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Share Name | Share Symbol | Market | Type |
---|---|---|---|
State National Companies, Inc. | NASDAQ:SNC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 21.02 | 21.00 | 21.10 | 0 | 01:00:00 |
UNITED STATES
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): March 19, 2015
STATE NATIONAL COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware |
|
001-36712 |
|
26-0017421 |
(State or other jurisdiction of |
|
(Commission File Number) |
|
(I.R.S. Employer |
1900 L. Don Dodson Dr.
Bedford, Texas 76021
(Address of principal executive offices) (zip code)
(817) 265-2000
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On March 19, 2015, State National Companies, Inc. (the Company) issued a press release reporting the Companys financial results for the fourth quarter and the year ended December 31, 2014. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this Report) and will be posted on the Investor Relations section of the Companys website at http://ir.statenational.com. In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 2.02 and in the attached Exhibit 99.1 shall be deemed to be furnished and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act).
Item 7.01 Regulation FD Disclosure.
On March 19, 2015, the Company published a data sheet providing certain financial information of the Company for the fourth quarter and the year ended December 31, 2014, which will be available on the Investor Relations section of the Companys website at http://ir.statenational.com. A copy of the data sheet is also furnished as Exhibit 99.2 to this Report. In accordance with General Instruction B.2 of Form 8-K, the information set forth in this Item 7.01 and in the attached Exhibit 99.2 shall be deemed to be furnished and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act.
Use of our Website to Distribute Material Company Information
Our company website address is www.statenational.com. We use our website as a channel of distribution for important company information. Important information, including press releases, investor presentations and financial information regarding our company, is routinely posted on and accessible on the Investor Relations subpage of our website, which is accessible by clicking on the tab labeled Investor Relations on our website home page. We also use our website to expedite public access to time-critical information regarding our company in advance of or in lieu of distributing a press release or a filing with the Securities and Exchange Commission (the SEC) disclosing the same information. Therefore, investors should look to the Investor Relations subpage of our website for important and time-critical information. Visitors to our website can also register to receive automatic e-mail notifications alerting them when new information is made available on the Investor Relations subpage of our website. In addition, we make available on the Investor Relations subpage of our website (under the link Financial Information and then SEC Filings), free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, ownership reports on Forms 3, 4 and 5 and any amendments to those reports as soon as practicable after we electronically file such reports with the SEC. Further, copies of our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, our Code of Business Conduct and Ethics and the charters for the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Directors are also available through the Investor Relations subpage of our website (under the link Corporate Governance).
Additionally, the public may read and copy any of the materials we file with the SEC at the SECs Public Reference Room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (800) SEC-0330. Our electronically filed reports can also be obtained on the SECs internet site at http://www.sec.gov.
Item 9.01 Financial Statements And Exhibits.
(d) Exhibits.
In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached exhibits shall be deemed to be furnished and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act.
99.1 Press Release dated March 19, 2015.
99.2 Data Sheet.
SIGNATURE
Pursuant to the requirements 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.
|
STATE NATIONAL COMPANIES, INC. | |
|
| |
|
| |
Date: March 19, 2015 |
By: |
/s/ David Hale |
|
|
David Hale |
|
|
Executive Vice President, Chief Operating Officer and Chief Financial Officer |
INDEX TO EXHIBITS
Exhibit No. |
|
Description of Exhibit |
|
|
|
99.1 |
|
Press Release dated March 19, 2015. |
|
|
|
99.2 |
|
Data Sheet. |
Exhibit 99.1
|
CONTACTS: |
State National Companies, Inc. |
FOR IMMEDIATE RELEASE |
|
David Hale, COO & CFO |
|
|
817-265-2000 |
|
|
|
|
|
Dennard · Lascar Associates |
|
|
Rick Black |
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713-529-6600 |
State National Companies Reports
Fourth Quarter and Full Year 2014 Earnings
BEDFORD, TX March 19, 2015 State National Companies, Inc. (NASDAQ: SNC) today reported its financial results for the fourth quarter and full year ended December 31, 2014.
Total revenues in the fourth quarter of 2014 were $43.0 million, up 15.3 percent from $37.3 million in the fourth quarter of 2013. Adjusted net income, a non-GAAP measure, was $7.9 million, or $0.18 per diluted share, in the fourth quarter of 2014, compared to adjusted net income of $8.3 million, or $0.24 per diluted share, for the same period in 2013. Reported net income was $6.8 million, or $0.15 per diluted share, in the fourth quarter of 2014. See below for a reconciliation of non-GAAP financial measures.
Total revenues for 2014 were $154.5 million, up 20.2 percent from $128.5 million in 2013, primarily due to increases in premiums earned and ceding fees. Adjusted net income was $28.7 million, or $0.73 per diluted share in 2014, compared to adjusted net income of $22.1 million or $0.65 per diluted share in 2013. Reported net income was $11.0 million in 2014, compared to $22.7 million in 2013.
Commenting on the year, State Nationals Chairman, President and Chief Executive Officer Terry Ledbetter, stated, We are pleased with our 2014 results, which reflect significant operational and corporate accomplishments. State National achieved gross written premiums of over $1.0 billion for the first time in our Companys 40-year history and reached record totals for premiums earned, ceding fees and adjusted net income. Adjusted net income increased 29.9% over 2013 with a 14.9% adjusted return on equity, which was very positive considering the 65.7% increase in equity over the prior year. We continue to grow by distinguishing ourselves as a trusted provider of customized insurance solutions, and by delivering superior service to our clients through quality programs in both our Program and Lender Services segments.
State National simplifies insurance so that our clients can protect more assets, businesses and people. By making insurance products easily accessible to our customers, we ensure processes are efficient and barriers are minimized, added Ledbetter. In October 2014 we completed the resale registration with the SEC of our common stock sold in the private placement and in November 2014, our shares began trading on the NASDAQ Global Select Market. Overall, State Nationals operating segments, competitive position and foundation for profitable growth are all stronger today than ever before.
