Goran Capital Inc. Reports Second Quarter 2000 Results
10 August 2000
Goran Capital Inc. Reports Second Quarter 2000 Results
TORONTO - Goran Capital Inc. , a major crop and automobile insurance carrier
reported results to June 30, 2000.
The Company's gross written premium reduced approximately 16% to
$275,359,000 for the six months ended June 30, 2000 compared to $325,892,000
for the same period last year. Operating loss excluding realized loss on
investments to June 30, 2000 was $688,000 compared to an operating loss of
$7,085,000 for the same period of 1999. The Company has not taken credit for
tax recoveries in the six-months ended June 30, 2000 compared to $8,711,000 of
credits taken in the same period last year. After distribution of the
$6,247,000 preferred securities a net loss of $8,738,000 is shown compared to
a loss of $5,716,000 which includes a tax credit of $8,711,000. The net loss
per share fully diluted was $1.49 compared to $.97 in the same period a year
ago.
The lack of tax credits means the Company will not report income taxes
against future pre-tax earnings until it has depleted the total allowances for
deferred taxes of approximately $27,000,000. In addition the Company will
report full results from its subsidiary including minority interest until it
has used up the minority interest losses absorbed totaling approximately
$10,000,000.
The Company continues to make significant strides to reduce expenses and
debt. Total employees and temporary staff have been reduced by 14% from 941 at
December 31, 1999 to 812 at June 30, 2000. Gorans' subsidiaries Granite
Reinsurance Company Ltd. and Granite Insurance Company purchased $23,000,000
of Symons International Group, Inc.'s trust preferred shares in the open
market for $2,810,000. This purchase increased the equity of Goran by
$21,763,000 and retains in the Company $374,000 of current interest payments.
Granite Re reported a year to date profit of $3,346,000. Significant
highlights of the Company's two divisions are as follows:
Nonstandard Automobile Insurance Operations
The nonstandard auto insurance operations continue to add new management
while rebuilding the Company. The gross written premium is lower this year as
under-priced business is replaced through rate increases and stricter
underwriting policy. These improvements have resulted in approximately a 10%
rate increase over that of last year. The loss of $10,037,000 to June 30,
2000 includes a draw down of deferred acquisition expense and the carrying
cost of severance and surplus staff as the business was reduced in size.
Reserves for the nonstandard auto division are reducing as a redundancy in
prior period reserves are being realized. The combined ratio for the
nonstandard operations has reduced from 123.5% at December 31, 1999 to 117.5%
at June 30, 2000.
Crop Insurance Operations
The crop operations reported earnings to June 30, 2000 of $7,157,000 on
slightly lower premium of $185,468,000 compared to earnings of $3,369,000 with
premium of $198,247,000 this period last year. Sales of MPCI were strong this
year, however farmers generally purchased less hail insurance. The crop
conditions remain favorable year to date.
These results reflect good progress to return the Company to profits in
the future.
The Company will host a conference call on August 10, 2000 at 3:30 p.m.
Central Time. The conference call may be accessed by calling 800-370-0869 in
the United States or 973-633-1010 internationally. Ask for the Goran Capital
conference call. Replay will be available for 30 days by dialing
800-345-6275.
Goran Capital Inc. has two main divisions. Superior Insurance Group is a
major writer of nonstandard automobile insurance in the United States.
Nonstandard auto insurance is sold through independent insurance agents and
generally carries higher premiums and low limits of liabilities. Goran's
subsidiary, Superior Insurance Group, writes nonstandard auto insurance in 22
states. IGF Insurance Company is the fifth largest insurer of crops in the
United States and writes business in 46 states.
GORAN CAPITAL INC.
