Delaware
|
95-1935264
|
(State
or other jurisdiction of incorporation
or organization)
|
(I.R.S.
Employer Identification
No.)
|
6301
Owensmouth Avenue
|
|
Woodland
Hills, California
|
91367
|
(Address
of principal executive offices)
|
(Zip
Code)
|
(818)
704-3700
|
www.21st.com
|
(Registrant’s
telephone number, including
area code)
|
(Registrant’s
web site)
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Description
|
Page
Number
|
|
PART
I – FINANCIAL INFORMATION
|
||
Item
1.
|
2
|
|
Item
2.
|
15
|
|
Item
3.
|
31
|
|
Item
4.
|
32
|
|
PART
II – OTHER INFORMATION
|
||
Item
1.
|
33
|
|
Item
1A.
|
33
|
|
Item
6.
|
34
|
|
35
|
||
EXHIBIT
INDEX
|
36
|
|
31.1
|
Certification
of principal executive officer pursuant to Rule 13a-14(a) under
the
Securities
Exchange
Act of 1934
|
|
31.2
|
Certification
of principal financial officer pursuant to Rule 13a-14(a) under
the
Securities
Exchange
Act of 1934
|
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350
|
June
30,
|
December
31,
|
|||||||
AMOUNTS
IN THOUSANDS, EXCEPT SHARE DATA
|
2007
|
2006
|
||||||
Assets
|
||||||||
Investments
available-for-sale
|
||||||||
Fixed
maturity securities, at fair value (amortized cost: $1,427,975
and
$1,453,468)
|
$
|
1,398,237
|
$
|
1,435,016
|
||||
Other
long-term investments, equity method
|
18,440
|
14,705
|
||||||
Total
investments
|
1,416,677
|
1,449,721
|
||||||
Cash
and cash equivalents
|
89,578
|
51,999
|
||||||
Accrued
investment income
|
16,965
|
17,215
|
||||||
Premiums
receivable
|
112,993
|
110,115
|
||||||
Reinsurance
receivables and recoverables
|
6,411
|
6,338
|
||||||
Prepaid
reinsurance premiums
|
2,051
|
2,095
|
||||||
Deferred
income taxes
|
45,970
|
48,437
|
||||||
Deferred
policy acquisition costs
|
63,621
|
63,581
|
||||||
Leased
property under capital leases, net of deferred gain of $871 and
$1,092 and
net of accumulated amortization of $43,801 and $42,149
|
17,048
|
19,281
|
||||||
Property
and equipment, at cost less accumulated depreciation of $111,819
and
$104,279
|
153,608
|
154,966
|
||||||
Other
assets
|
33,070
|
27,949
|
||||||
Total
assets
|
$
|
1,957,992
|
$
|
1,951,697
|
||||
Liabilities
and stockholders’ equity
|
||||||||
Unpaid
losses and loss adjustment expenses
|
$
|
451,254
|
$
|
482,269
|
||||
Unearned
premiums
|
328,793
|
321,927
|
||||||
Debt
|
109,197
|
115,895
|
||||||
Claims
checks payable
|
41,155
|
42,931
|
||||||
Reinsurance
payable
|
636
|
680
|
||||||
Other
liabilities
|
94,575
|
89,446
|
||||||
Total
liabilities
|
1,025,610
|
1,053,148
|
||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Common
stock, par value $0.001 per share; 110,000,000 shares authorized;
shares
issued 88,102,464 and 86,489,082
|
88
|
86
|
||||||
Additional
paid-in capital
|
472,404
|
441,969
|
||||||
Treasury
stock; at cost shares: 33,841 and 17,328
|
(530 | ) | (259 | ) | ||||
Retained
earnings
|
495,168
|
484,539
|
||||||
Accumulated
other comprehensive loss
|
(34,748 | ) | (27,786 | ) | ||||
Total
stockholders’ equity
|
932,382
|
898,549
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
1,957,992
|
$
|
1,951,697
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS, EXCEPT SHARE DATA
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Revenues
