BEDFORD, Texas, May 10, 2017 /PRNewswire/ -- State National
Companies, Inc. (NASDAQ: SNC), a leading specialty provider of
property and casualty insurance services, today reported its
financial results for the first quarter ended March 31, 2017. The Company also raised its 2017
earnings per share outlook.
Key Highlights - First Quarter 2017 Financials Compared to
the First Quarter 2016:
- Total revenues were $59.0
million, up 18%
- Premiums earned were $36.5
million, an increase of 15%
- Ceding fees were $17.6 million,
up 9%
- Net income was $11.5 million, an
increase of 19 %
- EPS of $0.27, up from
$0.23
- EBITDA was $19.4 million, up
17%
Commenting on the results, State National's Chairman and Chief
Executive Officer, Terry Ledbetter,
said, "We generated strong growth in the first quarter in both
business segments compared to the prior year that led to increased
earnings and EBITDA. In Lender Services, premiums earned grew 15
percent in the first quarter and ceding fees in our Program
Services segment grew 9 percent for the quarter.
In early May, we were pleased to announce the addition of two
significant client relationships in Program Services that have
begun writing with us in the second quarter. These clients both
bring existing books of business to State National and together are
expected to produce annual premiums of approximately $200 million. Furthermore, we continue to see a
high level of Program Services activity in our sales pipeline as a
result of our increased sales efforts and the elevated profile of
State National in the marketplace."
In both Lender and Program Services, favorable industry trends
underscore our firm belief that we are well positioned for
continued growth and profitability," added Ledbetter.
Total revenues in the first quarter of 2017 were $59.0 million, up 18% from $50.1 million in the first quarter of 2016.
Net income was $11.5 million, or
$0.27 per diluted share, in the first
quarter of 2017, compared to net income of $9.7 million, or $0.23 per diluted share, for the same period in
2016. Realized investment gains were $1.9
million in the first quarter of 2017, up from a loss of
$0.6 million in the first quarter of
2016. The impact of the realized net investment gains and losses
(net of tax) for the first quarter of 2017 was $0.04 per diluted share.
Lender Services Segment
In Lender Services, the Collateral Protection Insurance, or CPI,
business is fully vertically integrated as State National manages
all aspects of the CPI business for its clients, including policy
issuance and administration, underwriting and claims, which we
believe is a competitive advantage in the marketplace.
Additionally, the Company differentiates itself from competitors by
establishing long-term relationships with clients and providing
high-quality service and advanced technology to more than 600
customers and tracking over 6 million loans as of March 31, 2017.
In the first quarter of 2017, net premiums written from the
Lender Services segment were $33.8
million, an increase of $6.8
million, or 25%, from the first quarter of 2016. Net
premiums earned were $36.5 million in
the first quarter of 2017, an increase of $4.8 million, or 15%, from the first quarter of
2016. Contributing to this increase in Lender Services premiums are
sales of new accounts and loan portfolio growth from existing
accounts driven by continued high levels of automobile sales,
rising average automobile loan sizes and an aging U.S. automobile
fleet.
Losses and loss adjustment expenses were $19.1 million in the first quarter of 2017,
compared to $14.6 million in the
same period last year. The loss ratio increased to 52% in the
first quarter of 2017, primarily related to increased claim
severity, which we expect to decrease throughout the remainder of
the year. The net expense ratio decreased to 39% in the first
quarter 2017 from 41% in the first quarter 2016, which resulted in
an increase in our net combined ratio for the quarter of 91%
compared to 87% in the same period of 2016. Our long-term objective
for our Lender Services business is to achieve a net combined ratio
of 85% to 90%.
Program Services Segment
The Program Services segment provides fronting to general agents
and insurance carriers to leverage State National's "A" (Excellent)
A.M. Best rating with its expansive licenses and trusted reputation
to provide access to the U.S. property and casualty insurance
market in exchange for ceding fees. State National issues the
policy, and the reinsurer assumes the risk.
In the first quarter of 2017, total revenues from the Program
Services segment were $17.6 million,
an increase of $1.4 million, or 9%,
from the first quarter of 2016. The growth in revenues was
driven by increased ceding fees from both new and existing client
programs.
