Attached files
| file | filename |
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| 8-K - TOWER GROUP, INC. 8-K - Tower Group International, Ltd. | a6715788.htm |
Exhibit 99.1
Tower Group, Inc. Reports First Quarter 2011 Results; Quarterly Dividend Increased by 50% to $0.1875 Per Share
NEW YORK--(BUSINESS WIRE)--May 9, 2011--Tower Group, Inc. (NASDAQ: TWGP) today reported net income available to common shareholders of $25.7 million and diluted earnings per share of $0.61 for the first quarter 2011, up from $13.1 million, or $0.29 per share, in the first quarter of 2010.
Operating income (1) increased by 52% to $20.3 million in the first quarter of 2011 from $13.4 million in the first quarter of 2010. Diluted operating earnings per share (1) increased by 69% to $0.49 per share in the first quarter from $0.29 per share in the first quarter of 2010. Operating income in the first quarter of 2011 was impacted by unusually severe weather-related claims. After-tax losses from these events amounted to $9.8 million or $0.23 per share, slightly less than the $12.0 million or $0.27 per share recorded in the first quarter of 2010. The storm losses added 3.9 points to the first quarter 2011 loss ratio for the combined segments, down from 6.5 points in the first quarter 2010.
In October 2010, the Financial Accounting Standards Board issued new guidance concerning the accounting for costs associated with acquiring or renewing insurance contracts. Under the new guidance, only direct incremental costs associated with successful insurance contract acquisitions or renewals are deferrable. We have adopted this guidance early, effective January 1, 2011, and have retrospectively adjusted our previously issued financial information. Adoption of this guidance reduced the carrying value of our deferred acquisition costs as of December 31, 2010, by $78.7 million and Tower Group Inc. stockholders’ equity by $42.6 million. Diluted earnings per share for the first quarter 2010 were reduced by $0.09 per share as a result of this change in accounting.
Highlights (all percentage increases compare first quarter 2011 results to the results for the same period in 2010 except as noted otherwise):
| -- | Gross premiums written increased by 37.5% to $389.5 million. | |
| -- |
For the combined insurance segments, the net combined ratio improved to 97.7% from 99.4%. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net combined ratio was 97.6% for the first quarter of 2011.) |
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-- The net loss ratio was unchanged, at 63.2%. |
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-- The net expense ratio improved to 34.5 % from 36.2%. |
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| -- |
Net investment income increased by 39.7% to $32.4 million. |
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| -- |
Book value per share was $25.24 and Tower Group, Inc. stockholders’ equity was $1.0 billion as of March 31, 2011. |
Michael H. Lee, President and Chief Executive Officer of Tower Group, Inc., said, “Our operating results this quarter, while affected by winter storm losses in the northeast, continue to demonstrate strong operating fundamentals and positive trends. Our robust premium growth during the quarter was driven by our 2010 acquisition of OneBeacon’s personal lines business, expansion into specialty niche markets, territorial expansion and new organic growth initiatives. We also continued to maintain a favorable loss ratio by exercising underwriting and pricing discipline. Finally, we were successful in increasing our investment income by increasing our invested asset base and by enhancing our investment asset allocation. Based on these strong operating fundamentals and positive trends this quarter, we are confident in our outlook for the remainder of 2011. Consistent with our focus on enhancing value to our shareholders, we are pleased to announce that our Board has authorized a 50% increase in our quarterly dividends from 12.5 cents per share to 18.75 cents per share to stockholders of record as of June 13, 2011.”
| Financial Summary ($ in thousands, except per share data): | |||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
| 2011 | 2010 | ||||||||
| Gross premiums written | $ | 389,548 | $ | 283,249 | |||||
| Net premiums written | 360,018 | 247,293 | |||||||
| Total commission and fee income | 10,961 | 11,515 | |||||||
| Net investment income | 32,378 | 23,175 | |||||||
| Net realized investment gains | 7,360 | 740 | |||||||
| Total revenues | 430,494 | 303,476 | |||||||
| Other expense | - | (466 | ) | ||||||
| Net income attributable to Tower Group, Inc. | 25,685 | 13,052 | |||||||
| Earnings per share—Basic | $ | 0.61 | $ | 0.29 | |||||
| Earnings per share—Diluted | $ | 0.61 | $ | 0.29 | |||||
| Return on average equity | 9.9 | % | 5.7 | % | |||||
| Combined Commercial and Personal Segments | |||||||||
| Net premiums earned | 379,795 | 268,046 | |||||||
| Net loss ratio | 63.2 | % | 63.2 | % | |||||
| Net expense ratio | 34.5 | % | 36.2 | % | |||||
| Commercial Insurance Segment | |||||||||
| Net premiums earned | 251,768 | 233,431 | |||||||
| Net loss ratio | 65.3 | % | 58.2 | % | |||||
| Net expense ratio | 32.7 | % | 34.8 | % | |||||
| Personal Insurance Segment | |||||||||
| Net premiums earned | 128,027 | 34,615 | |||||||
| Net loss ratio | 59.1 | % | 97.0 | % | |||||
| Net expense ratio | 38.0 | % | 45.7 | % | |||||
| Reconciliation of non-GAAP financial measures: | |||||||||
| Net income attributable to Tower Group, Inc. | $ | 25,685 | $ | 13,052 | |||||
| Less: net realized gains on investments attributable to Tower Group, Inc. | 8,237 | 740 | |||||||
| Add: acquisition-related transaction costs (3) | (12 | ) | (857 | ) | |||||
| Add: income tax effects on above items | (2,882 | ) | (196 | ) | |||||
| Operating income attributable to Tower Group, Inc. | $ | 20,342 | $ | 13,365 | |||||
| Operating earnings per share—Basic | $ | 0.49 | $ | 0.30 | |||||
| Operating earnings per share—Diluted | $ | 0.49 | $ | 0.29 | |||||
| Operating return on average equity | 7.8 | % | 5.9 | % | |||||
First Quarter 2011 Highlights
Gross premiums written increased to $389.5 million in the first quarter, 37.5% higher than in the first quarter of 2010. Excluding programs, policies in-force increased by 84.4% as of March 31, 2011, compared to March 31, 2010. The growth was primarily due to the increase in policies in-force resulting from the acquisition of OneBeacon Personal Lines (OBPL) business in the third quarter of 2010. For the three months ended March 31, 2011, premium rates on renewed Commercial Insurance business excluding programs increased 1.0% and premium rates on renewed Personal Insurance business increased 3.5% compared to the same period in 2010, resulting in an overall premium rate increase on renewal business of 1.9%. During the same period, our Commercial Insurance business renewal retention rate excluding programs was 74.8% compared to our Personal Insurance business renewal retention rate of 83.8%, resulting in an overall retention rate of 82.0%.
Total revenues increased 41.9% to $430.5 million up from $303.5 million in the prior year's first quarter. The growth was primarily due to increased net premiums earned and net investment income resulting from the acquisition of the OBPL business in the third quarter of 2010. Net premiums earned represented 88.2% and 88.3% of total revenues for the three months ended March 31, 2011 and March 31, 2010, respectively.
Net investment income increased 39.7% to $32.4 million for the three months ended March 31, 2011, up from $23.2 million for the same period in 2010. The tax equivalent investment yield at amortized cost was 4.8% at March 31, 2011, compared to 5.7% at March 31, 2010. Net realized investment gains were $7.4 million for the three months ended March 31, 2011, compared to a gain of $0.7 million in the same period last year. The first quarter gains include other-than-temporarily impaired credit losses of $0.1 million, improving from $2.9 million of such losses in the first quarter of 2010.
Total commission and fee income decreased 4.8% to $11.0 million in the first quarter of 2011 compared to $11.5 million in the first quarter of 2010.
The net loss ratio was unchanged at 63.2% for the three months ended March 31, 2011 and March 31, 2010. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net loss ratio was 64.7% for the first quarter of 2011.)
Our net expense ratio, at 34.5% for the three months ended March 31, 2011 was an improvement from the 36.2% we recorded during the same period in 2010. (Excluding the business that we manage on behalf of the reciprocal exchanges, the net expense ratio was 32.9% for the first quarter of 2011.)
