CASTLEPOINT HOLDINGS LTD 
By CastlePoint Holdings, Ltd. (NASDAQ: CPHL) today reported its financial results for the first quarter of 2007. CastlePoint reported net income of approximately $7.1 million in its first quarter as a public company. CastlePoint reported diluted earnings per share of $0.23 for the first quarter of 2007 as compared to $(0.29) per share for the same period in 2006.
Key Highlights:
- Net premiums written for the quarter were $72.0 million, compared to zero in the prior year period
- 28% of total written premiums generated from clients other than operating subsidiaries of Tower Group, Inc., CastlePoint's sponsor
- Consolidated combined ratio was 93.7%
- Shareholders' equity increased by $121.3 million including $114 million of net proceeds to us from successful completion of IPO
GAAP Financial Summary: | |||
| Three Months Ended | |||
| March 31, | |||
| 2007 | 2006 | ||
| ($ in thousands except per share amounts) | |||
| Net premiums written | $ 71,895 | - | |
| Net premiums earned | 45,596 | - | |
| Net investment income | 5,791 | - | |
| Net realized (losses) gains on investments | 6 | - | |
| Total revenues | 53,954 | - | |
| Net income/(loss) | 7,071 | $(436) | |
| EPS ? basic | $0.23 | ($0.29) | |
| EPS ? diluted | $0.23 | ($0.29) | |
| Return on average equity | 9.6% | ||
Michael H. Lee, Chief Executive Officer of CastlePoint Holdings, stated ?This was our first quarter as a public company and our fourth quarter since our inception in April 2006. With $72.0 million in net premiums written including 28% of net premiums written in the quarter from clients other than Tower, we are pleased that our reinsurance, risk sharing, and programs solutions are continuing to find excellent reception in the marketplace. Our consolidated combined ratio of 93.7% reflects continued excellent underlying loss ratios from Tower, our largest customer, as well as continued reduction in our overall expense ratio as our business has expanded. The substantial increase in business from clients other than Tower also demonstrates our success in marketing our unique risk sharing and other reinsurance and insurance solutions.
Total revenues were $54.0 million in the first quarter of 2007. Net premiums earned represented 64.8% of net premiums written for the three months ended March 31, 2007.
Tower ceded 49% of its brokerage business written premiums to CastlePoint Reinsurance Company, Ltd., our reinsurance subsidiary, in the quarter, and for the three months ended March 31, 2007 we received $51.6 million total written premiums and $37.7 million total earned premiums from Tower. From clients other than Tower we generated $20.3 million in written premiums and $8.9 million in net earned premiums for the three months ended March 31, 2007. Our pipeline of programs and risk sharing as well as reinsurance deals continues to be strong. A.M. Best has confirmed CPRe's ?A-? rating.
Our subsidiary CastlePoint Insurance Company, our U.S. domestic primary insurer, received an A- rating from A.M. Best during the quarter. We expect CastlePoint Insurance Company to begin receiving a share of Tower's brokerage business during the second quarter of this year, subject to regulatory approval. We also expect our services income as a result of managing programs to increase throughout the year.
We generated investment income of $5.8 million during the quarter, and our average cash and invested assets were 1.69 times average shareholders' equity for the quarter. We expect the ratio of our invested assets to shareholders' equity to increase throughout the year and consequently our investment income to increase.
Additional Highlights and Disclosures:
Completion of IPO
On March 22, 2007, CastlePoint Holdings completed its initial public offering. We issued and sold 8,697,148 common shares, including 1,134,410 shares pursuant to the exercise of the underwriters' over-allotment option, at a price of $14.50 per share. We received net proceeds from the IPO, after deducting underwriting discounts and other offering expenses, of $114.0 million.
Redemption of Tower's Perpetual Preferred Stock
In December 2006, CastlePoint purchased 40,000 of Tower's perpetual preferred stock for an aggregate consideration of $40 million. On January 26, 2007, Tower redeemed all of such stock at the redemption price of $40 million in the aggregate plus approximately $0.3 million in accrued dividends that were paid in January 2007.
Dividend Declaration
The board of directors of CastlePoint Holdings has approved a quarterly dividend of $0.025 per share payable on June 27, 2007 to its shareholders of record as of June 15, 2007.
