MORRISTOWN, N.J., May 11, 2020 /PRNewswire/ -- ProSight Global,
Inc. (NYSE: PROS) (ProSight) today reported results for the first
quarter of 2020.
Highlights for the three months ended March 31, 2020 include:
- Strong underwriting income with limited impact from COVID-19 on
underwriting results. Combined ratio of 97.8% compared to 98.2% for
the first quarter of 2019.
- Gross written premiums ("GWP") for our customer segments
(2) increased 7.7%, to $212.3
million compared to the first quarter of 2019, with growth
across all customer segments except Transportation.
- Loss ratio of 62.0% compared to 60.5% for the first quarter of
2019 with no catastrophe losses in 2019 and COVID-19 as the
only potential catastrophe thus far in 2020. Current accident year
loss picks consider the uncertainty associated with newer niches as
well as COVID-19.
- Expense ratio of 35.8% compared to 37.7% for the first quarter
of 2019. The current quarter includes $1.0 million, or 0.5%, for current expected
credit losses ("CECL") related to the potential impact of COVID-19
on premiums receivable.
- Net income and adjusted operating income were adversely
impacted by the credit market reaction to COVID-19, which resulted
in net investment income ("NII") of $8.8
million. This is a decrease of $8.4 million, or 48.6%, compared to the first
quarter of 2019, and is due to unrealized losses in fixed income
limited partnerships. Excluding these unrealized losses, NII was
essentially flat with prior year.
- Investment results are not reported on a lag. The impact of
COVID-19-related investment valuations in March is reflected in our
first quarter results.
- Fully diluted book value per share ("BVPS") of $10.73 compared to $12.01 at December 31,
2019, reflecting significant mark-to-market unrealized
losses in the quarter. As of April 30,
2020, we have seen an improvement in unrealized investment
positions and a related estimated book value increase of
$37.0 million, or $0.81 per fully diluted share.
- Annualized return on equity ("ROE") of 5.3% and adjusted
operating ROE(3) of 6.2% compared to 13.4% and 13.3%,
respectively, for the first quarter of 2019 with the decline
primarily attributable to the unrealized losses in our fixed income
limited partnerships.
From CEO & President Larry
Hannon:
"Our thoughts are with all of those affected by the COVID-19
outbreak, as well as healthcare professionals, first responders and
those who sacrifice for others on a daily basis. I am proud of our
team's leadership and initiative, having transitioned successfully
to a 100% remote work environment that balanced the health and
safety of our employees with our obligations to our customers and
distribution partners. Our colleagues continue to work
closely with our insureds and distribution partners as we navigate
what will likely be one of the largest insured events in
history.
"I am pleased with our strong underwriting results in the
quarter and the early outreach to our insureds which resulted in
helpful solutions for those most impacted by COVID-19. We
reacted quickly as the impact of COVID-19 became apparent and
worked with our affected insureds, niche by niche, to right size
their on-going premiums to reflect what was happening in real time
to their exposure.
"On the asset side of our balance sheet, our investment
portfolio is high quality and liquid, with no exposure to public
equity, private equity, CLO equity, or venture capital. Over the
last two quarters we repositioned the portfolio to a higher average
credit quality. While our first quarter results reflect
the dislocation in the fixed income markets, they do not reflect
the benefits of spread tightening that has taken place so far in
the second quarter."
Outlook:
"Looking at the second quarter and balance of 2020, there is a
great deal of uncertainty from an economic and legislative
perspective and COVID-19 will likely be among the largest loss
events in insurance history. While it is not our normal practice to
give guidance, we believe the unprecedented nature of current
events warrant sharing aspects of our latest expectations to enable
our stakeholders to analyze the impact of COVID-19 on our business.
These guideposts represent our best estimates as of today assuming
a sluggish economic recovery that begins to take hold in Q3 and are
likely to evolve as conditions change."
- Customer Segment(2) Gross Written
Premium: 10-20% decline from 2019, with the most significant
COVID-19 impact expected in Q2. This excludes the decline from the
previously announced exit from excess workers compensation.
- Net Loss Ratio: Potential for up to a 3-point
increase from COVID-19 related claims and expenses in the current
accident year loss ratio.
- Expenses: Potentially higher costs from bad debt
provisioning given state-mandated deferrals of collections and the
impact of COVID-19 on some of our insureds.
- Net Investment Income: We expect our fixed income
portfolio, excluding limited partnerships, to yield approximately
3% for 2020. Net investment income volatility for the remainder of
2020 remains possible from our limited partnership
investments.
"Our longer-term objectives of a 62% loss ratio and two hundred
basis-point expense ratio reduction over the next three years
remains appropriate based on what we know about our business today.
Our team continues to execute on all the activities that underpin
these metrics and we will revisit them accordingly if we determine
that COVID-19 is going to have a longer-term impact on our top
line.
"We remain close to our customers and expect to emerge from this
crisis in a position of strength, able to continue delivering
differentiated, valuable solutions for them. We have an active
pipeline of potential new niches. We continue to manage expenses in
a fashion that allows us to fund incremental investments in talent
and technology at a pace more than offset by efficiency
gains. In sum, our niche strategy, exclusive distribution
arrangements, careful exposure management, and timely execution
leave us well positioned today and set the stage for profitable
growth as we exit 2020 and capitalize on opportunities to assume
risk at rates and terms that reflect the value we
provide."
Results of Operations for the three months ended March 31, 2020:
Net income from continuing operations was $6.8
million, or $0.15 per diluted
share, for the first quarter of 2020 compared to $13.7 million, or $0.35 per diluted share, for the first
quarter of 2019. Adjusted operating income (1) was
$8.0 million, or $0.18 per diluted share, for the first quarter of
2020 compared to $13.6 million, or
$0.34 per diluted share, for the
first quarter of 2019.
GWP including Other (2), decreased 16.4% for the
first quarter of 2020 when compared to the first quarter of 2019.
GWP (2) from customer segments was $212.3
million for the first quarter of 2020 compared to $197.1
million for the first quarter of 2019, an increase of 7.7%.
The growth was largest within the Marine and Energy, Real Estate
and Consumer Services customer segments. Other GWP
(2) were $1.5 million for
the first quarter of 2020 compared to $58.7
million for the first quarter of 2019, the decrease driven
by the exit from excess workers' compensation.
Underwriting income (1) was $4.5
million for the first quarter of 2020 compared to $3.5
million for the first quarter of 2019. The combined
ratio for the first quarter of 2020 was 97.8% compared to 98.2% for
the first quarter of 2019. The increase in underwriting
income (1) was due to changes in:
- The expense ratio of 35.8% for the first quarter of 2020
compared to 37.7% in the first quarter of 2019. The
policy acquisition expense ratio of 22.8% in the first quarter of
2020 compared to 23.8% in the first quarter of 2019 and general
& administrative expense ratio of 13.0% in the first quarter of
2020 compared to 13.9% in the first quarter of 2019. General &
administrative expenses in the first quarter of 2020 includes
$1.0 million of additional expense
for an increase to our credit allowance against premium receivables
due to COVID-19.
- Offset by an increase in the loss ratio of 62.0% for the first
quarter of 2020 compared to 60.5% for the first
quarter of 2019.
The loss ratio for the first
quarter of 2020 included a current accident year loss ratio of
61.9% compared to a current accident year loss ratio of 60.7% in
the first quarter of 2019.
The loss ratio for the first
quarter of 2020 included $0.2 million
(0.1 percentage points) of unfavorable prior accident year loss
development compared to $0.4 million
(0.2 percentage points) of favorable prior accident year loss
development in the first quarter of
2019.
Net investment income decreased by 48.6% to $8.8
million for the first quarter of 2020, from $17.2 million
for the first quarter of 2019. The decrease in net investment
income was driven by the mark-to-market unrealized loss on our
limited partnership investments of $8.2
million. The effects of the economic downturn in March
are reflected in our first quarter financial results as we do not
account for our limited partnership investments on a lag. In the
month of April, our investment in limited partnerships valuation
rebounded by $3.0 million due to
improving market conditions during the month. Excluding
the mark-to-market valuation adjustment on limited partnerships,
the net annualized yield on average invested assets at book value
was 3.0% for the first quarter of 2020.
Realized investment gains, net, for the first quarter of
2020 were $0.2 million compared to
$0.1 million for the first
quarter of 2019 and include an increase to our credit loss
allowance of $0.4 million.
Total stockholders' equity was $488.1 million as of
March 31, 2020, compared to
$543.0 million as of December 31, 2019. Tangible stockholders'
equity (4) was $458.9 million as of March 31, 2020, compared $513.8 million as of December 31, 2019. The decreases in total
stockholders' equity and tangible stockholders' equity
(4) were driven by a decrease in other comprehensive
income of $61.4 million, driven by
net unrealized losses on investment securities. As of
April 30, 2020, our unrealized loss
position, net of tax, improved by $37.0
million due to improved credit market conditions during the
month.
Fully diluted book value per share contracted by 10.7% to
$10.73 at March 31, 2020, compared to $12.01 at
December 31, 2019. Fully diluted
tangible book value per share (4) decreased by 11.3% to
$10.09 at March 31, 2020, compared to $11.37 at December 31,
2019.
(1). Adjusted operating income and underwriting income are
non-GAAP measures. See "Reconciliation of Non-GAAP Measures".
(2). Total GWP for the first quarter of 2020 including Other were
$213.8 million. Other includes GWP
from certain niches that are no longer part of our customer
segments. "Other" includes GWP from (i) primary and excess workers'
compensation coverage for exited Self-Insured Groups (ii) niches
exited prior to 2019, many with a concentration in commercial auto,
(iii) certain fronting arrangements in which all premium written is
ceded to a third party, (iv) participation in industry pools, and
(v) emerging new business.
(3). Return on equity is net income from continuing operations
expressed on an annualized basis as a percentage of average
beginning and ending stockholders' equity during the period.
Adjusted operating return on equity is a non-GAAP
measure. Adjusted operating return on equity is
adjusted operating income expressed on an annualized basis as a
percentage of average beginning and ending stockholders' equity
during the period.
(4). Tangible stockholders' equity and fully diluted tangible book
value per share are non-GAAP measures. Tangible stockholders'
equity is total common stockholders' equity excluding the value of
goodwill and other intangible assets. Fully diluted tangible
book value per share is total common stockholders' equity excluding
value of goodwill and other intangible assets divided by the number
of common shares outstanding, unvested restricted shares
and vested not issued shares. See "Reconciliation of Non-GAAP
Measures".
Conference Call
As previously announced, on Tuesday, May
12, 2020 at 10:00 a.m. EST, ProSight senior
management will host a conference call to discuss first quarter
2020 financial results.
The call will be available via webcast at
https://investors.prosightspecialty.com/ or by dialing (833)
968-2180 (within the United
States) or (825) 312-2110 (international), using the
passcode 9993174. A replay of the call will be available at
1:00 p.m. on Tuesday, May 12, 2020,
until 11:59 p.m. Tuesday, May 19,
2020, and can be accessed by dialing (800) 585-8367 or (416)
621-4642, using the passcode 9993174. The webcast will be available
one hour after the call concludes and will be archived on our
website for one year.
About ProSight
Founded in 2009 and headquartered in Morristown, New Jersey, ProSight Global, Inc.
is an innovative property and casualty insurance company that
designs unique insurance solutions to help customers improve their
business and realize value from their insurance purchasing
decision. The company focuses on select niche industries, deploying
differentiated underwriting and claims expertise with the goal of
enhancing each customer's operating performance. ProSight's
products are sold through a limited and select group of retail and
wholesale distribution partners. Each of ProSight's regulated
insurance company subsidiaries are rated "A-" (Excellent) by A.M.
Best. ProSight's shares trade on the New York Stock Exchange
("NYSE") under the ticker symbol PROS. To learn more about
ProSight visit www.prosightspecialty.com.
Forward-Looking Statements
This release contains forward-looking statements.
Forward-looking statements include statements relating to future
developments in ProSight's business or expectations for ProSight's
future financial performance and any statement not involving a
historical fact. Forward-looking statements use words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan,"
"should," "seek," "continue," and other words and terms of similar
meaning. ProSight's management believes that these
forward-looking statements are reasonable as of the time
made. However, caution should be taken not to place undue
reliance on any such forward-looking statements because such
statements speak only as of the date when made. Except as
required by law, ProSight undertakes no obligation to publicly
update any forward-looking statements, whether as a result of new
information, future events, or otherwise. Forward-looking
statements are subject to known and unknown risks and
uncertainties, including without limitation, the following:
performance of, and our relationships with, third-party agents and
vendors on which we rely to distribute certain business on our
behalf, adequacy of our loss reserves including as a result of
changes in the legal, regulatory, and economic environments in
which the Company operates or the impacts of COVID-19, judicial,
legislative, regulatory and other governmental developments,
including in response to COVID-19, litigation tactics and
developments, the effects of natural and man-made catastrophic
events, the availability and affordability of reinsurance, changes
in the business, financial condition or results of operations of
the entities in which we invest, infection rates and severity and
duration of pandemics, including COVID-19, and their
direct and indirect effects on our investments, business
operations, customers (including claims activity) and third
parties, as well as management's response to these factors.
ProSight cautions you that forward-looking statements are not
guarantees of future performance or outcomes and that actual
performance and outcomes may differ materially from those made in
or suggested by the forward-looking statements contained in this
release. For a discussion of some of the risks and important
factors that could affect ProSight's future results and financial
condition, see our filings with the U.S. Securities and Exchange
Commission ("SEC"), including, but not limited to, the risks and
uncertainties included under the captions "Risk Factors" in
ProSight's Annual Report on Form 10-K/A for the period ended
December 31, 2019 filed on
March 10, 2020, as updated by
ProSight's periodic filings with the SEC. References to "we,"
"us," "our," the "Company" and "ProSight", refer to ProSight
Global, Inc. and its consolidated subsidiaries.
Reorganization
ProSight was incorporated in Delaware in 2010. Prior to July 25, 2019, ProSight was a wholly-owned
subsidiary of ProSight Global Holdings Limited ("PGHL"), a
Bermuda holding company.
