Motor Club of America Announces Third Quarter and Nine Month Results
17 November 1999
Motor Club of America Announces Third Quarter and Nine Month Results
PARAMUS, N.J., Nov. 15 -- Motor Club of America
("Company") announced today its third quarter and nine month
results for the period ended September 30, 1999.
For the three months ended September 30, 1999, net income was $129,745 or
$.06 basic and diluted net income per share as compared to $1,015,460 or $.48
basic and diluted net income per share for the same period in 1998. Revenues
for the three month period were $14,627,084 as compared to $14,481,138 in
1998.
For the nine months ended September 30, 1999, net income was $2,126,799 or
$1.01 basic net income per share as compared to $3,174,930 or $1.51 basic net
income per share for the same period in 1998. Diluted net income per share
was $1.00 in 1999 and $1.50 in 1998. Revenues for the nine month period were
$43,358,910, as compared to $42,800,821 in 1998.
Results for the three and nine month period ended September 30, 1999 and
1998 included the following unusual or non-recurring events, the first two
items having been previously reported by the Company on September 24, 1999:
1) losses and expenses from Hurricane Floyd in 1999 and severe storms in 1998
totaling $482,000 or $.23 basic net income per share and $227,000 or $.11
basic net income per share, respectively, net of taxes; 2) in 1999, expenses
related to the North East acquisition of $597,000 or $.28 per share, net of
taxes; and 3) in 1999, recognition of additional net operating loss
carryforwards from an insolvent subsidiary and certain minimum tax credits not
previously recognized totaling $756,000 or $.36 basic net income per share and
$874,000 or $.41 basic net income per share for the three month and nine month
periods ended September 30, 1999, respectively.
Excluding these items, net income decreased $789,000 or $.37 basic net
income per share and $1,070,000 or $.51 basic net income per share in the
three and nine months ended September 30, 1999 as compared to the same periods
in 1998, respectively.
Archer McWhorter, Chairman of the Board of Motor Club stated,
"Disappointing personal automobile results took away from what was a quarter
of notable progress for our Company, as we completed the North East
acquisition and began our expansion beyond New Jersey. We continue to deal
with the effects of the personal auto rate rollback imposed on us and our
peers earlier this year, although we would note that the decline in earned
premium has been less than anticipated to date, due to a variety of factors
including the tier rating program implemented a year ago. Despite the ongoing
challenges in this line of business, we look ahead to continuing our
successful Preserver Insurance Company ("Preserver") programs and making
improvements at North East which will make it a contributor to future earnings
growth."
The Company stated that the principal cause of the decrease in operating
results was poor loss experience in the current accident year in Motor Club's
personal auto book of business, in addition to lower insurance premiums as a
result of the mandated rate rollback in that business. The Company reported
that it does not believe that the poor loss experience is related to the
mandated rate rollback and other changes in the personal auto market at this
time. This has been offset by improvements in results of operations by
Preserver which continues to produce excellent loss and combined ratios.
Preserver continues to experience positive premium growth during 1999,
with net premium written up $481,000 or 6% over 1998, with almost all of the
increase emanating from its commercial lines programs. Preserver's direct
premiums written have increased $1,276,000 or 13% in 1999 as compared to 1998.
The Company's loss ratios in 1999 and 1998 were as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Motor Club 81.6% 70.1% 74.2% 68.9%
Preserver 80.3% 73.9% 64.6% 62.1%
Total 81.3% 71.1% 71.7% 67.2%
Excluding the 1999 and 1998 storms, Preserver's year to date loss ratio
remained stable at 61.8% as compared to 59.3%, respectively. Preserver
continues to generate the majority of the Company's operating earnings.
North East's results of operations will be included in the Company's
consolidated results of operations commencing October 1, 1999. North East's
shareholders recently completed their elections related to the acquisition and
the final acquisition cost was $10,483,000, consisting of more than 99% cash
and less than 1% Motor Club of America common stock.
For the three months ended September 30,1999, North East's net loss was
$661,687 compared to net income of $214,248 for the same period in 1998.
