Net income increases 74% and net premiums written increase 4.2% over the comparable year-earlier results FARMINGTON, Conn., Aug. 8
FARMINGTON, Conn., Aug. 8 /PRNewswire-FirstCall/ -- Darwin Professional
Underwriters, Inc. ("Darwin," the "Company," or "Our") (NYSE: DR) today
announced its financial results for the second quarter ended June 30, 2008.
Highlights include:
(Logo: http://www.newscom.com/cgi-bin/prnh/20060829/NETU014LOGO )
-- Gross premiums written for the second quarter are $64.0 million.
Second quarter gross premiums written are 2.9% below our gross premiums for
the same period a year ago. Net premiums written for the quarter of $51.1
million are up 4.2% over the second quarter of 2007.
-- Net income of $13.5 million for the quarter ended June 30, 2008
represents a 73.7% increase over the $7.8 million for the quarter ended June
30, 2007.
-- Overall, the combined ratio is 67.9% for the second quarter 2008, which
compares favorably to the second quarter 2007 combined ratio of 82.7%. The
combined ratio excludes certain aspects of the Company's long-term incentive
plan which is included in other expenses. The improvement in the Company's
results is primarily driven by a decrease in the loss ratio (16.9% improvement
to 37.6%). The second quarter results include approximately $13.2 million
($8.6 million, net of tax) in favorable loss reserve development and the
corresponding ceded premiums, net of incentive compensation and profit sharing
expenses stemming from the favorable development of the 2003 through 2007
accident years.
-- Earnings per diluted share for the three months ended June 30, 2008 are
$0.79 compared to $0.45 per share for the same period in 2007.
-- Annualized return on average equity is 21.3% for the quarter ended June
30, 2008, while shareholders' equity grew $23.8 million, or 9.4% for the six
months ended June 30, 2008, from $254.2 million at December 31, 2007 to $278.0
million at June 30, 2008. Book value per share grew 9.4% to $16.33 at June 30,
2008 from $14.93 at December 31, 2007.
Stephen Sills, Darwin's Chief Executive Officer commented, "Darwin
recorded a significant increase in net income in the current quarter as
compared to the second quarter of 2007, and we demonstrated our commitment to
underwriting profitability with a second-quarter combined ratio of 67.9
percent. We are gratified that we have built an organization that has
delivered strong earnings and solid returns for our shareholders. We are
pleased that this quarter, perhaps one of our last as a stand-alone public
company, continues this trend. As Darwin becomes part of the Allied World
family, I believe that the franchise we have built, the people who have helped
us build it, and the business relationships we have forged will enable
continued success as part of the new combined organization."
Jack Sennott, Darwin's Executive Vice President, added, "We are focused on
completing the remaining items needed to close the merger with Allied World,
and we look forward to a successful integration in what we see as a very
complementary merger of capabilities. With significant expertise across all of
our lines, we believe we're well positioned to take advantage of the continued
opportunities we see in specialty insurance. We have cleared one regulatory
hurdle related to the merger already. On July 21st, the Federal Trade
Commission granted early termination of the Hart-Scott-Rodino Act's pre-merger
waiting period."
Important Information
Certain matters discussed in this release are forward-looking statements.
Such statements involve risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements.
Potential risks and uncertainties include the accuracy of assumptions
underlying the Company's outlook and other risks described in the Company's
filings with the Securities and Exchange Commission ("SEC"), including the
Company's Annual Report on Form 10-K for 2007 and Form 10-Q for second quarter
2008. These forward-looking statements represent the Company's judgment as of
the date of this release. The Company disclaims any intent or obligation to
update these forward-looking statements.
Additional Information
In connection with the proposed merger with Allied World Assurance Company
Holdings, Ltd, Darwin will file a proxy statement with the SEC. Investors are
urged to read the proxy statement when it becomes available because it will
contain important information. Darwin's stockholders and other interested
parties will be able to obtain the proxy statement, as well as other filings
containing information about Darwin (when they become available), free of
charge, at the website maintained by the SEC at http://www.sec.gov. Copies of
the proxy statement and other filings made by Darwin with the SEC can also be
obtained, free of charge, by visiting Darwin's website at
http://www.darwinpro.com.
Participants in the Solicitation
The directors and executive officers of Darwin may be deemed to be
participants in the solicitation of proxies in respect of the proposed merger.
Information regarding Darwin's directors and executive officers is available
in Darwin's proxy statement for its 2008 Annual Meeting filed with the SEC on
April 7, 2008. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy statement and
other relevant materials to be filed with the SEC regarding the merger when
they become available. Investors should read the proxy statement carefully
when it becomes available before making any voting or investment decisions.
About Darwin Professional Underwriters, Inc.
Darwin is a specialty insurance group based in Farmington, Connecticut.