Interest expense increased by $3.2 million for the three months ended March 31, 2011, compared to the same period in 2010.
Additional Highlights and Disclosures:
Dividend Declaration
Tower’s Board of Directors approved a quarterly dividend on May 5, 2011 of $0.1875 per share payable on June 24, 2011 to stockholders of record as of June 13, 2011.
2011 Guidance
Tower projects its full year 2011 operating earnings per share to be in a range of $2.70 to $2.90.
Notes on Non-GAAP Financial Measures
(1) Operating income excludes realized gains and losses, acquisition-related transaction costs and the results of the reciprocal business, net of tax. Operating income is a common measurement for property and casualty insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Additionally, these measures are a key internal management performance standard. Operating earnings per share is operating income divided by diluted weighted average shares outstanding. Operating return on equity is annualized operating income divided by average common stockholders' equity.
(2) For the three month period ended March 31, 2011, $9 thousand of acquisition-related transaction costs were not deemed deductible for tax purposes. A tax rate of 35% was used for those acquisition-related transaction costs that were tax deductible.
Conference Call
Tower will host a conference call to discuss these results on Tuesday, May 10, at 9:00 a.m. ET. A PowerPoint slide presentation will accompany the prepared remarks and will be posted along with a live broadcast of the conference call in the investor relations section of Tower Group, Inc.’s website. To listen, please visit the Investor Information section of www.twrgrp.com, or use this link: http://investor.twrgrp.com/events.cfm
Please access the website at least 15 minutes prior to the call to register and download any necessary audio software. If you are unable to participate during the live conference call, a webcast will be archived in the Investor Information section of Tower Group, Inc.'s website at www.twrgrp.com.
About Tower Group, Inc.
Tower Group, Inc. offers diversified property and casualty insurance products and services through its operating subsidiaries. Its insurance company subsidiaries offer insurance products to individuals and small to medium-sized businesses through its network of retail and wholesale agents and specialty business through program underwriting agents. Tower's insurance services subsidiaries provide underwriting, claims and reinsurance brokerage services to other insurance companies.
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release and any other written or oral statements made by or on behalf of Tower may include forward-looking statements that reflect Tower's current views with respect to future events and financial performance. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "will," "plan," "expect," "project," "intend," "estimate," "anticipate," "believe" and "continue" or their negative or variations or similar terminology. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. Please refer to Tower’s filings with the SEC, including among others Tower’s Annual Report on Form 10-K for the year ended December 31, 2010 for a description of the important factors that could cause the actual results of Tower to differ materially from those indicated in these statements. Forward-looking statements speak only as of the date on which they are made, and Tower undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
For more information, visit Tower's website at http://www.twrgrp.com/
Tower has changed the presentation of its business results, beginning July 1, 2010, by allocating the personal insurance business previously reported in either the Brokerage Insurance or Specialty Business segments along with the newly acquired OBPL business to a new Personal Insurance segment and merged the commercial business previously reported in either the Brokerage Insurance or Specialty Business segments in a new Commercial Insurance segment.
Tower has retained its Insurance Services segment, which will include fees earned by management companies acquired as a part of the OBPL transaction. This change in presentation reflects the way management organizes the segments for making operating decisions and assessing profitability subsequent to the OBPL acquisition. This will result in the reporting of three operating segments. The prior period segment disclosures have been restated to conform to the current presentation. Following the change in presentation described above, Tower now operates three business segments:
Commercial Insurance Segment offers a broad range of commercial lines property and casualty insurance products to small to mid-sized businesses distributed through a network of retail and wholesale agents on both an admitted and non-admitted basis. This segment also includes reinsurance solutions provided primarily to small insurance companies;
Personal Insurance Segment offers a broad range of personal lines property and casualty insurance products to individuals distributed through a network of retail and wholesale agents; and
Insurance Services Segment provides underwriting, claims and reinsurance brokerage services to insurance companies.
