Castlepoint Holdings Ltd (MM) (NASDAQ:CPHL)
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From Jun 2019 to Jun 2024
CastlePoint Holdings, Ltd. (NASDAQ:CPHL) today reported net income of
$10.3 million and basic and diluted earnings per share of $0.27 for the
second quarter of 2008. Operating earnings for the second quarter of
2008 were $13.2 million and $0.35 per share(a).
Key Operating Highlights (all percentage increases compare the second
quarter results to the same period in 2007):
Operating income and operating earnings per share on a diluted basis
increased by 25.5% and 29.6%, respectively, during the second quarter.
Operating return on average equity for the second quarter was 12.6%.
Net premiums written for the quarter were $128.1 million, an increase
of 59.1% from the prior year period.
The combined ratio for our reinsurance and insurance segments combined
was 91.3% for the quarter.
(a)Note on Non-GAAP Financial Measures: Operating income
excludes net realized gains (losses) and unrealized gains (losses)
included in net investment income. Operating income, operating earnings
per share, and operating return on average equity are common performance
measurements for property and casualty insurance companies. We believe
this presentation enhances the understanding of our results of
operations by highlighting the underlying profitability of our insurance
business. Additionally, these are key internal management performance
measures.
Three Months
Three Months
Six Months
Six Months
Ended June
Ended June
Ended June
Ended June
30, 2008
30, 2007
30, 2008
30, 2007
($ in thousands, except per share data)
Net premiums written
128,073
80,512
246,163
152,406
Net premiums earned
110,815
54,940
211,219
101,536
Net investment income:
Net investment income excl Partnership
8,778
8,088
16,914
13,879
Realized and unrealized losses on investment in Partnership (1)
(551)
0
(3,530)
0
Total net investment income
8,227
8,088
13,384
13,879
Net realized losses on investments
(2,801)
(25)
(1,436)
(19)
Total revenues
124,612
63,677
239,516
117,631
Net income
10,314
10,518
19,879
17,589
Earnings Per Share – Basic
$
0.27
$
0.27
$
0.52
$
0.51
Earnings Per Share – Diluted
$
0.27
$
0.27
$
0.52
$
0.51
Return on Average Equity
9.8%
10.4%
9.4%
10.2%
Excluding realized and
unrealized gains (losses), net of tax: (2)
Net income excluding realized and unrealized gains (losses), net of
tax
13,234
10,543
24,277
17,608
Reconciliation to Net Income:
Realized and unrealized losses on investment in Partnership (1)
(551)
0
(3,530)
0
Net realized losses on investments
(2,801)
(25)
(1,436)
(19)
Tax effect on realized and unrealized gain (losses)
432
0
568
0
Net income
10,314
10,518
19,879
17,589
Earnings per share – Basic
$
0.35
$
0.27
$
0.63
$
0.51
Earnings per share – Diluted
$
0.35
$
0.27
$
0.63
$
0.51
Return on Average Equity
12.6%
10.4%
11.5%
10.2%
(1) Realized and unrealized gains and losses from our investment in
a limited partnership were recorded as a component of net investment
income
(2) Excluding realized and unrealized gains (losses) on all
investments including limited partnerships
Book value as of June 30, 2008 was $423.3 million, which was $11.05 per
share.
For the six months ended June 30, 2008, operating earnings was $24.3
million or $0.63 per share, and net income was $19.9 million or $0.52
per share.
Net earned premiums increased 101.7% to $110.8 million in the second
quarter of 2008 from $54.9 million for the same period in 2007. Gross
written premiums from clients other than Tower were 26% of total, which
compares to 35% of gross written premiums from clients other than Tower
in the first quarter 2008. The decline in the percentage of business
from clients other than Tower reflects our desire to maintain
underwriting and pricing discipline in a more challenging reinsurance
market environment.
Net investment income increased by 1.7% to $8.2 million for the three
months ended June 30, 2008, as compared to $8.1 million for the same
period in 2007.
The net investment income in the quarter includes charges for
other-than-temporary-impairments of $3.4 million that are isolated to a
small portion of our investment portfolio with carried value of
approximately $12.4 million at June 30, 2008. In July 2008, $8.0 million
of these investments were sold resulting in an additional loss of $2.1
million. The remaining $4.4 million of these assets are expected to be
sold before year-end with no significant additional loss.