Effective July 25, 2019, PGHL merged
with and into ProSight, with ProSight surviving the merger. As a
result of the merger, all shares of PGHL then outstanding were
converted into the right to receive, without interest, 6.46 shares
of ProSight for each share of PGHL. The historical share and
per share figures contained in this release relating to periods
prior to and including June 30,
2019 have been restated to give effect to this conversion,
including reclassifying an amount equal to the change in value of
common stock to additional paid-in capital, as of the stated period
or date. Further details regarding this merger and related
reorganization transactions are included in ProSight's Annual
Report on Form 10-K/A for the period ended December 31, 2019 filed on March 10, 2020.
Non-GAAP Financial Measures
In presenting ProSight Global, Inc.'s results, management
has included financial measures that are not calculated under
standards or rules that comprise of U.S. generally accepted
accounting principles ("GAAP"). Such measures, including
underwriting income, adjusted operating income, adjusted operating
return on equity, adjusted operating return on tangible equity,
adjusted loss excluding WAQS, adjusted expense ratio excluding
WAQS, adjusted combined ratio excluding WAQS, tangible
stockholders' equity, tangible book value per share and fully
diluted tangible book value per share are referred to as non-GAAP
measures. These non-GAAP measures may be defined or calculated
differently by other companies. These measures should not be viewed
as a substitute for those measures determined in accordance with
GAAP. Reconciliations of these non-GAAP financial measures to
the most comparable GAAP figures are included at the end of this
press release.
|
|
Media:
|
Institutional
Investors:
|
Joe
Hathaway
|
Dean
Evans
|
JHathaway@prosightspecialty.com
|
DEvans@prosightspecialty.com
|
973.532.1706
|
973.532.1440
|
PROSIGHT GLOBAL,
INC.
|
CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
|
($ in thousands,
except per share amounts)
|
|
|
|
March 31
|
|
December 31
|
|
|
2020
|
|
2019
|
Assets
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
Fixed maturity
securities, available-for-sale at fair value (amortized cost
$2,038,469 in 2020 and $1,999,403 in
2019, allowance for credit losses $(416) in 2020 and $0 in
2019)
|
|
$
|
2,002,420
|
|
$
|
2,040,682
|
Commercial levered
loans at amortized cost (fair value $12,246 in 2020 and $13,950 in
2019)
|
|
|
13,725
|
|
|
14,069
|
Non-redeemable
preferred stock securities at fair value (amortized cost $11,669 in
2020 and $0 in 2019)
|
|
|
11,378
|
|
|
—
|
Limited partnerships
and limited liability companies at fair value (cost $67,445 in 2020
and $62,226 in 2019)
|
|
|
65,011
|
|
|
66,660
|
Short-term
investments
|
|
|
19,229
|
|
|
43,873
|
Total
investments
|
|
|
2,111,763
|
|
|
2,165,284
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
|
43,141
|
|
|
17,284
|
Restricted
cash
|
|
|
8,786
|
|
|
10,213
|
Accrued investment
income
|
|
|
13,812
|
|
|
13,610
|
Premiums and other
receivables, net
|
|
|
156,241
|
|
|
190,004
|
Receivable from
reinsurers on paid losses, net
|
|
|
4,876
|
|
|
3,481
|
Reinsurance
receivables on unpaid losses, net
|
|
|
156,866
|
|
|
193,952
|
Deferred policy
acquisition costs
|
|
|
99,842
|
|
|
98,812
|
Prepaid reinsurance
premiums
|
|
|
40,383
|
|
|
42,861
|
Net deferred income
taxes
|
|
|
20,598
|
|
|
4,803
|
Goodwill and net
intangible assets
|
|
|
29,181
|
|
|
29,189
|
Fixed assets and
capitalized software, net
|
|
|
36,313
|
|
|
37,167
|
Funds withheld
related to sale of affiliate
|
|
|
19,529
|
|
|
19,453
|
Other
assets
|
|
|
21,615