Financial Highlights
2014 Fourth Quarter
· Gross written premiums were $250.9 million, down 4.7 percent from $263.4 million in the fourth quarter 2013
· Premiums earned were $27.1 million, up 13.4 percent from $23.9 million in the fourth quarter 2013
· Ceding fees were $12.7 million, up 22.1 percent from $10.4 million in the fourth quarter 2013
· Adjusted net income was $7.9 million, down 4.8 percent from $8.3 million in fourth quarter 2013
· Adjusted diluted EPS of $0.18 compared to $0.24 in fourth quarter 2013
2014 Full Year
· Gross written premiums were just over $1.0 billion, up 27.7 percent from $810.0 million in 2013
· Premiums earned were $96.7 million, up 14.6 percent from $84.4 million in 2013
· Ceding fees were $45.7 million, up 38.9 percent from $32.9 million in 2013
· Adjusted net income was $28.7 million, up 29.9 percent from $22.1 million in 2013
· Adjusted diluted EPS of $0.73 compared to $0.65 in 2013
· Adjusted return on equity was 14.9 percent
· Shareholders equity was $240.9 million as of December 31, 2014, compared to $145.4 million as of December 31, 2013
Program Services Segment
Total revenues from the Program Services segment in the fourth quarter of 2014 were $12.7 million, an increase of $2.3 million, or 22.1 percent, from the fourth quarter of 2013. The increase in revenues was driven by a 22.1 percent increase in ceding fees to $12.7 million in the fourth quarter of 2014 from $10.4 million in the fourth quarter of 2013. The higher ceding fees were primarily the result of an increase in gross earned premiums related to the year over year increases from two significant programs.
Total revenues from the Program Services segment for the full year 2014 were $45.7 million, an increase of $13.3 million, or 41.0 percent, from 2013. This increase was primarily driven by a 38.9 percent increase in ceding fees to $45.7 million in 2014 from $32.9 million in 2013. The growth in ceding fees for two significant programs that contributed to the fourth quarter performance also drove the annual revenue increase. One of these programs experienced growth in gross written premium in 2014 while the other was added in mid-2013 and generated a full year of earned premiums in 2014.
Lender Services Segment
Total revenues from the Lender Services segment in the fourth quarter of 2014 were $27.7 million, an increase of $3.0 million, or 12.1 percent, from the fourth quarter of 2013. Premiums earned increased by $3.2 million, or 13.4 percent, to $27.1 million in the fourth quarter of 2014 from $23.9 million in the fourth quarter of 2013. Increases in Lender Services premiums were primarily driven by rising automobile sales, higher average automobile loan balances and increasing credit availability. In addition, the amendment to the CUNA Mutual alliance agreement resulted in additional net premiums earned due to the increase in our retention of this business.
Total revenues from the Lender Services segment for the full year 2014 were $99.5 million, an increase of $11.5 million, or 13.1 percent, from 2013, and premiums earned increased by $11.8 million, or 13.9 percent, to $96.7 million in 2014 from $84.9 million in 2013, primarily due to the same factors affecting the fourth quarter.
Losses and loss adjustment expenses (LAE) were $11.7 million in the fourth quarter of 2014 compared to $8.6 million in the same period last year, primarily a result of an increased loss ratio, increased retention for the business subject to the CUNA Mutual alliance and higher earned premium. The net loss ratio rose to 43.3
percent in the fourth quarter of 2014 from 35.9 percent in the fourth quarter of 2013, due to an increase in claim volume and severity.
Losses and LAE were $40.6 million for 2014 compared to $31.6 million for 2013, again related to an increased loss ratio and higher earned premiums. A strengthening economy, an aging automobile fleet, and easier access to credit have contributed to an increase in vehicle sales, resulting in higher loan balances upon which the Company pays claims. The net loss ratio increased to 42.0 percent for 2014 from 37.3 percent for 2013, which was also driven by an increase in claim volume and severity that impacted the fourth quarter performance.
General and Administrative Expenses
General and administrative expenses in the fourth quarter of 2014 increased by $3.3 million, or 24.8 percent, to $16.6 million from $13.3 million in the fourth quarter of 2013, primarily due to an increase in direct personnel costs, including stock-based compensation expense incurred in 2014. The Company did not have stock-based compensation expense in 2013.
General and administrative expenses for 2014 increased by $5.5 million, or 10.3 percent, to $58.9 million from $53.4 million in 2013, primarily due to the same factors affecting the fourth quarter.
Non-GAAP Reconciliation
This press release includes certain financial measures that have been adjusted for items impacting comparability. The accompanying information provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States of America (GAAP). Our non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income, earnings per share, return on equity or any other GAAP measure of liquidity or financial performance.
Adjusted net income is considered a non-GAAP financial measure because it reflects the following adjustments to net income, which is the most directly comparable measure calculated in accordance with GAAP: the pro forma provision for income taxes as if the Company had been treated as a C Corporation for each period presented, and the exclusion (net of tax benefit) of the increase in the Companys deferred tax asset as a result of the conversion to C Corporation status, the amount of founder special compensation and the non-recurring offering-related expenses and contract modification expense related to the amendment to our alliance agreement with CUNA Mutual. Management believes this measure is helpful to investors because it provides comparability in evaluating core financial performance between periods.
STATE NATIONAL COMPANIES, INC.
