Market Newsdesk

November 12, 2020 4:18 pm

IGI Reports Third Quarter and Nine Months 2020 Condensed and Unaudited Financial Results

IGI Reports Third Quarter and Nine Months 2020 Condensed and Unaudited Financial Results

HAMILTON, Bermuda–(BUSINESS WIRE)–
International General Insurance Holdings Ltd. (“IGI” or the “Company”) (NASDAQ:IGIC) today announced condensed and unaudited financial results for the third quarter and first nine months of 2020.

Highlights for the third quarter and first nine months of 2020 include:

(in U.S Dollars Millions, except percentages and per share information)
	Three Months Ended September 30		Nine Months Ended September 30
	2020	2019	2020	2019
Gross written premiums	$101.2	$73.9	$337.7	$260.2
% growth	36.9%		29.8%
Net premiums earned	$73.3	$54.0	$209.5	$157.4
Net underwriting results	$16.4	$15.6	$62.5	$41.7
Profit for the period	$9.5	$4.3	$20.7	$19.2
Combined ratio⁽¹⁾	93.7%	89.3%	86.5%	91.5%
Total investment income, net ⁽³⁾	$3.0	$2.5	$8.1	$8.3
Earnings per share	$0.20	$0.13	$0.46	$0.56
Return on average equity (annualized)⁽²⁾	10.2%	5.5%	8.0%	8.3%
Core operating income⁽²⁾	$6.4	$8.2	$30.1	$21.2
Core operating earnings per share⁽²⁾	$0.13	$0.23	$0.67	$0.58
Core operating return on average equity (annualized)⁽²⁾	6.7%	10.5%	11.6%	9.2%

(1)		See “Supplemental Information” to the “Condensed Consolidated Statements of Income (Unaudited)” below.
(2)		See the section titled “Non-IFRS Financial Measures” below.
(3)		See Note (1) in the “Notes to the Condensed Consolidated Statements of Income (Unaudited)” below.

IGI Chairman and CEO Mr. Wasef Jabsheh said, “We are pleased to share another set of strong financial results for the third quarter and first nine months of 2020.

“With the continued uncertainty in global financial markets caused by the COVID-19 pandemic and the frequency worldwide of catastrophe events continuing unabated, it is a testament to IGI’s diversified business profile, risk management, targeted business focus and broad geographic footprint that the Company has not been severely affected either financially or operationally in 2020. Our focus on successfully executing our strategy, the provision of excellent service to our clients and partners, and our inherent financial strength gives us confidence that we will maintain our track record of maximizing value for shareholders over the long-term.

“The pricing environment remains robust – with rates across our book of business up over 21% for the year-to-date – and we continue to thoughtfully, carefully, and profitably grow our book of business, as demonstrated by the 29.8% increase in gross written premiums so far this year. We remain cautious in managing our net exposures to minimize our overall risk profile, and again, this is demonstrated in our combined ratio of 93.7% for the third quarter and 86.5% for the year-to-date. I congratulate all our people across our various offices for the excellent results achieved in what, particularly operationally, has been a very demanding year for IGI.”

Results for the Three and Nine Months ended September 30, 2020 and 2019

Net profit for the quarter ended September 30, 2020 was $9.5 million, up from a net profit of $4.3 million for the quarter ended September 30, 2019. Net profit for the nine months ended September 30, 2020 was up slightly to $20.7 million when compared to a net profit of $19.2 million for the nine months ended September 30, 2019.

Core operating income, a non-IFRS measure defined below, was $6.4 million and $8.2 million for the quarters ended September 30, 2020 and 2019, respectively. This decrease in core operating income for the quarter ended September 30, 2020 compared to the same quarter of 2019, was primarily the result of a higher combined ratio, which was 4.4 points higher in the third quarter 2020 when compared to the third quarter of 2019. As a result, core operating return on average equity (annualized) decreased to 6.7% for the quarter ended September 30, 2020, compared to 10.5% for the same period of 2019.

The higher core operating income of $30.1 million for the nine months ended September 30, 2020 compared to $21.2 million for the nine months ended September 30, 2019, benefitted primarily from the combined ratio being 5.0 points lower in the nine months ended 2020 when compared to the nine months ended 2019. While average common shareholders’ equity increased by 12.8% on a comparative basis primarily due to growth in retained earnings during the period, core operating return on average equity (annualized) also increased to 11.6% for the nine months ended September 30, 2020 compared to 9.2% for the same period in 2019.

Underwriting Results

Gross written premiums were $101.2 million for the quarter ended September 30, 2020, an increase of 36.9% compared to $73.9 million for the quarter ended September 30, 2019. The increase in gross written premiums for the quarter was the result of new business generated across virtually all lines, as well as improved renewal pricing. With market conditions still firming, the Company also continued to further refine its existing portfolio, achieving improved terms and conditions.

For the first nine months of 2020, gross written premiums were $337.7 million, up 29.8% compared to $260.2 million for the first nine months of 2019.

The claims and claims expense ratios were 58.8% and 48.9% for the quarters ended September 30, 2020 and 2019, respectively. This included current accident year net catastrophe losses of $4.6 million or 6.3 points for the quarter ended September 30, 2020, compared to $2.0 million or 3.7 points for the quarter ended September 30, 2019. Favorable development on loss reserves from prior accident years was $0.3 million or 0.5 points for the quarter ended September 30, 2020 compared to favorable development of $5.8 million or 10.8 points for the quarter ended September 30, 2019. Catastrophe losses during the third quarter of 2020 were driven primarily by the heavy rain and high velocity winds that damaged cranes at the Jawaharlal Nehru port in Mumbai, India, and are included in the Short-tail segment.

The claims and claims expense ratio remained stable at 51.3% for the nine months ended September 30, 2020 compared to 51.9% for the nine months ended September 30, 2019. This included current accident year net catastrophe losses in the Short-tail segment of $7.2 million or 3.4 points for the nine months ended September 30, 2020, compared to $7.8 million or 5.0 points for the nine months ended September 30, 2019. Favorable development on loss reserves from prior accident years was $11.5 million or 5.5 points for the nine months ended September 30, 2020, compared to favorable development of $4.5 million or 2.9 points for the nine months ended September 30, 2019.

The combined ratio for the quarter ended September 30, 2020 was 93.7%, compared to 89.3% for the same quarter in 2019. Deterioration in the combined ratio was the result of greater level of claims and claims expense driven by lower positive loss experience on prior accident years when compared to the same period in 2019. Nevertheless, the combined ratio for the nine months ended September 30, 2020 improved 5.0 points to 86.5% from 91.5% for the same period in 2019 as the benefit of increased pricing per unit of exposure began to be earned through results.

Segment Results

The Long-tail Segment, which represented approximately 40.3%of the Company’s gross written premiums for the first nine months of 2020, includes all professional and financial lines written by the Company, including D&O, professional indemnity, financial institutions, legal expenses, as well as surety, marine liability and general third-party liability (casualty), all of which are non-U.S. exposures.

Net written premiums for the quarter ended September 30, 2020 in the Long-tail Segment were $46.2 million, compared to $26.4 million in the comparable quarter in 2019, primarily driven by growth in the financial and professional lines. The net underwriting result for this segment was $6.5 million for the third quarter of 2020, compared to $2.8 million in the third quarter of 2019, with financial and professional lines being the biggest contributors.

Net written premiums for the nine months ended September 30, 2020 in the Long-tail Segment were $116.7 million, compared to $82.7 million in the comparable period in 2019 driven by growth in the financial and professional lines. The net underwriting result for this segment increased by $14.1 million to $25.8 million for the first nine months of 2020, compared to $11.7 million in the first nine months of 2019, again driven by the financial and professional lines.

The Short-tail Segment, which represented approximately 54.8%of the Company’s gross written premiums for the first nine months of 2020, includes energy, property, general aviation, ports and terminals, marine cargo, marine trades, construction & engineering, and political violence.

Net written premiums for the quarter ended September 30, 2020 in the Short-tail Segment were $26.3 million, compared to $21.7 million in the comparable quarter in 2019, driven by increases in most lines, as well as the growth of the new U.S. E&S business. The net underwriting result for this segment was $8.4 million for the third quarter of 2020, down from the $13.1 million recorded in the third quarter of 2019, primarily due to higher incurred losses recorded in the ports and terminals line.

Net written premiums for the nine months ended September 30, 2020 in the Short-tail Segment were $115.0 million, an increase of $23.2 million compared to $91.8 million in the comparable period in 2019, primarily the result of increases in all short-tail lines, except for ports and terminals, and the growth of the new U.S. E&S business. The net underwriting result for this segment improved to $29.8 million for the first nine months of 2020, compared to $28.0 million in the first nine months of 2019, despite a $13.6 million increase in net claims and claims adjustment expenses, driven by the growth in premiums written while the increase in net claims and claims adjustment expenses was primarily attributable to higher incurred losses recorded in the ports and terminals line.

The Reinsurance Segment,which represented approximately 4.9%of the Company’s gross written premiums for the first nine months of 2020, comprises the Company’s inwards reinsurance portfolio.

Net written premiums for the quarter ended September 30, 2020 in the Reinsurance Segment were $5.1 million, compared to $4.2 million in the comparable quarter in 2019. The net underwriting result for this segment was a profit of $1.5 million for the third quarter of 2020, compared to a loss of $0.3 million in the third quarter of 2019, due to a lower level of claims and claims adjustment expenses.

Net written premiums for the nine months ended September 30, 2020 in the Reinsurance Segment were $16.5 million, compared to $15.1 million in the comparable period in 2019. The net underwriting result improved to $6.9 million for the first nine months of 2020, compared to $2.0 million in the first nine months of 2019, primarily due to a lower level of claims and claims adjustment expenses.

Investment Results

IGI’s investment results for the third quarter of 2020 showed some positive recovery in mark-to-market and foreign currency adjustments from the impact of market turbulence related to the COVID-19 pandemic during the first half of 2020. Combined, the fixed income and equity portfolios benefitted from a gain on revaluation of $8.1 million during the third quarter of 2020, which represents an appreciation in fair value reserves recorded through ‘Total Equity’. This, coupled with the benefit arising from recoveries in foreign exchange losses of $5 million recorded in income, added $13.1 million to ‘Total Equity’ at September 30, 2020.

Total investment income was $1.4 million during the third quarter of 2020, compared to $2.7 million in the third quarter of 2019. Total investment income, net (which excludes realized and unrealized gains and losses on investments and investment properties, expected credit losses on investments, and the share of profit (loss) from associates, was $3.0 million and $2.5 million for the quarters ended September 30, 2020 and 2019, respectively. This resulted in an annualized investment yield of 1.9% for the third quarter of 2020, compared to 1.8% for the corresponding period in 2019.

For the first nine months of 2020, total investment income was $4.1 million, compared to $10.1 million in the first nine months of 2019. Total investment income, net was $8.1 million and $8.3 million for the nine months ended September 30, 2020 and 2019, respectively. This resulted in an annualized investment yield of 1.7% for the first nine months of 2020, compared to 2.0% for the corresponding period in 2019.

Cash and short-term deposits totaled $312.1 million at September 30, 2020, representing 42.6% of the total investments and cash portfolio, compared to $312.2 million at December 31, 2019, when it represented 51.6%. The total investment and cash portfolio is comprised of cash and short-term deposits (cash portfolio), investments, investment in associates, and investment properties.

Total Equity

‘Total equity’ at September 30, 2020 was $379.7 million, representing an increase of 21.7% compared to $312.1 million at December 31, 2019. The movement in Total Equity during the three and nine months ended September 30, 2020, is illustrated below:

(in U.S. Dollars Millions)

Three Months Ended

September 30,

Nine Months Ended

September 30,

2020

2020

Total Equity at beginning of period

$366.3

$312.1

Net profit for the period

$9.5

$20.7

Net change in fair value reserves for investments through other comprehensive income for the period

$8.1

$10.3

Capital injection in connection with the Business Combination

–

$40.8

Interim ordinary dividends declared for the period

($4.3)

($4.3)

Total Equity at September 30, 2020

$379.6

$379.6

Separately, the Company previously announced that Chairman and CEO Wasef Jabsheh purchased an aggregate of 363,278 common shares of the Company for approximately $2.4 million in open market transactions during June, August and September of 2020. In addition, President Waleed Jabsheh purchased an aggregate of 50,000 common shares of the Company for approximately $350,000 in open market transactions during September of 2020.

International General Insurance Holdings Ltd.

Condensed Consolidated Statements of Income (Unaudited)

Quarter Ended

September 30,

Nine Months Ended

September 30,

(in U.S. Dollar Millions, except for percentages and per share data)

2020

2019

2020

2019

Gross written premiums

$101.2

$73.9

$337.7

$260.2

Reinsurers’ share of insurance premiums

($23.6)

($21.6)

($89.5)

($70.6)

Net written premiums

$77.6

$52.3

$248.2

$189.6

Net change in unearned premiums

($4.3)

$1.7

($38.7)

($32.2)

Net premiums earned

$73.3

$54.0

$209.5

$157.4

Net claims and claim adjustment expenses

($43.2)

($26.4)

($107.4)

($81.8)

Net policy acquisition expenses

($13.7)

($12.0)

($39.6)

($33.9)

Net underwriting results

$16.4

$15.6

$62.5

$41.7

Net investment income ⁽¹⁾

$2.1

$2.7

$5.2

$10.0

Share of profit (loss) from associates ⁽¹⁾

($0.7)

–

($1.1)

$0.1

General and administrative expenses

($11.8)

($9.9)

($34.2)

($28.3)

Other expenses, net⁽²⁾

($0.6)

–

($3.4)

($0.4)

Listing related costs

($0.2)

–

($3.5)

–

Gain/(loss)/gain on foreign exchange

$5.0

($4.1)

($3.7)

($3.7)

Profit before tax

$10.2

$4.3

$21.8

$19.4

Income tax

($0.7)

     –

($1.1)

($0.2)

Profit for the period

$9.5

$4.3

$20.7

$19.2

Basic and diluted earnings per share attributable to equity holders⁽³⁾

$0.20

$0.13

$0.46

$0.56

Quarter Ended

September 30,

Nine Months Ended

September 30,

2020

2019

2020

2019

Return on average equity(annualized) ⁽⁴⁾

10.2%

5.5%

8.0%

8.3%

Supplemental Information:

Claims and claims expense ratio⁽⁵⁾

58.8%

48.9%

51.3%

51.9%

Policy acquisition expense ratio⁽⁶⁾

18.7%

22.3%

18.9%

21.6%

General and administrative expense ratio⁽⁷⁾

16.1%

18.1%

16.3%

18.0%

Expense ratio⁽⁸⁾

34.8%

40.4%

35.2%

39.6%

Combined ratio⁽⁹⁾

93.7%

89.3%

86.5%

91.5%

International General Insurance Holdings Ltd.

