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Penn Millers Reports on First Quarter Results Ended March 31, 2011 and on the Effect of Recent Storm Activity on Second Quarter

^{Published on 2011-05-12 13:15:29 - Market Wire}
 

WILKES-BARRE, Pa.--([ BUSINESS WIRE ])--Penn Millers Holding Corporation (NASDAQ: PMIC) (aPenn Millersa or athe Companya) reported today its financial results for the first quarter ended March 31, 2011. For the three months ended March 31, 2011, Penn Millers reported net income of $1.9 million, or $0.42 per share on a diluted basis, compared to a net loss of $0.2 million, or $0.05 per share on a diluted basis, for the first quarter of 2010. Key highlights for the quarter are:

• Total revenues for the first quarter of 2011 were $19.2 million compared to $19.1 million for the same quarter in 2010. The increase resulted primarily from a higher level of realized investment gains, which were offset by lower investment income and lower net premiums earned.
  • Investment income continues to be impacted by declining investment yields in this low interest rate environment.
  • Net premiums written for the first quarter of 2011 were lower compared to the first quarter of 2010 by $0.4 million due to a $1.0 million decrease in the Commercial Business segment, which resulted from the financial underwriting and pricing actions being taken on the Solutions product. This decrease was partly offset by a $0.6 million increase in the Agribusiness segmenta™s net premiums written.
• The combined ratio for the first quarter of 2011 was 100.2%, compared to 113.6% for the first quarter of 2010.
  • The Companya™s Agribusiness segment was the primary driver behind the improved results with a combined ratio of 81.9% for the quarter, compared to 104.4% for the prior year quarter. The combined ratio for the Commercial Business segment increased from 133.1% in 2010 to 137.6% in 2011.
  • The loss ratios improved in both segments and were primarily driven by favorable development on prior year claims and a lower level of weather related incurred losses. Despite the lower level of weather losses in 2011 compared to 2010, the Commercial Business segment still experienced a relatively high level of catastrophe losses that represented 11 loss ratio points in the current quarter.
• Book value per share increased by $0.23 per share compared to December 31, 2010, and was $21.08 per share at March 31, 2011.
• Shareholdersa™ equity increased from $93.0 million at December 31, 2010 to $94.3 million at March 31, 2011, primarily as a result of the net income for the quarter.

The Company also reported today that the recent storm activity in the month of April will adversely affect its financial results for the second quarter of 2011. The losses resulted from five separate catastrophe events that occurred during the month of April and primarily affected policyholders in the Companya™s Agribusiness segment in the Midwestern and Southeastern United States.

Douglas A. Gaudet, President and Chief Executive Officer, commented on the impact of the storms, aThe devastating storms that swept across the country during April cut a wide swath of destruction and have impacted Penn Millers policyholders in at least 13 states. At this time, our claims teams are working very hard to assist our policyholders and our first priority is to ensure that their businesses continue operating as smoothly as possible. It will take some time to determine reliable estimates of the total losses, but we expect that they will exceed a typical second quarter for us. Over the past five years, we have averaged about 13 loss ratio points from catastrophe losses in the second quarter. At this time, we dona™t expect the losses from these storms to reach the same level as the catastrophe losses we experienced in the second quarter of 2010 when we incurred a catastrophe loss ratio of about 29 percentage points.a

Mr. Gaudet further commented, aPenn Millersa™ share price has increased over 75% since our initial public offering in October of 2009. The board and management are focused on continuing to create value and act in the best interest of our shareholders. We consider these first quarter results a sign of progress towards these long term goals.a

Penn Millers management will host an investor conference call and webcast on May 13, 2011 at 10:00 a.m. Eastern Time to discuss first quarter 2011 results. Registration for the event can be accessed via the Companya™s website at [ www.pennmillers.com ] located under Investor News. The conference call will be available for replay through May 27, 2011 through the Companya™s website, [ www.pennmillers.com ].

The Company provides property and casualty insurance through its wholly owned subsidiary, Penn Millers Insurance Company. Penn Millers Insurance Company provides agribusiness insurance and commercial lines insurance in 33 states. Penn Millers Insurance Company is rated aA-a (Excellent) by A.M. Best Company, Inc. The Company is located at 72 North Franklin Street in Wilkes-Barre, PA. The Companya™s web address is [ http://www.pennmillers.com ].

Some of the statements contained herein are aforward-looking statementsa within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as amay,a awill,a ashould,a aexpect,a aplan,a aintend,a aanticipate,a abelieve,a aestimate,a apredict,a apotentiala or acontinue,a or the negative of these terms or other terminology. Forward-looking statements are based on the opinions and estimates of management at the time the statements are made and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that could affect the Companya™s actual results include, among others, the fact that our loss reserves are based on estimates and may be inadequate to cover our actual losses; the uncertain effects of emerging claim and coverage issues on our business, including the effects of climate change; the geographic concentration of our business; an inability to obtain or collect on our reinsurance protection; a downgrade in the A.M. Best rating of our insurance subsidiaries; the impact of extensive regulation of the insurance industry and legislative and regulatory changes; a failure to realize our investment objectives; the effects of intense competition; the loss of one or more principal employees; the inability to acquire additional capital on favorable terms; a failure of independent insurance brokers to adequately market our products; and the effects of acts of terrorism or war. More information about these and other factors that potentially could affect our financial results is included in our Annual Report on Form 10-K, filed with the SEC and in our other public filings with the SEC. Readers are cautioned not to place undue reliance upon these forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to update any forward-looking statements.

Reconciliation of non-GAAP Measures

The Company uses a non-GAAP financial measure called aoperating income (loss)a which excludes realized investment gains or losses. Management believes this is useful to investors because investment gains and losses could distort the analysis of insurance operating trends. While these measures are utilized by investors to evaluate performance, they are not a substitute for the U.S. GAAP financial measure of anet income (loss).a Therefore, a reconciliation of these non-GAAP financial measures to the U.S. GAAP financial measure of anet income (loss)a is provided below: