Motor Club of America Announces Fourth Quarter and 1998 Results
2 March 1999
Motor Club of America Announces Fourth Quarter and 1998 Results
PARAMUS, N.J., March 2 -- Motor Club of America
(the "Company") announced today its results for the fourth
quarter and year ended December 31, 1998.
For the three months ended December 31, 1998, net income was $1,080,861 or
$.51 basic and diluted net income per share as compared to $847,259 or
$.41 basic and $.40 diluted net income per share for the same period in 1997.
Revenues for the three month period were $14,879,605 as compared to
$13,660,902 in 1997.
For the twelve months ended December 31, 1998, net income was
$4,255,791 or $2.02 basic income per share as compared to $3,482,702 or
$1.68 basic net income per share for the same period in 1997. Diluted net
income per share was $2.01 in 1998 and $1.66 in 1997. Revenues for the year
were $57,679,886 as compared to $54,696,670 in 1997.
The Company's results produced a 16.7% return on equity, the sixth
straight year in excess of 15%.
Archer McWhorter, Chairman of the Board of the Company, said, "We are very
pleased with our 1998 results. Return on equity was excellent again; pretax
income was up almost 24%, led by strong results in our Preserver Insurance
Company unit; our expense ratio fell below 30%; and most importantly, we
continued to execute our business strategies in New Jersey and as the new year
began, outside the State with our announcement of the North East transaction.
Our introduction of workers' compensation early in 1998 was very successful,
and it clearly contributed to the 11% growth of our other commercial lines
business in a very competitive market, while also enhancing our profitability.
While we believe this will set the stage for continued very profitable
operations, we continue to monitor the automobile insurance reforms being
implemented in New Jersey; in addition, the ongoing loss development of the
new personal automobile insurance business we have written in the last four
years continues to increase our overall loss ratios."
On January 26, 1999, the Company announced that it had reached an
agreement in principle with North East Insurance Company ("NEIC")
to acquire NEIC for a combination of stock and cash. The
parties continue to work together and expect to finalize a definitive
agreement in the very near future.
Effective July 1, 1998, Motor Club of America Insurance Company ("Motor
Club") began converting its existing six month policies to twelve month
policies. This measure will further improve the Company's operating
efficiency and service levels, and reduce expenses. 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 premiums earned.
Net premiums written increased $5,179,000 or 34% in the fourth quarter
1998 as compared to the same period in 1997, and $12,623,000 or 24% for the
year ended December 31, 1998 as compared to 1997. These increases are largely
the result of the conversion to twelve month policies by Motor Club and the
increased production by Preserver Insurance Company ("Preserver"), with net
commercial lines premium written up 13% and personal lines (primarily
homeowners) net premium written up 4% over 1997.
Compared to 1997, the Company had higher loss ratios during the fourth
quarter and in 1998, due to increased loss ratios on prior accident years and
increased reserves for loss expenses in Personal Auto. Despite severe storms
which occurred on September 7, 1998, Preserver continued to report stable loss
ratios which generated excellent profit levels.
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 separately rated B+ (Very Good) by A.M. Best
Company.
Additional information about Motor Club of America can be found on the
Company' Internet web site http://www.motr.com.
This press release contains statement 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 may 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.
This news release is also available at http://www.motr.com.
MOTOR CLUB OF AMERICA AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended For the Year Ended
December 31 December 31
1998 1997 1998 1997
Revenues:
Insurance premiums
(net of premiums
ceded totaling
$1,572,197,
$1,885,335
$6,751,175 and
$7,151,204 $13,694,617 $12,663,300 $53,175,663 $50,877,890
Net investment
income 1,143,455 941,336 4,304,507 3,594,509
Realized (losses)
gains on sales
of investments (78) -- 28,545 --
Other revenues 41,611 56,266 171,171 224,271
Total revenues 14,879,605 13,660,902 57,679,886 54,696,670
Losses and Expenses:
Insurance losses and
loss expenses
incurred (net of
reinsurance
recoveries
totaling
$2,322,004,
$1,248,833,
$4,736,671 and
$3,650,474) 9,942,623 7,938,085 36,479,591 33,141,691
Amortization of
deferred policy
acquisition costs
and other operating
expenses 3,557,880 4,568,006 15,480,889 16,924,512
Total losses
and expenses 13,500,503 12,506,091 51,960,480 50,066,203
Income before
Federal income taxes 1,379,102 1,154,811 5,719,406 4,630,467
Provision for Federal
income taxes:
current 27,663 12,300 193,121 37,573
deferred 270,578 295,252 1,270,494 1,110,192
Total provision for
Federal income taxes 298,241 307,552 1,463,615 1,147,765
Net income $1,080,861 $847,259 $4,255,791 $3,482,702
Net Income per common share:
Basic $.51 $.41 $2.02 $1.68
Diluted $.51 $.40 $2.01 $1.66
Weighted average common
and potential common
shares outstanding:
Basic 2,116,429 2,093,549 2,108,722 2,074,473
Diluted 2,119,370 2,115,077 2,120,525 2,102,395
Key Financial Statistics:
Book value per share -- -- $13.15 $10.98
Loss ratio
(GAAP basis) 72.6% 62.7% 68.6% 65.1%
Expense ratio
(GAAP basis) 26.0% 36.1% 29.1% 33.3%
Combined ratio
(GAAP basis) 98.6% 98.8% 97.7% 98.4%
Net premium written $20,253,203 $15,074,426 $64,302,715 $51,680,146