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Integon Corporation
Winston-Salem, NC 27152
Analysts' Contact:
Gay Huntsman (910) 770-3074
Media Contact:
Turner Coley (910) 760-3000
Integon Corporation Announces Third Quarter 1996 Results
WINSTON-SALEM, NC, October 24, 1996--Integon Corporation (NYSE:IN) announced
today results for the third quarter ended September 30, 1996. The Company
reported the preliminary financial impact of Hurricanes Fran and Bertha on
September 19, 1996.
<TABLE>
<CAPTION>
Financial Summary Table
(In Thousands Except Per Share Data)
(Unaudited)
<S> <C> <C>
Three Months Ended
9/30/96 9/30/95
-------- --------
Net Premiums Written $214,369 $163,564
Total Revenues 205,121 162,599
Operating Earnings 4,130 7,800
Net Realized Investment Gains 741 2,110
Net Income 4,871 9,910
Earnings Per Share (fully diluted)
Operating Earnings .17 .40
Net Realized Investment Gains .05 .11
Net Income .22 .51
Weighted Average Shares Outstanding 15,880 19,477
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Integon Corporation
Commenting on the Company's performance, Integon's President and Chief
Executive Officer James T. Lambie said, "We are disappointed with the quarter's
financial results. Without the impact of Hurricanes Fran and Bertha, operating
earnings would have been 31 cents per share for the quarter, 23 percent lower
than the 40 cents per share reported in third quarter 1995. The GAAP combined
ratio would have been 96.9 percent which is higher than our stated objective of
operating below 96.0 percent. We have several significant markets that have
contributed to the decline in earnings. In these markets, we have recently taken
rate increases and are continuing to aggressively manage agencies to terminate
relationships that are unprofitable."
Mr. Lambie continued, "The expense ratio was up slightly in the third
quarter to 21.9 percent from 21.6 percent in the third quarter of 1995. We don't
expect expense ratio improvement in the near term, as we increase our investment
in technology to enable us to rapidly implement our systems strategies. This
increased investment in technology will, we believe, lead to longer-term savings
that will ultimately reduce the expense ratio, make it easier for agents to do
business with us and enhance customer service.
"Even though we have had a disappointing quarter, we are still
confident we can achieve our long-term goals of net premiums written growth of
20 percent and a combined ratio below 96 percent. However, we will at times
experience quarterly fluctuations," Mr. Lambie said. This quarter is the first
out of the last seven consecutive quarters that the combined ratio has exceeded
96.0 percent after adjustment for catastrophes.
"Net premiums written in the third quarter grew 31 percent compared to
the same quarter in 1995. Although we have taken significant rate action during
1996, the growth has not slowed. We will be reducing the number of new states we
plan to enter through 1997 in order to concentrate on further profitable
penetration of existing markets. That action, coupled with the recent rate
action and continued aggressive agency management mentioned earlier, should put
earnings back on track and also bring the premium growth rate closer to our
targeted 20 percent level," Mr. Lambie stated.
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Integon Corporation
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For the nine months ended September 30, 1996, operating earnings
totaled $15.0 million, compared to $22.1 million for the first nine months of
1995. Operating earnings per share for the period were 68 cents, compared to
$1.13 for the 1995 period. Net income for the period was $16.6 million, compared
to $23.5 million in 1995. There were after-tax net realized investment gains of
$1.5 million for the nine months ended September 30, 1996, compared to gains of
$4.0 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 nine months ended September 30, 1996 totaled $575.2
million, compared to $457.5 million a year ago. Net premiums written were $606.4
million for the first nine months of 1996 and $458.1 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 28 states.
Please note that statements in this press release concerning future
profit levels and premium growth 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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Page 4, 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 Nine Months Ended
---------------------- ----------------------
9/30/96 9/30/95 Change 9/30/96 9/30/95 Change
--------- --------- --------- --------- --------- ---------
Direct premiums written $ 249,575 $ 204,794 21.9% $ 708,501 $ 602,874 17.5%
========= ========= ========= =========
Net premiums written $ 214,369 $ 163,564 31.1% $ 606,442 $ 458,126 32.4%
Change in unearned premium (22,579) (17,027) -32.6% (69,597) (44,981) -54.7%
--------- --------- --------- ---------
Premiums earned 191,790 146,537 30.9% 536,845 413,145 29.9%
Net investment income 8,026 7,657 4.8% 23,637 22,419 5.4%
Net realized investment gains 1,140 3,248 -64.9% 2,360 6,171 -61.8%
Other income 4,165 5,157 -19.2% 12,375 15,720 -21.3%
--------- --------- --------- ---------
TOTAL REVENUES 205,121 162,599 26.2% 575,217 457,455 25.7%
--------- --------- --------- ---------
Loss and loss adjustment expenses 147,249 107,820 36.6% 411,839 301,796 36.5%
Policy acquisition and other underwriting expenses 41,977 31,608 32.8% 114,042 91,038 25.3%
