dec. 31, 2006 to $40.6 million, as compared to pre-tax operating income in the comparable quarter of 2005 of $26.1 million.
Total revenue was at a record $243.1 million during the fourth quarter of 2006, up 14.5 percent from $212.4 million for the comparable quarter in 2005. Total revenue includes realized gains on the sales of investments, which were $8.7 million and $1.6 million for the fourth quarters of 2006 and 2005, respectively. Earned premiums for the three months ended Dec. 31, 2006 were a record $206.7 million compared to $187.8 million for 2005, or a 10.1 percent increase.
The Company's combined ratio for the fourth quarter of 2006 was 92.3 percent versus 96.7 percent for the same three-month period in 2005. Pre-tax underwriting income for the fourth quarter of 2006 and 2005 included favorable loss development from prior years' reserves of $28.6 million, and $13.3 million, respectively. All three primary business segments delivered strong underwriting income results in the fourth quarter of 2006 and reported combined ratios well under 90 percent, as follows: Excess and Surplus Lines at 83.0 percent; Select Markets at 87.6 percent; and Public Entity at 78.0 percent.
For the year ended Dec. 31, 2006, Argonaut Group reported record net income of $106.0 million, or $3.13 per diluted common share on 33.9 million weighted average shares. This compares to net income in 2005 of $80.5 million, or $2.53 per diluted common share on 31.8 million shares, which included hurricane losses of approximately $15.3 million. Total revenue in 2006 was a record $938.7 million versus $786.2 million in 2005. Total revenue includes realized gains on sales of investments of $21.2 million and $3.3 million for the years ended Dec. 31, 2006 and Dec. 31, 2005, respectively. Earned premiums for 2006 were a record $813.0 million compared to $699.0 million in 2005, up 16.3 percent.
The Group combined ratio for 2006 was 93.8 percent versus 98.7 percent in 2005. The Group combined ratio for 2005 included hurricane losses of approximately $15.3 million. Pre-tax underwriting income for the years ended Dec. 31, 2006 and Dec. 31, 2005 included favorable loss development from prior years' reserves of $44.9 million and $20.3 million, respectively. Segment combined ratios for 2006 were as follows: Excess and Surplus Lines was 88.9 percent; Select Markets was 91.0 percent; and Public Entity was 83.3 percent.
SEGMENT RESULTS
Excess & Surplus Lines (E&S) - For the fourth quarter of 2006, gross written premiums for E&S totaled $210.4 million, resulting in record pre-tax operating income of $35.6 million. This compares to gross written premiums of $178.1 million and operating income of $21.6 million in the fourth quarter of 2005. The combined ratio for the fourth quarter periods of 2006 and 2005, respectively, were 83.0 percent and 88.6 percent. The combined ratio for the 2005 fourth quarter included approximately $1.5 million in hurricane losses.
For the year ended Dec. 31, 2006, gross written premiums for E&S were a record $761.5 million, generating record operating income of $102.2 million and a combined ratio of 88.9 percent. This compares to gross written premiums of $619.8 million, operating income of $57.7 million and a combined ratio of 92.6 percent for 2005. E&S's combined ratio for 2005 included approximately $9.8 million in hurricane losses.
Select Markets - During the fourth quarter of 2006, gross written premiums were a record $95.0 million generating record operating income of $11.5 million, compared to gross written premiums of $91.9 million and operating income of $9.5 million during the same period in 2005. The combined ratio for the 2006 fourth quarter was 87.6 percent, versus a 2005 fourth quarter combined ratio of 89.4 percent, which included $351,000 in hurricane losses.
For the year ended Dec. 31, 2006, gross written premiums for Select Markets were a record $318.1 million, generating record operating income of $36.9 million and a combined ratio of 91.0 percent. This compares to gross written premiums of $296.6 million, operating income of $28.6 million and a combined ratio of 92.6 percent during 2005. Select Markets' combined ratio for 2005 included $2.5 million in hurricane losses.
Public Entity - Gross written premiums for the 2006 fourth quarter were $13.2 million, generating operating income of $4.5 million, versus gross written premiums of $12.0 million and operating income of $3.9 million for the quarter ended Dec. 31, 2005. The combined ratio for the 2006 fourth quarter was 78.0 percent versus 81.4 percent for the same period a year earlier.
For the year ended Dec. 31, 2006, gross written premiums for Public Entity were $73.7 million, generating record operating income of $13.5 million and a combined ratio of 83.3 percent. This compares to gross written premiums of $67.0 million, operating income of $9.4 million and a combined ratio of 92.3 percent for the year ended Dec. 31, 2005. Public Entity's combined ratio for 2005 included $2.9 million in hurricane losses.
Risk Management - The renewal rights to a majority of the business that comprised Risk Management were sold to XL America, Inc. in the third quarter of 2005, as previously disclosed. The remaining business activity for this segment during the fourth quarter of 2006 generated operating income of $7.5 million, compared to $5.3 million for the same period in 2005.
For the year ended Dec. 31, 2006, Risk Management's gross written premiums totaled $2.2 million and generated operating income of $25.5 million, versus gross written premiums of $72.3 million and operating income of $18.2 million for 2005. |