Condensed Consolidated Statements of Financial Position (Unaudited)

(in U.S. Dollars Millions)

As at

September 30,

2020

As at

December 31,

2020

ASSETS

Cash and short-term deposits

$312.1

$312.2

Insurance receivables

$144.4

$113.0

Investments ⁽¹⁰⁾

$384.2

$253.7

Investment in associates ⁽¹⁰⁾

$11.9

$13.1

Reinsurance share of outstanding claims

$187.0

$176.2

Reinsurance share of unearned premiums

$46.1

$33.9

Deferred excess of loss premiums

$25.3

$15.2

Deferred policy acquisition costs

$51.1

$41.7

Other assets

$8.7

$7.8

Investment properties ⁽¹⁰⁾

$23.0

$25.7

Intangible assets

$3.7

$3.9

Property, premises and equipment

$11.7

$12.7

TOTAL ASSETS

$1,209.2

$1,009.1

LIABILITIES

Gross outstanding claims

$473.2

$413.1

Gross unearned premiums

$257.1

$206.2

Insurance payables

$71.4

$53.5

Other liabilities

$16.1

$14.9

Deferred tax liabilities

$0.1

$0.3

Unearned commissions

$11.7

$8.9

TOTAL LIABILITIES

$829.6

$696.9

EQUITY

Common shares

$0.5

$143.4

Warrants

$12.2

–

Additional paid in capital

$154.2

$2.7

Treasury shares

–

($20.1)

Foreign currency translation reserve

($0.4)

($0.3)

Fair value reserves

$14.6

$4.3

Retained earnings

$198.5

$182.2

TOTAL EQUITY

$379.6

$312.2

TOTAL EQUITY AND LIABILITIES

$1,209.2

$1,009.1

Supplemental Information:

(in U.S. Dollars Millions)

As at

September 30,

2020

As at

December 31,

2019

Cash and short term deposits

$312.1

$312.2

Total investments⁽¹⁰⁾

$419.1

$292.5

Total Investments and cash portfolio

$731.2

$604.7

Common shares outstanding *

48.4

34.0

Minus: Unvested shares**

3.0

     –

Number of vested common outstanding shares (in millions of shares)

45.4

34.0

Total equity

$379.6

$312.2

Number of vested common outstanding shares (in millions of shares)

45.4

34.0

Book value per share

$8.36

$9.18

*Actual common outstanding shares as of December 31, 2019 are adjusted at a share exchange ratio of 0.254 used in the March 2020 Business Combination with Tiberius Acquisition Corp. to facilitate comparison to September 30, 2020.

**Represents earn out shares subject to vesting but which are issued and outstanding for purposes of voting and receipt of dividends. As at September 30, 2020, the vesting conditions attached to the earn out shares have not been met, therefore the earn out shares were not included in the weighted average number of ordinary shares for both the basic and diluted earnings per share.

Notes to the Condensed Consolidated Statements of Income (Unaudited):

(1)

The following is the calculated investment yields and the reconciliation of investment income and share of profit (loss) from associates included in the Condensed Consolidated Statements of Income (Unaudited) to Total investment income net, used to calculate investment yield:

Quarter Ended

September 30,

Nine Months Ended

September 30,

(in U.S. Dollar Millions, except percentages)

2020

2019

2020

2019

Net investment income*

$2.1

$2.7

$5.2

$10.0

Share of profit (loss) from associates

($0.7)

       –

($1.1)

$0.1

Total investment income

$1.4

$2.7

$4.1

$10.1

Minus

Realized gain (loss) on investments

($0.1)

($0.2)

$1.4

$0.3

Unrealized gain (loss) on investments

($0.2)

($0.2)

($2.9)

$0.8

Gain (loss) on investment properties

($0.5)

$0.6

($1.2)

$0.6

Expected credit losses on investments

($0.1)

–

($0.2)

–

Share of profit (loss) from associates

($0.7)

       –

($1.1)

$0.1

Total investment income, net (a)

$3.0

$2.5

$8.1

$8.3

Average investments (excluding investments in associates) and cash portfolio, at cost (b)

$621.8

$551.1

$649.2

$540.8

Investment Yield (a) / (b) annualized

1.9%

1.8%

1.7%

2.0%

*Net investment income is comprised of interest and dividend income, net of investment custodian fees and other investment expenses.

(2)

Represents the sum of other revenues, other expenses and impairment loss on insurance receivables.

Quarter Ended

September 30,

Nine Months Ended

September 30,

(in U.S. Dollars Millions)

2020

2019

2020

2019

Other revenues

$0.1

$0.3

$0.2

$1.2

Other expenses

($0.3)

($0.3)

($1.1)

($1.6)

Impairment loss on insurance receivables

($0.4)

–

($2.5)

–

Other expenses, net

($0.6)

–

($3.4)

($0.4)

(3)

Represents net profit for the period attributable to vested common shares divided by the weighted average number of shares – basic and diluted calculated as follows:

(in U.S. Dollars Millions, except per share information)

Quarter ended

September 30,

Nine months ended

September 30,

2020

2019

2020

2019

Net profit for the period attributable to equity holders

$9.5

$4.3

$20.7

$19.2

Minus: Earnings attributable to the earn out shares subject to vesting

$0.6

     –

$1.3

     –

Net profit for the period attributable to vested equity holders (a)

$8.9

$4.3

$19.4

$19.2

Weighted average number of shares – basic and diluted (in millions of shares) (b)

45.4

34.0

42.2

34.4

Basic and diluted earnings per share (a/b)

$0.20

$0.13

$0.46

$0.56

To make earnings per share for the period ending September 30, 2020 comparable with same period of September 30, 2019, the actual weighted average number of basic and diluted shares for the period ended September 30, 2019 is adjusted with the share exchange ratio of 0.254 that was used in the March 2020 Business Combination with Tiberius Acquisition Corp.

(4)

Represents annualized net profit for the period divided by average shareholders’ equity.

(5)

Represents net claims and claim adjustment expenses as a percentage of net premiums earned.

(6)

Represents net policy acquisition expenses as a percentage of net premiums earned.

(7)

Represents general and administrative expenses as a percentage of net premiums earned.

(8)

Represents the sum of the policy acquisition expense ratio and the general and administrative expense ratio.

(9)

Represents the sum of the claims and claim expense ratio and the expense ratio.

Notes to the Condensed Consolidated Statements of Financial Position (Unaudited):

(10)

Includes the following:

As at

(in U.S. Dollars Millions)

September 30, 2020

December 31, 2019

Investments

$384.2

$253.7

Investment properties

$23.0

$25.7

Investments in associates

$11.9

$13.1

Total investments

$419.1

$292.5

International General Insurance Holdings Ltd.

Segment Results (Unaudited)

Segment information for the IGI’s consolidated operations is as follows:

For the quarter ended September 30, 2020

(in U.S. Dollars Millions)

Specialty

Long-tail

Specialty

Short-tail

Reinsurance

Total

Underwriting revenues

Gross written premiums

$53.1

$43.0

$5.1

$101.2

Reinsurers’ share of insurance premiums

($6.9)

($16.7)

–

($23.6)

Net written premiums

$46.2

$26.3

$5.1

$77.6

Net change in unearned premiums

($8.7)

$4.3

$0.1

($4.3)

Net premiums earned

$37.5

$30.6

$5.2

$73.3

Net claims and claim adjustment expenses

($25.1)

($15.3)

($2.8)

($43.2)

Net policy acquisition expenses

($5.9)

($6.9)

($0.9)

($13.7)

Net underwriting results

$6.5

$8.4

$1.5

$16.4

For the quarter ended September 30, 2019

(in U.S. Dollars Millions)

Specialty

Long-tail

Specialty

Short-tail

Reinsurance

Total

Underwriting revenues

Gross written premiums

$32.0

$37.7

$4.2

$73.9

Reinsurers’ share of insurance premiums

($5.6)

($16.0)

–

($21.5)

Net written premiums

$26.4

$21.7

$4.2

$52.3

Net change in unearned premiums

($3.1)

$4.7

$0.1

$1.7

Net premiums earned

$23.3

$26.4

$4.3

$54.0

Net claims and claim adjustment expenses

($14.7)

($7.8)

($3.9)

($26.4)

Net policy acquisition expenses

($5.8)

($5.5)

($0.7)

($12.0)

Net underwriting results

$2.8

$13.1

($0.3)

$15.6

International General Insurance Holdings Ltd.

Segment Results (Unaudited)

For the nine months ended September 30, 2020

(in U.S. Dollars Millions)

Specialty

Long-tail

Specialty

Short-tail

Reinsurance

Total

Underwriting revenues

Gross written premiums

$136.1

$185.1

$16.5

$337.7

Reinsurers’ share of insurance premiums

($19.4)

($70.1)

–

($89.5)

Net written premiums

$116.7

$115.0

$16.5

$248.2

Net change in unearned premiums

($14.9)

($20.8)

($3.0)

($38.7)

Net premiums earned

$101.8

$94.2

$13.5

$209.5

Net claims and claim adjustment expenses

($57.2)

($45.8)

($4.4)

($107.4)

Net policy acquisition expenses

($18.8)

($18.6)

($2.2)

($39.6)

Net underwriting results

$25.8

$29.8

$6.9

$62.5

For the nine months ended September 30, 2019

(in U.S. Dollars Millions)

Specialty

Long-tail

Specialty

Short-tail

Reinsurance

Total

Underwriting revenues

Gross written premiums

$91.9

$153.2

$15.1

$260.2

Reinsurers’ share of insurance premiums

($9.2)

($61.4)

–

($70.6)

Net written premiums

$82.7

$91.8

$15.1

$189.6

Net change in unearned premiums

($14.2)

($15.4)

($2.6)

($32.2)

Net premiums earned

$68.5

$76.4

$12.5

$157.4

Net claims and claim adjustment expenses

($41.2)

($32.2)

($8.4)

($81.8)

Net policy acquisition expenses

($15.6)

($16.2)

($2.1)

($33.9)

Net underwriting results

$11.7

$28.0

$2.0

$41.7

Non-IFRS Financial Measures

In presenting IGI’s results, Management has included and discussed certain non-IFRS financial measures. We believe that these non-IFRS measures, which may be defined and calculated differently by other companies, better explain and enhance an understanding of our results of operations. However, these measures should not be viewed as a substitute for those determined in accordance with IFRS.

Combined Ratio

The table below illustrates the reconciliation of the combined ratio on a financial and accident year basis:

Quarter ended

September 30,

Nine months ended

September 30,

(in U.S. Dollar Millions, except percentages)

2020

2019

2020

2019

Net premiums earned (a)

$73.3

$54.0

$209.5

$157.4

Net Losses and loss adjustment expenses (b)

$43.2

$26.4

$107.4

$81.8

Policy acquisition expenses (c)

$13.7

$12.0

$39.6

$33.9

General and administrative expenses (d)

$11.8

$9.9

$34.2

$28.3

Prior year adverse/ (favorable) development (e)

($0.3)

($5.8)

($11.5)

($4.5)

Catastrophe (CAT) losses (f)

$4.6

$2.0

$7.2

$7.8

Combined ratio((b+c+d)/a)*

93.7%

89.3%

86.5%

91.5%

Minus: CAT losses on an accident year basis (f/a)

6.3%

3.7%

3.4%

5.0%

Minus: Prior year development (favorable)/unfavorable (e/a)

(0.5%)

(10.8%)

(5.5%)

(2.9%)

Accident year combined ratio prior to CAT losses

87.9%

96.4%

88.6%

89.4%

* See “Supplemental Information” to the “Condensed Consolidated Statements of Income (Unaudited)” below.

Core Operating Income

Core operating income measures the performance of our operations without the influence of after-tax gains or losses on investments and foreign currencies and other items as noted in the table below. We exclude these items from our calculation of core operating income because the amount of these gains and losses is heavily influenced by, and fluctuates in part according to, economic and other factors external to the Company and/or transactions or events that are typically not a recurring part of, and are largely independent of, our core underwriting activities and including them distorts the analysis of trends in our operations. We believe the reporting of core operating income enhances an understanding of our results by highlighting the underlying profitability of our core insurance operations. Our underwriting profitability is impacted by earned premium growth, the adequacy of pricing, and the frequency and severity of losses. Over time, such profitability is also influenced by underwriting discipline, which seeks to manage the Company’s exposure to loss through favorable risk selection and diversification, IGI’s management of claims, use of reinsurance and the ability to manage the expense ratio, which the Company accomplishes through the management of acquisition costs and other underwriting expenses.

In addition to presenting profit for the period determined in accordance with IFRS, we believe that showing “core operating income” provides investors with a valuable measure of profitability and enables investors, rating agencies and other users of our financial information to more easily analyze our results in a manner similar to how management analyzes our underlying business performance.

Core operating income is calculated by the addition or subtraction of certain line items reported in the ‘Condensed Consolidated Statements of Income’ from profit for the period and tax effecting each line item (resulting each item being a non-IFRS measure), as illustrated in the table below:

Quarter Ended

September 30,

Nine Months Ended

September 30,

(in U.S. Dollar Millions, except for percentages and per

2020

2019

2020

2019

share data)

Profit for the period

$9.5

$4.3

$20.7

$19.2

Reconciling items between profit for the period and core operating income:

Realized (gains)/loss on investments (tax adjusted) ⁽ⁱ⁾

$0.1

$0.2

($1.3)

($0.3)

Expected credit losses on investments

$0.1

–

$0.2

–

Unrealized loss/(gain) on investments (tax adjusted) ⁽ⁱ⁾

$0.1

$0.2

$2.6

($0.8)

Loss/(gain) on investment properties

$0.5

($0.6)

$1.2

($0.6)

Listing related costs

$0.2

–

$3.6

–

Loss/(gain) on foreign exchange (tax adjusted) ⁽ⁱ⁾

($4.1)

$4.1

$3.1

$3.7

Core operating income

$6.4

$8.2

$30.1

$21.2

Average shareholders’ equity ⁽ⁱⁱ⁾

$373.0

$312.0

$345.9

$308.3

Core operating return on average equity (annualized) ⁽ⁱⁱⁱ⁾

6.7%

10.5%

11.6%

9.2%

Basic and diluted core operating earnings per share ^(iv)

$0.13

$0.23

$0.67

$0.58

Return on average equity (annualized) ^(v)

10.2%

5.5%

8.0%

8.3%

Represents a non-IFRS financial measure as the line item balances reported in “Condensed Consolidated Statements of Income (Unaudited)” have been adjusted above for the related tax impact.

