| Contact: |
Peter J. Prygelski, CFO, 21st Century Holding Company
(954) 308-1252 or (954) 581-9993 |
|
21st CENTURY HOLDING COMPANY REPORTS SECOND QUARTER 2008 FINANCIAL RESULTS AND GROWTH STRATEGIES
|
Lauderdale Lakes
,
Florida
,
August 6, 2008
21st Century Holding Company (the “Company) (Nasdaq: TCHC), today reported results for the quarter ended June 30, 2008 (see attached tables).
For the three months ended June 30, 2008, the Company reported a net loss of $2,500,031, or $0.31 per share on 7,974,053 average undiluted shares outstanding, as compared to net income of $10,478,429, or $1.32 per share on 7,930,964 average undiluted shares outstanding in the same three month period last year. On a diluted share basis, the Company reported a net loss of $0.31 per share, based on 7,974,053 average diluted shares outstanding for the same three month period, as compared to $1.31 per share, based on 8,014,947 average diluted shares outstanding for the three months ended June 30, 2007. Included in the loss for the three months ended June 30, 2008 is the recognition of an “other than temporary loss” in our investment portfolio in accordance with Financial Accounting Standard 115. The recognition of this loss resulted in a $4.7 million write down in securities held by the Company. Without this write down earnings would have been approximately $0.06 cents per share on a fully diluted basis.
For the six months ended June 30, 2008, the Company reported net income of $1,808,558, or $0.23 per share on 7,944,305 undiluted shares versus net income of $11,321,234, or $1.42 per share on 7,944,933 undiluted shares in the same six month period last year. On a diluted share basis, the Company reported earnings of $0.23 per share, based on 7,975,057 average diluted shares outstanding for the same six month period, as compared to $1.40 per share, based on 8,099,187 average diluted shares outstanding for the six months ended June 30, 2007.
Net premiums earned decreased $9.4 million or 37.7% to $15.5 million for the three months ended June 30, 2008, as compared to $24.8 million for the same three-month period last year. Net premiums earned decreased $13.1 million or 27.8% to $34.1 million for the six months ended June 30, 2008, as compared to $47.2 million for the same six month period last year. The erosion of premium is due primarily to the soft market conditions prevailing in the state of Florida, led by Citizens Property Insurance Corporation (“Citizens”), the state run insurance company.
Total revenues decreased $19.1 million or 55.3% to $15.4 million for the three months ended June 30, 2008, as compared to $34.5 million for the same three-month period last year. Total revenues decreased $24.6 million or 41.0% to $35.5 million for the six months ended June 30, 2008, as compared to $60.1 million for the same six month period last year.
The Company is pleased to announce the following growth strategies scheduled to be implemented by year end 2008.
Federated National Insurance Company (“Federated National”), a wholly owned subsidiary of the Company, is currently in the process of seeking approval from the Florida Office of Insurance Regulation (“OIR”) to assume up to approximately $45 million in premiums from Citizens. Pending OIR approval, Federated National is expected to assume these policies during the fourth quarter of this year. Federated National is in the process of expanding its certificate of authority and is applying for approval to write the Commercial Multi-Peril line of business. This authority will allow for the sale of commercial residential policies and, if granted, should start with an initial Citizens assumption of up to approximately $15 million in premiums. Federated National also has a separate application in process to assume up to approximately $30 million in premiums from personal residential polices. Pending the required regulatory approvals, this should result in an immediate increase in premiums starting in the fourth quarter of 2008 and, due to reinsurance optimization, improve Federated National’s ability to deliver a profitable and more competitive rate in the marketplace.
American Vehicle Insurance Company (“American Vehicle”), another wholly owned subsidiary of the Company, expects to sign an agreement with a carrier that has an “A” rating from A.M. Best. This agreement would increase American Vehicle’s marketability of its insurance policies and assist in expanding its current products into new states.
Michael H. Braun, the Company’s Chief Executive Officer, said “While second quarter earnings were disappointing, I feel that we are well positioned to grow our company by executing these strategies, while continuing our practice of disciplined underwriting.”
The Company will hold an investor conference call at 4:30 PM (ET) today, August 6, 2008. Mr. Braun and Mr. Peter J. Prygelski, the Company’s CFO, will discuss the financial results and review the outlook for the Company. Messrs. Braun and Prygelski invite interested parties to participate in the conference call. Listeners can access the conference call by dialing toll free 888-460-6235, conference ID #57711029. Please call at least five minutes in advance to ensure that you are connected prior to the presentation. A replay of the conference call will be available for 7 days at 800-642-1687.
