Integon Corporation
Winston-Salem, NC 27152
Analysts' Contact:
Gay Huntsman (910) 770-3074
Media Contact:
Turner Coley (910) 760-3000
Integon Corporation Announces Second Quarter 1996 Results
WINSTON-SALEM, NC, JULY 25, 1996 -- Integon Corporation (NYSE:IN) announced
today results for the second quarter ended June 30, 1996. The Company's GAAP
combined ratio was 94.9 percent for the quarter, which produced operating
earnings per share of 45 cents, an increase of 18.4 percent over the same
quarter in 1995. Also, net premiums written increased 29.0 percent during the
quarter.
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<CAPTION>
Financial Summary Table
(In Thousands Except Per Share Data)
(Unaudited)
<S> <C> <C>
Three Months Ended
6/30/96 6/30/95
Net Premiums Written $ 197,811 $ 153,387
Total Revenues 191,276 152,201
Operating Earnings 8,854 7,525
Net Realized Investment Gains (Losses) (557) 1,595
Net Income 8,297 9,120
Earnings Per Share (fully diluted)
Operating Earnings .45 .38
Net Realized Investment Gains (Losses) (.03) .08
Net Income .42 .46
Weighted Average Shares Outstanding 19,654 19,473
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Integon Corporation
Commenting on the Company's performance, Integon's President and Chief
Executive Officer James T. Lambie said, "The second quarter was a very good
quarter for Integon with a GAAP combined ratio of 94.9 percent, which is
slightly lower than the 95.0 percent combined ratio of the second quarter 1995
and markedly lower than the 100.4 percent of the first quarter of 1996." As
previously reported, extreme weather conditions in many of Integon's markets
during January and February 1996 had a significant negative impact on first
quarter performance. Integon has established a long-term goal of maintaining the
combined ratio below 96 percent.
The 29 percent growth in net premiums written during the second quarter
reflects increased writings in substantially all markets in which Integon sells
nonstandard auto insurance. Additionally, premiums from the sale of specialty
automobile insurance, which includes business auto and motorcycle products,
increased 79.6 percent to $12.5 million during the quarter.
"Our strategy is growth at a pace that we can manage profitably. We
continue to increase market share in existing profitable markets while entering
new markets where we expect to be profitable within two years. In July, we
entered Wisconsin's nonstandard auto insurance market, and expect to be doing
business in Oregon in August, expanding our market to 28 states which comprise
approximately 74 percent of the U.S. nonstandard auto market. We monitor our
markets to ensure adequate levels of profitability while working toward a
long-term growth goal of net premiums written in the 20 percent range. Continued
investment in automation and technology and emphasis on top-quality claims
service through in-house adjusters should enable Integon to continue to gain
market share in this highly attractive market while operating at a combined
ratio in the mid-90's," Mr. Lambie said.
For the six months ended June 30, 1996, operating earnings totaled
$10.9 million, compared to $14.3 million for the first half of 1995. Operating
earnings per share for the period were 51 cents, compared to 73 cents for the
1995 period. Net income for the
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Integon Corporation
period was $11.7 million, compared to $13.5 million in 1995. There were net
realized investment gains of $793,000 for the six months ended June 30, 1996,
compared to a gain of $1.9 million in the 1995 period. Additionally, an
extraordinary loss of $2.6 million, primarily due to the settlement of
litigation, is reflected in the 1995 year-to-date results.
Revenues for the 1996 six-month period totaled $370.1 million, compared
to $294.9 million a year ago. Net premiums written were $392.1 million for the
first six months of 1996 and $294.6 million for the same period in 1995.
Integon Corporation, through its wholly owned property and casualty
insurance subsidiaries, specializes in the underwriting and marketing of
nonstandard and other specialty automobile insurance products to individuals.
The Company, headquartered in Winston-Salem, North Carolina, markets its
products through more than 12,500 independent agencies in 27 states.
Please note that statements in this press release concerning future
profit levels, market share, and combined ratio look forward in time and involve
risks and uncertainties that may affect the Company's actual results of
operations. The following important factors, among others, could cause actual
results to differ materially from those set forth in the forward looking
statements: claims frequency, claims severity, severe adverse weather
conditions, the cost of automobile repair, economic activity, competitive
pricing, and the regulatory environment in which the Company operates.