| Commercial Insurance & Personal Insurance Combined | ||||||||||
| ($ in thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2011 | 2010 | |||||||||
| Revenues | ||||||||||
| Premiums earned | ||||||||||
| Gross premiums earned | $ | 423,923 | $ | 321,819 | ||||||
| Less: ceded premiums earned | (44,128 | ) | (53,773 | ) | ||||||
| Net premiums earned | 379,795 | 268,046 | ||||||||
| Ceding commission revenue | 8,181 | 10,188 | ||||||||
| Policy billing fees | 2,178 | 771 | ||||||||
| Total revenues | 390,154 | 279,005 | ||||||||
| Expenses | ||||||||||
| Loss and loss adjustment expenses | ||||||||||
| Gross loss and loss adjustment expenses | 258,126 | 196,950 | ||||||||
| Less: ceded loss and loss adjustment expenses | ||||||||||
| (17,950 | ) | (27,613 | ) | |||||||
| Net loss and loss adjustment expenses | 240,176 | 169,337 | ||||||||
| Underwriting expenses | ||||||||||
| Direct commission expense | 76,348 | 57,923 | ||||||||
| Other underwriting expenses | 65,153 | 50,003 | ||||||||
| Total underwriting expenses | 141,501 | 107,926 | ||||||||
| Underwriting profit | $ | 8,477 | $ | 1,742 | ||||||
| Key Measures | ||||||||||
| Premiums written | ||||||||||
| Gross premiums written | $ | 389,548 | $ | 283,249 | ||||||
| Less: ceded premiums written | (29,530 | ) | (35,956 | ) | ||||||
| Net premiums written | $ | 360,018 | $ | 247,293 | ||||||
| Calendar Year Loss Ratios | ||||||||||
| Gross | 60.9 | % | 61.2 | % | ||||||
| Net | 63.2 | % | 63.2 | % | ||||||
| Underwriting Expense Ratios | ||||||||||
| Gross | 32.9 | % | 33.3 | % | ||||||
| Net | 34.5 | % | 36.2 | % | ||||||
| Combined Ratios | ||||||||||
| Gross | 93.8 | % | 94.5 | % | ||||||
| Net | 97.7 | % | 99.4 | % | ||||||
| Commercial Insurance Segment Information | |||||||||
| ($ in thousands) | |||||||||
| (Unaudited) | |||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
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2011 | 2010 | |||||||
| Revenues | |||||||||
| Premiums earned | |||||||||
| Gross premiums earned | $ | 276,551 | $ | 278,628 | |||||
|
Less: ceded premiums earned |
(24,783 | ) | (45,197 | ) | |||||
| Net premiums earned | 251,768 | 233,431 | |||||||
| Ceding commission revenue | 4,018 | 9,142 | |||||||
| Policy billing fees | 764 | 580 | |||||||
| Total revenues | 256,550 | 243,153 | |||||||
| Expenses | |||||||||
| Loss and loss adjustment expenses | |||||||||
| Gross loss and loss adjustment expenses | 181,694 | 162,590 | |||||||
|
Less: ceded loss and loss adjustment expenses |
|||||||||
| (17,204 | ) | (26,830 | ) | ||||||
| Net loss and loss adjustment expenses | 164,490 | 135,760 | |||||||
| Underwriting expenses | |||||||||
|
Direct commission expense |
50,478 | 50,005 | |||||||
| Other underwriting expenses | 36,750 | 40,864 | |||||||
| Total underwriting expenses | 87,228 | 90,869 | |||||||
| Underwriting profit | $ | 4,832 | $ | 16,524 | |||||
| Key Measures | |||||||||
| Premiums written | |||||||||
| Gross premiums written | $ | 263,012 | $ | 247,512 | |||||
| Less: ceded premiums written | (11,891 | ) | (28,075 | ) | |||||
| Net premiums written | $ | 251,121 | $ | 219,437 | |||||
| Calendar Year Loss Ratios | |||||||||
| Gross | 65.7 | % | 58.4 | % | |||||