Average shareholders’ equity equals the total equity at the reporting period end plus the total equity as of the beginning of the reporting period, divided by 2.

Represents annualized core operating income for the period divided by average shareholders’ equity.

Represents core operating income dividend by weighted average number of shares – basic and diluted for the period. For weighted average number of shares, see note 3 to the “Condensed Consolidated Statements of Income” (unaudited) above.

See note 4 to the Condensed Consolidated Statements of Income (unaudited) above.

Return on average equity and core operating return on average equity, both non-IFRS financial measures, represent the returns generated on common shareholders’ equity during the year. IGI’s objective is to generate superior returns on capital that appropriately reward shareholders for the risks assumed.

The Company has posted a Third Quarter and Nine Month 2020 investor presentation deck on its website at www.iginsure.com in the Investors section under the Presentations & Webcasts tab.

About IGI:

IGI is an international specialist commercial insurer and reinsurer underwriting a diverse portfolio of specialty lines. Established in 2001, IGI is an entrepreneurial business with a worldwide portfolio of energy, property, general aviation, construction & engineering, forestry, ports & terminals, marine cargo, marine trades, financial institutions, general third party liability, legal expenses, professional indemnity, marine liability, political violence, and reinsurance treaty business. Registered in Bermuda, with operations in Bermuda, London, Dubai, Amman, Labuan and Casablanca, IGI aims to deliver outstanding levels of service to clients and brokers. IGI is rated “A” (Excellent)/Stable by AM Best and “A-”/Stable by S&P Global Ratings. For more information about IGI, please visit www.iginsure.com.

Forward-Looking Statements:

This press release contains “forward-looking statements” within the meaning of the “safe harbour” provisions of the Private Securities Litigation Reform Act of 1995. The expectations, estimates, and projections of the business of IGI may differ from its actual results and, consequently, you should not rely on forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. Forward-looking statements contained in this press release may include, but are not limited to, information regarding our estimates of losses for catastrophes and other large losses including losses related to the COVID-19 pandemic, measurements of potential losses in the value of our investment portfolio, our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, the outcome of our strategic initiatives, our expectations regarding pricing and other market conditions, our growth prospects, and valuations of the potential impact of movements in interest rates, credit spreads, equity securities’ prices and foreign currency rates. These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside of the control of IGI and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) changes in demand for IGI’s services together with the possibility that IGI may be adversely affected by other economic, business, and/or competitive factors globally and in the regions in which it operates; (2) competition, the ability of IGI to grow and manage growth profitably and IGI’s ability to retain its key employees; (3) changes in applicable laws or regulations; (4) the potential inability to recognize the anticipated benefits of the business combination with Tiberius; (5) the outcome of any legal proceedings that may be instituted against the parties in connection with or related to the business combination with Tiberius; (6) the potential effects of the COVID-19 pandemic; (7) the inability to maintain the listing of the Company’s common shares or warrants on Nasdaq; and (8) other risks and uncertainties indicated in IGI’s annual report on Form 20-F for the year ended December 31, 2019, including those under “Risk Factors” therein, and in the Company’s other filings with the SEC. The foregoing list of factors is not exclusive. In addition, forward-looking statements are inherently based on various estimates and assumptions that are subject to the judgment of those preparing them and are also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of IGI. There can be no assurance that IGI’s financial condition or results of operations will be consistent with those set forth in such forward-looking statements. You should not place undue reliance upon any forward-looking statements, which speak only as of the date made. IGI does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions, or circumstances on which any such statement is based.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006018/en/

IGI:

Investors:

Robin Sidders, Head of Investor Relations

T: +44 (0) 2072 204937

M: +44 (0) 7384 514785

[email protected]

Media:

Aaida Abu Jaber, PR & Marketing Manager

T: +96265662082 Ext. 407

M: +962770415540

[email protected]

KEYWORDS: Ireland United Kingdom Europe Bermuda Caribbean

INDUSTRY KEYWORDS: Insurance Professional Services

MEDIA:

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Posted on November 12, 2020 4:18 pm
NIKE, Inc. Announces Second Quarter Fiscal 2021 Earnings and Conference Call

NIKE, Inc. Announces Second Quarter Fiscal 2021 Earnings and Conference Call

BEAVERTON, Ore.–(BUSINESS WIRE)–
NIKE, Inc. (NYSE: NKE) plans to release its second quarter fiscal 2021 financial results on Friday, December 18, 2020, at approximately 1:15 p.m. PT, following the close of regular stock market trading hours. Following the news release, NIKE management will host a conference call beginning at 2:00 p.m. PT to review results.

The conference call will be broadcast live over the Internet and can be accessed at http://investors.nike.com. For those unable to listen to the live broadcast, an archived version will be available at the same location through 9:00 p.m. PT, January 8, 2021.

About NIKE, Inc.

NIKE, Inc., based near Beaverton, Oregon, is the world’s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Converse, a wholly-owned NIKE, Inc. subsidiary brand, designs, markets and distributes athletic lifestyle footwear, apparel and accessories. For more information, NIKE, Inc.’s earnings releases and other financial information are available on the Internet at http://investors.nike.com. Individuals can also visit http://news.nike.com and follow @NIKE.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005989/en/

Investor Contact:

Andy Muir

(971) 473-3143

Media Contact:

KeJuan Wilkins

(971) 473-2556

KEYWORDS: United States North America Oregon

INDUSTRY KEYWORDS: Retail General Sports Sports Fashion

MEDIA:

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Posted on November 12, 2020 4:18 pm
DXC Technology Names Ken Sharp Chief Financial Officer

DXC Technology Names Ken Sharp Chief Financial Officer

TYSONS, Va.–(BUSINESS WIRE)–DXC Technology (NYSE:DXC) today announced that Ken Sharp has been appointed executive vice president and chief financial officer, reporting to DXC president and chief executive officer Mike Salvino, effective Nov. 30, 2020. Sharp was most recently vice president and chief financial officer for Northrop Grumman Corporation’s Defense Systems Sector.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20201112006043/en/

DXC Technology (NYSE: DXC) has announced that Ken Sharp has been appointed executive vice president and chief financial officer. (Photo: Business Wire)

“Ken is an outstanding addition to our leadership team,” Salvino said. “Ken is a proven hands-on, operations-focused finance leader who knows the industry and has deep experience in executing transformation journeys. We welcome Ken to the ‘new DXC’.”

Sharp will be responsible for DXC’s global financial strategy and reporting, general accounting, controllership, and investor relations. He takes over for DXC veteran Neil Manna, who has served as interim CFO and who continues in his role as senior vice president & corporate controller, reporting to Sharp.

“I have been very impressed with DXC’s transformation journey and all that the new leadership team has delivered so far,” Sharp said. “It’s exciting to be part of another transformation, and I look forward to helping accelerate DXC’s transformation journey and being part of the ‘new DXC’.”

From 2016 – 2018, Sharp was senior vice president of Finance at Orbital ATK Inc., which in 2018 was acquired by Northrop Grumman. He was responsible for operational finance and corporate functions including financial planning and analysis, controllership, regulatory compliance, and shared services.

Sharp also served as senior vice president, corporate controller and chief accounting officer at Leidos, Inc. (formerly known as SAIC) from 2013 – 2016 and prior to that at Computer Sciences Corporation (CSC), the predecessor company to DXC. While at CSC from 2001 – 2012, Sharp was vice president and CFO for its Outsourcing business and held other financial management roles. Mr. Sharp was also with Ernst & Young previously.

A veteran of the United States Marine Corps Reserves with the rank of Sergeant and service in Operation Desert Shield and Desert Storm, Sharp passed the CPA exam and holds an inactive license in the state of Maryland. Sharp has an Executive MBA from the George Washington University and a B.S. degree in Accounting from the University of Maryland.

About DXC Technology

DXC Technology (NYSE:DXC) helps global companies run their mission critical systems and operations while modernizing IT, optimizing data architectures, and ensuring security and scalability across public, private and hybrid clouds. With decades of driving innovation, the world’s largest companies trust DXC to deploy our enterprise technology stack to deliver new levels of performance, competitiveness and customer experiences. Learn more about the DXC story and our focus on people, customers and operational execution at www.dxc.technology.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006043/en/

Richard Adamonis, Corporate Media Relations, +1-862-228-3481, [email protected]

Shailesh Murali, Investor Relations, +1-703-245-9700, [email protected]

KEYWORDS: Virginia United States North America

INDUSTRY KEYWORDS: Internet Security Data Management Technology Software

MEDIA:

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Photo

DXC Technology (NYSE: DXC) has announced that Ken Sharp has been appointed executive vice president and chief financial officer. (Photo: Business Wire)

Posted on November 12, 2020 4:18 pm
Annaly Capital Management, Inc. Announces Preferred Dividends

Annaly Capital Management, Inc. Announces Preferred Dividends

NEW YORK–(BUSINESS WIRE)–
In accordance with the terms of Annaly’s 7.50% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”), the Board has declared a Series D Preferred Stock cash dividend for the fourth quarter of 2020 of $0.46875 per share of Series D Preferred Stock.

In accordance with the terms of Annaly’s 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series F Preferred Stock”), the Board has declared a Series F Preferred Stock cash dividend for the fourth quarter of 2020 of $0.434375 per share of Series F Preferred Stock.

In accordance with the terms of Annaly’s 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series G Preferred Stock”), the Board has declared a Series G Preferred Stock cash dividend for the fourth quarter of 2020 of $0.40625 per share of Series G Preferred Stock.

In accordance with the terms of Annaly’s 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series I Preferred Stock”), the Board has declared a Series I Preferred Stock cash dividend for the fourth quarter of 2020 of $0.421875 per share of Series I Preferred Stock.

Dividends for the Series D Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, and Series I Preferred Stock are payable on December 31, 2020 to preferred shareholders of record as of December 1, 2020.

About Annaly

Annaly is a leading diversified capital manager that invests in and finances residential and commercial assets. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at www.annaly.com.

Forward-Looking Statements

This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, risks and uncertainties related to the COVID-19 pandemic, including as related to adverse economic conditions on real estate-related assets and financing conditions; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow our commercial real estate business; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights; our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; and our ability to maintain our exemption from registration under the Investment Company Act of 1940. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006006/en/

Annaly Capital Management, Inc.

Investor Relations

1-888-8Annaly

[email protected]

KEYWORDS: United States North America New York

INDUSTRY KEYWORDS: Construction & Property Professional Services REIT Finance

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Posted on November 12, 2020 4:18 pm
Beazer Homes Reports Strong Fourth Quarter and Full Fiscal 2020 Results

Beazer Homes Reports Strong Fourth Quarter and Full Fiscal 2020 Results

ATLANTA–(BUSINESS WIRE)–
Beazer Homes USA, Inc. (NYSE: BZH) (www.beazer.com) today announced its financial results for the quarter and fiscal year ended September 30, 2020.

“Fiscal 2020 was an extraordinary year for Beazer Homes,” said Allan P. Merrill, the company’s Chairman and Chief Executive Officer. “While successfully adopting new health and safety procedures to allow us to continue selling, building and delivering homes during the pandemic, we achieved all of the financial objectives we outlined last fall and exited the year positioned to generate higher earnings in fiscal 2021. These results would not have been possible without the creative and tireless efforts of our entire team.”

Related to fiscal 2020, Mr. Merrill continued, “For the full year, we generated $53.3 million of net income from continuing operations, grew Adjusted EBITDA by more than 10%, produced a return on assets above 10% and brought our Debt to Adjusted EBITDA ratio below 5 times, fulfilling the financial objectives we established prior to the onset of the pandemic.”

Commenting on fiscal 2021, Mr. Merrill said, “We enter fiscal 2021 with the dollar value of our backlog nearly 50% higher than this time last year and expectations for substantially lower interest expense, providing us visibility into double-digit growth in earnings per share – even as we confront a short-term reduction in community count that has been exacerbated by the recent strength in new home orders.”

Looking beyond fiscal 2021, Mr. Merrill concluded, “With our deleveraging objective of reducing debt below $1 billion clearly in sight, we expect increased land and development spending during 2021 will allow us to increase the number of lots we own or control through options by year end, which we believe positions us for top and bottom line growth in the years ahead.”

Beazer Homes Fiscal 2020 Highlights and Comparison to Fiscal 2019

Net income from continuing operations of $53.3 million. Net income in fiscal 2020 and fiscal 2019 included one-time items related to loss on debt extinguishment, inventory impairments and abandonments, and restructuring and severance charges. Excluding these items, the Company generated net income from continuing operations of $56.5 million, compared to net income from continuing operations of $38.7 million in fiscal 2019

Homebuilding revenue of $2.1 billion, up 1.9%

5,492 new home closings, essentially flat year-over-year

Average selling price of $385.5 thousand, up 2.1%

Homebuilding gross margin was 16.4%, up 650 basis points. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 21.0%, up 130 basis points

SG&A as a percentage of total revenue was 11.9%, up 30 basis points

Net new orders of 6,293, up 12.9% on a 14.8% increase in sales/community/month to 3.2 and a 1.7% decrease in average community count to 163

Dollar value of backlog of $995.3 million, up 49.6%

Beazer Homes Fiscal Fourth Quarter 2020 Highlights and Comparison to Fiscal Fourth Quarter 2019

Net income from continuing operations of $24.6 million. Net income in fiscal 2020 and fiscal 2019 included one-time items related to loss on debt extinguishment, inventory impairments and abandonments, and restructuring and severance charges. Excluding these items, the Company generated net income from continuing operations of $25.6 million, compared to net income from continuing operations of $23.8 in fiscal fourth quarter 2019

Homebuilding revenue of $679.1 million, down 12.2% on a 13.8% decrease in home closings to 1,737 and a 1.8% increase in average selling price to $390.9 thousand

Homebuilding gross margin was 17.1%, up 190 basis points. Excluding impairments, abandonments and amortized interest, homebuilding gross margin was 21.7%, up 180 basis points

SG&A as a percentage of total revenue was 11.1%, up 160 basis points year-over-year

Net new orders of 2,009, up 37.8% on a 52.6% increase in sales/community/month to 4.4 and a 9.7% decrease in average community count to 151

Unrestricted cash at quarter end was $327.7 million; total liquidity was $577.7 million

The following provides additional details on the Company’s performance during the fiscal fourth quarter 2020:

Profitability. Net income from continuing operations was $24.6 million, generating diluted earnings per share of $0.82. Fourth quarter Adjusted EBITDA of $77.1 million was down $5.0 million compared to the same period last year, primarily driven by lower home closings, partially offset by an increase in homebuilding gross margin.

