Earnings announcement—
1998 first quarter
HARLEYSVILLE, PA—APRIL 22, 1998—Harleysville Group Inc. (NASDAQ:HGIC), a
holding company for nine regional property and casualty insurance companies, today
reported record results for the first quarter of 1998.
"We've just completed our best first quarter ever," commented Walter R.
Bateman, Harleysville Group's president and chief executive officer. "These record
earnings were generated by an upswing in premium production, improved underwriting results
and strong growth in investment income." First quarter basic operating earnings were
$0.40 per share in 1998, compared with $0.37 per share in 1997. Harleysville Group's first
quarter diluted operating earnings were $0.39 per share in 1998 and $0.37 per share in
1997.
First quarter basic net income per share was $0.48 in 1998, compared with $0.38 per
share in 1997. First quarter diluted net income per share was $0.47 in 1998 and $0.38 in
1997. After-tax realized investment gains—both basic and diluted—amounted to
$0.08 per share in the first quarter of 1998 and $0.01 per share in the first quarter of
1997. The increase in realized gains was attributable to sales from the company's equity
portfolio.
Harleysville Group's statutory combined ratio for the first quarter of 1998 was 104.0
percent, compared with 106.4 percent in the first quarter of 1997. "Better personal
auto underwriting results were a significant contributor to the improvement in our
combined ratio," Bateman explained.
Earned premiums increased 4 percent to $162.6 million in the first quarter of 1998,
compared with $156.4 million in 1997. First quarter after-tax investment income was up 4
percent to $16.5 million in 1998 from $15.9 million in 1997. Total revenues in the first
quarter rose 6 percent to $190.5 million in 1998, compared with $180.2 million in 1997.
Effective January 1, 1998, Harleysville Group's share of the intercompany pooling
agreement with Harleysville Mutual Insurance Company increased from 70 to 72 percent due
to the addition of Minnesota Fire and Casualty Company—a Minnesota subsidiary
acquired in October 1997—to the pool. "Our strategy to establish a national
network of regional insurers is especially successful during this period of dramatic
consolidation within the insurance industry," Bateman commented. "Our long-term
reputation as a stable, consistent regional market—coupled with the success of our
target marketing and incentive programs—has enabled us to attract new business
production from our agents. At the same time, the addition of Minnesota Fire and Casualty
to our intercompany pool has also contributed significantly to that growth."
Shareholders' equity was $468.2 million ($16.16 per share) at March 31, 1998, compared
with $446.5 million ($15.49 per share) at December 31, 1997, reflecting the improved
operating income and the appreciation in the equity portfolio.
Harleysville Group Inc. is a holding company for nine regional property and casualty
insurance companies whose marketing territory encompasses 31 states in the eastern half of
the United States. The companies include: Great Oaks Insurance Company;
Harleysville-Atlantic Insurance Company; Harleysville Insurance Company of New Jersey;
Huron Insurance Company; Lake States Insurance Company;
Mid-America Insurance Company; Minnesota Fire and Casualty Company; New York Casualty
Insurance Company; and Worcester Insurance Company.
Harleysville Group Inc. and Subsidiaries
|
| FINANCIAL HIGHLIGHTS |
|
Quarter Ended March 31 |
| (in thousands, except per share data) |
1998 |
1997 |
|
| OPERATING RESULTS |
|
|
|
| Premiums earned |
|
$162,632 |
$156,381 |
| Investment income, net of investment expenses |
21,235 |
20,591 |
| Net income |
$13,902 |
$10,832 |
| Per common share |
|
|
Basic Earnings |
|
$0.48 |
$0.38 |
|
Diluted Earnings |
|
$0.47 |
$0.38 |
|
Cash dividend |
|
$0.115 |
$0.105 |
| FINANCIAL CONDITION |
March 31, 1998 |
December 31, 1997 |
|
| Assets |
$1,860,537 |
$1,801,195 |
| Shareholders' equity |
468,215 |
446,515 |
|
Per common share |
$16.16 |
$15.49 |
|
| CONSOLIDATED STATEMENTS OF INCOME |
Quarter Ended March 31 |
|
| (in thousands, except per share data) |
1998 |
1997 |
|
| REVENUES: |
|
| Premiums earned |
|
$162,632 |
$156,381 |
| Investment income, net of investment expenses |
21,235 |
20,591 |
| Realized investment gains |
|
3,648 |
466 |
| Other income |
|
2,990 |
2,744 |
|
|
Total revenues |
|
190,505 |
180,182 |
|
| LOSSES AND EXPENSES: |
|
| Losses and loss settlement expenses |
116,291 |
114,783 |
| Amortization of deferred policy acquisition costs |
41,112 |
39,455 |
| Other underwriting expenses |
|
13,298 |
10,800 |
| Interest expense |
|
1,640 |
1,641 |
| Other expenses |
|
885 |
689 |
|
|
Total expenses |
|
173,226 |
167,368 |
|
| Income before income taxes |
17,279 |
12,814 |
| |
Income taxes |
3,377 |
1,982 |
|
| Net income |
13,902 |
$10,832 |
|
| Weighted average number of shares outstanding |
|
|
Basic |
|
28,912,067 |
28,382,272 |
|
Diluted |
|
29,468,076 |
28,644,595 |
|
| Per common share: |
|
|
Basic Earnings |
|
$0.48 |
$0.38 |
|
Diluted Earnings |
|
$0.47 |
$0.38 |
|
Cash dividend |
|
$0.115 |
$0.105 |
|
The per share data and the weighted average number of shares outstanding
for 1997 have been retroactively adjusted to reflect the two-for-one stock split effective
October 6, 1997, and the adoption of SFAS # 128 .
