ProCentury Corporation Announces First Quarter Results

ProCentury Corporation Announces First Quarter Results 


COLUMBUS, Ohio, June 7  /PRNewswire-FirstCall/ -- ProCentury Corporation
(NASDAQ:PROS) today announced financial results for the three months ended
March 31, 2004.  These results were also contained in the Company's quarterly
report on Form 10-Q filed with the SEC on Friday, June 4, 2004.

On April 26, 2004, ProCentury completed an initial public offering (IPO) in
which it issued eight million of its common shares at an initial offering price
of $10.50 per share.  In connection with the IPO, the Company exited the
specialty surety lines of business through the disposition of its subsidiaries,
Evergreen National Indemnity Company and Continental Heritage Insurance
Company.  As a result, following the IPO, ProCentury's sole remaining insurance
subsidiary is Century Surety Company, allowing the Company to focus on its
property and casualty excess and surplus lines of business. As of April 26,
2004, Evergreen and Continental and the related specialty surety lines of
business are no longer a part of ProCentury.

The following financial results are expressed on both a reported (GAAP) and pro
forma basis.  The pro forma information gives effect to the disposition of our
specialty surety lines as if it occurred on January 1, 2004.  The Company
believes that the pro forma information provides useful information to
investors because it excludes the performance of Evergreen and Continental,
which are no longer part of the Company.  A reconciliation of the pro forma
information to the Company's reported results is contained in the financial
tables accompanying this release and in the Company's quarterly report on Form
10-Q for the quarter ended March 31, 2004.

Financial Results

ProCentury's net income for the quarter ended March 31, 2004 was $2.9 million
or $0.58 per share compared to $848,000 or $0.17 per share for the same period
in 2003.  Gross written premiums were $49.4 million in the first quarter of
2004 compared to $39.9 million for the first quarter of 2003.  Net premiums
earned were $34.5 million in the first quarter of 2004 compared with $24.6
million reported for the same period of 2003.  The combined ratio was 91.5% for
the quarter ended March 31, 2004, compared with 97.5% for the first quarter of
2003.

Pro Forma Financial Results

ProCentury's pro forma net income was $2.6 million or $0.19 per share for the
quarter ended March 31, 2004 based on 13.1 million common shares outstanding
which includes the 8 million shares issued in the IPO.  Pro forma gross written
premiums were $42.9 million in the first quarter of 2004.  Pro forma net
written premiums were $36.6 million for the first quarter and net premiums
earned were $32.1 million.  The pro forma combined ratio for the first quarter
of 2004 was 93.1%.

Edward Feighan, ProCentury's Chief Executive Officer said, "We are very pleased
with the results of the first quarter.  The capital we raised with our initial
public offering has created opportunities for us in the marketplace and allows
us to support our strategy to pursue opportunistic niches in the non-admitted
market.  We are now singularly focused on enhancing shareholder

value by continuing to execute on our growth strategy while maintaining a
disciplined underwriting practice."

Commenting on the results of the quarter, Chris Timm, President of Century
Surety Company said, "All of the newly implemented strategies and procedures
that were put in place to prepare the Company for the IPO have proven to be
highly effective.  We continue to monitor loss reserves and expenses closely as
we focus on maintaining underwriting profitability."

Future Outlook

The following forward-looking statement is based on current expectations and
actual results may differ materially as explained more completely in the note
on forward-looking statements below.

The Company is currently expecting gross written premiums for the year ended
December 31, 2004 to range between $190 and $205 million.

Earnings Conference Call

ProCentury's first quarter 2004 results will be discussed in more detail on
Tuesday, June 8th at 11:00 a.m. EDT (8:00 a.m. PDT).  To listen to the call,
please dial 888-339-2688 approximately five minutes prior to the start of the
call. For those who cannot listen to the live conference call, a replay will be
available from approximately 1:00 p.m. EDT on June 8, until 4:00 p.m. EDT on
June 9, 2004. The access number for the replay is 888-286-8010 and the pass
code is 34179926.

About ProCentury Corporation

ProCentury Corporation (NASDAQ:PROS) is a specialty property and casualty
insurance holding company.  Its subsidiary, Century Surety Company, underwrites
general liability, commercial property, and multi-peril insurance for small and
mid-sized businesses.  Century Surety Company primarily writes excess and
surplus lines insurance and markets its products through a select network of
general agents and brokers.

NOTE ON FORWARD-LOOKING STATEMENTS

Some of the statements in this press release that are not historical statements
including the statements under "future outlook," are "forward- looking
statements" as defined in the Private Securities Litigation Reform Act of 1995.
 Forward-looking statements are derived from information that we currently have
and assumptions that we make and may be identified by words such as "believes,"
"anticipates," "expects," "plans," "should," "estimates" and similar
expressions.  Our forward-looking statements are subject to risks,
uncertainties and other factors that could cause actual results to differ
materially from those stated or implied in our forward-looking statements,
including but not limited to: 1) risks inherent in establishing loss and loss
adjustment expense reserves; 2) uncertainties related to the ratings of our
insurance subsidiary; 3) uncertainties related to government and regulatory
policies; 4) uncertainties relating to the cyclical nature of our business; 5)
changes in our relationships with, and the capacity of, our general agents; and
 6) the risk that our reinsurers may not be able to fulfill their obligations
to us.  You are cautioned not to place undue reliance on forward- looking
statements, which are made only as of the date of this press release. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
 For additional disclosure regarding potential risks, refer to documents we
file with the Securities and Exchange Commission.