Consolidated Financial Highlights
(unaudited Stated in US$)
STATEMENT OF EARNINGS
For the Three Months
Ended June 30,
2000 1999
$ $
REVENUE
Gross premiums written 131,140,000 173,870,000
Net premiums written 30,542,000 79,150,000
Premiums earned 44,984,000 76,527,000
Fee income 3,855,000 3,153,000
Net investment income 2,650,000 3,507,000
Net realized capital gain/(loss) (1,681,000) 366,000
Total 49,808,000 83,553,000
EXPENSES
Claims expenses 35,701,000 72,293,000
Operating expenses 15,692,000 21,015,000
Amortization of intangibles 735,000 651,000
Interest expense 23,000 105,000
Total 52,151,000 94,064,000
Income before income taxes,
minority
Net income before the following (2,343,000) (10,511,000)
Provision (Benefit) for
income taxes -- (4,705,000)
Minority interest -- (3,149,000)
Distributions on Preferred
Securities 2,983,000 3,225,000
NET EARNINGS (LOSS) (5,326,000) (5,882,000)
Net Earnings per share - Basic ($0.91) ($1.00)
Net earnings per share - Fully
diluted ($0.91) ($1.00)
Net earnings per share - Operating ($0.62) ($1.04)
For the Six Months
Ended June 30,
2000 1999
$ $
REVENUE
Gross premiums written 275,359,000 325,892,000
Net premiums written 69,971,000 146,421,000
Premiums earned 92,384,000 143,651,000
Fee income 7,646,000 7,617,000
Net investment income 5,898,000 7,015,000
Net realized capital gain/(loss) (1,316,000) (956,000)
Total 104,612,000 157,327,000
EXPENSES
Claims expenses 74,494,000 131,288,000
Operating expenses 30,630,000 32,645,000
Amortization of intangibles 1,266,000 1,256,000
Interest expense 226,000 179,000
Total 106,616,000 165,368,000
Income before income taxes,
minority
Net income before the following (2,004,000) (8,041,000)
Provision (Benefit) for
income taxes 487,000 (5,195,000)
Minority interest -- (3,516,000)
Distributions on Preferred
Securities 6,247,000 6,386,000
NET EARNINGS (LOSS) (8,738,000) (5,716,000)
Net Earnings per share - Basic ($1.49) ($0.97)
Net earnings per share - Fully
diluted ($1.49) ($0.97)
Net earnings per share - Operating ($1.26) ($0.87)
June 30, December 31,
BALANCE SHEET (US$) 2000 1999
$ $
ASSETS
Cash and investments 190,031,000 231,424,000
Due from insureds and reinsurers 383,564,000 190,998,000
Other receivables 1,661,000 8,466,000
Property and equipment 20,479,000 21,967,000
Deferred acquisition costs 10,151,000 13,920,000
Intangibles 43,850,000 43,812,000
Other assets 12,575,000 9,335,000
Total 662,311,000 519,922,000
LIABILITIES
Outstanding claims 168,577,000 219,918,000
Unearned premiums 192,150,000 90,007,000
Bank debt 4,582,000 16,929,000
Other payables 185,309,000 70,955,000
Total 550,618,000 397,809,000
MINORITY INTEREST
Preferred securities 112,000,000 135,000,000
Equity in net assets of subsidiary -- --
SHAREHOLDERS' EQUITY (DEFICIT) (307,000) (12,887,000)
Total 662,311,000 519,922,000
Outstanding shares at period end 5,776,398 5,876,398
Net Book Value per share ($0.05) ($2.19)
June 30, June 30,
STATEMENT OF CASH FLOWS (US$) 2000 1999
$ $
OPERATING ACTIVITIES
From operations (8,738,000) (5,716,000)
Change in net assets (14,494,000) 19,465,000
Cash provided (used) by operations (23,232,000) 13,749,000
INVESTING ACTIVITIES
Net (purchases) sales of investments 25,833,000 (8,660,000)
Net purchases of fixed assets (1,197,000) (3,685,000)
Redemption of share capital
& min int (2,916,000) --
Other -- (126,000)
Cash used in investing 21,720,000 (12,471,000)
FINANCING ACTIVITIES
Net purchase minoroty interest -- --
Increase (decrease) in notes
payable (12,347,000) (309,000)
Issue of share capital -- --
Loans to related parties -- --
Cost of shares acquired -- --
Other -- --
Cash provided by financing (12,347,000) (309,000)
Change in cash resources (13,859,000) 969,000
Cash resources beginning of period 35,807,000 42,759,000
Cash resources end of period 21,948,000 43,728,000
Cash resources are comprised of cash and short-term investments
GORAN CAPITAL INC.
