LANCASTER, Pa., Oct. 31, 2013 /PRNewswire/ -- Eastern
Insurance Holdings, Inc. ("EIHI" or the "Company") (NASDAQ: EIHI)
today reported net income for the three months ended September 30, 2013 of $3.7
million, or $0.48 per diluted
share, compared to net income of $2.8
million, or $0.36 per diluted
share, for the same period in 2012. EIHI's net income for the
three months ended September 30, 2013
includes net realized investment gains of $0.22 per diluted share compared to $0.08 per diluted share for the same period in
2012 and for the three months ended September 30, 2013 includes $879,000 or $0.12
per diluted share of after-tax transaction expenses related to its
previously announced merger with ProAssurance Corporation.
EIHI's diluted book value per share and tangible diluted book value
per share were $17.66 and
$16.19, respectively, as of
September 30, 2013.
Net income (loss) and diluted earnings per share for the three
months ended September 30, 2013 and
2012 consisted of the following (in thousands, except per share
data):
|
|
2013
|
|
2012
|
|
|
Net
Income (Loss)
|
|
Diluted
Earnings Per Share
|
|
Net
Income (Loss)
|
|
Diluted
Earnings Per Share
|
Workers' compensation
insurance
|
|
$
4,569
|
|
$
0.60
|
|
$
3,087
|
|
$
0.40
|
Corporate and
other
|
|
(877)
|
|
(0.12)
|
|
(301)
|
|
(0.04)
|
Net income
|
|
$
3,692
|
|
$
0.48
|
|
$
2,786
|
|
$
0.36
|
Weighted average fully diluted shares considered outstanding
used to calculate diluted earnings per share for the three months
ended September 30, 2013 and 2012
were 7,641,071 and 7,626,866, respectively.
Consolidated highlights for the third quarter include:
- Revenue for the third quarter of 2013 increased to $48.4 million compared to $43.7 million for the same period in 2012.
Net premiums earned were $45.1
million for the third quarter of 2013 compared to
$41.4 million for the same period in
2012.
- Net investment income was $1.0
million ($650,000 after-tax)
for the three months ended September 30,
2013, compared to $892,000
($615,000 after-tax) for the same
period in 2012.
- The change in equity interest in limited partnerships was a
loss of $10,000 ($7,000 after-tax) for the three months ended
September 30, 2013, compared to
income of $290,000 ($200,000 after-tax) for the same period in 2012,
a decrease of $300,000.
- Net realized investment gains, excluding the segregated
portfolio cell reinsurance segment, were $2.2 million ($1.7
million after-tax) for the three months ended September 30, 2013 compared to $983,000 ($625,000
after-tax) for the same period in 2012, which included convertible
bond investment portfolio after-tax net realized investment gains
of $515,000 and $383,000 for the three months ended September 30, 2013 and 2012, respectively.
The Company accounts for changes in the estimated fair value of its
convertible bond portfolio as a realized gain or loss.
Segment Operating Results
Workers' Compensation Insurance
EIHI's workers' compensation insurance segment reported net
income of $4.6 million for the third
quarter of 2013, compared to $3.1
million for the third quarter of 2012. Highlights for the
third quarter include:
- Direct written premiums increased to $49.3 million for the three months ended
September 30, 2013, compared to
$48.4 million for the same period in
2012, an increase of 1.9 percent. Direct written premium
includes premium ceded to the segregated portfolio cell reinsurance
segment of $10.5 million and
$8.8 million for the three months
ended September 30, 2013 and 2012,
respectively.
- Audit premium, which results from an examination of the
policyholders' payroll and other records, resulted in the recording
of additional premium to the Company which increased net premiums
earned by $267,000 for the three
months ended September 30, 2013
compared to $1.9 million for the same
period in 2012.
- The combined ratio was 89.4 percent for the third quarter of
2013, compared to 93.8 percent for the same period last year.
- The calendar period loss and LAE ratio was 65.1 percent for the
three months ended September 30, 2013
compared to 67.4 percent for the same period in 2012. The
calendar period loss and LAE ratio was impacted by additional audit
premium to the Company of $267,000
for the three months ended September 30,
2013, which decreased the 2013 loss and LAE ratio by 0.5
points compared to additional audit premium to the Company of
$1.9 million for the same period in
2012, which decreased the 2012 loss and LAE ratio by 4.1
points. There was no loss reserve development recorded on
prior accident years in the workers' compensation insurance segment
for the three months ended September 30,
2013 and 2012.
- The expense ratio was 23.5 percent for the three months ended
September 30, 2013, compared to 25.0
percent for the same period in 2012. The decrease in the
expense ratio is primarily attributable to growth in net earned
premium, prudent expense management strategies, and an increase in
Alternative Markets fee-based revenue, which is recorded as a
reduction to underwriting expenses.