Reconciliation of Non-GAAP Financial Measures
(in thousands, except per share data)
Adjusted Net Income
|
|
Three Months Ended |
|
Year Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
Adjusted net income |
|
$ |
7,887 |
|
$ |
8,337 |
|
$ |
28,683 |
|
$ |
22,084 |
|
Reconciliation of adjusted net income: |
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
6,847 |
|
$ |
13,926 |
|
$ |
11,013 |
|
$ |
22,711 |
|
Plus (less): Provision for income taxes to reflect change to C corporation status (4) |
|
(103 |
) |
(5,589 |
) |
4,090 |
|
(6,938 |
) | ||||
Less: Recognition of deferred tax asset upon conversion to C corporation (5) |
|
(201 |
) |
|
|
14,279 |
|
|
| ||||
Plus: Founder special compensation (1) (6) |
|
230 |
|
|
|
11,203 |
|
6,311 |
| ||||
Plus: Offering-related expenses (2) (6) |
|
483 |
|
|
|
5,524 |
|
|
| ||||
Plus: Contract modification expense (3) (6) |
|
229 |
|
|
|
11,132 |
|
|
| ||||
Adjusted net income |
|
$ |
7,887 |
|
$ |
8,337 |
|
$ |
28,683 |
|
$ |
22,084 |
|
Adjusted Earnings Per Share
|
|
Three Months Ended |
|
Year Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
Adjusted diluted earnings per share |
|
$ |
0.18 |
|
$ |
0.24 |
|
$ |
0.73 |
|
$ |
0.65 |
|
Reconciliation of adjusted diluted earnings per share: |
|
|
|
|
|
|
|
|
| ||||
Net income |
|
$ |
0.15 |
|
$ |
0.41 |
|
$ |
0.28 |
|
$ |
0.66 |
|
Plus (less): Provision for income taxes to reflect change to C corporation status (4) |
|
|
|
(0.17 |
) |
0.11 |
|
(0.19 |
) | ||||
Less: Recognition of deferred tax asset upon conversion to C corporation (5) |
|
|
|
|
|
0.36 |
|
|
| ||||
Plus: Founder special compensation (1) (6) |
|
0.01 |
|
|
|
0.28 |
|
0.18 |
| ||||
Plus: Offering-related expenses (2) (6) |
|
0.01 |
|
|
|
0.14 |
|
|
| ||||
Plus: Contract modification expense (3) (6) |
|
0.01 |
|
|
|
0.28 |
|
|
| ||||
Adjusted diluted earnings per share |
|
$ |
0.18 |
|
$ |
0.24 |
|
$ |
0.73 |
|
$ |
0.65 |
|
Adjusted Return on Equity
|
|
For the year ended |
|
|
|
December 31, |
|
|
|
2014 |
|
Adjusted return on equity |
|
14.9 |
% |
Reconciliation of adjusted return on equity: |
|
|
|
Net income |
|
5.7 |
% |
Plus: Provision for income taxes to reflect change to C corporation status (4) |
|
2.1 |
% |
Less: Recognition of deferred tax asset upon conversion to C corporation (5) |
|
7.4 |
% |
Plus: Founder special compensation (1) (6) |
|
5.8 |
% |
Plus: Offering-related expenses (2) (6) |
|
2.9 |
% |
Plus: Contract modification expense (3) (6) |
|
5.8 |
% |
Adjusted return on equity |
|
14.9 |
% |
(1) During the periods presented, we made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company. We refer to these as founder special compensation. Following the completion of the private placement, we ceased paying founder special compensation.
(2) Offering-related expenses are non-recurring expenses related to the Companys private placement of common stock.
(3) In connection with the 2014 amendment to the alliance agreement with CUNA Mutual, we paid CUNA Mutual $17.8 million. As a result, we recorded non-recurring contract modification expense of $17.8 million.
(4) Upon the completion of the private placement, our parent companys status as a Subchapter S corporation terminated and our consolidated income became fully subject to U.S. federal income taxes. This adjustment represents estimated income taxes as if the Company had been treated as a C Corporation for each period presented. The estimated tax was calculated assuming the Companys blended statutory federal and state income tax rates of 37.5% for the year ended December 31, 2014 and 38.1% for the year ended December 31, 2013, respectively.
(5) As a result of the Companys conversion to a C Corporation, the deferred tax asset increased by approximately $14.3 million primarily due to the effects of eliminating deferred tax balances on the insurance subsidiaries related to intercompany transactions. This excludes the tax effect related to contract modification expense of $6.7 million.
(6) Founder special compensation, offering-related expenses, and contract modification expense are shown net of the estimated tax benefit for each period presented. The estimated tax was calculated assuming the Companys blended statutory federal and state income tax rates of 37.5% and 38.1% for the periods ended December 31, 2014 and 2013, respectively.
Balance Sheet
State Nationals balance sheet reflects low financial leverage with $44.5 million of subordinated debentures. The subordinated debentures have limited covenant requirements and are interest-only until the mid-2030s. The Company had only $6.7 million of goodwill or other intangibles at December 31, 2014.
State Nationals investment portfolio is primarily comprised of fixed income securities, the majority of which have investment grade ratings with short duration of approximately four years and are laddered to allow for new funds to reinvest annually as rates change. Most of the Companys reserves are ceded to reinsurers.
2015 Outlook
In 2014, our Lender Services segment had the highest level of new sales in our Companys history. We expect that momentum to carry into 2015 because of our strong sales and marketing efforts coupled with the ongoing success of our relationship with CUNA Mutual. The trend of rising automobile sales, higher average automobile loan balances and increasing credit availability should also contribute to growth in 2015. Based on these factors we expect net earned premiums in 2015 to be in the range of $120 to $130 million, up from $96.7 million in 2014, with an expected combined ratio of 85 to 90 percent.
In Program Services, increased capital in the property and casualty insurance market, including the increased role of alternative capital markets in reinsurance, and the growth of offshore reinsurance markets generally should drive demand for our services, as many of these firms do not have direct access to the U.S. market. We also anticipate downgrades of certain insurance companies to create increased demand for our issuing carrier capacities. We have a robust pipeline that is partially a result of new dedicated staff that was added in the summer of 2014, calling directly on general agents. In 2015, we expect fees for Program Services to be in the range of $55 to $60 million. Included in this projection is our expectation of approximately $21 to $25 million in fees from Meadowbrook and Nephila, each of which individually contribute $10 to $13 million in fees.