|
|
|
29,537
|
Assets of
discontinued operations
|
|
|
23,342
|
|
|
21,584
|
Total
assets
|
|
$
|
2,786,288
|
|
$
|
2,877,234
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Reserve for unpaid
losses and loss adjustment expenses
|
|
$
|
1,545,799
|
|
$
|
1,521,648
|
Reserve for unearned
premiums
|
|
|
468,486
|
|
|
483,223
|
Ceded reinsurance
payable
|
|
|
13,148
|
|
|
17,768
|
Notes payable, net of
debt issuance costs
|
|
|
164,778
|
|
|
164,693
|
Funds held under
reinsurance agreements
|
|
|
23,374
|
|
|
58,855
|
Other
liabilities
|
|
|
48,843
|
|
|
56,438
|
Liabilities of
discontinued operations
|
|
|
33,758
|
|
|
31,578
|
Total
liabilities
|
|
|
2,298,186
|
|
|
2,334,203
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
Preferred stock,
$0.01 par value; 50,000,000 shares authorized; no shares issued or
outstanding
|
|
|
—
|
|
|
—
|
Common stock, $0.01
par value; 200,000,000 shares authorized; 43,355,319 and 43,071,186
shares issued,
43,342,399 and 43,058,266 shares outstanding in 2020 and 2019,
respectively
|
|
|
433
|
|
|
431
|
Paid-in
capital
|
|
|
661,203
|
|
|
661,761
|
Accumulated other
comprehensive (loss) income
|
|
|
(23,988)
|
|
|
37,453
|
Retained
deficit
|
|
|
(149,346)
|
|
|
(156,414)
|
Treasury shares - at
cost (12,920 shares)
|
|
|
(200)
|
|
|
(200)
|
Total
stockholders' equity
|
|
|
488,102
|
|
|
543,031
|
Total liabilities
and stockholders' equity
|
|
$
|
2,786,288
|
|
$
|
2,877,234
|
PROSIGHT GLOBAL,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
|
($ in
thousands)
|
|
|
|
Three Months Ended
March 31
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Gross written
premiums
|
|
$
|
213,784
|
|
$
|
255,838
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Net earned
premiums
|
|
|
205,662
|
|
|
195,608
|
|
Net investment
income
|
|
|
8,815
|
|
|
17,158
|
|
Realized investment
gains, net
|
|
|
232
|
|
|
113
|
|
Other income
|
|
|
112
|
|
|
93
|
|
Total
revenues
|
|
|
214,821
|
|
|
212,972
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
Net losses and loss
adjustment expenses incurred
|
|
|
127,557
|
|
|
118,333
|
|
Policy acquisition
expenses
|
|
|
46,986
|
|
|
46,573
|
|
General and
administrative expenses
|
|
|
26,637
|
|
|
27,194
|
|
Interest
expense
|
|
|
3,105
|
|
|
3,362
|
|
Other
expense
|
|
|
1,737
|
|
|
—
|
|
Total
expenses
|
|
|
206,022
|
|
|
195,462
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations before income taxes
|
|
|
8,799
|
|
|
17,510
|
|
|
|
|
|
|
|
|
|
Income tax
provision:
|
|
|
|
|
|
|
|
Current
|
|
|
1,631
|
|
|
141
|
|
Deferred
|
|
|
357
|
|
|
3,674
|
|
Total income tax
expense
|
|
|
1,988
|
|
|
3,815
|
|
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
|
6,811
|
|
|
13,695
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
Net income (loss) from
discontinued operations
|
|
|
257
|
|
|
(255)
|
|
Net
income
|
|
$
|
7,068
|
|
$
|
13,440
|
|
|
|
|
|
|
|
|
|
Return on equity
(1)
|
|
|
5.3
|
%
|
|
13.4
|
%
|
|
|
|
|
|
|
|
|
Adjusted operating
income (2)
|
|
$
|
7,976
|
|
$
|
13,582
|
|
|
|
|
|
|
|
|
|
Adjusted operating
return on equity (3)
|
|
|
6.2
|
%
|
|
13.3
|
%
|
|
(1). Return on equity
is net income from continuing operations expressed on an annualized
basis as a percentage of average beginning and ending stockholders'
equity during the period.
|
(2). Adjusted
operating income is a non-GAAP measure. See "Reconciliation of
Non-GAAP Measures".
|
(3). Adjusted
operating return on equity is a non-GAAP measure.
Adjusted operating return on equity is adjusted operating income
expressed on an annualized basis as a percentage of average
beginning and ending stockholders' equity during the
period.
|
PROSIGHT GLOBAL,
INC.