|
||||||||||||||||
Net
premiums earned
|
$
|
334,424
|
$
|
325,512
|
$
|
663,706
|
$
|
651,336
|
||||||||
Net
investment income
|
17,582
|
17,174
|
34,507
|
34,929
|
||||||||||||
Other
income
|
—
|
10
|
—
|
10
|
||||||||||||
Net
realized investment gains (losses)
|
64
|
30
|
351
|
(1,037 | ) | |||||||||||
Total
revenues
|
352,070
|
342,726
|
698,564
|
685,238
|
||||||||||||
Losses
and expenses
|
||||||||||||||||
Net
losses and loss adjustment expenses
|
235,221
|
223,094
|
468,678
|
459,590
|
||||||||||||
Policy
acquisition costs
|
70,466
|
64,887
|
139,118
|
124,219
|
||||||||||||
Other
underwriting expenses
|
9,795
|
9,504
|
21,520
|
22,104
|
||||||||||||
Other
expense
|
2,436
|
923
|
6,613
|
923
|
||||||||||||
Interest
and fees expense
|
1,677
|
1,854
|
3,403
|
3,752
|
||||||||||||
Total
losses and expenses
|
319,595
|
300,262
|
639,332
|
610,588
|
||||||||||||
Income
before provision for income taxes
|
32,475
|
42,464
|
59,232
|
74,650
|
||||||||||||
Provision
for income taxes
|
9,637
|
14,143
|
18,048
|
25,011
|
||||||||||||
Net
income
|
$
|
22,838
|
$
|
28,321
|
$
|
41,184
|
$
|
49,639
|
||||||||
Earnings
per share:
|
||||||||||||||||
Basic
|
$
|
0.26
|
$
|
0.33
|
$
|
0.47
|
$
|
0.58
|
||||||||
Diluted
|
$
|
0.25
|
$
|
0.33
|
$
|
0.46
|
$
|
0.57
|
||||||||
Cash
dividends declared per share
|
$
|
0.16
|
$
|
0.08
|
$
|
0.32
|
$
|
0.16
|
||||||||
Weighted-average
shares outstanding:
|
||||||||||||||||
Basic
|
87,782,310
|
85,968,155
|
87,447,464
|
85,918,791
|
||||||||||||
Additional
common shares assumed issued under treasury stock method
|
1,888,961
|
263,948
|
1,475,742
|
455,054
|
||||||||||||
Diluted
|
89,671,271
|
86,232,103
|
88,923,206
|
86,373,845
|
Common
Stock
|
||||||||||||||||||||||||||||
$0.001
par
value
|
Accumulated
|
|||||||||||||||||||||||||||
AMOUNTS
IN THOUSANDS,
EXCEPT
SHARE DATA
|
Issued
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Treasury
Stock
|
Retained
Earnings
|
Other
Comprehensive
Loss
|
Total
|
|||||||||||||||||||||
Balance
– January 1, 2007
|
86,489,082
|
$
|
86
|
$
|
441,969
|
$
|
(259 | ) |
$
|
484,539
|
$
|
(27,786 | ) |
$
|
898,549
|
|||||||||||||
Cumulative
effect of adopting FIN 48
|
(2,422 | ) | (2,422 | ) | ||||||||||||||||||||||||
Adjusted
balance – January 1, 2007
|
86,489,082
|
$
|
86
|
$
|
441,969
|
$
|
(259 | ) |
$
|
482,117
|
$
|
(27,786 | ) |
$
|
896,127
|
|||||||||||||
Comprehensive
income (loss)
|
41,184 | (1) | (6,962 | )(2) |
34,222
|
|||||||||||||||||||||||
Cash
dividends declared on common stock
|
(28,133 | ) | (28,133 | ) | ||||||||||||||||||||||||
Exercise
of stock options
|
1,494,232
|
2
|
24,063
|
24,065
|
||||||||||||||||||||||||
Issuance
of restricted stock
|
119,150
|
—
|
||||||||||||||||||||||||||
Forfeiture
of 16,513 shares
of restricted
stock
|
271
|
(271 | ) |
—
|
||||||||||||||||||||||||
Stock-based
compensation cost
|
3,625
|
3,625
|
||||||||||||||||||||||||||
Excess
tax benefit of stock-based compensation
|
2,476
|
2,476
|
||||||||||||||||||||||||||
Balance
– June 30, 2007
|
88,102,464
|
$
|
88
|
$
|
472,404
|
$
|
(530 | ) |
$
|
495,168
|
$
|
(34,748 | ) |
$
|
932,382
|
(1)
|
Net
income for the six months ended June 30,
2007.
