Atlas Financial Holdings Announces 2017 Third Quarter Financial Results
Company to Hold Conference Call on
Third Quarter 2017 Financial Performance Summary (comparisons to Third Quarter 2016 unless noted):
- Total revenue for the three month period ended
September 30, 2017 increased by 26.8% to$57.5 million - Gross premium written increased by 8.5% to
$65.9 million - In-force premium as of
September 30, 2017 increased 20.8% to$266.3 million compared to$220.4 million - Underwriting income for the third quarter 2017 was
$6.8 million compared to$7.1 million for the third quarter 2016 which included$1.9 million benefit from expenses recovered related to acquisitions and stock purchase agreements - The combined ratio for the third quarter 2017 was 87.9% compared to 83.5%
- Net income for the third quarter 2017 was
$5.1 million , or$0.42 per common share diluted, compared to$6.5 million , or$0.51 per common share diluted, representing a$0.09 or 17.7% decrease from third quarter 2016 - Book value per common share on
September 30, 2017 was$11.96 , compared to$10.54 as ofDecember 31, 2016 and$11.81 as ofSeptember 30, 2016 - Annualized return on equity (“ROE”) was 14.5% in the third quarter 2017 compared to 17.9% in the prior year period
Management Comments
Financial and Operational Review
Premium Written: For the three month period ended
Geographic Distribution: The Company is licensed in 49 states and the
Combined Ratio: Atlas’ combined ratio increased for the three month period ended
- Loss Ratio: The loss ratio relating to claims incurred for the three month period ended
September 30, 2017 was 59.5%, compared to 58.2% for the three month period endedSeptember 30, 2016 . The loss ratio increased year over year primarily due to the Company’s continued review of underwriting profitability by product and state and higher than expected claim costs associated with Atlas’ participation in non-voluntary assigned risk pools. Approximately$300,000 in physical damage claims related to Hurricane Harvey were also recorded in the quarter. The Company continues to see incremental opportunities to build on decades of experience in the claims area coupled with increasing use of analytics to increase expected margin in subsequent quarters. As previously announced, the Company is utilizing machine learning based predictive analytics in the claim area, in addition to using it as an underwriting tool, to further benefit from the data, experience and expertise within its organization. Atlas believes this approach amplifies the value of the assets accumulated over its operating subsidiaries’ many years spent focusing on niche target markets to model potential risk and deliver value for both our customers and stakeholders. On a year over year basis, the Company expects its loss ratio to continue to generally trend in a positive direction based on prior year and potential future pricing, underwriting and claims activities. - Underwriting Expense Ratio: The underwriting expense ratio for the three month period ended
September 30, 2017 was 28.4% compared to 25.3% for the three month period endedSeptember 30, 2016 .
The table below details the comparisons of each component of the Company’s combined ratio for the periods indicated (after accounting for the effect of quota share reinsurance):
Three Month Periods Ended | Nine Month Periods Ended | |||||||
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2017 | 2016 | 2017 | 2016 | |||||
Loss Ratio | 59.5 % | 58.2 % | 60.0 % | 58.9 % | ||||
Underwriting Expense Ratio: | ||||||||
Acquisition cost ratio | 14.0 % | 11.6 % | 12.4 % | 10.3 % | ||||
Other underwriting expense ratio | 13.3 % | 17.6 % | 13.7 % | 16.5 % | ||||
Deferred acquisition costs general expenses | 0.6 % | (0.4) % | 0.3 % | (0.6) % | ||||
Underwriting expense ratio before expenses related to stock purchase agreements and share-based compensation expenses | 27.9 % | 28.8 % | 26.4 % | 26.2 % | ||||
Expenses recovered related to stock purchase agreement ratio | — % | (4.4) % | — % | (1.8) % | ||||
Share-based compensation expense ratio | 0.5 % | 0.9 % | 0.6 % | 0.9 % | ||||
Underwriting expense ratio | 28.4 % | 25.3 % | 27.0 % | 25.3 % | ||||