General and Administrative Expenses
General and administrative expenses in the first quarter of 2017
increased to $19.1 million from
$17.0 million in the first quarter of
2016, reflecting investment in strategic growth and increased
consulting fees.
Balance Sheet
State National's balance sheet reflects low financial leverage
with only $43.8 million of
debt. This debt has limited covenant requirements and is
interest-only until the early to mid-2030s.
State National's investment portfolio has a short duration and
consists primarily of fixed income securities, the majority of
which have investment grade ratings. The portfolio is laddered to
allow for reinvestment of funds as rates change.
Approximately $2.4 billion of
State National's assets are comprised of reinsurance recoverables
that are primarily related to the Program Services segment.
Offsetting these recoverables are unpaid losses, loss adjustment
expenses and unearned premium liabilities for the same segment.
Recoverables of approximately $1.7
billion are secured by collateral held in trust funds for
our benefit or letters of credit. The remainder is ceded to
highly rated, well capitalized reinsurers.
2017 Outlook
State National is raising its 2017 outlook range for diluted
adjusted earnings per share to $1.18 to
$1.26 up from the Company's prior range of $1.13 to $1.21.
Conference Call
State National will host a conference call tomorrow,
May 11, 2017, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time) to discuss its first
quarter 2017 results. To access the call live, dial (412)
902-0030 and use the conference ID number 13660211# at least 10
minutes prior to the start time. Alternatively, investors can
listen live over the Internet by visiting the Company's website at
http://ir.statenational.com/. For those who cannot listen to
the live call, a telephonic replay will be available through
May 18, 2017 and may be accessed by
calling (201) 612-7415 and using pass code 13660211#. Also,
an archive of the webcast will be available after the call for at
least 90 days on the "Investor Relations" section of the Company's
website at http://www.statenational.com/.
Non-GAAP Reconciliation
The last page of this press release provides a reconciliation of
EBITDA, a non-GAAP financial measure, to net income, its most
directly comparable financial measure calculated and presented in
accordance with GAAP.
About State National Companies, Inc.
State National Companies, Inc. (NASDAQ: SNC) is a leading
specialty provider of property and casualty insurance services
operating in two niche markets across the
United States. 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. 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 ceding fees. To
learn more, please visit www.statenational.com. State
National routinely posts important Company information on its
website.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Various statements contained in this press release 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,"
"will," "plan," "target," "could" or other words that convey the
uncertainty of future events or outcomes.
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 collateral protection 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 that are difficult to predict, many of which are
beyond our control. Additional information about these risks and
uncertainties is contained 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
($ in
thousands, except for share and per share
information)
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2017
|
|
2016
|
|
Assets:
|
|
|
(unaudited)
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Fixed-maturity
securities – available-for-sale, at fair value (amortized cost
– $373,431, $329,994, respectively)
|
|
$
|
376,834
|
|
$
|
332,107
|
|
Equity
securities – available-for-sale, at fair value (cost –
$2,282, $3,271, respectively)
|
|
|
2,394
|
|
|
3,224
|
|
Total
investments
|
|
|
379,228
|
|
