Motor Club of America Announces Fourth Quarter and 1997 Results
12 March 1998
Motor Club of America Announces Fourth Quarter and 1997 Results
PARAMUS, N.J., March 11 -- Motor Club of America
("Motor Club") today reported continuing strong operating
results for the fourth quarter and year ended December 31, 1997.
For the three months ended December 31, 1997, net income was $847,259 or
$.41 basic net income per share as compared to $3,557,278 or $1.74 basic net
income per share for the same period in 1996. Fourth quarter diluted net
income per share was $.40 in 1997 and $1.70 in 1996. Revenues for the three
month period were $13,660,902 as compared to $13,563,407 in 1996.
For the year ended December 31, 1997, net income was $3,482,702 or $1.68
basic net income per share as compared to $5,330,108 or $2.61 basic net income
per share for the same period in 1996. For the year diluted net income per
share was $1.66 in 1997 and $2.56 in 1996. Revenues were $54,696,670 in 1997,
as compared to $50,318,640 in 1996.
Results for the fourth quarter and year ended December 31, 1996 include
the recognition for the first time of a net deferred tax asset of $2,076,000,
resulting principally from net operating loss carryforwards.
Motor Club's reported results were affected by certain non-recurring
events in 1996, as depicted in the following comparative table:
MOTOR CLUB OF AMERICA AND SUBSIDIARIES
For the Three Months Ended For the Year Ended
December 31, December 31,
1997 1996 1997 1996
Income:
From operations $1,154,81l $799,377 $4,630,467 $3,478,667
Lease termination charge -- -- -- (359,077)
Non-recurrinq tenancy
and relocation charges -- -- -- (327,916)
Reinsurance Settlement -- -- -- (197,196)
Gain on sale of subsidiary -- 702,419 -- 702,419
Income before
Federal income tax 1,154,811 1,501,796 4,630,467 3,296,897
Federal income tax:
current (12,300) (20,053) (37,573) (42,324)
deferred (295,252) 2,075,535 (1,110,192) 2,075,535
Total Federal
income tax (307,552) 2,055,482 (1,147,765) 2,033,211
Net income $847,259 $3,557,278 $3,482,702 $5,330,108
Basic Income Per Share:
From operations $.55 $.39 $2.23 $1.71
Lease termination charge -- -- -- (.18)
Non-recurring tenancy
and relocation charges -- -- -- (.16)
Reinsurance Settlement -- -- -- (.10)
Gain on sale of subsidiary-- .34 -- .34
Income before
Federal income tax .55 .73 2.23 1.61
Federal income tax:
current -- (.01) (.02) (.02)
deferred (.14) 1.02 (.53) 1.02
Total Federal income tax (.14) 1.01 (.55) 1.00
Net income $.41 $1.74 $1.68 $2.61
Archer McWhorter, Chairman of the Board of Motor Club, said, "The fourth
quarter and 1997 results saw operating income grow 44% and 33%, respectively,
principally as a result of combined ratio of 98.8% and 98.4%, in those
periods. During the 1997 fourth quarter, strong loss ratio results were
posted, and overall in 1997, our expense ratio fell another two points
(adjusted for non-recurring items in 1996). These continuing improvements
position the Company in 1998 to build on these strong profits, particularly in
commercial lines as we introduce our workers' compensation product. We are
also continuing to pursue opportunities to diversify our Company's operations
outside the State of New Jersey."
Motor Club's 1997 results produced a 17% return on equity, the fifth
straight year that this ratio has been in excess of 15%. The strong results
have been reflected in the Company's share price, which produced a total
return for shareholders of 42.1% in 1997.
As announced previously, Preserver Insurance Company, the Company's
commercial lines unit, has recently commenced writing, with substantial
reinsurance Support, workers' compensation insurance. The Company believes
that this product offering will significantly enhance Preserver's commercial
lines product offerings, further improve its opportunities in this profitable
marketplace and result in increased total commercial lines premium revenue.
Loss ratio experience continued at profitable levels, with the commercial
lines and homeowners business reporting a loss ratio of 57.4% in the fourth
quarter and 59.7% for the year. This compares with loss ratios of 62.8% and
75.5%, in the same periods in 1996, respectively. The personal auto loss
ratio was 64.3% in the fourth quarter (down from 71.4% in the 1997 third
quarter) and 66.8% for the year. This compares with loss ratios of 65.9% and
61.4% in the same periods in 1996, respectively. The higher personal auto
loss ratio in 1997 reflects the increased amounts of new personal automobile
that Motor Club has written since the 1995 first quarter, which generate
higher loss ratios.