Orders. Due to the high demand experienced during the fourth quarter, net new orders increased to 2,009, up 37.8% from the prior year, achieving the highest fourth quarter level in more than a decade. The increase in net new orders was driven by an increase in the absorption rate to 4.4 sales per community per month, up from 2.9 in the previous year, partially offset by a 9.7% decrease in average community count to 151. The cancellation rate for the quarter was 12.2%, down 410 basis points from the previous year.

Backlog. The dollar value of homes in backlog as of September 30, 2020 increased 49.6% to $995.3 million, or 2,509 homes, compared to $665.1 million, or 1,708 homes, at the same time last year. The average selling price of homes in backlog was $396.7 thousand, up 1.9% year-over-year.

Homebuilding Revenue. Fourth quarter homebuilding revenue was $679.1 million, down 12.2% from the same period last year. The decline in homebuilding revenue was primarily driven by a 13.8% decrease in home closings to 1,737 homes, which is attributed to the decrease in demand during March and April as a result of the COVID-19 pandemic.

Homebuilding Gross Margin. Homebuilding gross margin (excluding impairments, abandonments and amortized interest) was 21.7% for the fourth quarter, up 180 basis points year-over-year, driven primarily by lower sales incentives and pricing increases.

SG&A Expenses. Selling, general and administrative expenses as a percentage of total revenue was 11.1% for the quarter, up 160 basis points compared to the prior year. This increase was primarily driven by the decrease in home closings and homebuilding revenue in the quarter, while SG&A on an absolute dollar basis was relatively flat.

Liquidity. At the close of the fourth quarter, the Company had $577.7 million of available liquidity, including $327.7 million of unrestricted cash and $250.0 million available on its secured revolving credit facility.

Fiscal Year Results from Continuing Operations

Year Ended September 30,

2020

2019

Change*

New home orders, net of cancellations

6,293

5,576

12.9

%

Orders per community per month

3.2

2.8

14.8

%

Average active community count

163

166

(1.7

)%

Cancellation rates

15.8

%

16.1

%

-30 bps

Total home closings

5,492

5,500

(0.1

)%

ASP from closings (in thousands)

$

385.5

$

377.7

2.1

%

Homebuilding revenue (in millions)

$

2,116.9

$

2,077.2

1.9

%

Homebuilding gross margin

16.4

%

9.9

%

650 bps

Homebuilding gross margin, excluding I&A

16.5

%

15.2

%

130 bps

Homebuilding gross margin, excluding I&A and interest amortized to cost of sales

21.0

%

19.7

%

130 bps

Income (loss) from continuing operations before income taxes (in millions)

$

71.3

$

(116.6

)

$

187.9

Expense (benefit) from income taxes (in millions)

$

18.0

$

(37.2

)

$

55.2

Net income (loss) from continuing operations (in millions)

$

53.3

$

(79.4

)

$

132.7

Basic income (loss) per share from continuing operations

$

1.80

$

(2.59

)

$

4.39

Diluted income (loss) per share from continuing operations

$

1.78

$

(2.59

)

$

4.37

Income (loss) from continuing operations before income taxes (in millions)

$

71.3

$

(116.6

)

$

187.9

Loss on debt extinguishment, net (in millions)

$

—

$

(24.9

)

$

24.9

Inventory impairments and abandonments (in millions)

$

(2.9

)

$

(148.6

)

$

145.7

Restructuring and severance charges (in millions)

$

(1.3

)

$

—

$

(1.3

)

Income from continuing operations excluding loss on debt extinguishment, inventory impairments and abandonments, and restructuring and severance charges before income taxes (in millions) ^(a)

$

75.5

$

56.9

$

18.6

Net income from continuing operations excluding loss on debt extinguishment, inventory impairments and abandonments, and restructuring and severance charges after income taxes (in millions) ^(b)

$

56.5

$

38.7

$

17.8

Net income (loss) (in millions)

$

52.2

$

(79.5

)

$

131.7

Land and land development spending (in millions)

$

440.8

$

469.9

$

(29.1

)

Adjusted EBITDA (in millions)

$

204.4

$

180.2

$

24.2

* Change and totals are calculated using unrounded numbers.

(a)

Management believes that this measure assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating the differences in companies’ respective level of debt and level of impairments. This measure should not be considered an alternative to income (loss) from continuing operations before income taxes determined in accordance with GAAP as an indicator of operating performance.

(b)

For the year ended September 30, 2020, inventory impairments and abandonments and restructuring and severance charges were tax-effected at the effective tax rate of 25.2%. For the year ended September 30, 2019, loss on debt extinguishment and inventory impairments and abandonments were tax-effected at the effective tax rate of 31.9%.

Q4 Results from Continuing Operations

Quarter Ended September 30,

2020

2019

Change*

New home orders, net of cancellations

2,009

1,458

37.8

%

Orders per community per month

4.4

2.9

52.6

%

Average active community count

151

168

(9.7

)%

Actual community count at quarter-end

145

166

(12.7

)%

Cancellation rates

12.2

%

16.3

%

-410 bps

Total home closings

1,737

2,014

(13.8

)%

Average selling price (ASP) from closings (in thousands)

$

390.9

$

383.8

1.8

%

Homebuilding revenue (in millions)

$

679.1

$

773.0

(12.2

)%

Homebuilding gross margin

17.1

%

15.2

%

190 bps

Homebuilding gross margin, excluding impairments and abandonments (I&A)

17.2

%

15.2

%

200 bps

Homebuilding gross margin, excluding I&A and interest amortized to cost of sales

21.7

%

19.9

%

180 bps

Income from continuing operations before income taxes (in millions)

$

33.7

$

9.5

$

24.2

Expense from income taxes (in millions)

$

9.0

$

7.0

$

2.0

Net income from continuing operations (in millions)

$

24.6

$

2.5

$

22.2

Basic income per share from continuing operations

$

0.83

$

0.08

$

0.75

Diluted income per share from continuing operations

$

0.82

$

0.08

$

0.74

Income from continuing operations before income taxes (in millions)

$

33.7

$

9.5

$

24.2

Loss on debt extinguishment (in millions)

$

—

$

(25.5

)

$

25.5

Inventory impairments and abandonments (in millions)

$

(0.6

)

$

—

$

(0.6

)

Income from continuing operations excluding loss on debt extinguishment, inventory impairments and abandonments, and restructuring and severance charges before income taxes (in millions)^(a)

$

34.3

$

35.0

$

(0.7

)

Net income from continuing operations excluding loss on debt extinguishment, inventory impairments and abandonments, and restructuring and severance charges after income taxes (in millions)^(b)

$

25.6

$

23.8

$

1.8

Net income (in millions)

$

23.7

$

2.4

$

21.2

Land and land development spending (in millions)

$

116.1

$

106.3

$

9.8

Adjusted EBITDA (in millions)

$

77.1

$

82.1

$

(5.0

)

* Change and totals are calculated using unrounded numbers.

^(a)

Management believes that this measure assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating the differences in companies’ respective level of debt and level of impairments. This measure should not be considered an alternative to income from continuing operations before income taxes determined in accordance with GAAP as an indicator of operating performance.

^(b)

For the three months ended September 30, 2020, inventory impairments and abandonments and restructuring and severance charges were tax-effected at the effective tax rate of 25.2%. For the three months ended September 30, 2019, loss on debt extinguishment was tax-effected at the effective tax rate of 31.9%.

As of September 30,

2020

2019

Change

Backlog units

2,509

1,708

46.9

%

Dollar value of backlog (in millions)

$

995.3

$

665.1

49.6

%

ASP in backlog (in thousands)

$

396.7

$

389.4

1.9

%

Land and lots controlled

17,830

19,875

(10.3)

%

Conference Call

The Company will hold a conference call on November 12, 2020 at 5:00 p.m. ET to discuss these results. Interested parties may listen to the conference call and view the Company’s slide presentation by visiting the “Investor Relations” section of the Company’s website at www.beazer.com. To access the conference call by telephone, listeners should dial 800-475-0542 (for international callers, dial 517-308-9429). To be admitted to the call, enter the passcode “8571348.” A replay of the conference call will be available, until 10:00 PM ET on November 19, 2020 at 888-562-7249 (for international callers, dial 203-369-3937) with pass code “3740.”

About Beazer Homes

Headquartered in Atlanta, Beazer Homes (NYSE: BZH) is one of the country’s largest homebuilders. Every Beazer home is designed and built to provide Surprising Performance, giving you more quality and more comfort from the moment you move in – saving you money every month. With Beazer’s Choice Plans™, you can personalize your primary living areas – giving you a choice of how you want to live in the home, at no additional cost. And unlike most national homebuilders, we empower our customers to shop and compare loan options. Our Mortgage Choice program gives you the resources to easily compare multiple loan offers and choose the best lender and loan offer for you, saving you thousands over the life of your loan.

We build our homes in Arizona, California, Delaware, Florida, Georgia, Indiana, Maryland, Nevada, North Carolina, South Carolina, Tennessee, Texas, and Virginia. For more information, visit beazer.com, or check out Beazer on Facebook, Instagram and Twitter.

This press release contains forward-looking statements. These forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, that could cause actual results to differ materially from the results discussed in the forward-looking statements, including, among other things: (i) the cyclical nature of the homebuilding industry and a potential deterioration in homebuilding industry conditions; (ii) economic changes nationally or in local markets, changes in consumer confidence, wage levels, declines in employment levels, inflation or increases in the quantity and decreases in the price of new homes and resale homes on the market; (iii) the potential negative impact of the COVID-19 pandemic, which, in addition to exacerbating each of the risks listed above and below, may include a significant decrease in demand for our homes or consumer confidence generally with respect to purchasing a home, an inability to sell and build homes in a typical manner or at all, increased costs or decreased supply of building materials, including lumber, or the availability of subcontractors, housing inspectors, and other third-parties we rely on to support our operations, and recognizing charges in future periods, which may be material, for goodwill impairments, inventory impairments and/or land option contract abandonments; (iv) shortages of or increased prices for labor, land or raw materials used in housing production, and the level of quality and craftsmanship provided by our subcontractors; (v) the availability and cost of land and the risks associated with the future value of our inventory, such as asset impairment charges we took on select California assets during the second quarter of fiscal 2019; (vi) factors affecting margins, such as decreased land values underlying land option agreements, increased land development costs in communities under development or delays or difficulties in implementing initiatives to reduce our production and overhead cost structure; (vii) our ability to raise debt and/or equity capital, due to factors such as limitations in the capital markets (including market volatility) or adverse credit market conditions, and our ability to otherwise meet our ongoing liquidity needs (which could cause us to fail to meet the terms of our covenants and other requirements under our various debt instruments and therefore trigger an acceleration of a significant portion or all of our outstanding debt obligations), including the impact of any downgrades of our credit ratings or reduction in our liquidity levels; (viii) market perceptions regarding any capital raising initiatives we may undertake (including future issuances of equity or debt capital); (ix) terrorist acts, protests and civil unrest, political uncertainty, natural disasters, acts of war or other factors over which the Company has little or no control; (x) estimates related to homes to be delivered in the future (backlog) are imprecise, as they are subject to various cancellation risks that cannot be fully controlled; (xi) increases in mortgage interest rates, increased disruption in the availability of mortgage financing, changes in tax laws or otherwise regarding the deductibility of mortgage interest expenses and real estate taxes or an increased number of foreclosures; (xii) increased competition or delays in reacting to changing consumer preferences in home design; (xiii) natural disasters or other related events that could result in delays in land development or home construction, increase our costs or decrease demand in the impacted areas; (xiv) the potential recoverability of our deferred tax assets; (xv) potential delays or increased costs in obtaining necessary permits as a result of changes to, or complying with, laws, regulations or governmental policies, and possible penalties for failure to comply with such laws, regulations or governmental policies, including those related to the environment; (xvi) the results of litigation or government proceedings and fulfillment of any related obligations; (xvii) the impact of construction defect and home warranty claims; (xviii) the cost and availability of insurance and surety bonds, as well as the sufficiency of these instruments to cover potential losses incurred; (xix) the impact of information technology failures, cybersecurity issues or data security breaches; or (xx) the impact on homebuilding in key markets of governmental regulations limiting the availability of water.

Any forward-looking statement, including any statement expressing confidence regarding future outcomes, speaks only as of the date on which such statement is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time-to-time, and it is not possible to predict all such factors.