The Company is focused on the specialty liability insurance market and
underwrites D&O liability insurance for public and private companies, E&O
liability insurance, medical malpractice liability insurance, and other
specialty coverages. Darwin member companies include Darwin Professional
Underwriters, Inc., Darwin National Assurance Company ("DNA"), and Darwin
Select Insurance Company ("Darwin Select"). DNA and Darwin Select have earned
a financial strength rating of "A- (Excellent)" from A.M. Best Company. Darwin
is traded on the New York Stock Exchange under the ticker symbol, "DR." For
more information about Darwin, visit http://www.darwinpro.com.
Additional information concerning Darwin, its finances, and business
operations can be found in the Quarterly Report on Form 10-Q for the quarter
ended June 30, 2008 which will be filed with the SEC.
Darwin Professional Underwriters, Inc. and Subsidiaries
Selected Consolidated Statements of Operations Data
Three and Six Months Ended June 30, 2008 and June 30, 2007
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30,June 30,
2008200720082007
Gross premiums written$63,994 $65,882$144,037$140,160
Net premiums written $51,113 $49,032$109,127 $97,974
Revenues:
Net premiums earned $54,928 $46,378$106,911 $86,375
Net investment income 5,930 5,441 11,999 10,680
Other income 1,294 - 2,889 17
Net realized investment
losses (614) 17(614)-
Total revenues 61,538 51,836 121,185 97,072
Costs and expenses:
Losses and loss adjustment
expenses 20,653 25,253 40,617 50,723
Commissions and brokerage
expenses 5,992 6,329 12,438 11,509
Other underwriting,
acquisition and operating
expenses 10,638 6,760 17,838 13,245
Other expenses 4,817 2,237 9,816 2,814
Interest expense 69 - 138 -
Total costs and expenses42,169 40,579 80,847 78,291
Earnings before income taxes 19,369 11,257 40,338 18,781
Income tax expense 5,906 3,505 12,015 5,809
Net earnings $13,463 $7,752 $28,323 $12,972
Basic earnings per share:
Net earnings per share $0.80 $0.48 $1.68 $0.80
Weighted average shares
outstanding 16,892,327 16,133,472 16,892,092 16,130,177
Diluted earnings per share:
Net earnings per share $0.79 $0.45 $1.66 $0.76
Weighted average shares
outstanding 17,070,697 17,064,606 17,078,570 17,076,716
Combined ratio:
Loss ratio 37.6% 54.5% 38.0% 58.7%
Expense ratio 30.3% 28.2% 28.3% 28.7%
Combined ratio(1)67.9% 82.7% 66.3% 87.4%
See accompanying notes to Condensed Consolidated Financial Statements.
Darwin Professional Underwriters, Inc. and Subsidiaries
Selected Consolidated Balance Sheets Data
June 30, 2008 and December 31, 2007
(Unaudited)
(Dollars in thousands, except per share amounts)
June 30, December 31,
2008 2007
ASSETS:
Available-for-sale securities, at fair value:
Equity securities (cost: 2008, $7,413; 2007,
$4,000) $7,067$3,680
Fixed maturity securities (amortized
cost: 2008, $566,811; 2007, $439,748)565,429 445,661
Short-term investments, at cost which
approximates fair value 47,784 107,597
Total investments 620,280 556,938
Cash 6,440 7,469
Premiums receivable (net of allowance for
doubtful accounts of $75 as of June 30, 2008
and December 31, 2007) 27,16930,986
Reinsurance recoverable on paid and unpaid
losses148,635 136,370
Ceded unearned reinsurance premiums 44,17443,244
Deferred insurance acquisition costs13,94913,814
Property and equipment at cost, less
accumulated depreciation1,981 1,783
Goodwill and intangible assets 12,448 7,455
Net deferred income tax asset 18,84413,546
Current income taxes receivable 1,808 -
Other assets16,49315,530
Total assets $912,221 $827,135
LIABILITIES AND STOCKHOLDERS' EQUITY:
Loss and loss adjustment expense reserves $426,136 $387,865
Unearned premium reserves 144,270 141,126
Reinsurance payable 24,32020,999
Due to brokers for unsettled trades 8,771 -
Debt 5,000 5,000
Income taxes payable - 1,155
Accrued expenses and other liabilities 25,76316,817
al liabilities 634,260 572,962
Stockholders' equity:
Common stock; $0.01 par value; authorized
50,000,000 shares; issued and outstanding
17,017,881 shares at June 30, 2008 and
17,025,501 shares at December 31, 2007170 170
Additional paid-in capital 204,802 204,583
Retained earnings 74,11245,790
Accumulated other comprehensive income (loss) (1,123)3,630
Total stockholders' equity 277,961 254,173
Total liabilities and stockholders'
equity$912,221 $827,135
Book value per common share:
Book value per common share $16.33$14.93
Tangible book value per common
share $15.60$14.49
Net income return on average equity(2) 21.3% 13.7%
(1) Excludes other expenses which primarily consist of the company's
long-term incentive plan.
(2) Return on average equity for first six months is annualized.
SOURCE Darwin Professional Underwriters, Inc.