Conference Call
State National will host a conference tomorrow morning, March 20, 2015 at 9:00 a.m. Central Time to discuss further its fourth quarter and full year 2014 results. To access the call live, dial (716) 247-5810 and use the passcode 82008889# at least 10 minutes prior to the start time. Alternatively, investors can listen live over the Internet by visiting the Companys website at http://ir.statenational.com/. For those who cannot listen to the live call, a telephonic replay will be available through March 27, 2015 and may be accessed by calling (404) 537-3406 and using pass code 82008889 #. Also, an archive of the webcast will be available after the call for a period of 90 days on the Investors section of the Companys website at http://www.statenational.com/.
About State National Companies, Inc.
State National Companies, Inc. (NASDAQ: SNC) is a leading specialty provider of property and casualty insurance operating in two niche markets across the United States. In its Program Services segment, the Company leverages its A (Excellent) A.M. Best rating, expansive licenses and reputation to provide access to the U.S. property and casualty insurance market in exchange for a ceding fee. In its Lender Services segment, the company specializes in providing collateral protection insurance, which insures personal automobiles and other vehicles held as collateral for loans made by credit unions, banks and specialty finance companies. To learn more, please visit www.statenational.com
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally, but not always, accompanied by words such as estimate, believe, expect, anticipate, would, will, may, plan, goal, target, could, continue, intend or other words that convey the uncertainty of future events or outcomes. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control.
Examples of forward-looking statements include the plans and objectives of management for future operations, including those relating to future growth of our business, and are based on current expectations that involve assumptions that are difficult or impossible to predict accurately and many of which are beyond our control. There can be no assurance that actual developments will be those anticipated by us. Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, our ability to recover from our capacity providers, the cost and availability of reinsurance coverage, challenges to our use of issuing carrier or fronting arrangements by regulators or changes in state or federal insurance or other statutes or regulations, our dependence on a limited number of business partners, potential regulatory scrutiny of lender-placed automobile insurance, level of new car sales, availability of credit for vehicle purchases and other factors affecting automobile financing, our ability to compete effectively, a downgrade in the financial strength ratings of our insurance subsidiaries, our ability to accurately underwrite and price our products and to maintain and establish accurate loss reserves, changes in interest rates or other changes in the financial markets, the effects of emerging claim and coverage issues, changes in the demand for our products, the effect of general economic conditions, breaches in data security or other disruptions with our technology, and changes in pricing or other competitive environments.
Forward-looking statements involve inherent risks and uncertainties and State National Companies cautions readers that various factors could cause its actual financial and operational results to differ materially from those indicated by forward- looking statements made from time-to-time in news releases, reports, proxy statements, registration statements, and other written communications, as well as oral statements made from time to time by representatives of State National Companies. These factors and other risks and uncertainties are described in detail in our filings with the Securities and Exchange Commission. The forward-
looking statements in this press release speak only as of the date of this release, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
STATE NATIONAL COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
($ in thousands, except for share and per share information)
|
|
December 31, |
|
December 31, |
| ||
|
|
2014 |
|
2013 |
| ||
Assets |
|
|
|
|
| ||
Investments: |
|
|
|
|
| ||
Fixed-maturity securities available-for-sale, at fair value (amortized cost - $305,019, $178,901, respectively) |
|
$ |
309,911 |
|
$ |
180,954 |
|
Equity securities available-for-sale, at fair value (cost $1,419, $1,340, respectively) |
|
2,642 |
|
2,301 |
| ||
Total investments |
|
312,553 |
|
183,255 |
| ||
|
|
|
|
|
| ||
Cash and cash equivalents |
|
38,348 |
|
69,431 |
| ||
Restricted cash and investments |
|
6,597 |
|
6,800 |
| ||
Accounts receivable from agents, net |
|
18,528 |
|
17,306 |
| ||
Reinsurance recoverable on paid losses |
|
1,200 |
|
880 |
| ||
Deferred acquisition costs |
|
1,036 |
|
1,095 |
| ||
Reinsurance recoverables |
|
1,656,534 |
