SOUTHFIELD, Mich., Nov. 9 /PRNewswire-FirstCall/ -- First Mercury
Financial Corporation (NYSE:FMR) today announced results for the
third quarter and nine months ended September 30, 2006. Subsequent
to the end of the quarterly reporting period, the Company
successfully completed its initial public offering ("IPO") on
October 23, 2006. Highlights for the third quarter 2006 versus
third quarter 2005 include: -- Pro forma net income increased 26%
to $8.5 million -- Net income increased 16% to $6.9 million --
Annualized return on average stockholders' equity of 35.1% --
Combined ratio of 65.3% compared to 75.8% in 2005 -- Premiums
produced increased 17% to $53.3 million -- October IPO generated
net proceeds of approximately $174.0 million Highlights for the
year-to-date, nine-month period ended September 30, 2006 versus
same period 2005 include: -- Pro forma net income increased 22% to
$22.7 million -- Net income increased 2% to $18.3 million --
Annualized return on average stockholders' equity of 33% --
Combined ratio of 69.7% compared to 70.8% in 2005 -- Premiums
produced increased 27% to $172.4 million "Strong underwriting
results, combined with the earnings from our non-risk bearing
insurance services business, and growth in our security and
specialty classes, led to record third quarter performance," said
Richard Smith, president and chief executive officer. "Our ability
to deliver this kind of performance while preparing for First
Mercury's initial public offering is a testament to the dedication
and focus of our outstanding team." For the three months ended
September 30, 2006, premiums produced were $53.3 million, a 17
percent increase over premiums produced during the same period in
2005. For the nine months ended September 30, 2006, premiums
produced were $172.4 million, a 27 percent increase over premiums
produced during the same period in 2005. Premiums produced consists
of all of the premiums billed by CoverX(R), First Mercury's
licensed wholesale insurance broker, which produces and underwrites
all of the Company's business. First Mercury's combined ratio for
the third quarter was 65.3 percent compared with 75.8 percent for
the year-ago period. The Company's combined ratio was 69.7 percent
for the nine months compared with 70.8 percent for the year-ago
period. Net investment income earned in the third quarter was $2.4
million, up 38 percent from the third quarter of 2005. Net
investment income earned for the nine months was $6.7 million, a 34
percent increase over the same period in 2005. Net income for the
third quarter increased 16 percent to $6.9 million compared to $6.0
million for the same period in 2005. Net income for the nine months
increased 2 percent to $18.3 million compared to $17.9 million for
the same period in 2005. Pro forma net income for the third quarter
was $8.5 million compared to $6.7 million for the year-ago period,
an increase of 26 percent from the third quarter of 2005. Pro forma
net income for the nine months was $22.7 million compared to $18.6
million, an increase of 22 percent from the year-ago period. Pro
forma net income represents net earnings excluding the impact of
interest expense, net of taxes, on senior notes which were issued
in August 2005 and repaid in October 2006 with proceeds from First
Mercury's IPO. Mr. Smith concluded, "With the proceeds from our
IPO, we anticipate continued growth in our annual revenues in
excess of 20 percent for 2007 to result in a return on average
stockholders' equity for 2007 of over 20 percent." Pro Forma Net
Income Reconciliation Three Months Nine Months ended September 30,
ended September 30, ($ in thousands) 2006 2005(2) 2006 2005(2) Net
income $6,925 $5,968 $18,271 $17,884 Interest expense on senior
notes, net of taxes 1,543 754 4,455 754 Pro Forma net income (1)
$8,468 $6,722 $22,726 $18,638 Pro Forma Stockholders' Equity ($ in
thousands) Stockholders' equity at September 30, 2006 $83,453 Net
proceeds from issuance of common stock 173,967 Redemption of
preferred stock (63,567) Repurchase of Glencoe common stock
(24,691) Expenses related to repayment of $65 million of senior
notes (4,728) Pro forma stockholders' equity (3) $164,434
Conference Call Details The company will host a conference call
today at 10:00 a.m. Eastern Time to discuss third quarter results.