-Tables Follow-

BEAZER HOMES USA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Fiscal Year Ended

September 30,

September 30,

in thousands (except per share data)

2020

2019

2020

2019

Total revenue

$

686,748

$

781,701

$

2,127,077

$

2,087,739

Home construction and land sales expenses

569,511

665,404

1,776,534

1,773,085

Inventory impairments and abandonments

637

—

2,903

148,618

Gross profit

116,600

116,297

347,640

166,036

Commissions

26,847

29,837

82,507

79,802

General and administrative expenses

49,361

44,608

170,386

161,371

Depreciation and amortization

4,806

5,847

15,640

14,759

Operating income (loss)

35,586

36,005

79,107

(89,896

)

Equity in income of unconsolidated entities

209

88

347

404

Loss on extinguishment of debt, net

—

(25,494

)

—

(24,920

)

Other expense, net

(2,135

)

(1,092

)

(8,165

)

(2,226

)

Income (loss) from continuing operations before income taxes

33,660

9,507

71,289

(116,638

)

Expense (benefit) from income taxes

9,033

7,043

17,973

(37,217

)

Income (loss) from continuing operations

24,627

2,464

53,316

(79,421

)

Loss from discontinued operations, net of tax

(949

)

(35

)

(1,090

)

(99

)

Net income (loss)

$

23,678

$

2,429

$

52,226

$

(79,520

)

Weighted-average number of shares:

Basic

29,603

29,545

29,704

30,617

Diluted

30,005

30,169

29,948

30,617

Basic income (loss) per share:

Continuing operations

$

0.83

$

0.08

$

1.80

$

(2.59

)

Discontinued operations

(0.03

)

—

(0.04

)

(0.01

)

Total

$

0.80

$

0.08

$

1.76

$

(2.60

)

Diluted income (loss) per share:

Continuing operations

$

0.82

$

0.08

$

1.78

$

(2.59

)

Discontinued operations

(0.03

)

—

(0.04

)

(0.01

)

Total

$

0.79

$

0.08

$

1.74

$

(2.60

)

Three Months Ended

Fiscal Year Ended

September 30,

September 30,

Capitalized Interest in Inventory

2020

2019

2020

2019

Capitalized interest in inventory, beginning of period

$

132,096

$

148,825

$

136,565

$

144,645

Interest incurred

20,385

26,464

87,224

103,970

Capitalized interest impaired

—

—

(792

)

(13,907

)

Interest expense not qualified for capitalization and included as other expense

(2,095

)

(1,309

)

(8,468

)

(3,109

)

Capitalized interest amortized to home construction and land sales expenses

(30,727

)

(37,415

)

(94,870

)

(95,034

)

Capitalized interest in inventory, end of period

$

119,659

$

136,565

$

119,659

$

136,565

BEAZER HOMES USA, INC.

CONSOLIDATED BALANCE SHEETS

in thousands (except share and per share data)

September 30, 2020

September 30, 2019

ASSETS

Cash and cash equivalents

$

327,693

$

106,741

Restricted cash

14,835

16,053

Accounts receivable (net of allowance of $358 and $304, respectively)

19,817

26,395

Income tax receivable

9,252

4,935

Owned inventory

1,350,738

1,504,248

Investments in unconsolidated entities

4,003

3,962

Deferred tax assets, net

225,143

246,957

Property and equipment, net

22,280

27,421

Operating lease right-of-use assets

13,103

—

Goodwill

11,376

11,376

Other assets

9,240

9,556

Total assets

$

2,007,480

$

1,957,644

LIABILITIES AND STOCKHOLDERS’ EQUITY

Trade accounts payable

$

132,192

$

131,152

Operating lease liabilities

15,333

—

Other liabilities

135,983

109,429

Total debt (net of debt issuance costs of $10,891 and $12,470, respectively)

1,130,801

1,178,309

Total liabilities

1,414,309

1,418,890

Stockholders’ equity:

Preferred stock (par value $0.01 per share, 5,000,000 shares authorized, no shares issued)

—

—

Common stock (par value $0.001 per share, 63,000,000 shares authorized, 31,012,326 issued and outstanding and 30,933,110 issued and outstanding, respectively)

31

31

Paid-in capital

856,466

854,275

Accumulated deficit

(263,326

)

(315,552

)

Total stockholders’ equity

593,171

538,754

Total liabilities and stockholders’ equity

$

2,007,480

$

1,957,644

Inventory Breakdown

Homes under construction

$

525,021

$

507,542

Development projects in progress

589,763

738,201

Land held for future development

28,531

28,531

Land held for sale

12,622

12,662

Capitalized interest

119,659

136,565

Model homes

75,142

80,747

Total owned inventory

$

1,350,738

$

1,504,248

BEAZER HOMES USA, INC.

CONSOLIDATED OPERATING AND FINANCIAL DATA – CONTINUING OPERATIONS

Quarter Ended September 30,

Fiscal Year Ended September 30,

SELECTED OPERATING DATA

2020

2019

2020

2019

Closings:

West region

958

978

3,206

2,859

East region

398

445

1,045

1,092

Southeast region

381

591

1,241

1,549

Total closings

1,737

2,014

5,492

5,500

New orders, net of cancellations:

West region

1,124

808

3,589

2,983

East region

457

283

1,328

1,152

Southeast region

428

367

1,376

1,441

Total new orders, net

2,009

1,458

6,293

5,576

Fiscal Year Ended September 30,

Backlog units at end of period:

2020

2019

West region

1,365

982

East region

624

341

Southeast region

520

385

Total backlog units

2,509

1,708

Dollar value of backlog at end of period (in millions)

$

995.3

$

665.1

Quarter Ended September 30,

Fiscal Year Ended September 30,

SUPPLEMENTAL FINANCIAL DATA

2020

2019

2020

2019

Homebuilding revenue:

West region

$

355,448

$

354,880

$

1,180,577

$

1,012,977

East region

180,385

206,939

476,167

506,389

Southeast region

143,227

211,183

460,166

557,879

Total homebuilding revenue

$

679,060

$

773,002

$

2,116,910

$

2,077,245

Revenues:

Homebuilding

$

679,060

$

773,002

$

2,116,910

$

2,077,245

Land sales and other

7,688

8,699

10,167

10,494

Total revenues

$

686,748

$

781,701

$

2,127,077

$

2,087,739

Gross profit:

Homebuilding

$

115,976

$

117,844

$

348,110

$

206,034

Land sales and other

624

(1,547

)

(470

)

(39,998

)

Total gross profit

$

116,600

$

116,297

$

347,640

$

166,036

Reconciliation of homebuilding gross profit and the related gross margin before impairments and abandonments and interest amortized to cost of sales to homebuilding gross profit and gross margin, the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that this information assists investors in comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective level of impairments and level of debt.

Quarter Ended September 30,

Fiscal Year Ended September 30,

2020

2019

2020

2019

Homebuilding gross profit/margin

$

115,976

17.1

%

$

117,844

15.2

%

$

348,110

16.4

%

$

206,034

9.9

%

Inventory impairments and abandonments (I&A)

637

—

1,646

110,029

Homebuilding gross profit/margin before I&A

116,613

17.2

%

117,844

15.2

%

349,756

16.5

%

316,063

15.2

%

Interest amortized to cost of sales

30,701

36,256

94,844

93,875

Homebuilding gross profit/margin before I&A and interest amortized to cost of sales

$

147,314

21.7

%

$

154,100

19.9

%

$

444,600

21.0

%

$

409,938

19.7

%

Reconciliation of Adjusted EBITDA to total company net income (loss), the most directly comparable GAAP measure, is provided for each period discussed below. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies’ respective capitalization, tax position and level of impairments. These EBITDA measures should not be considered alternatives to net income determined in accordance with GAAP as an indicator of operating performance.

The reconciliation of Adjusted EBITDA to total company net income (loss) below differs from prior year, as it reclassifies stock-based compensation expense from an adjustment within EBITDA to an adjustment within Adjusted EBITDA in order to accurately present EBITDA per its definition.

Quarter Ended September 30,

Fiscal Year Ended September 30,

2020

2019

2020

2019

Net income (loss)

$

23,678

$

2,429

$

52,226

$

(79,520

)

Expense (benefit) from income taxes

8,764

7,034

17,664

(37,245

)

Interest amortized to home construction and land sales expenses and capitalized interest impaired

30,727

37,415

95,662

108,941

Interest expense not qualified for capitalization

2,095

1,309

8,468

3,109

EBIT

65,264

48,187

174,020

(4,715

)

Depreciation and amortization

4,806

5,847

15,640

14,759

EBITDA

70,070

54,034

189,660

10,044

Stock-based compensation expense

5,167

2,533

10,036

10,526

Loss on extinguishment of debt

—

25,494

—

24,920

Inventory impairments and abandonments ^(a)

637

—

2,111

134,711

Restructuring and severance expenses

(44

)

—

1,317

—

Litigation settlement in discontinued operations

1,260

—

1,260

—

Adjusted EBITDA

$

77,090

$

82,061

$

204,384

$

180,201

^(a)

In periods during which we impaired certain of our inventory assets, capitalized interest that is impaired is included in the line above titled “Interest amortized to home construction and land sales expenses and capitalized interest impaired.”

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005950/en/

Beazer Homes USA, Inc.

David I. Goldberg

Vice President of Treasury and Investor Relations

770-829-3700

[email protected]

KEYWORDS: United States North America Georgia

INDUSTRY KEYWORDS: Construction & Property Residential Building & Real Estate

MEDIA:

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Posted on November 12, 2020 4:18 pm
Transco Commences Registered Exchange Offer for its 3.250% Senior Notes Due 2030 and 3.950% Senior Notes Due 2050

Transco Commences Registered Exchange Offer for its 3.250% Senior Notes Due 2030 and 3.950% Senior Notes Due 2050

TULSA, Okla.–(BUSINESS WIRE)–
Transcontinental Gas Pipe Line Company, LLC (“Transco”), a wholly owned subsidiary of The Williams Companies, Inc. (NYSE: WMB), announced today that it has commenced an offer to exchange any and all of its $700 million in aggregate principal amount of outstanding 3.250 percent Senior Notes due 2030 (the “Original 2030 Notes”) and $500 million in aggregate principal amount of outstanding 3.950 percent Senior Notes due 2050 (the “Original 2050 Notes” and, together with the Original 2030 Notes, the “Original Notes”) for an equal amount of the applicable series of its registered 3.250 percent Senior Notes due 2030 (the “2030 Exchange Notes”) and 3.950 percent Senior Notes due 2050 (the “2050 Exchange Notes” and, together with the 2030 Exchange Notes, the “Exchange Notes”).

The terms of the Exchange Notes are identical in all material respects to those of the applicable series of the Original Notes, except that the Exchange Notes have been registered under the Securities Act of 1933, as amended, and the transfer restrictions, restrictive legends, registration rights and additional interest provisions relating to the Original Notes do not apply to the Exchange Notes. The purpose of the Exchange Offer is to fulfill Transco’s obligations under the registration rights agreement entered into in connection with the issuance of the Original Notes. Transco will not receive any proceeds from the exchange offer.

The exchange offer will expire at 5:00 p.m. Eastern Standard Time (EST) on December 11, 2020, unless extended (such date and time, as may be extended, the “Expiration Date”). The settlement date for the exchange offer will occur promptly following the Expiration Date. The terms of the exchange offer and other information relating to Transco and the Exchange Notes are set forth in a prospectus dated November 12, 2020, a copy of which has been filed with the Securities and Exchange Commission. Transco has not authorized any person to provide information other than as set forth in the prospectus.

Copies of the prospectus and the transmittal letter governing the exchange offer can be obtained from the exchange agent, The Bank of New York Mellon Trust Company, N.A., by faxing a request to (732) 667-9408 or by writing via regular or certified mail, or overnight courier, to The Bank of New York Mellon Trust Company, N.A., Corporate Trust Operations—Reorganization Unit, 111 Sanders Creek Parkway, East Syracuse, New York 13057, Attn: Tiffany Castor.

This press release is for informational purposes only and does not constitute an offer to sell nor a solicitation of an offer to buy any security. The exchange offer is being made solely pursuant to the prospectus dated November 12, 2020, including any supplements thereto, and only to such persons and in such jurisdictions as is permitted under applicable law.

About Williams

Williams (NYSE: WMB) is committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. Headquartered in Tulsa, Oklahoma, Williams is an industry-leading, investment grade C-Corp with operations across the natural gas value chain including gathering, processing, interstate transportation and storage of natural gas and natural gas liquids. With major positions in top U.S. supply basins, Williams connects the best supplies with the growing demand for clean energy. Williams owns and operates more than 30,000 miles of pipelines system wide – including Transco, the nation’s largest volume and fastest growing pipeline – and handles approximately 30 percent of the natural gas in the United States that is used every day for clean-power generation, heating and industrial use.

Portions of this document may constitute “forward-looking statements” as defined by federal law. Although Transco believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about issues that could lead to material changes in performance is contained in Transco’s annual and quarterly reports filed with the Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005848/en/

MEDIA:

[email protected]

(800) 945-8723

INVESTOR CONTACTS:

Danilo Juvane

(918) 573-5075

KEYWORDS: Oklahoma United States North America

INDUSTRY KEYWORDS: Oil/Gas Energy

MEDIA:

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Posted on November 12, 2020 4:18 pm
AvalonBay Communities, Inc. Declares Fourth Quarter 2020 Dividends

AvalonBay Communities, Inc. Declares Fourth Quarter 2020 Dividends

ARLINGTON, Va.–(BUSINESS WIRE)–AvalonBay Communities, Inc. (NYSE: AVB) announced today that its Board of Directors declared a cash dividend on the Company’s Common Stock (par value $0.01 per share) for the fourth quarter of 2020. The Common Stock dividend is $1.59 per share and is payable January 15, 2021 to all Common Stockholders of Record as of December 31, 2020.

About AvalonBay Communities, Inc.

As of September 30, 2020, the Company owned or held a direct or indirect ownership interest in 294 apartment communities containing 86,676 apartment homes in 11 states and the District of Columbia, of which 19 communities were under development. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas primarily in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. More information may be found on the Company’s website at http://www.avalonbay.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112006048/en/

Jason Reilley

Vice President

Investor Relations

AvalonBay Communities, Inc.

703-317-4681

KEYWORDS: United States North America Virginia

INDUSTRY KEYWORDS: Construction & Property Residential Building & Real Estate

MEDIA:

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Posted on November 12, 2020 4:18 pm
Dillard’s, Inc. Reports Third Quarter Results

Dillard’s, Inc. Reports Third Quarter Results

LITTLE ROCK, Ark.–(BUSINESS WIRE)–
Dillard’s, Inc. (NYSE: DDS) (the “Company” or “Dillard’s”) announced operating results for the 13 and 39 weeks ended October 31, 2020. This release contains certain forward-looking statements. Please refer to the Company’s cautionary statements included below under “Forward-Looking Information.” In particular, these results include certain effects of the COVID-19 pandemic which has had, and is continuing to have, a significant negative impact on the Company’s business, results of operations and financial position. Given the uncertainty surrounding the COVID-19 pandemic and its economic effects, the related financial impact to fiscal 2020 cannot be reasonably estimated at this time. For a more detailed discussion of the factors that could materially and adversely affect Dillard’s business, financial condition and results of operations, see the caption “Risk Factors” in the Company’s most recent Form 10-K filed on March 31, 2020, as updated by our periodic filings with the SEC.