|
1,372,225 |
| ||
Property and equipment, net (includes land held for sale $1,034, $1,034, respectively) |
|
18,397 |
|
19,265 |
| ||
Interest receivable |
|
1,795 |
|
1,333 |
| ||
Income taxes receivable |
|
|
|
1,451 |
| ||
Deferred income taxes, net |
|
23,864 |
|
3,728 |
| ||
Goodwill and intangible assets, net |
|
6,683 |
|
7,906 |
| ||
Other assets |
|
6,229 |
|
6,276 |
| ||
Total assets |
|
$ |
2,091,764 |
|
$ |
1,690,951 |
|
|
|
|
|
|
| ||
Liabilities |
|
|
|
|
| ||
Unpaid losses and loss adjustment expenses |
|
$ |
1,209,905 |
|
$ |
1,016,641 |
|
Unearned premium |
|
480,124 |
|
386,279 |
| ||
Allowance for policy cancellations |
|
55,500 |
|
39,623 |
| ||
Deferred ceding fees |
|
23,612 |
|
18,735 |
| ||
Accounts payable to agents |
|
2,448 |
|
2,564 |
| ||
Accounts payable to insurance companies |
|
4,399 |
|
5,285 |
| ||
Subordinated debentures |
|
44,500 |
|
52,000 |
| ||
Income taxes payable |
|
1,762 |
|
|
| ||
Other liabilities |
|
28,642 |
|
24,370 |
| ||
Other payables, affiliate |
|
|
|
100 |
| ||
Total liabilities |
|
1,850,892 |
|
1,545,597 |
| ||
|
|
|
|
|
| ||
Shareholders equity |
|
|
|
|
| ||
Common stock, $.001 par value (150,000,000 shares authorized; 44,247,102 and 40,627,200 shares issued at December 31, 2014 and December 31, 2013, respectively) |
|
44 |
|
41 |
| ||
Preferred stock, $.001 par value (10,000,000 and zero shares authorized at December 31, 2014 and December 31, 2013, respectively; no shares issued and outstanding at December 31, 2014 and December 31, 2013) |
|
|
|
|
| ||
Additional paid-in capital |
|
220,577 |
|
24,367 |
| ||
Retained earnings |
|
16,108 |
|
128,830 |
| ||
Treasury stock (zero and 6,450,304 shares at cost at December 31, 2014 and December 31, 2013, respectively) |
|
|
|
(10,000 |
) | ||
Accumulated other comprehensive income |
|
4,143 |
|
2,116 |
| ||
Total shareholders equity |
|
240,872 |
|
145,354 |
| ||
Total liabilities and shareholders equity |
|
$ |
2,091,764 |
|
$ |
1,690,951 |
|
STATE NATIONAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
($ in thousands, except for per share information)
|
|
Three Months Ended |
|
Years Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
| ||||
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Premiums earned |
|
$ |
27,065 |
|
$ |
23,945 |
|
$ |
96,650 |
|
$ |
84,378 |
|
Commission income |
|
366 |
|
537 |
|
1,533 |
|
2,031 |
| ||||
Ceding fees |
|
12,707 |
|
10,407 |
|
45,732 |
|
32,898 |
| ||||
Net investment income |
|
1,440 |
|
1,235 |
|
4,841 |
|
4,901 |
| ||||
Realized net investment gains |
|
125 |
|
434 |
|
1,311 |
|
1,764 |
| ||||
Other income |
|
1,323 |
|
720 |
|
4,460 |
|
2,531 |
| ||||
Total revenues |
|
43,026 |
|
37,278 |
|
154,527 |
|
128,503 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
Losses and loss adjustment expenses |
|
11,812 |
|
8,897 |
|
40,821 |
|
32,090 |
| ||||
Commissions |
|
1,444 |
|
245 |
|
3,882 |
|
2,378 |
| ||||
Taxes, licenses, and fees |
|
779 |
|
825 |
|
2,832 |
|
2,594 |
| ||||
General and administrative |
|
16,570 |
|
13,255 |
|
58,891 |
|
53,418 |
| ||||
Founder special compensation |
|
|
|
|
|
17,914 |
|
10,202 |
| ||||
Offering-related expenses |
|
603 |
|
|
|
8,833 |
|
|
| ||||
Contract modification expense |
|
|
|
|
|
17,800 |
|
|
| ||||
Interest expense |
|
509 |
|
579 |
|
2,237 |
|
2,323 |
| ||||
Total expenses |
|
31,717 |
|
23,801 |
|
153,210 |
|
103,005 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
|
11,309 |
|
13,477 |
|
1,317 |
|
25,498 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income taxes: |
|
|
|
|
|
|
|
|
| ||||
Current tax expense |
|
7,009 |
|
412 |
|
11,514 |
|
4,845 |
| ||||
Deferred tax benefit |
|
(2,547 |
) |
(861 |
) |
(21,210 |
) |
(2,058 |
) | ||||
|
|
4,462 |
|
(449 |
) |
(9,696 |
) |
2,787 |
| ||||
Net income |
|
$ |
6,847 |
|
$ |
13,926 |
|
$ |
11,013 |
|
$ |
22,711 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net income per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
| ||||
Basic earnings per share |
|
$ |
0.15 |
|
$ |
0.41 |
|
$ |
0.28 |
|
$ |
0.66 |
|
Diluted earnings per share |
|
0.15 |
|
0.41 |
|
0.28 |
|
0.66 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Pro Forma: |
|
|
|
|
|
|
|
|
| ||||
Income taxes expense |
|
$ |
4,364 |
|
$ |
5,140 |
|
$ |
493 |
|
$ |
9,725 |
|
Net income |
|
6,945 |
|
8,337 |
|
824 |
|
15,773 |
| ||||
Basic earnings per share |
|
0.16 |
|
0.24 |
|
0.02 |
|
0.46 |
| ||||
Diluted earnings per share |
|
0.16 |
|
0.24 |
|
0.02 |
|
0.46 |
|
Program Services Segment Results of Operations
Unaudited
|
|
Three Months Ended |
|
Years Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
($ in thousands) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Premiums earned |
|
$ |
11 |
|
$ |
35 |
|
$ |
(4 |
) |
$ |
(501 |
) |
Ceding fees |
|
12,707 |
|
10,407 |
|
45,732 |
|
32,898 |
| ||||
Other income |
|
|
|
3 |
|
|
|
3 |
| ||||
Total revenues |
|
12,718 |
|
10,445 |
|
45,728 |
|
32,400 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
Losses and loss adjustment expenses |
|
104 |
|
324 |
|
217 |
|
465 |
| ||||
