Fednat Holding Co (FNHC) 2007 Q4 法說會逐字稿

Good afternoon. My name is Heather and I will be your conference operator today. At this time, I would like to welcome everyone to 21st Century Holding Company's year end financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. (Operator Instructions).

Statements in this conference call or in documents incorporated by reference that are not historical facts are forward looking statements. Forward looking statements are subject to certain risks and uncertainties that could cause actual events and results to differ materially from those discussed herein. Without limiting the generality of the foregoing, words such as may, will, expect, believe, anticipate, intend, could, would, estimate or continue or the negative other variations thereof or comparable terminology are intended to identify forward looking statements. The risks and uncertainties include, but are not limited to, the risk and uncertainties described in this conference call or from time to time in our filings with the SEC. Thank you.

I would now like to turn the call over to Mr. Prygelski, chief financial officer. Please go ahead, sir.

Thank you, Operator. Thanks for joining the call today. Before we open up to questions, I want to read through some of the information that was in a press release that was sent out early this morning. For the three months ended December 31, 2007, the Company reported net income of $8,089,761 or $1.02 per share on an average of 7,913,249 shares as compared to a net loss of $4,050,889 or $0.52 per share on 7,846,037 shares outstanding for the same three month period last year.

For the 12 months ended December 31, 2007, the Company reported net income of approximately $21.3 million or $2.69 per share on 7,922,542 average undiluted shares outstanding, as compared to net income of $13,896,267 or $1.84 per share on 7,537,550 average undiluted shares outstanding in the same 12 month period last year.

On a diluted basis, the Company reported earnings of $2.65 per share on average diluted shares outstanding of 8,030,205 as compared to $1.72 per share based on 8,085,722 average diluted shares outstanding for the 12 months ended December 31, 2006.

Also, net premiums earned increased $7.8 million or 45.4% to $24.9 million for the three months ended December 31, 2007, as compared to $17.1 million for the same three month period last year. Net premiums earned increased $9.9 million or 11.1% to $99.2 million for the 12 months ended December 31, 2007 as compared to $89.3 million for the same 12 month period last year.

Total revenues increased $7.8 million or 35.9% to $29.5 million for the three months ended December 31, 2007, as compared to $21.7 million for the same three month period last year.

Total revenues increased $15.2 million or 14.6% to $119.1 million for the 12 months ended December 31, 2007, as compared to $103.9 million for the same 12 month period last year.

One thing I wanted to call your attention to was that in the press release that went out this morning, we mentioned that our record results in 2007 included a 35% increase in net income. That was actually a 53% increase in net income and a 46% increase in earnings per share.

I also want to make a point to say that for the first time in company history we're entering 2008 debt free. Those are our prepared remarks and we can open it up to questions now, Operator.

(Operator Instructions). Your first question comes from the line of Richard West with J.M. Dutton and Associates.

Good afternoon and great quarter.

Thanks, Richard.

My question -- the first has to do with the assessments from SIPC and FICA; the $5 million you indicated in the beginning of March of 2007 you would be recouping them.

Right.

The other income doesn't show a lot of recoupment.

Actually, we've recouped -- including the assessment we got in the third quarter, which brought our total assessments up to about $9 million, we've recouped -- and of the $9 million, the $2 million that we just got in the third quarter is not in our rates yet. It will be in our rates in April. So, based on the $7 million that we were assessed in our rates, we've collected about 50% of that; roughly three -- or a little over $3 million dollars.

Okay. Thank you. And then the second question on the gross premium seeded. I wonder if you can discuss that? It looks like you've got a return from reinsurance rather than giving premiums.

What that is is there's been an adjustment on our reinsurance as we go through the '07 year. There were some recoveries -- some adjustments really in what the premium was for 2007.

Okay. Well, thank you.

Your next question comes from the line of Charles Berger, private investor.

Great quarter. My question is regarding the homeowner's property casualty. I was wondering if you give us some color regarding how it performed according to expectations beginning July 1st and what do you anticipate beginning this coming July 1st?

Well, homeowner's book -- we've had that book for quite a while and there's been some competition there from Citizens which we've explained in the past. That was significant with the passage of the new legislation. We've also had some more competition from other carriers in the state as well. So, it's definitely a more competitive environment in Florida.

And has it decreased appreciably the number of the amount of coverage?

Yes. The premiums have decreased. We had a rate decrease that was approved and that was effective -- we filed that back effective June 1 of '07. We have another pending rate decrease pending as well and those two rate decreases are primarily because of decreased cost of reinsurance. Two reasons; what that state has offered reinsurance, but also that the private market the pricing has become more affordable.

Were you impacted at all by the recent tornadoes that just hit Florida?

No, we've had no impact.

Okay. Thank you.

(Operator Instructions). Your next question comes from the line of Al Humphrey with the Somono Group.

Congratulations, you guys. Just a terrific quarter. I was wondering if you had a cash position at the end of the year and possibly a book value?

Yes. Our book value 12/31/2007 was $10.45. Our cash in the bank shareholder equity is about $88 million. Our cash in the bank is approximately $22 million.

Is there any further talk about spending some of that money to buy back more shares, increase the dividend?

As far as the buyback goes, as we discussed on previous calls, through '07 we bought back approximately 320,000 shares for about $3.8 million and the average price of $11.89. We're authorized to buy up to 5 million right now, so that's where we stand on that. As far as the dividend, that will be discussed at the next board meeting which is in the beginning of March.

Okay. Can we expect any guidance going forward?

Well, I'm glad you brought that up. I think in light of the changing events and the emerging corporate disclosure trends that we see on the financial markets today and the Company's focus on delivering improved results over the long term, we've examined our practice of providing forward-looking financial guidance and have made a decision to steer the company on a long term path and not give out annual guidance going forward.

Okay. Well again, congratulations.

Thank you.

Your next question comes from the line of Richard West with J.M. Dutton and Associates.

One last question. A year from now are you going to have any auto insurance outstanding? You're down pretty low and on a loss ratio it's an anomaly it shows. Just a question. Is this completely out of it?

I'll have Mike answer that question. I will say that the reduction in auto is not by chance. It's kind of a strategy. Mike can --

We've been on that path for about three to four years. We just didn't see the opportunities in the market. I don't think it will disappear entirely. That's a license that we're interested in keeping. So, the book will continue to get smaller, but when we ramp up the new one, perhaps in the future, we always look at opportunities and if there's an opportunity we're going to seize on it. But right now, we don't see that.

Okay. Well, thank you.

(Operator Instructions). There are no further questions at this time. Are there any closing remarks?

Yes. I just wanted to make one closing remark. I just want to highlight the fact that over the past three years our income before taxes has steadily climbed; in '05 we were at $15.7 million; in '06 we were at $21.3 million; and this year we finished the year at $32.5 million. We enter '08 debt free and we're certainly excited about the future.

Thanks everybody for calling in.

Thank you for your participation in 21st Century Holding Company's year-end financial results conference call. You may now disconnect.