|
Six
Months Ended
|
|||||
(2)
|
Net
change in accumulated other comprehensive loss follows:
|
June
30, 2007
|
|||
Unrealized
holding losses arising during the period, net of tax benefit of
$3,957
|
$ | (7,350 | ) | ||
Reclassification
adjustment for investment losses included in net income, net of tax
expense of $8
|
14
|
||||
Amortization
of prior service cost and net actuarial loss on defined benefit plans,
net
of deferred tax expense of $201
|
374
|
||||
Total
net other comprehensive loss
|
$ | (6,962 | ) |
AMOUNTS
IN THOUSANDS, EXCEPT SHARE DATA
|
||||||||
Six
Months Ended June 30,
|
2007
|
2006
|
||||||
Operating
activities
|
||||||||
Net
income
|
$
|
41,184
|
$
|
49,639
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
12,742
|
13,304
|
||||||
Net
amortization of investment premiums and discounts
|
5,269
|
4,496
|
||||||
Stock-based
compensation cost
|
3,625
|
6,478
|
||||||
Provision
for deferred income taxes
|
4,816
|
9,431
|
||||||
Provision
for premiums receivable losses
|
1,086
|
1,151
|
||||||
Net
realized investment (gains) losses
|
(351 | ) |
1,037
|
|||||
Equity
loss of other long-term investment
|
187
|
—
|
||||||
Changes
in assets and liabilities
|
||||||||
Premiums
receivable
|
(3,964 | ) |
862
|
|||||
Deferred
policy acquisition costs
|
(40 | ) | (8,309 | ) | ||||
Reinsurance
receivables and recoverables
|
(73 | ) | (3 | ) | ||||
Federal
income taxes
|
2,285
|
2,786
|
||||||
Other
assets
|
(3,216 | ) | (1,866 | ) | ||||
Unpaid
losses and loss adjustment expenses
|
(31,015 | ) | (28,743 | ) | ||||
Unearned
premiums
|
6,866
|
1,490
|
||||||
Claims
checks payable
|
(1,776 | ) | (4,318 | ) | ||||
Other
liabilities
|
2,216
|
16,983
|
||||||
Net
cash provided by operating activities
|
39,841
|
64,418
|
||||||
Investing
activities
|
||||||||
Purchases
of:
|
||||||||
Fixed
maturity securities available-for-sale
|
(22,848 | ) | (180,179 | ) | ||||
Equity
securities available-for-sale
|
—
|
(35,627 | ) | |||||
Other
long-term investments, equity method
|
(4,045 | ) |
—
|
|||||
Property
and equipment
|
(8,570 | ) | (13,346 | ) | ||||
Maturities
and calls of fixed maturity securities available-for-sale
|
27,908
|
12,618
|
||||||
Sales
of:
|
||||||||
Fixed
maturity securities available-for-sale
|
15,142
|
55,346
|
||||||
Equity
securities available-for-sale
|
—
|
84,836
|
||||||
Other
long-term investments, equity method
|
123
|
—
|
||||||
Net
cash provided by (used in) investing activities
|
7,710
|
(76,352 | ) | |||||
Financing
activities
|
||||||||
Repayment
of debt
|
(7,359 | ) | (6,740 | ) | ||||
Dividends
paid (per share: $0.32 and $0.16)
|
(28,133 | ) | (13,763 | ) | ||||
Proceeds
from the exercise of stock options
|
24,065
|
3,844
|
||||||
Excess
tax benefit from stock-based compensation
|
1,455
|
113
|
||||||
Net
cash used in financing activities
|
(9,972 | ) | (16,546 | ) | ||||