|
335,331
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
49,133
|
|
|
91,698
|
|
Restricted cash and
investments
|
|
|
4,003
|
|
|
2,958
|
|
Accounts receivable
from agents, net
|
|
|
75,377
|
|
|
35,964
|
|
Reinsurance
recoverable on paid losses
|
|
|
1,636
|
|
|
1,430
|
|
Deferred acquisition
costs
|
|
|
1,161
|
|
|
1,194
|
|
Reinsurance
recoverables
|
|
|
2,397,488
|
|
|
2,342,864
|
|
Property and
equipment, net (includes land held for sale – $1,034, $1,034,
respectively)
|
|
|
16,441
|
|
|
16,163
|
|
Interest
receivable
|
|
|
2,129
|
|
|
2,112
|
|
Income taxes
receivable
|
|
|
—
|
|
|
329
|
|
Deferred income
taxes, net
|
|
|
27,709
|
|
|
28,858
|
|
Goodwill and
intangible assets, net
|
|
|
14,714
|
|
|
12,588
|
|
Other
assets
|
|
|
6,938
|
|
|
5,248
|
|
Total
assets
|
|
$
|
2,975,957
|
|
$
|
2,876,737
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Unpaid losses and
loss adjustment expenses
|
|
$
|
1,746,399
|
|
$
|
1,703,706
|
|
Unearned
premiums
|
|
|
691,233
|
|
|
680,691
|
|
Allowance for policy
cancellations
|
|
|
58,502
|
|
|
66,418
|
|
Deferred ceding
fees
|
|
|
33,806
|
|
|
32,226
|
|
Accounts payable to
agents
|
|
|
1,762
|
|
|
2,639
|
|
Accounts payable to
insurance companies
|
|
|
53,793
|
|
|
14,871
|
|
Debt, net
|
|
|
43,794
|
|
|
43,783
|
|
Income taxes
payable
|
|
|
5,210
|
|
|
—
|
|
Other
liabilities
|
|
|
34,208
|
|
|
36,023
|
|
Total
liabilities
|
|
|
2,668,707
|
|
|
2,580,357
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Common stock, $.001
par value (150,000,000 shares authorized; 42,173,561 and 41,924,440
shares issued at March 31, 2017 and December 31, 2016,
respectively)
|
|
|
42
|
|
|
42
|
|
Preferred stock,
$.001 par value (10,000,000 shares authorized; no shares issued and
outstanding at March 31, 2017 and December 31,
2016)
|
|
|
—
|
|
|
—
|
|
Additional paid-in
capital
|
|
|
230,388
|
|
|
229,297
|
|
Retained
earnings
|
|
|
75,205
|
|
|
66,230
|
|
Accumulated other
comprehensive income
|
|
|
1,615
|
|
|
811
|
|
Total shareholders'
equity
|
|
|
307,250
|
|
|
296,380
|
|
Total liabilities and
shareholders' equity
|
|
$
|
2,975,957
|
|
$
|
2,876,737
|
|
STATE NATIONAL
COMPANIES, INC.
CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
($ in
thousands, except for per share information)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2017
|
|
2016
|
|
Revenues:
|
|
|
|
|
|
|
Premiums
earned
|
$
|
36,508
|
|
$
|
31,677
|
|
Commission
income
|
|
276
|
|
|
321
|
|
Ceding fees
|
|
17,645
|
|
|
16,244
|
|
Net investment
income
|
|
2,151
|
|
|
2,040
|
|
Realized net investment
gains (losses)
|
|
1,876
|
|
|
(638)
|
|
Other income
|
|
531
|
|
|
456
|
|
|
|
58,987
|
|
|
50,100
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
18,831
|
|
|
15,089
|
|
Commissions
|
|
1,574
|
|
|
1,697
|
|
Taxes, licenses, and
fees
|
|
952
|
|
|
702
|
|
General and
administrative
|
|
19,128
|
|
|
16,994
|
|
Interest
expense
|
|
588
|
|
|
537
|
|
Total
expenses
|
|
41,073
|
|
|
35,019
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
|
17,914
|
|
|
15,081
|
|
|
|
|
|
|
|
|
Income
taxes:
|
|
|
|
|
|
|
Current tax expense
(benefit)
|
|
5,709
|
|
|
4,354
|
|
Deferred tax expense
(benefit)
|
|
715
|
|
|
1,057
|
|
|
|
6,424
|
|
|
5,411
|
|
Net income
(loss)
|
$
|
11,490
|
|
$
|
9,670
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common shareholders:
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.28
|
|
$
|
0.23
|
|
Diluted earnings per
share
|
|
0.27
|
|
|
0.23
|
|
|
|
|
|
|
|
|
Dividends, per
share
|
$
|
0.06
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding – basic
|
|
41,613,267
|
|
|
42,343,357
|
|
Weighted-average
common shares outstanding – diluted
|
|
42,495,238
|
|
|
42,396,713
|
|
Program Services
Segment — Results of
Operations Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
March 31,
|
($ in thousands)
|
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Ceding fees
|
|
|
$
|
17,645
|
|
$
|
16,244
|
Total
revenues
|
|
|
|
17,645