Consolidated Financial Highlights
(Stated in US$)
Three Months Ended June 30, 2000 OTHER AND
AUTO CROP CORPORATE TOTAL
Gross premiums
written 29,868,000 101,108,000 164,000 131,140,000
Net premiums
written 19,346,000 10,379,000 817,000 30,542,000
Premiums earned 37,377,000 6,501,000 1,106,000 44,984,000
Fee income 3,631,000 194,000 30,000 3,855,000
Net investment
income 2,453,000 (40,000) 237,000 2,650,000
Net realized
capital gain (1,682,000) 0 1,000 (1,681,000)
Total revenue 41,779,000 6,655,000 1,374,000 49,808,000
Claims expenses 29,184,000 7,894,000 (1,377,000) 35,701,000
Operating expenses 18,053,000 (4,655,000) 2,294,000 15,692,000
Amortization of
intangibles -- 246,000 (223,000) 23,000
Interest expense -- 23,000 712,000 735,000
Total expenses 47,237,000 3,508,000 1,406,000 52,151,000
Income (loss) before
the following (5,458,000) 3,147,000 (32,000) (2,343,000)
Income taxes
Minority interest
Distributions on
preferred securities -- -- -- 2,983,000
Earnings from continuing operations (5,326,000)
Net earnings (loss) -- -- -- (5,326,000)
Loss ratio 78.1% -- -- --
Expense ratio, net
of billing fees 38.6% -- -- --
Combined ratio 116.7% -- -- --
Three Months Ended June 30, 1999 OTHER AND
AUTO CROP CORPORATE TOTAL
Gross premiums
written 66,072,000 107,524,000 274,000 173,870,000
Net premiums
written 64,154,000 11,633,000 3,363,000 79,150,000
Premiums earned 66,836,000 6,074,000 3,617,000 76,527,000
Fee income 2,895,000 197,000 61,000 3,153,000
Net investment
income 3,296,000 (18,000) 229,000 3,507,000
Net realized
capital gain 366,000 0 0 366,000
Total revenue 73,393,000 6,253,000 3,907,000 83,553,000
Claims expenses 61,631,000 8,894,000 1,768,000 72,293,000
Operating expenses 23,609,000 (4,654,000) 2,060,000 21,015,000
Amortization of
intangibles -- 141,000 510,000 651,000
Interest expense -- 105,000 0 105,000
Total expenses 85,240,000 4,486,000 4,338,000 94,064,000
Income (loss) before
the following (11,847,000) 1,767,000 (431,000) (10,511,000)
Income taxes -- -- -- (4,705,000)
Minority interest -- -- -- (3,149,000)
Distributions on
preferred securities -- -- -- 3,225,000
Net earnings (loss) -- -- -- (5,882,000)
Loss ratio 92.2% -- -- --
Expense ratio, net
of billing fees 31.0% -- -- --
Combined ratio 123.2% -- -- --
GORAN CAPITAL INC.
Consolidated Financial Highlights
(Stated in US$)
Year-to-date June 30, 2000
AUTO CROP CORPORATE TOTAL
Gross premiums
written 89,437,000 185,468,000 454,000 275,359,000
Net premiums
written 49,815,000 17,949,000 2,207,000 69,971,000
Premiums earned 80,418,000 9,434,000 2,532,000 92,384,000
Fee income 7,565,000 35,000 46,000 7,646,000
Net investment
income 5,313,000 86,000 499,000 5,898,000
Net realized
capital gain (1,317,000) 1,000 0 (1,316,000)
Total revenue 91,979,000 9,556,000 3,077,000 104,612,000
Claims expenses 66,403,000 10,334,000 (2,243,000) 74,494,000
Operating expenses 35,613,000 (8,447,000) 3,464,000 30,630,000
Amortization of
intangibles -- 286,000 980,000 1,266,000
Interest expense -- 226,000 0 226,000
Total expenses 102,016,000 2,399,000 2,201,000 106,616,000
Income (loss) before
income taxes and
distributions on
preferred
securities (10,037,000) 7,157,000 876,000 (2,004,000)
Income taxes -- -- -- 487,000
Minority interest
Distributions on
preferred securities,
net of tax -- -- -- 6,247,000
Earnings from continuing operations (8,738,000)
Net earnings (loss) -- -- -- (8,738,000)
Loss ratio 82.6% -- -- --
Expense ratio, net
of billing fees 34.9% -- -- --
Combined ratio 117.5% -- -- --
Year-to-date June 30, 1999
AUTO CROP CORPORATE TOTAL
Gross premiums
written 127,243,000 198,247,000 402,000 325,892,000
Net premiums
written 137,840,000 13,246,000 (4,665,000) 146,421,000
Premiums earned 132,233,000 5,014,000 6,404,000 143,651,000
Fee income 7,417,000 138,000 62,000 7,617,000
Net investment
income 6,460,000 39,000 516,000 7,015,000
Net realized
capital gain (1,016,000) -- 60,000 (956,000)
Total revenue 145,094,000 5,191,000 7,042,000 157,327,000
Claims expenses 112,944,000 14,068,000 4,276,000 131,288,000
Operating expenses 43,204,000 (12,662,000) 2,103,000 32,645,000
Amortization of
intangibles -- 237,000 1,019,000 1,256,000
Interest expense -- 179,000 0 179,000
Total expenses 156,148,000 1,822,000 7,398,000 165,368,000
Income (loss) before
income taxes and
minority
interest (11,054,000) 3,369,000 (356,000) (8,041,000)
Provision for
income taxes -- -- -- (5,195,000)
Minority interest -- -- -- (3,516,000)
Distributions on Pref
Sec, net of tax -- -- -- 6,386,000
Earnings from continuing operations (5,716,000)
Net Earnings (Loss) -- -- -- (5,716,000)
Loss ratio 85.4% -- -- --
Expense ratio, net
of billing fees 27.1% -- -- --
Combined ratio 112.5% -- -- --