The call can be accessed live by dialing 888-802-2225 or by
visiting First Mercury Financial Corporation's website at
http://www.firstmercury.com/ . Investors may access a replay by
dialing 888-203-1112, passcode 1526054, which will be available
through November 16, 2006. The webcast replay will also be archived
in the "Investor Relations" section of the company's website. About
First Mercury Financial Corporation First Mercury Financial
Corporation markets and underwrites specialty commercial insurance
products, focusing on niche and underserved segments where the
company has underwriting expertise and other competitive
advantages. During the company's 33 years of underwriting risks,
First Mercury has established CoverX(R) as a recognized brand among
insurance agents and brokers. As primarily an excess and surplus
(E&S) lines underwriter, First Mercury has developed the
underwriting expertise and cost-efficient infrastructure which has
enabled it to underwrite such risks profitably. Safe Harbor
Statement This release contains forward-looking statements that
relate to future periods and includes statements regarding our
anticipated performance. Generally, the words "anticipates,"
"believes," "expects," "intends," "estimates," "projects," "plans"
and similar expressions identify forward- looking statements. These
forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause our
actual results, performance or achievements or industry results to
differ materially from any future results, performance or
achievements expressed or implied by these forward-looking
statements. These risks, uncertainties and other important factors
include, among others: our ability to maintain or the lowering or
loss of one of our financial or claims-paying ratings; our actual
incurred losses exceeding our loss and loss adjustment expense
reserves; the failure of reinsurers to meet their obligations; our
inability to obtain reinsurance coverage at reasonable prices; the
failure of any loss limitations or exclusions or changes in claims
or coverage; our lack of long-term operating history in certain
specialty classes of insurance; our ability to acquire and retain
additional underwriting expertise and capacity; the concentration
of our insurance business in relatively few specialty classes;
competition risk; fluctuations and uncertainty within the excess
and surplus lines insurance industry; the extensive regulations to
which our business is subject and our failure to comply with these
regulations; our ability to maintain our risk-based capital at
levels required by regulatory authorities; our inability to realize
our investment objectives; and the risks identified in our filings
with the Securities and Exchange Commission, including our
Registration Statement on Form S-1. Given these uncertainties, you
are cautioned not to place undue reliance on these forward-looking
statements. We assume no obligation to update or revise them or
provide reasons why actual results may differ. For more information
on the company, please visit the company's website at
http://www.firstmercury.com/ . FIRST MERCURY FINANCIAL CORPORATION
AND SUBSIDIARIES (4) Condensed Interim Consolidated Statements of
Operations (Unaudited) Successor Successor Predecessor Combined(2)
Three Month August 17 July 1 Three Months Ended to to Ended
September September August 16, September 30, 2006 30, 2005 2005 30,
2005 Operating Revenue Net earned premiums $26,947,350 $12,656,906
$13,219,435 $25,876,341 Commissions and fees 3,715,587 3,167,966
3,308,765 6,476,731 Net investment income 2,445,774 871,326 897,247
1,768,573 Net realized gains (losses) on investments 467,403 16,163