Commissions |
|
3 |
|
6 |
|
2 |
|
389 |
| ||||
Taxes, licenses, and fees |
|
5 |
|
8 |
|
8 |
|
10 |
| ||||
General and administrative |
|
2,853 |
|
2,838 |
|
10,855 |
|
11,010 |
| ||||
Total expenses |
|
2,965 |
|
3,176 |
|
11,082 |
|
11,874 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before income taxes |
|
$ |
9,753 |
|
$ |
7,269 |
|
$ |
34,646 |
|
$ |
20,526 |
|
|
|
|
|
|
|
|
|
|
| ||||
Program gross expense ratio |
|
1.3 |
% |
1.3 |
% |
1.2 |
% |
1.6 |
% | ||||
Gross premiums written |
|
$ |
216,241 |
|
$ |
225,473 |
|
$ |
909,501 |
|
$ |
691,067 |
|
Gross premiums earned |
|
$ |
222,941 |
|
$ |
183,223 |
|
$ |
815,189 |
|
$ |
562,965 |
|
Lender Services Segment Results of Operations
Unaudited
|
|
Three Months Ended |
|
Years Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
($ in thousands) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Premiums earned |
|
$ |
27,054 |
|
$ |
23,910 |
|
$ |
96,654 |
|
$ |
84,879 |
|
Commission income |
|
366 |
|
537 |
|
1,533 |
|
2,031 |
| ||||
Other income |
|
328 |
|
304 |
|
1,266 |
|
1,101 |
| ||||
Total revenues |
|
27,748 |
|
24,751 |
|
99,453 |
|
88,011 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
Losses and loss adjustment expenses |
|
11,708 |
|
8,573 |
|
40,604 |
|
31,625 |
| ||||
Commissions |
|
1,441 |
|
239 |
|
3,880 |
|
1,989 |
| ||||
Taxes, licenses, and fees |
|
774 |
|
817 |
|
2,824 |
|
2,584 |
| ||||
General and administrative |
|
10,238 |
|
8,705 |
|
38,995 |
|
36,020 |
| ||||
Contract modification expense |
|
|
|
|
|
17,800 |
|
|
| ||||
Total expenses |
|
24,161 |
|
18,334 |
|
104,103 |
|
72,218 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes |
|
$ |
3,587 |
|
$ |
6,417 |
|
$ |
(4,650 |
) |
$ |
15,793 |
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted pre-tax income |
|
$ |
3,587 |
|
$ |
6,417 |
|
$ |
13,150 |
|
$ |
15,793 |
|
Reconciliation of adjusted pre-tax income: |
|
|
|
|
|
|
|
|
| ||||
Pre-tax income (loss) |
|
3,587 |
|
6,417 |
|
(4,650 |
) |
15,793 |
| ||||
Plus: Contract modification expense (1) |
|
|
|
|
|
17,800 |
|
|
| ||||
Adjusted pre-tax income |
|
$ |
3,587 |
|
$ |
6,417 |
|
$ |
13,150 |
|
$ |
15,793 |
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss ratio |
|
43.3 |
% |
35.9 |
% |
42.0 |
% |
37.3 |
% | ||||
Net expense ratio |
|
46.0 |
% |
40.8 |
% |
47.3 |
% |
47.8 |
% | ||||
Net combined ratio |
|
89.3 |
% |
76.7 |
% |
89.3 |
% |
85.1 |
% | ||||
|
|
|
|
|
|
|
|
|
| ||||
Gross premiums written |
|
$ |
34,646 |
|
$ |
37,961 |
|
$ |
124,624 |
|
$ |
118,898 |
|
Net premiums written |
|
$ |
29,292 |
|
$ |
27,563 |
|
$ |
99,079 |
|
$ |
87,791 |
|
(1) In connection with the amendment to the alliance agreements with CUNA Mutual, we paid CUNA Mutual $17.8 million. As a result, we recorded non-recurring contract modification expense of $17.8 million.
Corporate Segment Results of Operations
Unaudited
|
|
Three Months Ended |
|
Years Ended |
| ||||||||
|
|
December 31, |
|
December 31, |
| ||||||||
($ in thousands) |
|
2014 |
|
2013 |
|
2014 |
|
2013 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Revenues: |
|
|
|
|
|
|
|
|
| ||||
Net investment income |
|
$ |
1,440 |
|
$ |
1,235 |
|
$ |
4,841 |
|
$ |
4,901 |
|
Realized net investment gains |
|
125 |
|
434 |
|
1,311 |
|
1,764 |
| ||||
Other income |
|
995 |
|
413 |
|
3,194 |
|
1,427 |
| ||||
Total revenues |
|
2,560 |
|
2,082 |
|
9,346 |
|
8,092 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Expenses: |
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
3,479 |
|
1,712 |
|
9,041 |
|
6,388 |
| ||||
Founder special compensation |
|
|
|
|
|
17,914 |
|
10,202 |
| ||||
Offering-related expenses |
|
603 |
|
|
|
8,833 |
|
|
| ||||
Interest expense |
|
509 |
|
579 |
|
2,237 |
|
2,323 |
| ||||
Total expenses |
|
4,591 |
|
2,291 |
|
38,025 |
|
18,913 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before income taxes |
|
(2,031 |
) |
(209 |
) |
(28,679 |
) |
(10,821 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax expense (benefit) |
|
4,462 |
|
(449 |
) |
(9,696 |
) |
2,787 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
|
$ |
(6,493 |
) |
$ |
240 |
|
$ |
(18,983 |
) |
$ |
(13,608 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Adjusted pre-tax income (loss) |
|
(1,428 |
) |
(209 |
) |
(1,932 |
) |
(619 |
) | ||||
Reconciliation of adjusted pre-tax income (loss): |
|
|
|
|
|
|
|
|
| ||||
Pre-tax income (loss) |
|
(2,031 |
) |
(209 |
) |
(28,679 |
) |
(10,821 |
) | ||||
Plus: Founder special compensation (1) |
|
|
|
|
|
17,914 |
|
10,202 |
| ||||
Plus: Offering-related expenses (2) |
|
603 |
|
|
|
8,833 |
|
|
| ||||
Pre-tax income (loss) |
|
$ |
(1,428 |
) |
$ |
(209 |
) |
$ |
(1,932 |
) |
$ |
(619 |
) |
(1) During the periods presented, we made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company. We refer to these payments as Founder special compensation. Following the completion of the private placement, we ceased paying Founder special compensation.
(2) Offering-related expenses are non-recurring expenses related to the Companys private placement of common stock.