Segregated Portfolio Cell Reinsurance
The segregated portfolio cell reinsurance segment has seventeen
active programs. These programs produce fee-based revenue and
segregated portfolio cell dividends for EIHI's other business
segments. Highlights for the third quarter include:
- Direct premium ceded from the workers' compensation insurance
segment to the segregated portfolio cell reinsurance segment
increased to $10.5 million for the
three months ended September 30,
2013, compared to $8.8 million
for the same period in 2012, an increase of 19.3 percent.
- Fee-based revenue generated for EIHI's other business segments
by the segregated portfolio cell reinsurance segment was
$1.6 million and $1.4 million for the three months ended
September 30, 2013 and 2012,
respectively.
- EIHI's portion of the segregated portfolio cell dividend income
for programs in which it has an ownership interest was $401,000 for the three months ended September 30, 2013, compared to $256,000 for the same period in 2012.
Corporate and Other
The corporate and other segment primarily includes corporate
expenses and EIHI's third party administration business. The
corporate and other segment recorded a net loss of $879,000 for the three months ended September 30, 2013, compared to a net loss of
$301,000 for the three months ended
September 30, 2012. The
corporate and other segment includes after-tax transaction expenses
of $879,000 related to its previously
announced merger with ProAssurance Corporation for the three months
ended September 30, 2013.
Financial Condition
Total assets were $417.3 million
as of September 30, 2013.
Shareholders' equity was $144.1
million as of September 30,
2013. There were no repurchases of our common stock during
the three months ended September 30,
2013. As of September 30,
2013, EIHI's book value per share and diluted book value per
share were $18.21 and $17.66, respectively. Outstanding shares used to
calculate book value per share and diluted book value per share
were 7,913,615 and 9,016,308, respectively, as of September 30, 2013. The basic book value per
share calculation includes the impact of restricted stock awards of
399,381 shares. The diluted book value per share calculation
includes the additional dilutive impact of stock options to
purchase 1,102,693 common shares, which have a weighted average
exercise price of $13.65.
Consolidated Financial Results
Set forth in the tables below are the unaudited consolidated
balance sheets as of September 30,
2013 and December 31, 2012 and
unaudited statements of income for the three and nine months ended
September 30, 2013 and 2012.
EASTERN INSURANCE
HOLDINGS, INC. AND SUBSIDIARIES
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited, in
thousands, except share and per share data)
|
|
|
September
30,
|
|
December 31,
|
|
2013
|
|
2012
|
ASSETS
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
Fixed income
securities, at estimated fair value (amortized cost, $153,036;
$145,486)
|
$
|
153,259
|
|
$
|
148,976
|
Convertible bonds, at
estimated fair value (amortized cost, $26,413; $18,207)
|
|
29,616
|
|
|
19,747
|
Equity securities, at
estimated fair value (cost, $17,684; $20,462)
|
|
23,103
|
|
|
23,200
|
Other long-term
investments, at estimated fair value (cost, $8,000;
$7,000)
|
|
11,722
|
|
|
9,974
|
Total
investments
|
|
217,700
|
|
|
201,897
|
Cash and cash
equivalents
|
|
51,345
|
|
|
48,075
|
Accrued investment
income
|
|
915
|
|
|
858
|
Premiums receivable
(net of allowance, $225; $225)
|
|
80,902
|
|
|
67,525
|
Reinsurance
recoverable on paid and unpaid losses and loss adjustment
expenses
|
|
19,222
|
|
|
19,676
|
Deferred acquisition
costs
|
|
11,571
|
|
|
9,497
|
Deferred income
taxes, net
|
|
3,574
|
|
|
3,239
|
Federal income taxes
recoverable
|
|
627
|
|
|
—
|
Intangible
assets
|
|
3,850
|
|
|
4,331
|
Goodwill
|
|
10,752
|
|
|
10,752
|
Other
assets
|
|
16,861
|
|
|
14,902
|
Total
assets
|
$
|
417,319
|
|
$
|
380,752
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Reserves for unpaid
losses and loss adjustment expenses
|
$
|
126,466
|
|
$
|
117,728
|
Unearned premium
reserves
|
|
90,191
|
|
|
73,775
|
Advance
premium
|
|
255
|
|
|
672
|
Accounts payable and
accrued expenses
|
|
23,811
|
|
|
23,540
|
Ceded reinsurance
balances payable
|
|
9,113
|
|
|
9,273
|
Segregated portfolio
cell dividend payable
|
|
20,805
|
|
|
17,354
|
Policyholder
dividends payable
|
|
2,536
|
|
|
2,312
|
Federal income taxes
payable
|
|
—
|
|
|
243
|
Total
liabilities
|
|
273,177