Total combined ratio | 87.9 % | 83.5 % | 87.0 % | 84.2 % | ||||
Atlas’ underwriting expense ratio for the three month period ended
As the Company continues the use of quota share reinsurance, and potentially changes the percentage of ceded premiums under its contract, the impact on the individual ratios of acquisition cost and other underwriting expense will vary. On a pro-forma basis, as if there was no quota share reinsurance in place, the components of the underwriting expense ratio for the periods indicated would have been as follows:
Three Month Periods Ended | Nine Month Periods Ended | |||||||
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2017 | 2016 | 2017 | 2016 | |||||
Acquisition costs | 16.1% | 15.6% | 14.9% | 14.5% | ||||
Other insurance general and administrative expenses | 11.9% | 14.8% | 12.4% | 13.7% | ||||
Deferred acquisition costs general expenses | 0.6% | (0.3)% | 0.2% | (0.5)% | ||||
Expenses recovered related to stock purchase agreements | —% | (3.7)% | —% | (1.5)% | ||||
Share-based compensation expense | 0.5% | 0.7% | 0.5% | 0.8% | ||||
Total underwriting expense ratio | 29.1% | 27.1% | 28.0% | 27.0% | ||||
Underwriting Results: Underwriting profit decreased to
Net Income before Taxes: Net income before taxes decreased to
Income Taxes: Atlas recognized tax expense of
Net Income: Atlas reported net income of
Earnings per share (“EPS”): Atlas generated
Share Count: The following chart illustrates Atlas’ potential dilutive common shares for the three month periods ended
Three Month Periods Ended | ||||
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Weighted average common shares outstanding | 12,045,519 | 12,045,519 | ||
Dilutive potential ordinary shares: | ||||
Dilutive stock options | 162,018 | 172,088 | ||
Dilutive shares upon preferred share conversion | — | 522,397 | ||
Dilutive average common shares outstanding | 12,207,537 | 12,740,004 | ||
Balance Sheet/Investment Overview
Book Value: Book value per common share was
Cash and Invested Assets: Cash and invested assets as of
Investment Strategy: Atlas aligns its securities portfolio to support the liabilities and operating cash needs of its insurance subsidiaries, to preserve capital and to generate investment returns. Atlas invests predominantly in fixed income securities with overall maturities that correlate with the payout patterns of Atlas’ claims liabilities and other liquidity needs. Other than fixed income investments are limited to an appropriately small percentage of our portfolio and are generally opportunities identified through the Company’s specialty focus or by leveraging the resources of our business partners. As of
Investment Income / Yield: Atlas generated net investment income of
Board of Directors Update
The Company also announced that
“On behalf of our entire organization, I want to thank Larry for his invaluable contribution to Atlas’ formation as well as our evolution over the past seven years,”
“I became involved with Atlas when it was only a concept, and it has been a great pleasure to be a small part of the growth and success Scott and his team delivered over the last seven years.”
Outlook for 2017
Conference Call Details
Date/Time: | |
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Participant Dial-In Numbers: | ||
( |
877-423-9817 | |
(International): | 201-493-6770 | |
To access the call, please dial-in approximately five minutes before the start time and, when asked, provide the operator with passcode “Atlas”.
An accompanying slide presentation will be available in .pdf format on the investor relations page of the Company’s website after issuance of the earnings release.
Webcast
The call will also be simultaneously webcast over the Internet via the “Investor Relations” section of Atlas’ website at www.atlas-fin.com/investorrelations or by clicking on the conference call link: http://atlas-fin.equisolvewebcast.com/q3-2017. Audio and a transcript of the call will be archived on the Company’s website.
About Atlas
The primary business of Atlas is commercial automobile insurance in
For more information about Atlas, please visit www.atlas-fin.com.