Other expenses 4,311 4,088 5.5% 11,682 13,472 -13.3%
Amortization of goodwill 769 775 -0.8% 2,308 2,322 -0.6%
Interest expense 3,732 3,593 3.9% 11,087 10,917 1.6%
--------- --------- --------- ---------
TOTAL EXPENSES 198,038 147,884 33.9% 550,958 419,545 31.3%
--------- --------- --------- ---------
INCOME FROM OPERATIONS BEFORE FEDERAL INCOME
TAXES AND EXTRAORDINARY ITEMS 7,083 14,715 -51.9% 24,259 37,910 -36.0%
Federal income taxes 2,212 4,805 -54.0% 7,706 11,836 -34.9%
--------- --------- --------- ---------
Income from operations before extraordinary items 4,871 9,910 -50.8% 16,553 26,074 -36.5%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (2,624) 100.0%
--------- --------- --------- ---------
NET INCOME 4,871 9,910 -50.8% 16,553 23,450 -29.4%
Preferred dividends 1,393 1,393 0.0% 4,178 4,178 0.0%
--------- --------- --------- ---------
Net income available to common stockholders $ 3,478 $ 8,517 -59.2% $ 12,375 $ 19,272 -35.8%
========= ========= ========= =========
Operating earnings $ 4,130 $ 7,800 -47.1% $ 15,019 $ 22,064 -31.9%
Net realized investment gains (net of taxes) 741 2,110 -64.9% 1,534 4,010 -61.7%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (2,624) 100.0%
--------- --------- --------- ---------
Net income $ 4,871 $ 9,910 -50.8% $ 16,553 $ 23,450 -29.4%
========= ========= ========= =========
PER SHARE:
Primary
Operating earnings $ 0.17 $ 0.41 -58.5% $ 0.68 $ 1.14 -40.4%
Net realized investment gains (net of taxes) 0.05 0.14 -64.3% 0.10 0.26 -61.5%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (0.17) 100.0%
--------- --------- --------- ---------
Net income $ 0.22 $ 0.55 -60.0% $ 0.78 $ 1.23 -36.6%
========= ========= ========= =========
Fully diluted
Operating earnings $ 0.17 $ 0.40 -57.5% $ 0.68 $ 1.13 -39.8%
Net realized investment gains (net of taxes) 0.05 0.11 -54.5% 0.10 0.20 -50.0%
Extraordinary items (net of taxes) (1) -- -- 0.0% -- (0.13) 100.0%
--------- --------- --------- ---------
Net income $ 0.22 $ 0.51 -56.9% $ 0.78 $ 1.20 -35.0%
========= ========= ========= =========
Weighted average shares outstanding
Primary 15,880 15,705 15,869 15,700
========= ========= ========= =========
Fully diluted 15,880 19,477 15,869 19,473
========= ========= ========= =========
(1) Litigation Setlement--- pretax $ -- $ -- $ ($ 3,800)
Reduction of Other Obligation - Affiliate - pretax -- -- -- 900
--------- --------- --------- ---------
$ -- $ -- $ -- ($ 2,900)
========= ========= ========= =========
</TABLE>
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Integon Corporation
October 24, 1996
<TABLE>
<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
BALANCE SHEETS
(In Thousands, Except Per Share Data)
(Unaudited)
<S> <C> <C>
9/30/96 12/31/95
---------- ----------
ASSETS
Fixed maturities available for sale
(amortized cost: $502,593 and $469,219) $ 497,942 $ 481,944
Other long-term investments 2,633 2,114
Cash and short-term investments 50,678 21,046
Reinsurance receivable 186,699 199,826
Premiums due and uncollected 259,274 199,087
Prepaid reinsurance premiums 53,085 56,726
Accounts and notes receivable 32,273 28,277
Accrued investment income 8,311 7,683
Deferred policy acquisition costs 59,292 46,413
Property and equipment 67,642 65,247
Goodwill 107,721 110,976
Deferred loan costs 1,925 2,195
Deferred income taxes 20,024 12,934
Other 6,091 7,211
=========== ===========
Total assets $ 1,353,590 $ 1,241,679
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Unearned premiums $ 371,868 $ 305,911
Loss and LAE payable 444,191 416,740
Accrued expenses and other liabilities 120,571 117,374
Short-term debt 34,000 16,000
Notes payable 150,751 150,807
----------- -----------
Total liabilities 1,121,381 1,006,832
----------- -----------
STOCKHOLDERS' EQUITY
Convertible preferred stock 14 14
Common stock 173 173
Additional paid-in capital 147,802 147,296
Net unrealized appreciation (depreciation) of securities (2,985) 8,288
Retained earnings 125,026 116,897
Treasury stock (37,821) (37,821)
----------- -----------
Total stockholders' equity 232,209 234,847
----------- -----------
Total liabilities and stockholders' equity $ 1,353,590 $ 1,241,679
=========== ===========
Book value per share $ 10.40 10.58
Common shares outstanding 15,733 15,705
</TABLE>
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Integon Corporation
October 24, 1996
<TABLE>
<CAPTION>
INTEGON CORPORATION AND SUBSIDIARIES
STATISTICAL SUPPLEMENT
(In Thousands, Except Ratios)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
---------------------- ----------------------
9/30/96 9/30/95 Change 9/30/96 9/30/95 Change
--------- --------- --------- --------- --------- ---------
NET PREMIUMS WRITTEN
Nonstandard automobile $194,473 $150,419 29.3% $ 550,134 $ 420,095 31.0%
Specialty automobile 13,515 5,964 126.6% 36,999 18,492 100.1%
Preferred automobile 6,376 6,354 0.3% 18,967 18,445 2.8%
Other 5 827 -99.4% 342 1,094 -68.7%
Total $214,369 $163,564 31.1% $ 606,442 $ 458,126 32.4%
GAAP
Loss ratio 76.8% 73.6% 3.pts. 76.7% 73.1% 3.6%
Expense ratio 21.9% 21.6% 0.pts. 21.2% 22.0% -0.8%
Combined ratio 98.7% 95.2% 3.pts. 97.9% 95.1% 2.8%
STATUTORY (1)
Loss ratio 76.7% 73.5% 3.pts. 75.9% 72.9% 3.0%
Expense ratio 21.5% 20.9% 0.pts. 21.5% 21.6% -0.1%
Combined ratio 98.2% 94.4% 3.pts. 97.4% 94.5% 2.9%
</TABLE>
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(1) The statutory combined ratio for the nine months ended September 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
0.9% points and an increase in the expense ratio of 0.7% points.