                 PROCENTURY CORPORATION AND SUBSIDIARIES
             Consolidated Condensed Statements of Operations
                               (Unaudited)

                                               For the Three Months Ended
                                                         March 31,
                                                    2004         2003

  Premiums earned                              $34,510,056     24,592,293
  Net investment income                          2,314,140      1,587,310
  Net realized investment gains                    160,770         82,050
      Total revenues                            36,984,966     26,261,653
  Losses and loss expenses                      18,674,975     13,898,874
  Amortization of deferred policy
   acquisition costs                             8,784,768      5,796,666
  Other operating expenses                       4,102,115      4,273,654
  Interest expense                                 415,212        317,787
      Total expenses                            31,977,070     24,286,981
      Income before gain on sale of minority
       interest in subsidiary, net               5,007,896      1,974,672
  Gain on sale of minority interest in
   subsidiary, net of transaction fees                   -         97,499
      Income before minority interest
       and income tax expense                    5,007,896      2,072,171
  Minority interest                                564,124        490,311
  Income tax expense                             1,555,898        734,333
      Net income                                $2,887,874        847,527
  Basic and diluted net income per share:
      Net income                                     $0.58           0.17
  Weighted average of shares outstanding         5,000,532      5,000,532


                 PROCENTURY CORPORATION AND SUBSIDIARIES
         Pro Forma Condensed Consolidated Statement of Operations
                For the Three Months Ended March 31, 2004
                               (Unaudited)

                                      Evergreen And
                        ProCentury     Continental             ProCentury
                        Historical      Pro Forma      Other    Pro Forma
                                     (dollars in thousands)

  Gross written premiums $49,364        6,491            -       42,873
  Net written premium    $38,032        1,391            -       36,641
  Premiums earned        $34,510        2,454(a)         -       32,056
  Net investment income    2,314          349(b)         -        1,965
  Net realized
   investment gains          161           38(c)         -          123
      Total revenues      36,985        2,841            -       34,144
  Losses and loss
   expenses               18,675         (216)(a)        -       18,891
  Amortization of
   deferred policy
   acquisition costs
   and other operating
   expenses               12,887          930(a)     1,009(e)    10,948
  Interest expense           415            -            -          415
      Total expenses      31,977          714        1,009       30,254
    Income (loss) before
     minority interest
     and income tax
     expense               5,008        2,127       (1,009)       3,890
  Minority interest          564            -          564(f)         -
  Income tax expense
   (benefit)               1,556          731(d)      (500)(g)    1,325
      Net income
       (loss)             $2,888        1,396       (1,073)       2,565
  Key Financial Ratios
    Loss and loss
     expense ratio         54.11%                                 58.93%
    Expense ratio          37.34                                  34.15
    Combined Ratio         91.45%                                 93.08%


  (a)  The adjustments for Evergreen and Continental include the
  termination of intercompany pooling agreement and the implementation of
  the loss portfolio agreements that occurred effective January 1, 2004.
  With these adjustments, the activity in the ProCentury Pro Forma column
  only represents activity for the excess and surplus lines operations and
  activity related to the other exited lines including the workers'
  compensation line and commercial automobile.

  (b)  The investment income adjustment is calculated based on pro forma
  investment income balances for Evergreen and Continental and include the
  effects of the termination of the intercompany pooling agreement and the
  implementation of the loss portfolio agreements. The pro forma investment
  income balances for Evergreen and Continental are lower than their actual
  investment balances due to the fact that the termination of the
  intercompany pooling agreement and the implementation of the loss
  portfolio agreement requires Evergreen and Continental to transfer cash
  and investments to Century in amounts equal to loss and loss expense
  reserves and unearned premium.

  (c)  Realized gains for Evergreen and Continental represent each company's
  actual realized gain activity for the three months ended March 31, 2004.

  (d)  Income tax expense for Evergreen and Continental represent each
  company's actual tax expenses as adjusted by 35% of any pro forma
  adjustments such as net investment income. See notes b and c above.

  (e)  This adjustment includes the following items that occurred in
  connection with the termination of the intercompany pooling agreement, the
  loss portfolio transfer and the IPO; $654,000 of income to ProCentury
  related to the reallocation of deferred acquisition costs from the
  termination of the intercompany pooling agreement and the loss portfolio
  transfer, $250,000 of a nonrecurring expense related to a severance
  agreement and $105,000 of expenses related to the IPO that could not be
  capitalized.

  (f)  Minority interest resulted from the partial sales of Evergreen that
  occurred in 2003 and 2002. As this pro forma assumes that Evergreen is no
  longer part of ProCentury, minority interest has been adjusted
  accordingly.

  (g)  The income tax adjustment in the Other column relates to the tax
  effect of the sale of Continental to Evergreen and the tax on the
  adjustments that are outlined in note e above. The pro forma income tax
  provision has been computed based on our estimated annual effective tax
  rate, which differs from the federal income tax rate of 35% principally
  because of tax-exempt investment income.


DATASOURCE: ProCentury Corporation



CONTACT:  Mary Magnani, Corporate Communications Manager of ProCentury

Corporation, [phone], or  



Web site:  http://www.procentury.com/ 

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