Three Months Ended | |||||||||||
March 31, | |||||||||||
2018 | 2017 | % change | |||||||||
Selected financial highlights: | |||||||||||
Gross premiums written | $ | 211.6 | $ | 197.6 | 7 | % | |||||
Net premiums written | 210.1 | 196.1 | 7 | ||||||||
Net premiums earned | 176.6 | 175.3 | 1 | ||||||||
Net investment income | 19.4 | 18.8 | 3 | ||||||||
Underwriting income(1) | 18.3 | 8.9 | 106 | ||||||||
Net income before impact of the LPT(1) | 23.0 | 20.3 | 13 | ||||||||
Adjusted net income(1) | 29.3 | 18.9 | 55 | ||||||||
Net income | 25.6 | 23.2 | 10 | ||||||||
Comprehensive (loss) income | (9.8 | ) | 31.2 | n/m | |||||||
Total assets | 3,847.9 | 3,833.6 | — | ||||||||
Stockholders' equity | 930.3 | 867.5 | 7 | ||||||||
Stockholders' equity including the Deferred Gain(2) | 1,091.3 | 1,039.4 | 5 | ||||||||
Adjusted stockholders' equity(2) | 1,093.3 | 956.9 | 14 | ||||||||
Annualized adjusted return on stockholders' equity(3) | 11.2 | % | 8.0 | % | 40 | % | |||||
Amounts per share: | |||||||||||
Cash dividends declared per share | $ | 0.20 | $ | 0.15 | 33 | % | |||||
Earnings per diluted share(4) | 0.77 | 0.70 | 10 | ||||||||
Earnings per diluted share before impact of the LPT(4) | 0.69 | 0.62 | 11 | ||||||||
Adjusted earnings per diluted share(4) | 0.88 | 0.57 | 54 | ||||||||
Book value per share(2) | 28.40 | 26.88 | 6 | ||||||||
Book value per share including the Deferred Gain(2) | 33.32 | 32.20 | 3 | ||||||||
Adjusted book value per share(2) | 33.38 | 29.65 | 13 | ||||||||
Combined ratio before impact of the LPT:(5) | |||||||||||
Loss and loss adjustment expense ratio: | |||||||||||
Current year | 62.5 | % | 63.8 | % | |||||||
Prior year | (7.0 | ) | — | ||||||||
Loss and loss adjustment expense ratio | 55.5 | % | 63.8 | % | |||||||
Commission expense ratio | 13.4 | 12.3 | |||||||||
Underwriting and other operating expenses ratio | 22.2 | 20.4 | |||||||||
Combined ratio before impact of the LPT | 91.1 | % | 96.6 | % | |||||||
(1) See Page 3 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
(2) See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
(3) See Page 4 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
(4) See Page 9 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | |||||||||||
(5) See Page 5 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. |
March 31, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Investments, cash and cash equivalents | $ | 2,725.6 | $ | 2,752.0 | ||||
Accrued investment income | 18.9 | 19.6 | ||||||
Premiums receivable, net | 350.0 | 326.7 | ||||||
Reinsurance recoverable on paid and unpaid losses | 538.0 | 544.2 | ||||||
Deferred policy acquisition costs | 50.8 | 45.8 | ||||||
Deferred income taxes, net | 26.5 | 28.7 | ||||||
Contingent commission receivable—LPT Agreement | 31.4 | 31.4 | ||||||
Other assets | 106.7 | 91.7 | ||||||
Total assets | $ | 3,847.9 | $ | 3,840.1 | ||||
LIABILITIES | ||||||||
Unpaid losses and LAE | $ | 2,258.1 | $ | 2,266.1 | ||||
Unearned premiums | 351.9 | 318.3 | ||||||
Commissions and premium taxes payable | 55.8 | 55.3 | ||||||
Deferred Gain | 161.0 | 163.6 | ||||||
Notes payable | 20.0 | 20.0 | ||||||
Other liabilities | 70.8 | 69.1 | ||||||
Total liabilities | $ | 2,917.6 | $ | 2,892.4 | ||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock and additional paid-in capital | $ | 381.0 | $ | 381.8 | ||||
Retained earnings(2) | 935.0 | 842.2 | ||||||
Accumulated other comprehensive (loss) income, net(2) | (2.0 | ) | 107.4 | |||||
Treasury stock, at cost | (383.7 | ) | (383.7 | ) | ||||
Total stockholders’ equity | 930.3 | 947.7 | ||||||
Total liabilities and stockholders’ equity | $ | 3,847.9 | $ | 3,840.1 | ||||
Stockholders' equity including the Deferred Gain (1) | $ | 1,091.3 | $ | 1,111.3 | ||||
Adjusted stockholders' equity (1) | 1,093.3 | 1,003.9 | ||||||
