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News and Information Article
Premiums increase 58% and net income increases over 400% against the
comparable year-earlier results.
FARMINGTON, Conn., Aug. 10 /-FirstCall/ -- Darwin
Professional Underwriters, Inc. (Darwin, the "Company", or "Our") (NYSE:
DR) today announced its financial results for the quarter ended June 30,
2006. Highlights for the second quarter and year-to-date include:
-- Gross premiums written during the second quarter were $58.1 million,
bringing year-to-date total writings to $117.9 million. Gross premiums
this quarter were 58.4% in excess of the comparable 2005 quarter, and
year to date writings are 67.3% ahead of our writings for the same
period a year ago.
-- Second quarter 2006 net income of $3.4 million represents a 429%
increase over the $0.6 million net income earned in the quarter ended
June 30, 2005. The comparable six-month figures are $6.2 million for
the six months ended June 30, 2006 compared to $1.1 million for the
same period in 2005, a 480% increase.
-- Overall, the combined ratio was 96.3% for the second quarter, which
compares favorably to 98.3% for the comparable 2005 quarter. The
combined ratio improvement was driven by decreases in both the loss
ratio (0.8% improvement to 68.1%) and the expense ratio (1.2%
improvement to 28.2%) for the quarter. The loss ratio improvement
includes approximately $0.8 million in favorable loss reserve
development ($0.5 million, net of tax) stemming from the 2003 accident
year. The improvement in the expense ratio was due to the spreading of
general and administrative costs over a larger premium base, but was
offset by approximately $0.5 million in one-time expenses ($0.3
million, net of tax) incurred with the issuance of restricted stock to
certain employees.
-- The year to date combined ratio was 96.4% in 2006 as compared to 97.8%
for the comparable period in 2005. Improvements in the loss ratio
(0.2%) and the expense ratio (1.2%) were the reasons for the combined
ratio improvement.
-- Annualized return on equity was 6.2% for the six months ended June 30,
2006, and shareholders equity grew 2.4% during the six months, from
$197.4 million at December 31, 2005 to $203.1 million at June 30,
2006.
-- Earnings per diluted share were $0.37 for the first six months of
2006. As earnings per diluted share were $0.17 in the first quarter of
2006, the current quarter activity yields an increase of $0.20 to
earnings per diluted share. Due to the anti-dilutive effect of a
preferred stock dividend paid in the second quarter, Darwins stand-
alone earnings per diluted share for the second quarter are $0.10. The
stand-alone first and second quarter fully-diluted EPS figures ($0.17
and $0.10, respectively) do not sum to the year-to-date figure of
$0.37 per share as the preferred dividend issued in the second quarter
is not anti-dilutive on a year-to-date basis.
For the quarter ended June 30, 2006, the break down of gross premiums
written by business line is as follows: medical malpractice liability --
$21.6 million; errors and omissions ("E&O") liability -- $24.5 million; and
directors and officers ("D&O") liability -- $12.0 million. For the
six-month period, the comparable figures are $42.4 million, $55.3 million
and $20.2 million for medical malpractice, E&O and D&O, respectively.
During the quarter, the Company also successfully completed its initial
public offering of common stock in May 2006. With exercise of the
underwriters over-allotment option, 6.0 million shares were sold at an
offering price of $16.00 per share. Net proceeds of the offering were used
to retire the Companys outstanding shares of Series A Preferred Stock and
Series C Preferred Stock and to redeem a portion of the outstanding shares
of Series B Convertible Preferred Stock, with the remainder of the Series B
Convertible Preferred Stock converted to common stock. Alleghany
Corporations ownership stake was reduced to 55% post offering.
Stephen Sills, Darwins president and chief executive officer,
commented, "as we said at the time of our offering, we believe that there
is ample opportunity in the specialty markets for a company with the right
people, approach and execution. The results we are announcing today
evidence that we are capitalizing on the opportunity."
The management of Darwin Professional Underwriters will hold a
conference call to discuss this press release this morning, August 10,
2006, at 9:00 a.m. eastern time. The live webcast of Darwins earnings
conference call can be accessed through Darwins web site at
http://investor.darwinpro.com. Analysts and investors interested in
participating in the live conference call should contact Jack Sennott
(860-284-1918) or Drake Manning (860-284-1500) to obtain dial in and
participant pass-code information.
The webcast version of the conference call will be archived on Darwins
web site following the date of the event. A telephonic replay of the
earnings conference call will be available shortly after the conclusion of
the call on August 10, 2006. To access the telephonic replay, domestic
callers may dial 888-286-8010 (international callers dial 617-801-6888) and
enter pass-code 20479384. The telephonic replay will be available until
August 17, 2006.
Certain matters discussed in this release are forward-looking
statements, including but not limited to the Companys expectations of
operating results for 2006. Such statements involve risks and uncertainties
that could cause actual results to differ materially from those in the
forward-looking statements. Potential risks and uncertainties include the
accuracy of assumptions underlying the Companys outlook and other risks
described in the Companys filings with the Securities and Exchange
Commission, including the Companys Registration Statement on Form S-1, as
amended. These forward- looking statements represent the Companys judgment
as of the date of this release. The Company disclaims any intent or
obligation to update these forward-looking statements.
About Darwin Professional Underwriters, Inc.
Darwin is a specialty insurance group based in Farmington, Connecticut.
