CHICAGO, March 26, 2012 /CNW/ - (TSX.V:AFH) Atlas Financial Holdings, Inc. ("Atlas" or the "Company") today announced its financial results for the fourth quarter and full year 2011.
As originally announced via press release on March 6, 2012, the Company became a domestic issuer in the United States ("US") and transitioned from reporting according to Canadian regulations with US secondary filings, to reporting according to US regulations with Canadian secondary filings. As a result, the Company has adopted US generally accepted accounting principles ("US GAAP") in its first annual filing under Form 10-K.
All amounts shown are in US dollars.
Full year 2011 Highlights
- On a year over year basis, gross premium written related to core commercial lines increased by 37% for 2011 as compared to 2010.
- Net loss for the year ended December 31, 2011 was $2.5 million.
- After taking the impact of the liquidation preference of the preferred shares into consideration, the basic and diluted loss per common share in 2011 was $(0.18).
- Non-operating expenses had an unfavorable impact of ($0.18) on basic and diluted earnings per share in 2011.
- Total investment income (including realized capital gains) in 2011 was $7.5 million, an increase of 36% as compared to 2010.
- Underwriting losses improved by $12.7 million for the year ended December 31, 2011 as compared to the full year of 2010.
- Atlas' distribution channel was able to write business in a total of 25 states at the end of 2011.
- Book value per common share diluted at December 31, 2011 was $2.03.
- Atlas carries a valuation allowance, in the amount of $0.67 per common share diluted at December 31, 2011, against its deferred tax asset.
In Atlas' core lines of business, commercial automobile insurance, gross premium written in the fourth quarter 2011 was $4.3 million, an increase of 40.3% over fourth quarter 2010 and a decrease of 19.9% as compared to the third quarter 2011, reflecting seasonality. Total gross premium written for the fourth quarter 2011 was $9.1 million reflecting a 2.1% decrease from the fourth quarter 2010 and a 16.9% decrease from the third quarter 2011.
For the year ended December 31, 2011, gross premium written related to core commercial lines increased by 36.9% for 2011 as compared to 2010. Total gross premium written was $42.0 million compared to $46.7 million in 2010, representing a 10.0% decrease primarily due to the reduction of non-core lines of business. Net premium earned was $9.1 million in the fourth quarter 2011, a 21.7% decrease compared with the fourth quarter of 2010 and a 3.2% increase compared to the third quarter 2011. Premiums are earned ratably over the term of underlying policies; therefore, changes in earned premiums follow any changes in written premium during the trailing twelve month period based on Atlas' typical policy term.
Net premium earned was $35.7 million in 2011, a 33.3% decrease compared with $53.6 million in 2010. The decrease in net premiums earned is attributable to the written premium decline experienced by the Company's insurance subsidiaries prior to Atlas' formation, coupled with the transition away from private passenger automobile insurance and other non-core lines of business during 2011.
Atlas' loss and loss adjustment expense ratio was 92.5% in the fourth quarter 2011 as compared with 87.0% in the fourth quarter 2010 and 79.4% in the third quarter 2011. This figure includes $1.8 million reserve strengthening adjustment made in the fourth quarter 2011 which unfavorably impacted the loss ratio by 19.8% in the fourth quarter and 5% on a full year 2011 basis. This reserve strengthening related to policies issued in years preceding 2010 which are currently being run off. The loss ratio relating to full year 2011 was 81.1% compared to 89.7% in 2010.
Atlas' loss ratio improved in 2011 compared to 2010 due to the increased composition of commercial auto as a percentage of the total written premium and the winding down of terminated non-core and non-profitable lines. Atlas has extensive experience and expertise with respect to underwriting and claims management in this specialty area of insurance and expects the loss ratio to return to levels supporting underwriting profit.
Other underwriting expense in the fourth quarter 2011 was $5.1 million, representing a 21.6% increase from the fourth quarter of 2010 and a 177.5% increase from the third quarter 2011. These ratios include a one-time $2.5 million non-cash charge recorded in the fourth quarter upon settlement of the American Country Pension Plan. This charge unfavorably impacted the other underwriting expense ratio by 28.0% in the fourth quarter. Excluding the pension related charge, other underwriting expense in the fourth quarter was 8.1% lower than fourth quarter 2010 and 7.0% higher than third quarter 2011. For the full year, the other underwriting expense ratio was 29.9% in 2011 compared to 34.3% in 2010. In the first quarter of 2011, we incurred non-recurring expenses of $0.6 million. The combination of the settlement of the American Country Pension Plan and the non-recurring expenses unfavorably impacted the other underwriting expense ratio by 8.8% for the full year. The favorable change in other areas of underwriting expense can be attributed to operating efficiencies realized after the reverse merger at the end of 2010 as well as the absence of significant agent receivable write-offs in 2011.