Net
increase (decrease) in cash and cash equivalents
|
37,579
|
(28,480 | ) | |||||
Cash
and cash equivalents, beginning of period
|
51,999
|
68,668
|
||||||
Cash
and cash equivalents, end of period
|
$
|
89,578
|
$
|
40,188
|
||||
Supplemental
information:
|
||||||||
Income
taxes paid
|
$
|
11,555
|
$
|
12,863
|
||||
Interest
paid
|
3,321
|
3,682
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Common
stock equivalents excluded from calculation of diluted EPS
|
845,008
|
6,157,293
|
2,141,139
|
5,359,356
|
|
·
|
Expected
payment of equity awards of approximately $47.2 million, which will
reduce
stockholders’ equity on the date of
payment;
|
|
·
|
Accelerated
recognition of stock-based compensation of $2.7 million, which will
increase other expense and additional paid-in
capital;
|
|
·
|
Payment
of retention bonuses to certain employees of $2.1 million, including
$0.9
million of retention bonus that will be accelerated by the Merger
Agreement and borne by AIG; and
|
|
·
|
Payment
of supplemental employee retirement plan benefits of $14.5 million,
including $2.2 million that will be accelerated by the Merger Agreement
and borne by AIG.
|
June
30,
2007
|
December
31,
2006
|
|||||||
Net
unrealized losses on
available-for-sale investments, net of deferred income tax benefit
of $10,408 and
$6,458
|
$
|
(19,330 | ) |
$
|
(11,994 | ) | ||
Unamortized
prior service cost and net actuarial loss of defined benefit pension
plans, net of deferred income tax benefit of $8,302 and
$8,503
|
(15,418 | ) | (15,792 | ) | ||||
Total
accumulated other comprehensive loss
|
$
|
(34,748 | ) |
$
|
(27,786 | ) |
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Service
cost
|
$
|
1,771
|
$
|
1,693
|
$
|
3,542
|
$
|
3,565
|
||||||||
Interest
cost
|
2,105
|
1,898
|
4,210
|
3,869
|
||||||||||||
Expected
return on plan assets
|
(2,360 | ) | (2,112 | ) | (4,721 | ) | (4,220 | ) | ||||||||
Amortization
of prior service cost
|
36
|
39
|
72
|
73
|
||||||||||||
Amortization
of net loss
|
251
|
628
|
503
|
1,306
|
||||||||||||
Total
|
$
|
1,803
|
$
|
2,146
|
$
|
3,606
|
$
|
4,593
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS, EXCEPT PER SHARE DATA
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Net
losses and loss adjustment expenses
|
$
|
184
|
$
|
759
|
$
|
412
|
$
|
1,893
|
||||||||
Policy
acquisition costs
|
561
|
448
|
710
|
935
|
||||||||||||
Other
underwriting expenses
|
638
|
434
|
1,567
|
2,269
|
||||||||||||
Income
before provision for income taxes
|
(1,383 | ) | (1,641 | ) | (2,689 | ) | (5,097 | ) | ||||||||
Provision
for income taxes
|
311
|
288
|
666
|
1,045
|
||||||||||||
Net
income
|
$
|
(1,072 | ) |
$
|
(1,353 | ) |
$
|
(2,023 | ) |
$
|
(4,052 | ) | ||||
Basic
and diluted earnings per share
|
$
|
(0.01 | ) |
$
|
(0.02 | ) |
$
|
(0.02 | ) |
$
|
(0.05 | ) |
AMOUNTS