Revenues for the three month period were $3,815,167 as compared to $3,732,864
in 1998.
For the nine months ended September 30, 1999, North East's net loss was
$1,256,653 as compared to $54,125 for the same period in 1998. Revenues for
the nine month period were $10,776,772, as compared to $9,791,640 in 1998.
In the three and nine month periods ended September 30, 1999, North East
recorded $575,229 and $737,836, respectively, in severance and merger-related
expenses (net of taxes) which are non-recurring. In the three and nine month
periods ended September 30, 1999, North East has also recorded $206,250 and
$618,750, respectively, in reinsurance costs (net of taxes) related to an
aggregate stop loss contract which will terminate December 31, 1999. This
contract has provided no reinsurance recoveries during 1999.
Excluding these non-recurring charges, North East's operating net income
was $119,792 and $99,933 in the three and nine months ended September 30,
1999.
Stephen A. Gilbert, President and Chief Executive Officer of the Company,
commented on the progress at North East stating, "The coming months should be
quite exciting at North East. Early next year we will introduce Preserver
products which have been so successful for our Company in recent years and we
are eager to recommence American Colonial Insurance Company's operations in
New York in 2000 as well, again using Preserver's products as a base on which
to build."
Patrick J. Haveron, Chief Executive Officer of the Company responsible for
mergers and acquisitions, added "The early stages of our North East
acquisition have been productive. We immediately made a $2 million surplus
contribution, consolidated the asset management function, began the
consolidation of the financial function and started the initial phases of the
restructuring of North East's reinsurance program. We look forward to a lower
expense ratio at North East soon while also enhancing its revenues."
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. North East Insurance Company writes personal automobile and small
commercial lines insurance in the State of Maine and is presently rated B-
(Fair) by Best. American Colonial Insurance Company is domiciled to write
insurance in the State of New York.
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 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.
MOTOR CLUB OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine For the Three
Months Ended Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Insurance premiums
(net of premiums
ceded totaling $5,299,714,
$5,178,978 $1,632,198
and $1,805,800) $39,643,239 $39,481,046 $13,376,548 $13,358,347
Net investment income 3,600,727 3,161,052 1,215,870 1,083,210
Realized gains
(losses) on sales
if investments 5,365 28,623 (13) 282
Other revenues 109,579 129,560 34,679 39,299
Total revenues 43,358,910 42,800,281 14,627,084 14,481,138
Losses and Expenses:
Insurance losses and
loss expenses incurred
(net of reinsurance recoveries
totaling $2,832,542,
$2,414,667, $989,726 and
$1,258,035) 28,413,303 26,536,968 10,873,022 9,496,231
Amortization of
deferred policy
acquisition costs and
operating expenses 12,532,366 11,923,009 3,792,530 3,644,605
Merger expenses 800,000 -- 800,000 --
Total losses and
expenses 41,745,669 38,459,977 15,465,552 13,140,836
Income (loss)
before Federal
income taxes 1,613,241 4,340,304 (838,468) 1,340,302
Provision (benefit)
for Federal income
taxes: current 45,159 165,458 (10,699) 104,121
deferred (558,717) 999,916 (957,514) 220,721
Total provision (benefit)
For Federal income taxes (513,558) 1,165,374 (968,213) 324,842
Net income $ 2,126,799 $ 3,174,930 $ 129,745 1,015,460
Net income per common share:
Basic $1.01 $1.51 $.06 $.48
Diluted $1.00 $1.50 $.06 $.48
Weighted average common and potential common shares outstanding:
Basic 2,116,429 2,106,125 2,116,429 2,116,429
Diluted 2,140,275 2,120,882 2,173,028 2,117,268
Key Financial Statistics:
Book value per share $13.07 $10.40
Loss ratio (GAAP basis) 71.7% 67.2% 81.3% 71.1%
Expense ratio (GAAP basis) 33.6% 30.2% 34.3% 27.3%
Combined ratio (GAAP basis) 105.3% 97.4% 115.6% 98.4%
Net premium written $36,900,964 $44,049,512 $12,478,566 $17,880,088