SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 28,1999
PENN-AMERICA GROUP, INC.
(Exact name of registration as specified in this charter)
Pennsylvania 0-22316 23-2731409
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(State or other jurisdiction of (Commission File (I.R.S. Employer
incorporation or organization) Number) Identification No.)
420 S. York Road, Hatboro, Pennsylvania 19040
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 443-3600
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Item 5. Other Events
On April 28,1999 the Company issued a press release (the "Press
Release") reporting the earnings of the Company for the first quarter of 1999;
the Company would be shedding the remaining portfolio of minimum limits
non-standard personal automobile business in California; and an increase of
500,000 shares in the stock buy-back program for 1999. The approval was given by
the Board of Directors bringing the total authorized under the program to two
million shares.
A copy of the Press Release is attached as Exhibit 99.01.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired:
Not applicable.
(b) Pro forma financial information:
Not applicable.
(c) Exhibits:
. Penn-America Group's press release dated April 28,1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PENN-AMERICA GROUP, INC.
Date: April 28,1999
BY: /s/ Rosemary Ferrero
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Rosemary Ferrero
(Principal Accounting Officer)
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NEWS
For Release: April 28, 1999
Contact: Financial: Rosemary Ferrero, CPA
Chief Financial Officer
(215) 443-3612
Media: David Kirk, APR
(610) 792-3329
Summary: Penn-America Group, Inc. (NYSE:PNG) reports net operating
earnings of $1.8 million or $0.20 per share(basic and diluted)
for the first quarter of 1999; company to shed remaining
portfolio of minimum limits non-standard personal automobile
business in California; board of directors authorizes buyback
of an additional 500,000 shares.
HATBORO PA (April 28, 1999) -- Penn-America Group, Inc. (NYSE:PNG)
today reported net earnings from operations before net realized gains for the
first quarter of 1999 of $1.8 million or $0.20 per share (basic and diluted)
compared with $2.6 million or $0.26 per share (basic and diluted) for the first
quarter of 1998, a decrease of 29.2 percent.
Net earnings for the first quarter decreased 14.4 percent compared with
the first quarter of 1998 to $2.2 million or $0.24 per share (basic and diluted)
as compared with $2.6 million or $0.26 per share (basic and diluted) in 1998.
Net earnings include net after-tax realized investment gains of $367,000, or
$0.04 per share, for 1999 and net after-tax realized investment losses of
$22,000 for 1998. Investment income decreased 13.1 percent to $2.4 million in
1999, compared with $2.8 million in 1998, primarily due to increased holdings of
tax-exempt municipal bonds.
As of March 31, 1999, Penn-America's insurance business comprised two
distinct markets: commercial lines, which represent approximately 80 percent of
the company's gross written premiums, and minimum limits non-standard personal
automobile insurance for individuals. Today, the company announced that it will
run-off its remaining portfolio of the automobile business, which is
underwritten through a single agent in California. This follows a move earlier
this year to eliminate the rest of the company's portfolio of this business in
six other states.
<PAGE>
Page Two/Penn-America Group (NYSE:PNG) First Quarter 1999 earnings
For the year ended December 31, 1998, the company wrote approximately
$23 million in non-standard personal automobile premiums, compared with
approximately $10 to $11 million of premium the company estimates will be
written during the run-off in 1999. For direct analysis of the impact of the two
types of business on the company, first quarter results are provided below for
each of the two types of business.
Jon S. Saltzman, president and CEO noted, "We're optimistic about the
strength of our commercial lines business which represents the bulk of our
underwritings. The non-standard personal automobile insurance has become a
distraction and no longer fits our business model. We've said repeatedly that we
would leave this business if its profitability did not meet our standards.
Because of what we believe are permanent changes in the marketplace for this
type of insurance, its profitability no longer meets our requirements. We are
doing what we said we would do to make best use of our stockholders' capital."
