NPTE North Pointe Hldgs Corp (MM)

SOUTHFIELD, Mich., March 28 /PRNewswire-FirstCall/ -- North Pointe Holdings Corporation (NASDAQ:NPTE) today reported financial results for the fourth quarter and full year ended December 31, 2007. Full Year 2007 Highlights -- Gross written premiums from continuing operations of $119.3 million compared with $90.2 million in 2006 -- Net premiums earned from continuing operations of $94.2 million compared with $66.7 million in 2006 -- Net income of $1.14 per diluted share versus $0.51 a year ago -- Book value per share increased 14.0% to $11.02 -- Cash and investments of $271.9 million -- Acquired Capital City Holdings, Inc. in July -- Announced sale of Home Pointe Insurance Company in October Fourth Quarter Highlights -- Gross premiums written from continuing operations of $39.2 million versus $22.6 million in 2006 -- Net premiums earned from continuing operations of $28.8 million versus $15.1 million in 2006 -- Net income per diluted share of $0.43 versus $0.05 in 2006 James Petcoff, president and chief executive officer, commented, "In 2007 we faced a challenging market environment, yet we focused our efforts on growing our specialty niches, organically and by acquisition. We accomplished the goal of strengthening North Pointe's commercial platform, by acquiring Capital City, and reduced our catastrophic exposure by selling Home Pointe. Our balance sheet is strong, and we look to take advantage of market opportunities as they come available." Full Year 2007 Gross premiums written from continuing operations for the year ended December 31, 2007 were $119.3 million compared to $90.2 million in 2006. This represents a $29.1 million increase, or 32.2 percent. Gross premiums written from continuing operations in the Company's commercial lines segment for 2007 increased $26.6 million, or 32.5 percent as a result of $29.2 million of gross premiums written by Capital City Insurance. This increase was offset by a $10.7 million decrease in the North Pointe Crop program, which was discontinued for 2007. Gross premiums written in the Company's personal lines segment increased $2.5 million, or 30.1 percent driven by $5.1 million of gross premiums written in the Pets Best program, which was new in 2007, and an increase of $1.3 million of gross premiums written in the Company's Midwest and Western homeowners lines of business. These increases were offset by a decrease of $3.9 million in the Florida homeowners line. Net premiums written from continuing operations for 2007 were $107.4 million as compared to $61.1 million in 2006, an increase of $46.3 million, or 75.8 percent. Net premiums earned from continuing operations for 2007 were $94.2 million as compared to $66.7 million for 2006, an increase of $27.5 million, or 41.2 percent. Net income was $10.3 million in 2007, which is just over double the 2006 net income of $4.7 million. North Pointe's loss ratio for 2007 was 53.1 percent as compared to 45.4 percent in 2006. The loss ratio for the commercial lines in 2007 was 58.1 percent as compared to 39.9 percent for 2006. The higher loss ratio produced by Capital City is a significant factor in the increase in the overall ratio as loss ratios for Capital City have been traditionally higher than those reported historically by North Pointe. The $3.3 million deficiency in net reserves in 2007 was mainly attributable to adverse developments in the Florida commercial lines of business. The Company does not expect future adverse results. Fourth Quarter 2007 Highlights Gross premiums written from continuing operations for the three months ended December 31, 2007, were $39.2 million compared to $22.6 million for 2006. Gross premiums written increased $13.9 million, or 64.6 percent, in our commercial lines, and increased $4.8 million, or 418.2 percent, in our personal lines, in the fourth quarter of 2007 compared with the prior year period. Total revenues from continuing operations in the fourth quarter of 2007 were $36.9 million, as compared to $17.2 million in the corresponding period in 2006, an increase of $19.7 million and 114 percent. Net premiums earned from continuing operations were $28.8 million in 2007, versus $15.1 million in 2006. The Company reported net income of $3.9 million for the fourth quarter, or $0.43 per diluted share. This compares to net income of $414,000, or $0.05 per diluted