The Commerce Group Announces 1999 Q4 and Year-End Earnings
27 January 2000
The Commerce Group, Inc. Announces 1999 Fourth Quarter and Year-End Earnings
WEBSTER, Mass.--Jan. 26, 2000--The Commerce Group, Inc. today reported 1999 fourth quarter and year-end earnings. Net earnings in the fourth quarter of 1999 were $38.1 million or $1.10 per share compared to $21.8 million or $0.61 per share in the fourth quarter of 1998.Direct premiums written by the Company's property and casualty insurance subsidiaries were $202.6 million in the fourth quarter of 1999 compared to $163.2 million in the fourth quarter of 1998. The number of Massachusetts automobiles insured for the fourth quarter of 1999 increased approximately 3.6% over the fourth quarter of 1998, and the average written premium per exposure increased 10.0%. Net premiums written in the fourth quarter of 1999 were $190.3 million compared to $143.3 million in the same period of 1998. Earned premiums were $228.5 million in the fourth quarter of 1999, compared to $185.9 million in the fourth quarter of 1998. Included in the fourth quarter 1999 results are direct, net and earned premiums of $22.6 million, $22.1 million and $22.9 million, respectively, for American Commerce Insurance Company which was acquired in January, 1999.
Net investment income was $24.4 million in the fourth quarter of 1999, compared to $23.1 million in the fourth quarter a year ago. For the quarter ended December 31, 1999 the Company had realized gains of $0.3 million. The Company had realized capital gains of $1.7 million or $0.03 per share during the fourth quarter of 1998.
Premium finance and service fees were $3.5 million in the fourth quarter of 1999 as compared to $3.6 million in the same period of 1998.
The statutory combined ratio for property and casualty operations was 93.3% in the fourth quarter of 1999 compared to 103.1% in the fourth quarter of 1998. The Company's fourth quarter 1999 loss ratio was 65.6%, compared to 77.5% for the fourth quarter of 1998. This improvement in the fourth quarter 1999 loss ratio is due to:
-- The continued acceleration of private passenger automobile earned premiums per exposure, coupled with improvements in bodily injury claims frequencies from current and prior quarters; -- The continued favorable development of homeowner liability losses and a re-evaluation of case-basis liability reserves to reflect this favorable trend; -- The estimate for future loss adjustment expenses has been reduced to reflect a decrease in current paid loss adjustment expenses and the initiation of certain cost reduction programs.
The Company's statutory underwriting expense ratio in the fourth quarter of 1999 increased to 27.7% from 25.6% in the fourth quarter of 1998, primarily as a result of higher contingency commissions due to favorable underwriting results.
Cumulative December 31, 1999 Results
Net earnings for the year ended December 31, 1999 were $102.6 million or $2.94 per share compared to $96.5 million or $2.68 per share in 1998.
For the year ended December 31, 1999, direct premiums written were $948.1 million compared to $796.9 million in 1998. The number of Massachusetts automobiles insured in 1999 increased approximately 0.9% over 1998, and the average written premium per exposure increased 9.1%. Net premiums written in 1999 were $912.0 million compared to $745.0 million in 1998, and earned premiums were $871.8 million in 1999 compared to $745.6 million in 1998. Included in the year-end 1999 results are direct, net and earned premiums of $85.7 million, $84.0 million and $82.6 million, respectively, for American Commerce Insurance Company which was acquired in January, 1999.
For the year ended December 31, 1999, net investment income increased to $89.8 million compared to $86.5 million for 1998. For the year ended December 31, 1999, the Company had realized gains on investments of $8.1 million, or $0.15 per share compared to $6.8 million or $0.12 per share for 1998.
Premium finance and service fees were $14.8 million for 1999 as compared to $13.4 million in 1998.
For the year ended December 31,1999, the Company's loss ratio was 72.0% compared to 71.6% for 1998 and the Company's statutory underwriting expense ratio was 26.5% compared to 26.5% for 1998. For the year ended December 31, 1999, the statutory combined ratio was 98.5% compared to 98.1% for 1998.
A Review Of The Balance Sheet
A complete presentation of December 31, 1999 and 1998 balance sheet information is included in the tables following this press release.
