EGI Financial Reports Strong Third Quarter Results



    Company continues to diversify and accelerate growth with new business
    initiatives

    TORONTO, Nov. 8 /CNW/ - EGI Financial Holdings Inc. (TSX:EFH) today
announced its results for the third quarter and nine-months ended
September 30, 2007.
    "As the competitive insurance market creates challenges for EGI to grow
its non-standard auto line of business, we remain focused on continuing to
diversify our business beyond the Ontario non-standard automobile market by
profitably growing our Niche Products division, by pursuing opportunities in
new geographic markets and new vehicles types, such as motorcycles, and by
expanding our reinsurance business in the United States," said Douglas
McIntyre, Chief Executive Officer of EGI Financial. "While underwriting
results in the Canadian P&C insurance industry are trending down toward the
industry's historic norms, EGI's new business initiatives continue to provide
shareholders with significant growth opportunities, which we expect will lead
to increased profitability as these new programs mature and premiums are
earned."

    
    -------------------------------------------------------------------------
    $000            3-months  3-months           9-months  9-months
                       ended     ended              ended     ended
                    Sept. 30, Sept. 30,     %    Sept. 30, Sept. 30,     %
                        2007      2006   Change      2007      2006   Change
    -------------------------------------------------------------------------
    Direct written
     and assumed
     premiums        $42,343   $29,184    45.1%  $114,837   $91,898    24.9%
    -------------------------------------------------------------------------
    Net written
     and assumed
     premiums        $39,624    26,635    48.8%  $107,254   $83,098    29.1%
    -------------------------------------------------------------------------
    Net earned
     premiums        $30,847   $28,490     8.3%   $85,445   $79,753     7.1%
    -------------------------------------------------------------------------
    Underwriting
     income           $3,536    $6,228   (43.2%)   $9,373   $11,017   (14.9%)
    -------------------------------------------------------------------------
    Investment
     income           $3,236    $2,143    51.0%    $7,905    $6,578    20.2%
    -------------------------------------------------------------------------
    Net income        $4,462    $5,489   (18.7%)  $11,338   $11,780    (3.8%)
    -------------------------------------------------------------------------
    Net income per
     diluted share     $0.44     $0.54   (18.5%)    $1.10     $1.16    (5.2%)
    -------------------------------------------------------------------------
    Book value        $10.39     $8.44    23.1%    $10.39     $8.44    23.1%
    -------------------------------------------------------------------------
    