share for the fourth quarter of 2006. The fourth quarter 2007 results include pre-tax expenses attributable to a South Carolina Property and Casualty Insurance Guaranty Association assessment of $678,000. The Company's loss ratio for the fourth quarter was 56.6 percent compared with 41.4 percent for the corresponding period in 2006 primarily due to North Pointe's Capital City acquisition. The Company's combined ratio for the fourth quarter was 101.8 percent compared with 113.8 percent for the corresponding period in 2006. Home Pointe Sale In October 2007, the Company signed an agreement to sell Home Pointe Insurance. On January 23, 2008, the Company through its wholly owned subsidiary, North Pointe Financial, completed the sale of Home Pointe Insurance to American Capital Assurance Corp., a subsidiary of Safe Harbour Holdings, LLC, a Florida domiciled insurance holding company. As a result, Home Pointe has been presented in our financials as a discontinued operation. Home Pointe conducted all of the Company's Florida homeowners and dwelling fire operations in 2007. QBE Merger Agreement On January 3, 2008, the Company entered into a definitive merger agreement to be acquired by QBE Holdings, Inc. ("QBE"), a wholly owned direct subsidiary of QBE Insurance Group Ltd. Under the terms of the merger agreement, QBE will acquire all of North Pointe's outstanding common stock shares for $16.00 per share and North Pointe will continue as the surviving corporation and a wholly owned subsidiary of QBE. The closing of the merger is expected to occur early in the second quarter. The merger is subject to the approval of the Company's shareholders at a Special Stockholders Meeting scheduled for April 10, 2008, certain regulatory approvals and the satisfaction or waiver of other customary closing conditions. The merger is not subject to a financing condition. Petcoff concluded, "The merger with QBE is on track and we expect completion of this agreement early in the second quarter of 2008. The combination of QBE and North Pointe assets is very complimentary and an advantageous partnership for both companies. Going forward, we will continue to work on reducing our expenses and focusing on driving premium growth as we leverage QBE's strength to ensure accomplishing our future growth plans." Conference Call Details North Pointe will host a conference call today, March 28, 2008, for investors and other interested parties at 11:00 a.m. Eastern Time to discuss fourth quarter and full year 2007 results. Individuals may either access the call by dialing 800-218-0713 or logging on to the company's website at http://www.npte.com/. Please allow 15 minutes to download the necessary software. For those unable to listen to the call live, a taped rebroadcast will be available beginning one hour following the completion of the call and will continue through April 4, 2008. To access the rebroadcast, please dial 800-405-2236, passcode 11110265. A replay of the call will also be available on the Internet at http://www.npte.com/ for 30 days following the event. About North Pointe Holdings Corporation North Pointe Holdings is a property and casualty insurer that markets both specialty commercial and personal insurance products. With a focus on owner-operated businesses, the company is the nation's largest insurer of independent bowling centers and the largest insurer of liquor liability insurance in Michigan. About QBE Holdings, Inc. QBE Holdings, Inc. is a subsidiary of Australia's QBE Insurance Group Ltd, one of the top 25 insurers and reinsurers worldwide with $12.5 billion of annualized gross written premium. QBE Holdings, headquartered in New York, is a leading North and South American insurer and reinsurer. It conducts business through various property and casualty insurance subsidiaries in eight countries. Additional Information and Where to Find It In connection with the proposed Merger, the Company has filed a proxy statement with the Securities and Exchange Commission. SHAREHOLDERS ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT, BECAUSE IT CONTAINS IMPORTANT INFORMATION. Shareholders may obtain a free copy of the proxy statement and other documents filed by North Pointe Holdings Corporation at the Securities and Exchange Commission's website at http://www.sec.gov/. The proxy statement and such other documents may also be obtained