16,881 33,044 Total Operating Revenues 33,576,114 16,712,361
17,442,328 34,154,689 Operating Expenses Losses and loss adjustment
expenses, net 13,224,626 6,537,310 6,827,858 13,365,168
Amortization of deferred acquisition expenses 3,545,679 2,683,362
2,802,622 5,485,984 Underwriting, agency and other expenses
2,492,884 3,405,552 1,171,767 4,577,319 Amortization of intangible
assets 291,667 142,663 149,004 291,667 Total Operating Expenses
19,554,856 12,768,887 10,951,251 23,720,138 Operating Income
14,021,258 3,943,474 6,491,077 10,434,551 Interest Expense
2,840,042 1,367,844 307,373 1,675,217 Change In Fair Value of
Derivative Instruments 336,405 (186,939) (193,791) (380,730) Income
Before Income Taxes 10,844,811 2,762,569 6,377,495 9,140,064 Income
Taxes 3,919,612 1,000,814 2,171,468 3,172,282 Net Income $6,925,199
$1,761,755 $4,206,027 $5,967,782 Earnings Per Share:(5)(6) Basic
$1.42 $0.32 $0.30 Diluted $0.55 $0.15 $0.21 Weighted Average Shares
Outstanding:(5)(6) Basic 4,220,045 4,141,454 12,536,224 Diluted
12,621,422 11,963,540 20,093,596 GAAP Underwriting Ratios: Loss
ratio 49.1% 51.7% 51.7% 51.7% Expense ratio 16.2% 30.1% 18.4% 24.1%
Combined ratio 65.3% 81.8% 70.1% 75.8% Other Data: Annual Return on
average stockholders' equity(7) 35.1% - - 35.7% FIRST MERCURY
FINANCIAL CORPORATION AND SUBSIDIARIES (4) Condensed Interim
Consolidated Statements of Operations (Unaudited) Successor
Successor Predecessor Combined(2) Nine Months August 17 January 1
Nine Months Ended to to Ended September September August 16,
September 30, 2006 30, 2005 2005 30, 2005 Operating Revenue Net
earned premiums $83,804,218 $12,656,906 $57,575,789 $70,232,695
Commissions and fees 12,478,369 3,167,966 13,649,492 16,817,458 Net
investment income 6,716,564 871,326 4,118,590 4,989,916 Net
realized gains (losses) on investments (14,250) 16,163 (57,919)
(41,756) Total Operating Revenues 102,984,901 16,712,361 75,285,952
91,998,313 Operating Expenses Losses and loss adjustment expenses,
net 43,186,133 6,537,310 28,072,054 34,609,364 Amortization of
deferred acquisition expenses 12,637,962 2,683,362 12,675,827
15,359,189 Underwriting, agency and other expenses 9,871,557
3,405,552 7,758,250 11,163,802 Amortization of intangible assets
875,000 142,663 732,337 875,000 Total Operating Expenses 66,570,652
12,768,887 49,238,468 62,007,355 Operating Income 36,414,249
3,943,474 26,047,484 29,990,958 Interest Expense 8,235,513
1,367,844 1,518,649 2,886,493 Change In Fair Value of Derivative
Instruments (50,667) (186,939) (230,291) (417,230) Income Before
Income Taxes 28,229,403 2,762,569 24,759,126 27,521,695 Income
Taxes 9,958,871 1,000,814 8,636,398 9,637,212 Net Income
$18,270,532 $1,761,755 $16,122,728 $17,884,483 Earnings Per
Share:(5)(6) Basic $3.69 $0.32 $1.12 Diluted $1.48 $0.15 $0.80
Weighted Average Shares Outstanding:(5)(6) Basic 4,206,556
4,141,454 12,536,224 Diluted 12,315,035 11,963,540 20,093,596 GAAP
Underwriting ratios: Loss ratio 51.5% 51.7% 48.8% 49.3% Expense
ratio 18.2% 30.1% 19.6% 21.5% Combined ratio 69.7% 81.8% 68.4%
70.8% Other Data: Annual Return on average stockholders' equity (7)
33.0% - - 38.6% FIRST MERCURY FINANCIAL CORPORATION AND
SUBSIDIARIES (4) Condensed Interim Consolidated Balance Sheets
(Unaudited) September 30, December 31, ASSETS 2006 2005 Investments
Debt securities $219,570,997 $182,679,565 Equity securities and
other 3,105,965 3,332,816 Short-term 26,139,947 25,012,499 Total
Investments 248,816,909 211,024,880 Cash and cash equivalents
7,693,227 8,399,598 Premiums and reinsurance balances receivable
14,084,459 17,573,531 Accrued profit sharing commissions 9,593,923