Financial Information
Atlas’ financial statements reflect consolidated results of Atlas’ subsidiaries:
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 2016 Annual Report on Form 10-K. 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.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME | ||||||||||||||||
($ in ‘000s, except for share and per share data) |
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Three Month Periods Ended | Nine Month Periods Ended | |||||||||||||||
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2017 | 2016 | 2017 | 2016 | |||||||||||||
Condensed Consolidated Statements of Income | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Net premiums earned | $ | 55,865 | $ | 43,251 | $ | 158,340 | $ | 126,806 | ||||||||
Net investment income | 902 | 1,403 | 3,311 | 3,168 | ||||||||||||
Net realized gains | 582 | 630 | 1,000 | 1,024 | ||||||||||||
Other income | 115 | 51 | 332 | 280 | ||||||||||||
Total revenue | 57,464 | 45,335 | 162,983 | 131,278 | ||||||||||||
Net claims incurred | 33,258 | 25,161 | 95,027 | 74,675 | ||||||||||||
Acquisition costs | 7,820 | 5,013 | 19,586 | 13,036 | ||||||||||||
Other underwriting expenses | 7,937 | 7,730 | 22,870 | 21,084 | ||||||||||||
Amortization of intangible assets | 97 | 97 | 292 | 292 | ||||||||||||
Interest expense | 467 | 257 | 1,379 | 756 | ||||||||||||
Expenses recovered pursuant to stock purchase agreement | — | (1,895 | ) | — | (2,297 | ) | ||||||||||
Total expenses | 49,579 | 36,363 | 139,154 | 107,546 | ||||||||||||
Income from operations before income tax expense | 7,885 | 8,972 | 23,829 | 23,732 | ||||||||||||
Income tax expense | 2,760 | 2,476 | 8,342 | 7,525 | ||||||||||||
Net income | 5,125 | 6,496 | 15,487 | 16,207 | ||||||||||||
Less: Preferred share dividends | — | 73 | — | 234 | ||||||||||||
Net income attributable to common shareholders | $ | 5,125 | $ | 6,423 | $ | 15,487 | $ | 15,973 | ||||||||
Basic weighted average common shares outstanding | 12,045,519 | 12,045,519 | 12,045,519 | 12,045,519 | ||||||||||||
Earnings per common share, basic | $ | 0.43 | $ | 0.53 | $ | 1.29 | $ | 1.33 | ||||||||
Diluted weighted average common shares outstanding | 12,207,537 | 12,740,004 | 12,197,365 | 12,746,102 | ||||||||||||
Earnings per common share, diluted | $ | 0.42 | $ | 0.51 | $ | 1.27 | $ | 1.27 | ||||||||
Condensed Consolidated Statements of Comprehensive Income | ||||||||||||||||
Net income | $ | 5,125 | $ | 6,496 | $ | 15,487 | $ | 16,207 | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Changes in net unrealized investment gains (losses) | 144 | (569 | ) | 1,226 | 4,092 | |||||||||||
Reclassification to net income | 56 | 105 | (183 | ) | 353 | |||||||||||
Effect of income tax | (70 | ) | 162 | (365 | ) | (1,556 | ) | |||||||||
Other comprehensive income (loss) | 130 | (302 | ) | 678 | 2,889 | |||||||||||
Total comprehensive income | $ | 5,255 | $ | 6,194 | $ | 16,165 | $ | 19,096 | ||||||||
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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||
($ in ‘000s, except for share and per share data) |
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2017 (unaudited) | 2016 | |||||||
Assets |
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Investments, available for sale | ||||||||
Fixed income securities, at fair value (amortized cost |
$ | 169,296 | $ | 156,487 | ||||
Equity securities, at fair value (cost |
5,597 | 6,223 | ||||||
Other investments | 32,682 | 32,181 | ||||||
Total Investments | 207,575 | 194,891 | ||||||
Cash and cash equivalents | 40,173 | 29,888 | ||||||
Accrued investment income | 1,210 | 1,228 | ||||||
Premiums receivable (net of allowance of |
91,964 | 77,386 | ||||||
Reinsurance recoverables on amounts paid | 6,474 | 7,786 | ||||||
Reinsurance recoverables on amounts unpaid | 25,214 | 35,370 | ||||||
Prepaid reinsurance premiums | 13,508 | 13,372 | ||||||
Deferred policy acquisition costs | 16,920 | 13,222 | ||||||
Deferred tax asset, net | 16,621 | 18,498 | ||||||
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2,726 | 2,726 | ||||||
Intangible assets, net | 4,243 | 4,535 | ||||||
Property and equipment, net | 17,536 | 11,770 | ||||||
Other assets | 6,280 | 12,905 | ||||||
Total Assets | $ | 450,444 | $ | 423,577 | ||||
Liabilities |
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Claims liabilities | $ | 114,503 | $ | 139,004 | ||||
Unearned premiums | 141,802 | 113,171 | ||||||
Due to reinsurers | 7,974 | 8,369 | ||||||
Notes payable, net | 23,975 | 19,187 | ||||||
Other liabilities and accrued expenses | 17,793 | 16,504 | ||||||
Total Liabilities | $ | 306,047 | $ | 296,235 | ||||
Shareholders’ Equity |
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Preferred shares, |
$ | — | $ | — | ||||
Ordinary voting common shares, |
36 | 36 | ||||||
Restricted voting common shares, |
— | — | ||||||
Additional paid-in capital | 200,134 | 199,244 | ||||||
Retained deficit | (56,231 | ) | (71,718 | ) | ||||
Accumulated other comprehensive income (loss), net of tax | 458 | (220 | ) | |||||
Total Shareholders’ Equity | 144,397 | 127,342 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 450,444 | $ | 423,577 | ||||
Use of Non-
Atlas uses these non-GAAP financial measures in order to present its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. The non-GAAP financial measures that Atlas presents may not be comparable to similarly-named measures reported by other companies.