Book value per share (1) | $ | 28.40 | $ | 29.07 | ||||
Book value per share including the Deferred Gain(1) | 33.32 | 34.09 | ||||||
Adjusted book value per share (1) | 33.38 | 30.80 | ||||||
(1) See Page 8 for calculations and Page 10 for information regarding our use of Non-GAAP Financial Measures. | ||||||||
(2) Adoption of a new accounting standard (ASU No. 2016-01) resulted in a $74.0 million reclassification adjustment from Accumulated other comprehensive income to Retained earnings as of January 1, 2018. |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Underwriting revenues: | |||||||
Gross premiums written | $ | 211.6 | $ | 197.6 | |||
Premiums ceded | (1.5 | ) | (1.5 | ) | |||
Net premiums written | 210.1 | 196.1 | |||||
Net premiums earned | 176.6 | 175.3 | |||||
Underwriting expenses: | |||||||
Losses and LAE incurred | (95.4 | ) | (109.0 | ) | |||
Commission expense | (23.7 | ) | (21.5 | ) | |||
Underwriting and other operating expenses | (39.2 | ) | (35.9 | ) | |||
Underwriting income | 18.3 | 8.9 | |||||
Net investment income | 19.4 | 18.8 | |||||
Net realized and unrealized (losses) gains on investments(2) | (8.0 | ) | 2.2 | ||||
Interest and financing expenses | (0.3 | ) | (0.4 | ) | |||
Income tax expense | (3.8 | ) | (6.3 | ) | |||
Net income | 25.6 | 23.2 | |||||
Unrealized AFS investment (losses) gains arising during the period, net of tax(3) | (35.8 | ) | 9.4 | ||||
Reclassification adjustment for realized AFS investment losses (gains) in net income, net of tax(3) | 0.4 | (1.4 | ) | ||||
Comprehensive (loss) income | $ | (9.8 | ) | $ | 31.2 | ||
Net Income | $ | 25.6 | $ | 23.2 | |||
Amortization of the Deferred Gain - losses | (2.1 | ) | (2.4 | ) | |||
Amortization of the Deferred Gain - contingent commission | (0.5 | ) | (0.5 | ) | |||
Net income before impact of the LPT Agreement (1) | 23.0 | 20.3 | |||||
Net realized and unrealized losses (gains) on investments | 8.0 | (2.2 | ) | ||||
Amortization of intangibles | — | 0.1 | |||||
Income tax (benefit) expense related to items excluded from Net income | (1.7 | ) | 0.7 | ||||
Adjusted net income (1) | $ | 29.3 | $ | 18.9 | |||
(1) See Page 10 regarding our use of Non-GAAP Financial Measures. | |||||||
(2) Adoption of a new accounting standard (ASU No. 2016-01) resulting in $12.9 million of unrealized losses on equity securities at March 31, 2018. | |||||||
(3) AFS = Available for Sale securities. |
Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Net income | A | $ | 25.6 | $ | 23.2 | |||
Impact of the LPT Agreement | (2.6 | ) | (2.9 | ) | ||||
Net realized and unrealized losses (gains) on investments(2) | 8.0 | (2.2 | ) | |||||
Amortization of intangibles | — | 0.1 | ||||||
Income tax (benefit) expense related to items excluded from Net income | (1.7 | ) | 0.7 | |||||
Adjusted net income (1) | B | 29.3 | 18.9 | |||||
Stockholders' equity - end of period | $ | 930.3 | $ | 867.5 | ||||
Stockholders' equity - beginning of period | 947.7 | 840.6 | ||||||
Average stockholders' equity | C | 939.0 | 854.1 | |||||
Stockholders' equity - end of period | $ | 930.3 | $ | 867.5 | ||||
Deferred Gain - end of period | 161.0 | 171.9 | ||||||
Accumulated other comprehensive loss (income) - end of period(3) | 2.5 | (126.9 | ) | |||||
Income taxes related to accumulated other comprehensive gains and losses - end of period | (0.5 | ) | 44.4 | |||||
Adjusted stockholders' equity - end of period | 1,093.3 | 956.9 | ||||||
Adjusted stockholders' equity - beginning of period | 1,003.9 | 941.0 | ||||||
Average adjusted stockholders' equity (1) | D | 1,048.6 | 949.0 | |||||
Return on stockholders' equity | A / C | 2.7 | % | 2.7 | % | |||
Annualized return on stockholders' equity | 10.9 | 10.9 | ||||||
Adjusted return on stockholders' equity (1) | B / D | 2.8 | % | 2.0 | % | |||
Annualized adjusted return on stockholders' equity (1) | 11.2 | 8.0 | ||||||