Total assets at December 31, 1999 were $1.9 billion. Total stockholders' equity was $646.6 million or $18.82 per share at December 31, 1999 compared to $705.8 million or $19.58 per share at December 31, 1998. There were 34.4 million shares of outstanding common stock on December 31, 1999 as compared to 36.0 million at December 31, 1998. During 1999, in accordance with previously announced stock buyback programs, the company acquired approximately 1.7 million shares of treasury stock at an average per share cost of $26.69. Under the ongoing program the Company may buy back an additional 1.5 million shares.
All quarterly figures are unaudited, and all results are reported in accordance with generally accepted accounting principals (GAAP) with the exception of operating ratios which are reported on a statutory basis.
The Commerce Group, Inc. is headquartered in Webster, Massachusetts. Property and casualty insurance subsidiaries include The Commerce Insurance Company and Citation Insurance Company in Massachusetts, Commerce West Insurance Company in California, and American Commerce Insurance Company in Columbus, Ohio.
THE COMMERCE GROUP, INC. CONSOLIDATED BALANCE SHEETS December 31, 1999 and 1998 (Thousands of Dollars) Unaudited December 31, December 31, 1999 1998 Assets Investments: Fixed maturities, at market $ 647,338 $ 619,267 Preferred stocks, at market $ 211,049 $ 197,425 Common stocks, at market $ 301,467 $ 283,961 Mortgage loans $ 72,451 $ 73,510 Cash and short-term investments $ 22,535 $ 75,912 Other investments $ 14,139 $ 7,825 Total investments $1,268,979 $1,257,900 Accrued investment income $ 14,697 $ 13,662 Premiums receivable $ 195,160 $ 162,878 Deferred policy acquisitions costs $ 98,500 $ 88,759 Property and equipment $ 34,802 $ 35,854 Due from reinsurers $ 48,365 $ 36,687 Residual market receivable Losses and LAE $ 106,576 $ 111,784 Unearned premiums $ 50,084 $ 41,436 Deferred income taxes $ 43,051 $ -- Non-compete agreement $ 3,179 $ -- Other assets $ 8,079 $ 7,023 Total assets $1,871,472 $1,755,983 Liabilities Losses and LAE $ 675,188 $ 596,996 Unearned premiums $ 457,095 $ 391,424 Current income taxes $ 10,839 $ 4,061 Deferred income taxes $ -- $ 3,769 Deferred income $ 7,464 $ 6,948 Contingent commissions accrued $ 33,468 $ 22,067 Payable for securities purchased $ 1,953 $ 62 Excess of book value of subsidiary interest over cost $ 10,758 $ -- Other liabilities $ 26,885 $ 24,871 Total liabilities $1,223,650 $1,050,198 Minority Interest $ 1,188 $ -- Stockholders' equity Preferred stock $ -- $ -- Common stock $ 19,000 $ 19,000 Paid-in capital $ 29,621 $ 29,621 Net accumulated other comprehensive income (loss) $ (52,867) $ 25,295 Retained earnings $ 734,488 $ 670,556 $ 730,242 $ 744,472 Treasury stock $ (83,608) $ (38,687) Total stockholders' equity $ 646,634 $ 705,785 Total liabilities & stockholders' equity $1,871,472 $1,755,983 THE COMMERCE GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended December 31, 1999 and 1998 (Thousands of Dollars, Except Per Share Data) Unaudited Three Months Ended December 31, 1999 1998 Direct premiums written $ 202,634 $ 163,236 Net premiums written $ 190,276 $ 143,275 Revenues: Earned premiums $ 228,500 $ 185,894 Net investment income $ 24,447 $ 23,073 Premium finance and service fees $ 3,502 $ 3,625 Amortization of excess of book value of subsidiary interest over cost $ 968 $ -- Realized investment gains $ 299 $ 1,688 TOTAL REVENUES $ 257,716 $ 214,280 Expenses: Losses and LAE $ 149,419 $ 143,126 Policy acquisition costs $ 57,005 $ 42,206 TOTAL EXPENSES $ 206,424 $ 185,332 Earnings before taxes $ 51,292 $ 28,948 Income taxes $ 13,489 $ 7,137 Earnings before minority interest $ 37,803 $ 21,811 Minority interest $ 291 $ -- NET EARNINGS $ 38,094 $ 21,811 COMPREHENSIVE INCOME $ 5,143 $ 21,712 BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 1.10 $ 0.61 Net earnings per share excluding the after-tax impact of net realized investment gains $ 1.10 $ 0.58 Cash dividends paid per share $ 0.28 $ 0.27 Weighted avg. shares outstanding 34,497,745 36,042,652 Statutory operating ratios for insurance subsidiaries Loss ratio 65.6% 77.5% Underwriting ratio 27.7% 25.6% Combined ratio 93.3% 103.1% THE COMMERCE GROUP, INC. CONSOLIDATED STATEMENTS OF EARNINGS Years Ended December 31, 1999 and 1998 (Thousands of Dollars, Except Per Share Data) Unaudited Year Ended December 31, 1999 1998 Direct premiums written $ 948,149 $ 796,858 Net premiums written $ 911,993 $ 745,048 Revenues: Earned premiums $ 871,830 $ 745,620 Net investment income $ 89,787 $ 86,501 Premium finance and service fees $ 14,774 $ 13,440 Amortization of excess of book value of subsidiary interest over cost $ 3,019 $ -- Realized investment gains $ 8,130 $ 6,769 TOTAL REVENUES $ 987,540 $ 852,330 Expenses: Losses and LAE $ 625,090 $ 531,429 Policy acquisition costs $ 233,660 $ 196,434 TOTAL EXPENSES $ 858,750 $ 727,863 Earnings before taxes $ 128,790 $ 124,467 Income taxes $ 27,154 $ 27,975 Earnings before minority interest $ 101,636 $ 96,492 Minority interest $ 952 $ -- NET EARNINGS $ 102,588 $ 96,492 COMPREHENSIVE INCOME $ 24,426 $ 94,555 BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 2.94 $ 2.68 Net earnings per share excluding the after-tax impact of net realized investment gains $ 2.79 $ 2.56 Cash dividends paid per share $ 1.11 $ 1.07 Weighted avg. shares outstanding 34,940,074 36,042,652 Statutory operating ratios for insurance subsidiaries Loss ratio 72.0% 71.6% Underwriting ratio 26.5% 26.5% Combined ratio 98.5% 98.1% THE COMMERCE GROUP, INC. SUPPLEMENTAL INFORMATION (Thousands of Dollars, Except Ratios and Other Information) Unaudited December 31, December 31, 1999 1998 OTHER BALANCE SHEET INFORMATION: Fixed maturities, at cost $661,445 $600,482 Preferred Stocks, at cost $230,934 $200,270 Common Stocks, at cost $351,940 $261,360 OTHER INFORMATION: Massachusetts policies in force Private passenger automobile 615,282 609,282 Homeowners 122,434 120,302 Commercial automobile 14,554 14,562 THE COMMERCE GROUP, INC. SUPPLEMENTAL INFORMATION (Thousands of Dollars, Except Ratios and Other Information) Unaudited Three Months Ended December 31, 1999 1998 OTHER EARNINGS STATEMENT INFORMATION: Net premiums earned of Massachusetts subsidiaries Private passenger automobile $185,667 $168,027 Homeowners $ 4,362 $ 3,020 Commercial automobile $ 9,321 $ 8,424 Net investment income, after tax $ 20,352 $ 18,882 Pure loss ratios of Massachusetts subsidiaries Private passenger automobile 63.0% 63.0% Homeowners (gross of reinsurance) 13.2% 34.4% Commercial automobile 60.8% 51.9% Mass. private passenger auto exposures written 160,157 154,528 Mass. private passenger auto premiums written $147,758 $129,603 Year Ended December 31, 1999 1998 OTHER EARNINGS STATEMENT INFORMATION: Net premiums earned of Massachusetts subsidiaries Private passenger automobile $709,421 $656,413 Homeowners $ 16,774 $ 23,233 Commercial automobile $ 37,955 $ 35,236 Net investment income, after tax $ 74,926 $ 71,094 Pure loss ratios of Massachusetts subsidiaries Private passenger automobile 65.7% 62.0% Homeowners (gross of reinsurance) 31.8% 31.8% Commercial automobile 60.3% 52.2% Mass. private passenger auto exposures written 815,763 808,744 Mass. private passenger auto premiums written $722,520 $656,316