###
Exhibit 99.2
|
DATA SHEET MARCH 2015 STATE NATIONAL COMPANIES CUSTOMIZED SOLUTIONS. QUALITY SERVICE. NASDAQ: SNC State National Companies, Inc. is a leading specialty provider of property and casualty insurance operating in two niche markets across the United States. In its Program Services segment, the company leverages its A (Excellent) A.M. Best rating, expansive licenses and reputation to provide access to the U.S. property and casualty insurance market in exchange for a ceding fee. In its Lender Services segment, the Company specializes in providing Collateral Protection Insurance (CPI), which insures personal autos held as collateral for loans made by credit unions, banks and specialty finance companies. INVESTMENT HIGHLIGHTS Unique business model with mid to high-teen Adjusted ROE Favorable conditions for growth as alternative reinsurance markets expand Significant barriers to entry with limited competition Strong capital base with limited underwriting exposure Experienced management team with significant ownership Collateral held is ~163% of secured reinsurance recoverables and has never had an unpaid reinsurance recoverable Low combined ratio and low volatility for the CPI product BUSINESS OVERVIEW We are a specialty insurance business that operates in two distinct segments: Program Services provides fronting to general agents and insurance carriers that lack an A.M. Best rating or licenses and who, in turn, pay us a 5%6% fronting fee. Lender Services provides Collateral Protection Insurance (CPI) to lending institutions to insure vehicles when borrowers fail to maintain insurance coverage. We have produced a 25+ year track record of profitability and have held an A rating from A.M. Best since 1993 when we first became eligible for a rating. Since being founded in 1973 by the Ledbetter family, we have grown our business organically and through opportunistic transactions. Recently, we have developed significant new relationships, including Nephila and Meadowbrook, and have favorably restructured our alliance with CUNA Mutual. COMPETITIVE ADVANTAGE Operates a very capital efficient business model: over 70% of our adjusted pre-tax income is from our fee-based Program Services business for the year ended December 31, 2014 Produced a very attractive Adjusted Return on Equity of 14.9% for the year ended December 31, 2014 Has established a strong market position over the last 40 years Maintains a cash and investment portfolio of ~$351 million with typically more than 70% of fixed maturities rated AA- or higher SIGNIFICANT BARRIERS TO ENTRY Long-Term Relationships Numerous producer and capacity provider relationships; Over 600 Lender Services clients, CUNA Mutual alliance; A.M. Best Extensive Credit and Underwriting Expertise Methodologies built since 1970s; Historically profitable across market cycles Strong Track Record Approximately $11B of premium ceded with no reinsurance recoverable losses; 25+ year track record of profitability; A rating from A.M. Best since 1993 Proprietary Lender Services Technology InsurTrak, an organically grown and proprietary insurance tracking system; Built and maintained internally; Developed over the last 30 years PROGRAM SERVICES SEGMENT Industry leader; we are the only significant company in the insurance industry where fronting is a dedicated business: rapidly becoming an active conduit for alternative reinsurance capital Generally we retain no risk other than the solvency of the reinsurer Disciplined credit underwriting process, which has allowed us to cede approximately $11B in premium in the last 26 years with no reinsurance recoverable losses Diverse and growing customer base; we have long-standing relationships combined with significant new customers We dont compete with our fee-for-service fronting clients GROSS PREMIUM WRITTEN NET PREMIUMS EARNED CEDING FEES 2014 $909.5 mm No retention of underwriting risk $45.7 mm 2013 $691.1 mm $32.9 mm Growth 31.6% 38.9% Q4 2014 $216.2 mm $12.7 mm Q4 2013 $225.5 mm $10.4 mm Growth -4.1% 22.1% LENDER SERVICES SEGMENT Diverse customer relationships; we have over 600 CPI clients and are tracking 5.8 million loans Experiencing significant new account sales and organic growth at the individual account level with increasing automobile sales Experiencing increased credit availability resulting in increased portfolio penetration Renewed our alliance with CUNA Mutual for an additional 4 years and moved from 50% retention of the CUNA business to 70% beginning July 1, 2014, which immediately improved the predictable earnings in our CPI business NET WRITTEN PREMIUM NET PREMIUM EARNED 2014 $99.1 mm $96.7 mm 2013 $87.8 mm $84.9 mm Growth 12.9% 13.9% Q4 2014 $29.3 mm $27.1 mm Q4 2013 $27.6 mm $23.9 mm Growth 6.2% 13.4% STATENATIONAL.COM |
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STOCK DATA (AS OF MARCH 18, 2015) FISCAL YEAR-END: 31-DEC 52-Week Range: $8.95 - $13.13 Shares Outstanding: 44.3 mm Market Capitalization: $486.7 mm Total Enterprise Value (TEV): $445.7 mm Average Daily Volume (L3M): 167,867 FINANCIAL DATA 12/31/2014 12/31/2013 Total Cash: $38.3 mm $69.4 mm Total Debt: $44.5 mm $52.0 mm Total Stockholders Equity: $240.6 mm $145.4 mm 4Q14 4Q13 Ceding Fees: $12.7 mm $10.4 mm Premiums Earned: $27.1 mm $23.9 mm $ 0$ 5% 10% 15% 20% 20122013201413.9% 15.4%14.9% ADJUSTED AFTER-TAX RETURN ON EQUITY$ 0$ 5$ 10$ 15$ 20$ 25$ 30$19.7$22.1$28.7ADJUSTED NET INCOME ($ IN MM) $ 0.00$ 0.20$ 0.40$ 0.60$ 0.80$ 1.002014$0.18$0.24$0.14$0.622014 ADJUSTED EARNING PER SHARE (DILUTED) 30% YoY growth201220132014$0.17Q4Q2Q1Q3 $ 0$ 5% 10% 15% 20% 20122013201413.9% 15.4%14.9% ADJUSTED AFTER-TAX RETURN ON EQUITY$ 0$ 5$ 10$ 15$ 20$ 25$ 30$19.7$22.1$28.7ADJUSTED NET INCOME ($ IN MM) $ 0.00$ 0.20$ 0.40$ 0.60$ 0.80$ 1.002014$0.18$0.24$0.14$0.622014 ADJUSTED EARNING PER SHARE (DILUTED) 30% YoY growth201220132014$0.17Q4Q2Q1Q3 $ 0$ 200$ 400$ 600$ 800$ 1000$ 1200201220132014$634.8$810.0$1,034.1GROSS PREMIUM WRITTEN ($ IN MM) 28% YoY growth0% 5% 10% 15% 20% 20122013201413.9% 15.4%14.9% ADJUSTED AFTER-TAX RETURN ON EQUITY$ 0$ 5$ 10$ 15$ 20$ 25$ 30$19.7$22.1$28.7ADJUSTED NET INCOME ($ IN MM) $ 0.00$ 0.20$ 0.40$ 0.60$ 0.80$ 1.002014$0.18$0.24$0.14$0.622014 ADJUSTED EARNING PER SHARE (DILUTED) 30% YoY growth201220132014$0.17Q4Q2Q1Q3 Reconciliations to adjusted numbers can be found on page 3 of this document. READER ADVISORY AND FORWARD LOOKING STATEMENTS This Data Sheet is presented as a brief company overview for the information of investors, analysts and other parties with an interest in the Company. State National Companies management hopes that this Data Sheet will encourage analysts and investors to investigate more about the Company through its Securities and Exchange Commission (SEC) filings, press releases and other public materials. This Data Sheet does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company. This Data Sheet contains certain forward-looking statements regarding the companys strategy, initiatives and expected performance. These statements are based on the companys current expectations as to the outcome and timing of future events. All statements, other than statements of historical facts, including all statements regarding the companys strategy, initiatives and future performance, that address activities or results that the company plans, expects, believes, projects, estimates or anticipates will, should or may occur in the future, including future financial or operating results, are forward-looking statements. Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of uncertainties and other factors, including operating risks, liquidity risks, legislative or regulatory developments, market factors or current or future litigation. State National Companies filings with the Securities and Exchange Commission can be obtained at no charge at www.sec.gov, as well as through our website at www.statenational.com. This Data Sheet does not purport to be all-inclusive or to contain all of the information that a reader may desire regarding the structure or the affairs of the Company. The information contained in this Data Sheet is only current as of March 19, 2015 and the Company undertakes no obligation to update this Data Sheet. 1900 L. Don Dodson Drive Bedford, Texas 76021 Phone 800.877.4567 www.statenational.com Investor Relations Contact: Rick Black Dennard Lascar Associates, LLC 713.529.6600 rblack@dennardlascar.com 3/2015 |
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ADJUSTED NET INCOME YEAR ENDED DECEMBER 31, 2014 2013 2012 Adjusted net income $ 28,683 $ 22,084 $ 19,651 RECONCILIATION OF ADJUSTED NET INCOME: Net income $ 11,013 $ 22,711 $ 15,882 Plus (less): Provision for income taxes to reflect change to C corporation status (4) 4,090 (6,938) (2,980) Less: Recognition of deferred tax asset upon conversion to C corporation (5) 14,279 -- -- Plus: Founder special compensation (1) (6) 11,203 6,311 6,749 Plus: Offering-related expenses (2) (6) 5,524 -- -- Plus: Contract modification expense (3) (6) 11,132 -- -- Adjusted net income $ 28,683 $ 22,084 $ 19,651 ADJUSTED DILUTED EARNINGS PER SHARE QUARTER ENDED YEAR ENDED YEAR ENDED 3/31/14 6/30/14 9/30/14 12/31/14 12/31/13 12/31/12 Adjusted diluted earnings per share $ 0.14 $ 0.24 $ 0.17 $ 0.18 $ 0.65 $ 0.57 RECONCILIATION OF ADJUSTED DILUTED EARNINGS PER SHARE: Net income $ (0.10) $ 0.02 $ 0.16 $ 0.15 $ 0.66 $ 0.46 Plus (less): Provision for income taxes to reflect change to C corporation status (4) 0.06 0.05 0.01 -- (0.19) (0.09) Less: Recognition of deferred tax asset upon conversion to C corporation (5) -- 0.42 -- -- -- -- Plus: Founder special compensation (1) (6) 0.18 0.14 -- 0.01 0.18 0.20 Plus: Offering-related expenses (2) (6) -- 0.13 -- 0.01 -- -- Plus: Contract modification expense (3) (6) -- 0.32 -- 0.01 -- -- Adjusted diluted earnings per share $ 0.14 $ 0.24 $ 0.17 $ 0.18 $ 0.65 $ 0.57 ADJUSTED RETURN ON EQUITY YEAR ENDED DECEMBER 31, 2014 2013 2012 Adjusted return on equity 14.9% 15.4% 13.9% RECONCILIATION OF ADJUSTED RETURN ON EQUITY: Net income 5.7% 15.8% 11.3% Plus (less): Provision for income taxes to reflect change to C corporation status (4) 2.1% (4.8)% (2.1)% Less: Recognition of deferred tax asset upon conversion to C corporation (5) 7.4% -- -- Plus: Founder special compensation (1) (6) 5.8% 4.4% 4.8% Plus: Offering-related expenses (2) (6) 2.9% -- -- Plus: Contract modification expense (3) (6) 5.8% -- -- Adjusted return on equity 14.9% 15.4% 13.9% (1) During the periods presented, we made special compensation payments to our co-founders and principal executive officers, Lonnie Ledbetter and Terry Ledbetter in recognition of their service to our Company. We refer to these as founder special compensation. Following the completion of the private placement, we ceased paying founder special compensation. (2) Offering-related expenses are non-recurring expenses related to the Companys private placement of common stock. (3) In connection with the 2014 amendment to the alliance agreement with CUNA Mutual, we paid CUNA Mutual $17.8 million. As a result, we recorded non-recurring contract modification expense of $17.8 million. (4) Upon the completion of the private placement, our parent companys status as a Subchapter S corporation terminated and our consolidated income became fully subject to U.S. federal income taxes. This adjustment represents estimated income taxes as if the Company had been treated as a C Corporation for each period presented. The estimated tax was calculated assuming the Companys blended statutory federal and state income tax rates of 37.5% for the year ended December 31, 2014 and 38.1% for the year ended December 31, 2013, respectively. (5) As a result of the Companys conversion to a C Corporation, the deferred tax asset increased by approximately $14.3 million primarily due to the effects of eliminating deferred tax balances on the insurance subsidiaries related to intercompany transactions. This excludes the tax effect related to contract modification expense of $6.7 million. (6) Founder special compensation, offering-related expenses, and contract modification expense are shown net of the estimated tax benefit for each period presented. The estimated tax was calculated assuming the Companys blended statutory federal and state income tax rates of 37.5% and 38.1% for the periods ended December 31, 2014 and 2013, respectively. STATENATIONAL.COM |
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