Dillard’s Chief Executive Officer William T. Dillard, II stated, “We have worked hard on inventory and expense control in unpredictable conditions throughout the pandemic. We achieved a 249 basis point gross margin improvement for the third quarter with ending inventory down 22%. Additionally, we cut expenses $100 million. As we enter this holiday season, one thing we can predict is the dedication of our associates and their exceptional service to our customers.”

Highlights of the Third Quarter (Compared to the Prior Year Third Quarter)

Net income of $31.9 million compared to net income of $5.5 million for the prior year third quarter

Net income of $1.43 per share compared to net income of $0.22 per share

Comparable store sales decreased approximately 24%.

Gross margin improved 249 basis points of sales

Inventory decreased approximately 22%

Selling, general and administrative expenses decreased $99.9 million

Short-term borrowings of $15.0 million following $229.6 million at August 1, 2020 and compared to $98.6 million at November 2, 2019

Share repurchases of $19.5 million (0.6 million shares) during the quarter

Third Quarter Results

Dillard’s reported net income for the 13 weeks ended October 31, 2020 of $31.9 million or $1.43 per share, compared to net income of $5.5 million, or $0.22 per share, for the prior year third quarter. Included in net income for the 13 weeks ended October 31, 2020 is a $2.2 million pretax loss ($1.4 million after tax or $0.06 per share) primarily related to the sale of a store property. The Company expects to be in a net operating loss position for the fiscal year. The CARES Act, signed into law on March 27, 2020, allows for net operating loss carryback to years in which the federal tax rate was 35%. Included in net income for the 13 weeks ended October 31, 2020 is a net tax benefit related to this provision.

Included in net income for the prior year 13 weeks ended November 2, 2019 is a pretax loss of $0.3 million ($0.2 million after tax or $0.01 per share) primarily related to the sale of a store property and $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.

Net sales for the 13 weeks ended October 31, 2020 and the 13 weeks ended November 2, 2019 were $1,024.9 million and $1,388.3 million, respectively. Net sales includes the operations of the Company’s construction business, CDI Contractors, LLC (“CDI”).

Total retail sales (which excludes CDI) for the 13-week periods ended October 31, 2020 and November 2, 2019 were $994.6 million and $1,334.2 million, respectively. Total retail sales decreased approximately 25% for the 13-week period ended October 31, 2020. Sales in comparable stores for the same period decreased approximately 24%.

Sales of home and furniture significantly outperformed the other categories followed by ladies’ accessories and lingerie and cosmetics. Sales of ladies’ apparel were significantly below trend. Sales in the Eastern region moderately outperformed the Central and Western regions, respectively.

Gross Margin / Inventory

Consolidated gross margin (which includes CDI) for the 13 weeks ended October 31, 2020 improved 249 basis points of sales to 35.7% compared to 33.2% for the prior year third quarter.

Retail gross margin for the 13 weeks ended October 31, 2020 improved 210 basis points of sales to 36.6% compared to 34.5% for the prior year third quarter primarily due to decreased markdowns.

Inventory at October 31, 2020 decreased approximately 22% compared to November 2, 2019.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses (“operating expenses”) for the 13 weeks ended October 31, 2020 decreased $99.9 million to $318.2 million (31.0% of sales) compared to $418.1 million (30.1% of sales) for the prior year third quarter primarily due to decreased payroll expense. While savings were realized in all expense categories, payroll expense declined approximately 28% during the quarter partially as a result of the Company’s reduced operating hours.

Retail operating expenses for the 13 weeks ended October 31, 2020 decreased $100.0 million to $316.7 million (31.9% of sales) compared to $416.7 million (31.2% of sales) for the prior year third quarter.

Share Repurchase

During the 13 weeks ended October 31, 2020, the Company purchased $19.5 million (approximately 0.6 million shares) of Class A Common Stock under its $500 million share repurchase program.

During the 39 weeks ended October 31, 2020, the Company purchased $95.6 million (approximately 2.2 million shares) of Class A Common Stock. As of October 31, 2020, authorization of $173.1 million remained under the program. Total shares outstanding (Class A and Class B Common Stock) at October 31, 2020 and November 2, 2019 were 22.0 million and 24.7 million, respectively.

39-Week Results

Dillard’s reported a net loss for the 39 weeks ended October 31, 2020 of $138.7 million or $6.05 per share, compared to net income of $43.4 million, or $1.69 per share, for the prior year 39-week period. Included in net loss for the 39 weeks ended October 31, 2020 is a $2.2 million pretax loss ($1.4 million after tax or $0.06 per share) primarily related to the sale of a store property. The Company expects to be in a net operating loss position for the fiscal year. The CARES Act, signed into law on March 27, 2020, allows for net operating loss carryback to years in which the federal tax rate was 35%. Included in net loss for the 39 weeks ended October 31, 2020 is a net tax benefit related to this provision.

Included in net income for the prior year 39 weeks ended November 2, 2019 is a pretax gain of $12.0 million ($9.4 million after tax or $0.37 per share) primarily related to the sale of four store properties and $2.8 million ($0.11 per share) in tax benefits related to amended state tax return filings.

Net sales for the 39 weeks ended October 31, 2020 and the 39 weeks ended November 2, 2019 were $2,730.6 million and $4,280.6 million, respectively. Net sales includes the operations of the Company’s construction business, CDI Contractors, LLC (“CDI”).

Total retail sales for the 39-week periods ended October 31, 2020 and November 2, 2019 were $2,638.8 million and $4,132.9 million, respectively. Total retail sales decreased approximately 36% for the 39-week period ended October 31, 2020.

Consolidated gross margin for the same 39-week periods was 27.2% and 32.6% of sales, respectively. Retail gross margin for the 39 weeks ended October 31, 2020 and November 2, 2019 was 28.0% and 33.7% of sales, respectively.

Consolidated operating expenses for the 39 weeks ended October 31, 2020 decreased $356.7 million to $875.7 million (32.1% of sales) compared to $1,232.4 million (28.8% of sales) for the prior year 39-week period primarily due to decreased payroll expense. Payroll expense declined approximately 34% during the 39-week period ended October 31, 2020.

Retail operating expenses for the 39 weeks ended October 31, 2020 decreased $356.5 million to $871.1 million (33.0% of sales) compared to $1,227.6 million (29.7% of sales) for the prior year 39-week period.

Store Information

Dillard’s has announced the upcoming closure of its Paradise Valley Mall location in Phoenix, Arizona (200,000 square feet). The Company expects to close the location by the end of the fiscal year. Dillard’s operates 250 Dillard’s locations and 32 clearance centers spanning 29 states and an Internet store at www.dillards.com. Total store square footage at October 31, 2020 was 48.0 million square feet.

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In Millions, Except Per Share Data)

13 Weeks Ended

39 Weeks Ended

October 31, 2020

November 2, 2019

October 31, 2020

November 2, 2019

Amount

% of Net Sales

Amount

% of Net Sales

Amount

% of Net Sales

Amount

% of Net Sales

Net sales

$

1,024.9

100.0

%

$

1,388.3

100.0

%

$

2,730.6

100.0

%

$

4,280.6

100.0

%

Service charges and other income

27.2

2.7

35.3

2.5

88.3

3.2

99.8

2.3

1,052.1

102.7

1,423.6

102.5

2,818.9

103.2

4,380.4

102.3

Cost of sales

658.7

64.3

926.8

66.8

1,987.0

72.8

2,886.6

67.4

Selling, general and administrative expenses

318.2

31.0

418.1

30.1

875.7

32.1

1,232.4

28.8

Depreciation and amortization

53.4

5.2

56.2

4.0

155.2

5.7

162.9

3.8

Rentals

5.1

0.5

5.9

0.4

16.3

0.6

18.2

0.4

Interest and debt expense, net

12.2

1.2

11.5

0.8

37.3

1.4

35.0

0.8

Other expense

2.0

0.2

1.9

0.1

6.4

0.2

5.8

0.1

(Loss) gain on disposal of assets

(2.2)

(0.2)

(0.3)

0.0

(2.2)

(0.1)

12.0

0.3

Income (loss) before income taxes

0.3

—

2.9

0.2

(261.2)

(9.6)

51.5

1.2

Income taxes (benefit)

(31.6)

(2.6)

(122.5)

8.1

Net income (loss)

$

31.9

3.1

%

$

5.5

0.4

%

$

(138.7)

(5.1)

%

$

43.4

1.0

%

Basic and diluted earnings (loss) per share

$

1.43

$

0.22

$

(6.05)

$

1.69

Basic and diluted weighted average shares

22.3

24.9

22.9

25.6

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In Millions)

October 31, 2020

November 2, 2019

Assets

Current Assets:

Cash and cash equivalents

$

61.1

$

79.1

Restricted cash

—

8.5

Accounts receivable

28.4

48.2

Merchandise inventories

1,545.3

1,970.0

Federal and state income taxes

127.0

—

Other current assets

65.6

74.2

Total current assets

1,827.4

2,180.0

Property and equipment, net

1,348.8

1,494.5

Operating lease assets

40.5

48.6

Deferred income taxes

14.7

—

Other assets

74.5

77.0

Total Assets

$

3,305.9

$

3,800.1

Liabilities and Stockholders’ Equity

Current Liabilities:

Trade accounts payable and accrued expenses

$

1,031.8

$

1,211.5

Other short-term borrowings

15.0

98.6

Current portion of long-term debt and finance lease liabilities

0.8

1.1

Current portion of operating lease liabilities

12.8

15.3

Federal and state income taxes

—

4.5

Total current liabilities

1,060.4

1,331.0

Long-term debt and finance lease liabilities

366.0

366.7

Operating lease liabilities

27.4

33.0

Other liabilities

271.3

243.2

Deferred income taxes

—

13.8

Subordinated debentures

200.0

200.0

Stockholders’ equity

1,380.8

1,612.4

Total Liabilities and Stockholders’ Equity

$

3,305.9

$

3,800.1

Dillard’s, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In Millions)

39 Weeks Ended

October 31, 2020

November 2, 2019

Operating activities:

Net (loss) income

$

(138.7

)

$

43.4

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

Depreciation and amortization of property and other deferred cost

157.3

164.4

Loss (gain) on disposal of assets

2.2

(12.0

)

Proceeds from insurance

8.7

0.4

Changes in operating assets and liabilities:

Decrease in accounts receivable

17.8

1.6

Increase in merchandise inventories

(80.3

)

(441.6

)

Increase in other current assets

(13.7

)

(2.0

)

Increase in other assets

(2.1

)

(8.4

)

Increase in trade accounts payable and accrued expenses and other liabilities

145.8

286.3

Decrease in income taxes

(162.5

)

(9.1

)

Net cash (used in) provided by operating activities

(65.5

)

23.0

Investing activities:

Purchase of property and equipment and capitalized software

(49.5

)

(70.9

)

Proceeds from disposal of assets

1.5

22.0

Distribution from joint venture

0.2

1.4

Net cash used in investing activities

(47.8

)

(47.5

)

Financing activities:

Principal payments on long-term debt and finance lease liabilities

(0.9

)

(0.7

)

Cash dividends paid

(10.7

)

(7.8

)

Purchase of treasury stock

(102.9

)

(101.5

)

Issuance cost of line of credit

(3.2

)

—

Increase in short-term borrowings

15.0

98.6

Net cash used in financing activities

(102.7

)

(11.4

)

Decrease in cash, cash equivalents and restricted cash

(216.0

)

(35.9

)

Cash, cash equivalents and restricted cash, beginning of period

277.1

123.5

Cash, cash equivalents and restricted cash, end of period

$

61.1

$

87.6

Non-cash transactions:

Accrued capital expenditures

$

6.0

$

9.6

Stock awards

0.8

1.0

Lease assets obtained in exchange for new operating lease liabilities

4.1

4.6

Forward-Looking Information

The foregoing contains certain “forward-looking statements” within the definition of federal securities laws. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: statements including (a) words such as “may,” “will,” “could,” “believe,” “expect,” “future,” “potential,” “anticipate,” “intend,” “plan,” “estimate,” “continue,” or the negative or other variations thereof, and (b) statements regarding matters that are not historical facts. The Company cautions that forward-looking statements contained in this report are based on estimates, projections, beliefs and assumptions of management and information available to management at the time of such statements and are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events, the receipt of new information, or otherwise. Forward-looking statements of the Company involve risks and uncertainties and are subject to change based on various important factors. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements made by the Company and its management as a result of a number of risks, uncertainties and assumptions. Representative examples of those factors include (without limitation) the COVID-19 pandemic and its effects on public health, our supply chain, the health and well-being of our employees and customers, and the retail industry in general; other general retail industry conditions and macro-economic conditions; economic and weather conditions for regions in which the Company’s stores are located and the effect of these factors on the buying patterns of the Company’s customers, including the effect of changes in prices and availability of oil and natural gas; the availability of consumer credit; the impact of competitive pressures in the department store industry and other retail channels including specialty, off-price, discount and Internet retailers; changes in consumer spending patterns, debt levels and their ability to meet credit obligations; changes in tax legislation; changes in legislation, affecting such matters as the cost of employee benefits or credit card income; adequate and stable availability and pricing of materials, production facilities and labor from which the Company sources its merchandise; changes in operating expenses, including employee wages, commission structures and related benefits; system failures or data security breaches; possible future acquisitions of store properties from other department store operators; the continued availability of financing in amounts and at the terms necessary to support the Company’s future business; fluctuations in LIBOR and other base borrowing rates; the elimination of LIBOR; potential disruption from terrorist activity and the effect on ongoing consumer confidence; other epidemic, pandemic or public health issues; potential disruption of international trade and supply chain efficiencies; any government-ordered restrictions on the movement of the general public or the mandated or voluntary closing of retail stores in response to the COVID-19 pandemic; world conflict and the possible impact on consumer spending patterns and other economic and demographic changes of similar or dissimilar nature. The Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended February 1, 2020, contain other information on factors that may affect financial results or cause actual results to differ materially from forward-looking statements.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005948/en/

Dillard’s, Inc.