The overall investment portfolio is $764.9 million and is comprised of
highly rated investments with an average credit rating of AA. The
overall book yield on the investment portfolio was 5.2% as of June 30,
2008.
CastlePoint Re, our Bermuda-based reinsurance subsidiary, assumed 35% of
Tower’s brokerage business as well as 50% of
CastlePoint Insurance Company’s program
business in the quarter. Net premiums written increased by 43.0% to
$95.8 million for the three months ended June 30, 2008, compared to
$67.0 million for the same period in the prior year. The net combined
ratio was 90.7% in the quarter as compared to 86.7% for the same prior
year period.
CastlePoint Insurance Company had net written premiums in the second
quarter of $32.3 million. The combined ratio for CastlePoint Insurance
Company in the second quarter was 93.2% on a net basis primarily
reflecting costs for ceded property catastrophe protection, and was
84.0% on a gross basis before ceded reinsurance.
Additional Highlights and Disclosures:
Dividend Declaration
CastlePoint Holdings, Ltd. Board of Directors previously had approved a
quarterly dividend of $0.05 per share payable September 30, 2008 to
stockholders of record as of September 15, 2008.
About CastlePoint Holdings, Ltd.
CastlePoint, a Bermuda-based holding company, through its subsidiaries,
CastlePoint Reinsurance Company, CastlePoint Management Corp., and
CastlePoint Insurance Company, provides property and casualty insurance
and reinsurance business solutions, products and services to small
insurance companies and program underwriting agents in the United States.
CPHL-F
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe
harbor” for forward-looking statements. This
press release or any other written or oral statements made by or on
behalf of CastlePoint may include forward-looking statements that
reflect CastlePoint’s current views with
respect to future events and financial performance. All statements other
than statements of historical fact included in this press release are
forward-looking statements. Forward-looking statements can generally be
identified by the use of forward-looking terminology such as “may,”
“will,” “plan,”
“expect,” “project,”
”guide or guidance,”
“intend,” “estimate,”
“anticipate,” “believe”
or “continue” or
their negative or variations or similar terminology. All forward-looking
statements address matters that involve risks and uncertainties.
Accordingly, there are or will be important factors that could cause
CastlePoint’s actual results to differ
materially from those indicated in these statements. The company
believes that these factors include, but are not limited to:
ineffectiveness or obsolescence of its business strategy due to changes
in current or future market conditions; increased competition on the
basis of pricing, capacity, coverage terms or other factors; greater
frequency or severity of claims and loss activity, including as a result
of natural or man-made catastrophic events, than CastlePoint’s
underwriting, reserving or investment practices anticipate based on
historical experience or industry data; the ability to obtain necessary
governmental licenses; the ability to hire and retain executive officers
and other key personnel; the ability to make certain acquisitions in a
timely fashion necessary to fulfill the company’s
business plan; the effects of acts of terrorism or war; developments in
the world’s financial and capital markets
that adversely affect the performance of the company’s
investments; changes in regulations or laws applicable to CastlePoint,
its subsidiaries, brokers or customers including tax laws in Bermuda and
the United States; acceptance of CastlePoint’s
products and services, including new products and services; changes in
the availability, cost or quality of reinsurance and failure of
CastlePoint’s reinsurers to pay claims timely
or at all; decreased demand for the company’s
insurance or reinsurance products; the effects of mergers, acquisitions
and divestitures; changes in rating agency policies or practices;
changes in legal theories of liability under CastlePoint’s
insurance policies or the policies that it reinsures; changes in
accounting policies or practices; and changes in general economic
conditions, including inflation and other factors. Forward-looking
statements speak only as of the date on which they are made, and
CastlePoint undertakes no obligation to update publicly or revise any
forward-looking statement, whether as a result of new information,
future developments or otherwise.
For more information visit CastlePoint’s
website at http://www.castlepoint.bm/.
CastlePoint Holdings, Ltd.