9,606,916 Reinsurance recoverable on paid and unpaid losses
57,251,799 22,482,855 Prepaid reinsurance premiums 49,517,959
36,879,714 Deferred acquisition costs 5,433,712 9,700,457
Intangible assets, net of accumulated amortization 38,272,724
30,645,143 Other assets 12,446,877 19,284,117 Total Assets
$443,111,589 $365,597,211 LIABILITIES AND STOCKHOLDERS' EQUITY Loss
and loss adjustment expense reserves $172,068,573 $113,863,642
Unearned premium reserves 92,216,904 84,476,255 Senior notes
65,000,000 65,000,000 Long-term debt 20,620,000 20,620,000 Other
liabilities 9,753,084 17,310,666 Total Liabilities 359,658,561
301,270,563 Stockholders' Equity:(5) Convertible preferred stock,
Series A voting, $0.01 par value; authorized 400 shares; issued and
outstanding 400 shares 4 4 Common stock, $0.01 par value;
authorized 55,130,000 shares; issued and outstanding 4,484,209 and
4,178,454 shares 44,842 41,785 Paid-in capital 59,610,919
58,857,245 Accumulated other comprehensive loss (587,547)
(1,284,164) Treasury stock (597,500) - Retained earnings 24,982,310
6,711,778 Total Stockholders' Equity 83,453,028 64,326,648 Total
Liabilities and Stockholders' Equity $443,111,589 $365,597,211
Footnotes (1) Pro Forma net income represents net income excluding
the impact of interest expense, net of taxes, on senior notes which
were issued in August 2005 and repaid in October 2006. (2) The
Combined amounts for three months ended September 30, 2005
represent the mathematical addition of the historical results for
(i) the predecessor period from July 1, 2005 through August 16,
2005, and (ii) the successor period from August 17, 2005 through
September 30, 2005. The Combined amounts for the nine months ended
September 30, 2005 represent the mathematical addition of the
historical results for (i) the predecessor period from January 1,
2005 through August 16, 2005, and (ii) the successor period from
August 17, 2005 through September 30, 2005. This approach is not
consistent with generally accepted accounting principles and yields
results that are not comparable on a period-to-period basis.
However, we believe it is the most meaningful way to discuss our
operating results for 2005 when comparing them to our operating
results for 2006. (3) Pro Forma amounts reflect the impact on the
September 30, 2006 Stockholders' Equity as if the IPO which was
completed on October 23, 2006, had been completed as of September
30, 2006. (4) First Mercury Holdings, Inc. was merged into First
Mercury Financial Corporation on October 16, 2006. Reflects amount
applicable to First Mercury Holdings, Inc. and consolidated
subsidiaries at September 30, 2006. (5) Reflects 925 to 1 stock
split that occurred on October 16, 2006 for all periods presented.
(6) Earnings per share and shares outstanding are not provided for
the Combined three months and nine months ended September 30, 2005
due to First Mercury Holdings, Inc.'s purchase and exchange of
shares on August 17, 2005. (7) Annual return on average
stockholders' equity was provided for the 2005 Combined column only
because we do not believe the separate predecessor and successor
stub periods ending August 16 and beginning August 17 are
meaningful. DATASOURCE: First Mercury Financial Corporation
CONTACT: Bill Kindorf, VP - Corporate Development, of First Mercury
Financial, +1-248-358-4010, or , or Analysts- Investors, Leslie
Loyet of Financial Relations Board, +1-312-640-6672, or Web site:
http://www.firstmercury.com/
Copyright
First Mercury Financial Corp (NYSE:FMR)
Historical Stock Chart
From Jun 2024 to Jul 2024
First Mercury Financial Corp (NYSE:FMR)
Historical Stock Chart
From Jul 2023 to Jul 2024