Financial tables follow.
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Integon Corporation
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<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended
--------------------- -------------------
6/30/96 6/30/95 Change 6/30/96 6/30/95 Change
--------- --------- --------- --------- ------- -------
Direct premiums written $ 229,262 $ 198,750 15.4% $ 458,926 $ 398,080 15.3%
========= ========= ========= =========
Net premiums written $ 197,811 $ 153,387 29.0% $ 392,073 $ 294,562 33.1%
Change in unearned premium (17,571) (16,321) -7.7% (47,018) (27,954) -68.2%
--------- --------- --------- ---------
Premiums earned 180,240 137,066 31.5% 345,055 266,608 29.4%
Net investment income 7,858 7,362 6.7% 15,611 14,762 5.8%
Net realized investment gains (losses) (857) 2,453 -134.9% 1,220 2,923 -58.3%
Other income 4,035 5,320 -24.2% 8,210 10,563 -22.3%
--------- --------- --------- ---------
TOTAL REVENUES 191,276 152,201 25.7% 370,096 294,856 25.5%
--------- --------- --------- ---------
Loss and loss adjustment expenses 134,032 99,847 34.2% 264,590 193,976 36.4%
Policy acquisition and other underwriting expenses 37,094 30,446 21.8% 72,065 59,430 21.3%
Other expenses 3,322 3,854 -13.8% 7,371 9,384 -21.5%
Amortization of goodwill 770 776 -0.8% 1,539 1,547 -0.5%
Interest expense 3,724 3,757 -0.9% 7,355 7,324 0.4%
--------- --------- --------- ---------
TOTAL EXPENSES 178,942 138,680 29.0% 352,920 271,661 29.9%
--------- --------- --------- ---------
INCOME FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND EXTRAORDINARY ITEMS 12,334 13,521 -8.8% 17,176 23,195 -25.9%
Federal income taxes 4,037 4,401 -8.3% 5,494 7,031 -21.9%
--------- --------- --------- ---------
Income from operations before extraordinary items 8,297 9,120 -9.0% 11,682 16,164 -27.7%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (2,624) 100.0%
--------- --------- --------- ---------
NET INCOME 8,297 9,120 -9.0% 11,682 13,540 -13.7%
Preferred dividends 1,392 1,392 0.0% 2,785 2,785 0.0%
--------- --------- --------- ---------
Net income available to common stockholders $ 6,905 $ 7,728 -10.6% $ 8,897 $ 10,755 -17.3%
========= ========= ========= =========
Operating earnings $ 8,854 $ 7,525 17.7% $ 10,889 $ 14,264 -23.7%
Net realized investment gains (losses) (net of taxes) (557) 1,595 -134.9% 793 1,900 -58.3%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (2,624) 100.0%
--------- --------- --------- ---------
Net income $ 8,297 $ 9,120 -9.0% $ 11,682 $ 13,540 -13.7%
========= ========= ========= =========
PER SHARE:
Primary
Operating earnings $ 0.47 $ 0.39 20.5% $ 0.51 $ 0.73 -30.1%
Net realized investment gains (losses) (net of taxes) (0.03) 0.10 -130.0% 0.05 0.12 -58.3%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (0.17) 100.0%
--------- --------- --------- ---------
Net income $ 0.44 $ 0.49 -10.2% $ 0.56 $ 0.68 -17.6%
========= ========= ========= =========
Fully diluted
Operating earnings $ 0.45 $ 0.38 18.4% $ 0.51 $ 0.73 -30.1%
Net realized investment gains (losses) (net of taxes) (0.03) 0.08 -137.5% 0.05 0.09 -44.4%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (0.13) 100.0%
--------- --------- --------- ---------
Net income $ 0.42 $ 0.46 -8.7% $ 0.56 $ 0.69 -18.8%
========= ========= ========= =========
Weighted average shares outstanding
Primary 15,815 15,700 15,863 15,698
========= ========= ========= =========
Fully diluted 19,654 19,473 15,863 19,471
========= ========= ========= =========
(1) Litigation Settlement - pretax $ -- -- $ -- $ ($3,800)
Reduction of Other Obligation - Affiliate - pretax -- -- -- 900
--------- --------- --------- ---------