| Net | 65.3 | % | 58.2 | % | |||||
| Underwriting Expense Ratios | |||||||||
| Gross | 31.3 | % | 32.4 | % | |||||
| Net | 32.7 | % | 34.8 | % | |||||
| Combined Ratios | |||||||||
| Gross | 97.0 | % | 90.8 | % | |||||
| Net | 98.0 | % | 93.0 | % | |||||
| Personal Insurance Segment Information | ||||||||||||
| ($ in thousands) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended March 31, | ||||||||||||
| 2011 | ||||||||||||
| Reciprocal | ||||||||||||
| Tower | Exchanges | Total | 2010 | |||||||||
| Revenues | ||||||||||||
| Premiums earned | ||||||||||||
| Gross premiums earned | $ | 95,343 | $ | 52,029 | $ | 147,372 | $ | 43,191 | ||||
| Less: ceded premiums earned | (12,574 | ) | (6,771 | ) | (19,345 | ) | (8,576 | ) | ||||
| Net premiums earned | 82,769 | 45,258 | 128,027 | 34,615 | ||||||||
| Ceding commission revenue | 2,800 | 1,363 | 4,163 | 1,046 | ||||||||
| Policy billing fees | 1,270 | 144 | 1,414 | 191 | ||||||||
| Total revenues | 86,839 | 46,765 | 133,604 | 35,852 | ||||||||
| Expenses | ||||||||||||
| Loss and loss adjustment expenses | ||||||||||||
| Gross loss and loss adjustment expenses | 52,915 | 23,517 | 76,432 | 34,360 | ||||||||
| Less: ceded loss and loss adjustment expenses | ||||||||||||
| (957 | ) | 211 | (746 | ) | (783 | ) | ||||||
| Net loss and loss adjustment expenses | 51,958 | 23,728 | 75,686 | 33,577 | ||||||||
| Underwriting expenses | ||||||||||||
| Direct commission expense | 15,296 | 10,574 | 25,870 | 7,918 | ||||||||
| Other underwriting expenses | 16,371 | 12,032 | 28,403 | 9,139 | ||||||||
| Total underwriting expenses | 31,667 | 22,606 | 54,273 | 17,057 | ||||||||
| Underwriting profit | $ | 3,214 | $ | 431 | $ | 3,645 | $ | (14,782 | ) | |||
| Key Measures | ||||||||||||
| Premiums written | ||||||||||||
| Gross premiums written | $ | 78,719 | $ | 47,817 | $ | 126,536 | $ | 35,737 | ||||
| Less: ceded premiums written | (10,450 | ) | (7,189 | ) | (17,639 | ) | (7,881 | ) | ||||
| Net premiums written | $ | 68,269 | $ | 40,628 | $ | 108,897 | $ | 27,856 | ||||
| Calendar Year Loss Ratios | ||||||||||||
| Gross | 55.5 | % | 45.2 | % | 51.9 | % | 79.6 | % | ||||
| Net | 62.8 | % | 52.4 | % | 59.1 | % | 97.0 | % | ||||
| Underwriting Expense Ratios | ||||||||||||
| Gross | 31.9 | % | 43.2 | % | 35.9 | % | 39.0 | % | ||||
| Net | 33.3 | % | 46.6 | % | 38.0 | % | 45.7 | % | ||||
| Combined Ratios | ||||||||||||
| Gross | 87.4 | % | 88.4 | % | 87.8 | % | 118.6 | % | ||||
| Net | 96.1 | % | 99.0 | % | 97.1 | % | 142.7 | % | ||||
| Insurance Services Segment Results of Operations | |||||||
| ($ in thousands) | |||||||
| (Unaudited) | |||||||
| Three Months Ended | |||||||
| March 31, | |||||||
| 2011 | 2010 | ||||||
| Revenue | |||||||
| Management fee income | $ | 6,695 | $ | - | |||
| Other revenue | 602 | 556 | |||||
| Total revenue | 7,297 | 556 | |||||
| Expenses | |||||||
| Direct commission expenses paid to producers | 255 | 122 | |||||
| Other insurance services expenses | 4,786 | 250 | |||||
| Total expenses | 5,041 | 372 | |||||
| Insurance services pre-tax income | $ | 2,256 | $ | 184 | |||
| Tower Group, Inc. | |||||||||
| Consolidated Balance Sheets | |||||||||
| (Unaudited) | |||||||||
| March 31, | December 31, | ||||||||