Julie Johnson Guymon

501-376-5965

[email protected]

KEYWORDS: United States North America Arkansas

INDUSTRY KEYWORDS: Retail Department Stores Fashion

MEDIA:

Logo

Posted on November 12, 2020 4:18 pm
Liberty Media Corporation Closes Private Offering of $800 Million of 0.50% Exchangeable Senior Debentures Due 2050

Liberty Media Corporation Closes Private Offering of $800 Million of 0.50% Exchangeable Senior Debentures Due 2050

ENGLEWOOD, Colo.–(BUSINESS WIRE)–
Liberty Media Corporation (“Liberty”) (Nasdaq: LSXMA, LSXMB, LSXMK, BATRA, BATRK, FWONA, FWONK) announced today that it has closed its previously announced private offering of $800 million aggregate original principal amount of its 0.50% exchangeable senior debentures due 2050 (the “Debentures”).

Upon an exchange of Debentures, Liberty, at its option, may deliver shares of Live Nation Entertainment, Inc. (“Live Nation”) common stock or the value thereof in cash (or any combination of shares of Live Nation common stock and cash). Initially, 11.0983 shares of Live Nation common stock are attributable to each $1,000 principal amount of Debentures, representing an initial exchange price of approximately $90.10 for each share of Live Nation common stock. A total of approximately 8,878,640 shares of Live Nation common stock are attributable to the Debentures. Interest will be payable quarterly on March 1, June 1, September 1 and December 1 of each year, commencing March 1, 2021. The Debentures may be redeemed by Liberty, in whole or in part, on or after September 1, 2024. Holders of the Debentures also have the right to require Liberty to purchase their Debentures on September 1, 2024. The redemption and purchase price will generally equal 100% of the adjusted principal amount of the Debentures plus accrued and unpaid interest to the redemption date, plus any final period distribution.

Liberty expects to use the net proceeds of the offering for general corporate purposes, which may include the future repayment of indebtedness, including Liberty’s 2.25% Exchangeable Senior Debentures due 2048, and the settlement of the call spread between the Formula One Group and the Liberty SiriusXM Group related to 34.8 million shares of Liberty’s Live Nation common stock.

The Debentures have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and, unless so registered, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The Debentures were offered by means of an offering memorandum solely to “Qualified Institutional Buyers” pursuant to, and as that term is defined in, Rule 144A of the Securities Act.

This press release does not constitute an offer to sell or the solicitation of an offer to buy the Debentures nor shall there be any sale of Debentures in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state.

Forward-Looking Statements

This press release includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the offering of Debentures and the use of proceeds therefrom. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, general market conditions. These forward-looking statements speak only as of the date of this press release, and Liberty expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Liberty’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Please refer to the publicly filed documents of Liberty, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, for risks and uncertainties related to Liberty’s business which may affect the statements made in this press release.

About Liberty Media Corporation

Liberty Media Corporation operates and owns interests in a broad range of media, communications and entertainment businesses. Those businesses are attributed to three tracking stock groups: the Liberty SiriusXM Group, the Braves Group and the Formula One Group. The businesses and assets attributed to the Liberty SiriusXM Group (NASDAQ: LSXMA, LSXMB, LSXMK) include Liberty Media Corporation’s interest in SiriusXM and Live Nation. The businesses and assets attributed to the Braves Group (NASDAQ: BATRA, BATRK) include Liberty Media Corporation’s subsidiary Braves Holdings, LLC, whose principal business is the Atlanta Braves. The businesses and assets attributed to the Formula One Group (NASDAQ: FWONA, FWONK) consist of all of Liberty Media Corporation’s businesses and assets other than those attributed to the Liberty SiriusXM Group and the Braves Group, including its subsidiary Formula 1 and a minority equity investment in AT&T Inc.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201112005944/en/

Liberty Media Corporation

Courtnee Chun, 720-875-5420

KEYWORDS: Colorado United States North America

INDUSTRY KEYWORDS: Internet Online Technology Entertainment TV and Radio

MEDIA:

Logo

Posted on November 12, 2020 4:18 pm
Trean Insurance Group Reports Third Quarter 2020 Results

– 23
%
Year-over-Year Growth in Gross Written Premiums
to $
132
.
3
Million –

– Net Income of $69.3 Million, Diluted Earnings per Share of $1.41 –

– Adjusted Net Income
of $10.5 Million,
Adjusted Diluted Earnings per Share of $0.21 –

– Significant Year-over-Year Improvement in Loss and Combined Ratios –

WAYZATA, Minn., Nov. 12, 2020 (GLOBE NEWSWIRE) — Trean Insurance Group, Inc. (Nasdaq: TIG) (“Trean” or the “Company”), a leading provider of products and services to the specialty insurance market, today reported results for the third quarter ended September 30, 2020.

Trean completed its initial public offering (“IPO”) in July 2020 and the results detailed below reflect gains and expenses related to the IPO and the Company’s public company readiness efforts.

Third
Quarter 2020
Highlights
and Subsequent Event
s

Gross written premiums increased 23.0% to $132.3 million, compared to $107.5 million in the third quarter of 2019

Loss ratio of 55.9%, a 720 basis point improvement compared to 63.1% in the third quarter of 2019

Expense ratio of 25.1%, a 90 basis point improvement compared to 26.0% in the third quarter of 2019

Combined ratio of 81.0%, an 810 basis point improvement versus 89.1% in the prior-year period

Net income was $69.3 million and diluted earnings per share were $1.41, primarily driven by a one-time $69.8 million gain on revaluation of the Company’s Compstar Holding Company LLC (“Compstar”) investment, and partially offset by $11.7 million in certain IPO-related bonuses, expenses and contract buyout fee

Adjusted net income⁽¹⁾ (excluding the aforementioned IPO-related events), was $10.5 million, and adjusted diluted earnings per share were $0.21

Return on equity of 102.5%; Adjusted return on equity⁽¹⁾ (excluding the aforementioned IPO-related events) of 15.5%; Adjusted return on tangible equity was 25.9%⁽¹⁾

Subsequent to quarter end, completed acquisition of 7710 Insurance Company and its associated program manager and agency

_{⁽¹⁾

Adjusted net income, adjusted return on equity

, adjusted return on tangible equity

and underwriting income are non-GAAP financial measures. See discussion of “Key Metrics” below.}

“Our proven business model and operating strategy produced an outstanding third quarter performance despite the ongoing challenging environment,” stated Andrew M. O’Brien, President and Chief Executive Officer of Trean. “We produced double-digit growth in gross written premiums, in large part due to the onboarding of new program partners that are already providing valuable contributions. Furthermore, our prudent underwriting approach and ability to quickly and fairly resolve claims led to a strong quarter of profitability. As we begin looking into 2021, we are excited about the multiple opportunities present in workers compensation and other lines. We will also continue to invest thoughtfully in our business to support our program partners and to promote sustainable long-term growth.”

Underwriting Results

Gross written premiums increased 23.0% to $132.3 million for the third quarter of 2020, compared to $107.5 million for the third quarter of 2019, primarily attributable to the addition of new program partners brought on board during the second and third quarters of 2020. Net earned premiums of $27.9 million grew 25.7% compared to the prior year’s third quarter, driven by the increase in gross written and gross earned premiums, partially offset by an increase in ceded earned premiums compared to the prior-year period.

Underwriting income⁽¹⁾ was $5.3 million, resulting in a combined ratio of 81.0% for the third quarter of 2020, compared to underwriting income of $2.4 million and a combined ratio of 89.1% for the prior-year period. Losses and loss adjustment expenses for the third quarter of 2020 were $15.6 million, which resulted in a 55.9% loss ratio, a 720 basis point improvement compared to 63.1% in the prior-year period. The improvement in the loss ratio during the third quarter was primarily attributable to the increase in net earned premiums during the period, offset by a decrease in favorable loss reserve estimate true-ups made during the third quarter of 2020 versus the third quarter of 2019.

General and administrative expenses were $7.0 million for the third quarter of 2020, compared to $5.8 million for the prior-year period. The Company’s expense ratio was 25.1% for the third quarter of 2020, a 90 basis point improvement compared to 26.0% for the prior-year period, primarily attributable to an increase in net earned premiums, partially offset by a rise in net agent commissions resulting from the increase in written premiums, higher salaries and benefits resulting from an expanded workforce and an increase in professional service expenses.

The third quarters of 2020 and 2019 included certain gains and expenses related to the IPO transaction and other consulting expenses, and management fee expenses including cash bonuses paid to unitholders and employees. Adjusted net income⁽¹⁾, which excludes those items, for the third quarter of 2020 was $10.5 million, a 61.8% increase compared to net income of $6.5 million for the prior-year period. Adjusted diluted earnings per share for the third quarter of 2020 were $0.21.

Investment Results

Net investment income was $1.9 million for the third quarter of 2020, compared to $1.7 million for the prior-year period. Cash and invested assets consist primarily of fixed maturities, equity securities and cash equivalents. The majority of the Company’s investment portfolio at September 30, 2020 was comprised of fixed maturity securities that were classified as available-for-sale of $375.3 million. Also included in investments at September 30, 2020 were $3.7 million of equity securities and $165.3 million of cash and cash equivalents. The Company’s investment portfolio had an average rating of “AA” at both September 30, 2020 and September 30, 2019.

Other

Other revenue increased $2.8 million, or 110.9%, to $5.4 million for the third quarter of 2020, compared to $2.6 million for the prior-year period, largely driven by an increase in brokerage fees earned due to the timing of effective dates of reinsurance contracts for current and new programs and increases in estimated premiums on reinsurance contracts.

Equity earnings in affiliates, net of tax were $0.4 million for the third quarter of 2020, compared to $1.0 million for the third quarter of 2019. The decrease primarily resulted from the Company acquiring the remaining 55% interest in Compstar in July 2020; following the acquisition, the Company now owns 100% of Compstar.

Shareholders
’ Equity and Returns

Total shareholders’ equity was $401.8 million at September 30, 2020, compared to $141.6 million at December 31, 2019. Return on equity was 102.5% for the third quarter of 2020, compared to 18.0% for the prior-year period, and adjusted return on equity⁽¹⁾ was 15.5% for the third quarter of 2020, compared to 20.2% for the prior-year period. The change in return on equity reflected a significant increase in the Company’s shareholders’ equity, primarily resulting from the increases in additional paid-in capital related to the IPO and retained earnings since December 2019. Return on tangible equity was 171.2% for the third quarter of 2020, compared to 18.5% for the prior-year period and adjusted return on tangible equity was 25.9% for the third quarter of 2020, compared to 20.7% for the prior-year period.

Webcast and Conference Call

A webcast and conference call to discuss the Company’s results will be held today beginning at 5:00 p.m. (Eastern Time). The audio webcast is accessible through the investor relations section of the Company’s website at https://investors.trean.com.

The dial-in number for the conference call is (877) 407-3982 (toll-free) or (201) 493-6780 (international), conference ID# 13711785. Any person interested in listening to the call should dial in or access the website at least 10 minutes before the call.

A replay of the call will be available at https://investors.trean.com for one year following the call.

Key M
etrics

The Company discusses certain key financial and operating metrics, described below, which provide useful information about its business and the operational factors underlying its financial performance.

Underwriting income is a non-GAAP financial measure defined as income before taxes excluding net investment income, investment revaluation gains, net realized capital gains or losses, IPO-related expenses, intangible asset amortization, noncash share-based compensation, other revenue, interest expense and other income. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of underwriting income to income before taxes in accordance with GAAP.

Adjusted net income is a non-GAAP financial measure defined as net income excluding the impact of various unusual events, including the consummation of the reorganization transactions in connection with our IPO, noncash intangible asset amortization and share-based compensation, or gains or losses that the Company does not believe reflect its core operating performance, which items may have a disproportionate effect in a given period, affecting comparability of the Company’s results. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted net income to net income in accordance with GAAP.

Loss ratio, expressed as a percentage, is the ratio of losses and loss adjustment expenses to net earned premiums.

Expense ratio, expressed as a percentage, is the ratio of general and administrative expenses to net earned premiums.

Combined ratio is the sum of the loss ratio and the expense ratio. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.

Return on equity is net income expressed on an annualized basis as a percentage of average beginning and ending shareholders’ equity during the period.

Adjusted return on equity is a non-GAAP financial measured defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending shareholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted return on equity to return on equity in accordance with GAAP.

Tangible shareholders’ equity is defined as shareholders’ equity less goodwill and other intangible assets.

Return on tangible equity is a non-GAAP financial measure defined as net income expressed on an annualized basis as a percentage of average beginning and ending tangible shareholders’ equity during the period.

Adjusted return on tangible equity is a non-GAAP financial measure defined as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending tangible shareholders’ equity during the period. See “Reconciliation of Non-GAAP Financial Measures” for a reconciliation of adjusted return on tangible equity to return on equity in accordance with GAAP.

Forward-Looking Statements

This press release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements that are not historical or current facts. These statements may discuss the Company’s net income, cash flow, financial condition, impairments, expenditures, growth, strategies, plans, achievements, capital structure, organizational structure, market opportunities and general market and industry conditions. Such forward-looking statements can be identified by words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “predict,” “project,” “believe,” “seek,” “outlook,” “future,” “will,” “would,” “should,” “could,” “may,” “can have,” “likely” and similar terms. Forward-looking statements are based on management’s current expectations and assumptions about future events. These statements are only predictions and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements if the underlying assumptions prove to be incorrect or as a result of risks, uncertainties, and other factors, including the impact of the COVID-19 pandemic on the business and operations of the Company, our program partners and other business relations. Other factors that may cause such differences include the risks described in the Company’s filings with the U.S. Securities and Exchange Commission, including the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. These forward-looking statements speak only as of the date on which they are made. Except as required by applicable securities laws, the Company disclaims any obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, changes in assumptions or otherwise. Investors are cautioned not to place undue reliance on the forward-looking statements contained in this press release or in other filings and public statements of the Company.

About
Trean
Insurance Group, Inc.