|
FACTORS AFFECTING
THE RESULTS OF OPERATIONS (WAQS) (UNAUDITED)
|
($ in
thousands)
|
|
|
|
Three Months Ended
March 31, 2020
|
|
Three Months Ended
March 31, 2019
|
|
|
|
Including
|
|
Effect of
|
|
Excluding
|
|
Including
|
|
Effect of
|
|
Excluding
|
|
|
|
WAQS
|
|
WAQS
|
|
WAQS
|
|
WAQS
|
|
WAQS
|
|
WAQS
|
|
Gross written
premiums
|
|
$
|
213,784
|
|
$
|
—
|
|
$
|
213,784
|
|
$
|
255,838
|
|
$
|
—
|
|
$
|
255,838
|
|
Ceded written
premiums
|
|
|
(23,601)
|
|
|
—
|
|
|
(23,601)
|
|
|
(45,936)
|
|
|
—
|
|
|
(45,936)
|
|
Net written
premiums
|
|
$
|
190,183
|
|
$
|
—
|
|
$
|
190,183
|
|
$
|
209,902
|
|
$
|
—
|
|
$
|
209,902
|
|
Net
retention(1)
|
|
|
89.0
|
%
|
|
—
|
|
|
89.0
|
%
|
|
82.0
|
%
|
|
—
|
|
|
82.0
|
%
|
Net earned
premiums
|
|
$
|
205,662
|
|
$
|
—
|
|
$
|
205,662
|
|
$
|
195,608
|
|
$
|
—
|
|
$
|
195,608
|
|
Losses and
LAE
|
|
|
127,557
|
|
|
—
|
|
|
127,557
|
|
|
118,333
|
|
|
—
|
|
|
118,333
|
|
Underwriting,
acquisition and insurance expenses
|
|
|
73,623
|
|
|
—
|
|
|
73,623
|
|
|
73,767
|
|
|
—
|
|
|
73,767
|
|
Underwriting income
(2)
|
|
$
|
4,482
|
|
$
|
—
|
|
$
|
4,482
|
|
$
|
3,508
|
|
$
|
—
|
|
$
|
3,508
|
|
Loss and LAE
ratio
|
|
|
62.0
|
%
|
|
—
|
|
|
—
|
|
|
60.5
|
%
|
|
—
|
|
|
—
|
|
Expense
ratio
|
|
|
35.8
|
%
|
|
—
|
|
|
—
|
|
|
37.7
|
%
|
|
—
|
|
|
—
|
|
Combined
ratio
|
|
|
97.8
|
%
|
|
—
|
|
|
—
|
|
|
98.2
|
%
|
|
—
|
|
|
—
|
|
Adjusted loss and LAE
ratio(3)
|
|
|
—
|
|
|
—
|
|
|
62.0
|
%
|
|
—
|
|
|
—
|
|
|
60.5
|
%
|
Adjusted expense
ratio(3)
|
|
|
—
|
|
|
—
|
|
|
35.8
|
%
|
|
—
|
|
|
—
|
|
|
37.7
|
%
|
Adjusted combined
ratio(3)
|
|
|
—
|
|
|
—
|
|
|
97.8
|
%
|
|
—
|
|
|
—
|
|
|
98.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of prior year
reserve development unfavorable/(favorable)
(4)
|
|
$
|
198
|
|
$
|
—
|
|
$
|
198
|
|
$
|
(395)
|
|
$
|
—
|
|
$
|
(395)
|
|
|
(1). Net retention is
a non-GAAP measure. We define net retention as the ratio of net
written premiums to gross written premiums.
|
(2). Underwriting
income is a non-GAAP measure. See "Reconciliation of Non-GAAP
Financial Measures".
|
(3). Adjusted loss
ratio and adjusted expense ratio are non-GAAP financial measures.
We define adjusted loss ratio and adjusted expense ratio as the
corresponding ratio excluding the effects of the WAQS. We use
these adjusted ratios as internal performance measures in the
management of our operations because we believe they give our
management and other users of our financial information useful
insight into our results of operations and our underlying business
performance. Our adjusted loss and LAE ratio, adjusted expense
ratio and adjusted combined ratio should not be viewed as
substitutes for our loss and LAE ratio, expense ratio and combined
ratio, respectively
|
(4) The effect of
prior year reserve development is included within losses and
LAE.
|
PROSIGHT GLOBAL,
INC.
|
SUPPLEMENTARY
UNDERWRITING INFORMATION (UNAUDITED)
|
($ in
thousands)
|
|
|
|
Three Months Ended
March 31
|
|
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
Gross written
premiums
|
|
$
|
213,784
|
|
$
|
255,838
|
|
Net written
premiums
|
|
|
190,183
|
|
|
209,902
|
|
Net earned
premiums
|
|
|
205,662
|
|
|
195,608
|
|
|
|
|
|
|
|
|
|
Net losses and
LAE
|
|
|
127,557
|
|
|
118,333
|
|
Catastrophe loss and
LAE
|
|
|
—
|
|
|
—
|
|
Unfavorable/(favorable)
prior year reserve development
|
|
|
198
|
|
|
(395)
|
|
Underwriting,
acquisition, and insurance expenses
|
|
|
73,623
|
|
|
73,767
|
|
Policy acquisition
expenses
|
|
|
46,986
|
|
|
46,573
|
|
General and
administrative expenses
|
|
|
26,637
|
|
|
27,194
|
|
|
|
|
|
|
|
|
|
Underwriting
income
|
|
$
|
4,482
|
|
$
|
3,508
|
|
|
|
|
|
|
|
|
|
Underwriting
ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ex-cat current accident
year loss and LAE ratio
|
|
|
61.9
|
%
|
|
60.7
|
%
|
Catastrophe loss and
LAE ratio
|
|
|
—
|
%
|
|
—
|
%
|
Unfavorable/(favorable)
prior year reserve development ratio
|
|
|
0.1
|
%
|
|
(0.2)
|
%
|
Loss and LAE
ratio
|
|
|
62.0
|
%
|
|
60.5
|
%
|
|
|
|
|
|
|
|
|
Policy acquisition
expense ratio
|
|
|
22.8
|
%
|
|
23.8
|
%
|
General and
administrative expense ratio
|
|
|
13.0
|
%
|
|
13.9
|
%
|
Expense
ratio
|
|
|
35.8
|
%
|
|
37.7
|
%
|
|
|
|
|
|
|
|
|
Combined
ratio
|
|
|
97.8
|
%
|
|
98.2
|
%
|
PROSIGHT GLOBAL,
INC.