| ($ in thousands, except par value and share amounts) | 2011 | 2010 | |||||||
| Assets | |||||||||
| Investments - Tower | |||||||||
| Available-for-sale investments, at fair value: | |||||||||
| Fixed-maturity securities (amortized cost of $2,035,939 and $1,968,670) | $ | 2,096,414 | $ | 2,041,557 | |||||
| Equity securities (cost of $91,103 and $91,218) | 92,673 | 90,317 | |||||||
| Short-term investments (cost of $0 and $1,560) | - | 1,560 | |||||||
| Investments - Reciprocal Exchanges | |||||||||
| Available-for-sale investments, at fair value: | |||||||||
| Fixed-maturity securities (amortized cost of $283,958 and $338,494) | 287,398 | 341,054 | |||||||
| Equity securities (cost of $1,965 and $0) | 2,342 | - | |||||||
| Total investments | 2,478,827 | 2,474,488 | |||||||
| Cash and cash equivalents (includes $592 and $2,796 relating to Reciprocal Exchanges) | 71,048 | 102,877 | |||||||
| Investment income receivable (includes $2,538 and $3,021 relating to Reciprocal Exchanges) | 26,486 | 23,562 | |||||||
| Premiums receivable (includes $36,673 and $53,953 relating to Reciprocal Exchanges) | 363,996 | 387,584 | |||||||
| Reinsurance recoverable on paid losses (includes $2,487 and $2,167 relating to Reciprocal Exchanges) | 20,394 | 18,214 | |||||||
| Reinsurance recoverable on unpaid losses (includes $11,757 and $15,092 relating to Reciprocal Exchanges) | 290,352 | 282,682 | |||||||
| Prepaid reinsurance premiums (includes $16,460 and $17,919 relating to Reciprocal Exchanges) | 63,288 | 77,627 | |||||||
| Deferred acquisition costs, net (includes $14,166 and $18,206 relating to Reciprocal Exchanges) | 160,863 | 164,123 | |||||||
| Deferred income taxes (includes $0 and $788 relating to Reciprocal Exchanges) | - | 2,245 | |||||||
| Intangible assets (includes $5,338 and $5,504 relating to Reciprocal Exchanges) | 121,595 | 123,820 | |||||||
| Goodwill | 250,103 | 250,103 | |||||||
| Other assets (includes $15,277 and $5,808 relating to Reciprocal Exchanges) | 283,566 | 230,405 | |||||||
| Total assets | $ | 4,130,518 | $ | 4,137,730 | |||||
| Liabilities | |||||||||
| Loss and loss adjustment expenses (includes $161,952 and $175,023 relating to Reciprocal Exchanges) | $ | 1,616,727 | $ | 1,610,421 | |||||
| Unearned premium (includes $107,862 and $123,949 relating to Reciprocal Exchanges) | 837,910 | 872,026 | |||||||
| Reinsurance balances payable (includes $1,459 and $3,402 relating to Reciprocal Exchanges) | 18,040 | 35,037 | |||||||
| Funds held under reinsurance agreements | 99,704 | 93,153 | |||||||
| Other liabilities (includes $12,539 and $9,384 relating to Reciprocal Exchanges) | 94,465 | 84,989 | |||||||
| Deferred income taxes (includes $1,070 and $0 relating to Reciprocal Exchanges) | 4,132 | - | |||||||
| Debt | 391,907 | 374,266 | |||||||
| Total liabilities | 3,062,885 | 3,069,892 | |||||||
| Stockholders' equity | |||||||||
| Common stock ($0.01 par value; 100,000,000 shares authorized, 46,379,344 and | |||||||||
| 45,742,342 shares issued, and 41,329,777 and 41,485,678 shares outstanding) | 464 | 457 | |||||||
| Treasury stock (5,049,567 and 4,256,664 shares) | (110,736 | ) | (91,779 | ) | |||||
| Paid-in-capital | 765,407 | 763,064 | |||||||