IN THOUSANDS, EXCEPT FOR PRICE DATA
|
Number
of
Options
|
Aggregate
Intrinsic
Value
|
Weighted-
Average
Exercise
Price
|
|||||||||
Outstanding
|
8,320
|
$
|
45,699
|
$
|
16.37
|
|||||||
Exercisable
|
6,739
|
36,220
|
16.48
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Fair
value of stock options granted
|
$
|
—
|
$
|
900
|
$
|
—
|
$
|
9,994
|
||||||||
Intrinsic
value of options exercised
|
941
|
266
|
7,510
|
483
|
||||||||||||
Grant
date fair value of options vested
|
967
|
884
|
7,614
|
7,399
|
||||||||||||
Proceeds
from exercise of stock options
|
2,911
|
3,126
|
23,992
|
3,844
|
||||||||||||
Tax
benefit realized as a result of stock option exercises
|
334
|
53
|
2,633
|
97
|
Homeowner
and
|
||||||||||||
Personal
|
Earthquake
|
|||||||||||
Auto
Lines
|
Lines
in Runoff
|
Total
|
||||||||||
Three
Months Ended June 30, 2007
|
||||||||||||
Net
premiums earned
|
$
|
334,424
|
$
|
—
|
$
|
334,424
|
||||||
Depreciation
and amortization expense
|
6,524
|
—
|
6,524
|
|||||||||
Segment
profit (loss)
|
19,108
|
(166 | ) |
18,942
|
||||||||
|
||||||||||||
Three
Months Ended June 30, 2006
|
||||||||||||
Net
premiums earned
|
$
|
325,512
|
$
|
—
|
$
|
325,512
|
||||||
Depreciation
and amortization expense
|
6,642
|
1
|
6,643
|
|||||||||
Segment
profit (loss)
|
28,293
|
(266 | ) |
28,027
|
||||||||
Six
Months Ended June 30, 2007
|
||||||||||||
Net
premiums earned
|
$
|
663,706
|
$
|
—
|
$
|
663,706
|
||||||
Depreciation
and amortization expense
|
12,741
|
1
|
12,742
|
|||||||||
Segment
profit (loss)
|
34,618
|
(228 | ) |
34,390
|
||||||||
Six
Months Ended June 30, 2006
|
||||||||||||
Net
premiums earned
|
$
|
651,336
|
$
|
—
|
$
|
651,336
|
||||||
Depreciation
and amortization expense
|
13,301
|
3
|
13,304
|
|||||||||
Segment
profit (loss)
|
45,765
|
(342 | ) |
45,423
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Segment
profit
|
$
|
18,942
|
$
|
28,027
|
$
|
34,390
|
$
|
45,423
|
||||||||
Net
investment income
|
17,582
|
17,174
|
34,507
|
34,929
|
||||||||||||
Other
income
|
—
|
10
|
—
|
10
|
||||||||||||
Net
realized investment gains (losses)
|
64
|
30
|
351
|
(1,037 | ) | |||||||||||
Other
expense
|
(2,436 | ) | (923 | ) | (6,613 | ) | (923 | ) | ||||||||
Interest
and fees expense
|
(1,677 | ) | (1,854 | ) | (3,403 | ) | (3,752 | ) | ||||||||
Consolidated
income before provision for income taxes
|
$
|
32,475
|
$
|
42,464
|
$
|
59,232
|
$
|
74,650
|
|
·
|
Overview
|
|
·
|
Results
of
Operations
|
|
·
|
Financial
Condition
|
|
·
|
Liquidity
and Capital
Resources
|
|
·
|
Contractual
Obligations and
Commitments
|
|
·
|
Critical
Accounting
Estimates
|
|
·
|
Recent
Accounting
Pronouncements
|
|
·
|
Forward-Looking
Statements
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
%
Change
’07
vs.‘06
|
2007
|
2006
|
%
Change
’07
vs.‘06
|
||||||||||||||||||
Direct
premiums written
|
$
|
323,122
|
$