|
|
|
16,244
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
|
|
(250)
|
|
|
509
|
Commissions
|
|
|
|
2
|
|
|
1
|
Taxes, licenses, and
fees
|
|
|
|
30
|
|
|
8
|
General and
administrative
|
|
|
|
4,319
|
|
|
3,108
|
Total
expenses
|
|
|
|
4,101
|
|
|
3,626
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
|
$
|
13,544
|
|
$
|
12,618
|
|
|
|
|
|
|
|
|
Gross premiums
written
|
|
|
$
|
344,998
|
|
$
|
271,026
|
Gross premiums
earned
|
|
|
$
|
331,407
|
|
$
|
267,025
|
Lender Services
Segment — Results of Operations Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
March 31,
|
|
($ in thousands)
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Premiums
earned
|
|
$
|
36,508
|
|
$
|
31,677
|
|
Commission
income
|
|
|
276
|
|
|
321
|
|
Other income
|
|
|
539
|
|
|
448
|
|
Total
revenues
|
|
|
37,323
|
|
|
32,446
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
|
|
19,081
|
|
|
14,580
|
|
Commissions
|
|
|
1,572
|
|
|
1,696
|
|
Taxes, licenses, and
fees
|
|
|
922
|
|
|
694
|
|
General and
administrative
|
|
|
11,739
|
|
|
10,607
|
|
Total
expenses
|
|
|
33,314
|
|
|
27,577
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
$
|
4,009
|
|
$
|
4,869
|
|
|
|
|
|
|
|
|
|
Net loss
ratio
|
|
|
52.3
|
%
|
|
46.0
|
%
|
Net expense
ratio
|
|
|
39.0
|
%
|
|
41.0
|
%
|
Net combined
ratio
|
|
|
91.3
|
%
|
|
87.0
|
%
|
|
|
|
|
|
|
|
|
Gross premiums
written
|
|
$
|
41,994
|
|
$
|
32,459
|
|
Net premiums
written
|
|
$
|
33,837
|
|
$
|
27,032
|
|
Corporate
Segment — Results of
Operations Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
March 31,
|
|
($ in thousands)
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
|
2,151
|
|
$
|
2,040
|
|
Realized net investment
gains (losses)
|
|
|
1,876
|
|
|
(638)
|
|
Other income
|
|
|
(8)
|
|
|
8
|
|
Total
revenues
|
|
|
4,019
|
|
|
1,410
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
General and
administrative
|
|
|
3,070
|
|
|
3,279
|
|
Interest
expense
|
|
|
588
|
|
|
537
|
|
Total
expenses
|
|
|
3,658
|
|
|
3,816
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
|
361
|
|
|
(2,406)
|
|
|
|
|
|
|
|
|
|
Income tax expense
(benefit)
|
|
|
6,424
|
|
|
5,411
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(6,063)
|
|
$
|
(7,817)
|
|
Non-GAAP Reconciliation
The accompanying information
provides a reconciliation of this non-GAAP financial measure to its
most directly comparable financial measure calculated and presented
in accordance with accounting principles generally accepted in
the United States of America
("GAAP"). This non-GAAP financial measure should not be
considered as an alternative to GAAP measures such as net income,
earnings per share, return on equity or any other GAAP measure of
liquidity or financial performance.
Earnings before interest, taxes, depreciation and amortization
or EBITDA, is considered a non-GAAP financial measure because it
reflects adjustments to net income for interest expense, income tax
expense, and depreciation and amortization. Management
believes this measure is helpful to investors and analysts because
it provides a supplemental measure of evaluating core financial
performance between periods.
STATE NATIONAL
COMPANIES, INC.
Reconciliation of
Non-GAAP Financial Measures
(unaudited)
($ in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2017
|
|
2016
|
EBITDA
|
|
|
|
$
|
19,437
|
|
$
|
16,637
|
Reconciliation of
EBITDA:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
11,490
|
|
$
|
9,670
|
Plus: Interest
expense
|
|
|
|
|
588
|
|
|
537
|
Plus: Income tax
expense
|
|
|
|
|
6,424
|
|
|
5,411
|
Plus: Depreciation and
amortization
|
|
|
|
|
935
|
|
|
1,019
|
EBITDA
|
|
|
|
$
|
19,437
|
|
$
|
16,637
|
CONTACTS:
|
State National
Companies, Inc.
David Hale, COO &
CFO
817-265-2000
Dennard ▪ Lascar
Associates
Rick Black
713-529-6600
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/state-national-companies-reports-first-quarter-2017-results-300455483.html
SOURCE State National Companies, Inc.