| Accumulated other comprehensive income | 43,080 | 48,883 | |||||||
| Retained earnings | 344,945 | 324,376 | |||||||
| Tower Group, Inc. stockholders' equity | 1,043,160 | 1,045,001 | |||||||
| Noncontrolling interests - Reciprocal Exchanges | 24,473 | 22,837 | |||||||
| Total stockholders' equity | 1,067,633 | 1,067,838 | |||||||
| Total liabilities and stockholders' equity | $ | 4,130,518 | $ | 4,137,730 | |||||
| Tower Group, Inc. | |||||||||
| Consolidated Statements of Income and Comprehensive Income | |||||||||
| (Unaudited) | |||||||||
| Three Months Ended | |||||||||
| March 31, | |||||||||
| (in thousands, except per share amounts) | 2011 | 2010 | |||||||
| Revenues | |||||||||
| Net premiums earned | $ | 379,795 | $ | 268,046 | |||||
| Ceding commission revenue | 8,181 | 10,188 | |||||||
| Insurance services revenue | 602 | 556 | |||||||
| Policy billing fees | 2,178 | 771 | |||||||
| Net investment income | 32,378 | 23,175 | |||||||
| Net realized investment gains (losses) | |||||||||
| Other-than-temporary impairments | (168 | ) | (6,146 | ) | |||||
| Portion of loss recognized in other comprehensive income | 24 | 3,215 | |||||||
| Other net realized investment gains | 7,504 | 3,671 | |||||||
| Total net realized investment gains (losses) | 7,360 | 740 | |||||||
| Total revenues | 430,494 | 303,476 | |||||||
| Expenses | |||||||||
| Loss and loss adjustment expenses | 240,176 | 169,337 | |||||||
| Direct and ceding commission expense | 76,603 | 58,045 | |||||||
| Other operating expenses | 66,339 | 51,008 | |||||||
| Acquisition-related transaction costs | 12 | 857 | |||||||
| Interest expense | 8,100 | 4,881 | |||||||
| Total expenses | 391,230 | 284,128 | |||||||
| Other income (expense) | |||||||||
| Other expense | - | (466 | ) | ||||||
| Income before income taxes | 39,264 | 18,882 | |||||||
| Income tax expense | 12,758 | 5,830 | |||||||
| Net income | $ | 26,506 | $ | 13,052 | |||||
| Less: Net income attributable to Reciprocal Exchanges | 821 | - | |||||||
| Net income attributable to Tower Group, Inc. | $ | 25,685 | $ | 13,052 | |||||
| Net income | $ | 26,506 | $ | 13,052 | |||||
| Gross unrealized investment holding gains arising during periods | (1,325 | ) | 23,811 | ||||||
| Gross unrealized gains on interest rate swaps | 938 | - | |||||||
| Less: Reclassification adjustment for (gains) losses included in net | |||||||||
| income | (7,360 | ) | (740 | ) | |||||
| Income tax (expense) related to items of other comprehensive | |||||||||
| income | 2,759 | (7,594 | ) | ||||||
| Comprehensive net income | $ | 21,518 | $ | 28,529 | |||||
| Less: Comprehensive income attributable to Reciprocal Exchanges | 815 | - | |||||||
| Comprehensive income attributable to Tower Group, Inc. | 20,703 | 28,529 | |||||||
| Earnings per share attributable to Tower stockholders: | |||||||||
| Basic | $ | 0.61 | $ | 0.29 | |||||
| Diluted | $ | 0.61 | $ | 0.29 | |||||
| Weighted average common shares outstanding | |||||||||
| Basic | 41,794 | 45,204 | |||||||
| Diluted | 41,930 | 45,406 | |||||||
| Dividends declared and paid per common share | $ | 0.13 | $ | 0.07 | |||||
CONTACT:
Tower Group, Inc.
Bill Hitselberger
Executive Vice
President and Chief Financial Officer
212-655-2110
bhitselberger@twrgrp.com