Both Canadian Business Units Produce Solid Results
TORONTO, Nov. 5 /CNW/ - EGI Financial Holdings Inc. (TSX:EFH) today
announced its results for the third quarter and nine months ended September
30, 2008.
"We are satisfied with the third quarter results, driven by strong
performances within both of our Canadian business segments. Difficulties
experienced in the launch of the Niche Products division's new Emergency
Travel Health ("ETH") program in the 2007/2008 travel season are now behind
us, having completely reengineered the 2008/2009 ETH product.", said Douglas
McIntyre, Chief Executive Officer of EGI Financial. "The Niche Products
division results improved dramatically from the first half of 2008, generating
an overall loss ratio in the third quarter that exceeded our expectations. Our
Personal Lines division has also continued to perform well, despite a lower
amount of favourable loss development in the first nine months of 2008 when
compared to the same period last year. With both of our Canadian business
units exceeding performance expectations, we anticipate a continuation of
strong results for the remainder of 2008".-------------------------------------------------------------------------
3 months 3 months 9 months 9 months
ended ended ended ended
Sept. 30, Sept. 30, % Sept. 30, Sept. 30, %
$000s 2008 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Direct written
and assumed
premiums 46,067 42,343 8.8% 130,782 114,837 13.9%
-------------------------------------------------------------------------
Net written
and assumed
premiums 43,067 39,624 8.7% 121,464 107,254 13.2%
-------------------------------------------------------------------------
Net earned
premiums 36,150 30,847 17.2% 117,708 85,445 37.8%
-------------------------------------------------------------------------
Underwriting
income 1,514 3,536 (57.2%) 652 9,373 (93.0%)
-------------------------------------------------------------------------
Investment
income 3,186 3,236 (1.5%) 12,491 7,905 58.0%
-------------------------------------------------------------------------
Net income 3,026 4,462 (32.2%) 8,302 11,338 (26.8%)
-------------------------------------------------------------------------
Net income per
diluted share 0.26 0.44 (40.9%) 0.76 1.10 (30.9%)
-------------------------------------------------------------------------
Book value 10.18 10.39 (2.0%) 10.18 10.39 (2.0%)
-------------------------------------------------------------------------In the third quarter of 2008, EGI Financial generated direct written and
assumed premiums totaling $46.1 million, 8.8% above the $42.3 million recorded
in the third quarter of 2007. Premium growth was achieved in both the Personal
Lines and Niche Products business segments. In our Personal Lines division,
direct premiums increased $2.4 million, an increase of 10% from 2007, with
premium increases generated within the non-standard auto and motorcycle lines
of business. Direct written premiums in the third quarter of 2008 for the
Niche Products business increased $0.5 million or 3% over the same period of
2007. This increase was achieved despite a decrease in written premiums in the
ETH line of business in the third quarter of 2008 to $5.0 million compared to
$8.9 million written in the same period in 2007.
Net written and assumed premiums increased $3.4 million, or 8.7%, to
$43.1 million compared to $39.6 million in the same period last year. This
increase is consistent with the increase in direct written and assumed
premiums in the period compared to 2007.
Net earned premiums for the three months ended September 30, 2008,
totaled $36.2 million, an increase of $5.3 million, or 17.2% compared to
$30.8 million in the third quarter of 2007. The growth in earned premiums
reflects the increase in premiums written and assumed in 2008 compared to 2007
and the ETH premiums that were written in 2007 but earned in 2008.
Both the Personal Lines and Niche Products divisions recorded
underwriting gains in the third quarter of 2008 of $1.3 million and
$1.0 million respectively. The significant improvement in the Niche Products
division results was primarily attributable to the underwriting gain
experienced in the Emergency Travel Health line of business in the quarter of
$0.4 million, compared to losses experienced in this line of business in the
first half of 2008. The International division which is still in its start-up
phase incurred a small underwriting loss of $0.3 million.
The combined ratio for the third quarter of 2008 (being the addition of
the ratio of net losses incurred to net earned premiums and the ratio of
underwriting expenses to net earned premiums) increased to 95.7% compared with
88.5% for the same period last year. EGI Financial believes that the full year
combined ratio is the best measure of the profitability of its underwriting
business.
The loss ratio in the quarter ended September 30, 2008 (being net losses
incurred expressed as a percentage of net earned premiums) was 64.0%, while
the expense ratio (being expenses incurred expressed as a percentage of net
earned premiums) was 31.7%. This compares with 58.2% and 30.3% respectively in
the same period of 2007. The Personal Lines division loss ratio increased to
69.0% from 60.3% in 2007 due to the loss ratio in the motorcycle line of
business increasing to 136.1% from 113.1% for the same period in 2007. A high
loss ratio is expected in this line of business in the summer months when
exposure to losses peaks. Management previously recognized the need for a
motorcycle rate increase and filed a 19.5% increase with the Ontario regulator
earlier in the year, which was approved by FSCO in the second quarter of 2008.
