Nashville-based Direct General Corp. announced its results of operations for the fourth quarter of 2004, noting a record level of net income for the year of $54.0 million, which represents a 25.3% increase from $43.1 million in 2003. The company’s return on average equity exceeded 25% in 2004.
For the fourth quarter of 2004, net income was $8.6 million or $0.38 per share, on a diluted basis. Comparatively, net income for the fourth quarter of 2003 was $11.4 million or $0.51 per diluted share. As previously announced, the company’s earnings in the fourth quarter of 2004 were adversely affected by an increase to loss reserves, which decreased net income for the quarter by $7.1 million or $0.31 per diluted share. The impact of reserve increases in the fourth quarter of 2003 was not significant.
William Adair, chairman, CEO and president stated, “Despite the strengthening of reserves in the fourth quarter and the financial impact of the unprecedented level of hurricanes that struck Florida and other southeastern states in the third quarter, Direct still produced net income of $54 million in 2004, a 25% increase over the prior year and the highest level of income in our history. Direct is entering 2005 as a sound and profitable company with a great business model and solid growth potential.”
For the three months ended Dec. 31, 2004, gross premiums written increased 1.3% to $104.2 million, as compared to the same period in 2003. Over this same period, gross revenues, a non-GAAP financial measure that the company uses as the primary measure of the underlying growth of its revenue streams from period to period, increased 4.1% to $130.6 million.
Net premiums written for the fourth quarter of 2004 decreased 0.3% to $96.8 million as compared to the fourth quarter of 2003 as a result of a slight increase in the percentage of business ceded to reinsurers to 7.1% from 5.6%. Net premiums earned, a function of net premiums written in the current and prior periods, were $98.9 million and $68.7 million in the quarters ended Dec. 31, 2004 and 2003, respectively.
Net loss ratios, which include both losses and loss adjustment expenses, were 82.0% and 72.8% for the fourth quarter of 2004 and 2003, respectively. The combined ratio was 89.9% in the fourth quarter of 2004, as compared to 75.8% for the corresponding period in 2003. For the year, the net loss and combined ratios were 75.7% and 80.0%, respectively, as compared to 73.6% and 74.7% in 2003.
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