|
316,838
|
2.0 | % |
$
|
673,652
|
$
|
655,406
|
2.8 | % | ||||||||||||
Net
premiums written
|
321,594
|
315,477
|
1.9
|
670,616
|
652,699
|
2.7
|
||||||||||||||||||
Net
premiums earned
|
$
|
334,424
|
$
|
325,512
|
2.7
|
$
|
663,706
|
$
|
651,336
|
1.9
|
||||||||||||||
Net
losses and loss adjustment expenses (“LAE”)
|
(235,221 | ) | (223,094 | ) |
5.4
|
(468,678 | ) | (459,590 | ) |
2.0
|
||||||||||||||
Underwriting
expenses
|
(80,261 | ) | (74,391 | ) |
7.9
|
(160,638 | ) | (146,323 | ) |
9.8
|
||||||||||||||
Underwriting
profit
|
$
|
18,942
|
$
|
28,027
|
(32.4 | ) |
$
|
34,390
|
$
|
45,423
|
(24.3 | ) |
|
·
|
California
direct premiums written decreased 12.5% to $251.4 million for the
quarter
ended June 30, 2007, compared to $287.4 million for the same period
in
2006.
|
|
·
|
Non-California
direct premiums written increased 143.4% to $71.7 million for the
quarter
ended June 30, 2007, compared to $29.4 million for the same period
in
2006.
|
|
·
|
Consolidated
combined ratio was 94.3% for the quarter ended June 30, 2007, versus
91.4%
for the same period in 2006. The consolidated combined ratios
for the three months ended June 30, 2007 and 2006 were both favorably
impacted by 5.6 points of prior accident year loss and LAE reserve
development.
|
|
·
|
California
direct premiums written decreased 11.4% to $531.0 million for the
six
months ended June 30, 2007, compared to $599.2 million for the same
period
in 2006.
|
|
·
|
Non-California
direct premiums written increased 153.9% to $142.7 million for the
six
months ended June 30, 2007, compared to $56.2 million for the same
period
in 2006.
|
|
·
|
Consolidated
combined ratio was 94.8% for the six months ended June 30, 2007,
versus
93.0% for the same period in 2006. 2007 was favorably impacted
by 5.5 points of prior accident year loss and LAE reserve development,
while 2006 was favorably impacted by 3.9 points of prior accident
year
development.
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||||||||||
AMOUNTS
IN THOUSANDS,
EXCEPT
SHARE DATA
|
2007
|
2006
|
%
Change
’07
vs.‘06
|
2007
|
2006
|
%
Change
’07
vs.‘06
|
||||||||||||||||||
Personal
auto lines underwriting profit
|
$
|
19,108
|
$
|
28,293
|
(32.5 | )% |
$
|
34,618
|
$
|
45,765
|
(24.4 | )% | ||||||||||||
Homeowner
and earthquake lines in runoff,
underwriting loss
|
(166 | ) | (266 | ) | (37.6 | ) | (228 | ) | (342 | ) | (33.3 | ) | ||||||||||||
Net
investment income
|
17,582
|
17,174
|
2.4
|
34,507
|
34,929
|
(1.2 | ) | |||||||||||||||||
Other
income
|
—
|
10
|
N/M1
|
—
|
10
|
N/M1
|
||||||||||||||||||
Net
realized investment gains (losses)
|
64
|
30
|
113.3
|
351
|
(1,037 | ) |
133.8
|
|||||||||||||||||
Other
expense
|
(2,436 | ) | (923 | ) |
163.9
|
(6,613 | ) | (923 | ) |
616.5
|
||||||||||||||
Interest
and fees expense
|
(1,677 | ) | (1,854 | ) | (9.5 | ) | (3,403 | ) | (3,752 | ) | (9.3 | ) | ||||||||||||