The full benefit of the rate increase will be experienced in the final quarter
of 2008 and during 2009. The non-standard auto segment is exceeding
expectations, recording an improvement in the current accident year (2008)
losses and continued favourable prior year loss development, although notably
a lesser amount compared to last year.
The Niche Products division recorded an improvement in loss ratio to
40.6% for the quarter compared to 42.3% for the third quarter of 2007. This
result represents a significant improvement in the loss ratios over the first
and second quarters, of 2008, of 66.7% and 97.0% respectively. With the
Company's ETH offering for the 2008/2009 travel season redesigned, management
expects the Niche Products division to continue reporting positive results for
the remainder of 2008.
Investment income in the third quarter of 2008 was $3.2 million compared
to $3.2 million last year. This result was achieved despite difficult
conditions within the financial markets which generated an investment
impairment provision of $0.5 million in the quarter. EGI's investment
portfolio reflected a $61.7 million, or 24.7%, increase in fair value as at
September 30, 2008, compared to September 30, 2007, including additions to the
portfolio.
EGI does not currently hold any non-bank asset backed commercial paper
(ABCP) in its investment portfolio.
Net income was $3.0 million for the three months ended September 30,
2008, a decrease of $1.5 million compared to net income of $4.5 million in the
third quarter of 2007. The decrease in net income was primarily related to the
decline in underwriting income compared to the same period in 2007. Fully
diluted earnings per share were $0.26 in the third quarter of 2008, compared
to $0.44 for the third quarter of 2007, a decrease of 40.9%. The annualized
return on equity on a last-twelve-months basis was 11.0%. Earnings per share
and return on equity have been adversely affected by the issuance of 1,943,630
common shares for net proceeds of $20.8 million pursuant to the completion of
our rights offering on July 31, 2008.Q3 2008 Personal Lines division performance:
- Net earned premiums increased to $25.6 million from $22.7 million in
2007
- Underwriting income decreased to $1.3 million from $2.9 million in
2007(*)
- Combined ratio of 95.0% compared with 87.3% for the 2007 period
Q3 2008 Niche Products division performance:
- Net earned premiums increased to $7.4 million from $5.6 million in
2007
- Underwriting income increased to $1.0 million from $0.7 million in
2007(*)
- Combined ratio of 85.8% compared with 87.3% for the 2007 period
Q3 2008 International division performance:
- Net earned premiums increased to $3.2 million from $2.6 million in
2007
- Underwriting loss increased to $(0.3) million compared to break even
in 2007(*)
- Combined ratio of 110.0% compared with 98.7% for the 2007 period
(*)Note: The Company has also expensed $0.5 million in the third quarter
of 2008 in corporate costs incurred as a result of evaluating potential
acquisition prospects which are not allocated to the divisions in 2008.For the nine months ended September 30, 2008, EGI Financial generated
direct written premiums totaling $130.8 million, 13.9% above the
$114.8 million level in the corresponding period last year. Growth has been
achieved in both Canadian divisions in 2008. Direct written premiums from
Personal Lines totaled $85.2 million, an increase of 12.6% from 2007.
Non-standard auto recorded growth of 8.4% and the motorcycle line achieved
growth of 20.5% compared to the same period in 2007. The Niche Products
division recorded written premiums of $35.7 million in the first nine months
of 2008 compared to $28.8 million for the same period of 2007 for a growth
rate of 24%. Total ETH premiums written in the first three quarters of 2008
were $8.1 million compared to $8.9 million in the same period last year. EGI
commenced writing ETH premium during the third quarter of 2007.
Net written and assumed premiums increased $14.2 million, or 13.2%, to
$121.5 million compared to $107.3 million in the same period last year. This
increase is consistent with the increase in direct written and assumed
premiums in the period compared to 2007.
In the nine-month period ended September 30, 2008 total underwriting
contribution decreased $8.7 million to an underwriting gain of $0.7 million,
compared to an underwriting gain of $9.4 million for the comparable period in
2007.
The combined ratio for the nine-month period in 2008 was 99.4% compared
with 89.0% for the same period last year. The loss ratio in the 2008 period
was 66.8% and the expense ratio was 32.6%. This compares with 57.3% and 31.7%
respectively in the same period last year.
Investment income for the nine months ended September 30, 2008 was
$12.5 million compared to $7.9 million for the same period in 2007. As in Q2,
the improvement in 2008 is the result of an increase in the fair value of the
investment portfolio on a year-over-year basis.