2007 Guidance
We believe our business strategies and platform position us very well to continue to grow. In addition, we expect that our net income and return on equity will increase, as agreements we have already executed both with Tower and other clients become earned premiums and as our invested assets continue to grow relative to our shareholders' equity.
For the second quarter of 2007, we project net income to increase to a range between $9.0 million and $11.0 million. We project CastlePoint's diluted earnings per share in the second quarter to be in the range between $0.24 and $0.27 per diluted share. For the full year, we anticipate diluted earnings per share to be between $1.10 and $1.20.
About CastlePoint Holdings, Ltd.
CastlePoint, a Bermuda-based holding company, through its subsidiaries, CastlePoint Reinsurance Company, CastlePoint Management Corp., and CastlePoint Insurance Company, provides property and casualty insurance and reinsurance business solutions, products and services to small insurance companies and program underwriting agents in the United States.
CPHL-F
Cautionary Note Regarding Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release or any other written or oral statements made by or on behalf of CastlePoint may include forward-looking statements that reflect CastlePoint's current views with respect to future events and financial performance. All statements other than statements of historical fact included in this press release are forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking terminology such as "may," "will," "plan," "expect," "intend," "estimate," "anticipate," "believe" or "continue" or their negative or variations or similar terminology. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause CastlePoint's actual results to differ materially from those indicated in these statements. The company believes that these factors include but are not limited to ineffectiveness or obsolescence of its business strategy due to changes in current or future market conditions; increased competition on the basis of pricing, capacity, coverage terms or other factors; greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than CastlePoint's underwriting, reserving or investment practices anticipate based on historical experience or industry data; the ability to obtain necessary governmental licenses; the ability to hire and retain executive officers and other key personnel; the ability to make certain acquisitions in a timely fashion necessary to fulfill the company's business plan; the effects of acts of terrorism or war; developments in the world's financial and capital markets that adversely affect the performance of the company's investments; changes in regulations or laws applicable to CastlePoint, its subsidiaries, brokers or customers including tax laws in Bermuda and the United States; acceptance of CastlePoint's products and services, including new products and services; changes in the availability, cost or quality of reinsurance and failure of CastlePoint's reinsurers to pay claims timely or at all; decreased demand for the company's insurance or reinsurance products; the effects of mergers, acquisitions and divestitures; changes in rating agency policies or practices; changes in legal theories of liability under CastlePoint's insurance policies or the policies that it reinsures; changes in accounting policies or practices; and changes in general economic conditions, including inflation and other factors. Forward-looking statements speak only as of the date on which they are made, and CastlePoint undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
For more information visit CastlePoint's website at http://www.castlepoint.bm/.
CastlePoint Holdings, Ltd. Consolidated Balance Sheets | ||||||
| (Unaudited) | ||||||
| March 31, 2007 | December 31, 2006 | |||||
($ in thousands, except par value and share amounts) | ||||||
| Assets | ||||||
| Fixed-maturity securities, available-for-sale, at fair value (amortized cost $408,357 for 2007; $293,878 for 2006) | $ | 410,726 | $ | 295,527 | ||
| Short-term investments, available-for-sale, at fair value (amortized cost $1,751 for 2007; $51,626 for 2006) | 1,751 | 51,638 | ||||
| Total available-for-sale investments | 412,477 | 347,165 | ||||
| Investment in Tower preferred stock | ? | 40,000 | ||||
| Common trust securities ? statutory business trusts, equity method | 3,094 | 3,094 | ||||
| Total investments | 415,571 | 390,259 | ||||
| Cash and cash equivalents | 158,380 | 34,784 | ||||