The company is focused on the professional liability insurance market and
underwrites directors and officers ("D&O") liability for public and private
companies, errors and omissions ("E&O") liability insurance, and medical
malpractice liability insurance. Darwin member companies include Darwin
Professional Underwriters, Inc., Darwin National Assurance Company (DNA),
and Darwin Select Insurance Company (DSI). DNA and DSI have earned a
financial strength rating of "A- (Excellent)" from A.M. Best Company.
Darwin is traded on the NYSE Arca exchange under the ticker symbol, "DR."
The company became
NYSE Arcas first listed company with its initial public offering on
May 19, 2006.
Additional information concerning Darwin, its finances and business
operations can be found in the quarterly report on Form 10-Q for the June
30, 2006 quarter which is being filed with the SEC today.
For more information about Darwin, visit http://www.darwinpro.com.
Darwin Professional Underwriters, Inc. and Subsidiaries
Consolidated Statements of Operations Data
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Gross premiums written $58,064 $36,655 117,948 $70,520
Net premiums written $36,420 $20,818 $73,208 $41,359
Revenues:
Net premiums earned $31,954 $19,945 $59,258 $38,689
Net investment income 3,763 931 7,123 1,563
Net realized investment
gains (losses) (3) --- (13) (60)
Total revenues 35,714 20,876 66,368 40,192
Costs and expenses:
Losses and loss
adjustment expenses 21,767 13,733 41,031 26,845
Commissions and brokerage
expenses 3,356 2,283 5,988 4,374
Other underwriting,
acquisition and operating
expenses 5,633 3,599 10,112 6,631
Other expenses 119 297 278 654
Total costs and
expenses 30,875 19,912 57,409 38,504
Earnings before income taxes 4,839 964 8,959 1,688
Income tax expense 1,462 326 2,794 626
Net earnings $3,377 $638 $6,165 $1,062
Basic earnings per share:
Net earnings per share $0.13 $0.10 $1.04 $0.16
Weighted average shares
outstanding 7,094,352 6,600,000 3,547,176 6,600,000
Diluted earnings per share:
Net earnings per share $0.10 $0.08 $0.37 $0.13
Weighted average shares
outstanding 8,719,928 8,119,224 16,535,853 8,133,049
Combined ratio:
Loss ratio 68.1% 68.9% 69.2% 69.4%
Expense ratio 28.2% 29.4% 27.2% 28.4%
Combined ratio 96.3% 98.3% 96.4% 97.8%
Darwin Professional Underwriters, Inc. and Subsidiaries
Selected Supplemental Balance Sheet Data
June 30, 2006 and December 31, 2005
(Dollars in thousands, except per share amounts)
June 30, December 31,
2006 2005
(Unaudited)
ASSETS:
Available for sale securities, at fair value:
Fixed maturity securities (amortized cost:
2006, $260,278; 2005, $120,832) $255,877 $120,770
Short-term investments, at cost which
approximates fair value 81,940 184,088
Total investments 337,817 304,858
Cash 22,407 10,255
Premiums receivable (net of allowance for
doubtful accounts of $50 as of June 30, 2006
and December 31, 2005) 23,932 22,090
Reinsurance recoverable on paid and unpaid
losses 72,125 51,260
Ceded unearned reinsurance premiums 41,957 33,853
Deferred insurance acquisition costs 9,663 7,603
Property and equipment at cost, less
accumulated depreciation of $878 and $599,
respectively 1,940 1,880
Intangible assets 7,306 7,092
Net deferred income tax asset 9,471 6,278
Current income taxes receivable - 283
Other assets 3,263 1,539
Total assets $529,881 $446,991
LIABILITIES AND STOCKHOLDERS EQUITY:
Loss and loss adjustment expense reserves $195,914 $138,089
Unearned premium reserves 110,340 88,280
Reinsurance payable 13,305 10,628
Due to brokers for unsettled trades - 2,216
Current income taxes payable 769 -
Accrued expenses and other liabilities 6,413 8,255
Total liabilities 326,741 247,468
Series A Preferred Stock; $0.10 par value;
(Redeemable at $20.00 per share);
authorized 500,000 shares; issued and
outstanding 0 shares at June 30, 2006
and 105,300 shares at December 31, 2005.
Aggregate liquidation preference of $0
at June 30, 2006 and $2,106 at December
31, 2005 - 2,106
Stockholders equity:
Common stock; $0.01 par value; authorized
50,000,000 shares; issued and outstanding
17,042,596 shares at June 30, 2006 and
8,105,625 shares at December 31, 2005 170 81
Additional paid-in capital 201,997 195,950
Retained earnings 3,748 1,425
Accumulated other comprehensive income (loss) (2,775) (39)
Total stockholders equity 203,140 197,417
Total liabilities and stockholders
equity $529,881 $446,991
June 30, December 31, December 31,
2006 2005 2005
Book value per common share: Pro forma (2) Actual (1)
Book value per common share $ 11.92 $11.96 $401.87
Tangible book value per
common share $ 11.49 $11.53 $387.43
Annualized net income return
on average equity 6.2%
(1) Actual book value per share based on the 1,505,625 shares of
restricted common stock outstanding, prior to conversion of all of
the Series B Convertible Preferred Stock into 14,850,000 shares of
DPUI common stock.
(2) Pro forma book value per share gives effect to the conversion of all
of the Series B Convertible Preferred Stock into 14,850,000 shares
of DPUI common stock, issuance of 144,375 shares of restricted stock
immediately prior to the initial public offering and the 1,505,625
shares of restricted common stock outstanding.
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