About the Company
The Company, through its subsidiaries, underwrites standard and non-standard personal automobile insurance, flood insurance, general liability insurance, mobile home insurance and homeowners’ property and casualty insurance in the State of Florida. The Company underwrites general liability coverage as an admitted carrier in the States of Louisiana, Texas and Alabama for more than 300 classes of business, including special events, as well as homeowners’ coverage in the State of Louisiana. The Company also operates as an approved (non-admitted) carrier in the States of Georgia and Kentucky offering the same general liability products. In addition, the Company has underwriting authority and processes claims for third party insurance companies. In addition to insurance services, the Company offers premium finance services to its insureds as well as insureds of certain third party insurance companies.
Safe harbor statements under the Private Securities Litigation Reform Act of 1995: Statements in this press release that are not historical fact are forward-looking statements that are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” or “continue” or the other negative variations thereof or comparable terminology are intended to identify forward-looking statements. The risks and uncertainties include, without limitation, uncertainties related to estimates, assumptions and projections generally; inflation and other changes in economic conditions (including changes in interest rates and financial markets); pricing competition and other initiatives by competitors; ability to obtain regulatory approval for applications to underwrite in an additional jurisdiction or for requested rate changes, and the timing thereof; legislative and regulatory developments; the outcome of litigation pending against the Company and any settlement thereof; risks related to the nature of the Company’s business; dependence on investment income and the composition of the Company’s investment portfolio; the adequacy of the Company’s liability for loss and loss adjustment expense; insurance agents; claims experience; limited experience in the insurance industry; ratings by industry services; catastrophe losses; reliance on key personnel; weather conditions (including the severity and frequency of storms, hurricanes, tornadoes and hail); changes in driving patterns and loss trends; acts of war and terrorist activities; court decisions and trends in litigation, and health care and auto repair costs; and other matters described from time to time by the Company in releases and publications, and in periodic reports and other documents filed with the United States Securities and Exchange Commission. In addition, investors should be aware that generally accepted accounting principles prescribe when a company may reserve for particular risks, including litigation exposures. Accordingly, results for a given reporting period could be significantly affected if and when a reserve is established for a major contingency. Reported results may therefore appear to be volatile in certain accounting periods.
#####
21st CENTURY HOLDING COMPANY
Consolidated Statements of Operations
(Unaudited)
| |
Three Months Ended June 30, |
Six Months Ended June 30, |
|
Revenue: |
2008
|
2007
|
2008
|
2007
|
|
Gross premiums written |
$ 27,240,913 |
$ 44,461,504 |
$ 54,844,309 |
$ 93,652,233 |
|
Gross premiums ceded |
(8,232,878) |
(15,803,043) |
(8,232,814) |
(15,808,830) |
| |
|
|
|
|
|
Net premiums written |
19,008,035 |
28,658,461 |
46,611,495 |
77,843,403 |
| |
|
|
|
|
|
(Decrease) in prepaid reinsurance premiums |
(2,366,330) |
(845,752) |
(13,520,164) |
(17,817,830) |
|
(Increase) decrease in unearned premiums |
(1,182,970) |
(2,999,006) |
973,245 |
(12,838,842) |
|
Net change in prepaid reinsurance premiums and
unearned premiums |
(3,549,300) |
(3,844,758) |