Commercial Lines
Gross written premiums for commercial lines in the first quarter of
1999 increased 3.2 percent to $17.6 million compared with $17.1 million for the
first quarter of 1998; net written premiums increased 6.6 percent to $16.3
million compared with $15.3 million in 1998.
The statutory combined ratio for commercial lines increased to 95.3
percent compared with 92.6 percent in 1998, primarily due to the expense ratio,
which increased to 34.4 percent compared with 31.6 percent in 1998. The increase
in the expense ratio is attributable primarily to an increase in the commission
the company pays to its commercial agents, from 20 percent to 22 percent. The
loss ratio in commercial lines improved to 60.9 percent in the first quarter of
1999 compared with 61.0 percent in the first quarter of 1998.
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Page Three/Penn-America Group (NYSE:PNG) First Quarter 1999 earnings
Personal Automobile Lines
Gross written premiums for personal automobile lines decreased 40.5
percent in the first quarter of 1999 to $4.5 million compared with $7.5 million
for the same quarter in 1998; net written premiums decreased 40.7 percent to
$4.4 million compared with $7.5 million in 1998. Of the $4.5 million of premiums
written in the first quarter of 1999, $2.4 million was written in California as
compared with $4.3 million written in California in the first quarter of 1998.
The decrease was due largely to actions the company took to limit losses in this
business by cutting-back production.
The statutory combined ratio for personal automobile lines increased to
112.3 percent compared with 99.3 percent in 1998, primarily due to the loss
ratio, which increased to 74.4 percent compared with 64.1 percent in 1998. The
expense ratio in personal automobile lines was 37.9 percent in 1999 and 35.2
percent in 1998. The increase in the expense ratio is attributable primarily to
the 40.5 percent decline in written premiums for non-standard personal
automobile insurance.
Stock Buy-Back Program
The board of directors has authorized today the buy-back of an
additional 500,000 shares of the company's common stock bringing the total
authorized for the buyback program to two million shares. During the first
quarter of 1999, the company repurchased 669,800 shares of Penn-America Group
stock at an average price of $10.91. As of March 31, 1999, the company held
1,212,125 treasury shares at a cost of $13.0 million. Funding for the treasury
stock purchases was provided in part by a $9 million dividend from the company's
insurance subsidiary, Penn-America Insurance Company.
<PAGE>
Page Four/Penn-America Group (NYSE:PNG) First Quarter 1999 earnings
Per Share Amounts
Per share amounts for the quarter ended March 31, 1999 are based on
weighted average shares outstanding of 9,128,579 (basic) and 9,203,562
(diluted). Per share amounts for the quarter ended March 31, 1998 are based on
weighted average share outstanding of 9,895,574 (basic) and 10,008,507
(diluted).
Penn-America Group, Inc. is a specialty niche insurance company which,
through its subsidiaries Penn-America Insurance Company and Penn-Star Insurance
Company, underwrites commercial property, general liability, commercial
multi-peril and commercial automobile insurance. The company has developed a
unique and profitable niche providing small-premium insurance products to small
businesses in small cities and towns in all 50 states through a controlled
network of 56 entrepreneurial general agents.
Saltzman and Rosemary Ferrero, the company's chief financial officer,
will conduct a teleconference for equity analysts and fund managers today at
11:00 a.m. Eastern Daylight Time. To participate, telephone (800) 230-1096 a few
minutes before 11:00 a.m. and request the Penn- America analyst conference. A
digital recording of the teleconference will be available from 5:00 p.m. today
through midnight eastern time, May 1. To hear the recording, telephone (800)
475-6701 at any time during that period and use access code 445345.
Statements made in this press release which are not historical,
including statements regarding 1998 full year and first quarter 1999
performance and expected insurance writings, are forward-looking statements
and as such are subject to a number of risks. Please see the company's 1998
10-K (and other reports filed pursuant to the Securities and Exchange Act of
1934) for additional disclosure regarding potential risk factors.
Note: Tables follow.