Adjusted operating income, before tax includes both underwriting income and loss and net investment income, but excludes net realized capital gains and losses, legal and professional expense incurred related to business combinations, interest expense, net impairment charges recognized in earnings and other items. Underwriting income is derived by reducing net premiums earned by losses and loss adjustment expenses incurred, policy acquisition costs and general operating expenses.
Reconciliation of
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Three Month Periods Ended | Nine Month Periods Ended | ||||||||||||||||||||||||||||
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2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||
Net income | $ | 5,125 | $ | 0.42 | $ | 6,496 | $ | 0.51 | $ | 15,487 | $ | 1.27 | $ | 16,207 | $ | 1.27 | |||||||||||||
Add: income tax expense | 2,760 | 0.23 | 2,476 | 0.19 | 8,342 | 0.69 | 7,525 | 0.59 | |||||||||||||||||||||
Add: expenses recovered pursuant to stock purchase agreement | — | — | (1,895 | ) | (0.15 | ) | — | — | (2,297 | ) | (0.18 | ) | |||||||||||||||||
Add: interest expense | 467 | 0.04 | 257 | 0.02 | 1,379 | 0.11 | 756 | 0.06 | |||||||||||||||||||||
Less: net realized investment gains | 582 | 0.05 | 630 | 0.05 | 1,000 | 0.08 | 1,024 | 0.08 | |||||||||||||||||||||
Less: other income | 115 | 0.01 | 51 | — | 332 | 0.03 | 280 | 0.02 | |||||||||||||||||||||
Adjusted operating income, before tax | $ | 7,655 | $ | 0.63 | $ | 6,653 | $ | 0.52 | $ | 23,876 | $ | 1.96 | $ | 20,887 | $ | 1.64 | |||||||||||||
After-tax return on average common equity is derived by subtracting preferred share dividends accrued from net income and dividing by average common equity. Common equity is total shareholders’ equity less preferred shares and cumulative preferred share dividends accrued. Average common equity is the average of common equity at the beginning and the ending of the reporting period.
Reconciliation of
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September | |
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As of: | 30, 2017 | 2017 | 2016 | 30, 2016 | 2016 | 2015 | ||||||||||||||||||
Total shareholders’ equity | $ | 144,397 | $ | 138,857 | $ | 127,342 | $ | 146,592 | $ | 142,958 | $ | 129,622 | ||||||||||||
Less: preferred shares | — | — | — | (4,000 | ) | (6,539 | ) | (6,941 | ) | |||||||||||||||
Less: accrued dividends on preferred shares | (333 | ) | (333 | ) | (333 | ) | (286 | ) | (622 | ) | (460 | ) | ||||||||||||
Total common equity | $ | 144,064 | $ | 138,524 | $ | 127,009 | $ | 142,306 | $ | 135,797 | $ | 122,221 | ||||||||||||
Reconciliation of
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Three Month Periods Ended | Nine Month Periods Ended | ||||||||||||
September | September | September | September | ||||||||||
30, 2017 | 30, 2016 | 30, 2017 | 30, 2016 | ||||||||||
Net income | $ | 5,125 | $ | 6,496 | $ | 15,487 | $ | 16,207 | |||||
Average equity | 141,627 | 144,774 | 135,869 | 138,106 | |||||||||
Return on equity | 14.5% | 17.9% | 15.2% | 15.6% | |||||||||
Net income | $ | 5,125 | $ | 6,496 | $ | 15,487 | $ | 16,207 | |||||
Preferred share dividends accrued | — | (73) | — | (234) | |||||||||
Net income attributable to common shareholders | $ | 5,125 | $ | 6,423 | $ | 15,487 | $ | 15,973 | |||||
Average common equity | 141,294 | 139,051 | 135,537 | 132,263 | |||||||||
Return on average common equity | 14.5% | 18.5% | 15.2% | 16.1% | |||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20171106006413/en/
At the Company:
CEO
[email protected]
www.atlas-fin.com
or
Investor Relations:
Senior Vice President
[email protected]
www.theequitygroup.com
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