20th Century Industries Reports Expanded Operations in 1998 Results
11 February 1999
20th Century Industries Reports Expanded Operations in 1998 Year-End Results
WOODLAND HILLS, Calif.--Feb. 11, 1999--20th Century Industries today reported results for the fourth quarter ended December 31, 1998. The company reported a net loss of $5.2 million, or $ 0.06 diluted loss per share, on revenues of $ 218.1 million, compared to 1997 fourth quarter net income of $19.3 million, or $ 0.23 diluted earnings per share, on revenues of $217.9 million.
During the quarter, 20th Century strengthened its balance sheet by recording a $40 million provision related to the remaining claims from the 1994 Northridge earthquake. "This adjustment provides for the estimated costs, including litigation expenses, necessary to close this chapter and enable the company to move forward with its strategic growth and expansion objectives," said William L. Mellick, chief executive officer and president of 20th Century.
According to Mellick, the fourth quarter was also impacted by a sharp increase in claims frequency in December 1998. He added that January 1999 was within expectations, down slightly in frequency compared to January 1998. He added that the company continued an aggressive advertising campaign during the quarter, including television.
For the year ended December 31, 1998, the company reported net income of $101.1 million, or $1.19 diluted earnings per share, on revenues of $870.7 million. This compares to 1997 net income of $110.9 million, or $1.37 diluted earnings per share, on revenues of $863.5 million. Results for 1998 and 1997, adjusted to exclude the effects of the provisions for Northridge earthquake claims, Y2K remediation costs and other non-recurring expenses were $1.56 and $1.58 on a diluted basis, respectively.
During the quarter, significant strides were made in taking 20th Century to new metropolitan centers, ending the year with expanded operations in three new states: Nevada, Oregon and Washington. 20th Century now has operations spanning the western seaboard.
"20th Century is best characterized as a mass merchandiser of economical personal automobile insurance in major population centers. These new markets are particularly well suited to our urban direct marketing profile and have both demographics and economic characteristics that work best with our marketing and operational advantages," Mellick stated.
Positive claim frequency and severity results for 1998 enabled 20th Century to apply for a rate reduction of 6.8 percent during the quarter, which was approved by the California Department of Insurance and will become effective February 15, 1999. With the 3.4 percent reduction implemented in the first quarter of the year, 20th Century has decreased its rates in California by 25 percent since 1996. The company also decreased rates in Arizona by an average of 9.7 percent, effective January 1, 1999.
Also during the quarter, 20th Century continued to align its information technology infrastructure and business processes with the company's strategic focus on profitable growth through geographic expansion and realization of further operational efficiencies. The company's expanded Internet service applications --such as an online rate quote capability announced in the third quarter -- were extremely well received, and customers utilized this convenient source of access extensively in the quarter.
Financial Notes
Other financial information for the 1998 fourth quarter includes:
-- For the year ended December 31, 1998, the number of vehicles insured increased by 53,153 to total 1,130,029. In addition, 20th Century Insurance Company of Arizona insured 15,541 vehicles at year end.
-- The total number of non-auto units insured was 68,018 at the end of 1998.
-- Long-term debt was reduced from $157.5 million at year-end 1997 to $112.5 million at year-end 1998. The year-end rate was .75 percent over LIBOR.
-- Direct premiums written for the fourth quarter increased to $214.8 million compared to $212.3 million for the fourth quarter of 1997. For the year, direct premiums written decreased by $16.2 million, to $885.6 million, due to lower premium rates offset in part by growth in automobiles insured.
-- Net investment income was $19.4 million for the 1998 fourth quarter compared to $18.6 million for the fourth quarter of 1997. Invested assets were $1.2 billion at the end of 1998 and the average pre-tax yield was 6.4 percent for the quarter. Total assets were $1.6 billion.
-- Stockholders' equity on a GAAP basis at the end of 1998 was $785.6 million, compared to $583.0 million at year-end 1997. Combined statutory surplus was $601.3 million compared to $548.0 million at the end of 1997.
-- Book value per share increased to $8.97 at December 31, 1998, a 29.4 percent increase from $6.93 at the end of 1997.
-- The automobile combined ratio on a GAAP basis was 85.4 for the year, compared to 82.8 for 1997.
-- The combined ratio, excluding the effects of the Northridge earthquake and other non-recurring charges, on a GAAP basis for 1998 was 85.1 compared to 83.4 for 1997, largely due to lower premium rates. For the fourth quarter 1998, the adjusted combined ratio was 94.4 compared to 83.8 for the quarter ended December 31, 1997, primarily due to an 8 percent increase in claims frequency.
-- 20th Century fully remediated its internal systems and processes for Y2K compliance during 1998. The company is continuing internal testing and also verifying the compatibility of third-party compliance with Y2K issues.
With operations in the western United States, 20th Century Industries is the ninth-largest personal auto insurance stock company in the country. Founded in 1958, the company was a pioneer of the direct response marketing approach in the personal automobile insurance industry. 20th Century specializes in providing economical, high-quality insurance products and services direct to customers without agents in metropolitan centers.
20th Century markets personal automobile insurance in Arizona, California, Nevada, Oregon and Washington.
20th Century Industries is traded on the New York Stock Exchange under the trading symbol TW. The company is headquartered at 6301 Owensmouth Avenue, Woodland Hills, Calif., 91367; 818/704-3514. 20th Century's address on the Internet is www.20thCenturyInsurance.com
-0-
20TH CENTURY INDUSTRIES AND SUBSIDIARIES
CONDENSED FINANCIAL STATEMENT
For the Fourth Quarter Ended December 31:
1998 1997
(amounts in thousands, except per share data)
Premiums Written --
Direct $ 214,818 $ 212,290
Net 193,130 190,918
Net Premiums Earned 193,974 198,237
Underwriting Profit (Loss) (29,348) 13,275
Net Investment Income 19,355 18,616
Income (Loss) Before Tax (7,437) 29,115
Net Income (Loss) (5,153) 19,332
Operating Earnings (Loss)
Per Common Share (Basic) $ (0.09) $ 0.26
Basic Earnings (Loss)
Per Common Share $ (0.06) $ 0.28
Diluted Earnings (Loss)
Per Common Share $ (0.06) $ 0.23
Basic Weighted Average
Number of Shares 87,612,976 51,513,176
Diluted Weighted Average
Number of Shares 87,612,976 (a) 62,190,278 (a)
(a) In 1998, the effect of stock options would be anti-dilutive;
therefore, it is not included in the diluted weighted average number
of shares. In 1997, the effect of convertible preferred stock would be
anti-dilutive.
-0-
20TH CENTURY INDUSTRIES AND SUBSIDIARIES
CONDENSED FINANCIAL STATEMENT
For the Year Ended Dec. 31:
1998 1997
(amounts in thousands, except per share data)
Premiums Written --
Direct $ 885,617 $ 901,769
Net 773,714 788,600
Net Premiums Earned 772,864 785,989
Underwriting Profit 67,862 104,316
Net Investment Income 75,146 73,463
Income Before Tax 155,370 168,128
Net Income 101,072 110,929
Operating Earnings
Per Common Share (Basic) $ 1.14 $ 1.71
Basic Earnings
Per Common Share $ 1.36 $ 1.76
Diluted Earnings
Per Common Share $ 1.19 $ 1.37
Basic Weighted Average
Number of Shares 66,976,393 51,499,676
Diluted Weighted Average
Number of Shares 84,883,874 80,725,378