Consolidated Balance Sheets
(Unaudited)
June 30,
December 31,
2008
2007
($ in thousands share except per share amounts)
Assets
Fixed-maturity securities, available-for-sale, at fair value
$
556,431
$
484,972
(amortized cost $570,734 for 2008; $484,523 for 2007)
Equity securities, available-for-sale, at fair value
52,020
42,402
(cost $56,810 for 2008; $44,036 for 2007)
Short-term investments, available-for-sale, at fair value
(amortized cost $16,911 for 2008; $0 for 2007)
16,911
-
Total available-for-sale investments
625,362
527,374
Investment in Partnerships, equity method
4,974
8,503
Common trust securities - statutory business trusts, equity method
4,022
4,022
Total investments
634,358
539,899
Cash and cash equivalents
149,362
153,632
Accrued investment income
4,204
4,064
Premiums receivable
160,957
125,597
Premiums receivable - programs
25,568
9,083
Prepaid reinsurance premiums
10,001
3,475
Reinsurance recoverable on paid loss & loss adjustment expense
1,366
22
Reinsurance recoverable on unpaid loss & loss adjustment expense
4,449
-
Deferred acquisition costs
85,439
73,073
Deferred income taxes
9,189
7,051
Deferred financing fees
3,610
3,673
Other assets
12,858
7,174
Total Assets
$
1,101,361
$
926,743
Liabilities and Shareholders' Equity
Liabilities
Loss and loss adjustment expenses
$
191,287
$
121,426
Unearned premium
258,987
217,518
Losses payable
20,672
8,527
Premiums payable - programs
47,102
16,257
Accounts payable and accrued expenses
2,145
3,592
Payable for securities
14,844
-
Other liabilities
9,015
3,595
Subordinated debentures
134,022
134,022
Total Liabilities
678,074
504,937
Shareholders’ Equity
Common shares ($0.01 par value, 100,000,000 shares authorized,
38,305,735 shares issued as of June 30, 2008 and 38,289,430 shares
issued as of December 31, 2007)
383
383
Additional paid-in-capital
386,203
385,057
Accumulated other comprehensive net loss
(17,722
)
(1,051
)
Retained earnings
54,423
37,417
Total Shareholders' Equity
423,287
421,806
Total Liabilities and Shareholders' Equity
$
1,101,361
$
926,743
CastlePoint Holdings, Ltd.
Consolidated Statements of Income and
Comprehensive Income
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2008
2007
2008
2007
($ in thousands, except share and per share amounts)
Revenues
Net premiums earned
$
110,815
$
54,940
$
211,219
$
101,536
Insurance services revenue
8,371
674
16,349
2,235
Net investment income
8,227
8,088
13,384
13,879
Net realized loss on investments
(2,801
)
(25
)
(1,436
)
(19
)
Total Revenues
124,612
63,677
239,516
117,631
Expenses
Loss and loss adjustment expenses
60,660
27,982
115,195
53,308
Commission and other acquisition expenses
45,485
19,389
87,009
35,962
Other operating expenses
6,196
4,379
12,633
7,715
Interest expense
2,826
2,153
5,669
4,354
Total Expenses
115,167
53,903
220,506
101,339
Income before income taxes
9,445
9,774
19,010
16,292
Income tax benefit
869
744
869
1,297
Net Income
$
10,314
$
10,518
$
19,879
$
17,589
Comprehensive Income
Net income
$
10,314
$
10,518
$
19,879
$
17,589
Other comprehensive income (loss):
Gross unrealized investment holding losses arising during period
(8,926
)
(6,661
)
(19,377
)
(5,945
)
Less: reclassification adjustment for losses incl. in net income
(2,801
)
(25
)
(1,436
)
(19
)
Other comprehensive loss
(6,125
)
(6,636
)
(17,941
)
(5,926
)
Income tax recovery related to items of other comprehensive income
496
614
1,270
585
Total other comprehensive loss
(5,629
)
(6,022
)
(16,671
)
(5,341
