Goran Capital Inc. Reports Second Quarter 1998 Results
27 July 1998
Goran Capital Inc. Reports Second Quarter 1998 Results
INDIANAPOLIS--July 27, 1998--Goran Capital Inc. (Toronto Stock Exchange:GNC) , a leading provider of crop and nonstandard automobile insurance, today announces the results for the second quarter ended June 30, 1998.The Company is pleased to report growth in earnings in its key product lines (crop and nonstandard automobile insurance). Gross premiums increased 16% from $147,445,000 for the second quarter in 1997 to $170,505,000 for the quarter ended June 30, 1998 and increased 26% from $275,359,000 for the same six month period in 1997 to $347,701,000 for the six months in 1998.
Consolidated net earnings were $4,775,000 or $0.82 per share for the second quarter and $8,477,000 or $1.46 per share for the six months ended June 30, 1998. This compares with $3,022,000 or $0.54 per share and $7,916,000 or $1.42 per share for the corresponding periods in 1997. Operating earnings per share (net earnings per share excluding the effect of realized gains) were $0.72 for the second quarter and $1.21 for the year to date in 1998 compared to $0.47 and $1.29 in 1997.
Pre-tax operating earnings for the nonstandard automobile segment were $6,001,000 in the second quarter compared to $76,000 in 1997 (pre-tax earnings in the second quarter of 1997 included a pre-tax charge of $5,300,000 to increase reserves). The loss ratio for the second quarter improved to 75.9% compared to 77.8% in the first quarter. The expense ratio improved significantly from 22.1% for the first six months in 1997 to 20.2% for the corresponding period in 1998.
Gross written premiums for crop operations were $92,020,000 for second quarter 1998 and $178,195,000 for the first six months in 1998 compared to $56,647,000 for second quarter 1997 and $108,356,000 for six months in 1997. Growth in volume results from the integration of the CNA business and continued market share penetration. Pre-tax earnings for the crop segment were $6,466,000 for the second quarter and $12,417,000 for the six months ended June 30, 1998 as compared to $6,227,000 for the second quarter and $13,180,000 for the corresponding periods in 1997. The crop results for 1998 have been impacted by the costs of the CNA transaction and its integration with our existing book of business.
While there are certain parts of the country where we have exposure to loss, such as Texas and North Carolina, the majority of our crop states are well ahead of averages with excellent crops. We are comfortable with our projected underwriting results and believe there is still good potential for upside development in MPCI. We have diversified our book of business on both a geographic and diverse crop basis. Our results for both the crop hail and MPCI segments of our business remain subject to various factors over the remaining part of the growing season and results will become more solidified in the third and fourth quarters.
We recently announced the acquisition of NACU, a crop insurance producer. This acquisition provides IGF with a significant presence in the upper Midwest, which is showing great crops this year. This area also will assist our expansion of AgPI(R) and Geo AgPLUS(TM) products.
The U.S. government has now provided permanent five year funding to the crop insurance industry with reimbursement rates reduced for 1999 and subsequent crop years. While there is no guarantee, we believe this is the end of the reimbursement reductions. IGF has been planning for this scenario for some time. Introduction of new products, which were previously announced, such as AgPI and GeoAg Plus, should provide the necessary nonsubsidized revenues to offset these reimbursement reductions and provide even further revenue growth as IGF moves towards a more full service company to the farmer. IGF has also recently undergone a substantial review of its workflow and operations similar to that undertaken by our nonstandard automobile operations. We expect this to yield cost reductions in the way we do business in the future. Finally, we believe more opportunities, such as that with NACU, will present themselves as smaller crop insurers can no longer efficiently compete, which will allow IGF to further expand its market penetration.
Conference call: The conference call this quarter is at 4:00 p.m. Eastern Daylight Time on Tuesday, July 28, 1998; dial 1-800-275-3210 and ask for the "SIG Conference Call". A digital replay of this call will be available immediately after the call and anyone who missed the call can call 1-888-814-5955 and listen to the replay. The replay will be available until midnight, August 3, 1998.
Goran Capital Inc. (TSE:GNS)is the 10th largest nonstandard automobile insurer in the USA and its crop subsidiary is the 4th largest insurer of crops. IGF Insurance Company is the crop operation and writes business in 40 states plus Canada. Pafco General Insurance Company and Superior Insurance Company are the nonstandard automobile insurance operations and write business in 21 states.
Anyone wishing further information may contact:
Alan G. Symons
President and Chief Executive Officer
Indianapolis (317)259-6302
Websites: SIG www.sigins.com
IGF www.igfinsurance.com
GORAN CAPITAL INC.
