Motor Club of America Announces First Quarter Results
6 May 1998
Motor Club of America Announces First Quarter Results
PARAMUS, N.J., May 6 -- Motor Club of America
("Company") announced today its first quarter results for the period ended
March 31, 1998. Revenues were $14,122,238 as compared to $13,780,326 for the
same period in 1997. Net income for the three month period was $1,024,531 or
$.49 basic net income per share, as compared to $921,993 or $.45 per share in
1996. First quarter diluted net income per share was $.48 in 1998 and $.44 in
1997.
Archer McWhorter, Chairman of the Board of the Company stated, "Our
1998 first quarter featured a number of positive developments. Operating
profits from Preserver Insurance Company ("Preserver") continued to be very
strong and we successfully introduced our new workers' compensation product in
March. Pre-tax income grew by 18%, despite higher costs associated with the
start-up of workers' compensation and a corporate identity program for
Preserver. We are cautiously monitoring the pending legislative measures
regarding personal automobile insurance in New Jersey. We believe the
legislation as presently structured would be a modest net negative for the
Motor Club of America Insurance Company's ("Motor Club") personal automobile
operations. We encourage the New Jersey Legislature to ensure that the cost
savings proposed are commensurate with the rate rollbacks which are being
mandated."
Effective July 1, 1998, Motor Club will convert its existing six month
policies, which constitute 98% of its personal automobile book of business, to
twelve month policies. This measure will further improve the Company's
operating efficiency and service levels, and reduce expenses. This is
particularly important since the New Jersey Department of Banking and
Insurance has not proposed or adopted regulations which would provide for
expedited prior approval rate increases, as required by legislation passed by
the New Jersey Legislature in 1997. While conversion to twelve month policies
will, for a one year period commencing July 1, 1998, temporarily increase the
amount of premiums written by the Company, it will not effect the amount of
premium earned.
Although net premiums written increased only $193,000 or 2% during the
1998 first quarter as compared to the same period in 1997, Motor Club expects
this amount to increase over the remainder of 1998 as the full effects of the
workers' compensation product is expected to increase overall commercial lines
premium writings.
The Company had slightly lower loss ratios during the 1998 first quarter
as compared to 1997, as follows:
1998 1997
Motor Club 69.7% 66.5%
Preserver 46.5% 58.3%
Total 64.1% 64.7%
The personal automobile loss ratio for Motor Club remains in line with
expectations which consider the increased amounts of new personal automobile
written since 1995. The Preserver loss ratio reflects the generally positive
trends which Preserver has experienced over the last two years (including
lower reinsurance costs), along with the relative lack of winter weather
losses in New Jersey in the first quarter of 1998.
With profits continuing, the Company accrued $170,000 for its annual
employee incentive awards in the 1998 first quarter; previously, these awards
were accrued for the entire year in the fourth quarter of each year.
Accordingly, for comparative purposes, the accrual of these awards in
1998 over the course of the year should be considered by readers of this
document.
Motor Club of America is a property and casualty insurance holding
company. Motor Club of America Insurance Company writes personal automobile
insurance. Preserver Insurance Company writes small commercial and homeowners
insurance. Both companies are rated B+ (Very Good) by A.M. Best Company.
Additional information about Motor Club of America can be found on the
Company's Internet web site http://www.motr.com.
This press release contains statements that are not historical facts and
are considered "forward-looking statements" (as defined in the Private
Securities Litigation Reform Act of 1995), which can be identified by terms
such as "believes," "expects," "may," "will," "should," "anticipates," the
negatives thereof, or by discussions of strategy. Certain statements
contained herein are forward-looking statements that involve risks,
uncertainties, opinions and predictions, and no assurance can be given that
the future results will be achieved since events or results my differ
materially as a result of risks facing the Company. These include, but are
not limited to, economic, market or regulatory conditions as well as risks
associated with Motor Club of America's entry into new markets;
diversification; catastrophic events; and state regulatory and legislative
actions which can affect the profitability of certain lines of business and
impede the Company's ability to charge adequate rates. Accordingly, Motor
Club of America's premium growth and underwriting results have been and will
continue to be potentially materially affected by these factors.
SEE STATEMENTS OF OPERATIONS ATTACHED
THIS NEWS RELEASE IS ALSO AVAILABLE AT http://WWW.MOTR.COM
MOTOR CLUB OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
March 31, 1998 March 31, 1997
Revenues:
Insurance premiums (net of
premiums ceded totaling
$1,578,300 (1998) and
$1,673,963 (1997)) $13,008,953 $12,864,339
Net investment income 1,041,286 850,645
Realized gains on sales
of investments 25,900 --
Other revenues 46,099 65,342
Total revenues 14,122,238 13,780,326
Losses and Expenses:
Insurance losses and
loss expenses incurred
(net of reinsurance
recoveries totaling
$889,336 (1998) and
$470,227 (1997)) 8,334,324 8,319,513
Amortization of deferred
policy acquisition costs 3,790,219 3,823,685
Other operating expenses 564,992 426,996
Total losses and expenses 12,689,535 12,570,194
Income before Federal
income taxes 1,432,703 1,210,132
Provision for Federal
income taxes: current 29,214 27,337
deferred 378,958 260,802
Total provision for Federal
income taxes 408,172 288,139
Net income $1,024,531 $921,993
Net Income per common share:
Basic $.49 $.43
Diluted $.48 $.44
Weighted average common and
potential common shares
outstanding:
Basic 2,095,321 2,047,504
Diluted 2,126,233 2,096,114
Key Financial Statistics:
Book value per share $11.46 $9.32
Loss ratio (GAAP basis) 64.1% 64.7%
Expense ratio (GAAP basis) 33.5% 33.1%
Combined ratio (GAAP basis) 97.6% 97.8%
Net premium written $12,796,123 $12,603,575
SOURCE Motor Club of America