(12,546,919) |
(30,656,672) |
| |
|
|
|
|
|
Net premiums earned |
15,458,735 |
24,813,703 |
34,064,576 |
47,186,731 |
|
Commission Income |
964,288 |
5,986,697 |
1,027,049 |
6,491,356 |
|
Finance revenue |
91,518 |
159,950 |
177,267 |
346,611 |
|
Managing general agent fees |
530,242 |
803,834 |
1,029,423 |
1,422,045 |
|
Net investment income |
1,899,407 |
2,131,326 |
3,775,434 |
3,699,936 |
|
Net realized investment (losses) gains |
(4,663,912) |
80,087 |
(6,313,289) |
(48,045) |
|
Regulatory assessments recovered |
912,430 |
414,724 |
1,234,335 |
681,724 |
|
Other income |
234,704 |
102,496 |
474,252 |
297,494 |
| |
|
|
|
|
|
Total revenue |
15,427,412 |
34,492,817 |
35,469,047 |
60,077,852 |
| |
|
|
|
|
|
Expenses: |
|
Loss and loss adjustment expenses |
12,493,367 |
9,657,700 |
20,367,699 |
23,760,355 |
|
Operating and underwriting expenses |
1,473,439 |
3,099,590 |
3,028,610 |
7,065,363 |
|
Salaries and wages |
1,762,957 |
1,733,616 |
3,521,469 |
3,289,868 |
|
Interest expense |
-- |
60,253 |
-- |
145,253 |
|
Policy acquisition costs, net of amortization |
3,787,474 |
4,908,566 |
7,623,315 |
9,516,530 |
| |
|
|
|
|
|
Total expenses |
19,517,237 |
19,459,725 |
34,541,093 |
43,777,369 |
| |
|
|
|
|
|
(Loss) income before provision for income tax (benefit) expense |
(4,089,825) |
15,033,092 |
927,954 |
16,300,483 |
|
Provision for income tax (benefit) expense |
(1,589,794) |
4,554,663 |
(880,604) |
4,979,249 |
|
Net (loss) income |
$ (2,500,031) |
$ 10,478,429 |
$ 1,808,558 |
$ 11,321,234 |
|
Basic net (loss) income per share |
$ (0.31) |
$ 1.32 |
$ 0.23 |
$ 1.42 |
|
Fully diluted net (loss) income per share |
$ (0.31) |
$ 1.31 |
$ 0.23 |
$ 1.40 |
| |
|
|
|
|
|
Weighted average number of common shares outstanding |
7,974,053 |
7,930,964 |
7,944,305 |
7,944,933 |
| |
|
|
|
|
|
Weighted average number of common shares outstanding (assuming dilution) |
7,974,053 |
8,014,947 |
7,975,057 |
8,099,187 |
| |
|
|
|
|
|
Dividends paid per share |
$ 0.18 |
$ 0.18 |
$ 0.36 |
$ 0.36 |
21st CENTURY HOLDING COMPANY
Other Selected Data
(Unaudited)
Balance Sheet
| |
Period Ending |
| |
06/30/08 |
12/31/07 |
| Total Cash & Investments |
$167,177,874 |
$158,748,019 |
| Total Assets |
$212,601,990 |
$219,360,763 |
| Unpaid Loss and Loss Adjustment Expense |
$58,347,345 |
$59,684,790 |
| Total Liabilities |
$129,776,081 |
$138,104,140 |
| Total Shareholders’ Equity |
$82,825,909 |
$81,256,623 |
| Common Stock Outstanding |
8,013,894 |
7,871,234 |
| Book Value Per Share |
$10.34 |
$10.32 |
Premium Breakout
| |
3 Months Ending
|
6 Months Ending
|
| Line of Business |
06/30/08
|
06/30/07
|
06/30/08
|
06/30/07
|
| |
(Dollars in thousands)
|
(Dollars in thousands)
|
| Homeowners' |
$19,931
|
$34,096
|
$39,920
|
$73,959
|
| General Liability |
7,235
|
10,075
|
14,590
|
18,225
|
| Automobile |
75 |
291 |
334 |
1,468 |
| Gross Written Premiums |
$27,241 |
$44,462
|
$54,844
|
$93,652
|
Commercial General Liability
Written Premium by State
| |
3 Months Ending
|
6 Months Ending
|
| State |
06/30/08
|
06/30/07
|
06/30/08
|
06/30/07
|
| |
(Dollars in thousands)
|
(Dollars in thousands)
|
| Alabama |
$28 |
$-- |
$72 |
$-- |
| Arkansas |
4 |
-- |
12 |
-- |
| California |
104 |
-- |
200 |
-- |
| Florida |
4,510 |
6,881 |
9,394 |
12,505 |
| Georgia |
143 |
295 |
329 |
592 |
| Kentucky |
1 |
4 |
1 |
5 |
| Louisiana |
1,330 |
1,481 |
2,514 |
2,682 |
| South Carolina |
28 |
43 |
60 |
87 |
| Texas |
1,090 |
1,354 |
2,000 |
2,322 |
| Virginia |
(3) |
17 |
8 |
32 |
| Gross Written Premiums |
$7,235 |
$10,075 |
$14,590 |
$18,225 |
Loss Ratios
| |
3 Months Ending
|
6 Months Ending
|
| Line of Business |
06/30/08
|
06/30/07
|
06/30/08
|
06/30/07
|
| Homeowners' |
77.50% |
37.50% |
54.96% |
52.30% |
| General Liability |
91.02% |
40.00% |
70.42% |
36.10% |
| Automobile |
(114.70)% |
54.70% |
(45.09)% |
135.20% |
| All Lines |
80.81% |
38.90% |
59.79% |
50.30% |
|
|
