Motor Club of America Announces Fourth Quarter and 1999 Results
17 March 2000
Motor Club of America Announces Fourth Quarter and 1999 ResultsPARAMUS, N.J., March 16 Motor Club of America (the "Company") announced today its results for the fourth quarter and year ended December 31, 1999. For the three months ended December 31, 1999, net loss was $849,866 or $.40 basic and diluted net loss per share as compared to net income of $1,080,861 or $.51 basic and diluted net income per share for the same period in 1998. Revenues for the three month period were $17,708,809 as compared to $14,879,605 in 1998. For the twelve months ended December 31, 1999, net income was $1,276,933 or $.60 basic and diluted net income per share as compared to $4,255,791 or $2.02 basic net income per share and $2.01 diluted net income per share for the same period in 1998. Revenues for the year were $61,067,719 as compared to $57,679,886 in 1998. Revenues and net income for North East Insurance Company and its subsidiaries for the three months ended December 31, 1999 were $4,462,341 and $170,921, respectively. North East was acquired by the Company on September 24, 1999. The Company had previously announced on March 1, 2000 that it expected to report a consolidated net loss for the three months ended December 31, 1999. Archer McWhorter, Chairman of the Board of the Company said, "While we were extremely disappointed with our fourth quarter results, we are heartened by a number of developments that took place during the fourth quarter 1999 and first quarter 2000. Our Commercial Lines efforts continue to meet with success, with the recent Mountain Valley acquisition being principal among those achievements. As we have stated, this acquisition fully establishes the Company as a regional insurer in New England and the Mid-Atlantic writing commercial lines." "Our Preserver unit continues to contribute strong profits to our overall results despite losses from Hurricane Floyd in 1999. Preserver's A.M. Best rating was just upgraded. This followed A.M.Best's fourth quarter upgrade of North East, which reported a solid profit in its first full quarter since its acquisition by Motor Club and we anticipate additional profit improvements in this unit as well. We look forward to building on these very decisive steps to continue to transform our companies into a strong regional commercial lines insurer." The Company reported that its Preserver Commercial Lines net premium increased by $832,000 or 10% as compared to 1998. The Company also reported that it expected its Commercial Lines net premium in 2000 to approach $30 million. Thus, for the first time in the Company's history, the revenues from the New Jersey private passenger automobile unit will constitute less than 50% of the Company's consolidated revenues. The Company reiterated its previous announcement that the cause of the consolidated net loss for the three months ended December 31, 1999, was the result of significantly higher Accident Year 1999 New Jersey private passenger automobile ("PPA") losses, specifically PIP (No Fault) first party claims. Additional reserves have been provided for these losses. The Company believes that this development may not be indicative of longer term trends and may be attributable to the 1999 implementation of the New Jersey Automobile Insurance Cost Reduction Act ("AICRA"), which was designed to reduce both premium and losses in that line of business in that State. The reduction in PPA premium associated with the AICRA rate rollback was in line with the Company's expectations. New Jersey PPA losses in Accident Year 1999 in coverages the Company offers other than PIP were only modestly higher as compared to prior years, and loss development of prior accident years for all coverages including PIP was not materially different than that previously experienced. The Company reported that elements of AICRA and other statutory amendments have yet to be implemented, and as such, may still have an impact on Motor Club's operations. The New Jersey PPA market continues to be subject to volatility, and consistent with the Company's long-stated goal to increase its identification as a provider of small commercial lines insurance and expand and diversify its operations outside the State of New Jersey, the Company is reviewing strategies to improve the profitability of its PPA business and to otherwise add more value to its shareholders. Losses and expenses from Hurricane Floyd in September 1999 totaled $511,000 or $.24 per share. The Company also announced that acquisition related expenses in connection with the Mountain Valley purchase would total approximately $182,000 or $.09 per share, net of tax, in the first quarter 2000. Motor Club of America is a property and casualty insurance holding company and is the parent company of the Preserver Insurance Group, which consists of: Preserver Insurance Company, which writes small commercial and homeowners insurance in New Jersey and Mountain Valley Indemnity Company, which is located in Manchester, NH and writes commercial insurance in New England and New York. Both Companies are rated B++ (Very Good) as part of the Preserver Insurance Group. Motor Club of America Insurance Company writes personal automobile insurance in New Jersey and is rated B+ (Very Good) by A.M. Best. North East Insurance Company writes personal automobile and small commercial lines insurance in the State of Maine and is rated B (Fair) by Best. American Colonial Insurance Company plans to commence operations in New York in the second quarter of 2000, writing commercial lines in tandem with the products offered by Mountain Valley. Additional information about Motor Club of America can be found on the Company' s Internet web site http://www.motr.com. Forward-Looking Statement Disclaimer. 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), including statements concerning the expected benefits of the merger with North East and acquisition of Mountain Valley and the expected future plans related thereto. These statements 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 catastrophic events. Consummation of the merger with North East and acquisition of Mountain Valley and future benefits therefrom involve various risks and uncertainties, including the risk of material adverse changes in financial markets or the condition of Motor Club; risks associated with Motor Club's entry into new markets; and state regulatory and legislative actions which can affect the profitability of certain lines of business and impede the companies' 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 those 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 Year Ended For the Three Months Ended December 31, December 31, December 31, December 31, 1999 1998 1999 1998 Revenues: Insurance premiums (net of premiums ceded totaling $8,358,946, $6,776,174 $3,059,232 and $1,597,196 $55,807,330 $53,175,663 $16,164,091 $13,694,617 Net investment income 5,080,939 4,304,507 1,480,212 1,143,455 Realized (losses) gains on sales of investments 36,040 28,545 30,675 (78) Other revenues 143,410 171,171 33,831 41,611 Total revenues 61,067,719 57,679,886 17,708,809 14,879,605 Losses and Expenses: Insurance losses and loss expenses incurred (net of reinsurance recoveries totaling $2,261,608, $4,736,671, ($570,934)and $2,322,004 40,631,053 36,479,591 12,217,750 9,942,623 Amortization of deferred policy acquisition costs and other operating expenses 19,086,403 15,426,743 6,730,895 3,503,734 Merger expenses 800,000 -- -- -- Interest expense 448,117 54,146 271,259 54,146 Total losses and expenses 60,965,573 51,960,480 19,219,904 13,500,503 Income before Federal income taxes 102,146 5,719,406 (1,511,095) 1,379,102 Provision for Federal income taxes: current (21,865) 193,121 (67,024) 27,663 deferred (1,152,922) 1,270,494 (594,205) 270,578 Total provision for Federal income taxes (1,174,787) 1,463,615 (661,229) 298,421 Net income (loss) $1,276,933 $4,255,791 $(849,866) $1,080,861 Net Income per common share: Basic (loss) $ .60 $2.02 $(.40) $ .51 Diluted $ .60 $2.01 $(.40) $ .51 Weighted average common and potential common shares outstanding: Basic 2,117,912 2,108,722 2,122,311 2,116,429 Diluted 2,138,797 2,120,525 2,122,311 2,119,370 Key Financial Statistics: Book value per share $12.97 $13.15 -- -- Loss ratio (GAAP basis) 72.8% 68.6% 75.6% 72.6% Expense ratio (GAAP basis) 36.4% 29.1% 43.3% 26.0% Combined ratio (GAAP basis) 109.2% 97.7% 118.9% 98.6% Net premium written $54,508,215 $64,302,715 $17,607,251 $20,253,203