$ -- -- $ -- $2,900)
========= ========= ========= =========
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Integon Corporation
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<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(In Thousands, Except Per Share Data)
(Unaudited)
<S> <C> <C>
6/30/96 12/31/95
ASSETS --------- ---------
Fixed maturities available for sale
(amortized cost: $489,815 and $469,219) $ 483,583 $ 481,944
Other long-term investments 2,582 2,114
Cash and short-term investments 37,806 21,046
Reinsurance receivable 183,835 199,826
Premiums due and uncollected 236,310 199,087
Prepaid reinsurance premiums 53,049 56,726
Accounts and notes receivable 30,495 28,277
Accrued investment income 7,482 7,683
Deferred policy acquisition costs 55,109 46,413
Property and equipment 66,199 65,247
Goodwill 109,266 110,976
Deferred loan costs 2,001 2,195
Deferred income taxes 19,557 12,934
Other 9,012 7,211
=========== ===========
Total assets $ 1,296,286 $ 1,241,679
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Unearned premiums $ 349,252 $ 305,911
Loss and LAE payable 429,057 416,740
Accrued expenses and other liabilities 117,216 117,374
Short-term debt 21,000 16,000
Notes payable 150,743 150,807
----------- -----------
Total liabilities 1,067,268 1,006,832
----------- -----------
STOCKHOLDERS' EQUITY
Convertible preferred stock 14 14
Common stock 173 173
Additional paid-in capital 147,744 147,296
Net unrealized appreciation (depreciation) of securities (4,055) 8,288
Retained earnings 122,963 116,897
Treasury stock (37,821) (37,821)
----------- -----------
Total stockholders' equity 229,018 234,847
----------- -----------
Total liabilities and stockholders' equity $ 1,296,286 $ 1,241,679
=========== ===========
Book value per share $ 10.19 $ 10.58
Common shares outstanding 15,732 15,705
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Integon Corporation
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<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
STATISTICAL SUPPLEMENT
(In Thousands, Except Ratios)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Six Months Ended
---------------------- ---------- ---------------------- ---------
6/30/96 6/30/95 Change 6/30/96 6/30/95 Change
-------- -------- ---------- ---------- ---------- ---------
NET PREMIUMS WRITTEN
Nonstandard automobile $178,855 $140,533 27.3% $ 355,661 $ 269,676 31.9%
Preferred automobile 6,123 5,863 4.4% 12,591 12,091 4.1%
Specialty automobile 12,496 6,958 79.6% 23,484 12,528 87.5%
Other 337 33 921.2% 337 267 26.2%
---------- ---------- ---------- ----------
Total $197,811 $153,387 29.0% $ 392,073 $ 294,562 33.1%
========== ========== ========== ==========
GAAP
Loss ratio 74.3% 72.8% 1.5% pts. 76.7 72.8 3.9%
Expense ratio 20.6% 22.2% -1.6% pts. 20.9 22.3 -1.4%
---------- ---------- ---------- ----------
Combined ratio 94.9% 95.0% -0.1% pts. 97.6 95.1 2.5%
========== ========== ========== ==========
STATUTORY (1)
Loss ratio 74.3% 73.0% 1.3% pts. 75.5 72.5 3.0%
Expense ratio 20.1% 21.9% -1.8% pts. 21.5 22.0 -0.5%
---------- ---------- ---------- ----------
Combined ratio 94.4% 94.9% -0.5% pts. 97.0 94.5 2.5%
========== ========== ========== ==========
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(1) The statutory combined ratio for the six months ended June 30, 1996 reflects
the cumulative effect of a change in statutory accounting method that reclassed
the deferral of a ceding expense allowance from loss reserves to other
liabilities in the first quarter. The year-to-date impact is a reduction in the
loss ratio of 1.3% points and an increase in the expense ratio of 1.1% points.