)
Comprehensive Income
$
4,685
$
4,496
$
3,208
$
12,248
Earnings Per Share
Basic earnings per common share
$
0.27
$
0.27
$
0.52
$
0.51
Diluted earnings per common share
$
0.27
$
0.27
$
0.52
$
0.51
Weighted-Average Common Shares Outstanding:
Basic
38,277,704
38,277,148
38,280,012
34,349,404
Diluted estimated
38,299,090
38,848,730
38,410,038
34,718,272
Reinsurance Segment Results of Operations
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2008
2007
2008
2007
($ in thousands)
Revenues
Premiums earned
Gross premiums earned
$
81,831
$
53,610
$
158,283
$
100,206
Less: ceded premiums earned
(25)
—
(34)
—
Net premiums earned
81,806
53,610
158,249
100,206
Expenses
Loss and loss adjustment expenses
Gross loss and loss adjustment expenses
45,348
27,264
86,689
52,590
Less: ceded loss and loss adjustment expenses
—
—
—
—
Net loss and loss adjustment expenses
45,348
27,264
86,689
52,590
Underwriting expenses
Ceding commission expense
27,812
18,348
53,465
33,705
Other underwriting expenses
1,034
839
2,125
1,489
Total underwriting expenses
28,846
19,187
55,590
35,194
Underwriting Profit
$
7,612
$
7,159
$
15,970
$
12,422
Key Measures
Premiums written
Gross premiums written
$
95,800
$
66,978
$
189,967
$
138,874
Less: ceded premiums written
(24)
—
(33)
—
Net premiums written
$
95,776
$
66,978
$
189,934
$
138,874
Loss Ratios
Gross
55.4%
50.9%
54.8%
52.5%
Net
55.4%
50.9%
54.8%
52.5%
Accident Year Loss Ratios
Gross
55.6%
52.2%
55.1%
52.7%
Net
55.6%
52.2%
55.1%
52.7%
Underwriting Expense Ratios
Gross
35.3%
35.8%
35.1%
35.1%
Net
35.3%
35.8%
35.1%
35.1%
Combined Ratios
Gross
90.7%
86.7%
89.9%
87.6%
Net
90.7%
86.7%
89.9%
87.6%
Insurance Segment Results of Operations
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2008
2007
2008
2007
($ in thousands)
Revenues
Premiums earned
Gross premiums earned
$
38,307
$
1,330
$
69,901
$
1,330
Less: ceded premiums earned
(9,298)
—
(16,932)
—
Net premiums earned
29,009
1,330
52,969
1,330
Ceding commission revenue
1,346
—
2,408
—
Total revenue
30,355
1,330
55,377
1,330
Expenses
Loss and loss adjustment expenses
Gross loss and loss adjustment expenses
19,123
718
35,602
718
Less: ceded loss and loss adjustment expenses
(3,811)
—
(7,095)
—
Net loss and loss adjustment expenses
15,312
718
28,507
718
Underwriting expenses
Ceding commission expense
11,882
549
21,893
549
Other underwriting expenses
1,196
19
1,932
21
Total underwriting expenses
13,078
568
23,825
570
Underwriting Profit
$
1,965
$
44
$
3,045
$
42
Key Measures
Premiums written
Gross premiums written
$
42,403
$
13,533
$
77,352
$
13,533
Less: ceded premiums written
(10,107)
—
(21,124)
—
Net premiums written
$
32,296
$
13,533
$
56,228
$
13,533
Loss Ratios
Gross
49.9%
54.0%
50.9%
54.0%
Net
52.8%
54.0%
53.8%
54.0%
Accident Year Loss Ratios
Gross
51.6%
54.0%
51.2%
54.0%
Net
55.2%
54.0%
54.4%
54.0%
Underwriting Expense Ratios
Gross
34.1%
42.7%
34.1%
42.8%
Net
40.4%
42.7%
40.4%
42.8%
Combined Ratios
Gross
84.0%
96.7%
85.0%
96.8%
Net
93.2%
96.7%
94.2%
96.8%
Insurance Services Segment Results of Operations
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2008
2007
2008
2007
($ in thousands)
Revenues
Direct commission revenue from programs
$
9,286
$
674
$
17,995
$
2,235
Total Revenues
9,286
674
17,995
2,235
Expenses
Direct commissions expense for programs
8,052
492
15,705
1,708
Other insurance services expenses
2,023
1,788
4,003
3,132
Total Expenses
10,075
2,280
19,708
4,840
Insurance Services Loss
$
(789)
$
(1,606)
$
(1,713)
$
(2,605)