In the fourth quarter of 1997, Motor Club of America adopted SFAS No. 128,
which establishes new standards for computing earnings per share and requires
reporting of earnings per share on both a basic and diluted basis. Basic
earnings per share essentially are the same as they would be absent the
adoption of SFAS No. 128 and are based upon the weighted average number of
outstanding shares, while diluted earnings per share include the effects of
outstanding stock options. All prior year per-share amounts have been
restated to reflect this change.
Motor Club of America is a property and casualty insurance holding
company. Motor Club of America Insurance Company writes personal automobile
insurance. Preserver Insurance Company writes small commercial and homeowners
insurance. Both companies are rated B+ (Very Good) by A.M. Best Company and
am presently licensed in the State of New Jersey.
Additional information about Motor Club of America can be found on the
Company's Internet web site http://www.motr.com.
This press release contains statements that are not historical facts and
are considered "forward-looking statements" (as defined in the Private
Securities Litigation Reform Act of 1995), which can be identified by terms
such as "believes", "expects", "may", "will", "should", "anticipates", the
negatives thereof, or by discussions of strategy. Certain statements
contained herein are "forward-looking statements" that involve risks,
uncertainties, opinions and predictions, and no assurance can be given that
the future results will be achieved since events or results may differ
materially as a result of risks facing the Company. These include, but are,
not limited to, economic, market or regulatory conditions as well as risks
associated with Motor Club of America's entry into new markets;
diversification; catastrophic events; and state regulatory and legislative
actions which can affect the profitability of certain lines of business and
impede the Company's ability to charge adequate rates. Accordingly, Motor
Club of America's premium growth and underwriting results have been and will
continue, to be potentially materially affected by these factors.
MOTOR CLUB OF AMERICA AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the Three Months Ended For the Year Ended
December 31, December 31,
1997 1996 1997 1996
Revenue:
Insurance premiums (net of
premiums ceded totaling
$1,885,335, $1,915,115
$7,151,204
and $7,273,083) $12,663,300 $11,784,268 $50,877,890 $45,194,073
Net investment income 941,336 821,790 3,594,509 3,087,112
Realized gains on
sales of investments -- 75 -- 5,485
Realized gain on
sale of subsidiary -- 702,419 -- 702,419
Motor Club membership fees -- 234,499 -- 1,215,039
Other revenues 56,266 20,356 224,271 114,512
Total revenues 13,660,902 13,563,407 54,696,670 50,318,640
Losses and Expenses:
Insurance losses and
loss expenses incurred
(net of reinsurance recoveries
totaling $1,248,833, ($179,350),
$3,650,474
and $6,840,459) 7,938,085 7,692,850 33,141,691 29,148,280
Amortization of deferred policy
acquisition costs and other
operating expenses 4,568,006 4,316,484 16,924,512 17,248,274
Lease termination charge -- -- -- 359,077
Motor Club benefits -- 52,277 -- 266,112
Total losses
and expenses 12,506,091 12,061,611 50,066,203 47,021,743
Income before Federal
income taxes 1,154,811 1,501,796 4,630,467 3,296,897
Provision (benefit) for Federal
income taxes: current 12,300 20,053 37,573 42,324
deferred 295,252 (2,075,535) 1,110,192 (2,075,535)
Total provision
(benefit) for
Federal income taxes 307,552 (2,055,482) 1,147,765 (2,033,211)
Net income $847,259 $3,557,278 $3,482,702 $5,330,108
Net Income per common share:
Basic $.41 $1.74 $1.68 $2.61
Diluted $.40 $1.70 $1.66 $2.56
Weighted average common
and potential common
shares outstanding:
Basic 2,093,549 2,047,443 2,074,473 2,045,590
Diluted 2,115,877 2,088,260 2,102,395 2,081,080
Key Financial Statistics:
Book value per share -- -- $10.98 $9.17
Loss ratio (GAAP basis)62.7% 65.3% 65.1% 64.5%
Expense ratio
(GAAP basis) 36.1% 35.9% 33.3% 37.9%
Combined ratio
(GAAP basis) 98.8% 101.2% 98.4% 102.4%
Net premium written$15,074,426 $14,838,532 $51,680,146 $47,337,295
SOURCE Motor Club of America