Net income decreased 26.8%, to $8.3 million for the nine months ended
September 30, 2008, compared to $11.3 million for the same period in 2007, due
primarily to the increase in the loss ratio in 2008. Fully diluted net income
per share, on the same basis, was $0.76 in the 2008 period, compared to $1.10
in the same period last year, a decrease of 30.9%.Nine months ended September 30, 2008, Personal Lines division
performance:
- Net earned premiums increased 12.3% to $73.2 million
- Underwriting income decreased 23.2% to $6.6 million(*)
- Combined ratio of 91.0% compared with 87.8% in 2007
Nine months ended September 30, 2008, Niche Products division
performance:
- Net earned premiums increased 143.2% to $35.8
- Underwriting loss of $(3.4) million versus gain of $1.3 million in
2007(*)
- Combined ratio of 109.5% compared with 91.4% in 2007
Nine months ended September 30, 2008, International division performance:
- Net earned premiums increased 57.3% to $8.8 million
- Underwriting loss of $1.4 million versus breakeven in 2007(*)
- Combined ratio of 116.1% compared with 99.0% in 2007
(*)Note: The Company has also expensed $1.1 million in 2008 and
$0.6 million in 2007 in corporate costs which have not been allocated to
a division.EGI Financial also announced that its Board of Directors has declared a
dividend of $0.06 per common share, payable on December 29, 2008 to
shareholders of record on December 12, 2008.
For the nine months ended September 30, 2008, approximately 30% of EGI
Financial's revenue was generated within the Niche Products division, 8%
within the International division and the remaining 62% generated within the
Personal Lines division. Geographically, EGI's business in the first nine
months of 2008 was derived from Ontario (71%), Quebec (10%), Alberta (4%),
other jurisdictions in Canada (7%) and United States (8%).
The annualized ratio of net written premiums to shareholders' equity in
the first nine months of 2008 was 1.4 times. Echelon's Minimum Capital Test
(MCT) margin at September 30, 2008 was 273%, providing EGI Financial with the
financial strength to grow its business utilizing its current resources.
Full Financial Statements and Management's Discussion and Analysis (MD&A)
will be available at a later date on the Company's web site at: www.egi.ca.
"Despite the unfavourable market conditions that have limited the growth
of many of EGI's competitors, we are continuing with efforts to drive organic
growth and explore niche opportunities in new markets" added Mr. McIntyre.
"With some easing of competitive conditions in the non-standard auto
marketplace continuing and numerous North American insurance companies
suffering from the world-wide financial crisis, EGI is favourably positioned
with our strong balance sheet to exploit profitable growth opportunities and
continue creating value for our shareholders."
About EGI Financial
-------------------
Founded in 1997, EGI Financial operates in the property and casualty
insurance industry in Canada and the United States, primarily focusing on
non-standard automobile insurance and other niche and specialty general
insurance products. EGI Financial's common shares are traded on the Toronto
Stock Exchange under the symbol EFH.
Non-GAAP Financial Measures
---------------------------
EGI Financial uses both Canadian generally accepted accounting principles
(GAAP) and certain non-GAAP measures to assess performance. Readers are
cautioned that non-GAAP measures do not have a standardized meaning under GAAP
and are unlikely to be comparable to similar measures used by other companies.
EGI Financial analyzes performance based on underwriting ratios such as
combined, expense and loss ratios as defined in regulations established under
the Insurance Companies Act (Canada). Return on equity (ROE) is a non-GAAP
measure which represents EGI Financial's net income for the twelve months
ended on the date indicated divided by the average shareholders' equity over
the same twelve-month period.
Forward-looking Information
---------------------------
This news release contains forward-looking information based on current
expectations. This information includes, but is not limited to, statements
about the operations, business, financial condition, priorities, targets,
ongoing objectives, strategies and outlook of EGI Financial for 2008 and
subsequent periods.
This information is based upon certain material factors or assumptions
that were applied in drawing a conclusion or making a projection as reflected
in the forward-looking information. By its nature, this information is subject
to inherent risks and uncertainties that may be general or specific. A variety
of material factors, many of which are beyond EGI Financial's control, affect
the operations, performance and results of EGI Financial and its business, and
could cause actual results to differ materially from the expectations
expressed in any of this forward-looking information.
EGI Financial does not undertake to update any forward-looking
information. Additional information about the risks and uncertainties about
EGI Financial's business is provided in its disclosure materials, including
its annual information form, filed with the securities regulatory authorities
in Canada, available at www.sedar.com.
Conference Call
---------------
A conference call for analysts and interested listeners will be held
Wednesday November 5, 2008 at 4:30 p.m. (ET). The call-in numbers for
participants are (416) 644-3416 or toll free, (800) 732-9303. A live audio
feed of the call will be broadcast on the internet through the Company's
website at www.egi.ca, or directly at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2433860.
A replay of the call will be available from 6:30 p.m. (ET) on November 5,
2008 until 11:59 p.m. on November 12, 2008. To access the replay, call (416)
640-1917 or toll free, (877) 289-8525, enter pass code number 21285404. The
replay can also be accessed over the Internet at the above address.
%SEDAR: 00022868E
For further information: Douglas E. McIntyre, Chief Executive Officer,
EGI Financial Holdings Inc., Telephone: (905) 214-7880
