Meadowbrook Insurance Group Inc
Meadowbrook Insurance — Q3 2014 Earnings Presentation
19 slides from Meadowbrook Insurance's earnings presentation, Nov 18, 2014
Slide 1: Investor Presentation Third Quarter 2014 Update
Investor PresentationThird Quarter 2014 Update
Slide 2: Forward-Looking Statements & Non-GAAP Financial Measures
2 Forward-Looking Statements & Non-GAAP Financial Measures The Company’s investor presentation may include certain statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 193
Slide 3: Meadowbrook Overview
Specialty niche focused commercial insurance underwriter and insurance administration services companyHeadquartered in Southfield, MI with 25 locations throughout the U.S. and ~929 employeesFounded in 1955, organized as a holding company in 1985, IPO and listed on the NYSE (MIG) in 1995 Shareholders
Slide 4: Balanced business model allows the Company to adapt to changing market conditions
Balanced business model allows the Company to adapt to changing market conditionsProduct, program and geographic diversificationAdmitted market capabilities contribute to stability and higher renewal retentionE&S platform with industry leading technology capabilities enable opportunistic response in
Slide 5: Meadowbrook Overview (continued) Key Statistics
5 Meadowbrook Overview(continued) Key StatisticsMarket Capitalization at 11/11/2014: $309.1MBook Value at 9/30/2014: $448.1MTangible Book Value at 9/30/2014: : $418.3MBook Value per Share at 9/30/2014: $8.94Tangible Book Value per Share: $8.35Book Value per Share, excluding unrealized gains / losses
Slide 6: Target Markets and Business Mix YTD 9/30/14
Food service industrySmall workers’ compensationAgriculture Target Markets YTD 9/30/14 Business Mix YTD 9/30/14 GWP: $578 million Excess workers’ compensationEnvironmentalMarineMedical malpracticeAviation Specialty Market ProductsYTD 9/30/14 GWP: $131M Admitted Specialty Programs &Standard Market Pr
Slide 7: YTD 9/30/14 GWP Geographic Breakdown
YTD 9/30/14 GWP Geographic Breakdown Top 5 States GWP Breakdown YTD 9/30/14 GWP: $578 million 7 Geographic Overview Geographically diverse premium base with strong local relationships
Slide 8: YTD 9/30/14 Net Operating Income
8 YTD 9/30/14 Net Operating Income Business positioned for an improved and profitable 2014 ($ in millions, except for per share amounts)
Slide 9: Reduced exposure to underperforming business, resulting in improved accident year results
Reduced exposure to underperforming business, resulting in improved accident year resultsIncludes public entity excess, long-haul transportation, auto repossessors, workers’ compensation for isolated CA territory and other select underwriting decisions (see slides 13-16 for additional discussion)Cum
Slide 10: Favorable development and completed run-off of terminated business
Favorable development of $1.0 million, or 0.2 combined ratio percentage pointsGrowth in recent years from rate increases and increase in the average program maturityMore certainty in estimating loss ultimates for mature businessAs programs and books of business mature, underlying claims patterns beg
Slide 11: Statutory Surplus
11 Statutory Surplus Since September 30, 2012, we have improved our premium to surplus leverage ratios through strengthening our capital position and terminating non-performing business Cumulative statutory net income of $82M since September 30, 2012Premium reduction through termination of non-perfo
Slide 12: Ongoing Business Remains Profitable
AY Loss & ALAE Ratio* & Terminated BusinessNet Earned Premium** *Statutory accident year loss & ALAE ratios evaluated at 9/30/14 and excludes the impact of the Swiss Re quota share.**Net earned premium presented above is on a statutory basis and excludes the impact of the Swiss Re quota share. 12 On
Slide 13: On-going Business Remains Profitable
13 On-going Business Remains Profitable 2010 2011 2012 ^ The Re-Evaluated AY combined ratio reflects reserve adjustments made following the accident year, for example, the 102.7% Re-Evaluated 2009 AY combined ratio reflects new loss development information gathered over the 4 1/2 years from 12/31/20
Slide 14: Achieved Rate Increases
Achieved Rate Increases Rate increases in excess of loss ratio trends have been achieved across the book of business 14 Between January 1, 2010 and September 30, 2014 cumulative written rate increases across the entire book of business have been in excess of 30%, more than 20 percentage points in ex
Slide 15: Achieved Rate Increases: Written Increases & Loss Ratio Trend
Achieved Rate Increases ANNUALAchieved Written Rate Increases & Loss Ratio Trend CUMULATIVEAchieved Written Rate Increases & Loss Ratio Trend Significant rate increases have been achieved across the book of business 15 * Full-year estimate assuming YTD written increase achieved throughout the year.
Slide 16: Accident Year Loss & LAE Ratio Bridge
16 Accident Year Loss & LAE Ratio Bridge Our 2014 accident year loss & LAE ratio has shown improvement and the current accident year results reflect a healthy risk margin of nearly 8% (a) 2013 GAAP Loss & LAE Ratio was 78.7% (b) Swiss Re quota share added 4.1% to the 2013 GAAP Loss & LAE Ratio(c) Un
Slide 17: Expense Ratio Analysis, excluding Swiss Re
Expense Ratio Analysis, excluding Swiss Re 17 ($ in millions)
Slide 18: YTD 9/30/14 Net Commission and Fee Revenue by Source
YTD 9/30/14 Net Commission and Fee Revenue by Source YTD 9/30/14 Net Commission & Fee Revenue: $33 million (business generated from unaffiliated sources) Net Commission & Fee Revenue and Profit Agency Commissions Managed Claims Managed Fees 18 Net Commission & Fee Revenue and Profit $33 million of Y
Slide 19: 2015 Guidance
2015 Guidance Gross Written PremiumRange of $715M - $725MGAAP Combined Ratio101% - 102%Net income from operations$20M - $22.5MNet operating income per share$0.40 - $0.45 Guidance ReflectsModerate premium growth in targeted areas of businessContinued positive impact of earned rate increases in excess
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