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures. | ||||||||
(2) Adoption of a new accounting standard (ASU No. 2016-01) resulting in $12.9 million of unrealized losses on equity securities at March 31, 2018. | ||||||||
(3) Adoption of a new accounting standard (ASU No. 2016-01) resulted in a $74.0 million reclassification adjustment from Accumulated other comprehensive income to Retained earnings as of January 1, 2018. |
Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Net premiums earned | A | $ | 176.6 | $ | 175.3 | |||
Losses and LAE incurred | B | 95.4 | 109.0 | |||||
Amortization of the Deferred Gain - losses | 2.1 | 2.4 | ||||||
Amortization of the Deferred Gain - contingent commission | 0.5 | 0.5 | ||||||
Losses and LAE before impact of the LPT (1) | C | 98.0 | 111.9 | |||||
Prior accident year favorable loss reserve development | (12.4 | ) | — | |||||
Losses and LAE before impact of the LPT - current accident year | D | $ | 110.4 | $ | 111.9 | |||
Commission expense | E | $ | 23.7 | $ | 21.5 | |||
Underwriting and other operating expenses | F | 39.2 | 35.9 | |||||
Combined ratio: | ||||||||
Loss and LAE ratio | B/A | 54.0 | % | 62.2 | % | |||
Commission expense ratio | E/A | 13.4 | 12.3 | |||||
Underwriting and other operating expenses ratio | F/A | 22.2 | 20.4 | |||||
Combined ratio | 89.6 | % | 94.9 | % | ||||
Combined ratio before impact of the LPT: (1) | ||||||||
Loss and LAE ratio before impact of the LPT | C/A | 55.5 | % | 63.8 | % | |||
Commission expense ratio | E/A | 13.4 | 12.3 | |||||
Underwriting and other operating expenses ratio | F/A | 22.2 | 20.4 | |||||
Combined ratio before impact of the LPT | 91.1 | % | 96.6 | % | ||||
Combined ratio before impact of the LPT: current accident year (1) | ||||||||
Loss and LAE ratio before impact of the LPT | D/A | 62.5 | % | 63.8 | % | |||
Commission expense ratio | E/A | 13.4 | 12.3 | |||||
Underwriting and other operating expenses ratio | F/A | 22.2 | 20.4 | |||||
Combined ratio before impact of the LPT: current accident year | 98.1 | % | 96.6 | % | ||||
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures. |
Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Unpaid losses and LAE at beginning of period | $ | 2,266.1 | $ | 2,301.0 | ||||
Reinsurance recoverable on unpaid losses and LAE | 537.0 | 580.0 | ||||||
Net unpaid losses and LAE at beginning of period | 1,729.1 | 1,721.0 | ||||||
Losses and LAE incurred: | ||||||||
Current year losses | 110.4 | 111.9 | ||||||
Prior year losses on voluntary business | (12.0 | ) | — | |||||
Prior year losses on involuntary business | (0.4 | ) | — | |||||
Total losses incurred | 98.0 | 111.9 | ||||||
Losses and LAE paid: | ||||||||
Current year losses | 5.9 | 4.7 | ||||||
Prior year losses | 94.2 | 102.9 | ||||||
Total paid losses | 100.1 | 107.6 | ||||||
Net unpaid losses and LAE at end of period | 1,727.0 | 1,725.3 | ||||||
Reinsurance recoverable on unpaid losses and LAE | 531.1 | 572.9 | ||||||
Unpaid losses and LAE at end of period | $ | 2,258.1 | $ | 2,298.2 |
March 31, 2018 | December 31, 2017 | |||||||||||||||||||||
Investment Positions: | Cost or Amortized Cost | Net Unrealized (Loss) Gain | Fair Value | % | Fair Value | % | ||||||||||||||||
Fixed maturities | $ | 2,437.3 | $ | (2.5 | ) | $ | 2,434.8 | 89 | % | $ | 2,463.4 | 83 | % | |||||||||
Equity securities | 118.0 | 80.7 | 198.7 | 7 | 210.3 | 7 | ||||||||||||||||
Short-term investments | 34.9 | — | 34.9 | 1 | 4.0 | — | ||||||||||||||||
Cash and cash equivalents | 56.3 | — | 56.3 | 2 | 73.3 | 2 | ||||||||||||||||
Restricted cash and cash equivalents | 0.9 | — | 0.9 | — | 1.0 | — | ||||||||||||||||
Total investments and cash | $ | 2,647.4 | $ | 78.2 | $ | 2,725.6 | 100 | % | $ | 2,962.3 | 100 | % | ||||||||||
Breakout of Fixed Maturities: | ||||||||||||||||||||||