    In the third quarter of 2007, EGI Financial generated direct written and
assumed premiums totaling $42.3 million, 45.1% above the $29.2 million level
in the corresponding period last year. The increase was primarily attributable
to the growth in motorcycle premiums in Ontario, the new reinsurance treaties
with AssuranceAmerica and from the Niche Products division's entry into the
emergency travel health insurance market in the quarter. The significant
growth in both the Personal Lines and Niche Products segments more than offset
weakness in the Ontario non-standard auto business.
    Net written and assumed premiums increased 48.8% to $39.6 million,
attributable to the above-mentioned growth and more effective utilization of
the Company's capital, through increased risk retention.
    Net earned premiums rose 8.3% in 2007 to $30.8 million from $28.5 million
last year, reflecting the year-over-year increase in direct premiums written
and assumed. The growth in earned premiums is significantly lower than the
growth in net written premiums in 2007 compared to 2006. This is primarily due
to the introduction of new premium from the Niche Products division's entry
into the emergency travel health line of business. During the third quarter of
2007, new direct premiums of $8.1 million were written in this line of
business, which will be earned predominantly in the last quarter of this year
and the first quarter of 2008, when many Canadian policyholders will be
traveling.
    In the quarter ended September 30, 2007 total underwriting income
decreased 43.2% to $3.5 million, compared to $6.2 million in the 2006 period.
The primary reason for this result is the increase in the loss ratio in the
quarter to 58.2% compared to 48.9% in 2006. The loss ratio increased in the
third quarter of 2007 as compared to the same period in 2006, due to the low
reported claims experience in the third quarter of 2006 and a decline in the
prior year reserve releases in the third quarter of 2007 to $2.0 million
compared to $2.6 million in the same period last year. Also, although written
premiums grew significantly in the third quarter of 2007 due to growth in the
Personal Lines motorcycle business and U.S. reinsurance arrangements, these
lines are not yet contributing similar margins as earned in our other core
lines of business. As premiums are earned over the next 12 months and as these
lines mature, management believes these areas will contribute more to
profitability.
    The combined ratio - being the addition of the ratio of net losses
incurred to net earned premiums, and the ratio of underwriting expenses to net
earned premiums - for the third quarter of 2007 increased to 88.5% compared
with 78.1% for the same period last year. EGI Financial believes that the
combined ratio is the best measure of the profitability of its underwriting
business.
    The loss ratio in the period ended September 30, 2007 - being net losses
incurred expressed as a percentage of net earned premiums - was 58.2%, while
the expense ratio - being expenses incurred expressed as a percentage of net
earned premiums - was 30.3%. This compares with 48.9% and 29.2% respectively
in the same period of 2006. The increase in the loss ratio was due to the
reasons outlined above.
    Investment income in the third quarter of 2007 was $3.2 million compared
to $2.1 million last year, an increase of 51.0%. The improvement reflects an
increase in the investment portfolio. Also, realized gains in the period were
$0.8 million, compared to losses of $0.1 million in the comparable period in
2006. EGI's investment portfolio reflected a $33.2 million, or 18.9%, increase
in fair value as at September 30, 2007, compared to September 30, 2006.
    EGI does not currently hold any non-bank asset backed commercial paper
(ABCP) in its investment portfolio.
    Net income was $4.5 million for the three months ended September 30,
2007, a 19.1% decrease from $5.5 million in the third quarter of 2006. The
primary reason for the decrease is the increase in the loss ratio in the
quarter to 58.2% compared to 48.9% last year as outlined above. Fully diluted
earnings per share were $0.44 in the third quarter of 2007, compared to $0.54
for the third quarter of 2006, a decrease of 18.5%. This represents an
annualized return on equity, on a last-twelve-months basis, of 18.3%.

    
    Q3 2007 Personal Lines division performance:
      -  Net earned premiums increased 3.4% to $25.2 million
      -  Income before taxes decreased 55.4% to $2.9 million(*)
      -  Combined ratio 88.4% compared with 73.5% for the 2006 period(*)

    Q3 2007 Niche Products division performance:
      -  Net earned premiums increased 36.6%, to $5.6 million
      -  Income before taxes increased to $0.7 million from a loss of
         $0.1 million(*)
      -  Combined ratio 87.3% compared with 101.6% for the 2006 period(*)

    (*) Note that, due to the commencement of a reallocation of overhead
    expenses to the Niche Products division in 2007, income before taxes in
    the Personal Lines division was positively impacted by $0.2 million, with
    a corresponding negative impact on the Niche Products division. Corporate
    expenses of $0.1 million were not allocated to the divisions in the third
    quarter.
    

    For the nine months ended September 30, 2007, EGI Financial generated
direct written premiums totaling $114.8 million, 24.9% above the $91.9 million
level in the corresponding period last year. As indicated in the third quarter
discussion, EGI's new business initiatives have resulted in a significant
increase in premiums despite competitive market conditions in Ontario
non-standard auto business.
    Net written and assumed premiums increased 29.1% to $107.3 million. As
noted in Q3, the incremental growth above that of written premiums was
primarily attributable to the new business lines and more effective
utilization of the Company's capital, through greater retention of risk. Net
earned premiums rose 7.1% in 2007 to $85.4 million from $79.8 million. While
this was less than the increase in net written and assumed premiums due to the
Company's changing mix of business, the bulk of the additional premiums will
earn over the remainder of the year and the first quarter of 2008.
    In the nine months ended September 30, 2007 total underwriting income
decreased 14.9% to $9.4 million, compared to $11.0 million in 2006. The
decrease was attributable to a higher loss ratio and the fact that the
comparable period in 2006 represented one of the most robust periods on record
within the Canadian P&C Insurance Industry.
    The combined ratio for the nine-month period in 2007 was 89.0% compared
with 86.2% for the same period last year. The loss ratio in the 2007 period
was 57.3% and the expense ratio was 31.7%. This compares with 56.1% and 30.1%
respectively in the first nine months of 2006.
    Investment income for the nine months ended September 30, 2007 was
$7.9 million compared to $6.6 million for the same period in 2006. As in Q3,
the improvement in 2007 is the result of an increase in the investment
portfolio on a year-over-year basis.
    Net income decreased 3.8%, to $11.3 million for the nine months ended
September 30, 2007, compared to $11.8 million for the same period in 2006, due
primarily to the increase in the loss ratio in 2007. Fully diluted net income
per share, on the same basis, was $1.10 in the 2007 period, compared to $1.16
in the same period last year, a decrease of 5.2%.