Provision
for income taxes
|
(9,637 | ) | (14,143 | ) | (31.9 | ) | (18,048 | ) | (25,011 | ) | (28.0 | ) | ||||||||||||
Net
income
|
$
|
22,838
|
$
|
28,321
|
(19.4 | ) |
$
|
41,184
|
$
|
49,639
|
(17.0 | ) | ||||||||||||
Basic
earnings per share
|
$
|
0.26
|
$
|
0.33
|
(21.2 | ) |
$
|
0.47
|
$
|
0.58
|
(19.0 | ) | ||||||||||||
Diluted
earnings per share
|
$
|
0.25
|
$
|
0.33
|
(24.2 | ) |
$
|
0.46
|
$
|
0.57
|
(19.3 | ) |
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Net
losses and LAE incurred related to insured events in:
|
||||||||||||||||
Current
accident year personal auto lines
|
$
|
253,905
|
$
|
241,215
|
$
|
505,245
|
$
|
484,726
|
||||||||
Prior
accident years:
|
||||||||||||||||
Personal
auto lines
|
(18,850 | ) | (18,387 | ) | (36,795 | ) | (25,479 | ) | ||||||||
Homeowner
and earthquake lines in runoff
|
166
|
266
|
228
|
343
|
||||||||||||
Total
prior years’ development recorded in current year
|
(18,684 | ) | (18,121 | ) | (36,567 | ) | (25,136 | ) | ||||||||
Total
net losses and LAE incurred
|
$
|
235,221
|
$
|
223,094
|
$
|
468,678
|
$
|
459,590
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||||||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||||||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
Change
’07
vs.‘06
|
%
Change
’07
vs.‘06
|
2007
|
2006
|
Change
’07
vs.‘06
|
%
Change
’07
vs.‘06
|
||||||||||||||||||||||||
Direct
premiums written
|
$
|
323,122
|
$
|
316,837
|
$
|
6,285
|
2.0 | % |
$
|
673,652
|
$
|
655,406
|
$
|
18,246
|
2.8 | % | ||||||||||||||||
Net
premiums written
|
$
|
321,594
|
$
|
315,476
|
$
|
6,118
|
1.9
|
$
|
670,616
|
$
|
652,700
|
$
|
17,916
|
2.7
|
||||||||||||||||||
Net
premiums earned
|
$
|
334,424
|
$
|
325,512
|
$
|
8,912
|
2.7
|
$
|
663,706
|
$
|
651,336
|
$
|
12,370
|
1.9
|
||||||||||||||||||
Net
losses and LAE
|
(235,055 | ) | (222,828 | ) |
12,227
|
5.5
|
(468,450 | ) | (459,248 | ) |
9,202
|
2.0
|
||||||||||||||||||||
Underwriting
expenses
|
(80,261 | ) | (74,391 | ) |
5,870
|
7.9
|
(160,638 | ) | (146,323 | ) |
14,315
|
9.8
|
||||||||||||||||||||
Underwriting
profit
|
$
|
19,108
|
$
|
28,293
|
$
|
(9,185 | ) | (32.5 | ) |
$
|
34,618
|
$
|
45,765
|
$
|
(11,147 | ) | (24.4 | ) | ||||||||||||||
Ratios:
|
||||||||||||||||||||||||||||||||
Loss
and LAE ratio
|
70.3 | % | 68.5 | % |
1.8
|
70.6 | % | 70.5 | % |
0.1
|
||||||||||||||||||||||
Underwriting
expense ratio
|
24.0
|
22.9
|
1.2
|
24.2
|
22.5
|
1.7
|
||||||||||||||||||||||||||
Combined
ratio
|
94.3 | % | 91.4 | % |
3.0
|
94.8 | % | 93.0 | % |
1.8
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Direct
premiums written
|
$
|
323,122
|
$
|
316,837
|
$
|
673,652
|
$
|
655,406
|
||||||||
Ceded
premiums written
|
(1,528 | ) | (1,361 | ) | (3,036 | ) | (2,706 | ) | ||||||||
Net
premiums written
|
321,594
|
315,476
|
670,616
|