| Accrued investment income | 2,873 | 2,211 | ||||
| Assumed premiums receivable (primarily with related parties) | 52,534 | 44,930 | ||||
| Premiums receivable ? programs (primarily with related parties) | 1,994 | 1,295 | ||||
| Deferred acquisition costs (primarily with related parties) | 38,605 | 30,363 | ||||
| Deferred income taxes | 1,614 | 1,089 | ||||
| Deferred financing fees | 3,092 | 3,084 | ||||
| Other assets | 5,366 | 3,327 | ||||
| Total Assets | $ | 680,030 | $ | 511,342 | ||
| Liabilities and Shareholders' Equity | ||||||
| Liabilities | ||||||
| Loss and loss adjustment expenses (primarily with related parties) | $ | 54,113 | $ | 34,192 | ||
| Unearned premium (primarily with related parties) | 111,482 | 86,181 | ||||
| Assumed losses payable (primarily with related parties) | 5,393 | 3,496 | ||||
| Premiums payable-programs (primarily with related parties) | 1,802 | 1,072 | ||||
| Accounts payable and accrued expenses | 2,029 | 2,869 | ||||
| Other liabilities | 1,065 | 725 | ||||
| Subordinated debentures | 103,094 | 103,094 | ||||
| Total Liabilities | $ | 278,977 | $ | 231,629 | ||
| Stockholders' Equity | ||||||
| Common shares ($0.01 par value, 100,000,000 shares authorized; 38,277,148 and 29,580,000 shares issued in 2007 and 2006) | 383 | 296 | ||||
| Additional paid-in-capital | 383,714 | 269,473 | ||||
| Accumulated other comprehensive net income | 2,337 | 1,657 | ||||
| Retained earnings | 14,619 | 8,288 | ||||
| Total Stockholders' Equity | 401,053 | 279,713 | ||||
| Total Liabilities and Stockholders' Equity | $ | 681,030 | $ | 511,342 | ||
CastlePoint Holdings, Ltd. Consolidated Statements of Income and Comprehensive Income (Unaudited) | |||||
Three Months Ended March 31, | |||||
| 2007 | 2006 | ||||
($ in thousands, except share and per share amounts) | |||||
| Revenues | |||||
| Net premiums earned (primarily with related parties) | $ | 45,596 | $ | ? | |
| Commission income (primarily with related parties) | 1,561 | ? | |||
| Net investment income | 5,791 | ? | |||
| Net realized gain on investment | 6 | ? | |||
| Total revenues | 53,954 | ? | |||
| Expenses | |||||
| Loss and loss adjustment expenses (primarily with related parties) | 25,326 | ? | |||
| Commission and other acquisition expenses (primarily with related parties) | 16,573 | ? | |||
| Other operating expenses | 3,336 | 436 | |||
| Interest expense | 2,201 | ? | |||
| Total expenses | 47,436 | 436 | |||
Income (loss) before income taxes | 6,518 | (436) | |||
| Income tax benefit | 553 | ? | |||
| Net income (loss) | $ | 7,071 | $ | (436) | |
| Comprehensive Income | |||||
| Net income(loss) | $ | 7,071 | $ | (436) | |
| Other comprehensive income: | |||||
| Gross unrealized investment holding gains arising during period | 715 | ? | |||
| Less: reclassification adjustment for gains included in net income | 6 | ? | |||
| 709 | ? | ||||
| Income tax expense related to items of other comprehensive income | (28) | ? | |||
| Total other comprehensive income | 681 | ? | |||
| Comprehensive Income (loss) | $ | 7,752 | $ | (436) | |
| Earnings Per Share | |||||
| Basic earnings per common share | $ | 0.23 | $ | (0.29) | |
| Diluted earnings per common share | $ | 0.23 | $ | (0.29) | |
| Weighted Average Common Shares Outstanding: | |||||
| Basic | 30,421,695 | 1,504,842 | |||
| Diluted | 30,507,021 | 1,504,842 | |||
Reinsurance Segment Results of Operations ($ in thousands) | ||||||||||||||||||||||||||||||||
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| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| 2007 | 2006 | |||||||||||||||||||||||||||||||
| ($ in thousands) | ||||||||||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||
| Premiums earned | ||||||||||||||||||||||||||||||||
| Gross premiums earned | $ | 46,596 | $ | ? | ||||||||||||||||||||||||||||
| Less: ceded premiums earned | ? | ? | ||||||||||||||||||||||||||||||
| Net premiums earned | 46,596 | ? | ||||||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||||
| Loss and loss adjustment expenses | ||||||||||||||||||||||||||||||||
| Gross loss and loss adjustment expenses | 25,326 | ? | ||||||||||||||||||||||||||||||
| Less: ceded loss and loss adjustment expenses | - | ? | ||||||||||||||||||||||||||||||
| Net loss and loss adjustment expenses | 25,326 | ? | ||||||||||||||||||||||||||||||
| Underwriting expenses | ||||||||||||||||||||||||||||||||
| Ceding commission expense | 15,357 | |||||||||||||||||||||||||||||||
| Other underwriting expenses | Share
© Business Wire - 2007
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