Atlas' combined ratio, which measures underwriting performance, was 169.7% for the fourth quarter 2011 as compared with 140.7% in the fourth quarter 2010 and 118.4% in the third quarter 2011. The aforementioned reserve strengthening and non-cash settlement charge unfavorably impacted the combined ratio in the fourth quarter by 47.8%. Atlas expects that growth in premiums from core lines and an absence of significant non-operating charges will improve the Company's combined ratio and deliver underwriting profit.
For the full year 2011, Atlas' combined ratio was 131.4% as compared to 144.7% in 2010. Non-operating expenses including reserve strengthening for pre-Atlas periods had an unfavorable impact of 13.9% on the Company's combined ratio in 2011.
Atlas lost $2.5 million during 2011 compared to net losses of $21.8 million in 2010. After taking the impact of the liquidation preference of the preferred shares into consideration, the basic and diluted loss per common share in 2011 was $(0.18) versus a loss per common share of $(1.19) in 2010 computed under continuation accounting rules.
The combination of the one-time $2.5 million ($1.8 million net of tax) non-cash charge upon settlement of the American Country Pension Plan, the $1.8 million ($1.2 million net of tax) fourth quarter reserve strengthening, and other non-recurring expenses incurred in Q1 2011 of $0.6 million ($0.4 million net of tax), had an unfavorable impact of ($0.18) on basic and diluted earnings per common share in 2011.
"The past year was an important transitional period in which we successfully consolidated our infrastructure around a lower cost base, brought closure to legacy issues and re-energized our distribution channel," said Scott D. Wollney, Atlas President & CEO. "In 2012, our focus shifts from transitioning away from the past to building a successful future."
Atlas' active states can be found on the Company's website. Continued expansion where Atlas' research supports a strong comparative value proposition utilizing existing licenses will continue into 2012.
Additional information about Atlas, including a copy of Atlas' fourth quarter and full year 2011 consolidated financial statements and Management Discussion & Analysis, can be accessed on the Canadian Securities Administrators' website at www.sedar.com, via the U.S. Securities and Exchange Commission internet site at www.sec.gov, or through Atlas' website at www.atlas-fin.com. As mentioned above, the Company has adopted US GAAP in its first annual filing under Form 10-K. Financials for the first through third quarters of 2011 are also available in US GAAP in addition to the originally filed IFRS statements on www.sedar.com and through Atlas' website. The adoption of US GAAP did not have a material impact on our financial condition.
Atlas will hold a conference call at 8:30 a.m. (Eastern Time) on March 26, 2012 to review fourth quarter and full year 2011 results. To access the call, approximately five minutes before the start time please dial 800-593-0693 and, when asked, provide the operator with passcode "Atlas". Questions will be taken at the end of the call.
Following the call, an audio webcast will be available and can be accessed at www.atlas-fin.com/atlas_investor_relations.html.
Atlas was formed on December 31, 2010 through a reverse triangular merger and the consolidated financial statements for 2010 are those of Atlas and its two insurance subsidiaries, American Country Insurance Company and American Service Insurance Company, Inc., which have been prepared in accordance with continuation accounting concepts included in Accounting Standard Codification 805 Business Combinations. Accordingly, and as a result of the merger date, shareholder's equity and earnings per share information provided herein for 2010 reflect the ordinary voting shares outstanding at the date of the merger as well as the ordinary voting shares, restricted voting shares and preferred shares that were issued in connection with the merger, as if such capitalization structure were in place during all 2010 periods for which financial information is being provided.
Financial Statement Presentation
As noted above, Atlas' financial statements reflect consolidated results including prior periods based on historical financial statements of Atlas' subsidiaries: American Insurance Acquisition Inc., American Country Insurance Company and American Service Insurance Company, Inc. while under the management of its previous owners. The 2010 financial statements and the historic results reflected therein contain certain expenses and fees that supported the infrastructure of the previous parent of these subsidiaries. Atlas no longer incurs these expenses, which included management fees, allocated overhead cost, and shared infrastructure expenses, after the December 31, 2010 date of the reverse triangular merger which created Atlas.
The primary business of Atlas is commercial automobile insurance in the United States, with a niche market orientation and focus on insurance for the "light" commercial automobile sector including taxi cabs, non-emergency paratransit, limousine/livery and business auto. The business of Atlas is carried on through its insurance subsidiaries American Country Insurance Company and American Service Insurance Company, Inc. Atlas' insurance subsidiaries have decades of experience with a commitment to always being an industry leader in these specialized areas of insurance.
Notice regarding forward-looking statements:
This release includes forward-looking statements regarding Atlas and its insurance subsidiaries and businesses. Such statements are based on the current expectations of the management of each entity. The words "anticipate", "expect", "believe", "may", "should", "estimate", "project", "outlook", "forecast" or similar words are used to identify such forward looking information. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting the Companies, including risks regarding the insurance industry, economic factors and the equity markets generally and the risk factors discussed in the "Risk Factors" section of the Company's Form 10-K for the year ended December 31, 2011. No forward-looking statement can be guaranteed. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Atlas and its subsidiaries undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
For further information:
Scott Wollney, Chief Executive Officer of Atlas Financial Holdings, Inc. at 847-700-8600.