Addison, Texas-based Affirmative Insurance Holdings Inc., a provider of personal non-standard automobile insurance, reported that net income for the second quarter of 2004 increased 52.6 percent over the same period in 2003.
Additionally, revenues from agency operations increased 20.1 percent and pre-tax margins improved 5.7 percentage points from year-ago levels. The company’s GAAP combined ratio of its insurance segment was 94.7 percent.
Affirmative said the solid financial performance comes on the heels of its IPO in July.
“As a new public company, we are pleased to report to our shareholders that the second quarter produced strong financial results and continued top-line growth,” said Thomas E. Mangold, president and chief executive officer of Affirmative Insurance Holdings Inc. “We are encouraged that the pricing and competitive conditions remain favorable in the markets where we operate.”
Affirmative’s second quarter financial report is its first public earnings announcement since the company’s July 9, 2004 initial public offering of 8,170,000 shares of common stock priced at $14.00 per share. Of the total shares sold in the offering, 4,420,000 were sold by Affirmative and 3,750,000 were sold by a selling shareholder, Vesta Insurance Group.
On July 26, 2004, Affirmative announced that the underwriters exercised in full their over-allotment option to purchase an additional 1,225,500 shares, also at $14.00 per share. The underwriters purchased 663,000 additional shares from Affirmative and 562,500 additional shares from Vesta. Including the shares sold in the IPO and over-allotment option, Affirmative’s net proceeds from the offering totaled approximately $65.3 million, after deducting estimated offering expenses.
Following Affirmative’s initial public stock offering, A.M. Best Co. upgraded the financial strength ratings of Affirmative’s insurance subsidiaries, Affirmative Insurance Company and Insura Property and Casualty Insurance Company Inc., to B+ (Very Good) from B (Fair). The ratings of the insurance companies were removed from review and assigned a stable outlook.
Second quarter 2004 net income was $5.5 million or $0.47 per diluted share, a year-over-year increase of $1.9 million or 52.6 percent, compared to $3.6 million or $0.36 per diluted share for the same period in 2003.
Total revenues for the three months ended June 30, 2004 were $67.2 million, an increase of $43.8 million, compared to $23.4 million for the same period in 2003. The increase in revenues was principally due to Affirmative’s retention of gross premiums written by its insurance companies following the restructuring of the reinsurance agreements with Vesta, which allowed Affirmative on Jan. 1, 2004 to start retaining premiums and losses that were previously ceded to Vesta.
For the six months ended June 30, 2004, the company reported net income of $12.8 million or $1.09 per diluted share, compared to net income of $9.1 million or $0.90 per diluted share in the same period of 2003. Total revenues for the first six months of 2004 totaled $139.4 million versus $51.1 million during the first half of 2003.
Affirmative also announced that it has entered into a $15 million two-year credit facility with The Frost National Bank. This senior secured credit facility will be used for general working capital for agency operations, capital for its affiliated insurance companies and/or to finance acquisition activities.
Affirmative maintains a positive outlook for the remainder of 2004 and believes earnings for the full year will be in the range of $1.60 to $1.80 per diluted share. For 2005, the company projects earnings to be in the range of $1.85 to $2.05 per diluted share.
Affirmative currently offers products and services in 11 states, including Texas, Illinois, California and Florida.
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