free of charge by directing such request to Investor Relations, North Pointe Holdings Corporation, 28819 Franklin Road, Southfield, Michigan, 48034, telephone: (248) 358-1171, or on the Company's website at http://www.npic.com/. Participants in the Solicitation The Company and its directors, executive officers and certain other members of its management and employees may be deemed to be participants in the solicitation of proxies from the Company's shareholders in connection with the proposed Merger. Information regarding the interests of such directors and executive officers is included in the Company's proxy statement relating to the proposed Merger. Safe Harbor Statement Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as: North Pointe pricing accurately the risks it underwrites; the establishment of adequate loss and loss adjustment expense reserves; risks associated with achieving the business integration objectives expected with the Capital City acquisition; retention and recruiting of independent agents; failure to pay claims accurately; risks associated with high concentration of North Pointe's business in certain geographic markets; inability to implement North Pointe's growth strategies; possible assessments for guaranty funds, other insurance-related assessments and mandatory reinsurance arrangements and North Pointe's ability to recover such assessments through future surcharges or other rate changes; the occurrence of severe weather conditions and other catastrophes; the cyclical and seasonal nature of the industries within which North Pointe operates; intense competition with other insurance companies; the potential loss of key personnel; North Pointe's ability to obtain and retain trade association endorsements; performance of North Pointe's various operating subsidiaries; restrictions that may limit the ability of North Pointe's subsidiaries to pay dividends to North Pointe; existing and future regulations by the local, state and federal governments; the compliance of subsidiaries with minimum capital and surplus requirements; ratings of North Pointe's insurance company subsidiaries by A.M. Best; the availability and pricing of reinsurance; the potential for non-payment or delay in payment by reinsurers; the outcome of current industry investigations; potential regulation limiting the use of undisclosed contingent commission arrangements with independent agents; adverse market conditions that could negatively impact North Pointe's investment portfolio; reliance on information technology and telecommunication systems; and management's ability to effectively manage a public company. To learn more about North Pointe Holdings Corporation, please visit http://www.npte.com/ Financial Tables Follow ... North Pointe Holdings Corporation and Subsidiaries Results of Operations for the Periods Ended December 31, 2007 and 2006 Three Months Ended Twelve Months Ended December 31, December 31, 2007 2006 2007 2006 (Dollars in thousands) Gross premiums written: Commercial lines $35,301 $21,448 $108,480 $81,901 Personal lines 5,907 1,140 10,884 8,284 Total gross premiums written 41,208 22,588 119,364 90,185 Net premiums written: Commercial lines 30,140 16,788 96,808 56,140 Personal lines 5,824 758 10,600 4,987 Total net premiums written 35,964 17,456 107,408 61,127 Revenues: Net premiums earned: Commercial lines 26,713 13,370 88,431 59,456 Personal lines 2,084 1,702 5,748 7,195 Total net premiums earned 28,797 15,072 94,179 66,651 Investment income, net 2,767 1,593 8,676 5,731 Net realized capital gains (losses) 2,545 36 3,320 (214) Fees and other income 2,806 456 6,649 1,369 Total revenues 36,915 17,157 112,824 73,537 Expenses: Losses and loss adjustment expenses 17,884 6,429 53,548 30,874 Policy acquisition costs 1,574 4,340 21,663 19,036 Other underwriting and operating expenses 12,707 6,903 27,981 21,781 Interest expense 1,226 502 3,261 1,711 Total expenses 33,391 18,174 106,453 73,402 Income (loss) before federal income tax expense (benefit) and extraordinary item 3,524 (1,017) 6,371 135 Federal income tax expense (benefit) 1,175 (375) 1,755 10 Income from continuing operations 2,349 (642) 4,616 125 Net income from discontinued operations 1,504 1,056 5,709 4,551 Net income (loss) $3,853 $414 $10,325 $4,676 Loss Ratio: Commercial lines 62.3% 43.6% 58.1% 39.9% Personal lines 59.6 35.3 37.7 99.0 Consolidated 