U.S. Treasuries and Agencies | $ | 148.8 | $ | (0.2 | ) | $ | 148.6 | 6 | % | $ | 148.8 | 6 | % | |||||||||
States and Municipalities | 550.1 | 14.9 | 565.0 | 23 | 642.5 | 26 | ||||||||||||||||
Corporate Securities | 1,134.8 | (7.5 | ) | 1,127.3 | 46 | 1,118.0 | 45 | |||||||||||||||
Mortgage-Backed Securities | 541.5 | (9.6 | ) | 531.9 | 22 | 495.3 | 20 | |||||||||||||||
Asset-Backed Securities | 62.1 | (0.1 | ) | 62.0 | 3 | 58.8 | 2 | |||||||||||||||
Total fixed maturities | $ | 2,437.3 | $ | (2.5 | ) | $ | 2,434.8 | 100 | % | $ | 2,463.4 | 100 | % |
Weighted average book yield | 3.2% | 3.1% | ||||||||
Average credit quality (S&P) | AA- | AA- | ||||||||
Duration | 4.4 | 4.2 |
March 31, 2018 | December 31, 2017 | March 31, 2017 | December 31, 2016 | |||||||||||||
Numerators: | ||||||||||||||||
Stockholders' equity | A | $ | 930.3 | $ | 947.7 | $ | 867.5 | $ | 840.6 | |||||||
Plus: Deferred Gain | 161.0 | 163.6 | 171.9 | 174.9 | ||||||||||||
Stockholders' equity including the Deferred Gain (1) | B | 1,091.3 | 1,111.3 | 1,039.4 | 1,015.5 | |||||||||||
Accumulated other comprehensive loss (income)(2) | 2.5 | (136.0 | ) | (126.9 | ) | (114.6 | ) | |||||||||
Income taxes related to accumulated other comprehensive gains and losses | (0.5 | ) | 28.6 | 44.4 | 40.1 | |||||||||||
Adjusted stockholders' equity (1) | C | $ | 1,093.3 | $ | 1,003.9 | $ | 956.9 | $ | 941.0 | |||||||
Denominator (shares outstanding) | D | 32,752,139 | 32,597,819 | 32,276,213 | 32,128,922 | |||||||||||
Book value per share (1) | A / D | $ | 28.40 | $ | 29.07 | $ | 26.88 | $ | 26.16 | |||||||
Book value per share including the Deferred Gain(1) | B / D | 33.32 | 34.09 | 32.20 | 31.61 | |||||||||||
Adjusted book value per share (1) | C / D | 33.38 | 30.80 | 29.65 | 29.29 | |||||||||||
Cash dividends declared per share | $ | 0.20 | $ | 0.60 | $ | 0.15 | $ | 0.36 | ||||||||
YTD Change in: (3) | ||||||||||||||||
Book value per share | (1.6 | )% | 3.3 | % | ||||||||||||
Book value per share including the Deferred Gain | (1.7 | ) | 2.3 | |||||||||||||
Adjusted book value per share | 9.0 | 1.7 | ||||||||||||||
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures. | ||||||||||||||||
(2) Adoption of a new accounting standard (ASU No. 2016-01) resulted in a $74.0 million reclassification adjustment from Accumulated other comprehensive income to Retained earnings as of January 1, 2018. | ||||||||||||||||
(3) Reflects the change in book value per share after taking into account dividends declared in the period. |
Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Numerators: | ||||||||
Net income | A | $ | 25.6 | $ | 23.2 | |||
Impact of the LPT Agreement | (2.6 | ) | (2.9 | ) | ||||
Net income before impact of the LPT (1) | B | 23.0 | 20.3 | |||||
Net realized and unrealized losses (gains) on investments(2) | 8.0 | (2.2 | ) | |||||
Amortization of intangibles | — | 0.1 | ||||||
Income tax (benefit) expense related to items excluded from Net income | (1.7 | ) | 0.7 | |||||
Adjusted net income (1) | C | $ | 29.3 | $ | 18.9 | |||
Denominators: | ||||||||
Average common shares outstanding (basic) | D | 32,830,481 | 32,327,784 | |||||
Average common shares outstanding (diluted) | E | 33,320,420 | 32,965,367 | |||||
Earnings per share: | ||||||||
Basic | A / D | $ | 0.78 | $ | 0.72 | |||
Diluted | A / E | 0.77 | 0.70 | |||||
Earnings per share before impact of the LPT: (1) | ||||||||
Basic | B / D | $ | 0.70 | $ | 0.63 | |||
Diluted | B / E | 0.69 | 0.62 | |||||
Adjusted earnings per share: (1) | ||||||||
Basic | C / D | $ | 0.89 | $ | 0.58 | |||
Diluted | C / E | 0.88 | 0.57 | |||||
(1) See Page 10 for information regarding our use of Non-GAAP Financial Measures. | ||||||||
(2) Adoption of a new accounting standard (ASU No. 2016-01) resulting in $12.9 million of unrealized losses on equity securities at March 31, 2018. |