|
|
|
244,897
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
Series A preferred
stock, par value $0, auth. shares—5,000,000; no shares issued and
outstanding
|
|
—
|
|
|
—
|
Common capital stock,
par value $0, auth. shares—20,000,000; issued—11,930,714 and
11,927,714, respectively; outstanding—7,919,527 and 7,910,609,
respectively
|
|
—
|
|
|
—
|
Unearned ESOP
compensation
|
|
(2,057)
|
|
|
(2,616)
|
Additional paid in
capital
|
|
118,627
|
|
|
117,443
|
Treasury stock, at
cost (4,011,187 and 4,017,105 shares, respectively)
|
|
(56,446)
|
|
|
(56,532)
|
Retained
earnings
|
|
82,749
|
|
|
75,169
|
Accumulated other
comprehensive income, net
|
|
1,269
|
|
|
2,391
|
Total shareholders'
equity
|
|
144,142
|
|
|
135,855
|
Total liabilities and
shareholders' equity
|
$
|
417,319
|
|
$
|
380,752
|
EASTERN INSURANCE
HOLDINGS, INC. AND SUBSIDIARIES
|
UNAUDITED
STATEMENTS OF INCOME
|
(Unaudited, in
thousands, except share and per share data)
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
September
30,
2013
|
|
September
30,
2012
|
|
September
30,
2013
|
|
September
30,
2012
|
Revenue:
|
|
|
|
|
|
|
|
|
Net
premiums earned
|
|
$
45,129
|
|
$
41,397
|
|
$
132,982
|
|
$
116,618
|
Net
investment income
|
|
955
|
|
892
|
|
2,778
|
|
2,906
|
Change
in equity interest in limited partnerships
|
|
(10)
|
|
290
|
|
748
|
|
738
|
Net
realized investment gains (losses)
|
|
2,255
|
|
1,023
|
|
3,162
|
|
1,511
|
Other
revenue
|
|
29
|
|
84
|
|
163
|
|
239
|
Total
revenue
|
|
$
48,358
|
|
$
43,686
|
|
$
139,833
|
|
$
122,012
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Losses
and loss adjustment expenses incurred
|
|
28,948
|
|
27,849
|
|
84,672
|
|
76,335
|
Acquisition and other underwriting expenses
|
|
5,426
|
|
5,486
|
|
16,147
|
|
15,391
|
Other
expenses
|
|
7,868
|
|
6,224
|
|
21,591
|
|
18,119
|
Amortization of intangible assets
|
|
160
|
|
202
|
|
480
|
|
605
|
Policyholder dividends
|
|
309
|
|
493
|
|
807
|
|
715
|
Segregated portfolio dividend expense
|
|
441
|
|
29
|
|
2,154
|
|
1,414
|
Total
expenses
|
|
43,152
|
|
40,283
|
|
125,851
|
|
112,579
|
Income before
income taxes
|
|
5,206
|
|
3,403
|
|
13,982
|
|
9,433
|
Income
tax expense
|
|
1,514
|
|
617
|
|
4,054
|
|
2,377
|
Net
income
|
|
$
3,692
|
|
$
2,786
|
|
$
9,928
|
|
$
7,056
|
Earnings per share
(EPS):
|
|
|
|
|
|
|
|
|
Basic shares
outstanding
|
|
7,586,843
|
|
7,480,526
|
|
7,558,707
|
|
7,539,870
|
Basic EPS
|
|
$
0.48
|
|
$
0.37
|
|
$
1.29
|
|
$
0.92
|
|
|
|
|
|
|
|
|
|
Diluted shares
outstanding
|
|
7,641,071
|
|
7,626,866
|
|
7,597,614
|
|
7,679,503
|
Diluted
EPS
|
|
$
0.48
|
|
$
0.36
|
|
$
1.29
|
|
$
0.90
|
Cautionary Statement
Some of the statements contained in this press release are
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended. In some
cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "expect," "project," "plan,"
"intend," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of these terms or other
similar terminology. Forward-looking statements are based on
the opinions and estimates of management at the time the statements
are made and are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
anticipated in the forward-looking statements. No assurance
can be given that management's expectations, beliefs or projections
will occur or be achieved or accomplished. Factors that could
affect the Company's actual results include, among others, the fact
that our loss reserves are based on estimates and may be inadequate
to cover our actual losses; the uncertain effects of emerging claim
and coverage issues on our business; an inability to obtain or
collect on our reinsurance protection; a downgrade in the A.M. Best
rating of our insurance subsidiaries; the impact of extensive
regulation of the insurance industry and legislative and regulatory
changes; a failure to realize our growth strategies and investment
objectives; the further deterioration in the fixed income and
equity security markets, the effects of intense competition; the
loss of one or more principal employees; the geographic
concentration of our business; the failure of independent insurance
brokers to adequately market our products; and other factors
described in our filings with the U.S. Securities and Exchange
Commission. Readers are cautioned not to place undue reliance
upon these forward-looking statements, which speak only as of the
date of this release. The Company undertakes no obligation to
update any forward-looking statements.
SOURCE Eastern Insurance Holdings, Inc.