California-based 21st Century Insurance Group reported a 24.5 percent increase in net income to $18.4 million, or $0.22 per share, in the fourth quarter of 2003 compared to the same period in 2002. For the year ended Dec. 31, 2003, net income increased to $53.6 million, or $0.63 per share, compared to a net loss of $12.3 million, or $0.14 per share in 2002.
The 2003 full year results include a first quarter after-tax charge of $24.1 million to strengthen earthquake reserves and certain nonrecurring, nonoperational items that increased second quarter net income by $9.6 million after-tax. In 2002, the company’s results included third quarter after-tax charges for earthquake and software write-offs totaling $58.4 million.
“2003 was an outstanding year for 21st. We grew in excess of 20 percent, our best growth rate since 1987, and improved our personal auto combined ratio by two points to 96.5,” said Bruce Marlow, president and CEO. The company also reported in its core personal auto lines that:
— Direct premiums written increased 13.3 percent to $304.6 million in the fourth quarter of 2003 compared to $268.9 million for the same period in 2002. For the year ended Dec. 31, 2003, direct premiums written for the personal auto lines increased 22.9 percent to $1,223.4 million from $995.8 million in 2002.
— The GAAP combined ratio for the personal auto lines improved to 95.7 percent in the fourth quarter of 2003 from 97.9 percent in the same quarter a year ago. For the years ended Dec. 31, 2003 and 2002, the GAAP combined ratio for the personal auto lines was 96.5 percent and 98.5 percent, respectively.
— Underwriting profit increased to $13.3 million in the three months ended Dec. 31, 2003, compared to $5.3 million in the fourth quarter of 2002. For the year ended Dec. 31, 2003, personal auto lines underwriting profit was $41.0 million compared to $13.4 million for 2002.
The company began offering personal auto insurance in Illinois, Indiana and Ohio on Jan. 28, 2004. “These are important markets for our long term growth. In 2004, we will concentrate on a slow but steady introduction of our brand and our unmatched package of more standard policy features, superior customer service and low cost,” said Marlow. Results from these new markets are not expected to be material in 2004.
As previously announced, the reincorporation of 21st Century Insurance Group from California to Delaware was effective on Dec. 4, 2003. There will be no change in the location of company operations, location of employees, or in the way the company does business as a result of the reincorporation. The company’s common stock will continue to trade on the New York Stock Exchange under the symbol TW. Delaware is the state of incorporation for 58 percent of the Fortune 500 and 51 percent of all publicly traded companies.
Cash flow from operations for the fourth quarter of 2003 increased to $42.3 million compared to $15.7 million from the fourth quarter of 2002. For the year ended Dec. 31, 2003, cash flow from operations was $187.5 million compared to $76.3 million for 2002.
Total assets increased from $1.5 billion at Dec. 31, 2002 to $1.7 billion at Dec. 31, 2003. Book value per share increased 7 percent in 2003 over 2002 to $8.20 per share. In December 2003, the company completed a $100 million senior debt offering and used $85 million of the proceeds to increase the statutory surplus of its principal insurance subsidiary. The ratio of net premiums written to statutory surplus improved to 2.3 at the end of 2003 compared to 2.4 a year ago.
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