652,700
|
||||||||||||
Net
change in unearned premiums
|
12,830
|
10,036
|
(6,910 | ) | (1,364 | ) | ||||||||||
Net
premiums earned
|
$
|
334,424
|
$
|
325,512
|
$
|
663,706
|
$
|
651,336
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Interest
on fixed maturity securities, at fair value
|
$
|
16,889
|
$
|
17,087
|
$
|
33,715
|
$
|
33,954
|
||||||||
Interest
on cash and cash equivalents
|
942
|
287
|
1,469
|
621
|
||||||||||||
Loss
from other long-term investments, equity method
|
—
|
—
|
(187 | ) |
—
|
|||||||||||
Dividends
on equity securities
|
—
|
—
|
—
|
811
|
||||||||||||
Total
investment income
|
17,831
|
17,374
|
34,997
|
35,386
|
||||||||||||
Investment
expense
|
(249 | ) | (200 | ) | (490 | ) | (457 | ) | ||||||||
Net
investment income
|
$
|
17,582
|
$
|
17,174
|
$
|
34,507
|
$
|
34,929
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Pre-tax
– fixed maturity securities
|
4.6 | % | 4.6 | % | 4.6 | % | 4.7 | % | ||||||||
After-tax
– fixed maturity securities
|
3.3 | % | 3.3 | % | 3.3 | % | 3.4 | % |
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
AMOUNTS
IN THOUSANDS
|
2007
|
2006
|
2007
|
2006
|
||||||||||||
Gross
realized gains
|
$
|
239
|
$
|
97
|
$
|
621
|
$
|
1,549
|
||||||||
Gross
realized losses
|
(175 | ) | (67 | ) | (270 | ) | (2,586 | ) | ||||||||
Net
realized gains (losses) on investments
|
$
|
64
|
$
|
30
|
$
|
351
|
$
|
(1,037 | ) |
June
30, 2007
|
December
31, 2006
|
|||||||||||||||
AMOUNTS
IN THOUSANDS
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||
Unpaid
losses and LAE
|
||||||||||||||||
Personal
auto lines
|
$
|
449,893
|
$
|
444,433
|
$
|
480,731
|
$
|
475,261
|
||||||||
Homeowner
and earthquake lines in runoff
|
1,361
|
680
|
1,538
|
808
|
||||||||||||
Total
|
$
|
451,254
|
$
|
445,113
|
$
|
482,269
|
$
|
476,069
|
|
·
|
Ongoing
costs to enhance our computer
software;
|
|
·
|
The
repayment of the $100 million principal on the Senior Notes due in
2013;
|
|
·
|
Related
interest on the Senior Notes above;
|
|
·
|
The
repayment of the $60 million term loan due to subsidiary;
and
|
|
·
|
Any
dividends to stockholders that our board of directors may
declare.
|
AMOUNTS
IN THOUSANDS
|
June
30,
2007
|
December
31,
2006
|
||||||
Stockholders’
equity – GAAP
|
$
|
932,382
|
$
|
898,549
|
||||
Condensed
adjustments to reconcile GAAP stockholders’ equity to statutory
surplus:
|
||||||||
Net
book value of fixed assets under capital leases
|
(17,919 | ) | (20,373 | ) | ||||
Deferred
loss (gain) under capital lease transactions
|
339
|
(79 | ) | |||||
Capital
lease obligation
|
9,280
|
15,985
|
||||||
Nonadmitted
net deferred tax assets
|
(16,724 | ) | (17,419 | ) | ||||
Difference
in net deferred tax assets reported under Statutory Accounting
Principles
|
21,557
|
24,200
|
||||||
Intercompany
receivables
|
(64,345 | ) | (11,488 | ) | ||||
Fixed
assets |