|
|
SHARE AND PER
SHARE INFORMATION (UNAUDITED)
|
|
|
|
|
|
|
March 31
|
|
|
December 31
|
|
|
|
|
2020
|
|
|
2019
|
|
Shares
outstanding
|
|
|
43,342,399
|
|
|
43,058,266
|
|
Fully diluted shares
outstanding
|
|
|
45,500,600
|
|
|
45,196,716
|
|
|
|
|
|
|
|
|
|
Book value per
share(1)
|
|
$
|
11.26
|
|
$
|
12.61
|
|
Book value per share
(fully diluted)(1)
|
|
$
|
10.73
|
|
$
|
12.01
|
|
Tangible book value
per share(1)
|
|
$
|
10.59
|
|
$
|
11.93
|
|
Tangible book value
per share (fully diluted)(1)
|
|
$
|
10.09
|
|
$
|
11.37
|
|
|
|
|
Three Months Ended
March 31
|
|
(share amounts in
thousands)
|
|
2020
|
|
2019
|
|
Weighted average
basic shares outstanding
|
|
|
43,910
|
|
|
38,851
|
|
Weighted average
diluted shares outstanding
|
|
|
44,274
|
|
|
39,455
|
|
|
|
|
|
|
|
|
|
Earnings per share
- basic:
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
$
|
0.16
|
|
$
|
0.35
|
|
Adjusted operating
income(2)
|
|
$
|
0.18
|
|
$
|
0.35
|
|
|
|
|
|
|
|
|
|
Earnings per share
- diluted:
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
$
|
0.15
|
|
$
|
0.35
|
|
Adjusted operating
income(2)
|
|
$
|
0.18
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
Adjusted operating
return on equity ("ROE") (3)
|
|
|
6.2
|
%
|
|
13.3
|
%
|
Adjusted operating
return on tangible equity ("ROTE")(3)
|
|
|
6.6
|
%
|
|
14.3
|
%
|
|
(1). Book value per
share is total common stockholders' equity divided by the number of
common shares outstanding. Fully diluted book value per share is
total common stockholders' equity divided by the number of common
shares outstanding, unvested restricted shares and vested non
issued shares. Tangible book value per share and fully diluted
tangible book value per share are non-GAAP measures. Tangible book
value per share is total common stockholders' equity excluding
value of goodwill and other intangible assets divided by the number
of common shares outstanding. Fully diluted tangible book
value per share is total common stockholders' equity excluding the
after-tax value of goodwill and other intangible assets divided by
the number of common shares outstanding, unvested
restricted shares, and vested not issued shares. See
"Reconciliation of Non-GAAP Financial Measures".
|
(2). Adjusted
operating income is a non-GAAP measure. See "Reconciliation of
Non-GAAP Financial Measures".
|
(3). Adjusted
operating return on equity and adjusted operating return on
tangible equity are non-GAAP measures. Adjusted operating return on
equity is adjusted operating income expressed on an annualized
basis as a percentage of average beginning and ending stockholders'
equity during the period. Adjusted operating return on tangible
equity is adjusted operating income expressed on an annualized
basis as a percentage of average beginning and ending stockholders'
equity, excluding goodwill and other intangible assets, during the
period.
|
PROSIGHT GLOBAL,
INC.