Consolidated Financial Highlights
(unaudited)
(Stated in US$)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
STATEMENT OF EARNINGS 1998 1997 1998 1997
$ $ $ $
REVENUE
Gross premiums
written 170,505,000 147,445,000 347,701,000 275,359,000
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Net premiums written 109,729,000 83,734,000 208,090,000 150,524,000
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Premiums earned 99,618,000 75,378,000 171,503,000 139,269,000
Fee income 4,901,000 5,753,000 11,390,000 10,791,000
Net investment income 3,720,000 3,603,000 6,896,000 6,885,000
Net realized capital
gain/(loss) 846,000 742,000 2,814,000 1,684,000
___________ ___________ ___________ ___________
109,085,000 85,476,000 192,603,000 158,629,000
___________ ___________ ___________ ___________
EXPENSES
Claims expenses 71,187,000 59,343,000 126,489,000 104,514,000
Operating expenses 24,244,000 18,732,000 40,266,000 32,492,000
Amortization of
intangibles 510,000 164,000 1,021,000 293,000
Interest expense 49,000 1,080,000 232,000 2,451,000
___________ ___________ ___________ ___________
95,990,000 79,319,000 168,008,000 139,750,000
___________ ___________ ___________ ___________
Income before income
taxes, minority
interest and
distributions
on preferred
securities 13,095,000 6,157,000 24,595,000 18,879,000
___________ ___________ ___________ ___________
Provision for
income taxes 4,415,000 2,124,000 8,438,000 6,240,000
Minority interest 1,809,000 1,011,000 3,454,000 4,723,000
Distributions on
Pref Sec, net
of tax 2,096,000 0 4,226,000 0
___________ ___________ ___________ ___________
Earnings from
continuing operations 4,775,000 3,022,000 8,477,000 7,916,000
Loss from discontinued
operations 0 (286,000) (185,000) (573,000)
___________ ___________ ___________ ___________
NET EARNINGS 4,775,000 2,736,000 8,292,000 7,343,000
___________ ___________ ___________ ___________
___________ ___________ ___________ ___________
Earnings per share
from continuing
operations $0.82 $0.54 $1.46 $1.42
Operating EPS $0.72 $0.47 $1.21 $1.29
Earnings per share
from continuing
operations-fully
diluted $0.78 $0.49 $1.40 $1.36
Net earnings per
share $0.82 $0.49 $1.42 $1.32
Net earnings per share-
fully diluted $0.78 $0.44 $1.37 $1.26
______________________________________________________________________
June 30, December 31,
BALANCE SHEETS (US$) 1998 1997
$ $
ASSETS
Cash and investments 271,079,000 247,124,000
Due from insureds
and reinsurers 472,047,000 236,017,000
Other receivables 1,820,000 2,658,000
Property and equipment 17,570,000 12,230,000
Deferred acquisition
costs 18,727,000 11,849,000
Intangibles 42,126,000 42,562,000
Other assets 7,736,000 8,408,000
___________ ___________
831,105,000 560,848,000
___________ ___________
___________ ___________
LIABILITIES
Outstanding claims 185,961,000 152,871,000
Unearned premiums 230,348,000 118,616,000
Other payables 182,410,000 64,616,000
Bank debt 35,000 4,182,000
___________ ___________
598,754,000 340,285,000
MINORITY INTEREST
Equity in net assets
of subsidiary 28,302,000 25,231,000
Preferred securities 135,000,000 135,000,000
SHAREHOLDERS' EQUITY 69,049,000 60,332,000
___________ ___________
831,105,000 560,848,000
___________ ___________
___________ ___________
STATEMENT OF CASH June 30, June 30,
FLOWS (US$) 1998 1997
$ $
OPERATING ACTIVITIES
From operations 8,292,000 7,343,000
Increase in net
liabilities 6,474,000 18,463,000
___________ ___________
Cash provided
by operations 14,766,000 25,806,000
___________ ___________
INVESTING ACTIVITIES
Net purchases
of investments (7,770,000)(12,547,000)
Net purchases of
fixed assets (6,545,000) (2,659,000)
___________ ___________
Cash used in
investing (14,315,000)(15,206,000)
___________ ___________
FINANCING ACTIVITIES
Issue of share
capital 366,000 198,000
Decrease in bank
loans (4,147,000) (2,728,000)
Increase in
contributed surplus 0 23,000
Increase in minority
interest 3,071,000 2,304,000
___________ ___________
Cash used from
financing (710,000) (203,000)
___________ ___________
Change in cash
resources (259,000) 10,397,000
Cash resources
beginning
of period 36,557,000 33,730,000
___________ ___________
Cash resources end
of period 36,298,000 44,127,000
___________ ___________
___________ ___________
Cash resources are comprised of cash and short-term investments.