<PAGE>
PENN-AMERICA GROUP, INC. AND SUBSIDIARIES (NYSE: PNG)
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data and ratios)
SELECTED BALANCE SHEET DATA At March 31, 1999 At December 31, 1998
- --------------------------- ----------------- --------------------
Investments and Cash $ 175,003 $ 182,866
Total Assets 221,950 230,504
Unpaid Losses and Loss Adjustment
Expenses 88,343 88,937
Unearned Premiums 33,294 34,253
Capitalized Lease Obligations 1,923 2,080
Total Liabilities 128,158 129,874
Total Stockholders' Equity $ 93,792 $ 100,630
Total Shares Outstanding 8,736 9,396
Book Value Per Share $ 10.74 $ 10.71
STATUTORY DATA Three Months Ended Twelve Months Ended
3/31/99 3/31/98 12/31/98
Commercial Lines:
Loss Ratio 60.9% 61.0% 59.0%
Expense Ratio 34.4 31.6 34.1
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Combined Ratio 95.3% 92.6% 93.1%
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Personal Lines:
Loss Ratio 74.4% 64.1% 70.1%
Expense Ratio 37.9 35.2 37.3
---- ---- ----
Combined Ratio 112.3% 99.3% 107.4%
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Total:
Loss Ratio 63.9% 62.0% 62.3%
Expense Ratio 35.2 32.8 35.0
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Combined Ratio 99.1% 94.8% 97.3%
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Statutory Surplus $ 77,739 $ 86,184 $ 85,358
======== ======== ========
GAAP DATA
Commercial Lines:
Loss Ratio 60.9% 61.0% 59.0%
Expense Ratio 34.6 32.6 34.2
---- ---- ----
Combined Ratio 95.5% 93.6% 93.2%
===== ===== =====
Personal Lines:
Loss Ratio 74.4% 64.1% 70.1%
Expense Ratio 39.1 36.2 37.3
---- ---- ----
Combined Ratio 113.5% 100.3% 107.4%
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Total:
Loss Ratio 63.9% 62.0% 62.3%
Expense Ratio 35.5 33.7 35.6
---- ---- ----
Combined Ratio 99.4% 95.7% 97.9%
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<PAGE>
PENN-AMERICA GROUP, INC. AND SUBSIDIARIES (NYSE: PNG)
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Twelve Months
Three Months Ended Ended
3/31/99 3/31/98 12/31/98
Gross Written Premiums $ 22,100 $ 24,571 $ 95,097
Net Written Premiums 20,743 22,766 87,829
REVENUES:
Premiums Earned 21,462 23,035 89,493
Net Investment Income 2,410 2,775 10,763
Net Realized Investment Gains (Losses) 556 (34) 18
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Total Revenues 24,428 25,776 100,274
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LOSSES AND EXPENSES:
Losses and Loss Adjustment
Expenses 13,724 14,291 55,733
Amortization of Deferred
Policy Acquisition Costs 6,153 6,370 25,452
Other Underwriting Expenses 1,453 1,394 6,389
Interest Expense 36 44 177
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Total Losses and Expenses 21,366 22,099 87,751
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Earnings Before Income Tax 3,062 3,677 12,523
Income Tax 853 1,097 3,642
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NET EARNINGS $ 2,209 $ 2,580 $ 8,881
========= ======== =========
PER SHARE DATA:
Basic Per Share:
Operating Earnings $ 0.20 $ 0.26 $ 0.91
Net Realized Gains $ 0.04 $ 0.00 $ 0.00
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Net Earnings $ 0.24 $ 0.26 $ 0.91
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Weighted Average Shares Outstanding 9,129 9,896 9,766
====== ====== =====
Diluted Per Share:
Operating Earnings $ 0.20 $ 0.26 $ 0.90
Net Realized Gains $ 0.04 $ 0.00 $ 0.00
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Net Earnings $ 0.24 $ 0.26 $ 0.90
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Weighted Average Shares Outstanding 9,204 10,009 9,873
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