|
GROSS WRITTEN
PREMIUM BY CUSTOMER SEGMENT (UNAUDITED)
|
($ in
millions)
|
|
|
|
Three Months Ended
March 31
|
|
|
|
|
|
2020
|
|
2019
|
|
% Change
|
|
Construction
|
|
$
|
24.5
|
|
$
|
23.3
|
|
5.2
|
%
|
Consumer
Services
|
|
|
30.6
|
|
|
27.5
|
|
11.3
|
|
Marine and
Energy
|
|
|
32.8
|
|
|
19.8
|
|
65.7
|
|
Media and
Entertainment
|
|
|
30.5
|
|
|
29.7
|
|
2.7
|
|
Professional
Services
|
|
|
29.7
|
|
|
29.6
|
|
0.3
|
|
Real
Estate
|
|
|
33.2
|
|
|
28.7
|
|
15.7
|
|
Sports
|
|
|
9.5
|
|
|
7.8
|
|
21.8
|
|
Transportation
|
|
|
21.5
|
|
|
30.7
|
|
(30.0)
|
|
Customer segments
subtotal
|
|
|
212.3
|
|
|
197.1
|
|
7.7
|
|
Other
|
|
|
1.5
|
|
|
58.7
|
|
(97.4)
|
|
Total
|
|
$
|
213.8
|
|
$
|
255.8
|
|
(16.4)
|
%
|
Reconciliation of Non-GAAP Financial Measures
Underwriting income is a non-GAAP financial measure that we
believe is useful in evaluating our underwriting performance
without regard to investment income. Underwriting income represents
the pre-tax profitability of our insurance operations and is
derived by subtracting losses and LAE, and underwriting,
acquisition and insurance expenses from net earned premiums. We use
underwriting income as an internal performance measure in the
management of our operations because we believe it gives us and
users of our financial information useful insight into our results
of operations and our underlying business performance. Underwriting
income should not be considered in isolation or viewed as a
substitute for net income calculated in accordance with GAAP. Other
companies may calculate underwriting income differently.
Net income for the three months ended March 31, 2020 and 2019 reconciles to
underwriting income as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
($ in
thousands)
|
|
2020
|
|
2019
|
Net income from
continuing operations
|
|
$
|
6,811
|
|
$
|
13,695
|
Income tax
expense
|
|
|
1,988
|
|
|
3,815
|
Income from
continuing operations before taxes
|
|
|
8,799
|
|
|
17,510
|
|
|
|
|
|
|
|
Net investment
income
|
|
|
8,815
|
|
|
17,158
|
Realized investment
gains, net
|
|
|
232
|
|
|
113
|
Interest and other
expense, net
|
|
|
4,730
|
|
|
3,269
|
Underwriting
income
|
|
$
|
4,482
|
|
$
|
3,508
|
Adjusted operating income is a non-GAAP financial measure that
we use as an internal performance measure in the management of our
operations because we believe it gives our management and other
users of our financial information useful insight into our results
of operations and underlying business performance, by excluding
items that are not part of our underlying profitability drivers or
likely to re-occur in the foreseeable future. Adjusted operating
income should not be considered in isolation or viewed as a
substitute for net income calculated in accordance with GAAP. Other
companies may calculate adjusted operating income differently.
Net income for the three months ended March 31, 2020 and 2019 reconciles to adjusted
operating income as follows:
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31
|
($ in
thousands)
|
|
2020
|
|
2019
|
Net income from
continuing operations
|
|
$
|
6,811
|
|
$
|
13,695
|
Income tax
expense
|
|
|
1,988
|
|
|
3,815
|
Income from
continuing operations before taxes
|
|
|
8,799
|
|
|
17,510
|
|
|
|
|
|
|
|
Other expense
(1)
|
|
|
1,737
|
|
|
—
|
Realized investment
gains, net
|
|
|
(232)
|
|
|
(113)
|
Adjusted operating
income before taxes
|
|
|
10,304
|
|
|
17,397
|
Less: income tax
expense on adjusted operating income
|
|
|
2,328
|
|
|
3,815
|
Adjusted operating
income
|
|
$
|
7,976
|
|
$
|
13,582
|
|
(1) Other expense
within the adjusted operating income includes non-recurring grants
of restricted stock units in connection with the initial public
offering and costs associated with the transition of our former
Chief Executive Officer.
|
Tangible stockholders' equity is a non-GAAP financial measure
that we use as an internal performance measure to evaluate the
strength of our balance sheet and to compare returns relative to
this measure. We define tangible stockholders' equity as
stockholders' equity less goodwill and net intangible assets.
Tangible stockholders' equity should not be considered in isolation
or viewed as a substitute for stockholders' equity calculated in
accordance with GAAP. Other companies may calculate tangible
stockholders' equity differently.
Stockholders' equity at March 31,
2020 and December 31, 2019
reconciles to tangible stockholders' equity as follows:
|
|
|
|
|
|
|
|
|
March 31,
2020
|
|
December 31,
2019
|
($ in thousands
except per share amounts)
|
|
|
|
Stockholders'
equity
|
|
$
|
488,102
|
|
$
|
543,031
|
Less: goodwill and
net intangible assets
|
|
|
29,181
|
|
|
29,189
|
Tangible
stockholders' equity
|
|
$
|
458,921
|
|
$
|
513,842
|
Book value per
share
|
|
$
|
11.26
|
|
$
|
12.61
|
Book value per share
(fully diluted)
|
|
$
|
10.73
|
|
$
|
12.01
|
Tangible book value
per share
|
|
$
|
10.59
|
|
$
|
11.93
|
Tangible book value
per share (fully diluted)
|
|
$
|
10.09
|
|
$
|
11.37
|
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SOURCE ProSight Global, Inc.