Trean Insurance Group, Inc. (Nasdaq: TIG) provides products and services to the specialty insurance market. Trean underwrites specialty casualty insurance products both through its program partners and its own managing general agencies. Trean also provides its program partners with a variety of services including issuing carrier services, claims administration and reinsurance brokerage. Trean is licensed to write business across 49 states and the District of Columbia. For more information, please visit www.trean.com.

Contacts

Investor Relations
[email protected]
(952) 974-2260

Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands)

(unaudited)

Three Months Ended September 30, Percentage Nine Months Ended September 30, Percentage

2020 2019 Change Change 2020 2019 Change Change

Revenues

Gross written premiums $ 132,284 $ 107,534 24,750 23.0 % $ 349,755 $ 313,488 36,267 11.6 %

Increase in gross unearned premiums (22,963 ) (5,612 ) (17,351 ) 309.2 % (39,601 ) (18,099 ) (21,502 ) 118.8 %

Gross earned premiums 109,321 101,922 7,399 7.3 % 310,154 295,389 14,765 5.0 %

Ceded earned premiums (81,465 ) (79,761 ) (1,704 ) 2.1 % (238,460 ) (230,227 ) (8,233 ) 3.6 %

Net earned premiums 27,856 22,161 5,695 25.7 % 71,694 65,162 6,532 10.0 %

Net investment income 1,857 1,721 136 7.9 % 6,653 4,578 2,075 45.3 %

Gain on revaluation of Compstar investment 69,846 – 69,846 100.0 % 69,846 – 69,846 100.0 %

Net realized capital gains (losses) 115 (34 ) 149 (438.2 )% 3,345 689 2,656 385.5 %

Other revenue 5,401 2,561 2,840 110.9 % 11,323 8,049 3,274 40.7 %

Total revenue 105,075 26,409 78,666 297.9 % 162,861 78,478 84,383 107.5 %

Expenses

Losses and loss adjustment expenses 15,564 13,976 1,588 11.4 % 40,681 38,446 2,235 5.8 %

General and administrative expenses 6,995 5,756 1,239 21.5 % 23,437 15,894 7,543 47.5 %

IPO bonuses and contract buyout fee 11,054 – 11,054 100.0 % 11,054 – 11,054 100.0 %

Intangible asset amortization 1,120 11 1,109 10,081.8 % 1,154 35 1,119 3,197.1 %

Noncash share-based compensation 307 – 307 100.0 % 307 – 307 100.0 %

Interest expense 520 498 22 4.4 % 1,482 1,683 (201 ) (11.9 )%

Total expenses 35,560 20,241 15,319 75.7 % 78,115 56,058 22,057 39.3 %

Other income (expense) 209 (8 ) 217 (2,712.5 )% 263 118 145 122.9 %

Income before taxes 69,724 6,160 63,564 1,031.9 % 85,009 22,538 62,471 277.2 %

Provision for income taxes 788 1,395 (607 ) (43.5 )% 4,679 4,404 275 6.2 %

Equity earnings in affiliates, net of tax 401 1,021 (620 ) (60.7 )% 2,333 2,494 (161 ) (6.5 )%

Net income $ 69,337 $ 5,786 63,551 1,098.4 % $ 82,663 $ 20,628 62,035 300.7 %

Earnings per share:

Basic $ 1.41 $ 0.15 $ 2.00 $ 0.55

Diluted $ 1.41 $ 0.15 $ 2.00 $ 0.55

Weighted average shares outstanding

Basic 49,054,441 37,386,394 41,304,132 37,386,394

Diluted 49,056,001 37,386,394 41,304,652 37,386,394

Key Metrics

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages) 2020 2019 2020 2019

Underwriting income⁽¹⁾ $ 5,297 $ 2,429 $ 7,576 $ 10,822

Adjusted net income⁽¹⁾ $ 10,477 $ 6,474 $ 21,600 $ 21,797

Loss ratio 55.9 % 63.1 % 56.7 % 59.0 %

Expense ratio 25.1 % 26.0 % 32.7 % 24.4 %

Combined ratio 81.0 % 89.1 % 89.4 % 83.4 %

Return on equity 102.5 % 18.0 % 40.6 % 23.4 %

Adjusted return on equity⁽¹⁾ 15.5 % 20.2 % 10.6 % 24.7 %

Return on tangible equity⁽¹⁾ 171.2 % 18.5 % 67.3 % 24.0 %

Adjusted return on tangible equity⁽¹⁾ 25.9 % 20.7 % 17.6 % 25.3 %

⁽¹⁾ Adjusted net income, adjusted return on equity, return on tangible equity, adjusted return on tangible equity and underwriting income are non-GAAP financial measures. See “Reconciliation of Non-GAAP Financial Measures” below for a reconciliation to the applicable GAAP measure.

Trean Insurance Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share data)

September 30, 2020 December 31, 2019

Assets (unaudited)

Fixed maturities, available for sale $ 375,286 $ 337,865

Preferred stock, available for sale 240 343

Common stock, available for sale 3,458 492

Equity method investments 232 12,173

Total investments 379,216 350,873

Cash and cash equivalents 165,255 74,268

Restricted cash 21,175 1,800

Accrued investment income 2,418 2,468

Premiums and other receivables 99,635 62,460

Income taxes refundable 797 –

Related party receivables 33 22,221

Reinsurance recoverable 350,425 307,338

Prepaid reinsurance premiums 103,929 80,088

Deferred policy acquisition cost, net 3,777 2,115

Property and equipment, net 8,439 7,937

Right of use asset 6,558 –

Deferred tax asset – 1,367

Goodwill 139,575 2,822

Intangible assets, net 73,436 –

Other assets 9,721 3,277

Total assets $ 1,364,389 $ 919,034

Liabilities

Unpaid loss and loss adjustment expenses $ 465,502 $ 406,716

Unearned premiums 143,390 103,789

Funds held under reinsurance agreements 160,614 163,445

Reinsurance premiums payable 59,756 53,620

Accounts payable and accrued expenses 73,865 14,995

Lease liability 7,054 –

Income taxes payable – 714

Deferred tax liability 12,597 –

Long-term debt 39,858 29,040

Total liabilities 962,636 772,319

Redeemable preferred stock – 5,100

Shareholders’ Equity

Common stock 511 –

Members’ equity – 78,438

Additional paid-in capital 287,234 17,995

Retained earnings 104,853 40,361

Accumulated other comprehensive loss 9,155 4,821

Total shareholders’ equity 401,753 141,615

Total liabilities and shareholders’ equity $ 1,364,389 $ 913,934

Reconciliation of Non-GAAP Financial Measures

Underwriting income

The Company defines underwriting income as income before taxes excluding net investment income, investment revaluation gains, net realized capital gains or losses, IPO-related expenses, intangible asset amortization, noncash share-based compensation, other revenue, interest expense and other income. Underwriting income represents the pre-tax profitability of the Company’s underwriting operations and allows management to evaluate the Company’s underwriting performance without regard to investment income, IPO-related expenses, intangible asset amortization, noncash share-based compensation, interest expense and other revenue and income. The Company uses this metric because the Company believes it gives management and other users of the Company’s financial information useful insight into the Company’s underwriting business performance by adjusting for these expenses and sources of income. Underwriting income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define underwriting income differently.

Three Months Ended September 30, Percentage Nine Months Ended September 30, Percentage

(in thousands, except percentages) 2020 2019 Change 2020 2019 Change

Net income $ 69,337 $ 5,786 1,098.0 % $ 82,663 $ 20,628 300.7 %

Income tax expense 788 1,395 (43.5 )% 4,679 4,404 6.2 %

Equity earnings in affiliates, net of tax (401 ) (1,021 ) (60.7 )% (2,333 ) (2,494 ) (6.5 )%

Income before taxes 69,724 6,160 1,031.9 % 85,009 22,538 277.2 %

Other revenue (5,401 ) (2,561 ) 110.9 % (11,323 ) (8,049 ) 40.7 %

Net investment income (1,857 ) (1,721 ) 7.9 % (6,653 ) (4,578 ) 45.3 %

Gain on revaluation of Compstar investment (69,846 ) – 100.0 % (69,846 ) – 100.0 %

Net realized capital gains (losses) (115 ) 34 (438.2 )% (3,345 ) (689 ) 385.5 %

Interest expense 520 498 4.4 % 1,482 1,683 (11.9 )%

IPO bonuses and contract buyout fee 11,054 – 100.0 % 11,054 – 100.0 %

Intangible asset amortization 1,120 11 10,081.8 % 1,154 35 3,197.1 %

Noncash share-based compensation 307 – 100.0 % 307 – 100.0 %

Other income (expense) (209 ) 8 (2,712.5 )% (263 ) (118 ) 122.9 %

Underwriting income $ 5,297 $ 2,429 118.1 % $ 7,576 $ 10,822 (30.0 )%

Adjusted net income

The Company defines adjusted net income as net income excluding the impact of certain items, including the consummation of the reorganization transactions in connection with the IPO, noncash intangible asset amortization and share-based compensation, or gains or losses that the Company believes do not reflect its core operating performance, which items may have a disproportionate effect in a given period, affecting comparability the Company’s results across periods. The Company calculates the tax impact only on adjustments that would be included in calculating the Company’s income tax expense using the effective tax rate at the end of each period. The Company uses adjusted net income as an internal performance measure in the management of its operations because the Company believes it gives its management and other users of its financial information useful insight into the Company’s results of operations and underlying business performance by eliminating the effects of these items. Adjusted net income should not be viewed as a substitute for net income calculated in accordance with GAAP, and other companies may define adjusted net income differently.

Three Months Ended September 30, Percentage

(in thousands, except percentages) 2020 2019 Change

Net income $ 69,337 $ 5,786 1,098.4 %

Intangible asset amortization 1,120 11 10,081.8 %

Noncash stock-based compensation 307 – 100.0 %

Expenses associated with Altaris management fee, including cash bonuses paid to unitholders – 441 (100.0 )%

Expenses associated with IPO and other one-time legal and consulting expenses 645 387 66.7 %

Expenses related to debt issuance costs, including OID amortization – 25 (100.0 )%

FMV adjustment of remaining investment in subsidiary (69,846 ) – 100.0 %

IPO bonuses and contract buyout fee 11,054 – 100.0 %

Total adjustments (56,720 ) 864 (6,664.8 )%

Tax impact of adjustments (2,140 ) (176 ) 1,115.9 %

Adjusted net income $ 10,477 $ 6,474 61.8 %

Nine Months Ended September 30, Percentage

(in thousands, except percentages) 2020 2019 Change

Net income $ 82,663 $ 20,628 300.7 %

Intangible asset amortization 1,154 35 3,197.1 %

Noncash stock-based compensation 307 – 100.0 %

Expenses associated with Altaris management fee, including cash bonuses paid to unitholders 883 1,324 (33.3 )%

Expenses associated with IPO and other one-time legal and consulting expenses 1,845 829 122.6 %

Expenses related to debt issuance costs, including OID amortization 135 75 80.0 %

FMV adjustment of remaining investment in subsidiary (71,846 ) – 100.0 %

Net loss (gain) on purchase & disposal of subsidiaries (3,115 ) (634 ) 391.3 %

IPO bonuses and contract buyout fee 11,054 – 100.0 %

Total adjustments (59,583 ) 1,629 (3,757.6 )%

Tax impact of adjustments (1,480 ) (460 ) 221.7 %

Adjusted net income $ 21,600 $ 21,797 (0.9 )%

A

djusted return on equity

The Company defines adjusted return on equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending shareholders’ equity during the period. The Company uses adjusted return on equity as an internal performance measure in the management of its operations because the Company believes it gives management and other users of the Company’s financial information useful insight into the Company’s results of operations and underlying business performance by adjusting for items that the Company believes do not reflect its core operating performance and that may diminish comparability across periods. Adjusted return on equity should not be viewed as a substitute for return on equity calculated in accordance with GAAP, and other companies may define adjusted return on equity differently.

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages) 2020 2019 2020 2019

Adjusted return on equity calculation:

Numerator: adjusted net income $ 10,477 $ 6,474 $ 21,600 $ 21,797

Denominator: average shareholders’ equity 270,519 128,299 271,684 117,688

Adjusted return on equity 15.5 % 20.2 % 10.6 % 24.7 %

Return on equity 102.5 % 18.0 % 40.6 % 23.4 %

Return on tangible equity and adjusted return on tangible equity

The Company defines tangible shareholders’ equity as shareholders’ equity less goodwill and other intangible assets. The Company defines return on tangible equity as net income expressed on an annualized basis as a percentage of average beginning and ending tangible shareholders’ equity during the period. The Company defines adjusted return on tangible equity as adjusted net income expressed on an annualized basis as a percentage of average beginning and ending tangible shareholders’ equity during the period. The Company regularly evaluates acquisition opportunities and have historically made acquisitions that affect shareholders’ equity. The Company uses return on tangible equity and adjusted return on tangible equity as internal performance measures in the management of the Company’s operations because the Company believes they give management and other users of its financial information useful insight into the Company’s results of operations and underlying business performance by adjusting for the effects of acquisitions on the Company’s shareholders’ equity and, in the case of adjusted return on tangible equity, by adjusting for items that the Company believes do not reflect its core operating performance and that may diminish comparability across periods. Return on tangible equity and adjusted return on tangible equity should not be viewed as substitutes for return on equity calculated in accordance with GAAP, and other companies may define return on tangible equity and adjusted return on tangible equity differently.

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages) 2020 2019 2020 2019

Return on tangible equity calculation:

Numerator: net income $ 69,337 $ 5,786 $ 82,663 $ 20,628

Denominator:

Average shareholders’ equity 270,519 128,299 271,684 117,688

Less: Average goodwill and other intangible assets 108,476 2,982 107,994 2,993

Average tangible shareholders’ equity 162,043 125,317 163,690 114,695

Return on tangible equity 171.2 % 18.5 % 67.3 % 24.0 %

Return on equity 102.5 % 18.0 % 40.6 % 23.4 %

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentages) 2020 2019 2020 2019

Adjusted return on tangible equity calculation:

Numerator: adjusted net income $ 10,477 $ 6,474 $ 21,600 $ 21,797

Denominator: average tangible shareholders’ equity 162,043 125,317 163,690 114,695

Adjusted return on tangible equity 25.9 % 20.7 % 17.6 % 25.3 %

Return on equity 102.5 % 18.0 % 40.6 % 23.4 %

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