These financial figures are unaudited.
|
| CONSOLIDATED BALANCE SHEETS |
| (in thousands, except share data) |
March 31, 1998* |
December 31, 1997 |
|
| ASSETS |
|
| Investments: |
|
|
Fixed maturities: |
|
|
Held to maturity at amortized cost |
$642,565 |
$611,604 |
|
Available for sale at fair value |
697,905 |
689,806 |
|
Equity securities at fair value |
140,994 |
121,830 |
|
Short-term investments, at cost, which approximates fair value |
11,217 |
28,350 |
|
|
Total investments |
1,492,681 |
1,451,590 |
|
| Cash |
23,475 |
1,460 |
| Premiums in course of collection |
81,408 |
83,948 |
| Reinsurance receivable |
82,254 |
78,750 |
| Accrued investment income |
20,853 |
21,253 |
| Deferred policy acquisition costs |
73,668 |
72,076 |
| Prepaid reinsurance premiums |
11,118 |
14,504 |
| Property and equipment, net |
24,656 |
24,778 |
| Deferred income taxes |
15,834 |
18,906 |
| Other assets |
34,590 |
33,930 |
|
|
Total assets |
$1,860,537 |
$1,801,195 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
| Liabilities: |
|
|
Unpaid losses and loss settlement expenses |
$893,417 |
$868,393 |
|
Unearned premiums |
302,874 |
298,625 |
|
Accounts payable and accrued expenses |
89,120 |
72,427 |
|
Debt and capitalized lease obligations |
97,440 |
97,440 |
|
Due to affiliate |
9,471 |
17,795 |
|
|
Total liabilities |
1,392,322 |
1,354,680 |
|
| Shareholders' equity: |
|
|
Preferred stock, $1 par value; authorized 1,000,000 shares; none issued |
|
|
Common stock, $1 par value; authorized 80,000,000 shares; issued and
outstanding 28,967,604 and 28,821,973 shares |
28,968 |
28,822 |
|
Additional paid-in capital |
116,098 |
113,646 |
|
Accumulated other comprehensive income |
55,006 |
46,478 |
|
Retained earnings |
268,143 |
257,569 |
|
|
Total shareholders' equity |
468,215 |
446,515 |
|
| Total liabilities and shareholders' equity |
$1,860,537 |
$1,801,195 |
SUPPLEMENTARY FINANCIAL ANALYSTS' DATA*
|
|
Quarter Ended March 31 |
| (in thousands, except per share data) |
|
1998 |
1997 |
|
| Pretax investment income |
|
$21,235 |
$20,591 |
| Related federal income taxes |
|
4,719 |
4,668 |
|
| After-tax investment income |
|
$16,516 |
$15,923 |
|
| Net premiums written ** |
|
$170,266 |
$155,249 |
|
| Basic per common share: |
|
|
Operating income (loss) |
|
$0.40 |
$0.37 |
|
Realized gains, net of tax |
|
0.08 |
0.01 |
|
| Net income |
|
$0.48 |
$0.38 |
|
| Diluted per common share: |
|
|
Operating income (loss) |
|
$0.39 |
$0.37 |
|
Realized gains, net of tax |
|
0.08 |
0.01 |
|
| Net income |
|
$0.47 |
$0.38 |
|
*These financial figures are unaudited
**Net premiums written for 1998 and 1997 include $2,925,000 and $913,000 of unearned
premiums transferred in connection with the 1/1/98 and 1/1/97 pooling changes,
respectively.
|