56.6 41.4 53.1 45.4 Expense Ratio 45.2 72.4 49.2 60.0 Combined Ratio 101.8 113.8 102.3 105.4 North Pointe Holdings Corporation and Subsidiaries Consolidated Balance Sheets As of December 31, 2007 and 2006 2007 2006 (Dollars in thousands, except share data) ASSETS Investments Debt securities, available for sale, at fair value (amortized cost of $198,184 and $108,911 in 2007 and 2006, respectively) $200,681 $107,334 Common stocks, at fair value (cost of $3,335 and $9,302 in 2007 and 2006, respectively) 3,054 11,376 Preferred stock (cost of $1,000 and $0 in 2007 and 2006, respectively) 1,037 - Other investments 2,241 1,088 Total investments 207,013 119,798 Cash and cash equivalents 64,890 46,039 Accrued investment income 2,136 1,236 Premiums and agent balances receivable, net 31,346 18,088 Reinsurance recoverables on: Paid losses 5,337 4,168 Unpaid losses 51,141 33,321 Prepaid reinsurance premiums 7,770 11,881 Deferred policy acquisition costs 13,731 8,848 Deferred federal income taxes, net 9,375 5,061 Federal income tax recoverable 3,496 523 Fixed assets, net of accumulated depreciation 5,743 5,946 Prepaid expenses and other assets 3,263 2,668 Goodwill 11,550 - Assets of discontinued operations 14,276 - Total assets $431,067 $257,577 LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY Liabilities Unpaid losses and loss adjustment expenses $172,264 $89,755 Unearned premiums 63,309 42,320 Debt 54,287 23,131 Amounts due to reinsurers 1,118 1,930 Accrued expenses and other liabilities 24,871 7,122 Premiums in advance 368 4,970 Amounts withheld for others 8,311 114 Liabilities of discontinued operations 8,285 - Total liabilities 332,813 169,342 Commitments and contingent liabilities Shareholders' equity Common stock, no par value; 50,000,000 shares authorized 8,919,329 and 9,122,687 issued and outstanding in 2007 and 2006, respectively 49,041 50,578 Preferred stock, no par value; 5,000,000 shares authorized; and 0 shares issued and outstanding in 2007 and 2006, respectively - - Retained earnings 47,654 37,329 Accumulated other comprehensive income: Net unrealized gains on investments, net of deferred federal income tax expense of $769 and $169, respectively 1,559 328 Total shareholders' equity 98,254 88,235 Total liabilities and shareholders' equity $431,067 $257,577 The accompanying notes are an integral part of these condensed consolidated financial statements. North Pointe Holdings Corporation and Subsidiaries Consolidated Statements of Income For the Years Ended December 31, 2007 and 2006 2007 2006 (Dollars in thousands, except share data) Revenues Direct premiums written $115,666 $90,175 Assumed premiums written 3,658 10 Gross premiums written 119,324 90,185 Premiums ceded (11,916) (29,058) Net premiums written 107,408 61,127 (Increase)/decrease in unearned premiums (13,229) 5,524 Net premiums earned 94,179 66,651 Investment income, net of investment expenses 8,676 5,731 Net realized capital gains (losses) 3,320 (214) Fees and other income 6,649 1,369 Total revenues 112,824 73,537 Expenses Losses and loss adjustment expenses, net 53,548 30,874 Policy acquisition costs 21,663 19,036 Other underwriting and operating expenses 27,981 21,781 Interest expense 3,261 1,711 Total expenses 106,453 73,402 Income before federal income tax expense and discontinued operations Federal income tax expense 6,371 135 Income from discontinued operations 1,755 10 Income from continuing operations 4,616 125 Discontinued Operations (Note 3) Income from operations of discontinued subsidiary 8,632 6,891 Federal income tax expense 2,923 2,340 Income from discontinued operations 5,709 $4,551 Net Income $10,325 $4,676 Earnings Per Share Basic Continuing operations $0.51 $0.01 Discontinued operations 0.63 0.50 Net income $1.14 $0.51 Diluted Continuing operations $0.51 $0.01 Discontinued operations 0.63 0.50 Net income $1.14 $0.51 Weighted average number of shares Basic 9,009,578 9,114,452 Diluted 9,015,881 9,116,516 The accompanying notes are an integral part of these condensed consolidated financial statements. DATASOURCE: North Pointe Holdings Corporation CONTACT: Brian J. Roney, Chief Financial Officer of North Pointe Holdings Corporation, +1-248-358-1171, ; or Leslie Loyet, General Inquiries, +1-312-640-6672, , for North Pointe Holdings Corporation Web site: http://www.npte.com/

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