SOUTHFIELD, Mich. /PRNewswire/
Full Year 2010 Overview
Meadowbrook Insurance Group, Inc. (NYSE: MIG) reported that net operating income for the year ended December 31, 2010 increased 8.8% to $58.2 million, or $1.07 per diluted share, up from $53.5 million, or $0.93 per diluted share, for the comparable prior year period. Net income increased 13.4% to $59.7 million, or $1.10 per diluted share, compared to $52.7 million, or $0.92 per diluted share, in 2009. Our 2010 results include $1.5 million, or $0.03 per diluted share, of net after-tax realized gains, whereas 2009 results include ($865,000), or ($0.01) per diluted share, of after-tax realized losses.
Gross written premium increased 16.4% to $801.9 million in 2010, compared to $688.7 million in the comparable prior year period. The increase in premium is primarily due to new business initiatives commencing in the second half of 2009.
For the year ended December 31, 2010, net earned premium increased 22.3% to $659.8 million, compared to $539.6 million in 2009.
The year-to-date GAAP combined ratio for 2010 was 95.0%, compared to 93.2% for the comparable period in 2009.
During the first quarter of 2010, the Company made certain reclassifications to the expense classifications on the Consolidated Statement of Income. These reclassifications were made to enable the user of the financial statements to calculate the GAAP combined ratio directly from the Consolidated Statement of Income. As a result, the Consolidated Statement of Income for the year ended December 31, 2009, has been reclassified to conform to this revised presentation. These reclassifications do not change total expenses or consolidated net income as originally reported for the year ended December 31, 2009. Please refer to Form 8-K filed on May 3, 2010 for further detail. For the year ended December 31, 2010, this refinement resulted in a 1.7 percentage point increase in the expense ratio, a 1.0 percentage point decrease in the loss and LAE ratio and a decrease of $4.9 million in general, selling and administrative costs.
The calendar year loss and LAE ratio for the year ended December 31, 2010 was 60.6% compared to 60.7% for the year ended December 31, 2009. The 2010 results include favorable development of 4.7 percentage points, while the 2009 results include favorable development of 5.3 percentage points. The accident year loss and LAE ratio for the year-to-date 2010 period was 65.3%, compared to 66.0% for 2009.
Policy acquisition and other underwriting expenses for 2010 increased $51.9 million to $227.0 million, compared to $175.1 million for the same period in 2009. Our expense ratio increased 1.9 percentage points to 34.4% for the year ended December 31, 2010, from 32.5% for the year ended December 31, 2009. This change reflects an increase in external costs, primarily net commission expense relating to new business added in the second half of 2009 where the agent performs certain policy issuance functions.
General, selling and administrative costs decreased $7.1 million to $22.5 million for 2010 from $29.6 million for the same period in 2009. This decrease reflects our ability to further leverage fixed costs.
Commenting on the year, Meadowbrook President and Chief Executive Officer Robert S. Cubbin stated: “We are pleased with our results as we continue to achieve profitable growth in a competitive market. Our growth strategy has been to develop specialty niche expertise in a range of select areas. Through this approach we have developed a book of business that is broadly diversified by line of business, customer base and geography. We believe this diversity reduces our risk profile and enables us to generally deliver more predictable results. Our focus on pricing adequacy and disciplined underwriting has resulted in a significant increase to net operating income as compared to the prior year.”
Fourth Quarter 2010 Overview
ourth quarter 2010 net operating income, a non-GAAP measure, grew to $14.2 million, or $0.26 per diluted share, compared to $13.6 million, or $0.24 per diluted share, in the fourth quarter of 2009. Net income for the quarter was $15.4 million, or $0.29 per diluted share, compared to $16.4 million, or $0.29 per diluted share, in the prior year quarter. Our 2010 results include $1.2 million, or $0.03 per diluted share, of net after-tax realized gains, whereas 2009 results include $2.9 million, or $0.05 per diluted share, of after-tax realized gains.
Fourth quarter gross written premium increased 9.8% to $200.7 million, compared to $182.8 million in the fourth quarter of 2009. The increase in premium is primarily due to growth in rate increases primarily in workers’ compensation.
For the three months ended December 31, 2010, net earned premium increased 19.0% to $173.8 million, compared to $146.0 million in the fourth quarter of 2009. This growth reflects the impact of new programs implemented in 2009 where the production source had controlled the book of business over an extended period of time and the loss experience indicated adequate pricing.
The GAAP combined ratio for the fourth quarter of 2010 was 95.4%, compared to 94.8% in the fourth quarter of 2009.
During the first quarter of 2010, the Company made certain reclassifications to the expense classifications on the Consolidated Statement of Income. These reclassifications were made to enable the user of the financial statements to calculate the GAAP combined ratio directly from the Consolidated Statement of Income. As a result, the Consolidated Statement of Income for the three months ended December 31, 2009, has been reclassified to conform to this revised presentation. These reclassifications do not change total expenses or consolidated net income as originally reported for the three months ended December 31, 2009. Please refer to Form 8-K filed on May 3, 2010 for further detail. For the three months ended December 31, 2010, this refinement resulted in a 1.7 percentage point increase in the expense ratio, a 1.0 percentage point decrease in the loss and LAE ratio and a decrease of $1.2 million in general, selling and administrative costs.
The calendar year loss and LAE ratio for the fourth quarter increased 1.0 percentage points to 61.6% from 60.6% for the same period in 2009. The 2010 results include favorable development of 4.2 percentage points compared to 2009 results, which included favorable development of 5.3 percentage points. The accident year loss and LAE ratio for the fourth quarter of 2010 was 65.8%, compared to 65.9% in the fourth quarter of 2009. The accident year loss and LAE ratio is a non-GAAP measure that represents our GAAP loss and LAE ratio excluding the impact of any adverse or favorable development on prior year loss reserves.
Policy acquisition and other underwriting expenses for the three months ended December 31, 2010 increased $8.8 million to $58.8 million from $50.0 million for the same period in 2009. Our expense ratio decreased 0.4 percentage points to 33.8% for the three months ended December 31, 2010, from 34.2% for the same period in 2009.
General, selling and administrative costs decreased $0.2 million to $5.4 million for the three months ended December 31, 2010 from $5.6 million for the three months ended December 31, 2009.
2011 Guidance Affirmed
For 2011, we expect net operating income to be in a range of $53.0 million to $58.5 million. We expect gross written premium in a range of $830 million to $850 million, and the combined ratio should be in a range of 96.0% to 97.0%. Achieving results within these ranges would result in net operating income in a range of $1.00 to $1.10 per share.
Commenting on the 2011 outlook, Mr. Cubbin stated: “We believe that 2011 should prove to be another good year for the Company. We will continue to focus on price adequacy, disciplined underwriting, efficient claims handling and developing specialty niche expertise. This strategy has served us well despite a prolonged period of low interest rates, as well as a competitive pricing environment, which we expect will continue into 2011.”
The full earnings release is available here.
Source:PRNewswire