    
    Nine-months 2007 Personal Lines division performance:
      -  Net earned premiums increased 0.5% to $70.7 million
      -  Income before taxes decreased 24.4% to $8.7 million(*)
      -  Combined ratio 87.7% compared with 83.6% for the 2006 period(*)

    Nine-months 2007 Niche Products division performance:
      -  Net earned premiums increased 54.7% to $14.7 million
      -  Income before taxes increased 333% to $1.3 million(*)
      -  Combined ratio 91.4% compared with 94.2% for the 2006 period(*)
    

    (*) Note that, due to the commencement of a reallocation of overhead
    expenses to the Niche Products division in 2007, income before taxes in
    the Personal Lines division was positively impacted by $0.6 million, with
    a corresponding negative impact on the Niche Products division. Corporate
    expenses of $0.6 million were not allocated to the divisions in the nine
    months ended September 30, 2007.

    EGI Financial also announced that its Board of Directors has declared a
dividend of $0.05 per common share, payable on December 28, 2007 to
shareholders of record on December 14, 2007.
    Geographically, EGI Financial's business in the first nine months of 2007
was derived from Ontario (75%), Quebec (9%), Alberta (2%), other jurisdictions
in Canada (5%) and United States (9%).
    On January 1, 2007 the Company adopted, on a prospective basis, two new
accounting standards related to financial instruments, which were issued by
the Canadian Institute of Chartered Accountants. The new standards result in
the recording of all investments at fair value in the Consolidated Balance
Sheet. In addition, cumulative changes in the fair value of investments are
reported in Accumulated Other Comprehensive Income (AOCI), a new component of
Shareholders' Equity.
    Upon adoption of these standards, total assets of EGI increased by
$8.0 million to reflect the adjustment to fair value of investments as at
January 1, 2007 previously measured at cost or amortized cost. In addition,
the AOCI was credited an amount of $5.3 million representing the adjustment to
fair value of investments, net of income tax. This amount is offset by an
Other Comprehensive Loss of $1.1 million in the first nine months of 2007,
reflecting a decline in fair value of bonds in the period.
    Attributable in part to these changes, total assets at September 30, 2007
were $335.3 million. The investment portfolio at fair value, including cash
and premium finance receipts, increased to $249.5 million, or $25.84 per
share, compared to $215.4 million, or $22.43 per share, a year earlier. Book
value per share was $10.39 at September 30, 2007 compared with $8.93 per share
as at Dec. 31, 2006 and $8.44 per share at September 30, 2006.
    The annualized ratio of net written premiums in the nine months of 2007
to shareholders' equity was 1.5 times. Echelon's Minimum Capital Test (MCT)
margin at September 30, 2007 was 310%, 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)
are available on the Company's web site at: www.egi.ca/financial.html.
    "The first nine months of 2007 was in line with management's
expectations," added Mr. McIntyre. "As we look out to the balance of 2007, we
expect to continue to produce solid financial results while accelerating our
profitable diversification and expansion initiatives."

    About EGI Financial
    -------------------
    Founded in 1997, EGI Financial operates in the property and casualty
insurance industry in Canada, 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 2007 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
Friday, November 9, 2007 at 10:00 a.m. (ET). The call-in numbers for
participants are 416-644-3423 or toll free, 866-249-1964. A live audio feed of
the call will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2039840
    A replay of the call will be available from 12:00 p.m. (ET) on
November 9, 2007 until 11:59 p.m. on November 18, 2007. To access the replay,
call 416-640-1917 or toll free, 877-289-8525, enter pass code number 21249666,
and then press the pound # key. The replay can also be accessed over the
Internet at the above address.

    %SEDAR: 00022868E




For further information:

For further information: Douglas E. McIntyre, Chief Executive Officer,
EGI Financial Holdings Inc., Telephone: (905) 564-9215


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